Hudson Enterprises, Inc. v. Certain Underwriters at Lloyd's London Insurance Companies

United States Court of Appeals
For the Eighth Circuit
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No. 16-2846
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Hudson Enterprises, Inc., doing business as River Valley Marina
lllllllllllllllllllll Plaintiff - Appellant
v.
Certain Underwriters at Lloyd's London Insurance Companies, Subscribing to
Policy #10NCG01559 and Agreement Numbers NPPI1011456 and NPPI09112456
lllllllllllllllllllll Defendant - Appellee
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Appeal from United States District Court
for the Eastern District of Arkansas - Little Rock
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Submitted: April 5, 2017
Filed: April 28, 2017
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Before GRUENDER, MURPHY, and KELLY, Circuit Judges.
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MURPHY, Circuit Judge.
On the night of April 30, 2011 a storm generated strong winds and left seven
inches of rain in the Little Maumelle River basin. The River Valley Marina lost five
of its docks to the storm. The docks were covered by an insurance policy issued by
Certain Underwriters at Llyod's London Insurance Companies (Underwriters) which
excluded losses "caused directly or indirectly" by flood. Underwriters denied
coverage based on the flood exclusion. The marina then filed this action against
Underwriters, alleging that they breached the policy. The district court1 granted
Underwriters summary judgment after concluding that the docks were lost to flood.
Hudson appeals, and we affirm.
I.
Ray and Debra Hudson own Hudson Enterprises, which operates the River
Valley Marina. The marina owns eight docks on the north bank of the Little
Maumelle River in Little Rock, Arkansas. The Little Maumelle River runs west to
east until it converges with the Arkansas River. The marina is located approximately
two miles above the Little Maumelle's confluence with the Arkansas River.
On the night of April 30, 2011 approximately seven inches of rain fell in the
Little Maumelle watershed. Several area residents testified that the river rose at least
three feet above its normal levels and exceeded its banks in some places. Photos
indicate that there was standing water in the parking lot near one of the marina's
docks the next day. The rain also greatly increased the speed of the river's current.
In addition to rain, the storm brought with it high winds that tore down tree branches
near the marina.
The marina lost five of its eight docks to the storm. The three docks that
survived the storm were located upstream from the docks that were swept away. The
marina was covered by an insurance policy issued by Underwriters. After the storm,
the marina contacted Underwriters to obtain compensation for the loss. Its policy
insured the marina against "direct physical loss of or damage to" its eight docks. The
policy contained an exclusion, however, which stated:
1
The Honorable D.P. Marshall Jr., United States District Judge for the Eastern
District of Arkansas.
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We will not pay for loss or damage caused directly or indirectly by any of
the following. Such loss or damage is excluded regardless of any other
cause or event that contributes concurrently or in any sequence to the loss.
These exclusions apply whether or not the loss event results in widespread
damage affecting a substantial area, or remains localized - even when
restricted to the insured premises.
....
4. Water - (a) Flood, surface water, waves, tides, tidal waves, overflow of
any body of water, or their spray, all whether driven by wind or not; . . . .
A few days after the storm, Underwriters sent an adjuster to take photographs
of the marina and talk to the Hudsons. Mr. Hudson told the adjuster that the "[t]he
velocity of that water" caused the damage to the docks. Underwriters denied
coverage after finding that the loss was caused by "a flash flood that occurred on the
Little Maumelle River following heavy rains." The Hudsons later came to believe,
however, that a utility pole caused their loss when it fell onto the docks as a result of
the storm's high winds.
Hudson Enterprises (Hudson) filed this action against Underwriters in state
court. Underwriters removed the case to federal court. During discovery, Hudson
served an interrogatory on Underwriters that stated, "In the course of your
investigation of the facts and circumstances forming the basis for the claim for
benefits tendered by Plaintiff . . . did you obtain any expert opinion relating to your
determination to deny payment of such claim?" Underwriters answered on
November 16, 2015 by stating "discovery is ongoing and [Underwriters] have not yet
made a determination as to whether an expert witness may testify at trial." The
answer then indicated "[i]f Underwriters decide to have a testifying expert,
Underwriters will identify said expert(s) in accordance with the Federal Rules of Civil
Procedure."
The district court entered a case scheduling order which required Underwriters
to "identify all expert witnesses and produce their opinions by 27 January 2016."
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Underwriters disclosed their civil engineering expert to Hudson on January 27, 2016.
The expert concluded that the flash flood was the sole cause of Hudson's loss and
rejected Hudson's utility pole hypothesis. Hudson objected to Underwriters' expert
and asked that his opinions be stricken because the expert had been disclosed too late
and because Underwriters had not supplemented their interrogatory answer after
retaining him. At the hearing on Hudson's motion to strike, counsel for Underwriters
stated that he had first contacted the expert on December 18 and had not received a
draft expert report until the last week of January. The district court denied the motion
to strike.
The parties later filed cross motions for summary judgment. The district court
denied Hudson's motion and granted that of Underwriters. The court concluded that
there was no genuine issue of material fact regarding whether or not a flood had
caused the damage to Hudson's docks and that the policy exclusion therefore applied.
Hudson appeals, arguing that the district court abused its discretion by refusing to
strike the report and opinions of the Underwriters expert and erred by granting their
motion for summary judgment.
II.
Hudson argues that the district court abused its discretion when it refused to
strike Underwriters' expert report and opinions. We review a district court's
"discovery rulings in a manner both narrow and deferential, and reversal is only
warranted if an erroneous ruling amounted to a gross abuse of discretion." Robinson
v. Potter, 453 F.3d 990, 994–95 (8th Cir. 2006) (internal quotation marks omitted).
Hudson appears to argue that Underwriters disclosed their expert in an untimely
fashion. A party must disclose expert testimony "at the times and in the sequence that
the court orders." Fed. R. Civ. P. 26(a)(2)(D). Underwriters thus complied with the
Federal Rules of Civil Procedure by disclosing their expert on the last day allowed
by the scheduling order.
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Hudson also argues that the district court should have stricken the expert report
for Underwriters because they did not supplement their interrogatory answers in a
timely fashion after they had secured their expert. A party that has responded to an
interrogatory "must supplement or correct its disclosure or response: (A) in a timely
manner if the party learns that in some material respect the disclosure or response is
incomplete or incorrect." Fed. R. Civ. P. 26(e)(1). Hudson's interrogatory asked
Underwriters if they had obtained "any expert opinion relating to your determination
to deny payment of such claim." In November 2015 Underwriters responded that
"they have not yet made a determination as to whether an expert witness may testify
at trial." Underwriters counsel did not receive draft expert reports until the last week
of January. On January 27, Underwriters disclosed to Hudson the reports and
opinions of their two expert witnesses. Because only a few days had passed at most
between when Underwriters obtained their expert's opinion and disclosed it to
Hudson, we cannot conclude that the district court grossly abused its discretion by
denying Hudson's motion to strike.
III.
Hudson argues that the district court erred by granting Underwriters summary
judgment. We review a district court's "grant of summary judgment de novo and
consider the facts in the light most favorable to the nonmoving party." Nichols v.
Tri-Nat'l Logistics, Inc., 809 F.3d 981, 985 (8th Cir. 2016). A district court's grant
of "[s]ummary judgment is only appropriate when 'there is no genuine dispute as to
any material fact and the moving party is entitled to judgment as a matter of law.'"
Id. (quoting Pinson v. 45 Dev., LLC, 758 F.3d 948, 951–52 (8th Cir. 2014)). We
review de novo questions of contract interpretation. Anderson v. Hess Corp., 649
F.3d 891, 896 (8th Cir. 2011). It is undisputed that Arkansas law applies to this
diversity action. See Emp'rs Reinsurance Co. v. Mass. Mut. Life Ins. Co., 654 F.3d
782, 789 (8th Cir. 2011).
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Hudson first argues that the term "flood" in the exclusion to the insurance
contract is ambiguous. In Arkansas, "the intent to exclude coverage in an insurance
policy should be expressed in clear and unambiguous language, and an insurance
policy, having been drafted by the insurer without consultation with the insured, is
to be interpreted and construed liberally in favor of the insured and strictly against the
insurer." Nationwide Mut. Ins. Co. v. Worthey, 861 S.W.2d 307, 310 (Ark. 1993).
If policy language is ambiguous, "and it is fairly susceptible of two or more
interpretations, one favorable to the insured and the other favorable to the insurer, the
one favorable to the insured will be adopted." Id.
Hudson claims that the term "flood" is ambiguous because it is not defined in
the policy. An undefined term in an insurance policy, however, is not automatically
ambiguous. Essex Ins. Co. v. Holder, 261 S.W.3d 456, 458 (Ark. 2007). Moreover,
the Arkansas Court of Appeals has concluded that an identically worded policy
exclusion is unambiguous. Ebbing v. State Farm Fire & Cas. Co., 1 S.W.3d 459,
461–62 (Ark. Ct. App. 1999). Ebbing defined "flood waters" as "those waters above
the highest line of the ordinary flow of a stream, and generally speaking they have
overflowed a river, stream, or natural water course and have formed a continuous
body with the water flowing in the ordinary channel." Id. at 462 (quoting Ferndale v.
Great Am. Ins. Co., 527 P.2d 939, 940 (Colo. App. 1974)). Although only decisions
from a state's highest court control our interpretation of state law, Hudson has not
provided any reason why Ebbing is not predictive of how the Arkansas Supreme
Court would rule on this issue. See Pinson, 758 F.3d at 952. We therefore conclude
that the term "flood" in this insurance contract is unambiguous and adopt the
definition of "flood" given in Ebbing.
Hudson next argues that there is a genuine issue of material fact as to whether
the damage to the docks occurred as the result of a flood. Hudson claims that strong
winds were the sole cause of its damages here because they caused a utility pole to
crash into its docks. In support of this claim, Hudson relies on the testimony of
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several area residents that the storm on April 30 and May 1 involved very strong
winds that knocked down tree limbs. Hudson also submitted evidence that the winds
were gusting at 40 miles per hour during the storm. Hudson finally relies on a
photograph that shows a downed utility pole lying on one of the marina docks.
Underwriters' civil engineering expert rejected Hudson's utility pole hypothesis.
Its expert concluded that the utility pole had not fallen down as the result of wind
because it would have taken wind gusts of more than 200 miles per hour to knock
down a utility pole of that size. The expert also concluded that even if the wind had
caused the pole to fall, the impact could not have caused the structural damage to the
docks. In light of this expert report, Hudson's submission of lay testimony that the
storm generated strong wind gusts and a photograph of the downed utility pole did
not create a genuine issue of material fact as to whether wind or flood caused the
damage to the docks.
Hudson alternatively argues that the damage here was not caused by a "flood"
but rather by strong "current within the banks of" the Little Maumelle River. There
is however no genuine issue of material fact that the storm on the night of April 30
caused the waters of the Little Maumelle to rise "above the highest line of the
ordinary flow" of the river. See Ebbing, 1 S.W.3d at 462 (quoting Ferndale, 527
P.2d at 940). Several lay witnesses testified that the storm caused the river to rise at
least three feet above its ordinary flow level. Moreover, both parties agree that the
storm caused the river to overflow its banks and left standing water in a parking lot
near one of the marina's docks. The facts show that the rain event on the night of
April 30 created a flood on the Little Maumelle River.
There is also no genuine issue of material fact that the force generated from the
flood waters directly or indirectly caused the damage to the marina's docks. The
Underwriters expert opined that at the time of the storm, the river's current would
have exerted at least 75,000 pounds of hydrodynamic force on the docks. The expert
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further stated that 75,000 pounds was "much more than enough force" to cause the
damage to the marina because the cables securing the docks to the riverbank were
only rated for 14,400 pounds of force. Hudson's argument that the damage was the
result of a strong current within the banks of the Little Maumelle River does not
defeat summary judgment because this damage was caused by the strong current in
waters which were "above the highest line of the ordinary flow" of the river. See
Ebbing, 1 S.W.3d at 462 (quoting Ferndale, 527 P.2d at 940). At the very least, the
flood indirectly caused the damage to the marina.
IV.
For the reasons stated above, we affirm the district court.
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