Security Building Miami, LLC. v. SOMPO America Insurance Company

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF FLORIDA

CASE NO. 1:23-CV-22407-WILLIAMS/REID

SECURITY BUILDING MIAMI,

LLC,

Plaintiff,

vs.

SOMPO AMERICA INSURANCE. CO.,

Defendant.

___________________________________/

REPORT AND RECOMMENDATION ON

CROSS-MOTIONS FOR SUMMARY JUDGMENT

Two motions are currently pending before this Court: (1) a Motion for Partial Summary

Judgment filed by Security Building Miami, LLC’s (“Plaintiff” or “SBM”) [ECF No. 48] and

Statement of Material Facts in Support [ECF No. 47]; and a Cross-Motion for Summary Judgment

filed by Sompo America Insurance Company (“Sompo Insurance”) [ECF No. 54] and Statement

of Material Facts in Support [ECF No. 55].

The Honorable Kathleen M. Williams referred this matter for a Report and

Recommendation under 28 U.S.C. § 636. [ECF No. 53]. For the reasons stated below, the

Undersigned respectfully RECOMMENDS that SBM’s Motion for Partial Summary Judgment

[ECF No. 48] be DENIED and Sompo’s Cross-Motion for Summary Judgment [ECF No. 54] be

GRANTED.

I. BACKGROUND

A. Procedural Background

This is a first-party breach of contract action brought by Plaintiff, the owner of a historic

building called The Security Building in downtown Miami, Florida. Plaintiff SBM alleges in its

Complaint that on or about May 15, 2021, the business’ personal property, and tenant

improvements and betterments suffered a loss caused by covered peril or perils, and consequently,

the business suffered a loss of income. [ECF No. 1 ¶19; ECF No. 54-2 at 2–3]. Plaintiff alleges

that its insurance policy with Defendant Sompo Insurance establishes a valid written contract

between the Parties that covers the loss. [Id. ¶ 34]. Plaintiff claims Defendant violated the terms

of the policy by failing to cover its losses. [Id. ¶ 38].

B. The Undisputed Facts1

The Undersigned finds that the following facts are undisputed. In 2015, SBM AR Owner

(“SBAR”), the former owner of The Security Building, leased the property under a fifteen-year

lease agreement to a subsidiary of WeWork, Inc., named “117 NE 1st Ave Tenant LLC.”

(collectively “WeWork”) [ECF No. 1 ¶ 12–13; ECF No. 1-4; ECF No. 47 ¶ 3; 55 ¶ 3]. Five years

later, Defendant Sompo Insurance issued a commercial property insurance policy to WeWork

effective November 1, 2020, to November 1, 2021. [ECF No. 1 ¶ 12; ECF No. 1-1]. The policy

listed SBAR as an additional named insured. [ECF No. 47 ¶ 15].

WeWork stopped paying SBAR rent in April 2020, and SBAR defaulted on its mortgage

shortly after the WeWork crash. [ECF Nos. 47 ¶ 7; 55 ¶ 7]. SBM purchased the mortgage on March

1 The Court has determined the facts, which are undisputed unless otherwise noted, based on the parties’ submissions.

Federal Rule of Civil Procedure 56 requires a Court ruling on summary judgment to hold the facts in a light most

favorable to the non-moving party.

18, 2021, and took title through a deed in lieu of foreclosure on June 11, 2021. [ECF Nos. 47 ¶ 7;

55 ¶ 7]. This type of deed included “non-merger language,” stating:

It is not intended … to operate to effectuate any merger of the fee simple interest

of Grantee in and to the Property with the still outstanding mortgage lien and

security agreement on the Property … such rights … as set forth in the Mortgage

shall survive the execution and delivery of this Deed and shall remain outstanding.

…

THIS CONVEYANCE IS EXPRESSLY MADE SUBJECT to the liens of the Loan

Documents and other permitted encumbrances and such liens and encumbrances

shall remain in full force and effect notwithstanding this conveyance.

[ECF Nos. 47 ¶ 7] (quoting [ECF No. 1-3 ¶ 4]); [55 ¶ 7]

SBAR and SBM also entered into an Assignment and Assumption of Lease Agreement

that transferred to SBM Miami, LLC:

[A]ny and all existing rights and claims Assignor [SBAR] currently holds or may

hold against the Tenant and its guarantor under the Lease arising out of any and all

liabilities, obligations, claims, costs and expenses whatsoever arising under or on

account of the Lease prior to the Effective Date.

[ECF Nos. 47 ¶ 8; 55 ¶ 8].

Plaintiff explains that this assignment gave it “two distinct and independent interests in the

Property”: owner and mortgagee. [ECF Nos. 47 ¶ 9; 55 ¶ 9]. Therefore, it “obtained all the rights

of the landlord/owner and of the mortgagee under the lease, mortgage, the policy, and the law.”

[ECF Nos. 47 ¶ 9] (internal citation omitted). WeWork members and representatives began moving

out of the property in May 2021 and hired additional movers to “remove additional business

personal property, including furniture from the Property.” [ECF No. 55 ¶ 29]. The last time any

WeWork representative visited the property was May 28, 2021. [Id. ¶ 31].

Two weeks after SBM took title to the property, on June 25, 2021, SBM filed its

“Complaint for Possession of Real Property and damages against WeWork and Tenant in the

Eleventh Circuit in . . . Miami-Dade County.” [ECF Nos. 55 ¶ 32; 70 ¶ 32]. SBM submitted a

claim, seeking coverage under the policy from the loss. [ECF Nos. 47 ¶ 20; 55 ¶ 20]. On August

2, 2021, Plaintiff submitted its “First Notice of Loss” to Sompo for damages allegedly sustained

to the property. [ECF No. 55 ¶ 35; 70 ¶ 35]. There, SBM “informed Sompo of a ‘change in

ownership and occupancy,’ and SBM confirmed that the Property was secured and vacant.” [ECF

No. 55 ¶¶ 36–37; 70 ¶¶ 36–37].

Sompo assigned SBM a claim number and assigned an outsider adjusting firm to formulate

the claim. [ECF Nos. 47 ¶ 21; 55 ¶ 21]. An outside adjusting firm sent “several new adjusters,

inspectors, and Sompo’s attorneys to conduct additional inspection of the Property” seven months

after SBM filed its claim. [ECF Nos. 47 ¶ 23; 55 ¶ 23].

Both parties agree that the date of the loss was May 15, 2021. [ECF No. 47 ¶ 15; ECF No.

55 ¶ 15].

II. LEGAL STANDARD

Federal Rule of Civil Procedure 56(a) requires that “[t]he court shall grant summary

judgment if the movant shows that there is no genuine dispute as to any material fact and the

movant is entitled to judgment as a matter of law.” A dispute is genuine “if the evidence is such

that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby,

Inc., 477 U.S. 242, 248 (1986). “A fact is material if it ‘might affect the outcome of the suit under

the governing law.’” Fonseca v. Wal-Mart Stores, E., LP, No. 18-CV-62768, 2019 WL 7371813,

at *2 (S.D. Fla. 2019) (quoting Anderson, 477 U.S. at 248).

The movant must support its assertion that there is no genuine dispute as to any material

fact by “citing to particular parts of materials in the record, including depositions, documents,

electronically stored information, affidavits or declarations, stipulations (including those made for

purposes of the motion only), admissions, interrogatory answers, or other materials[.]” Fed. R.

Civ. P. 56(c)(1)(A). “If a party . . . fails to properly address another party’s assertion of fact as

required by Rule 56(c), the court . . . may: . . . consider the fact undisputed for purposes of the

motion.” Acheron Portfolio Tr. v. Mukamal as Tr. of Mut. Benefits Keep Policy Tr., No. 18-CV-

25099, 2021 WL 7368630, at *2 (S.D. Fla. Sept. 24, 2021) (citing Fed. R. Civ. P. 56(e), report

and recommendation adopted, No. 18-25099-CIV, 2022 WL 354241 (S.D. Fla. Feb. 7, 2022),

aff’d, No. 22-10748, 2022 WL 17420869 (11th Cir. Dec. 6, 2022)).

When determining whether a genuine issue of material fact exists, courts “view all

evidence and draw all reasonable inferences in favor of the nonmoving party.” Smith v. Royal

Caribbean Cruises, Ltd., 620 F. App’x 727, 729 (11th Cir. 2015). Courts “resolve factual

controversies in favor of the nonmoving party [ ] only when there is an actual controversy, that is,

when both parties have submitted evidence of contradictory facts.” Little v. Liquid Air Corp., 37

F.3d 1069, 1075 (5th Cir. 1994). “We do not, however, in the absence of any proof, assume that

the nonmoving party could or would prove the necessary facts.” Id. (emphasis in original).

“The standard of review for cross-motions for summary judgment does not differ from the

standard applied when only one party files a motion.” Torres v. Rock & River Food Inc., 244 F.

Supp. 3d 1320, 1327 (S.D. Fla. 2016) (citing Am. Bankers Ins. Grp. v. United States, 408 F.3d

1328, 1331 (11th Cir. 2005)). “Cross-motions for summary judgment will not, in themselves,

warrant the court in granting summary judgment unless one of the parties is entitled to judgment

as a matter of law on facts that are not genuinely disputed.” Torres, 244 F. Supp. 3d at 1327

(internal quotation marks and citation omitted). “[A] court must consider each motion on its own

merits, resolving all reasonable inferences against the party whose motion is under consideration.”

Id. at 1327–28.

III. DISCUSSION

SBM moves for Partial Summary Judgment for three central reasons. First, it contends that

Sompo is liable for the losses because it is undisputed that the vacant/unoccupied exclusionary

provision does not apply. [ECF No. 48 at 3]. Second, the vacant and unoccupied exclusion does

not apply because the Claimant/Plaintiff is a lender. [Id. at 7]. And third, the theft exclusionary

provision applies. [Id. at 12].

Conversely, Sompo moves for summary judgment because, first, it is undisputed that the

property was vacant or unoccupied for sixty consecutive days before the date of loss. [ECF No. 54

at 1–2]. Secondly, the standard mortgage clause is void because Plaintiff failed to provide notice

to Sompo of the change in ownership and a change to a more hazardous occupancy of the property.

[Id.].

The undersigned will address each claim in order.

A. SBM’s Motion for Partial Summary Judgment

SBM argues summary judgment in its favor is warranted. Sompo denied the insurance

claim after concluding that the insured premises was vacant or unoccupied for a period of sixty

consecutive days prior to the date of the loss and because its investigation showed that several

items of business property had been stolen. [ECF No. 55 ¶ 24]. First, SBM contends there is no

genuine issue of material fact regarding whether the property was vacant or unoccupied and

because the policy contained a New York Standard Mortgage Clause providing that the policy

would not be invalidated by a change to a more hazardous occupancy. Also, the vacant or

unoccupied clause does not apply here because Sompo knew or should have known that the

building would become unoccupied. Regarding the theft clause, SBM maintains the theft exclusion

does not apply because the loss was not caused by theft and cannot apply in light of the New York

Standard Mortgage Clause.

(i) The Terms of the Policy.

Sompo issued a commercial property insurance policy to WeWork, which protected the

117 N.E. 1st Ave., Miami, FL 33132 property. [ECF No. 54 at 3] (internal citation omitted). The

relevant parts of the Policy state:

Perils not included: This Company shall not be liable for loss by included fire or

other perils insured against in this policy caused, directly, or indirectly, by:

* * *

24(j) nor shall this Company be liable for loss by theft.

STANDARD FIRE POLICY PROVISIONS ENDORSEMENT

* * *

Conditions suspending or restricting insurance. Unless otherwise provided in

writing added hereto this Company shall not be liable for loss occurring:

while the hazard is increased by any means within the control or knowledge of

the insured; or while a described building, whether intended for occupancy by

owner or tenant, is vacant or unoccupied beyond a period of sixty consecutive

days;

This Policy excludes loss or damage directly or indirectly caused by or resulting

from any of the following regardless of any other cause or event, whether or not

insured under this Policy, contributing concurrently or in any other sequence to the

loss.

* * *

any dishonest act, including but not limited to theft, committed alone or in

collusion with others, at any time:

a) by an Insured or any proprietor, partner, director, trustee, officer, or employee of

an Insured;

b) by any proprietor, partner, director, trustee, or officer of any business or entity

(other than a common carrier) engaged by an Insured to do anything in connection

with property insured under this Policy.

This Policy does insure acts of direct insured physical damage intentionally caused

by an employee of an Insured or any individual specified in b above, and done

without the knowledge of the Insured. In no event does this Policy cover loss by

theft by any individual specified in a or b above.

EXCLUSIONS

In addition to the exclusions elsewhere in this Policy, the following exclusions

apply unless otherwise stated:

A. This Policy excludes:

1) indirect or remote loss or damage.

2) interruption of business, except to the extent provided by this Policy

3) loss of market or loss of use

4) loss or damage or deterioration arising from any delay.

5) mysterious disappearance, loss or shortage disclosed on taking inventory, or any

unexplained loss.

* * *

GENERAL PROVISIONS

* * *

LENDERS LOSS PAYEE AND MORTGAGEE INTERESTS AND

OBLIGATION

The Company will pay for loss to specified property insured under this Policy to

each specified Lender Loss Payee (hereinafter referred to as Lender) as its interest

may appear, and to each specified Mortgagee as its interest may appear, under all

present or future mortgages upon such property, in order of precedence of the

mortgages.

The interest of the Lender or Mortgagee (as the case may be) in property insured

under this Policy will not be invalidated by:

1) any act or neglect of the debtor, mortgagor, or owner (as the case may be) of the

property.

* * *

3) change in the title or ownership of the property.

* * *

The Lender or Mortgagee will notify the Company of any known change in

ownership, occupancy, or hazard and, within 10 days of written request by the

Company, may pay the increased premium associated with such known

change. If the Lender or Mortgagee fails to pay the increased premium, all

coverage under this Policy will cease.

* * *

B. The Company may cancel this Policy and/or the interest of the Lender or

Mortgagee under this Policy, by giving the Lender or Mortgagee written notice 60

days prior to the effective date of cancellation, if cancellation is for any reason

other than non-payment.

[ECF No. 1-1 at 11–93] (emphasis added).

(ii) The Vacant or Unoccupied Clause.

SBM argues that “vacant” means property “devoid of every item of furniture and

furnishings.” See [ECF No. 48 at 3] (citing Hehemann v. Michigan Millers Mut. Ins. Co., 240 So.

2d 851, 854 (Fla. 4th DCA 1970)). In other words, “vacant” correlates with a lack of “inanimate

objects.” [ECF No. 48 at 3] (citing Hehemann, 240 So. 2d at 854). SBM argues that the property

could not have been “vacant” before the May 15, 2021, date of loss since the property had

“thousands of pieces of furniture and appliance and other inanimate objects” inside. [ECF No. 48

at 3]. Also, SBM contends under the plain meaning of the terms the “Property could not have been

vacant or unoccupied at the time of the loss because human activity in the Property was itself the

cause of the loss.” [Id. at 7] (citing Geico Gen. Ins. Co. v. Virtual Imaging Servs., 141 So. 3d 147,

157 (Fla. 2013)) (internal citation omitted). Relatedly, it also argues that it would be an

impossibility for a loss to occur when the building was vacant or unoccupied since “human activity

in the Property was itself the cause of the loss.” [ECF No. 48 at 7].

SBM admits that January 31, 2021, was the last day WeWork used the property. [ECF No.

48 at 4]. Evan Leaphart, a WeWork member, was told to move his business out of the property by

the end of February. [ECF No. 47-2 ¶ 3]. After that, according to SBM, in February the property

was used by Telemundo for two events, one in March 2021. [ECF No. 48 at 4-5]. A city meter

reader also made monthly visits to the property to read the water meter located in the basement up

until May 2021. [ECF No. 48 at 4-5]. Finally, on May 15, 2021, WeWork removed its furnishings

from the property. Id.

Although Sompo concedes that the policy left vacant or unoccupied undefined, the “plain

and ordinary meaning” of ‘vacant’ means ‘not occupied by an incumbent, possessor, or officer.’”

[ECF No. 54 at 6] (first citing Botee v. S. Fid. Ins. Co., 162 So. 3d 183, 186 (Fla. 5th DCA 2015);

then quoting Vacant, Merriam-Webster’s Online Dictionary, https://www.merriam-

webster.com/dictionary/vacant (last visited on Aug. 16, 2024)). Sompo also noted the plain

meaning of unoccupied is “not busy . . . not lived in.” Unoccupied, Merriam-Webster’s Online

Dictionary, https://www.merriam-webster.com/dictionary/unoccupied (last visited on June 21,

2024).

Sompo also cites to Eleventh Circuit caselaw that interpreted the word vacant “under a

similarly worded vacancy exclusion to mean the ‘absence of amenities minimally necessary for

human habitation.’” [ECF No. 54 at 6] (quoting Am. Mut. Fire Ins. Co. v. Durrence, 872 F.2d 378,

379 (11th Cir. 1989)). Vacancy is closely defined as property “empty or deprived of contents or

without inanimate objects.” Durrence, 872 F.2d at 379.

“Summary judgment is appropriate in a contract dispute where the contract is clear and

unambiguous on its face.” Panama Music, Corp. v. Universal Music Grp. Inc., No. 12-20200-CIV,

2013 WL 12310734, at *6 (S.D. Fla. July 9, 2013). “Language whose meaning is otherwise plain

is not ambiguous merely because the parties urge different interpretations in the litigation.” Id.

(internal quotation marks and citation omitted). Under Florida law “the elements of a breach of

contract action are: (1) a valid contract; (2) a material breach; and (3) damages.” Alhassid v. Bank

of Am., N.A., No. 14-CIV-20484, 2015 WL 11216721, at *4 (S.D. Fla. Sept. 14, 2015) (internal

quotation marks omitted) (citing J.J. Gumberg Co. v. Janis Servs., Inc., 847 So. 2d 1048, 1049

(Fla. 4th DCA 2003)).

Further, “[t]o constitute a vital or material breach, a defendant’s non-performance must be

such as to go to the essence of the contract.” Marchisio v. Carrington Mortg. Servs., LLC, 919

F.3d 1288, 1313 (11th Cir. 2019) (quoting Sublime, Inc. v. Boardman’s Inc., 849 So. 2d 470, 471

(Fla. 4th DCA 2003)). A court must construe the “contract in its entirety, striving to give every

provision meaning and effect.” See Dahl–Eimers v. Mut. of Omaha Life Ins. Co., 986 F.2d 1379,

1382 (11th Cir. 1993) (citing Excelsior Ins. Co. v. Pomona Park Bar & Package Store, 369 So.2d

938, 941 (Fla. 1979)). Of course, a “court cannot rewrite an insurance contract to extend coverage

beyond what is clearly set forth in the contractual language.” Szczeklik v. Markel Int’l Ins. Co.,

Ltd., 942 F.Supp.2d 1254, 1260 (M.D. Fla. 2013) (quoting Fla. Residential Prop. & Cas. Joint

Underwriting Ass’n v. Kron, 721 So.2d 825, 826 (Fla. 3d DCA 1998)). A district court does,

however, have power to “interpretat[e] . . . an insurance contract [as] a matter of law.” Gulf Tampa

Drydock Co. v. Great Atlantic Ins. Co., 757 F.2d 1172, 1174 (11th Cir. 1985).

“Striving to give every provision meaning and effect,” the Court will first follow the

simple, clear definition of “vacant” that Black’s Law Dictionary provides. See Dahl–Eimers, 986

F.2d at 1382 (citing Excelsior Ins. Co., 369 So.2d at 941. Vacant, as an adjective and in the

insurance context, means “empty; unoccupied.” Vacant, Black’s Law Dictionary (10th ed. 2014)

(emphasis added). As a noun, vacant is “[t]he quality, state, or condition of being unoccupied, esp.

in reference to an office . . . .” Id. (emphasis added). Black’s Law Dictionary adds that courts

sometimes distinguish vacant from unoccupied, where the former means “completely empty”

while the latter can mean “not routinely characterized by the presence of human beings.” Id.

Applying the definition here, “vacant” and “unoccupied” are one and the same. So, the

question remains whether there is a genuine dispute if the property was vacant or unoccupied for

sixty consecutive days before the May 15, 2021, date of loss. The Court believes there is none. See

Sec. Bldg. Miami, LLC v. Sompo Am. Ins. Co., No. 1-23-CV-22407, 2024 WL 712455, at *4 (S.D.

Fla. Feb. 2, 2024), report and recommendation adopted, 23-22407-CV, 2024 WL 707237 (S.D.

Fla. Feb. 20, 2024) (finding in Sompo’s Motion to Dismiss that the Notice of Loss stated that the

“property is secured and is currently vacant,” but that language does not unambiguously reveal

that the property was “vacant or unoccupied beyond a period of sixty consecutive days.”).

Based upon the plain meaning of the terms, the undersigned concludes that the undisputed

facts show that the property was vacant or unoccupied for sixty consecutive days before May 15,

2021. First, in the state court action against WeWork, SBM stated that WeWork “abandoned the

lease and vacated the premises” in April 2020, a year before the May 15, 2021, date of loss, where

the property “sat empty.” [Id.] (citing Security Building Miami, LLC v. 117 NE 11st Ave Tenant

LLC, No. 2021-015090-CA-01 ¶¶ 33, 402). Importantly, it is undisputed that on January 31, 2021,

over three months before the date of the loss, WeWork stopped operating as a co-working center

and told its members to leave by that date. [ECF No. 47 ¶ 6]. At the beginning of 2021, Andrew

Brown, WeWork’s property manager, explained that he started “decommissioning the IT

infrastructure”—removing essential hardware, wiring, and the access control system. [Id.] (citing

[ECF No. 54-3 ¶¶ 8–9]). According to Brown’s affidavit, the team finished this process in February

2021, leaving the property vacant for over sixty days before the May 15, 2021, date of loss. [ECF

No. 54 at 8]. After January 31, at best, SBM has noted only intermittent occupancy, not continuous

occupancy, which clearly changed the use of the building.

It is undisputed that in or around April 2020, WeWork relinquished control of the Property.

Security Building Miami, LLC, No. 2021-015090-CA-01 ¶ 33. On June 22, 2022, Sompo issued

its denial of coverage letter. [ECF No. 47-4]. It noted the date of loss as May 15, 2021. [Id. at 1].

On August 2, 2021, SBAR/SBM provided Notice of Loss to Sompo with a date of

loss on or about May 15, 2021, claiming, ‘real property’ damage including ‘related

water and mold damages,’ ‘personal property,’ ‘loss of gross profit,’ and ‘possible

other damages.’ McLarens was assigned as the independent adjuster to investigate

the claim on behalf of Sompo. McLarens first inspected the Property in October.

[Id. at 3] (emphasis added).

Sompo contends that the property was vacant as early as January 2021 as it was “stripped

of most of the . . . personal property and was no longer being used for its intended purposes.” [ECF

No. 77 at 2]. Andrew Brown, WeWork’s technological senior manager, stated in his affidavit that

“on or about January 14, 2021, WeWork notified JLL, WeWork’s property manager, of the

impending closure of the Property and began removing property from the premises.” [ECF No.

2 WeWork and SBM settled this action. WeWork agreed to pay $5,556,740 while SBM dismissed the complaint

with prejudice. [ECF No. 47-4 at 3].

55-6 ¶ 8]. Brown witnessed the “decommissioning” of the information technology infrastructure,

removal of essential hardware, and “wiping of non-essential equipment including [the] access

control system.” [Id. ¶ 9].

By February—though Plaintiff disputes this point—property manager JLL placed a

padlock on the entrance. [ECF No. 55-6 ¶ 10]. WeWork then hired Dataknox Solutions, Inc. in

May 2021 to “complete the final stage of decommissioning the IT infrastructure by removing all

remaining equipment including . . . cameras, speakers, and keycard readers. All of the equipment

was cut at the wire where appropriate to allow for reinstallation by the property owner or the next

tenant.” [Id. ¶ 12]. In Sompo’s First Set of Interrogatories to Plaintiff’s president, Eyal Peretz, was

asked to “[i]dentify all Persons that were present at the Property from March 15, 2021, to May 15,

2021.” [ECF No. 54 at 10–11 n.3]. Peretz answered “that only a single individual, Reece Williams,

occupied the Insured Premises during this 60-day period.” [ECF No. 54 at 10–11 n.3] (internal

citation omitted).

SBM cites two facts to establish that the property was not vacant. First, there was a

Telemundo party on the property on February 4 and 12, 2021, and again in March. [ECF No. 48

at 4]. SBM provides an apparent City of Miami Police Department report, where unnamed officers

worked “extra duty detail” on February 4, 2021, at 7:14 a.m. for “Telemundo Production until

2000HRS.” [ECF No 48-2 at 3]. SBM’s manager stated in his affidavit that “between March 3,

2021, and March 18, 2021, I . . . was prevented from entering the Property by a security guard who

advised that an event was taking place within the Building. I could see a bunch of people moving

around inside . . . .” [ECF No. 70-1 ¶ 3]. He continues, “I had a clear view of the doors to the front

entrance of the Building. None of the doors had a padlock.” [Id. ¶ 4].

These facts SBM supplies to prove the property was not vacant are wholly insufficient to

prove no genuine issue of material fact. First, Telemundo holding an event, SBM’s manager stating

he could see a “bunch of people moving around inside” while he was outside the property, and a

threadbare police report that unnamed officers worked “extra duty detail” for “Telemundo

Production” all lack even a “mere scintilla of evidence in support” of SBM’s position. See

Flamingo S. Beach I Condo. Ass’n, Inc. v. Selective Ins. Co. of Southeast, 492 F. App’x 16, 26

(11th Cir. 2013) (quoting Anderson, 477 U.S. at 249–50). Second, even if SBM could establish

that Telemundo had a gathering inside the property in February 2021, it would nonetheless “fall

outside of the Policy’s vacancy or unoccupied exclusion 60-day window” since Telemundo is not

a policyholder. [ECF No. 77 at 5].

Indeed, the policy states that “[u]nless otherwise provided in writing added hereto this

Company should not be liable for loss occurring . . . while a described building, whether intended

for occupancy by owner or tenant, is vacant or unoccupied beyond a period of sixty consecutive

days.” [ECF No. 1-1 at 12] (emphasis added). Therefore, a third-party gathering is disconnected

from the policy’s “intended use” and outside any activity Sompo anticipated when drafting its

policy. [ECF No. 77 at 5].

This overlaps with SBM’s equally unavailing fact of Miami-Dade County Water and Sewer

employees checking the property’s meter. It lists four instances in 2021 where a meter reader

entered the property’s basement to take a quick, handheld reading of the fire line and water meter.

[ECF No. 48-1 at 1–15]. This, too, is insufficient. See JJD Associates of Palm Beach, Ltd. v. Am.

Empire Surplus Lines Ins. Co., No. 11-80247-CV, 2011 WL 5873061, at *3 (S.D. Fla. Nov. 22,

2011) (“informal use of the vacant premises to store tools and sporadic entry by the agent for the

center and maintenance personnel are not the ‘customary’ operations contemplated by the

policy.”); see also Langill v. Vermon Mut. Ins. Co., 268 F.3d 46, 48 (1st Cir. 2001) (“random

evening visits hardly provide the appearance of somebody being at home . . . .”). There is no

evidence provided that the meter reader used any of the property’s amenities to take the reading or

that the city meter reader was an employee of WeWork or SBM. [ECF No. 54 at 12].

Thus, there is no genuine dispute of material fact regarding whether the property was

continuously vacant or unoccupied for 60 consecutive days prior to the date of the loss. See Fed.

R. Civ. P. 56(a). Unfortunately, for SBM, the undisputed facts establish that it was.

(iii) SBM did not adhere to the Standard Mortgage Clause provisions.

Next, SBM contends that even if the Court were to find that the vacant/unoccupied clause

applies, SBM could nonetheless prevail as a mortgagee under the policy’s Lenders Loss Payee

provision, i.e., the Standard Mortgage Clause. [ECF No. 48 at 7]. SBM argues that under the clause

“[i]ts interest cannot be affected by the unoccupied exclusion that pertains to a more hazardous

occupancy status.” [Id.].

a. SBM did not adhere to the Standard Mortgage Clause provision, requiring

timely notice of change in occupancy.

First, SBM argues that it is a “lender” protected under the policy, even when there is a

change to a more hazardous occupancy. [ECF No. 48 at 7]. The New York Standard Mortgage

Clause reads, in part, that “[t]he interest of the . . . Mortgagee . . . in the property insured under

this Policy will not be invalidated by: change to a more hazardous occupancy.” [ECF No. 1-1 at

93]. While SBM concedes that properties are more hazardous when vacant or unoccupied, it claims

that it is a mortgagee whose interest cannot be affected. [Id.].

Sompo argues that SBM fails to cite any caselaw from this Court or Florida that supports

its proposition. [ECF No. 54 at 13]. Moreover, Sompo accuses SBM of “cherry picking” relevant

portion of the Standard Mortgage Clause, when, in fact, “Plaintiff failed to comply with multiple

conditions under the Standard Mortgage Clause provision before the date of loss, which caused

prejudiced to Sompo and forecloses the applicability of clause.” [Id.].

Sompo spotlights a fatal fact: SBM’s failure to timely notify Sompo of either the change

in ownership (SBM acquiring the mortgage from SBAR) or the actual theft that occurred, which

is the more hazardous condition. See [id. at 13].

The mortgage’s language is certainly clear:

The Lender or Mortgagee will notify the Company of any known change in

ownership, occupancy, or hazard and, within 10 days of written request by the

Company, may pay the increased premium associated with such known change. If

the Lender or Mortgagee fails to pay the increased premium, all coverage under

this Policy will cease.

* * *

B. The Company may cancel this Policy and/or the interest of the Lender or

Mortgagee under this Policy, by giving the Lender or Mortgagee written notice 60

days prior to the effective date of cancellation, if cancellation is for any reason

other than non-payment.

[ECF No. 1-1 at 99] (emphasis added).

SBM simply did not adhere to this provision. “In assessing a written agreement, the parties’

intent ‘is derived from the objective meaning of the words . . . .” Julian Depot Miami, LLC v. Home

Depot U.S.A., Inc., 364 F. Supp. 3d 1354, 1359 (S.D. Fla. 2018) (quoting Feaz v. Wells Fargo

Bank, N.A., 745 F.3d 1098, 1104 (11th Cir. 2014)). First, the mortgage is clear that SBM must

notify Sompo of any known change in ownership, occupancy, or hazard within ten days. Alice Hu,

Sompo’s Chief Operating Officer, attested in her affidavit that “there are no other documents

notifying Sompo of a change in the Property’s occupancy or hazard until August 2, 2021” –– in

other words, after the May 15, 2021, date of loss. [ECF No. 54-4 ¶ 7]. Once SBM did notify

Sompo, it stated that the property was now vacant. [Id. ¶ 8].

Second, it is not too far of a leap to conclude that leaving a property vacant would lead to

a more hazardous condition. Third, the Court agrees with Sompo that all SBM needed to do “when

[it] knew there was a mass exodus by the Insureds,” was notify Sompo so “Sompo could have

reassessed the risk and/or assessed additional premiums or canceled the Policy, whichever it

deemed appropriate at that time.” [ECF No. 54 at 15]. Therefore, SBM’s argument is unavailing.

b. The vacancy exclusion applies.

SBM second sub-argument argues that the vacancy/unoccupied exclusion is now

irrelevant “because the pre-requisite condition required for the exclusion to apply does not exist in

this case.” [ECF No. 48 at 8]. The loss here would still have occurred even if the property was

vacant or unoccupied. [Id.]. “Indeed, the loss occurred because people went into the Property and

caused it. As such, the vacant or unoccupied provision does not apply, and Plaintiff is entitled to

coverage.” [Id.]. Sompo provides no real response. Nevertheless, this argument is speculative at

best. Also, as the Court will address below, WeWork was a policyholder. This argument fails to

persuade the Court that there is no genuine issue of material fact on this issue.

c. SBM’s estoppel claim is meritless.

SBM also contends that Sompo would be estopped from denying coverage “because it

knew or should have known that the building would become unoccupied; yet it elected to insure

the building in the face of that knowledge.” [Id.]. It draws support from Poland v. Phillips, 371

So. 2d 1053, 1056 (Fla. 3d DCA 1979) that an “insurance policy may not be issued on a vacant

building and then be excluded from coverage because it is a vacant building.” SBM believes that

the facts here are germane to Poland because Sompo “knew or should have known that the building

would become unoccupied.” [ECF No. 48 at 9]. The dispositive facts SBM draws support from is

that the insurance policy is “sophisticated,” and Sompo knowing WeWork had “financial

troubles.” [Id.].

The Court finds this argument meritless, however. It is not Sompo’s responsibility to

monitor the state of WeWork’s financial well-being. Instead, SBM needed to abide by the

insurance policy and notify Sompo of the ongoing eviction and state court proceeding between

SBM and WeWork. See [ECF No. 1-1 at 11–93]. This argument is unavailing.

(iv.) SBM’s Arguments Regarding the Alleged Theft of the Furnishings Fail.

SBM’s raises several arguments about the alleged theft of the furnishing. First, it argues

that the property could not have been vacant because the only way a loss or theft could have

occurred is by a third party accessing or occupying the property to effectuate the loss or theft. [ECF

No. 48 at 9–10]. And even if the property was occupied while a theft took place, SBM’s argument

still fails because the acts do not conform to the “intended uses of the Insured Premises and

therefore do not constitute occupancy.” [Id.].

SBM argues that the May 15, 2021, loss was not caused by “theft.” [ECF No. 48 at 10].

First, despite its “attempt[] to report” theft to the City of Miami Police Department, the police

ostensibly told someone that day (it is unclear whom) that this was a “civil matter.” [Id.]. Second

SBM believes that Florida’s landlord lien statute applies. [Id.] (quoting Fla. Stat. § 83.08). Third,

WeWork cannot steal its own property. [Id.]. SBM puts the most weight on its third point:

“WeWork cannot steal its own property.” [ECF No. 48 at 10]. It connects this argument to

Florida’s theft statute, Fla. Stat. § 812.014, that requires an intent element to deprive another of its

property. [Id.]. Therefore, “the removal of the property damaged Plaintiff, but it was not theft;

therefore, the theft exclusion cannot apply.” [Id.].

SBM adds that the theft exclusion should also extend to the New York Standard Mortgage

Clause because “‘the mortgagee’s coverage will not be invalidated by a foreclosure, a change in

ownership, a more hazardous use of the property, or a loss caused by the neglect of the owner,

provided that the mortgagee pays any premium demanded should the owner fail to do so.’” [Id. at

11] (Indep. Fire Ins. Co. v. NCNB Nat’l Bank, 517 So. 2d 59, 63 (Fla. 1st DCA 1987)). Indeed,

the First District Court of Appeal held thirty-seven years ago that a New York standard mortgage

clause “create[d] a separate agreement between the insurance company and the mortgagee in which

policy provisions of the insurance contract not in conflict with the mortgage clause become part

of this separate contract.” Indep. Fire Ins. Co., 517 So. 2d at 63.

Applying that law to these facts, as SBM argues, the New York Standard Mortgage created,

in part, an independent contract between the insurer and the Plaintiff, “providing slightly different

rights to SBM Miami than were provided to WeWork.” [ECF No. 48 at 11]. Thus, “even if the loss

was caused by theft—which it was not—that theft was an ‘act’ of WeWork.” [Id.].

SBM’s argument fails because the “Standard Mortgage Clause protects the lender or

mortgagee’s interests when the property owner’s act or failure to comply violates a policy

obligation or prohibition.” [ECF No. 54 at 15] (internal citation omitted). The policy included an

exception for loss resulting from “any dishonest act, including but not limited to theft, by an

insured.” [ECF No. 1-1 at 11–93]. Put differently, the policy does not provide for theft by the

insured. See [ECF No. 54 at 16]. Both Parties agree that the furnishings were taken by one of the

insured, WeWork.

The undersigned agrees that it would be illogical if a policyholder could steal its joint

policyholder’s property and then recover from the insurer. Certainly, nothing in the “Standard

Mortgage Clause create[d] separate coverage for this type of loss.” [ECF No. 54 at 16]. The same

reasoning applies to SBM’s argument that WeWork cannot steal its own property. [ECF No. 48 at

10]. Again, the policy states that the insured is excluded from coverage for “mysterious

disappearance, loss or shortage disclosed on taking inventory, or any unexplained loss.” [ECF No.

1-1 at 11–93]. The photographs included in Plaintiff’s Reply to Defendant’s Response in

Opposition to Plaintiff’s Motion for Partial Summary Judgment depict movers putting equipment

and furnishings, ostensibly WeWork’s, into an Enterprise moving truck. [ECF 70-1 at 5–7].

SBM admits it “attempted to report” a loss to the City of Miami Police Department. [ECF

No. 48 at 10]. Sompo denied the May 15, 2021, date of loss because the “claim for damage

associated with Tenant’s theft is excluded by the Loss by Theft and Theft by Insured exclusions.”

[ECF No. 47-4 at 5]. Hunt’s affidavit also states that several items of “business personal property”

were stolen. [ECF No. 54-4 ¶ 10].

Thus, after reviewing the record, SBM failed to carry its burden of showing no genuine

issue of material fact that Sompo breached its policy agreement. See Fed. R. Civ. P. 56(a). As such,

the undersigned cannot recommend that SBM’s partial summary judgment motion be granted.

C. Sompo’s Motion for Summary Judgment

Sompo also moved for summary judgment. See generally [ECF No. 54]. It argues that the

Court should grant the motion because, first, the undisputed material facts show that the property

was vacant/unoccupied for sixty consecutive days before the date of loss. [ECF No. 54 at 1].

Second, the New York Standard Mortgage Clause is “void” because SBM failed to notify Sompo

of a change in ownership and that the building was now a more hazardous occupancy, which

prejudiced Sompo. [Id. at 1–2].

Sompo also filed its Statement of Additional Material Facts. [ECF No. 55]. Following

SBM’s Response [ECF No. 70], it is undisputed that “In May 2021, WeWork hired additional

movers to remove additional business personal property, including furniture from the Insured

premises.” [ECF Nos. 55 ¶ 29; 70 ¶ 29]. WeWork’s representatives or members last visited the

property on May 28, 2021. [ECF Nos. 55 ¶ 31; 70 ¶ 31]. “On June 25, 2021, Plaintiff filed a

Complaint for Possession of Real Property and Damages against WeWork and Tenant in the

Eleventh Judicial Circuit Court in and for Miami-Dade County . . . .” [ECF Nos. 55 ¶ 32 (internal

citation omitted); 70 ¶ 32]. Then on August 2, 2021, SBM “sent its First Notice of Loss to Sompo

for alleged damage to the Insured Premises . . . .” [ECF Nos. 55 ¶ 35; 70 ¶ 35]. The Parties agree

that SBM notified Sompo of a change in ownership and occupancy. [ECF Nos. 55 ¶ 36 (quotation

marks omitted; 70 ¶ 36]. The Parties agree that SBM “also confirmed that, at the time of the Notice,

the Insured Premises was ‘secured’ and ‘vacant.’” [ECF Nos. 55 ¶ 37; 70 ¶ 37].

(i) Sompo Established that the Property was Vacant.

For the reasons already discussed, see supra pp. 9–18, the Court finds no genuine dispute

of material fact that the property was vacant. Sompo argues SBM “made several affirmative

statements” that the property was vacant—like advising the state court “that the Insured Premises

was vacant for at least one year prior to the date of loss and that in April 2020, [and] Tenant

abandoned the lease and vacated the premises.” [ECF No. 54 at 7]. SBM confirmed that “‘[i]n or

about April 2020, Tenant vacated and abandoned the Insured Premises, and that the [Insured

Premises] sat empty since that time.’” [Id.]. It then filed the Notice of Loss, stating WeWork “left

the property” and that it was now “secured and currently vacant.” [Id.] (internal citation omitted).

Sompo lastly highlights that WeWork began removing the property’s IT infrastructure, and the

property manager placed a padlock on the entrance door. [Id. at 8, 10].

SBM rejects Sompo’s argument because Sompo contradicted itself when it admitted that

WeWork hired movers on or about May 2021. [Id.] (citing [ECF No. 55 ¶ 6]. Sompo then admitted

that on or about May 2021, Dataknox removed technological equipment from the property. [ECF

No. 74 at 3] (citing [ECF No. 55 ¶ 19]. Therefore, if the property were vacant 60 days prior to May

15, 2021, WeWork would not have been hiring movers to remove the business property, furniture,

cameras, speakers, and keycard readers from the Property.” [ECF No. 74 at 3].

These facts do not persuade the Court to change its position. Vacant, as an adjective and in

the insurance context, means “empty; unoccupied.” Vacant, Black’s Law Dictionary (10th ed.

2014). As a noun, vacant is “[t]he quality, state, or condition of being unoccupied, esp. in reference

to an office . . . .” Id. Sompo carried its burden to show no genuine issue of material fact that the

property was vacant or unoccupied for sixty consecutive days. See Fed. R. Civ. P. 56(a). Summary

Judgment should be granted on this part.

(ii) The Undisputed Facts Show that SBM Failed to Timely Notify Sompo of a Change in

Ownership and the Change to a More Hazardous Occupancy.

Sompo argues it is undisputed that SBM failed to comply with the Standard Mortgage

Clause requirements of (1) notifying Sompo of the change in ownership from SBAR to SBM and

(2) notifying Sompo that the property was vacant and now created a more hazardous occupancy.

[ECF No. 54 at 13] (citing [ECF No. 1-1 at 11–93]). The failure to notify resulted in prejudice to

Sompo because it denied it “the opportunity to determine whether an additional premium is due

and payable to continue coverage . . . .” [ECF No. 54 at 13] (quoting Indep. Fire Ins. Co., 517 So.

2d at 64). Sompo believes that a lender may be precluded from recovery under a standard mortgage

clause where:

(1) a described “change” or “increase in hazard” falling within the meaning of the

policy has occurred; (2) that such change or increase was so substantial that the risk

insured by the insurer materially increased; (3) that such change occurred after the

effective date of the insurance; and (4) that the mortgagee’s violation of the notice

requirement caused the insurer’s failure to cancel the policy or demand an

additional premium.

[ECF No. 54 at 13] (citing Smith v. Peninsular Ins. Co., 181 So.2d 212 (Fla. 1st DCA 1966)).

The Court concludes that Sompo is correct. Therefore, Sompo carried its burden and

established no genuine dispute of material fact that SBM failed to follow the requirement provided

in the New York Standard Mortgage. See Fed. R. Civ. P. 56(a). Summary Judgment should be

granted on this part.

(iii) Theft by an Insured is Not a Covered Loss.

Lastly, Sompo states there is no genuine issue of material fact on whether theft is a covered

loss. [ECF No. 54 at 15]. First, Sompo directs the Court to its policy, which explicitly “excludes

coverage for loss that result from ‘any dishonest act, including but not limited to theft, by an

insured.’” [Id. at 16]. Second, The Standard Mortgage Clause also does not create “separate

coverage” for theft. [Id.]. Sompo claims that “theft, removal, or ‘mysterious disappearance’ of the

business personal property were acts of the Insureds and therefore are all excluded causes of loss

under the Policy.” [Id.].

As the Undersigned as already found, SBM failed to establish any genuine issue of material

fact regarding whether this theft is covered by the Standard Mortgage Clause. The undisputed facts

establish that SBM and WeWork were joint-policy holders and that WeWork took the furnishings

that SBM now complains of. See [ECF Nos. 47 ¶ 13; 55 ¶ 13].

Sompo carried its burden to establish no genuine issue of material fact that a theft by the

insured occurred that excludes SBM from coverage. See Fed. R. Civ. P. 56(a). Summary judgment

should be granted.

IV. CONCLUSION

Based on the reasoning above, it is RECOMMENDED that Security Building Miami, LLC’s

Motion for Partial Summary Judgment [ECF No. 48] be DENIED. It is further

RECOMMENDED that Sompo America Insurance Company’s Motion for Summary Judgment

[ECF No. 54] be GRANTED.

Objections to this Report may be filed with the District Judge within fourteen days of

receipt of a copy of the Report. Failure to timely file objections will bar a de novo determination

by the District Judge of anything in this recommendation and shall constitute a waiver of a party’s

“right to challenge on appeal the district court’s order based on unobjected-to factual and legal

conclusions.” 11th Cir. R. 3-1; see also Harrigan v. Metro-Dade Police Dep’t Station #4, 977 F.3d

1185, 1191-92 (11th Cir. 2020); 28 U.S.C. § 636(b)(1)(C).

SIGNED this 16th day of September 2024.

Lt Rel

-*LISETTEM.REID)

UNITED STATES MAGISTRATE JUDGE

ce: US. District Judge Kathleen M. Williams; and

All Counsel of Record

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