Written By Jean Meyer
Notes on Ave. C. Aps., LLC v. Cincinnati Ins. Co.[1]
On February 25, 2021, the Honorable Timothy Cavan published his Opinion in the above referenced insurance coverage dispute case addressing two Motions for Partial Summary Judgment. For the practitioner, Judge Cavan’s decision is noteworthy in several respects which are concisely summarized below.
As background, the Ave. C. Aps. decision arose out of the following fact pattern. Avenue C Apartments, LLC (“ACA”) initiated construction on a 126-luxury apartment in Billings Montana. Cincinnati Insurance Company (“Cincinnati”) insured ACA at times relevant to the construction. During the winter of 2017/2018, accumulated snow and ice on the apartment’s roof melted and caused water damage to the top floor and portions of lower floors. Water penetrated the roof membrane, damaged the roof decking, and soaked underlying insulation between the decking and the 4th floor ceiling. Water also ran down walls and damaged insulation and drywall. Ultimately, the water damage caused or contributed to condensation and mold, causing further damage, and required restoration.
With these facts, ACA submitted a property loss notice to Cincinnati, Cincinnati did not provide any coverage for ACA’s claimed damages, and this dispute arose concerning whether insurance coverage existed under Cincinnati’s Policy defective work exclusion among other provisions. ACA then filed the above titled action alleging breach of contract, violations of Montana’s Unfair Trade Practices Act, and constructive fraud/breach of fiduciary duties. Cincinnati answered, and asserted a counterclaim for declaratory judgment that ACA’s damages and losses were not covered under the Policy, considering a defective construction work exclusion, among other reasons. Both ACA and Cincinnati filed Partial Motions for Summary Judgment addressing the Cincinnati Policy.
In evaluating the Parties’ pending Partial Motions for Summary Judgment, the Court made the following findings which are worth highlighting.
First, in evaluating the relevant defective construction work exclusion, the Court observed that the Policy exclusion was subject to a “resulting loss clause,” which provided that “if an excluded cause of loss. . . results in a Covered Cause of Loss, [Cincinnati] will pay for that portion of ‘loss’ covered by that Covered Cause of Loss.” So, while defective workmanship, in of itself, would be an excluded loss under the relevant policy, the exclusion also contained an ensuing loss provision. The Court noted that it had previously considered a similar ensuing loss clause in an earlier case[2] and concluded that the policy had an exclusion for defective workmanship, but the exclusion also contained an ensuing loss provision. In that previous decision, the Court noted that ensuing loss provisions generally operate as an exception to the policy exclusion, and ultimately concluded that while the cost of remediating defective work was not covered, any “subsequent covered loss that occurs as a consequence or result of the faulty workmanship” was covered.
Second, in evaluating Cincinnati’s Motion for Partial Summary Judgment on its Declaratory Judgment claim for relief, the Court found that Cincinnati failed to meet its initial burden as the moving party by failing to establish the absence of a genuine issue of material fact. In the Court’s Opinion, it highlighted what exactly is required in order to meet this initial burden. For example, in evaluating the defective work exclusion as it related to alleged defects with the roof assembly, the Court noted that while Cincinnati had set forth certain undisputed facts, the cited facts did not establish the absence of any issue of material fact that all repairs were related to defective work, or that the defective work exclusion excludes coverage for the cost of repairing the entire roof assembly. Cincinnati did not offer any facts to establish what portion of the necessary repairs to the roof assembly are required to correct defective workmanship, and which are required to repair damage caused by a coverage loss that occurred as a result of those defects. Without those facts, the Court could not determine what portion of roof assembly repair would be covered.
Third, the Ave. C. Aps. decision is noteworthy in that it highlighted the importance of making sure a party’s expert witness is actually an expert in the field in which he or she is presented. In this vein, ACA’s Motion for Partial Summary Judgment argued that Cincinnati’s Policy violated Montana’s Property and Casualty Insurance Policy Language Simplification Act. Concerning the Simplification Act, ACA argued, in part, that the Policy failed to adhere to the Act’s minimum font size requirements. In support of this contention ACA presented an ostensible expert witness (a law professor) to opine on the font size contained within the Cincinnati Policy. However, ACA failed to establish that its expert witness was qualified to provide expert opinions as to font size. The Court then noted that F.R.E. 702 requires that a party’s designated expert witness must first be qualified “by knowledge, skill, experience, training or education” and only upon that showing may the presented expert provide expert testimony. Here, the Court found that ACA failed to establish that its expert witness (the law professor) was qualified or had expertise in fonts, typography, printing, publishing, graphic design, or the like and thus the Court found it could not rely upon the expert testimony of ACA’s expert.
In summary, the Ave. C Aps. decision is a highly technical opinion which illustrates the importance of strict adherence to the Federal Rules of Civil Procedure and Federal Rules of Evidence when engaging in dispositive motions practice in the United States District Court for the District of Montana. For additional information concerning defect litigation in Montana, generally, you can reach Jean Meyer by telephone at (406) 219-8422 or by e-mail at meyer@meyerconstructionlaw.com.
[1] No. CV 19-37-BLG-SPW-TJC, 2021 U.S. Dist. LEXIS 49341, at *1 (D. Mont. Feb. 25, 2021)
[2] Leep v. Trinity Universal Company, F. Supp.3d 1071 (D. Mont. 2017)