Bear Investments, LLC v. Penn National Mutual Casualty Insurance Company

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF NORTH CAROLINA

WESTERN DIVISION

NO. 5:19-CV-529-FL

BEAR INVESTMENTS, LLC, )

)

Plaintiff, )

)

v. ) ORDER

)

PENN NATIONAL MUTUAL )

CASUALTY INSURANCE COMPANY, )

)

Defendant. )

This matter comes before the court on cross-motions for summary judgment (DE 62, 73).

The issues raised are ripe for ruling. For the following reasons, plaintiff’s motion is denied and

defendant’s motion is granted in part and denied in part.

STATEMENT OF THE CASE

Plaintiff commenced this action October 8, 2019, in Superior Court of Cumberland County,

North Carolina, asserting a single claim for breach of contract arising from defendant’s failure to

pay for damages sustained to plaintiff’s commercial property as a result of Hurricane Matthew.

Defendant removed the action to this court November 21, 2019, on the basis of diversity

jurisdiction under 28 U.S.C. § 1332, defendant timely filed answer, and discovery proceeded under

the terms of the court’s January 23, 2020, case management order. That order was amended

September 24, 2020, with consent of both parties following withdrawal and replacement of

plaintiff’s counsel.

Thereafter, the court granted plaintiff’s consent motion to stay the case pending appraisal

of the property at issue. The parties filed March 15, 2022, a status report indicating that the

appraisal process had concluded. The court lifted the stay and entered amended case management

order.

On September 16, 2022, plaintiff moved to amend the complaint to add: 1) Economy of

Cumberland Self Storage, LLC, (“Economy”) as an additional plaintiff, 2) a second breach of

contract claim for failure to pay for damage to the property arising from Hurricane Florence, 3) a

claim for bad faith under North Carolina common law, 4) a claim for violation of North Carolina’s

Unfair and Deceptive Trade Practices Act (“UDTPA”), see N.C. Gen. Stat. §§ 58-63-15, 75-1.1,

and 5) additional factual allegations. Such amendment was opposed by defendant.

A few weeks later, plaintiff moved to supplement its motion to amend, filing a new

proposed amended complaint that removed Economy as a plaintiff, removed the second contract

claim, and added additional factual allegations. Defendant opposed the motion to amend and

moved to strike such motion to supplement inter alia for failure to comply with the deadlines

enumerated in the Federal Rules of Civil Procedure, the court’s case management order, and this

court’s local rules. The parties jointly moved to continue the dispositive motions deadline in light

of issues pending before the court, and this motion to continue was granted.

The court held hearing on motions then pending January 27, 2023, at which the court

granted plaintiff’s motions to amend and denied defendant’s motion to strike. Plaintiff filed

amended complaint January 31, 2023. The parties proposed limited additional discovery, and the

court ordered deadlines for such discovery and amended deadlines for dispositive motions March

2, 2023.

Thereafter, defendant filed partial motion for judgment on the pleadings, seeking dismissal

of plaintiff’s newly-added claims. The court granted the motion by order entered November 8,

2023, with respect to plaintiff’s UDTPA claim arising from damages sustained as a result of

Hurricane Matthew and its bad faith claim but denied the motion with respect to plaintiff’s UDTPA

claim arising from damages sustained as a result of Hurricane Florence and its fraud claim.

The instant motions followed April 1, 2024. Plaintiff seeks summary judgment in its favor

with respect to each of its three claims. Defendant likewise moves for summary judgment, seeking

dismissal all of plaintiff’s claims.

Plaintiff relies in support of its motion upon: 1) eight affidavits by persons involved in the

underlying coverage dispute and the resumes of those persons; 2) engineering reports, inspections,

and appraisals of the damaged commercial property; 3) correspondence between the parties and

between persons involved with the claim and coverage dispute; 4) two notices of property loss; 5)

an report by its expert witness, Donald L. Dinsmore (“Dinsmore”), and documents relied upon in

that report; and 6) depositions of Neil R. Baer, P.E. (“Baer”); Dereck L. Rabun, P.E. (“Rabun”);

Craig Graham (“Graham”); Eric Long (“Long”); Boyd Wright, (“Wright”); defendant, by and

through Brian Claude Woods (“Woods”), under Federal Rule of Civil Procedure 30(B)(6); William

Hamrick Jr., (“Hamrick”); and Michael M. Gibson (“Gibson”).1 Defendant relies in support of its

motion upon some of the same documents, and: 1) plaintiff’s articles of incorporation and certain

warranty deeds; 2) two depositions of James Smith, Sr. (“Smith”), and depositions of Jeffrey

Raines (“Raines”), Lewis O’Leary, Jr., (“O’Leary”), Dinsmore, Kevin Correia (“Correia”), and

Ricky Hall (“Hall”); 3) additional correspondence between the parties and between persons

1 An appendix comprising an index of names, describing each individual or entity’s role and affiliation, is

attached hereto.

involved with the claim and coverage dispute; 4) additional estimates and invoices; 5) the relevant

insurance policies; and 6) the appraisal award.

Plaintiff submitted with its opposition brief an affidavit by Smith addressing its interest in

the property. Defendant resubmitted some evidence already relied upon the parties, a claims file

diary entry, and an affidavit by its attorney.

STATEMENT OF UNDISPUTED FACTS

The relevant undisputed facts may be summarized as follows. Plaintiff is the operator of a

commercial storage facility located at 815 Gillespie Street, Fayetteville, North Carolina (the

“property”). (Plf’s SMF (DE 89) ¶¶ 2-3).2 In November 2014, plaintiff conveyed ownership of

the property to Economy of Cumberland Self Storage, LLC, but continued to employ a manager

of the property and maintains responsibility for a loan secured by the property. (Def’s SMF (DE

92 ¶ 3)); (DE 80-3 at 2). At all times relevant to this action, the property was insured by defendant.

(Plf’s SMF (DE 89) ¶ 4).

In October 2016, Hurricane Matthew made landfall and damaged the property. (Plf’s SMF

(DE 89) at 5). Plaintiff submitted a repair estimate from Evans Contracting in the amount of

$348,480.00. (Def’s SMF (DE 92) ¶ 10). Defendant then hired an engineer, Ron Bittler, P.E.

(“Bittler”), who conducted an inspection “to determine damage causation and extent of damage to

the” property and “to review and comment on” the estimate by Evans Contracting. (DE 65-1 at

3). In a report dated December 1, 2016, Bittler noted some pre-existing damage and concluded

that “only 5% to 10% of roof damage [could] be attributed to the storm event.” (DE 80-8 at 4).

Defendant paid plaintiff $75,000.00 in December 2016. (Def’s SMF (DE 92) ¶ 15).3 In February

2 Where a fact asserted in the movant’s statement of material fact is undisputed, the court cites to the opposing

parties’ responsive statements of facts, where it indicates the fact is admitted, undisputed, or without opposing fact.

3 Plaintiff disputes whether this payment was in settlement of the claim, but not the fact or amount of payment.

2018, plaintiff hired Southeastern Home Builders of Clinton, LLP to undertake $32,500.00 in

repairs to the property. (See DE 80-10 at 2; 83-7 at 23-25).

On or about September 14, 2018, Hurricane Florence damaged the property. (Def’s SMF

(DE 92) ¶ 24), and plaintiff submitted a claim to defendant for damages arising from that storm.

(Id. ¶ 25). Defendant hired an independent adjuster, Jim Majors, who conducted an inspection,

and estimated damage in the amount of $86,738.94. (Id. ¶ 26-27). Bittler undertook a second

inspection, and produced another report. (Id. ¶ 30). On January 30, 2019, defendant sent plaintiff

a reservation of rights letter that did not deny plaintiff’s claim, but stated that there defendant had

identified “several areas of concern which could . . . limit or exclude coverage.” (DE 67-7 at 2).

On September 4, 2019, defendant’s adjuster represented that while defendant “continue[d] to

handle [the] loss under a full and complete reservation of rights,” he had “issued payment for . . .

$85,738.94 . . . in good faith toward settlement of the loss.” (DE 81-7 at 2).

In November 2019, the parties began an appraisal process set forth in the policy. Plaintiff

chose Danny Partin (“Partin”) as its appraiser, defendant chose Graham as its appraiser, and the

two appraisers selected Gibson as umpire. (DE 98-2 at 2). After inspection, Graham expressed

his opinion that “replacement is the only way to make repairs” to John Malone, counsel for

defendant. (DE 71-4 at 171). Malone responded, “[p]lease do not agree to proceed with appraisal

before we speak,” (id.), and after Graham spoke with Malone and Wright, he completed an

appraisal which recommended repairing rather than replacing the roof. (Id. at 99; DE 71-4 at 144-

49). That appraisal also cites an “engineer inspection” stating the structure was “20% damaged by

wind,” (DE 71-4 at 144-49), but no report with this figure has surfaced.

The final appraisal award, signed by plaintiff’s appraiser and the umpire, states a

replacement cost of $5,643,546.15. (DE 68-1). On March 25, 2022, defendant paid plaintiff

$473,073.38, representing, in defendant’s opinion, “the portion of the appraisal award that [it]

determined is covered by the . . . policies,” less amounts previously paid and applicable

deductibles. (DE 67-9 at 2).

COURT’S DISCUSSION

A. Standard of Review

Summary judgment is appropriate where “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.” Fed. R.

Civ. P. 56(a). The party seeking summary judgment “bears the initial responsibility of informing

the district court of the basis for its motion, and identifying those portions of [the record] which it

believes demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett,

477 U.S. 317, 323 (1986).

Once the moving party has met its burden, the non-moving party must then “come forward

with specific facts showing that there is a genuine issue for trial.” Matsushita Elec. Indus. Co. Ltd.

v. Zenith Radio Corp., 475 U.S. 574, 586–87 (1986). Only disputes between the parties over facts

that might affect the outcome of the case properly preclude the entry of summary judgment. See

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48 (1986) (holding that a factual dispute is

“material” only if it might affect the outcome of the suit and “genuine” only if there is sufficient

evidence for a reasonable jury to return a verdict for the non-moving party).4

“[A]t the summary judgment stage the [court’s] function is not [itself] to weigh the

evidence and determine the truth of the matter but to determine whether there is a genuine issue

for trial.” Id. at 249. In determining whether there is a genuine issue for trial, “evidence of the

non-movant is to be believed, and all justifiable inferences are to be drawn in [non-movant’s]

4 Throughout this order, internal citations and quotation marks are omitted unless otherwise specified.

favor.” Id. at 255; see United States v. Diebold, Inc., 369 U.S. 654, 655 (1962) (“On summary

judgment the inferences to be drawn from the underlying facts contained in [affidavits, attached

exhibits, and depositions] must be viewed in the light most favorable to the party opposing the

motion.”).

Nevertheless, “permissible inferences must still be within the range of reasonable

probability, . . . and it is the duty of the court to withdraw the case from the [factfinder] when the

necessary inference is so tenuous that it rests merely upon speculation and conjecture.” Lovelace

v. Sherwin-Williams Co., 681 F.2d 230, 241 (4th Cir. 1982). Thus, judgment as a matter of law

is warranted where “the verdict in favor of the non-moving party would necessarily be based on

speculation and conjecture.” Myrick v. Prime Ins. Syndicate, Inc., 395 F.3d 485, 489 (4th Cir.

2005). By contrast, when “the evidence as a whole is susceptible of more than one reasonable

inference, a [triable] issue is created,” and judgment as a matter of law should be denied. Id. at

489–90.

B. Analysis

1. Breach of Contract

Both parties seek summary judgment on this claim. Defendant argues that it is entitled to

judgment as a matter of law, as relevant here, where 1) that part of plaintiff’s breach of contract

claim arising from damage sustained during Hurricane Florence is time-barred, 2) plaintiff lacked

an insurable interest on the property at the time of the asserted breach, 3) plaintiff has failed to

offer admissible evidence that defendant breached the contract, and 4) defendant has already paid

plaintiff more than it owes.5 Plaintiff argues that the undisputed facts show that it is “entitled to

5 Defendant also objects to certain affidavits filed by plaintiff in support of its motion for summary judgment,

but the court does not rely on those affidavits because they are not determinative of either motion. (See DE 63-71).

compensatory damages in the amount of the [appraisal a]ward” and interest. (DE 72). The court

addresses each argument in turn.

a. Time-Bar

As noted in the court’s November 8, 2023, order, North Carolina law provides that in an

action for breach of a contract insuring real property, the three-year limitations period accrues on

the date of “the inception of the loss . . . when hurricane-force winds damaged plaintiff’s

real property.’” (Order (DE 61) at 8-9 (quoting Skyline Restoration, Inc. v. Church Mutual

Insurance Co., 20 F.4th 825, 830-831 (4th Cir. 2021)); see N.C. Gen. Stat. § 1-52(12).

The parties agree that Hurricane Florence “made landfall and damaged the [] property” on

“or about September 14, 2018.” (Def’s SMF (DE 92) ¶ 24). Plaintiff moved to amend its

complaint September 16, 2022, about four years after the inception of such loss. (DE 33).

Accordingly, under the reasoning of the court’s November 8, 2023, order plaintiff’s breach of

contract claim arising from defendant’s alleged failure to pay for damages sustained as a result of

Hurricane Florence is time-barred.6 (See Order (DE 61) at 8-10).

Plaintiff argues that its breach of contract claim in this part is not time-barred because on

March 25, 2022, defendant paid plaintiff purportedly for losses sustained as a result of both

Hurricanes Matthew and Florence in a lump sum, after deducting payments already rendered

separately for each hurricane. This is a non-sequitur. Plaintiff does not cite, and the court has not

found, any precedent holding that an insurer’s payments after the statute of limitations has run toll

the statute of limitations or change its accrual date required by N.C. Gen. Stat. § 1-52(12).

6 Where no motion for judgment on the pleadings was made with respect to plaintiff’s breach of contract claim,

the court did not determine the breach of contract claim was time-barred in its November 8, 2023, order. However,

the same analysis applying to plaintiff’s bad faith claim, which was held to be time-barred, applies here.

Plaintiff also argues that its breach of contract claim regarding Hurricane Florence is one

and the same as its breach of contract claim regarding Hurricane Matthew, where defendant’s

failure to pay fully for damages sustained as a result of Hurricane Matthew prevented plaintiff

from repairing the property fully, exacerbating the damage sustained when Hurricane Florence

later hit. As the court remarked in its November 8, 2023, order, a “continuing violation is

occasioned by continual unlawful acts, not by continual ill effects from an original violation.” (DE

61 at 10) (citing Williams v. Blue Cross Blue Shield of North Carolina, 357 N.C. 170, 179 (2003)).

Thus, such alleged ill effects resulting from the original failure to pay do not serve to extend the

limitations period for that part of the claim regarding Hurricane Florence.

Accordingly, defendant is entitled to summary judgment on plaintiff’s breach of contract

claim arising from damage sustained during Hurricane Florence, and plaintiff’s motion in this part

is denied.

b. Insurable Interest

Defendant argues it entitled to summary judgment based on the remaining part of plaintiff’s

breach of contract claim for damage arising from Hurricane Matthew based on plaintiff’s lack of

insurable interest in the property. The court disagrees.

North Carolina law requires that insurance coverage not be “for more than the interest of

the insured.” Collins v. Quincy Mut. Fire Ins. Co., 297 N.C. 680, 683 (1979) (citing N.C. Gen.

Stat. § 58-44-16(f)(1)). An entity “has an insurable interest in the subject matter insured” when it

derives “pecuniary benefit or advantage from its preservation, or will suffer pecuniary loss or

damage . . . by the happening of the event insured against.” King v. National Union Fire Ins. Co.,

258 N.C. 432, 434-35 (1963). The policy in effect when Hurricane Matthew made landfall

stipulated that defendant would “not pay [plaintiff] more than [its] financial interest in the

[c]overed [p]roperty.” (DE 81-19 at 49).

It is undisputed that plaintiff conveyed ownership of the property to Economy of

Cumberland Self Storage, LLC in November 2014, prior to Hurricane Matthew. (Def’s SMF (DE

92) ¶3; DE 80-3 at 2). However, the record reflects that plaintiff is responsible for a loan owed to

Cape Fear Farm Credit and secured by the property. (See Def’s SMF (DE 92) ¶¶ 46-47). In

addition, plaintiff employed a manager, Dawn Fedders (“Fedders”) who performed a variety of

important tasks, including collecting rent from tenants. (DE 80-5 at 23-24).7 Making “all

justifiable inferences” in plaintiff’s favor, as the court is required to do when considering

defendant’s argument in favor of summary judgment, the court cannot conclude as a matter of law

that plaintiff lacked any insurable interest in the property. Anderson, 477 U.S. at 247.

Therefore, defendant’s motion is denied in this part as to this issue.

c. Liability

Under North Carolina law, “[t]he elements of a claim for breach of contract are 1) existence

of a valid contract and 2) breach of the terms of the contract.” Wells Fargo Ins. Servs. USA, Inc.

v. Link, 372 N.C. 260, 276 (2019). The “interpretation of an insurance policy is a question of law”

for the court.8 State Auto Prop. & Cas. Ins. Co. v. Travelers Indem. Co. of Am., 343 F.3d 249,

7 For purposes of the instant analysis, the court does not consider plaintiff’s assertions in its response brief that

it maintained possession of and had an office at the property, routed expenses and revenue through its own bank

account, and “ran the warehouse business conducted at the property,” (Plf’s Resp. (DE 94) at 9), where defendant

objects to their consideration on the basis that these assertions were not disclosed during the discovery period and

where resolution of this objection is not necessary for ruling on the instant motions. The court also does not consider

determinative the fact that plaintiff paid the premiums on the policy, where applying this exception would swallow

North Carolina’s requirement that coverage not exceed the insured’s interest in the property, nor the fact that plaintiff

made repairs, where this conduct occurred after the date of the loss.

8 The parties do not dispute North Carolina law applies here. Further, North Carolina choice of law is

applicable, see Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, (1941), and guides application of North

Carolina substantive law, Fortune Ins. Co. v. Owens, 351 N.C. 424, 428 (2000), and North Carolina statutory law,

N.C. Gen. Stat. § 58-3-1.

254 (4th Cir. 2003); Accardi v. Hartford Underwriters Ins. Co., 373 N.C. 292, 295 (2020). “As

with all contracts, the object of construing an insurance policy is to arrive at the insurance coverage

intended by the parties when the policy was issued.” Harleysville Mut. Ins. Co. v. Buzz Off Insect

Shield, L.L.C., 364 N.C. 1, 9 (2010). “When the policy language is clear and unambiguous, a

court is required to enforce the policy as written.” Cont’l Cas. Co. v. Amerisure Ins. Co., 886 F.3d

366, 371 (4th Cir. 2018). “Terms defined in insurance policies are applied to all clauses of the

insurance contract, while undefined terms are construed in accordance with their ordinary

meaning.” Id.

However, “ambiguities in the terms of an insurance policy must be construed against the

insurer and in favor of coverage.” N.C. Farm Bureau Mut. Ins. Co., Inc. v. Martin ex rel. Martin,

376 N.C. 280, 286 (2020) (explaining that “this rule of construction is only triggered when a

provision in an insurance agreement is ambiguous”). Accordingly, “[w]hen the meaning of words

or the effect of provisions is uncertain or capable of several reasonable interpretations, the doubts

will be resolved . . . in favor of coverage.” Cont’l Cas., 886 F.3d at 371.

Under North Carolina law, “the sources of liability which are excluded from [property]

coverage must be the sole cause of the injury in order to exclude coverage under the policy.” State

Capital Ins. Co. v. Nationwide Mut. Ins. Co., 318 N.C. 534, 546 (1986); see, e.g., Erie Ins.

Exchange v. Bledsoe, 141 N.C. App. 331, 338 (2000) (recognizing that a homeowner’s recovery

would not be barred by a clause excluding recovery for “settling which is so severe that it suddenly

and material impairs the structure of a building” unless such settling was the only cause of damage

to the home).

Here, neither party is entitled to summary judgment on plaintiff’s contract claim arising

from Hurricane Matthew where there are disputed issues of material fact bearing on the amount of

damage, if any, the hurricane inflicted. The building and personal property coverage form of the

policy in effect when Hurricane Matthew made landfall provides in pertinent part,

We will pay for direct physical loss of or damage to Covered Property at the premises

described in the Declarations caused by or resulting from any Covered Cause of Loss.

(DE 81-19 at 40). The “Causes of Loss – Special Form” provision provides in pertinent part,

A. Covered Causes of Loss

When Special is shown in the Declarations, Covered Causes of Loss means Risks Of Direct

Physical Loss unless the loss is:

1. Excluded in Section B., Exclusions; or

2. Limited in Section C., Limitations; that follow.

(Id. at 67). Reading these sections of the policy together, defendant agreed to pay for direct

physical loss of or damage to the property from all causes except those specifically excluded or

limited.

Sections B(2)(d)(1)-(2) of the “Causes of Loss – Special Form” provision, titled

“Exclusions,” provides in pertinent part that defendant “will not pay for loss or damage caused by

or resulting from . . . wear and tear; rust or other corrosion, decay, deterioration, hidden or latent

defect or any quality in [the] property that causes it to damage or destroy itself.” (Id. at 68).9

Construing this provision in accordance with North Carolina law, defendant is not required to pay

for any damage resulting solely from the above-stated causes. See State Capital Ins. Co. 318 N.C.

at 546. While damage to the property caused solely by wear and tear or other causes named in

section B(2)(d)(1)-(2) is not covered under the policy, defendant is required to pay for storm

9 The court has considered that part of section B(2) which reads, “if an excluded cause of loss that is listed in

[B](2)(d)(1) through (7) results in a ‘specified cause of loss’ . . . [defendant] will pay for the loss or damage caused

by that ‘specified cause of loss[.]” (Id. at 69) (emphasis added), and the definition of “Specified Causes of Loss,” (id.)

which includes “windstorm or hail.” (Id. at 74). However, these provisions do not affect the analysis where any

defects in the property could not have caused Hurricane Matthew itself, but only contributed to damage the property

sustained during that storm.

damage exacerbated by those causes. In short, defendant must pay for 1) pure storm damage and

2) storm damage exacerbated by B(2)(d)(1)-(2) causes, but not 3) B(2)(d)(1)-(2) damage that pre-

existed the storms.

Plaintiff has produced evidence suggesting the property sustained storm damage from

Hurricane Matthew in the amount of $368,480.00. (DE 66-3 at 2). However, defendant paid only

$75,000.00 specifically in “compromise” of the claim arising from Hurricane Matthew. (Def’s

SMF (DE 92) ¶ 15; DE 80-9 at 2).10 Plaintiff therefore has demonstrated at least a genuine issue

of fact that it sustained “direct physical loss of or damage to Covered Property at the premises

described in the Declarations caused by or resulting from any Covered Cause of Loss,” and that

defendant did not “pay for” such loss, thus breaching the policy. (DE 81-19 at 40). Accordingly,

defendant’s motion for summary judgment as to the breach of contract claim must be denied.

At the same time, plaintiff has not demonstrated that it is entitled to judgment as a matter

of law on its breach of contract claim, because disputed issues of material fact exist as to whether

and how much damage pre-existed the storms. (See DE 92 ¶¶ 13, 32). Bittler, who inspected the

property and authored a report on behalf of defendant following Hurricane Matthew, observed that

the “building and roof system [were] not watertight prior to the storm event,” (DE 80-8 at 3), that

“some gutter damage pre-existed the storm event,” (id. at 5), that “timber deterioration and

displacement of the timber furring nailing plate atop the roof purlins [made] the metal roof panels

more susceptible to wind related damages,” (id.), and that “[s]ome roof panels had corroded.”

(Id.). Bittler concluded that “only 5% to 10% of the roof damage [could] be attributed to”

Hurricane Matthew. (Id. at 4). However, it is not clear from the report whether this figure is meant

10 Defendant also paid plaintiff $473,073.38 in March 2022, (see DE 67-9 at 2), but plaintiff argues that this

payment related at least in part to Hurricane Florence and is also an underpayment when compared with the cost of

$5,643,546.15 to restore the property after both storms, as calculated by Gibson. (DE 68-1 at 2).

to describe the damage attributable solely to Hurricane Matthew, which would be an incorrect

measure of plaintiff’s insurance coverage, or whether Bittler was estimating the combined effect

of the storm and any B(2)(d)(1)-(2) causes.11 Bittler also conducted an inspection after Hurricane

Florence. (DE 65 ¶ 4). After that inspection, Long, defendant’s adjuster, asked Bittler’s firm:

[C]an the locations for each type of damage referenced in the report be specified for each

building, i.e. recent wind damage from Florence as opposed to wind damage from Matthew

as opposed to any other pre-existing maintenance, aging, long term deterioration etc.? . . .

To clarify, can Mr. Bittler provide a sketch of each building with annotations on the sketch

to identify the general and/or precise area(s) of damage including a description of the type

of damage within each annotation?

(DE 65-3 at 3) (emphasis added). Bittler responded that he did “not have the required level of

detail from [the] previous two field inspections that would be necessary to provide” this

information. (Id. at 2).

It is not clear whether plaintiff accedes that any damage to the property pre-existed the

storms. (See DE 92 ¶ 13) (responding to defendant’s contention that “Bittler’s December 1,

2016[,] report states that the Evans roof repair proposal addressed . . . pre-existing damaged areas”

with “the Bittler report speaks for itself”); (DE 94 at 6) (analyzing “non-excluded concurrent

cause[s]” of loss, which the court has held to be covered, without addressing excluded pre-existing

loss, which is not). In any event, the evidence on the extent of damage sustained to the building

during Hurricane Matthew is susceptible to many reasonable inferences. See, e.g., (DE 65-1 at 4)

(“[O]nly 5% to 10% of the roof damage can be attributed to the subject storm event.”) (DE 81-12)

(testimony by Baer stating, “[w]hen I was there I saw a lot of maintenance that had been performed,

. . . [s]o I’m not sure what maintenance [Bittler is] expecting and what he is seeing that he says it

hasn’t been maintained.”); (DE 71-8 at 60) (testimony of Hamrick that defendant could not, from

11 Because Bittler was not deposed, he was never asked to clarify the 5-10% figure.

photographs, “differentiate due to the condition of the property”); (DE 66 ¶ 4) (testimony by

Brown that plaintiff “obtained an estimate for the damage from Hurricane Matthew from Evans

Contracting . . . in the amount of $368,480[.00]”) (emphasis added); (DE 66-3 at 2) (Evans

Contracting estimate); (DE 80-10 at 2) (invoice for $32,500.00 for the repairs undertaken by

Correia in February 2018); (DE 83-7 at 23-25) (testimony by Correia that he “fix[ed] what[ was]

damaged,” describing repairs undertaken over the course of about a week). Accordingly, summary

judgment on this part of the claim pertaining to Hurricane Matthew is not available to either

party.12

3. Fraud

Under North Carolina law, “[t]he essential elements of fraud are: 1) false representation or

concealment of a material fact, 2) reasonably calculated to deceive, 3) made with intent to deceive,

4) which does in fact deceive, 5) resulting in damage to the injured party.” Rowan County Board

of Education v. Gypsum Co., 332 N.C. 1, 17 (1992). In addition to these five elements, “any

reliance on the allegedly false representations must be reasonable.” Forbis v. Neal, 361 N.C. 519,

527 (2007). “The mere failure to carry out a promise in contract . . does not support a tort action

for fraud.” Strum v. Exxon Co., 15 F.3d 327, 331 (4th Cir. 1994).

Neither party is entitled to summary judgment on plaintiff’s claim for fraud where there

are disputed issues of material fact as to whether any misrepresentation or concealment of material

facts were reasonably calculated or made with intent to deceive plaintiff.

12 Defendant points in addition to a section of the policy limiting its liability to a maximum of $50,000.00 for

loss in value of undamaged portions of the property resulting from laws requiring demolition of parts of the same

property. (See DE 74; 81-19 at 79). Where this section is offered in response to plaintiff’s expert testimony concerning

damages sustained as a result of Hurricane Florence, (see DE 195-200), and that claim is time barred, the court does

not consider this section

As an initial matter, plaintiff has presented sufficient evidence to demonstrate a genuine

issue of fact as to each element. First, with respect to a false representation, plaintiff contends that

defendant “communicated with its appraiser,” after which defendant’s appraiser switched

positions. (Pl’s Mem. (DE 72) at 22). In particular, defendant’s appraiser, Graham, expressed his

opinion in an email that, “the roof and siding [were] such that replacement is the only way to make

repairs.” (DE 71-4 at 168). Fourteen minutes later, defendant’s attorney in this matter, Malone,

responded, “please do not agree to proceed with the appraisal before we speak.” (DE 71-4 at 171).

Graham, Malone, and Wright spoke by telephone for twenty-five minutes, (id. at 98), after which

Graham completed an appraisal which recommended repairing rather than replacing the roof. (Id.

at 99); (DE 71-4 at 144-49). Graham’s final appraisal cites an “engineer inspection” stating the

structure was “20% damaged by wind,”13 (DE 71-4 at 144-49); however, Graham was not able to

recall what report he looked to for this number, and no engineer’s report claiming 20% wind

damage has surfaced in this matter. (DE 71-4 at 39-40). Graham’s representation that he relied

on an engineer’s report claiming 20% wind damage thus plausibly could be inferred to be a false

representation, in service of concealment of a material fact, Graham’s actual opinion that the

structure could only be repaired by replacing the roof and siding.

Next, the fact that a phone call with defendant’s counsel and claim examiner was scheduled

minutes after Graham expressed an opinion unfavorable to defendant is susceptible both to an

inference that the misrepresentation and concealment was reasonably calculated and made with

intent to deceive.

Next, an inference of actual deception and injury is created by the use to which the appraisal

was put. The appraisal provision of the policy requires each party to “select a competent and

13 Though not directly stated in plaintiff’s brief, this statement presumably is the false representation on which

plaintiff seeks to rely.

impartial appraiser,” and the two appraisers “select an umpire.” (DE 81-14 at 47). The appraisers

were to “state separately the value of the property and the amount of loss,” and to “submit their

differences to the umpire” only if they disagreed. (See id.) (see also DE 90-7) (testimony that

“nobody ever” contacts an umpire when the parties’ appraisers settle the case). Thus, it is a

plausible inference that Gibson, the umpire, was deceived by the report incorporating the 20%

wind damage statement, (see DE 90-7 at 68) (“What impacted me in this case is the estimates

written by the two appraisers and the engineering reports, Forte and Summit”),14 and to the extent

that defendant’s and disagreement between the appraisers resulted in more work for Gibson, the

umpire, who expressed cost concerns throughout his testimony, see, e.g. (DE 90-7 at 78) (“If I had

written an estimate on this, the bill would have been astronomical”), and hired his own engineer

to create a report. (Id. at 81-83).

In sum, the foregoing evidence is sufficient to support an inference of fraud. Defendant,

thus, is not entitled to summary judgment on this claim.

Defendant argues that summary judgment in its favor is warranted based upon testimony

by Wright, who participated in the phone call through which plaintiff alleges defendant exerted

improper influence on the process. However, Wright never testified with specificity about a phone

call with Malone and Graham. He said only,

I don’t remember. I know the appraisal took forever and, you know, on our side

we were getting a little anxious as to why it was taking so long. But I don’t really

– I seem to recall at some late point in the process there was a conversation with

the appraiser and it had to do with, “What’s taking so long?” But other than that, I

don’t really remember having – you know, it’s kind of like, “I’m going to let this

thing, the appraisal, run its course and wait for a final decision.”

14 To the extent that defendant’s $473,073.38 payment to plaintiff incorporates the 20% wind damage figure

and Graham’s appraisal, additional evidence may exist that plaintiff has in fact been deceived by this statement and

by asserted concealment of Graham’s true opinions.

(DE 81-18 at 31). Based on the court’s review of other evidence in the case, it is unlikely this

passage, which emphasizes Wright’s concern with delay, references the phone call with which

plaintiff is concerned, given Malone’s earlier instruction to Graham not to proceed. (See DE 71-

4 at 171). Thus, there are disputed issues of material fact as to whether defendant falsely

represented or concealed material facts and whether defendant intended to deceive plaintiff.

Accordingly, defendant’s motion for summary judgment on this issue is denied.

At the same time, none of plaintiff’s arguments as to why summary judgment should be

granted in its favor on this issue are convincing. Plaintiff claims that defendant “represented that

it would fairly participate in the . . . appraisal process . . . when it did not intend to do so,” and

points to several supporting allegations for this fraud charge. (Pl’s Mem. (DE 72) at 22). First,

plaintiff states in conclusory fashion, and without citing to record evidence, that defendant “had

no intent to honor the [appraisal a]ward.” (Id.). This contention is insufficient to demonstrate a

genuine issue of fact. Celotex Corp., 477 U.S. at 323.

Second, plaintiff argues that the series of events examined above entitles it to summary

judgment on this issue. However, this series of events is compatible both with an intent to mislead

plaintiff and with simple oversight or error by defendant in the course of a complex appraisal. In

addition, there is also evidence suggesting that misrepresentations or concealments ultimately were

not relied upon by Gibson. (DE 90-7) (agreeing with the statement “[y]ou picked one ([plaintiff’s])

estimate over the other”). Accordingly, a genuine issue of material fact exists as to whether

defendant intended to deceive plaintiff on the basis of its instructions to its appraiser, Graham’s

alleged concealment of his true opinions, and the 20% damage figure. As the court explains below,

none of plaintiff’s arguments for summary judgment in its favor on this issue are convincing.

Third, plaintiff contends that defendant “rejected the [a]ward conclusion, buttressed by the

Baer independent engineering report, that the cause of loss for the award was wind, a covered

cause of loss.” (Pl’s Mem. (DE 72) at 22). The court is unable to discern any misrepresentation,

concealment, or detrimental reliance in this charge, which sounds simply as a rephrasing of

plaintiff’s time-barred breach of contract claim arising out of Hurricane Florence.

Fourth, plaintiff posits that defendant “stated that the appraisal panel should not address

covered v. excluded causes of loss when it knew its appraiser had done just that[.]” (Id. at 22).

Again, plaintiff includes no citation to the record, or even alleged speaker, for this statement, and

a statement fitting this description did not surface from the court’s review of the record. This

contention thus is insufficient to demonstrate a genuine issue of fact. Celotex Corp., 477 U.S. at

323.

Fifth and finally, plaintiff contends that defendant’s rejection of the appraisal award, with

reference to “the debunked Graham appraisal . . . [and] a non-existent 20% wind cause formula”

supports summary judgment in its favor. (Pl’s Mem. (DE 72) at 22). This is simply a rephrasing

of the second contention examined above, and fails for the same reasons to provide a basis for

summary judgment in favor of plaintiff.

Accordingly, both parties’ motions for summary judgment are denied in that part pertaining

to plaintiff’s fraud claim.

4. UDTPA

Insurance law in North Carolina is governed by North Carolina General Statute § 58-63-

15, which defines “unfair methods of competition and unfair and deceptive acts or practices in the

business of insurance” to include the following enumerated “unfair claim settlement practices,” as

pertinent here:

a. Misrepresenting pertinent facts or insurance policy provisions relating to

coverages at issue;

b. Failing to acknowledge and act reasonably promptly upon communications with

respect to claims arising under insurance policies;

c. Failing to adopt and implement reasonable standards for the prompt investigation

of claims arising under insurance policies;

d. Refusing to pay claims without conducting a reasonable investigation based upon

all available information;

e. Failing to affirm or deny coverage of claims within a reasonable time after proof-

of-loss statements have been completed;

f. Not attempting in good faith to effectuate prompt, fair and equitable settlements

of claims in which liability has become reasonably clear;

g. Compelling [the] insured to institute litigation to recover amounts due under an

insurance policy by offering substantially less than the amounts ultimately

recovered in actions brought by such insured;

h. Attempting to settle a claim for less than the amount to which a reasonable man

would have believed he was entitled; . . .

j. Making claims payments to insureds or beneficiaries not accompanied by [a]

statement setting forth the coverage under which the payments are being made;

k. Making known to insureds or claimants a policy of appealing from arbitration

awards in favor of insureds or claimants for the purpose of compelling them to

accept settlements or compromises less than the amount awarded in arbitration; . .

. .

m. Failing to promptly settle claims where liability has become reasonably clear,

under one portion of the insurance policy coverage in order to influence settlements

under other portions of the insurance policy coverage; and

n. Failing to promptly provide a reasonable explanation of the basis in the insurance

policy in relation to the facts or applicable law for denial of a claim or for the offer

of a compromise settlement.

N.C. Gen. Stat. § 58-63-15(11).

“[T]he acts proscribed in [N.C. Gen. Stat.] § 58–63–15(11) were designed to protect the

consuming public” based on the determination that the specified conduct is “inherently unfair,

unscrupulous, immoral, and injurious to consumers.” Gray v. N.C. Ins. Underwriting Ass’n, 352

N.C. 61, 70-71 (2000). More generally, § 75-1.1(a) declares as unlawful “[u]nfair methods of

competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting

commerce.” “A practice is unfair when it offends established public policy as well as when the

practice is immoral, unethical, oppressive, unscrupulous, or substantially injurious to consumers.”

Gray, 352 N.C. at 68. “In order to establish a prima facie claim for unfair trade practices, a plaintiff

must show: (1) defendant committed an unfair or deceptive act or practice, (2) the action in

question was in or affecting commerce, and (3) the act proximately caused injury to the plaintiff.”

Dalton v. Camp, 353 N.C. 647, 656 (2001).

In considering the intersection between North Carolina General Statute § 75-1.1 and § 58-

63-15(11), the Fourth Circuit has explained as follows:

North Carolina’s Unfair and Deceptive Trade Practices Act (“UDTPA”), N.C. Gen.

Stat. § 75-1.1, prohibits unfair and deceptive acts or practices, generally, and North

Carolina’s “Unfair Claim Settlement Practices” statute, N.C. Gen. Stat. § 58-63-

15(11), defines unfair practices in the settlement of insurance claims. As relevant

here, § 75-1.1 provides a private cause of action for violations, whereas § 58-63-

15(11) does not; instead “the remedy for a violation of section 58-63-15 is the filing

of a section 75-1.1 claim.” Country Club of Johnston Cty., Inc. v. U.S. Fid. & Guar.

Co., 150 N.C.App. 231, 563 S.E.2d 269, 278 (2002) (internal quotation marks

omitted). Thus, an individual may file an independent § 75-1.1 claim, or may file a

§ 75-1.1 claim that relies on a violation of § 58-63-15(11). See Gray[, 352 N.C. at

61] (2000).

Elliott v. Am. States Ins. Co., 883 F.3d 384, 396 (4th Cir. 2018). Unlike with allegations of

common law bad faith, good faith is not a defense to an alleged violation of N.C. Gen. Stat. § 58-

63-15(11). See Gray, 352 N.C. at 68 (“Good faith is not a defense to an alleged violation of [N.C.

Gen. Stat.] § 75–1.1.”).

Plaintiff’s complaint15 references claims for violation of North Carolina General Statute

§§ 58-63-15(11)(a), (b), (c), (d), (e), (f), (g), (h), (j), (m), and (n). Plaintiff contends in its motion

15 All references to the complaint (“compl.”) are to the amended complaint at DE 52.

it is entitled to summary judgment on its UDTPA claim, but it omits mention of subparagraphs

(b), (e), and (m), and adds address of subparagraph (k). Defendant moves for summary judgment

on all subparagraphs cited in the complaint. The court addresses them in turn below.

a. § 58-63-15(11)(a)

Subparagraph (a) prohibits “[m]isrepresenting pertinent facts or insurance policy

provisions relating to coverages at issue.” Both parties move for summary judgment as to this

subparagraph, with defendant contending that there is no evidence that it “misrepresent[ed]

pertinent facts or insurance policy provisions relating to coverages at issue” and plaintiff stating

that “Wright misrepresented that [plaintiff] bore and continues to bear the burden of establishing

what portion of damage found at the [p]roperty was based on an excluded cause of loss.” (DE 72

at 23; 94 at 18).

As the court has discussed with respect to plaintiff’s fraud claim, plaintiff has demonstrated

a genuine issue of fact that defendant falsely represented or concealed material facts by concealing

its appraiser’s opinion regarding replacement of the roof and siding and incorporating a 20% wind

damage figure not supported by evidence. See supra § B(3). These misrepresentations constitute

pertinent facts relating to coverages at issue, thus, plaintiff has demonstrated the existence of an

issue of material fact regarding this claim.

However, plaintiff fails to point to any specific policy provisions it claims defendant

misrepresented, either in support of its own motion or in response to defendant’s motion. While

plaintiff contends that Wright misrepresented the policy, plaintiff has not directed the court’s

attention to any specific examples of such alleged misrepresentation, and the court has not found

any in the record. In the absence of any specific mention of policy provisions claimed to have

been misrepresented, plaintiff has not demonstrated an issue of fact on this prong of subparagraph

(a). In addition, plaintiff has not shown an absence of disputed issues of material fact regarding

defendant’s alleged misrepresentations of pertinent facts. Accordingly, both parties’ motions are

denied with respect to subparagraph (a).

b. § 58-63-15(11)(b)

Defendant moves for summary judgment on this subparagraph. Plaintiff neither moves for

summary judgment on this subparagraph nor responds to defendant’s arguments on this score.

Subparagraph (b) prohibits “[f]ailing to acknowledge and act reasonably promptly upon

communications” relating to a claim under an insurance policy as an unfair claim settlement

practice. Defendant has produced a series of emails showing defendant timely attempted to

communicate with plaintiff and its public adjuster, and often did not hear back for weeks. See,

e.g., (DE 80-20) (indicating that defendant did not receive a response to its reservation of rights

letter); (DE 81-1 at 2) (“We have yet to receive a response form the insured to our reservation of

rights letter or contact from his public adjuster on this loss. Do you have any new information?”);

(DE 81-4) (rejecting plaintiff’s estimate the day after receipt). Plaintiff has not addressed this

evidence or acknowledged that its complaint includes a claim under this subparagraph.

As such, on the present record, defendant has demonstrated there is no genuine issue of

material fact as to its liability under this subparagraph. Accordingly, defendant’s motion is granted

in this part.

c. § 58-63-15(11)(c)

Subparagraph (c) deems it unlawful to “[f]ail[] to adopt and implement reasonable

standards for the prompt investigation of claims arising under insurance policies,” N.C. Gen. Stat.

§ 58-63-15(11)(c).

Plaintiff has presented sufficient evidence to establish a genuine issue of material fact

regarding the adequacy of defendant’s standards for investigation of claims. Long, defendant’s

adjuster, testified that defendant had “a manual that” that general adjuster team “used for reviewing

files,” (DE 71-5 at 5), but there were no manuals that were specific to Long’s position as a general

adjuster. (id. at 6). In addition, Long could not testify to the existence of any “instructions or

training,” (id. at 8), on creating claims journal entries, testified that “no training was provided to

him” where he had almost 20 years’ experience upon his hiring and was required by the State of

North Carolina to take continuing education courses. (Id. at 4). Wright, who later handled

plaintiff’s claim, testified that he was not aware of any internal written policies that applied to what

he did. (DE 71-6 at 25). When asked whether he received “any sort of formal training,” Wright

testified,

No, most of what – the fundamentals of claim handling obviously, I already knew when I

came to work at Penn National, so that wasn’t necessary. The uniqueness of what I

currently do, that would just be handled as matters came up. And I would talk to my boss

at the time, Tom Kline, and he would say, “This is - - this is why we want to do it this way

or that way,” and, okay, that’s the way we did it.”

(Id. at 24-25). Viewing this evidence in the light most favorable to plaintiff, defendant’s motion

with respect to this part of plaintiff’s claim must be denied.

However, plaintiff has not demonstrated an absence of material fact showing liability on

this issue. Plaintiff relies upon the affidavit of Dinsmore, its expert witness in insurance claims

handling. Dinsmore states that defendant

failed to adopt and implement any reasonable standards for the investigation of commercial

property insurance claims such as [plaintiff’s] claim. [Defendant] has commercial

insurance underwriting manuals . . . but has absolutely no commercial property insurance

claim manuals, guidelines, or instructions.

(DE 67 ¶ d). While such oversight weighs in favor of liability, plaintiff has not cited, and the court

has not found, any case holding that a lack of written manuals, guidelines, or instructions

constitutes a failure to adopt “reasonable standards” as a matter of law under N.C. Gen. Stat. § 58-

63-15(11)(c). Further, the question of reasonableness of defendant’s standards is susceptible to

competing inferences for determination by the factfinder. See, e.g., Marcus Bros. Textiles, Inc. v.

Price Waterhouse, LLP, 350 N.C. 214, 225 (1999) (“Ordinarily, the question of whether an actor

is reasonable in relying on the representations of another is a matter for the finder of fact.”).

Defendant, for its part, points to a series of emails purporting to show that “Eric Long

engaged engineers to assess the damage to the building, requested information from the insured’s

public adjuster, and ultimately paid in full the amount that he could substantiate with his

investigation.” (DE 74 at 17). Long’s handling of plaintiff’s individual claims is not determinative

of whether the broader standards adopted by defendant were reasonable. There thus remain

material disputes of fact as to the reasonableness of defendant’s standards for investigating

promptly claims arising under its policies. Accordingly, both parties’ motions are denied with

respect to this subparagraph.

d. § 58-63-15(11)(d)

This subparagraph deems it unlawful to “refus[e] to pay clams without conducting a

reasonable investigation based on all available information.” § 58-63-15(11)(d). Plaintiff has

submitted evidence showing that defendant paid only $85,738.94, (DE 81-7 at 2), before plaintiff

requested appraisal, even though the appraised replacement cost of the structure eventually was

calculated to be $5,643,546.15. (DE 68-1 at 2). Even after the award issued, defendant paid only

$473,073.38, (DE 67-9 at 2), which suggests that defendant did not properly recognize all available

information regarding the state of the structure or the cost to replace it.

Plaintiff simply repeats its allegations that defendant refused to make additional payments

“without explanation or reasonable investigation,” (DE 72 at 24), and defendant relies on the same

emails referenced in the previous section. Both these showings are insufficient to show an absence

of material fact. Accordingly, both parties’ motions are denied with respect to this subparagraph.16

e. § 58-63-15(11)(e)

Subparagraph (e) makes it an unfair and deceptive trade practice for insurance companies

to “[f]ail[] to affirm or deny coverage of claims within a reasonable time after proof-of-loss

statements have been completed.” N.C. Gen. Stat. § 58-63-15(11)(e). Defendant has shown that

this subparagraph is inapplicable to this case where no proof of loss statement was submitted by

plaintiff or requested by defendant. Plaintiff does not address this showing in its response brief,

and the court has not found in its own review of the record any evidence of a proof of loss statement

bearing on the case. In addition and in the alternative, defendant disputed liability under the

policies up through and including the instant motion before the court, and plaintiff does not point

to evidence showing an unreasonable delay between any proof-of-loss statement and any denial of

coverage. Accordingly, defendant’s motion is granted on this basis with respect to subparagraph

(e).

f. § 58-63-15(11)(f), (g), (h), and (m)

Subparagraphs (f), (g), (h), and (m) all govern an insurer’s conduct once liability under the

governing policy is either reasonably clear or not disputed. Plaintiff’s claims under these

subparagraphs accordingly fail where it has not introduced evidence showing that liability is

reasonably clear.

16 The parties are reminded that plaintiff’s claim for violation of this subparagraph arising from any failure

reasonably to investigate the damage arising from Hurricane Matthew is time barred under the terms of the court’s

November 8, 2023, order. (DE 61 at 6).

Subparagraph (f) states that it is an unfair claim settlement practice to “[n]ot attempt[] in

good faith to effectuate prompt, fair and equitable settlements of claims in which liability has

become reasonably clear.” N.C. Gen. Stat. § 58-63-15(11)(f). A violation of this subparagraph

generally requires the insurer to refuse to pay or settle when objective or outside forces

demonstrate liability, not when the parties reasonably dispute coverage. See, e.g., Elliot, 88 F.3d

at 398 (liability became reasonably clear when jury returned verdict on fault in underlying events);

Gray, 352 N.C. at 63-64, 72-74 (liability under statute when insurer ignored its own adjuster’s

figures and conclusions); Luther v. Seawell, 191 N.C. App. 139, 144-45 (2008) (no liability under

statute when insurer made genuine argument on coverage). Liability is not “reasonably clear” if a

genuine dispute on liability or coverage exists, and advocating a coverage position that ultimately

proves incorrect does not violate this subparagraph. See Topsail Reef Homeowners Ass’n v.

Zurich Specialties London, Ltd., 11 F. App’x 225, 234 (4th Cir. 2001).

Plaintiff argues that liability became clear either when “Bitttler opined that the roof needed

replacing and the damages could not be segregated” or “in February 2022[,] upon issuance of the

[appraisal] award.” (DE 94 at 19). However, Bittler did not state the cost to repair the structure

in either of his reports, making it impossible that liability was established by those reports. (See

DE 65-1; 65-2). Second, the undisputed facts show that liability was contested up through and

including the time of appraisal, when defendant issued to plaintiff its final payment based on its

appraiser’s assessment and its own coverage positions, which do not accord with plaintiff’s

positions. (DE 92 ¶ 80). Plaintiff purports to deny defendant’s statement that its “decision to pay

the part of the appraisal award that was covered by the policy was based in part on receipt of Craig

Graham’s report,” (id.), however, its denial describes a process by which defendant’s

decisionmaker relied uncritically on Graham’s report, disputing only the “in part” portion of

defendant’s statement. (Id.) (“The only document Wright reviewed in making his decision was

Graham’s report). Thus, when viewed in the light most favorable to plaintiff, defendant relied on

its own appraisers and decisionmakers, distinguishing this case from instances in which the insurer

was found to have violated subparagraph (f). See Gray, 352 N.C. at 63-64, 72-74. Finally, the

fact that plaintiff has not proposed a definite timeframe as to when liability became clear militates

against any conclusion that defendant violated subparagraph (f). Accordingly, defendant’s motion

is granted with respect to subparagraph (f).

Section 58-63-15(11)(g) prohibits “[c]ompelling [the] insured to institute litigation to

recover amounts due under an insurance policy by offering substantially less than the amounts

ultimately recovered in actions brought by such insured.” N.C. Gen. Stat. § 58-63-15(11)(g). As

no amount is “due” until liability is determined, typically this subparagraph “require[s] that the

coverage issue be determined in favor of the insured.” Elliott, 883 F.3d at 398. The subparagraph

by its terms additionally requires that the insurer offer “substantially less than the amounts

ultimately recovered” by the insured before there is a violation. N.C. Gen. Stat. § 58-63-15(11)(g).

Here, where liability has not been determined, suit under this subparagraph is premature. Thus,

the court finds as a matter of law that defendant did not violate subparagraph (g).

Subparagraph 58-63-15(11)(h) prohibits “[a]ttempting to settle a claim for less than the

amount to which a reasonable man would have believed he was entitled.” N.C. Gen. Stat. § 58-

63-15(11)(h). When liability has not yet been determined, it cannot be said that a reasonable

person would believe himself entitled to either the maximum coverage provided under the policy,

or some amount ultimately recovered. Elliott, 883 F.3d at 99 (“The mere fact of having [] coverage

does not entitle the insured to recover at all.”). Thus, as a matter of law defendant did not violate

subparagraph (h) by making settlement offers for less than the entire amount claimed by plaintiff

The court accordingly grants defendant’s motion for summary judgment as to this subparagraph.

Plaintiff’s claim under subparagraph (m), prohibiting “[f]ail[ure] to promptly settle claims

where liability has become reasonably clear, under one portion of the insurance policy coverage

in order to influence settlements under other portions of the insurance policy coverage,” fails for

the reasons described above. It also fails where plaintiff does not mention this subsection in its

brief in support of its motion for summary judgment or in opposition to defendant’s motion.

Accordingly, with respect to subparagraphs (f), (g), (h), and (m), defendant’s motion is

granted and plaintiff’s motion is denied.

g. § 58-63-15(11)(j) and (n)

Subparagraphs (j) and (n) govern an insurer’s duty to explain its decisions. In particular,

subparagraph (j) prohibits “making claims payments to insureds or beneficiaries not accompanied

by a statement setting forth the coverage under which the payments are being made.” § 58-63-

15(11)(j). Subparagraph (n) prohibits “[f]ailing to promptly provide a reasonable explanation of

the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or

for the offer of a compromise settlement.” § 58-63-15(11)(n).

As an initial matter, defendant’s motion for summary judgment as to plaintiff’s claims

under subparagraphs (j) and (n) must be denied where defendant has not pointed to any instance

in which it communicated to plaintiff the specific policy provisions under which it was denying

the full amount of plaintiff’s claim for damages related to Hurricane Florence.17

17 The court acknowledges that defendant cited specific policy provisions in its October 24, 2016, letter

mistakenly denying plaintiff’s claim for damages sustained as a result of Hurricane Matthew, (see DE 66-2), but

plaintiff’s claim for violation of the UDTPA based on Hurricane Matthew was dismissed as time-barred under the

terms of the court’s November 8, 2023, order.

Evidence pertinent to this claim is susceptible to multiple interpretations, precluding

summary judgment. On March 25, 2022, defendant sent plaintiff a payment of $473,073.38, which

it claimed “represent[ed] the portion of the appraisal award that [defendant] ha[d] determined is

covered by the . . . policies issued to” plaintiff. (DE 67-9 at 2). Defendant also referenced

“amounts previously paid to” plaintiff and “any applicable deductible.” (Id.).

Defendant had sent to plaintiff on January 30, 2019, a letter acknowledging receipt of

plaintiff’s claim arising out of damages sustained as a result of Hurricane Florence. (See DE 67-

7 at 2). That letter explained that defendant had identified “several areas of concern which could

. . . limit or exclude coverage,” and stated that “there are questions as to whether” defendant was

obligated to pay for the loss “as the cause of damage is yet to be determined and verified.” (Id. at

3). Emails from Long, its adjuster, also advised that plaintiff was required “to identify the damage

specifically from Hurricane Florence.” (DE 81-9 at 2) (see also DE 81-7 at 2). While defendant’s

concerns with pre-existing damage are referenced throughout the parties’ correspondence,

defendant has not cited, and the court has not found, any instance in which defendant explained

those concerns in terms of the actual policy language applicable to damage arising from Hurricane

Florence.

As such, the court cannot determine as a matter of law that defendant’s communications

adequately comprise “a statement setting forth the coverage under which the payments are being

made,” § 58-63-15(11)(j), when put in the context of the parties’ long history of dealing. Likewise,

the parties’ extensive correspondence shows consistent disagreement about whether and to what

extent the property had been damaged before the storms, and if it had been damaged, whether

defendant was obligated to pay for the portion of the loss stemming from such damage.

Accordingly, genuine issues of material fact preclude a determination whether or not defendant

“[f]ail[ed] to promptly provide a reasonable explanation of the basis in the insurance policy in

relation to the facts or applicable law for denial of a claim or for the offer of a compromise

settlement.” § 58-63-15(11)(n).

Plaintiff relies on DENC, LLC v. Philadelphia Indemnity Insurance Co., in which the

insurer “first grant[ed] coverage and then den[ied] it in a confusing letter,” enumerating many

provisions, including some that “were not even part of the policy,” but not explaining which barred

coverage. 32 F.4th 38, 50 (4th Cir. 2022). Here, however, it is not clear from the evidence

presented to this point whether defendant’s communications “had the capacity to mislead,” id.,

where there was no change in position, and where plaintiff arguably was on notice from its

experience with Hurricane Matthew that defendant held the view that it was not obligated to pay

for pre-existing damages. Cf. Martin v. Nautilus Insurance Co., 629 F. Supp. 3d 333, 342

(M.D.N.C. 2022) (denying insurer’s motion to dismiss a claim under subparagraph (n) where the

insurer denied the insured’s claim in letters that acknowledged the insured’s fire loss but relied on

policy language related to a theft loss).

Accordingly, both parties’ motions are denied with respect to subparagraphs (j) and (n).

h. § 58-63-15(11)(k)

This subparagraph, which is not cited in the complaint, prohibits “[m]aking known to

insureds . . . a policy of appealing from arbitration awards in favor of insureds . . . for the purpose

of compelling them to accept settlements or compromises less than the amount awarded in

arbitration.” N.C. Gen. Stat. § 58-63-15(11)(k). To the extent that plaintiff is attempting to amend

its complaint by brief in support of its summary judgment motion, this is improper. See Fed. R.

Civ. Proc. 15(a)(2) (requiring leave of court or the opposing party’s written consent once the

window for amending a complaint as a matter of course has closed); (DE 55) (Court’s March 2,

2023, order requiring any motion for leave to amend the pleadings to be filed by September 1,

2023). Even overlooking this basic issue, plaintiff has not alleged or presented evidence

suggesting that defendant made known to plaintiff a policy of appealing from arbitration awards,

as opposed to rejecting an arbitration award in this single instance. Accordingly, plaintiff’s motion

for summary judgment as to this subparagraph is denied, as is any motion to amend the complaint

to include a claim under this subparagraph, and no claim under this subparagraph may be brought.

CONCLUSION

Based on the foregoing:

1. Plaintiff’s motion for summary judgment (DE 62) is DENIED;

2. Defendant’s motion (DE 73) is DENIED with respect to plaintiff’s claim for breach

of contract arising from defendant’s failure to pay for damages sustained as a result

of Hurricane Matthew;

3. It is GRANTED with respect to plaintiff’s claim for breach of contract arising from

defendant’s failure to pay for damages sustained as a result of Hurricane Florence;

4. Defendant’s motion is DENIED with respect to plaintiff’s claim for fraud under

North Carolina common law;

5. It is GRANTED with respect to plaintiff’s claims for violations of N.C. Gen. Stat.

§58-63-15(11) (b), (e), (f), (g), (h), (k) and (m); and

6. Defendant’s motion is DENIED with respect to plaintiff’s claims for violation of

subparagraphs (a), (c), (d), (j), and (n) of that statute.

Where additional claims remain for trial in accordance with case management order as

amended March 2, 2023, this case now is ripe for entry of an order governing deadlines and

procedures for final pretrial conference and trial. The parties are DIRECTED to confer and file

within 21 days from the date of this order a joint status report informing of 1) estimated trial length;

2) particular pretrial issues which may require court intervention in advance of trial, if any; and 3)

at least three suggested alternative trial dates. In addition, the parties shall specify if they wish to

schedule a court-hosted settlement conference or other additional alternative dispute resolution

procedure in advance of trial, and if so the date for completion of such. Specify in the report if

conference with the court is requested in advance of its entry of that scheduling order to follow.

SO ORDERED, this the 24th day of September, 2024.

LOUISE W. FLANAGAN

United States District Judge

33

APPENDIX

Index of Names

Persons Affiliated with Plaintiff

Donald L. Dinsmore (“Dinsmore”) – Plaintiff’s expert witness

James Smith, Sr. (“Smith”) – Co-owner

Ricky Hall (“Hall”) – Co-owner

Jeffrey Raines (“Raines”) – public adjuster

Kevin Correia (“Correia”) – performed repairs for plaintiff

Dawn Fedders (“Fedders”) – manager

Persons Affiliated with Defendant

Eric Long (“Long”) – adjuster

Dereck L. Rabun, P.E. (“Rabun”) – engineer hired by Long

Ron Bittler, P.E. (“Bittler”) – engineer hired by Long

Bill Hamrick (“Hamrick”) – property claims manager

John Malone (“Malone”) – counsel for defendant

Boyd Wright (“Wright”) – claim examiner

Jim Majors (“Majors”) – independent adjuster

Appraisers and Related

Michael M. Gibson (“Gibson”) – umpire

Neil L. Baer, P.E. (“Baer”) – independent engineer hired by Gibson

Danny Partin (“Partin”) – plaintiff’s appraiser

Craig Graham (“Graham”) – defendant’s appraiser

Other Entities

Southeastern Home Builders of Clinton, LLP – hired by plaintiff to perform repairs

Economy of Cumberland Self Storage, LLC – entity to which plaintiff conveyed ownership of

the property in November 2014

Evans Contracting – provided plaintiff a repair estimate

Cape Fear Farm Credit – holder of loan secured by the property