Henlopen Hotel, Inc. v. United National Insurance Company

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
HENLOPEN HOTEL, INC.
Plaintiff,
UNITED NATIONAL INSURANCE
)
)
)
)
Vv. ) CA. No. N18C-09-212 PRW
)
)
COMPANY, )
)
Defendant. )
Submitted: January 10, 2020
Decided: January 10, 2020
Written Decision Issued: January 15, 2020
ORDER ON PARTIES’ MOTIONS TO EXCLUDE EXPERT WITNESSES
AND FOR SUMMARY JUDGMENT
Upon Henlopen Hotel’s Motion to Exclude Expert Opinion Testimony,
DENIED.
Upon Henlopen Hotel’s Motion for Partial Summary Judgment,
DENIED.
Upon United National Insurance’s Motion to Exclude Expert Opinion Testimony,
DENIED.
Upon United National Insurance’s Motion for Summary Judgment,
GRANTED IN PART, DENIED IN PART.
This 15" day of January, 2020, upon consideration of the Motion to Exclude
the Expert Testimony of Mervin T. Thomas (D.I. 163) filed by United National
Insurance Company (“United National”) and the response thereto (D.I. 168) filed
by Henlopen Hotel, Inc. (“Henlopen Hotel”); Henlopen Hotel’s Motion in Limine to
exclude testimony from J. Frank Peter (D.I. 171) and United National’s response
thereto (D.I. 174); Henlopen Hotel’s Motion for Partial Summary Judgment (D.I.
122) accompanying brief (D.I. 132) and United National’s answering brief thereto
(D.J. 170); United National’s Motion for Summary Judgment (DI. 137)
accompanying brief (D.I. 138) and Henlopen Hotel’s answering brief thereto (D.I.
169); the oral arguments presented by the parties on the various motions, and the
complete record in this matter, it appears to the Court that:
(1) Henlopen Hotel filed this action against its insurer, United National
Insurance Company for contract breach and insurance bad-faith! following a
coverage denial for water damage caused by a ruptured pipe in January 2018. United
National denied coverage based on its factual conclusion that the pipe burst due to
freezing and its interpretation of Helopen Hotel’s policy that, it says, disqualified
coverage for such an incident.”
(2) United National supports its conclusion that the pipe burst due to
freezing with the expert analysis of J. Frank Peter (“Peter’”).? Henlopen Hotel seeks
to admit the testimony of its own expert witness, Mervin T. Thomas (“Thomas”), to
rebut this factual conclusion and give support to Henlopen Hotel’s alternative
Complaint §§ 16-25 (D.I. 1).
2 Id. at ex. C.
3 See generally Def. Resp. to PIf. Mot. (D.I. 168), ex. A. [Hereinafter “Peter Report”].
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hypothesis that the pipe failed due to accumulated wear and age.*
(3) In dueling motions to exclude, each party seeks to bar the use of the
other’s expert alleging his testimony fails to satisfy the admissibility criteria for
expert opinion evidence under Delaware’s evidence rules.
(4) In Henlopen Hotel’s Motion for Partial Summary Judgment, it seeks
the Court’s determination that the water damage is covered under the policy based
on either of two theories. Henlopen Hotel’s first theory is that its undisputed efforts
to keep the pipes heated satisfied the terms of the policy’s Heat Requirement
Endorsement? and therefore make the damage compensable irrespective of whether
those efforts successfully prevented freezing.® Alternatively, the hotel argues that
United National has failed to produce admissible evidence that freezing occurred
and caused the damage.’
(5) In United National’s Motion for Summary Judgment, the insurer argues
that the Heat Requirement Endorsement creates an ipso facto coverage exclusion for
frozen pipes,® and that the record shows beyond all genuine dispute that the pipe
7 Def. Mot. (D.I. 163), ex. B [Hereinafter “Thomas Report”’].
° Aff. of Herbert W. Mondros, Esq. (D.I. 138), ex. 10.
& Plf. Br. (D.I. 132), at 28.
7 Id. at 29.
8 See Def. Br. (D.I. 138), at 28 (“The plain import of the Heat Requirement is this language
is [sic] that the Hotel must not only maintain heat, but that it must maintain heat at a level sufficient
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ruptured due to a freeze.’ Similarly, United National argues that because the policy
unambiguously denies coverage, there was no breach of the covenant of good faith
and fair dealing.
(6) In the alternative, United National argues that even if a triable issue
exists as to coverage, the exclusion and factual record demonstrate that United
National’s behavior shows neither bad faith nor maliciousness and so require entry
of summary judgment as to the insurance bad faith count and prayer for punitive
damages.!°
(7) Summary judgment is governed by Superior Court Civil Rule 56 and in
a cross-motion with disputed facts, neither party’s motion shall be granted unless the
record shows that there is no genuine issue of material fact and one of the parties is
entitled to judgment as a matter of law.!!
I. EACH EXPERTS’ TESTIMONY IS ADMISSIBLE.
(8) Delaware Rule of Evidence 702 permits a witness to provide an expert
opinion if his or her testimony survives a five-step examination that looks at
to prevent the fire suppression system from freezing. If the fire suppression system froze, it is
manifest that the Hotel failed to satisfy that condition”) (italics in original).
: Id. at 30-31.
” Id. at 34.
HM Laugelle v. Bell Helicopter Textron, Inc., 88 A.3d 110, 118 (Del. Super. Ct. 2014).
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whether:
(a) the witness is qualified as an expert by knowledge, skill, experience,
training, or education;
(b) the evidence is relevant;
(c) the expert’s opinion is based upon information reasonably relied
upon by experts in the particular field;
(d) the expert testimony will assist the trier of fact to understand the
evidence or to determine a fact in issue; and
e the expert testimony will not create unfair prejudice or confuse or
p » pre]
mislead the jury.!”
(9) Rule 702 substantially mirrors the corresponding federal rule of
evidence’? and Delaware courts find federal precedent of assistance when making
expert admissibility determinations.'* “The test of reliability is flexible,” and it is
within the discretion and responsibility of the Court both to devise how to measure
reliability as well as to perform that measurement given the specifics and disciplines
involved in the given case before it.!°
(10) When its admission is challenged, a trial judge must ensure that expert
w Bowen v. E.I. DuPont de Nemours & Co., Inc., 906 A.2d 787, 795 (Del. 2006).
3 See M.G. Bancorporation, Inc. v. Le Beau, 737 A.2d 513, 521 (Del. 1999) (“Delaware Rule
of Evidence 702 is identical to its federal counterpart”).
7 See Tumlinson v. Advanced Micro Devices, Inc., 81 A.3d 1264, 1269 (Del. 2013)
(“Daubert and its progeny” are “the correct interpretation of Delaware Rule of Evidence 702”)
(citing M.G. Bancorporation, Inc.).
7 Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 141 (1999).
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t,16
testimony is both reliable and relevant.'® Expert testimony is relevant if it assists the
fact finder in “understand[ing] the evidence or . . . determin[ing] a fact in issue.””!”
Reliable expert testimony is premised on technical or specialized knowledge, which
requires the testimony to be grounded in reliable methods and procedures and
“supported by appropriate validation—i.e., ‘good grounds,’ based on what is
known.”!® So, at bottom, the Court’s examination of an expert’s opinion “must be
solely focused on principles and methodology, not on the conclusions they
generate.”!”
(11) It is the burden of the party seeking to introduce the expert testimony
to establish its admissibility by a preponderance of the evidence.”? And “[a] strong
preference exists” for admitting expert opinions “when they will assist the trier of
fact in understanding the relevant facts or the evidence.” 7!
7 Daubert, 509 U.S. at 597 (1993).
M7 Id. at 591 (quoting Fed. R. Evid. 702).
8 Id. at 590.
: Tumlinson, 81 A.3d at 1270 (quoting Daubert v. Merrell Dow Pharmaceuticals, Inc., 509
U.S. 579, 595 (2013)).
20 Id
- Norman v. All About Women, P.A., 193 A.3d 726, 730 (Del. 2018).
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(12) The Court notes that a rigid application of the Daubert factors”? simply
cannot be engaged to determine testimonial reliability in every field of expertise.”?
For example, many scientific, technical, or specialized fields are not subject to peer
review and publication. That is why the test of reliability is “flexible,” and the trial
court has “broad latitude when it decides how to determine reliability.”
A. Both Experts Possess Education, Training, and Experience.
(13) Thomas obtained an Associate’s Degree from Temple University in
architectural design and building construction technology in 1971.”° He has spent
the decades since working in various construction-related fields, including as a
carpenter, a builder, a zoning officer and building inspector, and a construction
supervisor, among other capacities.”° The professional and practical knowledge and
experience Thomas necessarily accrued over the course of that career constitutes the
“knowledge, skill, experience, training, or education” necessary to give an expert
2 3 2
22 Bowen, 906 A.2d at 795 (outlining the several factors identified in Daubert that a trial judge
might consider in his or her “gatekeeper”-role when deciding whether an expert’s testimony “has
a reliable basis in the knowledge and experience of [the relevant] discipline.”).
a See, e.g., Watkins v. Telsmith, Inc., 121 F.3d 984, 990 (Sth Cir. 1997) (noting “[n]Jot every
guidepost outlined in Daubert will necessarily apply to expert testimony based on engineering
principles and practical experience’’).
a Kumho, 526 U.S. at 141-42.
= Def. Mot. (D.I. 163), ex. A..
i Id.
opinion on matters in the field of construction.”’
(14) Peter obtained a Bachelor’s Degree in Chemical Engineering from the
University of Delaware in 1971, and a Master’s in the same subject from the
University of Pennsylvania in 1974.78 He has likewise spent decades working in
various construction-related fields, including design, safety, crisis management and
response, and forensics.”? Since 2003, he has worked solely in matters associated
with building forensics, repair management, and associated legal support, with a
focus on the effects of water on buildings°° As with Thomas, Peter has the
qualifications necessary to form an expert opinion on matters related to construction
engineering.
(15) The experts’ professional opinions are informed by a synthesis of
knowledge and expertise accrued over their long careers. This expertise is
fundamentally interdisciplinary, and includes a foundation in physics and
chemistry—which certainly have ample peer-reviewed journals—as well as in
2 D.R.E. 702. United National in its Motion asserts that Thomas “admitted he does not have
any scientific, technical, or any other specialized knowledge that will assist the jury in this case to
determine the cause of pipe failure,” citing to Thomas’s deposition. The section of the deposition
cited includes only Thomas disclaiming any training or education as a meteorologist. Thomas Dep.
at 101.
28 Peter Report, at 6.
7 Id.
My Id.
observations and practical know-how in construction engineering—which generally
evades such formal academic review and commentary. “Many scientific, technical,
or specialized fields are not subject to peer review and publication,” though they
adhere to the characteristics of falsifiability, testability, and iterative refinement
characteristic of the scientific method.*! While mere ipse dixit from experience is
insufficiently reliable to satisfy Rule 702,°? that concern is not present where the
professional’s opinions are founded on data, assumptions, or inferences themselves
published in scientific literature or otherwise amenable to examination. When an
adverse party can adequately interrogate the bases of an expert’s opinion, highlight
contrary data, and expose the expert’s consideration or lack of consideration of
alternative scenarios, falsifiability is satisfied and the circumstances call for rigorous
cross-examination rather than gatekeeping exclusion.*?
B. The Experts’ Opinions Are Relevant.
(16) Evidence is relevant when it has a “tendency to make the existence of
any fact that is of consequence to the determination of the action more probable or
31 Delaware ex. Rel. French v. Card Compliant, LLC, 2018 WL 4151288, *2 (Del. Super. Ct.
Aug. 29, 2018).
32 E.g. Wiercinski v. Brescia Properties, LLC, 2015 WL 227980, *2-3 (Del. Super. Ct. Jan.
15, 2015) (“[The expert’s] theory of dating wood rot is based solely on his work experience, and
his methodology is not supported by any scientific data.”) (emphasis added).
33 Port. v. Turner, 954 A.2d 308, 314 (Del. 2008).
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less probable than it would be without the evidence.”** Whether the broken pipe in
this case ruptured due to a freeze during the cold snap in late 2017 and early 2018 is
° The experts’ opinions directly relate to
a central disputed issue of this case.
whether or not such a freeze caused the rupture, and if credited would make that
conclusion respectively more or less probable in the mind of the fact finder.
C. The Experts Use Professionally Reasonable Methods.
(17) Thomas’s first step was to consult with an outside metallurgical lab.*®
When that lab informed him that no metallurgic test could determine with certainty
whether a pipe fracture was caused by freezing, he conducted his own investigation
based on temperature patterns.*’ To track those temperatures, Thomas used Weather
Underground,” a credible and recognized source of weather data.*” He considered
34 Garcia y. State, 2006 WL 3087173, at *2 (Del. Oct. 31, 2006) (quoting D.R.E. 401).
= The alleged freeze is the sine gua non for United National’s Motion for Summary Judgment
(D.J. 137) as discussed in the corresponding brief. (D.I. 138).
7 Def. Mot. (D.I. 163), ex. C [Hereinafter “Thomas Dep.” ] at 64.
37 Td.
8 Weather Underground is owned by The Weather Channel and collects historical weather
data from government sources, as well as from private stations, primarily at airports. Thomas Dep.
at 89. The service was originally founded at the University of Michigan in Ann Arbor in 1995.
John Schwartz and Brian Stetler, Fans Howl After Weather Site Buys Out Rival, THE NEW YORK
TIMES, July 3, 2012, https://www.nytimes.com/2012/07/04/us/as-weather-channel-buys-weather-
underground-fans-fear-change.html (last accessed December 20, 2019). The name was chosen as
a “winking reference” to the 1960s violent radical group, which also had roots on that university
campus. /d.
7 See, e.g., Pyramid Technologies, Inc. v. Hartford Casualty Ins. Co., 752 F.3d 807, 815 (9th
Cir. 2014); Bentz v. Butler, 2017 WL 2081000, at *7 n.7 (S.D. Ill. May 15, 2017); Cowley v Sunset
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convection in the laundry chute,*° and the physical appearance and markings on the
broken fixture which, based on his experience, resembled accumulated long-term
damage rather than a single recent freeze-driven burst event."!
(18) Peter is also not a metallurgist and also consulted with an outside
metallurgy lab, though unlike Thomas he obtained a full report.4? Peter also
reviewed Weather Underground data, though instead of conducting a thorough
sweep through four decades of records, Peter limited himself to a “cursory review”
of weather data from the 2017-18 winter cold snap in question.*? Peter also took
into consideration convection effects in the laundry chute.“
(19) The similarity of the experts’ methods speaks to their general
acceptance in the field. The experts both consulted with an outside metallurgical
lab. Both experts reviewed temperature data from the same source. Both considered
thermal convection in the laundry chute. Both more generally seek to diagnose the
cause of the pipe failure by eliminating alternative explanations based on
Yacht Charters, Inc., 2011 WL 2938463, at *4 (S.D. Fla. July 20, 2011); Burroughs v. Mackie
Moving Systems Corp., 2010 WL 1254630, at *7 (E.D. Mo. Mar. 24, 2010).
2 Thomas Report, at 1.
7 Id. 8.
"2 Peter Report, at 3.
8 Id. at 9.
_ Td. at 4.
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circumstantial reasoning. The different depth with which they pursued particular
lines of investigation and the different assumptions they made are readily subject to
cross-examination and to evaluation by the fact finder for credibility and weight.
D. The Experts Will Assist the Trier of Fact.
(20) The ultimate fact finder, the jury, is presumably familiar with some of
the basic ideas underlying the conclusions of both Thomas and Peter. The unusual
property of water that it expands when frozen, and hence that ice floats, is universally
known. That this expansion exerts pressure on the surrounding container is also
common knowledge.** The magnitude of forces involved, and other thermodynamic
issues present in this case go well beyond this common knowledge, however.*” So
too are each expert’s knowledge and application of construction principles related to
the location of the water pipe and how that might make freeze a more or less likely
cause of its failure. The expert opinions are therefore vital to the fact finder’s ability
® See Ercolani v. Excelsior Ins. Co., 830 F.2d 31, 33 (3rd Cir. 1987) (taking as given that
water expands when frozen); Album Realty Corp. v. American Home Assur. Co., 607 N.E.2d 804,
806 (N.Y. 1992) (“[A]ny owner of a home or other property with running water knows . . . water
expands when it freezes.”) (Titone, J., dissenting); Ruddy v. Atlantic Mutual Ins. Co. , 342 N.Y.S.2d
72, 74 (N.Y. App. Div. 1972) (It is a “well-known property of water” that “in the process of. . .
freezing at 32 Fahrenheit, it preliminarily expands . . .”).
7 See Nationwide Ins. Co. v. Warren, 675 S.W.2d 402, 403 (Ky. Ct. App. 1984) (affirming
trial court’s finding: “[E]veryone knows, ice is water which is frozen and which expands and exerts
pressure.”’).
7 For example, the experts’ technical discussion of convection effects in the laundry chute.
Peter Report ,at 4; Thomas Report, at 1.
=p
to understand and evaluate the plausibility of the parties’ competing theories for why
the pipe fractured.
E. Neither Expert Appeals to any Improper Bias.
(21) Evidence appeals to an unfair prejudice when it tends to suggest
decision on an improper basis, commonly but not necessarily emotion rather than
reason.‘® The fact finder may credit each expert’s opinion and analysis, or may not,
but there is nothing in the record to suggest either will appeal to or persuade the fact
finder on any improper basis. Whatever persuasive power might lie in each expert’s
opinion does so due to the coherence and power of its content to explain events.
II. DISPUTED FACTS PRECLUDE SUMMARY JUDGMENT FOR BREACH.
(22) Each party’s summary judgment motion is viewed in a light most
favorable to its opponent, accepting the non-movant’s version of any disputed facts
along with all favorable rational inferences.”
(23) United National’s coverage denial is based solely on the Heat
Requirement Endorsement.*° Under a light most favorable to Henlopen Hotel, the
Court must credit Thomas’s opinion that the pipe did not suffer a freeze-related
a8 See Paikin v. Vigilant Ins. Co., 2013 WL 5488454, at *3 n.7 (Del. Super. Ct. Oct. 1, 2013).
Solera Holdings, Inc. v. XL Specialty Ins. Co., 213 A.3d 1249, 1254 (Del. Super. Ct. 2019).
7 Hrg. Tr. (September 16, 2019), at 3 (D.I. 101).
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failure.?! When the Court does so, and should the jury follow, Henlopen Hotel would
be found to have satisfied any possible reading of the Heat Requirement
Endorsement and is entitled to have the claim paid.
(24) Conversely, on Henlopen Hotel’s motion, viewing the record in a light
most favorable to United National requires crediting Peter’s expert analysis and
opinion that the pipe failed because it froze in the cold weather. From that, of course,
the fact finder could reasonably infer the freeze was caused by Henlopen Hotel’s
failure to maintain heat in the building as required. And, under such circumstances,
the coverage exclusion created by the Heat Requirement Endorsement would apply.
(25) Thus, each of the parties’ cross-motions for summary judgment as to
Count I (Breach of Contract) must be DENIED.
II. UNITED NATIONAL HAS A BONA FIDE BASIS TO DISPUTE LIABILITY.
(26) To establish bad faith, an insured must show that the insurer’s refusal
to honor its contractual obligation was clearly without any reasonable justification.>?
Where an insurer’s denial of coverage is premised on a theory sufficiently well-
supported as to resist summary judgment, they are entitled to contest coverage and
cannot be subject to an “extra-contractual” claim for bad faith or punitive damages.™
al See Hart v. Deshong, 8 A.2d 85, 88 (Del. Super. Ct. 1939) (light most favorable analysis
involves adopting and giving credit to that testimony which is most advantageous).
7 Enrique v. State Farm Mutual Auto. Ins. Co., 142 A.3d 506, 511 (Del. 2016).
as Casson v. Nationwide Ins. Co., 455 A.2d 361, 368-69 (Del. Super. Ct. 1982).
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(27) United National’s refusal to pay has at all times been based on the
theory that the damage was caused by Henlopen Hotel’s failure to keep the pipes
heated and prevent a freeze.’ As that theory is sufficiently supported to preclude
summary judgment in Henlopen Hotel’s favor, United National’s motion for
summary judgment as to Count II (Bad Faith) should be GRANTED.»
IV. HENLOPEN HOTEL’S GOOD FAITH AND FAIR DEALING CLAIM
IS DUPLICATIVE.
(28) The implied covenant of good faith and fair dealing involves inferring
contractual terms to handle developments or contractual gaps that neither party
anticipated and which the policy’s words do not expressly address.*°
An express
contractual clause dealing with a situation thus precludes application of the implied
covenant of good faith and fair dealing.’
(29) Inthe Complaint, Henlopen Hotel cited United National’s nonpayment
*4 See Compl., ex. C (United National’s initial coverage denial letter, asserting “the fire
suppression main pipe burst due to a freeze. . . the policy provisions require that the heat be
maintained or the pipes be drained”) (D.I. 1).
= Casson, 455 A.2d at 369 (“Implicit in th[e Court’s] ruling [denying plaintiffs motion for
summary judgment because of a material factual dispute requiring a jury determination as to
whether or not the insured had complied with a condition precedent for insurance coverage] is a
determination that a bona fide dispute existed.”).
* Nationwide Emerging Managers, LLC v. Northpointe Holdings, LLC, 112 A.3d 878, 896
(Del. 2015).
ci Dunlap v. State Farm Fire and Cas. Co., 878 A.2d 434, 441 (Del. 2005).
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as the sole grounds for breach of the implied covenant.*® In its brief opposing United
National’s request for summary judgment, Henlopen Hotel exclusively argues that
nonpayment was contrary to Henlopen Hotel’s reasonable expectations, and that
United National acted arbitrarily and unreasonably in denying payment.°”
(30) The Heat Requirement Endorsement explicitly deals with whether
coverage is available for frozen pipes. Whether that exclusion does or does not apply
under these circumstances is addressed by the interpretation of that express clause,
rather than the implied covenant.
(31) Likewise, the accusation that United National acted arbitrarily and
unreasonably in refusing to compensate Henlopen Hotel is a reiteration of the
doomed bad faith count.
V. UNITED NATIONAL BEARS THE BURDEN OF SHOWING AN EXCLUSION.
(32) An insured bears the initial burden of showing that a loss is within the
coverage provisions of an insurance policy.® Once this burden is met, the insurer
bears the burden of proof that a policy exclusion applies to the loss.*!
°8 Compl. §§ 19-23 (D.I. 1).
7 Plf. Br. (D.I. 169), at 21-22.
> Deakyne v. Selective Ins. Co. of Am., 728 A.2d 569, 571 (Del. Super. Ct. 1997).
7 National Grange Mut. Ins. Co. v. Elegant Slumming, Inc., 59 A.3d 928, 932 n.18 (Del.
2013).
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(33) United National argues that the Heat Requirement Endorsement
phrases itself as “a condition of this insurance” and therefore shifts the burden to
Henlopen Hotel to prove that the included exceptions do not apply.” The Heat
Requirement Endorsement by its terms “modifies insurance provided under. .. ALL
COVERAGE PARTS OF THE POLICY.”® It defines particular conditions under
which specific types of losses that would otherwise be covered under the policy will
not be paid. Despite the unusual phrasing, the Heat Requirement Endorsement
unambiguously operates as an exclusion of otherwise-covered losses, not a
precondition for the existence ofa policy. Proof of the applicability of this exception
thus rests with United National.
(34) The “cardinal rule of contract construction” is that “where possible, a
court should give effect to all contract provisions.”°* United National’s desired
reading of the Heat Requirement Endorsement as an ipso facto exclusion for frozen
pipes cannot be reconciled with the document’s plain language.
(35) The Heat Requirement Endorsement informs Henlopen Hotel that it is
“required to maintain heat at a level sufficient in buildings and other structures
covered by this policy to prevent freezing of plumbing, heating, air conditioning and
62 Pif. Br. (D.I. 138), at 24.
7 Aff. of Herbert W. Mondros, Esq. (D.I. 138), ex. 10 (emphasis in original).
7 EI. du Pont de Nemours and Co., Inc. v. Shell Oil Co., 498 A.2d 1108, 1114 (Del. 1985).
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fire protection systems.”© This precludes United National’s reading for two reasons.
(36) First, United National’s preferred reading would render “to maintain
heat at a level sufficient in buildings and other structures covered by this policy”
mere meaningless surplusage.°°
(37) Second, the compulsory action the Heat Requirement Endorsement
obligates the insured to undertake is to maintain heat. The exclusion is a
consequence if the insured “do[es] not comply with this requirement.” The focus of
the language of the Heat Requirement Endorsement is at all times with the actions
taken by the insured and under its control. Resting a determination of coverage
entirely on whether a freeze occurs—no matter the steps and precautions taken by
the insured to prevent such freeze—would likewise negate this operative language
rendering it meaningless.
(38) Under United National’s reading, the meaning of the Heat Requirement
Endorsement would be unchanged if the entirety of its content were deleted except
for “[W]e will not pay for loss or damage caused by or resulting from. . . the
plumbing, heating, air conditioning or fire protection systems. . . resulting from
freezing.”
6° Id.
? See Heron Bay Property Owners Assc., Inc. v. CooterSunrise, LLC, 2013 WL 3871432, at
*10 (Del. Ch. Jun. 27, 2013) (“Each provision and term should be given effect, where possible, so
as not to render a part of the contract mere surplussage.”).
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(39) Whether Henlopen Hotel maintained heat is a disputed question of fact.
United National can show that the exclusion of the Heat Requirement Endorsement
applies and acts to preclude recovery under the policy by showing both that the pipe
failed due to a freeze during the relevant cold spell, and that the freeze occurred
because Henlopen Hotel failed to adequately maintain heat in the hotel building.
(40) The mere fact of a freeze might on its own be sufficient to permit a jury
to infer that the cause of the freeze was Henlopen Hotel’s failure to maintain heat.
However, proving a freeze is not per se conclusive, as the fact finder could determine
that the freeze occurred due to a supervening cause so extreme and unpredictable as
to excuse the failure of Henlopen Hotel’s efforts to overcome and prevent such an
occurrence.®
VI. CONCLUSION
(41) Peters and Thomas each satisfy the threshold criteria for expert opinion
testimony under Rule 702. That the experts use somewhat different assumptions and
67 See Mountaire Farms, Inc. v. Williams, 2005 WL 1177569, *5 (Del. Super. Ct. Apr. 25,
2005) (Delaware accepts discharge by supervening impracticability of performance as a defense
to breach of contract under certain limited circumstances) (citing Restatement (Second) of
Contracts § 261 (1981)); cf Truax v. Philadelphia, W. & B.R. Co., 8 Del. 233, 245 (Del. Super.
Ct. 1866) (“Common carriers are treated, in a certain sense, as insurers. . . they are held responsible
for all losses, except those occasioned by inevitable accident, called the act of God. . . [t]he act of
God denotes such causes as are beyond the control of the carrier, and produce loss without the
intervention of human agency.”’).
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inferences to obtain highly dissimilar results is not at all unusual.®* Their respective
methods are sufficiently rigorous to satisfy the Court’s gatekeeping function.
Consequently, both parties’ cross-motions to exclude the adverse expert must be
DENIED.
(42) The experts’ disagreement in turn raises a material question as to
whether Henlopen Hotel satisfied the terms of the Heat Requirement Endorsement.
The fact finder could, crediting one expert or the other, determine that the loss was
or was not covered. As a result, the parties’ cross-motions for summary judgment
must be DENIED as to Count I (Breach of Contract). Given the record presented to
this point and the concessions of the parties it would appear that to prevail at trial
United National must demonstrate both that the pipe failed due to a freeze, and that
this freeze occurred because Henlopen Hotel failed to maintain adequate heat in the
building.
(43) Because United National’s denial of coverage has always been based
on the same theory, and because that theory is sufficiently reasonable to survive
68 Cf Inre Appraisal of Dole Food Co., Inc., 114 A.3d 541, 557 (Del. Ch. 2014) (“Men and
women who purport to be applying sound, academically-validated valuation techniques come to
this court and, through the neutral application of their expertise to the facts, come to widely
disparate results, even when applying the same methodology. These starkly contrasting
presentations have, given the duties required of this court, imposed upon trial judges the
responsibility to forge a responsible valuation from what is often ridiculously biased ‘expert’
input.”) (quoting Finkelstein v. Liberty Digital, Inc., 2005 WL 1074364, at *13 (Del. Ch. Apr. 25,
2005)).
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summary judgment, United National’s motion for summary judgment as to Count
III (Bad Faith) is GRANTED.
(44) And since Count II (Breach of the Implied Covenant of Good Faith)
relates to an obligation addressed by an express term of the contract, the implied
covenant is displaced and United National’s motion for summary judgment on that
count is GRANTED.
ITISSOO ae is 15 day of January, 2020.
LL. CE tee CO ti
Paul R. Wallace, Judge
Original to Prothonotary
cc: Counsel via File and Serve
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