United States District Court, District of Columbia
DELORES MCGEE, doing business as Emergent Preparatory Academy, Plaintiff,
WARD MEMORIAL AFRICAN METHODIST EPISCOPAL CHURCH, and ERIE INDEMNITY COMPANY, Defendants.
N. MCFADDEN, USD.J.
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.
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.
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.
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
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)).
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.
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.
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
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.
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 ...