United States District Court, E.D. Arkansas, Western Division
HAND CUT STEAKS, INC. et al. PLAINTIFFS
SOUTHERN INSURANCE COMPANY DEFENDANT
Southern Insurance Company's (“Southern”)
motion for summary judgment [Doc. No. 29] is denied.
case arises from a dispute over the proper sum owed under an
insurance policy. Plaintiffs Hand Cut Steaks, Inc.; Hand Cut
Steaks of Jonesboro, Inc.; and Property Ventures, LLC were
the owners and operators of a Colton's Steakhouse in
Jonesboro, Arkansas, which burned down on December 17, 2014.
Resp. Pl.'s Statement Undisputed Facts (“Pl.'s
Facts”) ¶ 1, Doc. No. 37; Resp. Def.'s
Statement Undisputed Facts (“Def.'s Facts”)
¶ 2, Doc. No. 32. This property was one of multiple
properties insured by Southern under blanket insurance policy
CMP 5516015, effective April 1, 2014, through April 1, 2015.
Def.'s Facts ¶¶ 2-4. The blanket policy covered
real property at nine locations and personal property at
twelve locations. Id. ¶ 4. The Colton's
Steakhouse was designated “premises number 002”
in the policy's “description of premises.”
Doc. No. 26-2, at 13. The fire totally destroyed premises
number 002. Pl.'s Facts ¶ 2. It is undisputed that
premises number 002 was the only property that was destroyed
of the multiple properties covered under the blanket policy.
Def.'s Facts ¶¶ 4, 8.
insurance policy provided $8, 437, 025 in blanket building
coverage and $4, 715, 000 in blanket personal property
coverage. Id. ¶ 5. The parties agree that the
blanket policy provided replacement cost coverage, Pl.'s
Facts ¶ 6, and that the policy required the insured to
maintain a coinsurance percentage of 100%. Def.'s Facts
¶ 9. The replacement cost of the building, to date,
totals $1, 618, 142.79, and the replacement cost of the
personal property contained in the building, to date, totals
$503, 819.72. Pl.'s Facts ¶¶ 9, 12; Doc. No.
27, at 2. Southern has paid plaintiffs $909, 135.87 toward
building replacement cost and $433, 199.20 towards personal
property replacement cost. Def.'s Facts ¶¶ 13,
17. Southern asserts that a coinsurance percentage has been
applied properly and it has paid the full amount properly
owed under the policy for building and personal property
replacement cost. Plaintiffs respond they are entitled to the
full replacement cost for the building and personal property
as long as those costs do not exceed the maximum limits
identified in the policy for each category respectively.
policy also provided $3, 925, 000 in blanket lost income
coverage. Pl.'s Facts ¶¶ 15, 16. Southern has
paid $835, 785 towards lost income. Def.'s Facts ¶
18. Southern claims it has paid plaintiffs the full amount to
which they are entitled because they failed to rebuild
premises 002 within a “reasonable” time as
required by the policy's language. Doc. No. 30, at 9-10;
Doc. No. 29-1, at 106 (policy language defining “Period
of restoration”). Plaintiffs respond by arguing that
the policy did not limit the time allowed to rebuild, that
the time to rebuild was reasonable, and that they are
entitled to recover all of their lost income totaling $1,
071, 742.40. Pl.'s Facts ¶ 17.
seek damages for breach of contract on their claims for the
replacement cost of the building and personal property and
for lost income; a statutory penalty equal to 12% of the
judgment, pre- and post-judgment interest, and attorney's
fees pursuant to Arkansas Code Annotated section 23-79-208;
and punitive damages for bad faith conduct. Am. Compl.
¶¶ 14-18, Doc. No. 19. Southern moves for summary
judgment as to all of plaintiffs' claims. Doc. No. 29, at
judgment is appropriate when there is no genuine dispute as
to any material fact, and the moving party is entitled to
judgment as a matter of law. Fed.R.Civ.P. 56(a); Anderson
v. Liberty Lobby Inc., 477 U.S. 242, 249-50 (1986). Once
the moving party demonstrates that there is no genuine
dispute of material fact, the non-moving party may not rest
upon the mere allegations or denials in his pleadings.
Holden v. Hirner, 663 F.3d 336, 340 (8th Cir. 2011).
Instead, the non-moving party must produce admissible
evidence demonstrating a genuine factual dispute requiring
trial. Id. Importantly, when considering a motion
for summary judgment, all reasonable inferences must be drawn
in a light most favorable to the non-moving party.
Holland v. Sam's Club, 487 F.3d 641, 643 (8th
Cir. 2007). The evidence is not weighed, and no credibility
determinations are made. Jenkins v. Winter, 540 F.3d
742, 750 (8th Cir. 2008).
parties dispute whether a coinsurance percentage applies to
reduce the amount the insured can recover under the policy.
Coinsurance is a method used to divide the risk of loss
between the insurer and the insured. State Auto Prop.
& Cas. Ins. Co. v. Boardwalk Apartments, L.C., 572
F.3d 511, 516 (8th Cir. 2009). Generally, coinsurance
provisions require the insured to maintain insurance on
covered property in an amount at least equal to a specified
percentage, and failure to do so results in the insured
assuming the status of a coinsurer who will bear a
proportionate amount of the loss. Wetmore v. Unigard Ins.
Co., 107 P.3d 123, 125 (Wash. App. 2005). The purpose of
coinsurance is to reward those who insure at close to full
value and to penalize those who insure at less than full
asserts that a coinsurance penalty was properly applied to
reduce plaintiffs' claim for building and personal
property replacement cost pursuant to the policy's plain
and unambiguous language. If an insurance policy's
language is unambiguous, the plain language controls.
Buddy Bean Lumber Co. v. Axis Surplus Ins. Co., 715
F.3d 695, 697-98 (8th Cir. 2013). The plain language of
blanket policy CMP 5516015 states, “If a coinsurance
percentage is shown in the Declarations, the following
condition applies.” Doc. 29-1, at 94 (Building and
Personal Property Coverage Form, Section F: Additional
Conditions). The declarations page demonstrates that a 100%
coinsurance percentage is shown for the building and personal
property at premises 002, thus satisfying this condition.
Doc. No. 29-2, at 1-4.
condition “a” provides, “We will not pay
the full amount of any loss if the value of Covered Property
at the time of the loss times the Coinsurance percentage
shown for it in the Declarations is greater than the Limit of
Insurance for the property.” Doc. No. 29-1, at 94. The
parties agree that the coinsurance percentage shown in the
declarations is 100%. Doc. No. 34, at 6; Doc. No. 30, at 5.
The parties agree that the value of the covered property is
equal to its replacement cost. Doc. No. 30, at 8 (citing to
the policy's language, which states, “Replacement
Cost . . . replaces Actual Cash Value in the Valuation Loss
Condition of this Coverage Form.”); Doc. No. 34, at 6
(“In light of the optional ‘replacement cost'
coverage, the value of the covered property is equal to the
actual replacement cost . . . .”). And, the parties
agree that the limit of insurance set out in the policy was
$8, 437, 025 for the building and $4, 715, 000 for the
personal property respectively. Pl.'s Facts ¶¶
5, 7; Def.'s Facts ¶ 5. Multiplying “the value
of Covered Property at the time of the loss [$1, 618, 142.79
for the building or $503, 819.72 for personal property] times
the Coinsurance percentage shown for it in the Declarations
[100% or 1.00], ” does not yield an amount
“greater than the Limit of Insurance for the property,
” which is $8, 437, 025 or $4, 715, 000 respectively.
Therefore, condition “a” does not apply under the
policy's plain language, despite Southern's
assertions to the contrary.
“b, ” however, does apply under the policy's
plain language. It states, “If one Limit of Insurance
applies to two or more separate items, this condition will
apply to the total of all property to which the limit
applies.” Doc. No. 29-1, at 95. This condition is
satisfied because the policy provided one limit of insurance
for the buildings insured under the policy and one limit for
the personal property insured under the policy respectively.
Doc. No. 29-2 at 4 (listing $8, 437, 025 as the “Limit
of Insurance” for blanket building coverage and $4,
715, 000 as the “Limit of Insurance” for blanket
personal property coverage); Pl.'s Facts ¶¶ 4,
5, 7; Def.'s Facts ¶ 5. Condition “b”
then provides an example of the four steps used to calculate
“the minimum amount of insurance to meet your
Coinsurance requirements ...