United States District Court, E.D. Wisconsin
PROSPERITY HANDS, LLC, ELOISE JONES, and ROBERT JONES, Plaintiffs,
STATE FARM FIRE & CASUALTY CO., Defendant.
DECISION AND ORDER
ADELMAN District Judge
Hands, LLC (“Prosperity”) filed this action
against State Farm Fire and Casualty Company. It alleges that
State Farm breached an insurance policy and committed
insurance bad faith when it denied its claim for property
damage caused during an unusually severe rainstorm on April
19, 2013. Before me now is State Farm's motion for
summary judgment. See Fed. R. Civ. P.
owned a building on North Teutonia Avenue in the City of
Milwaukee. It purchased an insurance policy from State Farm
that included property coverage for the building. The
building has three street addresses and three storefronts.
Prosperity operated a laundry and dry cleaning service out of
the center storefront at 3737 North Teutonia Avenue. The
building, which was built in 1925, has a ground floor and a
basement. It has a flat roof that is slightly pitched to
drain from the east side of the building to the west side.
The first image below depicts the building's roof; the
second depicts the front of the building, which faces east:
time of the rainstorm in April 2013, the roof of the building
was between 20 and 30 years old and in need of repair. In
February 2013, the Joneses hired a roofer, John Anderson, to
examine the roof to determine the cause of a leak. Anderson
examined the roof, found a small leak over the front door to
the dry cleaning business, and repaired it. In the course of
repairing this leak, Anderson repaired part of a parapet on
the front/east side of the building. While he was on the
roof, Anderson also noticed other problems, including areas
of the roof that exhibited wind damage and that were
potential leaks. Anderson Dep. at 25:16-26:5. In
Anderson's opinion, these problems were severe enough to
require that the entire roof be replaced down to the decking.
Anderson Dep. at 39:1-41:4. Anderson thought it would cost
between $75, 000 and $100, 000 to complete these repairs.
Anderson Aff. ¶ 7. Anderson advised the Joneses to
contact their insurance company about the condition of the
roof in February 2013 to see if it would be willing to pay
for the repairs. The record does not make clear whether the
Joneses contacted State Farm about these issues before the
storm on April 19, 2013, but in any event the roof was not
replaced as Anderson recommended before then. During the
storm on April 19, 2013, rainwater infiltrated the building
through the roof and caused damage to the interior of the
building and to property located inside the building.
the storm, Anderson looked at the roof again. He found that the
condition of the roof was worse than it was in February 2013.
According to Anderson, part of the roof now had
“dips” in it and also had broken apart at the
seams. Anderson Aff. ¶ 8; Anderson Dep. at 28:12-28:16.
Anderson also noticed that mortar had been “washed
away” from between bricks in the building's front
parapet. Anderson Dep. at 30:7- 30:20. The area from
where the mortar had been washed away was more than two feet
higher than the surface of the roof. Id. at
31:2-31:25. According to Anderson, when he was on the roof in
February 2013, the mortar in the parapet was largely intact.
Id. at 30:14-14:20.
Anderson's opinion that the damage to the roof and
parapet he observed after the storm was caused by the storm.
His theory is that, during the storm, the amount of rain that
fell on the roof was so great that the roof could not drain
it fast enough, and this resulted in more than two feet of
water accumulating on the roof and against the front/east
parapet. In Anderson's opinion, it was the weight of this
huge body of water on the roof that caused it to dip and tear
apart at the seams. Anderson Dep. at 28:12-28:22. Anderson
also believes that this body of water rose up to the level of
the top of the parapet-about two or three feet off the
surface of the roof-and washed the mortar out from between
the bricks. Id. at 30:1-32:7. Anderson opines that
to repair the damage to the roof and parapet caused by the
storm, not only would the entire roof need to be replaced
(which he thought was necessary even before the storm), but
also some of the joists and structural matter underneath the
roof would have to be replaced, and the front parapet would
need to be rebuilt. Id. at 45:1-46:6. Anderson
opines that the cost of making these repairs would be between
$300, 000 and $400, 000. Anderson Aff. ¶ 7.
to State Farm, however, the storm did not cause any damage to
the roof. Instead, because the roof was in a state of
disrepair and prone to leaks at the time the storm hit,
rainwater simply entered the building through existing holes
and leaky areas. After Prosperity reported the damage to
State Farm, it sent two claims representatives, Boedecker and
Casnovsky, to inspect the premises. They looked for storm
damage to the roof but did not find any. However, they did
observe multiple defects in the roof that were due to long
term normal wear and tear and lack of maintenance. Def.
Proposed Findings of Fact (“PFOF”) ¶ 54.
These defects would allow rainwater to infiltrate into the
building. Id. ¶ 55. Based on Boedecker and
Casnovsky's determination that the storm did not cause
damage to the roof, but instead water infiltrated the
building through preexisting leaks, State Farm denied
State Farm's initial denial of the claim, Prosperity
asked State Farm for another opinion on coverage. State Farm
then retained an engineering firm, Building Envelope
Consultants, Ltd., to inspect the building. This firm
inspected the roof and concurred with State Farm's
initial assessment, i.e., that the storm did not
cause any damage to the roof and that the rainwater that
entered through the roof did so because the roof was in poor
shape before the storm hit. The firm prepared a written
report that stated in relevant part as follows:
The subject roof was in a state of disrepair due to deferred
maintenance, poor quality installation techniques and normal
wear and tear. The roof is not salvageable but requires full
removal and replacement as a result of its age and condition.
The poor condition of the roof system was also directly
responsible for the water infiltration which caused the
discovered interior water damage to ceiling materials. The
interior water infiltration and resulting damage to finish
materials was a long term condition as evidenced by the
previous repairs observed. There was no evidence to support a
claim any single weather related event caused any damage to
the building or its components to cause any of the observed
conditions. The building requires extensive remedial action
as a result of deferred maintenance.
Balistreri Decl. Ex. B at 5.
Farm informed Prosperity of the results of Building
Envelope's inspection. However, Prosperity continued to
insist that the damage was covered by State Farm's
policy. State Farm then offered to have Building Envelope
perform a second inspection and confer with John Anderson
about the roof. Representatives from Building Envelope met
with Anderson on the roof of the building, but Anderson was
unable to convince the engineers that the storm had caused
damage to the roof. Thus, Building Envelope did not change
its opinions, as expressed in its previous report.
Ultimately, State Farm did not pay the claim.
filed this suit against State Farm in state court, alleging
that State Farm breached the insurance policy and also denied
the claim in bad faith. State Farm removed the action to this
court under the diversity jurisdiction, 28 U.S.C. §