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Emerald Coast Finest Produce Company, Inc. v. Alterra American Insurance Co.

United States Court of Appeals, Fifth Circuit

July 20, 2017

EMERALD COAST FINEST PRODUCE COMPANY, INCORPORATED, Plaintiff - Appellant
v.
ALTERRA AMERICAN INSURANCE COMPANY; BANCORPSOUTH INSURANCE SERVICES, INCORPORATED, formerly known as Stewart Sneed Hewes Insurance, Defendants - Appellees

         Appeal from the United States District Court for the Southern District of Mississippi

          Before REAVLEY, OWEN, and SOUTHWICK, Circuit Judges.

          LESLIE H. SOUTHWICK, Circuit Judge.

         The plaintiff leased its commercial warehouse and required the lessee to provide full property damage insurance coverage for the warehouse. After the warehouse sustained substantial fire damage, the plaintiff brought this suit against the lessee, the insurance agent, and the insurer. The plaintiff settled with the lessee, and the district court granted summary judgment to the insurance defendants. The plaintiff appealed. We AFFIRM.

         FACTUAL AND PROCEDURAL BACKGROUND

         On January 18, 2013, Emerald Coast Finest Produce Company, Inc. entered a lease agreement with Sunrise Fresh Produce, LLC. Under the agreement, Sunrise would operate its produce distribution business in Emerald's specialty refrigerated warehouse located in Pensacola, Florida. The lease agreement also gave Sunrise an option to purchase the warehouse for a price "equal to fair market value, but with a cap of $4, 600, 000.00."

         The lease agreement required Sunrise to "provide and keep in force fire and extended coverage property damage insurance on the Premises equal to 100% of the replacement value of the building." In the weeks leading up to the execution of the lease agreement, Sunrise's Vice President and Chief Financial Officer, Jarrod Gray, initiated the process of obtaining the required insurance by contacting Sunrise's insurance agent at BancorpSouth, Jeff Carter. Carter was Vice President and Producer at BancorpSouth.

         Gray emailed Carter on January 4, 2013, and informed him that Sunrise would be responsible for "insuring the building, contents, etc." of a property in the coming weeks. Gray stated "[t]he building has a value of roughly $5, 000, 000." He asked Carter to "begin the process of determining insurance cost." Gray also stated he would "get [Carter] the other information (i.e. contents value, inventory, trucks, etc.) early next week."

         On January 14, Carter asked Gray for information about the building, including the square footage, distance from the beach, and year the building was built. Another Sunrise employee, Michael O'Brien, provided that information. In an email to Gray and O'Brien later that day, Carter stated, "We can always adjust later but using $5, 000, 000 on main building (125, 000 SF). How much on 8, 000 shop? ($300, 000?) How much in Contents / Stock for Main Building? Contents for Shop?" O'Brien responded, "Sounds good on buildings, " and Gray responded, "$300, 000 is fine on shop. Contents in main building would be roughly $350, 000 including inventory. Contents of [shop] would be roughly $25, 000."

         BancorpSouth added the warehouse insurance policy to Sunrise's existing property damage insurance policy with Alterra America Insurance Co.[1] The policy limits were as described in the emails, including a $5, 000, 000 limit on the warehouse. An endorsement added Emerald to the policy as "mortgagee." After the policy was issued, Emerald received a certificate of insurance that listed Sunrise as the insured, Emerald as an additional interest, and described the policy limits. Emerald disputes whether it ever received a copy of the insurance policy, but it does not dispute that it received a copy of the certificate of insurance. There is no indication that any party ever expressed concern about the amount of coverage placed on the warehouse.

         On April 26, 2013, three months after the parties entered into the lease agreement, a fire broke out in the warehouse and substantially damaged the building. Emerald believed the fire was caused by Sunrise's improper installation of two 48-volt forklift chargers in the warehouse. After the fire, Alterra hired a company that determined the replacement cost of the warehouse was $15, 258, 019, far exceeding the $5, 000, 000 in coverage. Another report concluded that repairs would cost $10, 037, 411. Emerald received the extent of the $5, 000, 000 policy limit. Emerald claims the defendants should have placed $15, 000, 000 in coverage, though, and calculates its damages as the difference between the $5, 000, 000 policy and the $15, 258, 019 replacement-cost figure.

         Emerald filed the current complaint against Sunrise, BancorpSouth, and Alterra on October 15, 2014, in the United States District Court for the Southern District of Mississippi. Emerald argued Sunrise breached its obligations under the lease agreement and was negligent in various respects. Emerald and Sunrise have settled that part of the suit.

         Emerald claimed BancorpSouth was negligent for failing to determine the actual replacement-cost value of the warehouse before placing insurance coverage with Alterra. Emerald asserted another negligence claim against BancorpSouth for alleged failure to procure the requested 100-percent replacement-cost insurance coverage. Finally, Emerald asserted a negligence claim against Alterra for failing to determine the actual replacement cost of the warehouse and, in the alternative, for respondeat superior liability for the negligence of BancorpSouth.

         BancorpSouth filed a motion for summary judgment on April 24, 2015. Alterra did the same a month later. Emerald responded with, among other motions, a motion for partial summary judgment in which Emerald argued that the district court should apply Florida law to its claims. The district court denied that motion without prejudice due to insufficient briefing. It noted that Emerald's motion contained two pages ...


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