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A-1 Transmission Automotive Technology, Inc v. Amco Insurance Company

April 27, 2012

A-1 TRANSMISSION AUTOMOTIVE TECHNOLOGY, INC., PLAINTIFF,
v.
AMCO INSURANCE COMPANY, DEFENDANT.



The opinion of the court was delivered by: Honorable Ronald S.W. Lew Senior, U.S. District Court Judge

ORDER re: Defendant AMCO Insurance Company's Motion for Partial Summary Judgment [43]

On April 6, 2012, Defendant AMCO Insurance Company's ("Defendant") Motion for Partial Summary Judgment was set for regular calendar before the Court [43]. The Court having reviewed all papers submitted pertaining to this Motion and having considered all arguments presented to the Court, NOW FINDS AND RULES AS FOLLOWS:

The Court GRANTS in Part and DENIES in Part Defendant's Motion for Partial Summary Judgment. The Court DENIES Defendant's Motion for Partial Summary Judgment in part as to Plaintiff A-1 Transmission Automotive Technology, Inc.'s ("Plaintiff") bad faith claims. The Court, however, GRANTS Defendant's Motion for Partial Summary Judgment in part as to preclude punitive damages.

I. UNDISPUTED FACTS

A. The Insurance Policy

This case arises out of an insurance claim for lost Business Income and Extra Expenses that Plaintiff filed with Defendant. Plaintiff is an auto transmission and exhaust emission specialist company that operates its principal place of business from an auto garage in Corona, California. In 2007, Defendant issued Plaintiff a Premier Businessowners Policy ("the Policy") to cover specific types of accidents or property damage that could occur at Plaintiff's auto garage. During the policy period, November 2, 2007 to November 2, 2008, the Policy covered the costs for building replacement, business personal property, potential loss of business income ("Business Income") due to an accident, any extra expenses ("Extra Expenses") that may occur during restoration, and other miscellaneous costs. The Policy, however, carried policy limits of: (1) $617,300 plus 6% inflation for building replacement, (2) $61,400 plus 2.9% inflation for business personal property, (3) $10,000 for increased construction costs, (4) $25,000 for debris removal, and (5) $10,000 for actual costs incurred to comply with enforcement of ordinance or law in the course of any repair efforts by Plaintiff.

At issue between the Parties is Defendant's alleged refusal to reimburse Plaintiff for (1) lost Business Income and (2) Extra Expenses incurred. For Business Income, the Policy provides that Defendant will reimburse Plaintiff for all Business Income loss, which results from the forced suspension of business operations after an accident. The Policy does not have any monetary limitations for Business Income but does limit compensation to actual loss of Business Income that occurs within 12 months after an accident. For Extra Expenses, the Policy provides that Defendant will reimburse Plaintiff for Extra Expenses incurred to avoid or minimize suspension of operations and to continue operations. Further, Defendant has an obligation to reimburse Plaintiff for Extra Expenses incurred (1) to repair or replace property or (2) to restore lost information on damaged valuable papers and records. The Policy provides, however, that Extra Expenses are only paid to Plaintiff to the extent that the Extra Expense incurred by Plaintiff reduces the amount otherwise payable as Extra Expenses or Business Income.

Finally, the Policy requires Plaintiff to take reasonable steps to protect all covered property from further damage and to keep a record of such expenses for consideration in the settlement of the claim. However, such expenses do not increase any of the policy limits of the insurance.

B. Property Damage at Plaintiff's Business

On January 18, 2008, Plaintiff sustained a substantial partial fire loss at its garage, and Defendant commenced a claim investigation on the same date. On January 21, 2008, Defendant issued Plaintiff a $25,000 advance to compensate for business personal property. Within the first week of the loss, Defendant's claim adjuster, David Melton ("Melton"), was working with Plaintiff's public adjuster ("PA"), David Skipton, to facilitate emergency shoring and repairs required by authorities to allow entry to the red-tagged building and to provide temporary power.

On January 29, 2008, Melton took the recorded statement of Plaintiff's president, David Krattenmaker who claimed Plaintiff grossed $1 million annually. Defendant then advanced $50,000 under the Business Income coverage and obtained an agreed scope of repair. The next day, Melton commenced investigation of Plaintiff's Business Income claim by retaining Roberta Salata ("Salata"), a CPA, to evaluate the merits of the claim. Between January and July 2008, Salata, the PA, and Melton exchanged various e-mails in which Defendant requested various financial documentation from Plaintiff that could help support Plaintiff's Business Income claim. In March 2008, Defendant also paid Plaintiff $81,808.45 in building coverage and advanced Plaintiff an additional $50,000 in Business Income.

On August 20, 2008, Defendant paid Plaintiff an additional $409,749.98 for the building loss. However, Melton sent Plaintiff a letter stating that it had not received documentation to support a Business Income claim.

On November 7, 2008, Defendant received an official Business Income loss claim from Plaintiff's PA, requesting an additional $143,099.94 for a six-month post-fire Business Income loss. Plaintiff also requested $120,378.84 in an Extra Expense claim, which included a request for reimbursement of $68,000 in security expenses. On November 21, 2008, Salata responded to the Business Income loss claim and requested various financial documents that Salata states had yet to be provided, including Plaintiff's general ledgers for 2007 and 2008. Between November 2008 and January 2009, the Parties exchanged various letters and e-mails, in which Defendant repeatedly reiterated its need for certain financial documents. Defendant, however, made certain payments to Plaintiff, which brought the total benefits paid to Plaintiff to $814,319.13.

During the course of 2009, the Parties exchanged multiple e-mails and letters, in which Plaintiff sent certain documents to Defendant, and Defendant asked for more documents. On August 24, 2009, Defendant sent a letter to Plaintiff, explaining that Salata did not have sufficient documentation to accurately determine Business Income loss and as a result, it could only estimate the Business Income loss at $29,181. Defendant offered to meet with Plaintiff to discuss additional documents needed to support the Business Income claim. In 2010, Plaintiff's attorney, Francis Doherty became involved and ...


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