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C & H Liquor Store, Inc. v. Harleysville Preferred Insurance Co.

United States District Court, N.D. Georgia, Atlanta Division

September 20, 2019

C & H Liquor Store, Inc., Plaintiff,
Harleysville Preferred Insurance Company, Defendant.


          Michael L. Brown, United States District Judge.

         Plaintiff C & H Liquor Store, Inc. (“C&H”) claims Defendant Harleysville Preferred Insurance Company (“Harleysville”) breached a commercial insurance policy by refusing to pay C&H for various forms of property damage and lost income after a fire damaged his business. Harleysville moved for summary judgment. (Dkt. 27.) The Court grants in part and denies in part that motion.

         I. Factual and Procedural Background

         C&H operates a liquor store out of a building that it leases. (Dkt. 39 ¶ 2.) A fire erupted at the business in June 2014, destroying the right side of the building, causing smoke damage to the left side, and forcing C&H to close from June 29, 2014, through mid-August of that year. (Id. ¶ 4.)

         C&H was insured under a policy issued by Harleysville. (Dkt. 27-3 ¶ 1.) The policy covered various kinds of damage to the business and its property. (See Dkt. 28-4.) The policy had a limit of $400, 000, meaning Harleysville would pay no more than that for losses and damages arising from a single occurrence. (Id. at 6.) It provided coverage above that amount, however, for specific other losses and expenses. Section I, provision A.5.a(4), for example, provided another $10, 000 in coverage for debris removal expenses. (Id. at 34.) That provision specifically stated that the $10, 000 benefit was on top of the $400, 000 policy limit. (Id.) Other provisions made additional coverage above the policy limit available for expenses arising from extended business interruption and extra expenses incurred during a period of restoration. (Id. at 37, 38.) Yet another provision made clear that certain expenses like fire department service charges and pollutant clean up and removal expenses were not subject to the $400, 000 policy limit. (Id. at 50.)

         C&H notified Harleysville of the fire and submitted claims for business personal property, debris removal, and lost business income. (Dkt. 27-3 ¶ 3.) In July and August 2014, Harleysville paid C&H $400, 000 as the policy limit for the lost business property, including the damage to the store’s contents and improvements and emergency services. (Dkts. 27-2 at 5, 19; 27-3 ¶ 4.) In September 2014, C&H asked Harleysville to pay invoices for security services and restoration work, smoke clean up, emergency repairs, and other work performed on the store. (Dkt. 39 at 4, 6–27.) Harleysville reviewed the invoices and paid C&H $10, 000 - the policy limit for debris removal. (Dkts. 27-2 at 5, 19; 27-3 ¶ 4.)

         In July 2014, Harleysville requested documents from C&H, including (1) a summary of monthly revenues from January 2012 through June 2014, (2) daily revenues from June 1 through 29, 2014, (3) monthly profit and loss statements from January 2013 through the time of the request and going forward, and (4) C&H’s 2012 and 2013 federal income tax returns. (Dkts. 27-2 at 3; 27-3 ¶¶ 5–6.) Harleysville sought this information to assess any later claim for ongoing business losses, a loss not subject to the $400, 000 policy limit in some cases. In September 2014, C&H said it had provided the requested information but was not ready to settle its claim for ongoing business losses. (Dkts. 34-1 at 86; 39 at 32.)[1] In late 2014 and early 2015, Harleysville repeatedly requested that C&H provide information supporting its business income claim. (Dkt. 27-2 at 5, 8, 10, 14, 16.) Harleysville warned C&H that it would close the file and assume C&H no longer intended to pursue such a claim if C&H did not respond by November 2014, later extending the deadline to March 19, 2015, and eventually April 19, 2015. (Id. at 8, 14, 20.) C&H never responded, and Harleysville closed the lost business income claim in April 2015. (Dkt. 28-1 ¶ 8.)

         C&H sued Harleysville in the State Court of Fulton County, Georgia, in June 2016, alleging a single claim for breach of contract. (Dkt. 1-1 at 3–6.) Harleysville removed the action to federal court and, after discovery, moved for summary judgment. (Dkts. 1, 27.) C&H opposed that motion. (Dkt. 37.)

         II. Legal Standard

         Summary judgment is appropriate when “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). “No genuine issue of material fact exists if a party has failed to ‘make a showing sufficient to establish the existence of an element . . . on which that party will bear the burden of proof at trial.’ ” AFL-CIO v. City of Miami, 637 F.3d 1178, 1186–87 (11th Cir. 2011) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986)). An issue is genuine when the evidence is such that a reasonable jury could return a verdict for the nonmovant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249–50 (1986).

         The moving party bears the initial responsibility of asserting the basis for his motion. See Celotex Corp., 477 U.S. at 323. The movant is not, however, required to negate the non-movant’s claim. Instead, the moving party may meet his burden by “‘showing’-that is, pointing to the district court-that there is an absence of evidence to support the nonmoving party’s case.” Id. at 325. After the moving party has carried its burden, the non-moving party must present competent evidence that there is a genuine issue for trial. Id. at 324.

         The Court views all evidence and factual inferences in a light most favorable to the non-moving party. See Samples v. City of Atlanta, 846 F.2d 1328, 1330 (11th Cir. 1988). But the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment. Anderson, 477 U.S. at 248. “The requirement is that there be no genuine issue of material fact.” Id. The essential question is “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Id. at 251–52.

         III. Discussion

         “An insurance policy is simply a contract, the provisions of which should be construed as any other type of contract.” RLI Ins. v. Highlands on Ponce, LLC, 635 S.E.2d 168, 170–71 (Ga.Ct.App. 2006) (quoting Hunnicutt v. S. Farm Bureau Life Ins. Co., 351 S.E.2d 638, 640 (Ga. 1987). Courts must consider an insurance policy as a whole, give effect to each provision, and interpret each provision to harmonize with each other. See ALEA London Ltd. V. Woodcock, 649 S.E.2d 740, 745 (Ga.Ct.App. 2007); see also Ga. Code Ann. § 13-2-2(4) (“the whole contract should be looked to in arriving at the construction of any part”). “Construction of the contract, at the outset, is a question of law for the court.” Id. at 171 (citing Deep Six, Inc. v. Abernathy, 538 S.E.2d 886, 888 (Ga.Ct.App. 2000)). “The court undertakes a three-step process in the construction of the contract, the first of which is to determine if the instrument’s language is clear and unambiguous.” Id. (citing Woody’s Steaks v. Pastoria, 584 S.E.2d 41, 43 (Ga.Ct.App. 2003)). If the language is unambiguous, the court simply enforces the contract according to the terms, and looks to the contract alone for the meaning. Id.

[I]f the contract is ambiguous in some respect, the court must apply the rules of contract construction to resolve the ambiguity. Finally, if the ambiguity remains after applying the rules of construction, the issue of what the ambiguous language means and what the parties intended must be resolved by a jury.

CareAmercia, Inc. v. S. Care Corp., 494 S.E.2d 720, 722 (Ga.Ct.App. 1997). Georgia courts have defined “ambiguity” as duplicity, indistinctness, an uncertainty of meaning or expression used in a written instrument, and found that it also signifies doubtful or uncertain nature or being open to various interpretations. See RLI Ins., 635 S.E.2d at 171; Early v. Kent, 108 S.E.2d 708, 709 (Ga. 1959). Ambiguities in an insurance contract are strictly construed against an insurer, and any exclusions from coverage are likewise strictly construed. ALEA London Ltd., 649 S.E.2d at 745 (quoting Guar. Nat. Ins. Co. v. Brock, 474 S.E.2d 46, 49 (Ga.Ct.App. 1996)). And, where possible, insurance contracts should be read in accordance with an insured’s reasonable expectations. Id.

         “The elements for a breach of contract claim in Georgia are the (1) breach and the (2) resultant damages (3) to the party who has the right to complain about the contract being broken.” SAWS at Seven Hills, LLC v. Forestar Realty, Inc., 805 S.E.2d 270, 274 (Ga.Ct.App. 2017) (quoting Dewrell Sacks, LLP v. Chi. Title Ins. Co., 749 S.E.2d 802, 806 (Ga.Ct.App. 2013)). The parties dispute the first two elements.

         At the outset, the parties dispute what evidence the Court should consider in deciding the summary judgment motion. Harleysville objects to any consideration of damages calculations provided by C&H’s owner, Tea Mo, in an affidavit he filed in opposing summary judgment; C&H’s sales summaries attached as an exhibit to that affidavit; and C&H’s First Amended Response to First Interrogatories. (Dkts. 36-1; 39 ¶¶ 6–8, pp. 28–31; 40 at 1–2, 5, 8, 10). The sales records, and the discussion of the records in Mr. Mo’s affidavit, C&H’s statement of facts, and its amended discovery responses, show C&H’s sales from January 2013 through June 2015 and provide an estimate of C&H’s business loss during the twelve months following the fire. (Dkts. 36-1; 39 ¶¶ 6–8, pp. 28–31.)

         Harleysville claims C&H did not produce these documents and information during discovery. (Dkt. 40 at 1–2, 5, 8, 10.) It claims C&H first provided this information in response to Harleysville’s motion for summary judgment and the Court should not consider it. C&H admits it did not produce this information during discovery but says its failure should be excused. (Dkt. 37 at 9.)

         Harleysville says C&H violated Rules 26 and 37 of the Federal Rules of Civil Procedure. Rule 26(a)(1)(A)(ii) provides

Except as exempted by Rule 26(a)(1)(B) or as otherwise stipulated or ordered by the court, a party must, without awaiting a discovery request, provide to the other parties: a copy-or a description by category and location-of all documents, electronically stored information, and tangible things that the disclosing party has in its possession, custody, or control and may use to support its claims or defenses, unless the use would be solely for impeachment . . . .

         Parties also must supplement their Rule 26 disclosures at appropriate intervals. See Fed. R. Civ. P. 26(e)(1). Parties who fail to satisfy these disclosure and supplementation requirements are prohibited, under Rule 37(c)(1), from using the undisclosed evidence “at trial, at a hearing, or on a motion, ” unless the failure is harmless. Fed.R.Civ.P. 37(c)(1); see also Cooley v. Great S. Wood Preserving, 138 Fed.Appx. 149, 161 (11th Cir. 2005). The “burden rests upon the non-producing party to demonstrate that its actions were substantially justified or harmless.” United States v. Batchelor-Robjohns, No. 03–20164–CIV, 2005 WL 1761429, at *2 (S.D. Fla. June 3, 2005); see also Mitchell v. Ford Motor Co., 318 Fed.Appx. 821, 824 (11th Cir. 2009).

         During discovery, Harleysville asked C&H to identify all damages it sought to recover under its breach of contract claim. (Dkt. 34-2 at 9.) C&H responded that it would supplement its response to provide the actual damages it suffered from its business loss. (Id.) C&H did not do so until it responded to Harleysville’s motion for summary judgment almost two months after the discovery period ended.[2] (Dkts. 36-1 at 9; 40 at 1–2.) Harleysville argues C&H should have produced such documents and information in its Rule 26 disclosures. See Fed. R. Civ. P. 26(a)(1)(A)(ii). Harleysville also contends that, even now, C&H has produced no underlying receipts or documents to support the information in its sales summaries. Harleysville further argues that under Georgia insurance law, C&H should have provided this information in response to its repeated inquires during its initial investigation of C&H’s claims.

         C&H counters that it provided many financial documents in its response to Harleysville’s request for production of documents. (Dkt. 37 at 9.) The record shows C&H produced 2012–June 2014 sales summaries, tax returns from 2012 and 2013, and 2013–June 2014 financial statements. (Dkt. 34-1 at 8, 90–106, 108–119.) But none of these documents provided any information about C&H’s business losses after the fire occurred in June 2014. C&H also never filed with the Court any initial disclosures under Rule 26(a) or supplemental disclosures under Rule 26(e). Harleysville thus had no opportunity during discovery to analyze C&H’s records from after the fire or conduct additional document discovery about ongoing business losses.[3] Harleysville also had no opportunity to depose any of C&H’s representatives about its alleged business losses. C&H has failed to explain its failure to disclose timely this information and cannot now cure its error.

         Under these circumstances, C&H’s failure to disclose or produce this evidence was neither harmless nor substantially justified. As Harleysville notes, it was both unfair and prejudicial for C&H to produce records supporting its claim for business loss only after forcing Harleysville to defend this lawsuit, after the close of discovery, and in response to summary judgment briefing. Mr. Mo. asserts in his affidavit that C&H’s sales summaries from July 2014 through June 2015 were “made at or near [that] time, ” yet C&H delayed providing the information to Harleysville for more than two years. (Dkt. 39 ¶ 6.)

         C&H argues it was justified in failing to provide the information and documents because Harleysville never complained that C&H needed to update its discovery responses or noticed the deposition of any of its representatives. (Dkt. 37 at 10–11.) But C&H had to produce the evidence to support its claims during discovery period and to comply with the Federal Rules of Civil Procedure. C&H also argues that its “failure” was harmless, because it has amended its ...

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