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White Mountain Communities Hospital Incorporated v. Hartford Casualty Insurance Co.

United States District Court, D. Arizona

April 17, 2015

White Mountain Communities Hospital Incorporated, Plaintiff,
Hartford Casualty Insurance Company, Defendant.

ORDER AND OPINION [Re: Moyions at Dockets 78, 96]

JOHN W. SEDWICK, Senior District Judge.


At docket 78 defendant Hartford Casualty Insurance Company ("Hartford") filed a motion for summary judgment. At docket 96 Plaintiff White Mountain Communities Hospital Incorporated ("White Mountain") filed an opposition and a cross motion for summary judgment as to the issue of property damage. Defendant Hartford filed its reply and response at docket 116. White Mountain filed its reply at docket 123. Oral argument was heard March 30, 2015.


Hartford issued a commercial property insurance policy to White Mountain covering the period from April 1, 2011 thru April 1, 2012. The policy provided insurance coverage against business income losses as well as property losses. White Mountain's hospital located near Springerville was affected by the Wallow Fire, which began burning on May 29, 2011, and which led to the temporary evacuation of Springerville through June 13, 2011. White Mountain sought payment under the policy for business income losses and property damage. Originally, Hartford processed the business income loss claim pursuant to the "Civil Authority" provision of the policy, which insures against business income loss in the event access to the property is prohibited by order of a civil authority.[1] Hartford paid $433, 520 based on the provision. Later, in November, after a new adjuster was appointed to the file, Hartford decided that there could be coverage under the "Business Income Coverage" provision in the policy, [2] based on reported smoke damage, but it determined that a reasonable period for repairs would have been 60 days. It then paid another $250, 000 to W hite Mountain for business income lost during the additional 60 days. In total, Hartford paid White Mountain $723, 548 on the claims, consisting of a little over $40, 000 for property damage claims and $683, 520 for business interruption through August 6, 2011. White Mountain contends that it is entitled to be paid more money on its business income loss claim and thus brings a breach-of-contract claim against Hartford. It also brings an insurance bad faith claim and punitive damages claim against Hartford based upon Hartford's denial of additional payments and White Mountain's allegation of inadequate investigation and delayed payments. White Mountain also raises an unjust enrichment claim against Hartford.


Summary judgment is appropriate where "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law."[3] The materiality requirement ensures that "only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment."[4] Ultimately, "summary judgment will not lie if the... evidence is such that a reasonable jury could return a verdict for the nonmoving party."[5] However, summary judgment is mandated under Rule 56(c) "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial."[6]

The moving party has the burden of showing that there is no genuine dispute as to any material fact.[7] Where the nonmoving party will bear the burden of proof at trial on a dispositive issue, the moving party need not present evidence to show that summary judgment is warranted; it need only point out the lack of any genuine dispute as to material fact.[8] Once the moving party has met this burden, the nonmoving party must set forth evidence of specific facts showing the existence of a genuine issue for trial.[9] All evidence presented by the non-movant must be believed for purposes of summary judgment, and all justifiable inferences must be drawn in favor of the non-movant.[10] However, the non-moving party may not rest upon mere allegations or denials, but must show that there is sufficient evidence supporting the claimed factual dispute to require a fact-finder to resolve the parties' differing versions of the truth at trial.[11]


A. Breach of Contract

White Mountain alleges Hartford breached the insurance contract when it denied White Mountain's claim for business income losses incurred after August 6, 2011. White Mountain argues that the contract provides coverage for reduced revenue caused by the fire and that Hartford failed to fully compensate it as required. The basis for White Mountain's breach-of-contract claim and its opposition to Hartford's motion for summary judgment is its belief that losses stemming from the fire are covered as long as there has been some property damage; that is, it believes Hartford should pay them for business losses through at least part of 2012 because the facility suffered some property damage due to the fire and those damages were not fully repaired until 2012. White Mountain's argument is off base. The Business Income Coverage provision does not cover all income losses caused by the fire; rather, it covers only those income losses resulting from actual physical damage to the facility caused by fire. The policy states as follows:

We will pay up to the Special Business Income Limit of Insurance... for the actual loss of Business Income you sustain and the actual, necessary and reasonable Extra Expense you incur due to the necessary interruption of your business operations during the Period of Restoration due to direct physical loss of or direct physical damage caused by or resulting from a Covered Cause of Loss to property ...[12]

Hartford correctly stresses that only income lost because of business interruption caused by physical damage to the property is covered. Business income lost because of the fire in general is not covered.

White Mountain clearly had some physical property damage. It is undisputed that White Mountain staff had to clean some soot and that ultimately White Mountain discovered damage to air conditioners and carpet and that there were some microscopic smoke toxins found in air filters that had already been removed from the facility.[13] Plaintiff asserts there are disputed facts about the extent of smoke contamination, but the dispute over the existence or extent of the smoke contamination inside the facility, if any, is immaterial. Plaintiff fails to point to any evidence that it lost business income due to smoke contamination or any physical damage to the facility. That is, there is nothing to show that the AC repairs, cleaning, carpet replacement, or smoke inside the building, as opposed to the economic conditions in the area from the fire, caused a cessation or slowdown of business. There is no evidence that any part of the facility was physically dysfunctional during repairs or that it lost patients because of the damage or repair work. To the contrary, the record shows that despite the repairs and cleaning that had to be done, White Mountain did not have to turn away patients after the facility's reopening.[14] Indeed, White Mountain's CEO could not name any services that the hospital was unable to provide because of property damage, except for perhaps its sleep studies ...

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