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Prosperity Hands, LLC v. State Farm Fire and Casualty Co.

United States District Court, E.D. Wisconsin

February 1, 2017



          LYNN ADELMAN District Judge

         Prosperity 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. 56.[1]

         I. BACKGROUND

         Prosperity 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:


         At the 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.

         After the storm, Anderson looked at the roof again.[2] 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.[3] 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.

         It is 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.

         According 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 Prosperity's claim.

         After 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.

         State 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.

         Prosperity 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. § ...

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