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McGee v. Ward Memorial African Methodist Episcopal Church

United States District Court, District of Columbia

September 28, 2018

DELORES MCGEE, doing business as Emergent Preparatory Academy, Plaintiff,
v.
WARD MEMORIAL AFRICAN METHODIST EPISCOPAL CHURCH, and ERIE INDEMNITY COMPANY, Defendants.

          MEMORANDUM OPINION

          TREVOR N. MCFADDEN, USD.J.

         This case arises from a flood caused by a ruptured sewer line, which made premises owned by Ward Memorial African Methodist Episcopal Church unusable for Delores McGee and the child development facility she operated. Ms. McGee seeks damages from the Church and Erie Indemnity Company on various legal theories. But the lease between the Church and Ms. McGee waives “all claims” to the maximum extent permitted by law, and Ms. McGee's non-contract claim for gross negligence is insufficient. Ms. McGee also improperly names Erie Indemnity Company as a defendant. Erie Indemnity is not the insurer under Ms. McGee's insurance contract but the insurer's attorney-in-fact. The Court will therefore grant the Church's Motion for Summary Judgment, Erie Indemnity's Motion to Dismiss, and Ms. McGee's Motion to Dismiss the Church's counterclaims based on the same suit-waiving lease.

         I.

         In June 2012, Ward Memorial African Methodist Episcopal Church leased a building in the northeast quadrant of the District of Columbia to Ms. McGee, who was doing business as Emergent Preparatory Academy II. Second Am. Compl. (Am. Compl.) ¶ 9; Lease Agreement, ECF No. 30-3 at 4 (Lease). The Academy was a school for infants and children ages two to twelve. Am. Compl. ¶ 9. The lease was for five years and was governed by District of Columbia law. Id. ¶¶ 9, 12. Ms. McGee paid a $4, 500 security deposit and made rent payments of $4, 000 per month thereafter. Id. ¶ 11.

         With about a month remaining on the lease in May 2017, tree roots ruptured a sewer line, leading to sewage causing severe damage to the building's walls and floors. Id. ¶¶ 13, 15. Ms. McGee immediately notified the Church. Id. ¶ 13. The Office of the State Superintendent of Education issued an abatement order the next day that required the Academy to cease operations immediately. Id. ¶ 17. The abatement order remained in effect until “specified remediation services were performed, including air quality services.” Id. But if the remediation did not start within two days, Ms. McGee would have to surrender her operating license. Id. A remediation services company told Ms. McGee that the affected walls and floor would need to be replaced. Id. ¶ 15.

         Ms. McGee claims that the Church had “prior, actual knowledge of the sewer line's dangerous condition because of numerous other sewage backups, ” one of which required “installation of a sewer cleanout line for regular maintenance.” Id. ¶ 16. That cleanout line, she says, was not “properly maintain[ed].” Id.

         Ms. McGee maintained an insurance policy, covering January 2017 to January 2018. Id. ¶ 34. She alleges that the “only parties to the Policy are [Ms.] McGee and [Erie] Indemnity.” Id. ¶ 33. The Policy states that Erie Indemnity Company serves as the attorney-in-fact for Erie Insurance Exchange and its subscribers, and that the Exchange is one of two “Member Companies” within the Erie Insurance Group-the other being Erie Insurance Property and Casualty Company. ECF No. 31-2 at 11-12 (page numbers created by the Court's Case Management/Electronic Case Filing System (CM/ECF)).

         After the flood, Ms. McGee says that Erie Indemnity would not authorize insurance payments for the state-required mediation, although it paid the remediation company to remove damaged items. Id. ¶¶ 18-19. Ms. McGee paid a plumber to fix the sewer line. Id. Ms. McGee also claims that Erie Indemnity promised to replace her personal property but has since refused to pay for her damages under her insurance policy. Id. ¶ 19. With no insurance payments forthcoming, Ms. McGee and the Church disagreed about who should pay for remediation; each claimed that the other was responsible. Id. ¶¶ 20-21. The Lease obligated the Church as landlord to “restore the damage to the Premises” after a “fire or other casualty.” Id. ¶ 20. Ms. McGee claims that this obligation applied to the sewage damage and that the Church never intended to comply, even on the day the contract was signed. Id. ¶ 21.

         In any event, the remediation services were not performed, and Ms. McGee lost her operating license for the Academy on May 19, 2017. Id. ¶ 22. Two days later, she repudiated the Lease. Id. In September 2017, Ms. McGee wrote a letter demanding “a pro-rated refund of the rent paid for May 2017, and her full $4, 500 security deposit, ” which the Church ignored. Id. ¶ 28. With her business shut down, Ms. McGee incurred severe losses, including over $300, 000 in business losses, and monthly storage costs of $1, 316. Id. ¶¶ 30-31. Ms. McGee eventually received insurance payments of $44, 000 for personal property damage and $50, 000 for business losses. Id. ¶ 35. She alleges that her damages exceed these levels and that Erie Indemnity violated the insurance policy terms by refusing to compensate her for the full effect of the flood. Id. ¶¶ 36-40.

         The operative complaint makes claims for declaratory relief, breach of contract, and breach of the implied covenant of good faith and fair dealing, against both the Church and Erie Indemnity. Id. ¶¶ 42-62. Against the Church only, Ms. McGee also brings claims for gross negligence and conversion. Id. ¶¶ 63-71. In response, the Church filed a counter-claim for $75, 000, claiming that Ms. McGee violated the lease by underpaying her rent, not paying required utility bills, and failing to repair the premises. Counterclaim, ECF No. 16-1. The Church has also moved for summary judgment, claiming that the lease contains a full waiver of “all claims” between the parties and that Ms. McGee's non-contract claims fail on their own terms. For its part, Erie Indemnity moves to dismiss, arguing that Ms. McGee has named the wrong insurance entity.[1]

         II.

         A.

         To prevail on a motion for summary judgment, a movant must show 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); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986); Celotex Corp v. Catrett, 477 U.S. 317, 322 (1986). “[A] party seeking summary judgment always 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, 477 U.S. at 323. Once this showing has occurred, the non-moving party bears the burden of setting forth “specific facts showing that there is a genuine issue for trial.” Anderson, 477 U.S. at 250.[2]

         The basis for most of the Church's Motion for Summary Judgment is a waiver contained in the lease. Mot. Summ. J. 6. That waiver is expansive:

[I]f and to the extent that applicable law permits a full waiver of claims between landlords and tenants in leases such as this Lease, then Landlord and Tenant waive all claims against the other . . . for any loss, damage or injury, notwithstanding the negligence of either party in causing a loss or the availability of insurance proceeds.

Lease ¶ 4.4. The waiver is preceded by a long discussion of how “Landlord and Tenant . . . acknowledge that the use of insurance is the best way to protect against loss, ” and an agreement that “in the event of loss or damage . . . such loss” will be satisfied first from insurance proceeds, then from “additional insurance proceeds that would have been paid to the party suffering the loss . . . had the insurance required . . . been carried by such party, ” and “finally, by the third party (provided such third party is not an agent or employee of Tenant) causing the loss or damage.” Id. (emphasis added). The ...


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