Travelers Indemnity Company, The v. P1 Group, Inc.

CourtDistrict Court, D. Kansas
DecidedMarch 5, 2020
Docket6:18-cv-01287
StatusUnknown

This text of Travelers Indemnity Company, The v. P1 Group, Inc. (Travelers Indemnity Company, The v. P1 Group, Inc.) 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
Travelers Indemnity Company, The v. P1 Group, Inc., (D. Kan. 2020).

Opinion

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF KANSAS

THE TRAVELERS INDEMNITY COMPANY,

Plaintiff, vs. Case No. 18-01287-EFM

P1 GROUP, INC.,

Defendant.

MEMORANDUM AND ORDER Plaintiff The Travelers Indemnity Company (“Travelers”) is suing Defendant P1 Group, Inc. (“P1”) to recover the amount it paid under an insurance contract with McPherson Hospital (the “Hospital”). Before the Court are the Parties’ cross-motions for partial summary judgment (Doc. 46 and 49). For the following reasons, the Court denies P1’s motion and grants in part and denies in part Travelers’ motion.1

1 P1 additionally filed a Motion for Hearing regarding its Motion for Partial Summary Judgment (Doc. 61). The Court denies that motion now and will consider P1’s corresponding Motion for Hearing regarding its Motion to Exclude Testimony at a later date. I. Factual and Procedural Background2 Travelers is an insurance company that provided property insurance to the Hospital, which operates in McPherson, Kansas. Travelers is subrogated to the rights of the Hospital in this case. P1 provides facilities maintenance services, including plumbing repairs, to the Hospital. As part of these services, P1 replaced a drain pipe in the Hospital’s mechanical room.

On October 18, 2016, the Hospital experienced flooding that damaged its property. The flooding resulted from a burst water softener drain line—installed by P1—in the Hospital’s mechanical room. After a nurse discovered the flooding during the morning shift, the Hospital discharged all patients and closed for the remainder of October 18. The Hospital reopened on October 19, but doctors did not complete scheduled surgeries on the 19th or 20th. The Hospital resumed surgeries on the 21st. The Hospital’s insurance policy with Travelers stated: We [Travelers] will pay for the actual loss of Business Income you sustain due to the necessary “suspension” of your “operations” during the “period of restoration” caused by direct physical loss of or damage to property at premises which are described in the Declarations and for which a Business Income Limit of Insurance is shown in the Declarations. The contract stated that in exchange for insuring the Hospital, Travelers was subrogated “to the extent of our [Travelers’] payment” to the Hospital. The Hospital also had a deductible for business interruption damages. The contract stated, in relevant part: An hour deductible applies to your Business Income coverage. We will not pay for loss of Business Income in any one occurrence that is incurred during the period of time that: a. Begins at the time of the direct physical loss or damage that triggers the Business Income coverage; and

2 The facts come from the Pretrial Order and the Parties’ motions and are viewed in the light most favorable to the respective non-moving party. b. Continues for the consecutive number of hours shown in the Declarations as the applicable Business Income hour deductible. This deductible prohibited the Hospital from makings claims for the 72 hours immediately following the physical damages. As such, the deductible period for the flood damage began on October 18 and terminated on October 20. Following the flood, the Hospital filed a business interruption claim with Travelers. Travelers calculated the Hospital’s business interruption damages based on financial information provided by the Hospital’s controller, Tania Thompson. Thompson indicated that the Hospital delayed—but did not entirely cancel—surgeries scheduled for October 18-20. The Hospital eventually performed those postponed surgeries. Based on this information, Travelers’ accountant, Jeffrey Perry, calculated the Hospital’s damages.

The Hospital’s insurance policy with Travelers included the following terms governing Travelers’ determination of any business interruption damages: a. The amount of Business Income loss will be determined based on: (1) The Net Income of the business before the direct physical loss or damage occurred; (2) The likely Net Income of the business if no physical loss or damage occurred, . . . (3) The operating expenses, including payroll expenses necessary to resume “operations” with the same quality of service that existed just before the direct physical loss or damage; and (4) Other relevant sources of information, including: (a) Your financial records and accounting procedures; (b) Bills, invoices and other vouchers; and (c) Deed, liens or contracts. b. Resumption of Operations We will reduce the amount of your Business Income loss to the extent you can resume your “operations” in whole or in part, by using damaged or undamaged property (including merchandise or “stock”) at the described premises or elsewhere and, with respect to the Business Income From Dependent Property Additional Coverage, by using any other available source of materials or outlet for your products. c. If you do not resume “operations”, or do not resume “operations” as quickly as possible, we will pay based on the length of time it would have taken to resume “operations” as quickly as possible. Perry did not determine business interruption damages for October 18-20, because those days were within the deductible period. Rather, Perry calculated that the business interruption damages by averaging the income the Hospital received on a daily basis from July 1, 2015 through June 30, 2016, and then comparing this to the income the Hospital actually received on October 21-23. Perry found that the Hospital suffered $69,631.92 in business interruption damages on October 21-23. Travelers paid this amount to the Hospital. Bryan Cline, P.E., provided a report on behalf of the Hospital as an expert witness. In it, he states that the damage resulting from the broken water line can be attributed to the following causes:  the pipe and connected fixtures were in a four-foot deep, sunken room with little or no outlet for water, and they were supplied by a 3-inch water main;  the plastic pneumatic lines for the control valves of the water softener system were vulnerable to inadvertent damage;  the pneumatic control valves on the water softener system failed in the open position opening the municipal water supply line into the plant;  no check valve was installed in the wastewater pipe that was connected to the sump pump discharge line to prevent backflow to the water softeners;  the sump pump was not sized to pump water that came from the municipal water supply;  the sump pump system was not independent of the water supply line, but was connected to it;  the Hospital left the boiler room unattended without having a monitoring or warning system that would have given notice to the hospital personnel of the water intrusion;  the Hospital operated its water softener system during the night and early morning hours when none of its employees were present to discover a water intrusion. Cline further testified that an unidentified Culligan’s Water franchisee (“Culligan’s”) installed the plastic pneumatic lines for the control valves of the water softener system in a manner that made them vulnerable to inadvertent damage. Cline’s report states that Culligan’s should have installed valves that closed if the pneumatic lines failed or disconnected, which would have stopped the flow of water through the pipe system. Travelers brought this suit alleging that P1 negligently installed the water softener drain line in the Hospital’s mechanical room, causing it to burst and flood the room, resulting in

$237,008.24 in damages which includes $69,631.92 in lost business income. P1 now moves for partial summary judgment on Travelers’ lost business income claim. Travelers moves for partial summary judgment on P1’s comparative fault contentions. II.

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Travelers Indemnity Company, The v. P1 Group, Inc., Counsel Stack Legal Research, https://law.counselstack.com/opinion/travelers-indemnity-company-the-v-p1-group-inc-ksd-2020.