Buchholz v. Crestbrook Insurance Company

CourtDistrict Court, W.D. Texas
DecidedFebruary 8, 2022
Docket1:20-cv-00449
StatusUnknown

This text of Buchholz v. Crestbrook Insurance Company (Buchholz v. Crestbrook Insurance Company) is published on Counsel Stack Legal Research, covering District Court, W.D. Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Buchholz v. Crestbrook Insurance Company, (W.D. Tex. 2022).

Opinion

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF TEXAS AUSTIN DIVISION

CLAY BUCHHOLZ and LINDSAY § BUCHHOLZ, § Plaintiffs § § v. § CIVIL NO. 1-20-CV-449-RP

§ CRESTBROOK INSURANCE § COMPANY d/b/a NATIONWIDE § PRIVATE CLIENT Defendant §

REPORT AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE

TO: THE HONORABLE ROBERT PITMAN UNITED STATES DISTRICT JUDGE Before the Court are Plaintiffs’ Motion for Partial Summary Judgment (Dkt. 46); Plaintiffs’ Motion to Exclude Proposed Expert Testimony of Jeffrey Peters (Dkt. 74); Crestbrook’s Motion for Summary Judgment (Dkt. 75); Crestbrook’s Motion to Strike or to Exclude Plaintiffs’ ‘Non- Retained Expert’ Tom Haring (Dkt. 76); Crestbrook’s Motion to Limit Plaintiffs’ Expert Sean O’Brien (Dkt. 77); and the various response, reply, and sur-reply briefs. On November 23, 2021, the District Court referred these motions to the undersigned Magistrate Judge for disposition and Report and Recommendation, pursuant to 28 U.S.C. § 636(b)(1), Federal Rule of Civil Procedure 72, and Rule 1 of Appendix C of the Local Rules of the United States District Court for the Western District of Texas. I. General Background In 2017, Plaintiffs Clay Buchholz and Lindsay Buchholz bought a 10,000-square-foot home located at 14132 Flat Top Ranch Road in Austin, Texas (the “Residence”). Plaintiffs purchased a 1 home insurance policy (the “Policy”)1 from Defendant Crestbrook Insurance Company d/b/a Nationwide Private Client (“Crestbrook”). Dkt. 49 ¶ 10. Plaintiffs also purchased additional insurance coverage from Crestbrook for “Biological Deterioration or Damage.” Id. ¶ 9. For the Policy period from January 25, 2019 through January 25, 2020, Plaintiffs paid a Policy premium of $11,477.38 and a Biological Deterioration Clean Up premium of $4,554.53. In exchange,

Crestbrook agreed to provide approximately $6.4 million in general insurance coverage for Plaintiffs’ Residence and $1.6 million in additional biological-deterioration coverage. Id. ¶ 13. In April 2019, Plaintiffs discovered water damage in the wall of their indoor basketball court after “a basketball went through the wall.” Dkt. 46-8 at 2. The water damage was caused by a leaking exterior fountain. Id. After discovering the water leak, Plaintiffs retained a contractor to inspect the plumbing throughout their house and perform mold testing. Id. This inspection revealed other water leaks in Plaintiffs’ laundry room, two of their bathrooms, and a closet. Id. In addition, the inspection revealed mold in various areas throughout their Residence. Id. Between April and July 2019, Plaintiffs submitted five claims to Crestbrook for losses for

water and related mold damage in each of the rooms with a water leak (“Claims 1-5”). Dkts. 46 at 3; 46-6 at 2-3; 50-12. Plaintiffs also submitted a sixth claim for “reported mold growth”2 and/or “Mold in HVAC system”3 (the “Mold Claim”). Because Crestbrook determined that the water leaks were covered losses under the Policy, Crestbrook paid Claims 1-5, paying Plaintiffs $745,778 for the covered losses, including mold damage caused by the covered losses, additional living expenses, and investigation costs. Dkt. 46 at 4.

1 Dkt. 46-1 at 12-40. 2 Dkt. 46-3 at 1. 3 Dkt. 46-6 at 3. On July 26, 2019, however, Crestbrook sent Plaintiffs a Reservation of Rights letter as to the Mold Claim, notifying Plaintiffs that there were potential coverage questions regarding the cause of the loss, and that Crestbrook would further investigate the claim “to determine the source of the water intrusion and mold.” Dkt. 46-2 at 3. In response, Plaintiffs hired MLAW Forensics, Inc., a private engineering firm, to perform a forensic investigation of the cause of the mold damage. See

Agreement for Professional Engineering Services, Dkt. 75-3 at 73-75. Crestbrook agreed to let Plaintiff choose their own engineer and paid for Plaintiffs to use MLAW Forensics for the investigation. Dkt. 75 at 6. MLAW engineer Dean Read, P.E., was the lead investigator assigned to Plaintiffs’ case. Dkt. 46-4 at 1. Read issued his Causation Report on November 12, 2019, opining that “the elevated moisture contents and bio-organic growth (BOG) in your home . . . are the result of both discrete leaks and a ‘global’ issue due to interruption or restriction of the moisture vapor drive drying process cause[d] by the HVAC and other issues discussed later in this report.” Id. at 1. Read concluded that:

1. While framing damage and localized BOG has occurred due to the discrete leaks, the localized nature of these discrete leaks cannot account for the widespread elevated moisture contents and BOG throughout the house. 2. The widespread elevated moisture contents and BOG are the result of interruptions or restrictions of the moisture vapor drive drying process. 3. The interruptions and restrictions to the drying process are the result of the following: a. Improperly designed or configured and non-functional HVAC systems. This is considered the primary cause for the elevated moisture contents and the BOG. If not for the issues with the HVAC systems, the elevated moisture contents and BOG would not likely have occurred. b. The wall paints. c. Stained trim boards and paneling. Id. at 4. Read explained that “vapor drive is a natural phenomenon where water vapor migrates through the building envelope from a warmer higher humidity state to a cooler lower humidity state based on the rules of thermodynamics.” Id. at 3. He further explained that in Central Texas, “this vapor drive is typically into houses from hot humid air outside the house or in vented attics.” Id.

Ordinarily, the vapor will move through the walls and ceilings and then dry, causing no problems, but Read found that the Residence’s HVAC systems—and to a lesser degree the wall paint, paneling, and trim—were interrupting the drying process and causing the growth of mold. Id. In reaching his conclusion that the HVAC systems were the primary cause of the mold, Read relied on a report produced by Tom Green, P.E., who was retained to evaluate the HVAC systems at the Residence. Id. at 3. In his report, Green found that three of the six HVAC systems were “improperly sized” for the space, and three were “generally dysfunctional” but could be made operational by “reasonably easy repairs.” Id. at 11. Green opined that the HVAC systems “short cycled,” reducing the effectiveness of dehumidifying the air inside the Residence, and that “the as-

found conditions of the HVAC system can easily be contributing causes to the microbial growth experienced in the residence.” Id. at 11, 14-15. Green further opined that: “It is quite possible that the three dysfunctional systems have been in that condition for a long period (several months, if not a year or more).” Id. at 17. Plaintiffs submitted the MLAW Causation Report (and attached Green Report) to Crestbrook “as evidence of what caused the mold losses” at Plaintiffs’ Residence. Robinson Dep. 130:9-17, Dkt. 77-3 at 156. Crestbrook relied on the MLAW Causation Report in determining that the Mold Claim should be denied. In its Denial of Coverage Letter, Crestbrook explained that while the Policy contained Biological Deterioration or Damage coverage for mold growth, that provision “would only apply if it resulted from a covered cause of loss.” Dkt. 46-3 at 3. Crestbrook found that the mold growth was not caused from a covered loss under the Policy such as a water leak but, instead, was caused from workmanship and construction issues with the HVAC system, wall paint, paneling, and trim; weather conditions and dampness; and a gradual or sudden loss due to a mechanical breakdown of the HVAC system. Crestbrook contends that all of these causes fall

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Buchholz v. Crestbrook Insurance Company, Counsel Stack Legal Research, https://law.counselstack.com/opinion/buchholz-v-crestbrook-insurance-company-txwd-2022.