Fifth Circuit Affirms District Court’s Grant of Summary Judgment to Insurer on Property Loss Claim

    The Fifth Circuit affirmed the district court's grant of summary judgment to the insurer despite the insured's claim it was not adequately compensated for its loss. In the Matter of New York Inn, Inc., 2025 U.S. App. LEXIS 7887 (5th Cir. April 3, 2025). 

    Viva Inn Motel submitted a claim to its insurer, Associated Industries Insurance Company, for water damage from a burst pipe occurring on February 17, 2021. New York Inn, a corporate affiliate of Viva, was an additional insured on the policy. An adjuster investigated for Associated and recommended that Associated pay Viva  $153,961.57, representing the actual cash value (ACV) amount of the loss. An adjuster for Viva and New York Inn (Motel Owners) provided an estimate for replacement cost value (RCV) of repairs for $175,256.42. 

    Associated sent a payment to Viva for $153,961.57 and requested documentation to support the payment for RCV. Viva requested an advance payment for Viva's business interruption loss. Associated responded that it would consider the payment but requested Viva's profit and loss statements for the prior three months to calculate the payment. The Motel submitted a profit and loss statement for October 20, 2020, through December 20, 2024. Based on this document, Associated estimated the business interruption loss from February 17, 2021, to May 31, 2021, as $74,295. This estimate was used to calculate the payment owed to Viva and a check was issued for $26,349.82. An advance payment of $10,000 for content loss was also issued, but Associated noted that Viva had not submitted any inventory of damaged contents. 

    Viva hired Decagon Development Company, Inc. to renovate the Motel. Decagon sent three invoices to Viva, totalling $682,244. Associated hired a consultant to inspect the Motel and provide an estimate of repairs. The cost of repairs were estimated at $236,188.84. After deducting the prior payment of $153,961.57 for ACV, Associated paid Viva another $81,227.27. 

    In December 2022, the Motel reopened. 

    In May 2021, New York Inn filed for bankruptcy. It filed a complaint, joined by Viva, in the bankruptcy proceeding against Associated for underpaying New York Inn's claim. Associated filed a motion to dismiss, which the bankruptcy court granted. On appeal to the district court, summary judgment was granted to Associated.

    Motel Owners appealed. Motel Owners alleged Associated failed to pay the full amount owed for (1) repairs to the Motel; (2) contents in the Motel; and (3) interruption to the business caused by damage from the storm. 

    The court determined that Motel sought an additional $435,305.77 for building repair. Viva failed to differentiate between costs of building repairs attributable to risks covered by the policy (i.e., the water damage from the storm) and costs attributable to risks not covered by the policy (i.e., the mold damage due to the delay in remediating the water damage). The invoices submitted by Motel Owners did not differentiate between covered and non-covered repairs. The insured had the burden to separate the damage attributable to the risk covered by the policy versus damage caused by non-covered risks. Therefore, Motel Owners' evidence did not create a genuine dispute of material fact as to whether Associated breached the policy by underpaying for building repair. 

    Regarding contents loss, Associated paid $10,000, but Viva never submitted the required documentation for additional coverage. Motel Owners had the burden to prove they suffered a loss and that the loss was covered by the policy. Accordingly, Motel Owners' evidence did not create a genuine dispute of material fact as to whether Associated breached the policy by underpaying for contents. 

    Associated paid Viva $26,349.82 for business interruption between February 17, 2021, to May 31, 2021. Motel Owners argued that they were entitled to at least an additional $73,650.19 to compensate them for the entire duration of the Motel's restoration from February 2021 to December 2022, when the Motel reopened. Motel Owner's argument was based solely on what it felt was reasonable or feasible, rather than on the text of the policy, which did not define the duration of time for business interruption based on what was reasonable or feasible. Because Motel Owners failed to adequately brief their argument that the bankruptcy court and the district court erred in granting Associated's summary judgment as to coverage for business interruption, they abandoned that argument. 

    Therefore, the district court's grant of Associated's motion for summary judgment was affirmed.