Court Denies Insurer’s Motion for Summary Judgment on Breach of Contract Claim and Further Denies Motion to Exclude Insured’s Expert

    The court denied the insurer's Motion for Summary Judgment seeking to dismiss the insured's breach of contract claim. The court also denied the insurer's Daubert motion to exclude the insured's expert witness. Ram Krishana Inc. v. Mt. Hawley Ins Co., 2025 U.S. Dist. LEXIS 18912 (S.D N.Y Feb. 3, 2025).

    The insured owned property in Louisiana operated as a Motel 6 (Hotel Property). A restaurant was located at an adjoining address (Restaurant Property) owned by ANK Holdings, LLC, with two members: the same Mukesh and Kailash Zveri who owned the Hotel Property. Mt. Hawley issued a policy covering the Hotel Property and the Restaurant Property. 

    On August 27, 2020, the insured notified Mt. Hawley of a claim for damage to the Properties caused by Hurricane Laura. Mt. Hawley retained Engle Martin to inspect the Properties. Engle Martin spoke with Roger Newman, one of the insured's public adjusters, who informed Engle Martin that he "estimated the necessary repairs will exceed $2,000,000 Engle Martin submitted reports to Mt. Hawley, which included Mr. Newman's loss estimate. Mt. Hawley also hired JS Held, a building consultant, to help with the adjustment of the claim. During this time, the Properties were further damaged by Hurricane Delta.

    In December 2020, Mt. Hawley made a $250,000 payment to the insured as an advance. In connection with the payment, Mt. Hawley requested that the insured execute a partial proof of loss for the advance payment. Mt. Hawley issued subsequent payments of $18,664.21 and $46,376.35, but did not require additional proofs of loss for these payment.

    The insured did not submit an additional proof of loss form. Mt. Hawley renewed its "Request for Information" and sought additional information for review and consideration. The insured did not respond. Mt. Hawley did receive an estimate for water mitigation work from Roadrunner kConstruction and had previously been informed by the insured's public adjuster that he estimated repairs would exceed $2,000,000. 

    On May 24, 2021, the insured invoked the policy's appraisal provision. Mt. Hawley's counsel wrote to the insured seeking clarification for the appraisal demand since "the correspondence does not set forth the Insured's contention regarding the amount of loss or provide any information or documentation that would allow Mt. Hawley to understand what the Insured's contention is regarding that number."  Mt. Hawley also reiterated previous requests for documentation, including work performed by Roadrunner Restoration and files with moisture level information, and requested that the insured provide a signed, sworn proof of loss. Other that the December 2020 Partial Proof of Loss, the insured did not submit any additional proofs of loss.

    The insured performed repairs to the roof and additional portions of the Hotel Property, spending approximately $1,600,000. 

    The insured sued Mt. Hawley. Cross motions for summary judgment were filed. Mt. Hawley also filed a Daubert motion to exclude the testimony of the insured's expert, Jeffrey Major. Mt. Hawley's motion for summary judgment challenged the insured's breach of contract claim arising out of Mt. Hawley's failure to timely pay funds owned under the policy for losses arising from Hurricanes Laura and Delta.

    On the breach of contract claim, Mt. Hawley contended that the claim was barred due to the insured's failure to submit a signed proof of loss form setting forth its amount of loss, as required by the policy, and that the Partial Proof of Loss did not satisfy the policy's requirements because it did not set forth the full and complete amount of the loss.

    The court disagreed that the insured's failure to file an additional proof of loss form barred its claim. Mt. Hawley identified no policy language requiring the submission of additional proofs of loss. The insured did provide additional information regarding the loss, including the estimate from the insured's public adjuster that repairs would exceed $2,000,000, as well as the insured's position stated in its request for appraisal that the full Building Policy limits were properly due based on the "devastating amount of damage to the Insured Hotel." Based on this information, the insured's claim was not barred for failure to file an additional proof of low. 

    The court also rejected Mt. Hawley's argument that the insured's failure to submit an additional "complete" signed, sworn proof of loss in connection with its appraisal request was a bar to coverage. There was no separate proof of loss requirement in the policy for the appraisal process. The appraisal provision required only that the insurer and insured "disagree on the value of the property or the amount of the loss." The insured's letter invoking appraisal informed Mt. Hawley that it "disputed the amount of the loss" because the "$250,000 in policy benefits were inadequate to complete the necessary repairs and made a demand for the full Building Policy limits to be tendered. This satisfactorily informed Mt. Hawley that there was a disagreement as to the amount of loss and provided information regarding the loss amount. Consequently, Mt. Hawley was not entitled to summary judgment on the breach of contract claim. 

    The court next determined that the insured did not have an insurable interest in the Restaurant Property because the property was owned by ANK Holdings. The court also granted Mt. Hawley's motion regarding the insured's claim for replacement costs for repairs to the Main Building. The parties did not dispute that the insured had not made all of the repairs for which it sought replacement costs, including to the Main Building. Under the policy and New York law, the insured was required to actually repair or replace the damaged property before making a claim for replacement costs. The court granted Mt. Hawley's motion ruling that the insured could not recover replacement costs for repairs it had not yet made.

    Finally, the court turned to Mt. Hawley's motion to exclude the testimony of Jeffrey Major, the insured's expert on causation and amount of loss. Mr. Major estimated that the actual cash value of the loss was $1,342,605.08 after relying on estimates calculated in a software program called 'Xactimate. Mr. Major not only used the program, but, instead of using the program's default prices, Mr. Major put in his own prices. 

    Mt. Hawley did not question Mr Major's qualifications, but argued his opinions were unsupported and unreliable based on the price inputs underlying his cost estimates using Xactimate. Mt. Hawley submitted that Mr. Major's opinion were unreliable because the cost information was based only on his general experience and no documentation or objective substantiation for those estimates weas provided. The court disagreed that Mr. Major should be disqualified on this basis. Mr. Major identified the particular prices that he independently input into Xactimate and explained that the costs came from builders who did work in the storm that damaged the insured's property and his own experience in adjusting similar claims. His opinions could be challenged on cross examination. Mt. Hawley's motion to exclude Mr. Major's testimony was denied.