United States District Court, E.D. Arkansas, Western Division
HAND CUT STEAKS, INC. et al. PLAINTIFFS
SOUTHERN INSURANCE COMPANY DEFENDANT
motion for summary judgment [Doc. No. 26] 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 defendant Southern Insurance Company
(“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 separate locations and personal
property at twelve separate 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. Plaintiffs, however, assert they are entitled to the full
replacement cost for the building and for the personal
property as long as the replacement cost does not exceed the
maximum limits identified in the policy for each category
respectively. Southern responds that a coinsurance percentage
has been properly applied to both categories and that
plaintiffs have been paid the appropriate amount owed under
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. Plaintiffs assert they are entitled to recover all 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. They move for summary
judgment as to all claims except their claim for punitive
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).
the parties dispute whether a coinsurance percentage applies
to reduce the amount plaintiffs 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 value. Id.
argue that premises number 002 suffered a total loss under
Arkansas's valued policy law, and accordingly, they are
entitled to collect up to the full amount stated in the
blanket policy's limits of coverage without application
of a coinsurance penalty. Doc. No. 27, at 3. Arkansas's
valued policy law reads as follows:
Except as provided in subsection (b) of this section, in case
of a total loss by fire or natural disaster of the property
insured, a property insurance policy other than for flood and
earthquake insurance shall be held and considered to be a
liquidated demand against the company taking the risk for the
full amount stated in the property insurance policy or the
full amount upon which the company charges, collects, or
receives a premium.
Ark. Code Ann. § 23-88-101(a)(1). This argument fails
because subsection (b) clearly states, “This section
does not apply [i]f the claim is for the total loss of a
building that is insured under a blanket insurance policy for
a stated amount that covers two (2) or more buildings or that
covers buildings and personal property.” Id.
§ 23-88-101(b)(3)(A). The parties agree that the blanket
policy covered multiple buildings and that only one of them
burned. Pl.'s Facts ¶ 4; Def.'s Facts ¶ 8.
Put simply, Arkansas's valued policy law does not apply
and thus does not prevent the application of a coinsurance
penalty. See Boardwalk Apartments, L.C., 572 F.3d at
516 (“where one building in a group of buildings is
destroyed, the . . . Valued Policy Law does not
question of whether a coinsurance penalty applies pursuant to
the policy language is a distinct issue. Plaintiffs assert
that the policy's plain language demonstrates that a