United States District Court, W.D. Wisconsin
WELTON ENTERPRISES, INC., WELTON FAMILY LIMITED PARTNERSHIPS and 3PP PLUS LIMITED PARTNERSHIP, Plaintiffs,
THE CINCINNATI INSURANCE COMPANY, Defendant
September 15, 2015.
Welton Enterprises, Inc., Welton Family Limited Partnerships,
3PP Plus Limited Partnership, Hy Cite/Welton, LLC,
Plaintiffs: Anthony K. Murdock, LEAD ATTORNEY, Halloin &
Murdock, S.C., Milwaukee, WI.
Cincinnati Insurance Company, Defendant: Mark W. Rattan, LEAD
ATTORNEY, Brendan Daniel Corcoran, Litchfield Cavo LLP,
OPINION & ORDER
M. CONLEY, District Judge.
April of 2011, a hailstorm dented the rooftops of numerous
structures in Middleton, Wisconsin, giving rise to the usual
insurance claims, sales of property, settlements and
lawsuits. Many of the latter centered around whether the
applicable commercial insurance policies provide coverage.
Among those structures were commercial buildings owned by the
plaintiffs, Welton Enterprises, Inc., Welton Family Limited
Partnerships and 3PP Plus Limited Partnership (collectively,
" Welton" ). More than four years later, Welton and
the insurer of those buildings, The Cincinnati Insurance
Company (" Cincinnati Insurance" ), continue to
litigate this question.
Insurance contends that because the denting is purely
cosmetic and is not visible from the ground, it does not
constitute " direct physical loss" under the
applicable policy; it also asserts various coverage defenses,
including non-cooperation. Welton, on the other hand, argues
that the policy provides coverage regardless of the nature of
the denting and maintains that Cincinnati Insurance's
insistence to the contrary constitutes bad faith.
this court is Cincinnati Insurance's motion for summary
judgment (dkt. #95). For the reasons that follow, the court
concludes that the denting to Welton's roofs constitutes
" direct physical loss," whether cosmetic or not,
and will deny Cincinnati Insurance's motion on that
point. At the same time, Cincinnati Insurance is entitled to
summary judgment on Welton's claim that its position on
coverage constituted bad faith. Finally, the court will deny
Cincinnati Insurance's motion as regards its
newly-asserted coverage defenses.
Hailstorm and Policy Language
April 3, 2011, hailstorm dented the roofs of twelve
commercial buildings owned by Welton. At the time, those
buildings were insured by a commercial policy that included
the following " Coverage" language in Section A:
" We will pay for direct physical 'loss' to
Covered Property at the 'premises' caused by or
resulting from any Covered Cause of Loss." (Aff. of
Bruce P. Graham Ex. A (dkt. #98-1) Page 3 [hereinafter "
Policy" ].) The Policy defines " loss"
as " accidental loss or damage," but does not
define " direct" or " physical." (
See id. at 33-35 (" Definitions"
event of a covered loss, Cincinnati Insurance has four
options under the terms of the Policy, two of which are
relevant here: (1) " [p]ay the value of lost or damaged
property" or (2) " [p]ay the cost of repairing or
replacing the lost or damaged property." ( Id.
at 28.) The Policy provides that Cincinnati Insurance will
determine the value of covered property at " 'Actual
Cash Value' as of the time of 'loss,'"
subject to certain exceptions not relevant to this lawsuit. (
Id. at 30.) Actual Cash Value (" ACV" )
" means replacement cost less a deduction that reflects
depreciation, age, condition and obsolescence." (
Id. at 33.) In contrast, " Replacement
Cost" does not include a deduction for depreciation and
replaces ACV if elected. ( Id. )
D.3 of the Policy also imposes certain " Duties In The
Event of Loss or Damage" on the insured, Welton, "
in order for coverage to apply[.]" ( Id. at
27.) In relevant part, those duties include:
(2) Give us prompt notice of the " loss." Include a
description of the property involved.
(3) As soon as possible, give us a description of how, when
and where the " loss" occurred. . . .
(5) At our request, give us complete inventories of the
damaged and undamaged property. Include quantities, costs,
values and amount of " loss" claimed. . . .
(8) Cooperate with us in the investigation or settlement of
( Id. )
Advance Cable Company, LLC v. Cincinnati Insurance
Company, No. 13-cv-229-wmc, 2014 WL 975580 (W.D. Wis.
Mar. 12, 2014), a companion federal case to this one, this
court concluded on summary judgment that that the "
'loss'" language established coverage even for
non-structural, non-visible denting to metal roof panels.
See Id. at *7-12. The court also held,
however, that Cincinnati Insurance's position was fairly
debatable, and granted Cincinnati Insurance summary judgment
on that claim. Id. at *12-15; see also
Advance Cable Co., LLC v. Cincinnati Ins. Co., No.
13-cv-229-wmc, 2014 WL 2808628, at *7 (W.D. Wis. June 20,
2014) (denying reconsideration on bad faith claim). The
Seventh Circuit affirmed both conclusions on appeal.
See Advance Cable Co., LLC v. Cincinnati Ins.
Co., 788 F.3d 743, 746-49 (7th Cir. 2015). The
Advance Cable case did not, however, involve any
additional coverage defenses, such as non-cooperation.
addition, plaintiffs would make much of Cincinnati Insurance
losing a similar construction argument over the phrase "
direct physical loss" in a separate lawsuit brought
against it by Hy Cite/Welton, LLC, in the Circuit Court for
Dane County, Wisconsin, although that decision amounts to a
one-page order issued in April of 2015, which denied
Cincinnati Insurance's motion for summary judgment "
for reasons set forth on the record during the hearing."
Not only does it appear no transcript was ever requested for
that hearing, preventing this court from determining the
basis for the order, but a final judgment has yet to be
entered by the circuit court. See Hy Cite/Welton, LLC v.
Cincinnati Insurance Company, No. 2013CV002123 (Wis.
Cir. Ct. Dane County Apr. 27, 2015).
Facts Related to Investigation and Claims Procedure
record, exactly when Welton first discovered the
denting to its roof remains unclear. Welton's brief
states that it first discovered the damage in the summer of
2011, when Scott Martin of Great Lakes Roofing inspected
them, but its citation to Martin's affidavit in support
is flawed in two respects. First, Martin does not
say he inspected the roofs in summer; he says only that he
went on the roofs " after the April 3, 2011 hail
storm." (Aff. of Scott A. Martin (dkt. #115-1) ¶
4.) Second, Martin's affidavit describes his
inspection of property located at 2113 Eagle Drive in
Middleton -- property that was a part of Advance
Cable case, but does not appear to be part of the
is evidence that on September 27, 2011, Joanna Burish,
Welton's CEO, sent an e-mail to agents Robyn Henslin and
Steve Squires at Hausmann-Johnson Insurance ("
Hausmann" ) asking how to arrange for the inspection of
certain properties for hail damage. (Aff. of Timothy J.
Casper Ex. H (dkt. #115-8).) Henslin responded the next day,
indicating that she had forwarded the list of buildings to
Hausmann's in-house claims person, Nick Veech. Veech
e-mailed Burish on September 28, providing the names of
roofing contractors to whom he had sent the addresses to be
inspected. (Decl. of Mark W. Rattan Ex. C (dkt. #97-3).)
Veech also wrote that once they had determined " the
extent of the damage to the buildings," Burish should
inform him so he could " get the claim information put
together and sent in to Cincinnati." ( Id. )
November 18, Burish e-mailed Henslin and Squires indicating
that the roofers Veech had recommended had not worked out and
that they had retained Great Lakes Roofing to inspect the
roofs. (Decl. of Mark W. Rattan Ex. E (dkt. #97-5).) Squires
responded asking Burish to " send a list of the
properties you want to make a
claim on along with any reports that you have." (Aff. of
Timothy J. Casper Ex. G (dkt. #115-7).) Squires further
copied Veech and Curt Jorgenson, Cincinnati Insurance's