Boardwalk Apartments, L.C. v. State Auto Property & Casualty Insurance

85 F. Supp. 3d 1275, 2015 U.S. Dist. LEXIS 4430, 2015 WL 197300
CourtDistrict Court, D. Kansas
DecidedJanuary 14, 2015
DocketCase No. 11-2714-JAR
StatusPublished

This text of 85 F. Supp. 3d 1275 (Boardwalk Apartments, L.C. v. State Auto Property & Casualty Insurance) is published on Counsel Stack Legal Research, covering District Court, D. Kansas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Boardwalk Apartments, L.C. v. State Auto Property & Casualty Insurance, 85 F. Supp. 3d 1275, 2015 U.S. Dist. LEXIS 4430, 2015 WL 197300 (D. Kan. 2015).

Opinion

MEMORANDUM AND ORDER

JULIE A. ROBINSON, District Judge.

This insurance coverage action arose out of a 2005 fire at Boardwalk Apartments, L.C.’s (“Boardwalk”) apartment complex in Lawrence, Kansas. Boardwalk was insured under a commercial property insurance policy issued by State Auto Property and Casualty Insurance Company (“State Auto”). The Policy’s business income, replacement cost, and coinsurance provisions were at issue in this case, the second of two lawsuits filed to resolve coverage disputes after the fire. The Court ruled on several matters on cross-motions for summary judgment, narrowing the issues to be decided at trial. Beginning on June 24, 2014, this case was tried to a jury. The jury returned verdicts in favor of Boardwalk on both breach of contract claims, calculating damages for each claim and finding consequential damages in the amount of $2,627,943. Before the Court is State Auto’s Motion to Alter or Amend Judgment Pursuant to Rule 59(e) and/or for Relief from Judgment Pursuant to Rule 60(b) (Doc. 358), which includes a request for remittitur. As described more fully below, the Court determines that the consequential damages award is excessive and conditions the denial of a new trial on the amount of consequential damages upon the acceptance by Boardwalk of a remitti-tur.

I. Background

The Boardwalk apartment complex in Lawrence, Kansas, was located on Frontier Way, which used to be called Fireside Drive. This dispute arises out of a fire that occurred on October 7, 2005 that destroyed Building 1 in the Boardwalk apartment complex. On March 27, 2006, State Auto filed a lawsuit on certain coverage issues against Boardwalk in the Western District of Missouri (“the Missouri Litigation”). The Missouri Litigation concluded on September 8, 2009. The Court determined on summary judgment that after the Missouri Litigation concluded, Boardwalk timely elected to rebuild Building 1. Boardwalk contended at trial that State Auto breached the insurance contract because it failed to pay the full amounts owed under the policy. Boardwalk sought the cost to replace Building 1, which Boardwalk contended at trial was $3,408,957. State Auto previously paid Boardwalk $2,128,794.17 as indemnity for Building 1, but Boardwalk contended in this lawsuit that State Auto owed it an additional amount for the replacement cost of Building 1. State Auto argued that the coinsurance provision of the Policy applied, reducing its obligation to pay the full re[1279]*1279placement cost, and therefore Boardwalk was not entitled to any additional amounts under the terms of the Policy.

Second, Boardwalk contended it was entitled under the insurance policy to its lost rental business income during the “period of restoration,” as well as consequential damages as a result of State Auto’s failure to pay what was owed to Boardwalk under the Policy. State Auto asserted a counterclaim that Boardwalk is not. entitled to any additional payments under the Policy because Boardwalk failed to cooperate with State Auto in the investigation or settlement of its claims. State Auto further asserted that Boardwalk’s actual business income losses are much lower than Boardwalk contended because Boardwalk should have replaced Building 1 more quickly than it did and because Boardwalk’s business income claim must be reduced by the interest income Boardwalk earned on the prior indemnity payment during the time it took to replace Building 1.

In the Pretrial Order entered on July 24, 2013, Boardwalk sought consequential damages on both of its breach of contract claims, including “increased business income losses and increased costs of construction due to building laws and ordinances passed during the pendency of litigation.”1 In the Damages section of the Pretrial Order, Boardwalk sought “consequential damages resulting from State Auto’s delay in honoring its obligations under the Policy.”2 Under the business income loss heading, the parties set forth subsections (a) for “Compromise Figures” and (b) “Boardwalk’s Expert’s Calculation.”3 The compromise figures set forth in subsection (a) utilized Patrick Bello’s adjusted numbers and claimed actual damages of $1,046,322.42. Boardwalk states on page 66: “State Auto is liable for the remainder of Boardwalk’s business income losses above $949,200 ($97,122.42) because State Auto wrongfully sought to avoid liability by filing suit [in the Missouri Litigation], thereby delayed Boardwalk’s ability to replace Building 1 and stem its rental income losses.”4 The expert calculation in subsection (b) is based on Boardwalk damages expert Joseph Lesovitz’s calculations, presented in the form of two scenarios.5 Scenario 1 claimed $1,412,607 in business income loss based on historical rents and a 69.5 month period of restoration, ending in July 2011. Scenario 2 claimed $2,001,362 based on all business income loss resulting from the delay in payment, assuming a new building was constructed in 2006.

On the replacement cost claim, Boardwalk requested the full replacement cost to rebuild Building 1 with no coinsurance, as well as “Additional Costs of Construction Due to Laws and Ordinances Regulating Reconstruction of Building 1,” to the extent that any limitation of coverage for these costs was deemed to be against Kansas public policy.6 Within this category of damages, Boardwalk “in addition” sought “recovery of maintenance and other costs it incurred in maintaining Fireside Drive, for which it had to assume responsibility due to City of Lawrence density require-' ments enacted in 2006, in order to replace the number of units destroyed in the October 2005 fire.”7

[1280]*1280In its March 28, 2014 Summary Judgment Order,8 the Court ruled on several discrete issues in this case, including that the “compromise figures” by Bello did not bind State Auto. The Court also ruled that Boardwalk was entitled to consequential damages on the replacement cost claim in the amount of any business income loss that exceeded the business income policy limit of $1,099,200, assuming it can show the requisite evidence of causation at trial. The Court ruled on the business income loss claim that actual interest earned by Boardwalk from the 2006 indemnity payment should offset its business income loss, and allowed both damages experts to revise their expert reports to align with the Court’s ruling on that issue.

Boardwalk presented extensive evidence at trial about the business income losses on Building 1. Bello and Lesovitz testified as to their lost business income calculations and Randall Wilson testified on behalf of State Auto, presenting alternate calculations. In addition, Ernie Fleischer, the managing member of Boardwalk, testified that he wanted to rebuild Building 1 as soon as possible after the fire because he knew that the longer Building 1, the largest building in the complex, was vacant, the harder it would be to rent out the remaining units in the complex.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Servants of the Paraclete v. Does
204 F.3d 1005 (Tenth Circuit, 2000)
Smith v. Ingersoll-Rand, Co.
214 F.3d 1235 (Tenth Circuit, 2000)
Russo v. Ballard Medical Products
550 F.3d 1004 (Tenth Circuit, 2008)
Elm Ridge Exploration Company v. Engle
721 F.3d 1199 (Tenth Circuit, 2013)
Prager v. Campbell County Memorial Hospital
731 F.3d 1046 (Tenth Circuit, 2013)
Phillips & Easton Supply Co. v. Eleanor International, Inc.
512 P.2d 379 (Supreme Court of Kansas, 1973)
Denman v. Aspen Drilling Co.
520 P.2d 1303 (Supreme Court of Kansas, 1974)
M.D. Mark, Inc. v. Kerr-McGee Corp.
565 F.3d 753 (Tenth Circuit, 2009)
Hochman v. American Family Insurance
673 P.2d 1200 (Court of Appeals of Kansas, 1984)
Brown v. United Methodist Homes for the Aged
815 P.2d 72 (Supreme Court of Kansas, 1991)
Klein v. Grynberg
44 F.3d 1497 (Tenth Circuit, 1995)
Dow Chemical Co. v. Seegott Holdings, Inc.
768 F.3d 1245 (Tenth Circuit, 2014)

Cite This Page — Counsel Stack

Bluebook (online)
85 F. Supp. 3d 1275, 2015 U.S. Dist. LEXIS 4430, 2015 WL 197300, Counsel Stack Legal Research, https://law.counselstack.com/opinion/boardwalk-apartments-lc-v-state-auto-property-casualty-insurance-ksd-2015.