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State Auto Property and Casualty Insurance Co. v. El Shaddai Christian Ministries, Inc.

United States District Court, S.D. Mississippi, Northern Division

March 29, 2017




         BEFORE THIS COURT is State Auto Property and Casualty Company's (hereinafter referred to as “State Auto”) Motion for Summary Judgment. [Docket no. 92]. The consolidated lawsuits sub judice present the interrogatory whether the insurance policy (hereinafter referred to as the “Policy”) purchased by El Shaddai Christian Ministries, Inc., (hereinafter referred to as “El Shaddai”) from State Auto, provides coverage for storm water damage to the roof of El Shaddai's church building, located at 3120 Robinson Street, Jackson, Mississippi (hereinafter referred to as the “Subject Property”).

         State Auto's motion for summary judgment is premised on Rule 56 of the Federal Rules of Civil Procedure[1" name="FN1" id="FN1">1]. By its motion, State Auto asks this court to grant summary judgment in its favor and to dismiss the claims of El Shaddai against it. State Auto's argument is that the damage to the roof of the Subject Property was not due to a storm event, but caused by a long-term lack of maintenance and neglect. This court is not persuaded to grant State Auto's motion under the jurisprudence of Rule 56, and will DENY its motion for summary judgment. [Docket no. 92].


         This court first must determine whether it has subject matter jurisdiction. The complaint filed by State Farm alleges that this court possesses federal subject matter jurisdiction by way of diversity jurisdiction as codified under 28 U.S.C. § 1332[2]. [Docket no. 1, ¶ 5]. The parties to this matter are: State Auto which is an insurance company organized under the laws of the State of Iowa, with its principle place of business in the State of Ohio; and El Shaddai, a non-profit corporation incorporated in the State of Mississippi with its principle place of business in the State of Mississippi [Docket no. 1, ¶¶2-3].

         The consolidated case (state civil action number 25CI1:15-cv-148-JAW), which was originally filed in the Circuit Court of Hinds County, Mississippi, named Boyles Moak & Stone, Inc. (hereinafter referred to as “Boyles”), as a second defendant. Boyles is a corporation doing business in the State of Mississippi. [3:15-CV-229-HTW-LRA, Docket no. 1-1, PP. 3');">P. 3-4]. El Shaddai filed its state court lawsuit on March 16, 2015. [3:15-CV-229-HTW-LRA, Docket no. 1-1](hereinafter referred to as “state lawsuit”).

         On March 26, 2015, State Farm filed a notice of removal with this federal forum alleging Boyles had “been fraudulently and/or improperly joined in this action solely for the purpose of defeating diversity of citizenship jurisdiction in this matter.” [3:15-CV-229-HTW-LRA, Docket no. 1]. Neither Boyles nor El Shaddai moved the federal court to remand the state lawsuit to Hinds County Circuit Court; instead, on April 14, 2015, United States District Court Judge Tom S. Lee entered an order dismissing Boyles by the agreement of the parties. In this court's eye, that agreement of the parties to dismiss Boyles was akin to an admission of fraudulent joinder of Boyles, which would have resulted in this court dismissing Boyles from this action. That same day, on April 14, 2015, that case was consolidated with case number 3:15-CV-112-HTW-LRA, the lead case in this consolidated action (hereinafter referred to as the “lead case”).

         This court alternatively finds that District Court Judge Lee could have remanded 3:15-CV-229-HTW-LRA if persuaded the El Shaddai has a viable claim against Boyles. On removal questions, the federal court takes a snapshot of the pleadings at the time of removal.[3] Then, 3:15-CV-229-HTW-LRA would not have featured diverse parties, as El Shaddai and Boyles are both Mississippi citizens. Still, has the court remanded the matter, the defendant therein, State Auto, simply would have removed again and the court would have lost time, a wasteful exercise.

         Further, the United States Supreme Court, in facing situations somewhat similar to that facing this court, has found, “[where the] jurisdictional defect was cured, i.e., complete diversity was established before the trial commenced[, ]” “‘the District Court [had] jurisdiction of the parties at the time it entered judgment.'” Caterpillar Inc. v. Lewis, 519 U.S. 61, 73, 117 S.Ct. 467');">117 S.Ct. 467, 475, 136 L.Ed.2d 437 (1996)(Quoting Grubbs v. General Elec. Credit Corp., 405 U.S. 669');">405 U.S. 669, 700, 1344');">92 S.Ct. 1344, 31 L.Ed.2d 612 (1972)). Therefore, this court is not convinced it would be an efficient use of judicial resources to sever and remand the state case because the jurisdictional defect has been corrected.

         As to the jurisdictional amount: “[t]he amount in controversy, in an action for declaratory or injunctive relief, is the value of the right to be protected or the extent of the injury to be prevented.” Webb v. Investacorp., Inc., 89 F.3d 252, 256 (5th Cir. 1996). El Shaddai does not challenge the amount in controversy as set forth in State Farm's Complaint - that alleged amount being $658, 000.00. In fact, in filing its own complaint, El Shaddai requested punitive damages as well as compensatory damages. [3:15-cv-229-TSL-RHW, Docket no. 1-1, P. 8]. Therefore, this court, which had an independent obligation to confirm its subject matter jurisdiction[4" name="FN4" id= "FN4">4], finds the mandates of 28 U.S.C. § 1332 are satisfied: the parties are completely diverse and the amount in controversy is satisfied.

         Inasmuch as this court is exercising diversity of citizenship subject-matter jurisdiction, this court, sitting in Mississippi, will apply Mississippi's law to the substantive issues in accordance with the Erie Doctrine. Erie v. Tompkins, 4 U.S. 64');">304 U.S. 64, 78-79, 58 S.Ct. 817, 1188');">82 L.Ed. 1188 (1938). Under the Erie Doctrine, federal courts sitting in diversity must apply state substantive law and federal procedural law. Foradori v. Harris, 477');">523 F.3d 477, 486 (5th Cir. 2008) (citing Gasperini v. Ctr. for Humanities, Inc., 18 U.S. 415');">518 U.S. 415, 426-427 (1996)).


         A. Undisputed Facts

         El Shaddai purchased the Subject Property on September 23, 2003. [Docket no. 92-1]. On March 18, 2009, Gail Kayiwa (hereinafter referred to as “Kayiwa”), the president of El Shaddai, reported a roof leak due to storm damage to Brotherhood Mutual Insurance Company (hereinafter referred to as “Brotherhood”) and filed a claim for such. [Docket no. 92-2]. Brotherhood retained an independent adjuster, Central Adjustment Company (hereinafter referred to as “Central”), to inspect the premises and survey the damage. [Docket no. 92-3]. Central visited the Subject Property on April 13, 2009, and prepared a report, including photographs which purport to show water pooling on the Subject Property's roof. [Docket no. 92-3].

         Brotherhood denied the claim on April 29, 2009, by sending a letter to El Shaddai explaining: there was no storm damage to the roof; the roof was “worn out and in need of maintenance”; and the Brotherhood policy excluded damage due to wear and tear. [Docket no. 92-4]. Brotherhood cancelled its policy approximately eight (8) months later, claiming that El Shaddai had failed to pay the premiums. [Docket no. 92-5].

         Kayiwa thereafter sought replacement insurance coverage for the Subject Property. She looked to State Auto. On March 5, 2012, El Shaddai signed a new Business Owners Application for insurance with State Auto. [Docket no. 92-6]. Kayiwa backdated a check issued to State Auto, which purported to be issued on March 2, 2012. [Docket no. 92-7, P. 21, LL. 9-19]. State Auto issued the Policy, numbered BOP 2666518 on March 6, 2012 with a policy period of March 2, 2012 through March 2, 2013. [Docket nos. 91-8 & 91-9].

         On July 16, 2012, roughly a period slightly over four (4) months after State Auto had issued the policy, El Shaddai filed a claim with State Auto for a roof leak and water intrusion which it claimed had occurred as a result of a sudden storm event on March 2, 2012, the date the Policy became effective, and three days before Kayiwa signed the insurance application. [Docket no. 92-10]. State Auto inspected the property on July 19, 2012. [Docket no. 92-11]. State Auto denied the claim on July 23, 2012, stating there was no evidence of storm damage, but, rather the roof presented long-existing maintenance issues. [Docket no. 92-12].

         El Shaddai reported the same claim a second time on October 5, 2012. [Docket no. 92-13]. State Auto retained an independent adjuster, Cunningham Lindsey (hereinafter referred to as “Lindsey”) on October 11, 2012, to inspect the property. [Docket no. 92-14]. Lindsey found the same maintenance issues Central had found three (3) years prior. [Docket no. 92-14]. After receiving Lindsey's report, State Auto denied the second claim filed by El Shaddai with State Auto on October 18, 2012. [Docket no. 92-15].

         State Auto terminated the policy on October 19, 2012, as a result of non-payment of premiums by El Shaddai. [Docket no. 92-16]. Sammuel Honnold (hereinafter referred to as “Honnold”), a roofing contractor, examined the Subject Property on January 17-18, 2013, at the direction of El Shaddai. [Docket no. 92-17]. Honnold contacted State Auto and informed it he believed the damage to the roof was due to settling as the result of a sinkhole. [Docket no. 92-17]; however, El Shaddai does not intend to, nor can it, rely on the ...

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