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Katopothis v. Windsor-Mount Joy Mutual Insurance Co.

United States District Court, District of Columbia

September 26, 2016



          RANDOLPH D. MOSS United States District Judge.

         This case arises from a plumbing accident at the Delaware vacation home of Francesca Dahlgren and her husband Vasilli Katopothis (“Plaintiffs”), who are residents of the District of Columbia. Dkt. 5-1 at 3. While Plaintiffs were in the District, a pipe failure flooded their Delaware residence, leading to an infestation of mold and, Plaintiffs say, necessitating the demolition of the home. They allege losses of more than $800, 000. Dkt. 35 at 6, 12.

         Plaintiffs now seek to recover from two defendants. First, they have sued their home insurance provider, Windsor-Mount Joy Mutual Insurance Co. (“Windsor”), a Pennsylvania corporation with its principal place of business in Pennsylvania. Dkt. 5-1 at 3. Plaintiffs claim that Windsor breached their insurance contract by refusing to cover Plaintiffs' loss. Dkt. 35 at 2- 6 (Am. Compl. ¶¶ 5-33). Second, Plaintiffs have sued the company they hired to mitigate the flood damage, R.W. Home Services, Inc. doing business as Gale Force Cleaning and Restoration (“Gale Force”), which is a Delaware corporation with its principal place of business in Delaware. Dkt. 42-5 at 2 (McCreary Decl. ¶ 2). Alleging that Gale Force failed adequately to remediate the loss, Plaintiffs assert claims against it for breach of contract, negligence, negligent misrepresentation, and violations of the Delaware Consumer Protection Act. Dkt. 35 at 7-12 (Am. Compl. ¶¶ 39-72). In addition, Windsor has filed a third party complaint against Gale Force. Dkt. 28. That complaint alleges that, to the extent Windsor is liable to Plaintiffs, it is subrogated to Plaintiffs' claims against Gale Force for breach of contract and negligence claims and that it is also entitled to recover as a matter of common law indemnity and contribution. Id.

         Two sets of motions are now before the Court. First, Plaintiffs and Windsor have filed cross-motions for summary judgment. Plaintiffs have moved for partial summary judgment against Windsor as to liability-that is, they seek to establish coverage. Dkt. 36. Windsor, in turn, has cross-moved for summary judgment, arguing that the policy's “Exclusions for Unoccupied Residences” exclude Plaintiffs' loss from coverage. Dkt. 46. Second, Gale Force has moved to dismiss all claims against it for lack of personal jurisdiction, and has moved to dismiss Windsor's subrogation counts for failure to state a claim. Dkt. 42. Plaintiffs and Windsor oppose the motion to dismiss for lack of personal jurisdiction and, in the alternative, request leave to conduct additional jurisdictional discovery. Dkts. 48 & 49. Windsor further requests that, if personal jurisdiction over Gale Force is lacking, that the Court “vouch-in” Gale Force or transfer the case to Delaware. Dkt. 48-1 at 7-14. Finally, Windsor opposes the motion to dismiss the subrogation counts. Id. at 14-18.

         For the reasons discussed below, the Court concludes that the insurance policy unambiguously excludes coverage of Plaintiffs' claims. As a result, Plaintiffs' motion for partial summary judgment will be denied and Windsor's motion for summary judgment will be granted. The Court further concludes that it lacks personal jurisdiction over Gale Force with respect to Plaintiffs' claims against it, and that further jurisdictional discovery is unwarranted. The Court will therefore transfer the case to the U.S. District Court for the District of Delaware pursuant to 28 U.S.C. § 1406(a).

         I. BACKGROUND

         The following facts are undisputed, except where specifically noted:

         In the spring of 2000, Plaintiffs purchased a second home in Rehoboth Beach, Delaware. Dkt. 40-1 (Dahlgren Dep. 23:9-23:15). They have since used it periodically throughout each year, spending close to forty percent of their time there. Id. at 15:11-15:17. They spend the remainder of their time in Washington, D.C., where they live and work. Id. at 15:11-15:14, 18:16-18:18; accord Dkt. 40-15 (Katopothis Dep. 7:2-7:13). While Plaintiffs were in the District for a ten-day period in February 2013, a plumbing accident caused significant damage to their Delaware home. Dkt. 40-1 (Dahlgren Dep. 102:1-103:3).

         A. The Insurance Policy

         Plaintiffs contracted with Windsor to insure the Delaware property on an annual basis starting on June 15, 2000. Dkt. 40 at 13. The policy thereafter renewed every year, with the operative policy covering the period between June 15, 2012, and June 15, 2013. Dkt. 40 at 13- 16. It consists of two relevant forms: a twenty-seven-page “Special Form, ” Dkt. 40-21 at 3-27, and a one-page endorsement, labeled “ML-508D (04-06), ” id. at 30. Windsor added form ML-508D to the policy in 2004 and then modified it in 2006. Dkt. 40 at 14-15.

         The Special Form defines the policy's rules of coverage, which differ for real and personal property. For real property, the policy has what is commonly known as an “all risk” structure. This means that any direct physical damage to the insured building is covered, unless the policy specifically identifies the risk of such loss as an “exclusion.”[1] Dkt. 40-21 at 11. For personal property, the policy has what is known as a “named peril” structure. This means that personal property is insured only against risks expressly listed in the policy and, even then, only against risks that are not otherwise excluded.[2] Dkt. 40-21 at 13-14. The “accidental discharge or overflow” of water from a plumbing system is a risk to personal property expressly covered by the policy, subject to applicable exclusions. Dkt. 40-21 at 14.

         The Special Form also contains three types of exclusions. They are: (1) exclusions applicable only to real property, [3] see Dkt. 40-21 at 12-13; (2) exclusions applicable to both real and personal property, and which are subject to an additional “anti-concurrent causation” clause, [4] see Id. at 15-16; and (3) exclusions applicable to both real and personal property, and which contain an explicit exception allowing coverage for “ensuing loss[es], ”[5] see Id. at 16-17. Neither party contends that Plaintiffs' insurance claim falls within any of these Special Form exclusions.

         The parties dispute only the proper interpretation of the freestanding ML-580D endorsement, titled “Additional Exclusions for Unoccupied Residences.” Id. at 30. It provides:

ML-508D (04-06)
In addition to exclusions found elsewhere in your policy, if the insured residence is vacant, unoccupied (meaning an absence of 72 hours), or under construction and unoccupied, the Insured must:
a. Maintain Heat in the residence and shut off the water supply where it enters the residence. If the residence is heated by a hot water system, the water supply to the heating system must be maintained and the water supply to the rest of the residence must be shut off.
b. Shut off the water supply where it enters the residence and completely empty liquids from any plumbing, heating, air condition system, water heater, or domestic appliance.
If this is not done, we do not pay for loss caused by freezing of or discharge, leakage, or overflow from any plumbing, heating, or air conditioning system or any appliance or other equipment attached to it.

Dkt. 40-21 at 30. The Delaware Department of Insurance approved this endorsement, see Dkt. 40-22, as required by Delaware law, see Del. Code tit. 18, § 2714(a).

         The same page on which Windsor printed the endorsement also includes an “important policyholder notice, ” labeled “WB-27D (07-11).” See Dkt. 40-21 at 30. Unlike the ML-580D endorsement, the notice was not submitted for regulatory approval, and, as Windsor itself agrees, it is not part of the contract. Dkt. 40-3 (Underwood Dep. 87:8-88:13). According to Windsor's corporate designee, Windsor included the notice “to help the insured to realize the provisions of the [ML-508D] exclusion.” Id. The notice that accompanied the operative policy stated:

WB-27D (07-11)
Be aware that damage from water which escapes from plumbing and heating systems and appliances is a frequent cause of loss and can cause large claims and great damage particularly when the leak goes undetected and the water keeps running and running for long periods of time. In the past we have paid water damage claims in excess of $100, 000! There are some simple, common sense steps you can take to minimize these claims and thus save yourself the cost of your deductible and the inconvenience of major damage to your property. At the same time, in the long run, minimizing claims can keep insurance rates down and protect your insurability.
Please read form ML-508D (04-06) which is a part of your policy and states that if you fail to take one of two steps when the insured property is vacant or unoccupied (meaning an absence in excess of 72 hours) or under construction and unoccupied, you will have no coverage for the kinds of water damage described in the form. We interpret “occupancy” to mean that someone stays there overnight. Other visits to the premises do not constitute “occupancy.”
If your home does not currently have a means to shut off the water supply where it enters the home or to shut off the water to the rest of the home if you have a heating system which uses water, it is your responsibility to have a plumber accommodate this need.
Therefore, every time the property is going to be unoccupied for more than three days be sure to take the required measures.
If you have any questions, please contact your agent.

Dkt. 40-21 at 30 (emphasis added). Windsor included similar notices in the policies covering the years 2006 to 2012, but those notices lacked the italicized language. Dkt. 40 at 14-15; see Dkts. 40-4, 40-5 & 40-6 (previous copies of notice and form ML-580D).

         Plaintiffs did not read the ML-580D exclusion or the WB-27D notice until after they submitted the insurance claim that is the subject of this case. Dkt. 40-1 (Dahlgren Dep. 249:13).

         B. The Incident

         On February 16, 2013, Francesca Dahlgren returned to her Delaware residence to find water gushing “[like] a waterfall” from a hole in the ceiling, flooding the house with about two inches of water. Dkt. 40-1 (Dahlgren Dep. 102:1-102:3, 105:19-107:13, 110:5-110:13). A pressurized water pipe had failed at the joint, causing the leakage and subsequent flooding. Dkt. 36-1 at 11; Dkt. 40 at 19. The flooding later resulted in the proliferation of mold. Dkt. 36-1 at 11. In or around May 2013, Plaintiffs demolished the residence and built a new home on the property, Dkt. 40 at 19, allegedly as a result of the water damage and mold infestation, Dkt. 35. at 3 (Am. Compl. ¶ 13).

         No person was present at the Delaware property during the six days prior to February 16, 2013.[6] Dkt. 40-1 (Dahlgren Dep. 102:19-104:8, 198:19-199:8). The last person at the property had been Plaintiffs' friend Carol McCann, who checked the doors and checked for mail at the house on February 10, but did not go inside. Id. Plaintiffs themselves were last at the property on February 6, 2013. Id. Their belongings, however, including food, medicine, and clothing, remained in the house throughout the relevant period. Id. at 198:6-198:14.

         Although Plaintiffs did leave the heating system on during their absence, they did not “shut off the water supply where it enters the residence.” Dkt. 40-21 at 30. Indeed, as Plaintiffs now emphasize, the house “did not have a water supply valve on the main water supply where the water enters the home.” Dkt. 36-1 at 7. The record discloses only two means by which Plaintiffs could have prevented water from flowing into the house's plumbing: (1) requesting that a city official turn off the water manually, Dkt. 36-13 at 3; or (2) hiring a plumber to install a master shutoff valve for an estimated onetime cost of $815, Dkt. 40-10 at 4. Plaintiffs took neither step. Their only actions with respect to the water supply were to shut off “the water supply to the outside shower” and “the water supply to the outside hose, ” Dkt. 40-1 (Dahlgren Dep. 199:16-199:18)-that is, to prevent water from flowing out of the house's plumbing system. Dahlgren testified that she believed she “did everything within [her] power to secure the house” before leaving it on February 6, 2013. Id. at 199:20-200:1.

         C. Windsor's Assessment

         Plaintiffs timely filed a claim under their policy with Windsor. Dkt. 1-2 at 6 (Compl. ¶ 22); Dkt. 2-2 at 2 (Answer ¶ 13). Windsor hired a third-party adjuster, Tim Stapf, to assess the claim and to investigate the “occupancy of the property prior to the loss.” Dkt. 36-10 at 2; accord Dkt. 36-1 at 11. According to Windsor's guidelines, third-party adjustors make initial recommendations as to coverage, but Windsor retains final decisionmaking authority. Dkt. 40-18 at 2. Stapf reported to Windsor's in-house adjustor, Cheryl Ackley, who in turn reported to Windsor's general claims manager, Ed Campbell. Dkt. 36-1 at 11-12; Dkt. 40-19 (Campbell Decl. ¶¶ 2, 3); Dkt. 40-20 (Ackley Dep. at 6:13-6:20).

         On March 3, 2013, Stapf filed a draft report, Dkt. 36-13, in which he recommended that Windsor approve Plaintiffs' insurance claim because the house lacked a shutoff valve. He wrote:

It is this writer's opinion that coverage would be afforded for this loss, as the property was constructed in such a way that restricts your insured from complying with the water supply requirements in your ML-508D endorsement. Simply put, it is not logical or reasonable to require your insured to turn off a water supply valve that does not exist.

Id. at 3. The report did acknowledge, however, that Plaintiffs could have “compl[ied] with [the ML-508D] requirement” by “calling the water company and arrang[ing] to have them shut off the supply line.” Id. at 2-3. (Stapf was unfamiliar with the WB-27(D) notice, recited above, which referred to the additional possibility that an insured party could have a shutoff valve installed.) Dkt. 40-17 (Stapf Dep. 63:15-65:11). Because Ackley was out of town at the time, Stapf escalated this “tricky” issue directly to Campbell. Dkt. 40-20 (Ackley Dep. 87:14-88:7).

         The next day, Campbell requested that Stapf change his report to conform to Windsor's standing interpretation of the policy. Dkt. 36-14. Campbell explained that “even [in cases in which] the insured has no way in which to shut off a portion of the water supply [and] does not have the system modified to allow this to be done, ” the policy “is clear” that “we are not to afford coverage for this type of loss.” Id. at 2. He said that Plaintiffs had a “duty” to “realize [that] modifications need[ed] to be done to meet [Windsor's] requirements” and to “contact a qualified plumber” if necessary. Id. He then added that, although he personally is “not in agreement with the position taken by [Windsor], ” he had his “marching orders.” Id. Campbell later testified that he was not commenting on the proper interpretation of the policy, but rather describing his view that Windsor should not sell policies with the ML-508D (04-06) exclusion at all. Dkt. 40-19 (Campbell Decl. ¶ 6). Stapf deleted the quoted language from his report, and modified it to opine that Windsor could either grant or deny coverage. See Dkt. 36-15.

         When Ackley later returned from vacation, she expressed confusion regarding the status of the claim. Dkt. 40-20 (Ackley Dep. 90:3-90:16, 91:10-91:15). She wrote in the case file: “This is the one [where] the [insured] cannot turn off [the] water . . . ??? [H]ow should this one be handled?” Dkt. 36-13 at 3; Dkt. 40-20 (Ackley Dep. 80:10-81:7). Upon learning that Campbell had resolved the issue, she added “per [manager, ] denial.” Dkt. 36-13 at 3.

         On March 11, 2013, Windsor denied Plaintiffs' insurance claim. Dkt. 36-17. Windsor cited the ML-508D exclusion as the reason for the denial, but reserved the right to invoke other policy terms that might also preclude coverage. Id. at 3.

         D. Plaintiffs' Contract with Gale Force

         Plaintiffs hired Gale Force to remediate the water damage from the burst pipe. Dkt. 28 at 2 (Third Party Compl. ¶¶ 4-5); Dkt. 35 at 7 (Am. Compl. ¶ 40). Gale Force is a Delaware corporation, with its principle place of business in Delaware. Dkt. 42-5 at 2 (McCreary Decl. ¶ 2). The company has no office in the District, has no registered agent in the District, and is not registered to do business in the District. Id. at 2-3 (¶¶ 3-10). According to Gale Force's president and owner, “[n]o employee or representative of Gale Force traveled to the District of Columbia in connection with services ...

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