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Certain Underwriters at Lloyd's of London v. Lowen Valley View, L.L.C.

United States Court of Appeals, Fifth Circuit

June 6, 2018

CERTAIN UNDERWRITERS AT LLOYD'S OF LONDON, Syndicate Nos. 2003, 1414, 0510, 4472, 1183, 1200, and 4444, Subscribing to Policy Number NJL440003612, Plaintiff - Appellee
v.
LOWEN VALLEY VIEW, L.L.C.; PANADE II, LIMITED, doing business as Hilton Garden Inn, Defendants - Appellants

          Appeal from the United States District Court for the Northern District of Texas

          Before CLEMENT, HIGGINSON, and HO, Circuit Judges.

          STEPHEN A. HIGGINSON, Circuit Judge:

         An insurance underwriter brought this suit seeking a declaratory judgment that it owed no coverage under a commercial property insurance policy. The insured counterclaimed for declaratory judgment, breach of the insurance contract, and violations of the Texas Insurance Code. The district court granted summary judgment in favor of the insurer on all claims, and we affirm.

         I.

         Defendants Lowen Valley View, LLC and Panade II Limited (collectively, Lowen Valley) own and operate a Hilton Garden Inn in Irving, Texas. Plaintiff Certain Underwriters at Lloyd's of London, Syndicate Nos. 2003, 1414, 0510, 4472, 1183, 1200, and 4444, Subscribing to Policy Number NJL440003612 (Lloyd's) issued Lowen Valley a commercial property insurance policy for the period from June 2, 2012 to June 2, 2013. In November 2014, a Lowen Valley employee "noticed that the shingles on the top of the hotel looked bad" and called a roofing contractor to investigate. The contractor found evidence of significant hail damage.

         On December 29, 2014, Lowen Valley notified the company's insurance agent that the hotel roof had suffered hail damage. The agent filed a "Property Loss Notice" with Lloyd's the same day. The notice listed Lowen Valley's "Date of Loss" as June 13, 2012. The agent apparently based the June 2012 date of loss on a weather history report obtained by Lowen Valley's roofing contractor. The report listed nine hail events of varying severity occurring "[a]t location" between January 2006 and December 2014.

         After receiving the claim, Lloyd's sent an adjuster, Derek Phipps, to inspect the property. Phipps concluded that the roof would need to be replaced, and estimated a total repair cost of $429, 225.41. On March 2, 2015, Lloyd's, through another adjuster, sent Lowen Valley a "reservation of rights" letter, which stated that "potential coverage issues may exist."

         After sending the reservation of rights letter, Lloyd's commissioned Haag Engineering to prepare a report-what would become the first of three- analyzing Lowen Valley's claim. In this first report, Haag confirmed that the hotel had suffered hail damage and concluded that "the most recent hailstorm with hailstones large enough to cause the damage [Haag] observed was on June 13, 2012." (emphasis added). At Lloyd's request, Haag also completed a second report. This time, Haag stated that its previous report had "concluded that the observed damage most likely occurred on June 13, 2012." (emphasis added).

         On February 18, 2016, Lloyd's denied Lowen Valley's claim. The same day, Lloyd's filed this suit seeking a declaratory judgment that it owed no coverage for Lowen Valley's hail damage claim. Lowen Valley counterclaimed for declaratory judgment, breach of the insurance contract, and violations of the Texas Insurance Code.

         Haag prepared two more documents after Lloyd's sued. Haag's third report "conclude[d] that it is unlikely that hail only fell at this location one time." The report identified four dates for which both National Weather Service hail reports and third-party radar data suggested that hail greater than one inch in diameter fell in the vicinity of the hotel. Finally Haag produced a "letter to clarify statements made in [its] past reports regarding dates of hailfall and potential damage." The letter explained that "a single sentence in the June report inadvertently referred to June 13, 2012, as the 'most likely' date that damage occurred instead of the 'most recent.'" Haag averred that it never intended "to suggest that June 13, 2012, was the known date or the only date that dents/damage occurred at this property, " and, to the contrary, "[m]eteorological study . . . identifies additional dates in which conditions were conducive to hail at the site prior to June 2012."

         Lloyd's moved for summary judgment on all claims before the district court. The court granted Lloyd's motion in full, and this appeal followed.

         II.

         The district court granted summary judgment on Lloyd's declaratory judgment claim for two, independent reasons: (1) Lowen Valley failed to meet its burden to offer evidence that would allow a trier of fact to segregate covered losses from non-covered losses, and (2) Lowen Valley failed to provide prompt notice of its loss, and this delay ...


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