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Advanced Sleep Center, Inc. v. Certain Underwriters at Lloyd's, London

Court of Appeals of Louisiana, Fifth Circuit

February 8, 2017





          Panel composed of Jude G. Gravois, Robert M. Murphy, and Hans J. Liljeberg






         Appellants, Advanced Sleep Center, Inc. and Advanced Neurodiagnostic Center, Inc., have appealed the trial court judgment in favor of defendant, Certain Underwriters at Lloyd's London.[1] For the reasons that follow, we affirm the judgment of the trial court.


         Defendant issued a policy of insurance to insure plaintiffs' property, (hereinafter referred to as "the subject property"), which consists of a three-story stucco building, located at 2905 Kingman Street in Metairie, Louisiana, for the policy period from June 29, 2012 to June 29, 2013. Hurricane Isaac struck the area where the subject property is located on August 29, 2012. On October 11, 2012, Dr. Morteza Shamsnia, one of the owners of the plaintiff corporations, submitted a property loss notice to their insurance broker asserting that winds from the hurricane caused damage to the subject property's roof, which resulted in damaged flooring, and that "damage to the building caused power outage and medicines were destroyed." Defendant denied coverage for the alleged losses and plaintiffs filed suit.

         At trial, Daniel Onofrey testified that he is a licensed commercial contractor and has worked in the construction industry for forty years. Prior to 2008, he was an insurance adjuster and handled property damage claims for insurance companies and property owners. Mr. Onofrey had a long standing relationship with Dr. Shamsnia. At the time Hurricane Isaac struck, he was in the process of constructing a building for Dr. Shamsnia, located next door to the subject property. Dr. Shamsnia asked Mr. Onofrey to look at the subject property after Hurricane Isaac. Mr. Onofrey met with Dr. Shamsnia's maintenance man, identified as Mohammad Tareh, to repair the roof of the subject property. In repairing the roof, Mr. Tareh applied an elastomeric coating to the roof.

         Mr. Onofrey testified that there was widespread water damage to the building, which was caused by water intrusion from Hurricane Isaac. In his deposition, Mr. Onofrey stated that the leaks into the building were caused by the parapet wall surrounding the roof. At trial, Mr. Onofrey testified that water came in through the flashing for the parapet wall, explaining that the flashing "waffled up" allowing water to enter. Mr. Onofrey stated that he had recently realized that the flashing "was lifting and a breach of the counter flashing caused water intrusion" and this was the only thing that could cause so much widespread damage. Mr. Onofrey stated that this damage to the flashing was visible, and referred to pictures of the flashing, which Mr. Onofrey stated was "waffling up."

         At Dr. Shamsnia's request, Mr. Onofrey prepared a repair estimate for damage to the building alleged to be caused by the hurricane. The estimate includes the costs to repair roof leaks and the exterior stucco, as well as numerous interior repairs throughout the building including replacing insulation, ceiling tiles, flooring, cabinetry, countertops, sinks, light fixtures, cameras, smoke detectors, blinds, window hardware, replace and/or repair and paint drywall, and paint molding and doors. The total estimated cost of these repairs was $369, 693.89. Mr. Onofrey explained that this estimate was compiled from items Dr. Shamsnia pointed out as they walked through the building. Mr. Onofrey took notes during this inspection but he no longer had the notes at the time of trial. Mr. Onofrey testified that he did not take pictures during this inspection. Mr. Onofrey was listed as the insured's contact person on the property loss claim form.

         Mr. Onofrey testified that he inspected the building with the adjuster assigned to the claim by defendant, J. Scott McClary. Mr. Onofrey pointed out damage to the building as he walked through the building with Mr. McClary. Mr. Onofrey accompanied Mr. McClary to the roof of the building.

         Dr. Shamsnia, a professor of neurology, testified that he and his wife work in the subject building, where they operate a sleep study center and a neurodiagnostic center. He testified that defendant inspected the property twenty-eight days before the storm and determined the building was in "good standing."

         Dr. Shamsnia stated that he and his wife, Simin Mirtaheri, evacuated to Los Angeles for Hurricane Isaac. When he went into the building after the storm, there were multiple areas of damage on the second and third floors from water getting into the building from the windows and roof. He instructed his "superintendent, " Mohammad Tareh, to make the necessary repairs to stop water from leaking into the building from the roof. Mr. Tareh tightened the screws on the roof and changed the seals at the bottom of windows. Mr. Tareh also picked up wet carpet and dried it. Some of the carpet was replaced with laminate flooring. The minimum amount of repairs were done to make the building functional so Dr. Shamsnia and his wife could resume patient care. Dr. Shamsnia did not have an invoice or a list of the repairs performed by Mr. Tareh.

         After Mr. Tareh worked on the roof, Dr. Shamsnia had roofing work performed by the roofing contractor who was working on his new building. Dr. Shamsnia was told by this contractor that the roof needed to be replaced. Dr. Shamsnia testified that the roof had not been replaced and it can be observed that the "flanges and all of that are bent." Dr. Shamsnia testified that the water damage inside the building is obvious - there are water stains on the ceiling and walls throughout the building, some of the windows are "buckled, " and the building smells from the water damage. In Dr. Shamsnia's view the pictures of the building that were entered into evidence do not show all of the damage to the building.

         In addition to the damage to the building, plaintiffs also submitted a claim for loss of medications. Dr. Shamsnia testified that there were medications in the building which had to be stored at a constant temperature. These medications are ruined if they are not held at the recommended temperature for more than twenty-four hours. Dr. Shamsnia retained the ruined medications and pictures of the ruined medication were submitted into evidence at trial. Dr. Shamsnia testified that there was a "direct power loss" to the building based on the inspection performed by "his" electrician.[2] He gave a copy of the electrician's report to defendant's adjuster. Although defendant denied that this report was dated, Dr. Shamsnia testified that the report was dated.

         Dr. Shamsnia received the letter denying his claim for damages in December 2012. In July 2013, he contacted Daniel Scott Claire, a public insurance adjuster, to inspect the building. Mr. Claire prepared a second repair estimate which totals $142, 597.00. On July 30, 2013, Dr. Shamsnia mailed this repair estimate, along with a letter, to defendant stating that he disagreed with the decision to deny the claim and requested to proceed under the "request for appraisal" provision of the policy. Dr. Shamsnia testified that he did not receive a response to this letter from defendant; however, the property was re-inspected by defendant in August 2013.

         Glen Scarsone, an engineer for Entergy, which supplied power to the subject building, testified that there was a widespread power outage in Metairie which began at 6:01 a.m. on August 29, 2012 and lasted over twenty-four hours. He explained that the subject property was located in the area that was affected by the power outage.

         J. Scott McClary testified that he works for Worley Catastrophe Response. This claim was assigned to Worley on October 15, 2012. Mr. McClary testified that the initial adjuster assigned to the claim was unable to get in touch with plaintiffs to inspect the property before the claim was reassigned to Mr. McClary. Mr. McClary was assigned the claim on November 4, 2012 and he inspected the property on November 13, 2012. Mr. Onofrey accompanied Mr. McClary during his inspection of the building. Mr. McClary took numerous photographs of the property during the inspection, which were admitted into evidence.

         Mr. McClary testified that Mr. Onofrey told him that repairs were made to the second floor of the building, including replacing the flooring and ceiling tiles. Mr. McClary asked for pictures of the building prior to repairs being made and Mr. Onofrey stated he would provide the pictures. However, pictures of the building prior to repairs were never provided. Mr. McClary was told that repairs had not been made to the third floor of the building. Mr. McClary was not able to access all areas of the third floor due to patients being present. Photographs taken by Mr. McClary depict the lobby and hallways of the third floor. The carpet and ceiling tiles have not been replaced. Mr. McClary testified that he did not see any water damage on the third floor of the building.

         Mr. McClary testified that the pictures of the front of the building do not show any exterior damage to the building, including the roof. Mr. McClary explained that the roof of the building is made of sheet metal consisting of panels that are held down with screws and held at the edges by fasteners. While inspecting the roof, he looked for evidence of movement of the panels, such as loosened fasteners, and movement of the seams. He explained that if the panel moved, the area of the panel which the fastener previously covered would be cleaner than the surrounding area. He did not see any evidence of movement of the panels. He inspected the area around the parapet wall, noting that this area can be a "problem" on this type of roof. He did not see any loosening of the seams or fasteners. He went over the numerous pictures he took of the roof and explained that they did not show any damage to the roof. Mr. McClary referred to pictures of the flashing which Mr. Onofrey stated was "waffling up." Mr. McClary was unsure of what "waffling up" meant, but testified that the flashing on this building looked normal. Mr. McClary pointed out that the pictures show maintenance on the roof such as elastometric sealant around the roof vents; this is normal maintenance for this type of roof.

         Mr. McClary explained that the insurance policy issued by defendant on this property only covers interior damage if it is caused by water entering the building due to damage to the roof or exterior of the building. Mr. McClary recommended that the claim be denied because he saw no damage to the roof or exterior of the building. Mr. McClary further explained that the policy only covered losses for contents of the property that were caused by a power failure that occurred on the premises. He recommended that the claim for the ruined medications also be denied because the power failure was caused by an off premises, widespread power outage in the area.

         Mr. McClary inspected the property for the second time on August 15, 2013. At that inspection, he was accompanied by Dr. Shamsnia and Mr. Claire. Mr. McClary again took numerous pictures of the property. Mr. McClary went over these pictures during trial and testified that there was no difference in the building between his initial inspection on November 13, 2012 and the second inspection on August 15, 2013. Mr. McClary went over several pictures of the roof taken during the second inspection. Referring to the south and southwestern areas of the roof, he explained that there was no evidence of wind damage. He testified that there was no evidence of any movement of the panels, flashing or screws of the roof.

         Mr. McClary testified that the third floor of the building was in the same condition as it was on his prior inspection of November 2012. The same carpet ...

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