Opinion
C.A. No. 02C-12-003WLW.
Submitted: May 10, 2005.
Decided: May 31, 2005.
Upon Defendants' Motions for Summary Judgment. Granted in part; Denied in part.
William D. Fletcher, Jr., Esquire of Schmittinger Rodriguez, P.A., Dover, Delaware and Marry F. Higgins, Esquire, Odessa, Delaware; co-counsel for Plaintiffs.
Robert K. Pearce, Esquire of Ferry Joseph Pearce, P.A., Wilmington, Delaware; attorneys for Defendant Richard Davis.
Norman H. Brooks, Esquire of Marks O'Neill O'Brien Courtney, P.C., Wilmington, Delaware; attorneys for Defendant RHIS.
Steven P. Casarino, Esquire of Casarino Christman Shalk, P.A., Wilmington, Delaware; attorneys for Defendant Lititz Mutual Insurance Company.
ORDER AND OPINION
Before the Court are three Motions for Summary Judgment filed by each of the three defendants in this case. Oral arguments on these motions were held on May 10, 2005. Based on the submissions of the parties and the oral arguments, it appears to the Court that:
I. FACTS
Plaintiff Tina Atwell purchased a home on December 8, 2000 from Defendant Richard Davis. She later discovered severe water damage and dampness as well as mold, dry rot, and bacteria in the home. Plaintiff and her daughter also allegedly suffered a host of medical problems related to the microbial contaminants in the house. Plaintiff filed suit on behalf of herself and her daughter against Richard Davis ("Davis"), RHIS, Inc. d/b/a Reliable Home Inspection Service ("RHIS"), and Lititz Mutual Insurance Company ("Lititz").
A. Plaintiffs' Suit Against Defendant Davis
Plaintiffs allege that Defendant Davis knew, or should have known, that the heater in the house was defective and that this defect caused moisture problems. Plaintiffs further allege that Defendant failed to inform Plaintiffs of this defect on his signed Disclosure statement. Defendant Davis now requests summary judgment because Defendant argues Plaintiffs have presented no evidence that he had knowledge of any moisture problem caused by the failure of the heating system.
Plaintiffs assert that Defendant Davis had knowledge of the defective heater and affirmatively hid the signs of moisture damage by using textured paint to repaint walls in the house and by installing new wall-to-wall carpet. Plaintiffs also allege that this conduct constitutes fraud on behalf of the defendant in that he induced them to purchase the property by this concealment. Plaintiffs further contend that Defendant Davis committed negligent misrepresentation by failing to provide accurate information about the property by answering "unknown" on the question of whether there was any standing water on the property.
Defendant Davis contends that Plaintiffs have presented no evidence that Defendant knew that the allegedly defective heater was creating moisture problems. Defendants argue that to establish fraud under 6 Del. C. § 2572 Defendants would have to show (1) that Defendant made a false representation of material fact; (2) Defendant's knowledge or belief that the representation was false or was made with reckless indifference to the truth; (3) an intent to induce the plaintiffs to act or refrain from acting; (4) Plaintiffs' action or inaction was taken in justifiable reliance on the representation; and (5) plaintiffs suffered resulting damages. Defendant argues that Plaintiffs have not met their burden to affirmatively show that Defendant Davis had knowledge that the defective heater was causing moisture problems.
See Lord v. Souder, 748 A.2d 393, 402 (Del. 2000).
Defendant also argues that Plaintiffs have offered no evidence that the heater caused the problems in the house. Defendant maintains that the only evidence introduced that the heater was defective was Plaintiff Tina Atwell's testimony that the heater was old and "touchy" and that the pilot light needed to be relit on occasion. Defendant further asserts that Plaintiffs' experts agree that the alleged moisture problem was created when water infiltrated the ducts and/or sump beneath the heater and the heater blew hot air over the water, thereby spreading moisture through the house. Defendant Davis argues that this indicates that the heater was working properly, rather than improperly. Defendant argues further that Plaintiffs have presented no evidence that Defendant knew of any moisture problems caused by any source.
Plaintiffs argue that Summary Judgment is inappropriate in this situation because there are still numerous disputes of material fact remaining. Plaintiffs assert that Plaintiff Tina Atwell has testified that Defendant's son-in-law (Mark Belfiore) told her that he had to replace the windows in the home (prior to the sale to Plaintiff) because of a moisture problem. Mark Belfiore now, however, asserts that he did not tell Ms. Atwell that he replaced the windows because of a moisture problem. B. Plaintiffs' Suit Against Defendant RHIS, Inc.
Deposition of Tina Atwell at 44.
Deposition of Mark Belfiore at 57.
On December 5, 2000, Plaintiff Tina Atwell hired RHIS, Inc., d/b/a Reliable Home Inspection Service, to perform an inspection of the house. Plaintiffs allege that Defendant RHIS failed to properly inspect the home and failed to notice the moisture problems and potential for mold growth. Plaintiffs have produced an expert, Mr. J. Frank Peter who inspected the property and alleged that there was a condensation problem in the house. Mr. Peter prepared an expert report of his findings dated June 21, 2004. In his report, Mr. Peter opined that water from around the property's foundation flowed beneath the floor slab and collected in the heater duct work sump. Mr. Peter also opined that, based on his observations, the water in the heating ducts probably predated Plaintiff's purchase of the property. Plaintiffs have also presented the testimony of an inspector, Mr. Hawthorn, who is certified by the American Society of Home Inspectors, as well as an engineer, Mr. Blum, who allege that RHIS should have noticed a potential humidity problem in the house during its inspection and should have given a more complete report.
Defendant RHIS contends that Mr. Peter's opinion is not grounded in science and is not subject to peer review because he simply made a visual inspection of the area immediately beneath the heater. Defendant therefore argues that "[t]he record is devoid of any evidence showing that Co-Defendant RHIS was negligent in its inspection of the subject property."
C. Plaintiffs' Suit Against Defendant Lititz Mutual Insurance Company
Plaintiff Tina Atwell also filed a breach of contract claim on behalf of herself and her daughter against Defendant Lititz Mutual Insurance Company after Lititz notified Plaintiff that her policy did not cover the damage sustained to her home. Plaintiffs' Complaint alleges that Lititz committed breach of contract by failing to pay for home repairs for the damage sustained to Plaintiffs' home including the ensuing dry rot and bacterial contamination as well as the cost of testing the house for microbial contaminants. Plaintiff Tina Atwell further alleges that she is entitled to payment under the policy for the cost of replacing the heater and duct work as well as the cost of repairing the water damage in the master bedroom and decontaminating the property. Defendant Lititz now requests summary judgment because Defendant claims the homeowner's insurance policy held by Plaintiff excludes coverage for the particular structural damage Plaintiffs are claiming.
Defendant Lititz Mutual Insurance Company now moves for summary judgment because it alleges that its policy clearly and unambiguously excludes (and excluded as of the date of the claimed damage) coverage for water damage resulting from water below the surface of the ground and for loss caused by mold. Defendant Lititz argues that all experts in the case agree that the damage was caused by underground water that infiltrated the house's heating ducts and ultimately caused the mold. Defendant contends that Plaintiffs' claims against Defendant Lititz are therefore barred by Defendant's policy exclusions and summary judgment should be granted to Defendant Lititz Insurance Company.
Plaintiffs contend that ground water seepage is not the cause of the loss because that condition has never been corrected yet the moisture problems in the house have substantially improved. Plaintiffs further maintain that Defendants have failed to address the doctrine of "ensuing loss" under which the mold could be considered the loss itself as opposed to the cause of the loss and which should therefore be covered by the Lititz policy. Plaintiffs claim that the dry rot and the bacterial contamination which were allegedly dispersed by the heater were not excluded by the Lititz policy until 2003, (three years after the events alleged in the Complaint) and that such claims are, therefore, still valid.
D. Punitive Damages
At oral arguments for these motions, Plaintiffs also contended that punitive damages should be assessed against Defendant Davis for his failure to report the moisture problems in the house which Plaintiffs allege Mr. Davis knew of. Plaintiffs allege that Mr. Davis committed fraud or at least negligent misrepresentation by listing as "unknown" a problem with standing water on the property on a pre-printed seller's form. Plaintiffs also maintain that Defendant Davis actively concealed the moisture damage by painting and re-carpeting the house before selling it to Plaintiffs.
Plaintiffs further asserted that they were entitled to punitive damages against Defendant RHIS for failure to properly conduct an inspection of Plaintiffs' house prior to the sale and for failure to give an adequate warning about the possibility of problems with the heater and the potential for moisture damage to the house.
II. DISCUSSION
Summary judgment should be rendered if the record shows that there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. The facts must be viewed in the light most favorable to the non-moving party. Summary judgment may not be granted if the record indicates that a material fact is in dispute, or if it seems desirable to inquire more thoroughly into the facts in order to clarify the application of the law to the circumstances. However, when the facts permit a reasonable person to draw but one inference, the question becomes one for decision as a matter of law. A. Plaintiffs' Suit Against Defendant Davis
Superior Court Civil Rule 56(c).
Guy v. Judicial Nominating Comm'n, 659 A.2d 777, 780 (Del.Super.Ct. 1995).
Ebersole v. Lowengrub, 180 A.2d 467, 470 (Del. 1962).
Wootten v. Kiger, 226 A.2d 238, 239 (Del. 1967).
It is the opinion of the Court that the questions of what Defendant Davis actually knew or should have known about the heater and the moisture in the house are disputes of fact for the jury to determine. Plaintiff Tina Atwell has testified that Defendant's son-in-law replaced the windows in the house because of a moisture problem. Defendant's son-in-law now denies making such statements. This dispute turns on the particular facts of the case and cannot be decided by the Court as a matter of law. Rather, it is a factual dispute to be resolved by the trier of fact.
The Court also agrees with Plaintiffs that the issue of exactly how much Defendant Davis should have known about the moisture problems and the heater cannot be decided as a matter of law. To resolve this dispute, the trier of fact must closely examine the particular circumstances of this case in order to determine whether a reasonable person would have known about the moisture or not. The Court, as a judge of the law, cannot resolve such a fact-specific dispute when so many issues of fact remain unresolved.
The facts must be viewed in the light most favorable to the non-moving party — in this case the Plaintiffs. Because it is the opinion of the Court that there are still genuine issues of material fact in dispute in this case, Defendant's Motion for Summary Judgment is DENIED as to the claims of negligent misrepresentation and fraud.
B. Plaintiffs' Suit Against Defendant RHIS, Inc.
Plaintiffs have produced an expert, Mr. Peter, who has opined that there may have been water in the heating duct prior to Ms. Atwell's purchase of the property. As detailed in the Court's decision on Defendant Davis' Motion in Limine, the Court has decided to permit the testimony of Mr. Peter. Plaintiffs have also presented other experts who allege there was a failure on the part of RHIS to conform to the proper inspection standards and a failure to notice and fully notify Plaintiffs of a potential humidity problem. These expert reports constitute sufficient evidence against RHIS to create a dispute of material fact and to preclude Summary Judgment. Defendant's Motion for Summary Judgment is, therefore, DENIED.
C. Plaintiffs' Suit Against Defendant Lititz Mutual Insurance Company
The Court finds that there are no genuine issues of material fact remaining as to the cause of the microbial contamination. Although Plaintiffs dispute this proposition, it appears to the Court that all the experts involved in the case agree that the source of the high humidity level in the house was a result of subsurface water that infiltrated the sump area under the heater. Therefore, Plaintiffs' only remaining claims against Defendant Lititz involve a legal issue of interpretation of the insurance policy.
In interpreting the language of an insurance policy, the Court must follow certain well-established guidelines. If the contract language is clear and unambiguous, the Court must give the language its plain meaning. If the language contains any ambiguity, the contract language is "construed most strongly against the insurance company that drafted it." The language to be interpreted in this policy is on page 9 of 18 under "Section I — PERILS INSURED AGAINST." The policy states that "any ensuing loss to property described in Coverages A and B not excluded or excepted in this policy is covered." As described on page 7 of 18, the policy specifically excludes from its coverage any damage caused by "mold, wet or dry rot." The policy, on page 9 of 18, also excludes from its coverage any damage caused by "[w]ater below the surface of the ground including water which exerts pressure on or seeps or leaks through a building . . . or other structure."
Phillips Home Builders, Inc. v. Travelers Insurance Co., 700 A.2d 127, 129 (Del. 1997) (citing Playtex F.P., Inc. v. Columbia Cas. Co., 622 A.2d 1074, 1076 (Del. 1992)).
Id. (citing Rhone-Poulenc Basic Chems. Co. v. American Motorists Ins. Co., 616 A.2d 1192, 1196 (Del. 1992)).
The Court finds that the ensuing loss clause in the Lititz insurance policy is not ambiguous and should be interpreted based on its plain meaning. It is the opinion of the Court that Plaintiffs' insurance policy with Lititz specifically excludes and excluded as of the date this damage is claimed, damage from mold and subsurface water. After hearing the parties' arguments, the Court also finds that "ensuing loss" does not include the structural damage involved in this case to the duct work and walls in the master bedroom which were directly caused by the subsurface water and the subsequent mold infiltration.
While Phillips Home Builders, Inc. appears to be the only Delaware case discussing ensuing loss, a number of federal courts have addressed the issue. For example, as the Court noted in Montefiore Medical Center v. American Protection Insurance Company, "An ensuing loss provision does not cover loss caused by the excluded peril, but rather covers loss caused to other property wholly separate from the defective property itself." 226 F.Supp. 2d 470, 479 (S.D.N.Y. 2002).
The Delaware Supreme Court in Phillips Home Builders v. Travelers Insurance Company, held that the ensuing loss provision in the Traveler's Insurance Policy was ambiguous. The Court applied the contra proferentum principle to this ambiguous language and held that the policy provided coverage to the insured for structural damage (in that case, settling of the structure) caused by a covered cause of loss. In the case sub judice, the policy language is somewhat clearer. In any event, the structural damage was directly caused by mold and subsurface water, both of which are specifically excluded from coverage by the policy. Because the Court finds that the property damage suffered by Plaintiffs is not covered by the insurance policy, Defendant Lititz Mutual Insurance Company's Motion for Summary Judgment is GRANTED.
The Travelers Policy stated that Travelers would pay "if `loss' caused by a Covered Cause of Loss results. . . ." Phillips, 700 A.2d at 129.
Phillips, 700 A.2d at 130.
D. Punitive Damages
The Court finds no basis for assessing punitive damages against Mr. Davis, who was merely the caretaker for the house in which Mr. Davis' daughter and son-in-law had been living and in which no one had lived for approximately nine months previous to the sale to Ms. Atwell. While Mr. Davis may have responded "unknown" to a number of questions on a pre-printed real estate seller's form, his response of "unknown" is not a sufficient basis for permitting Plaintiffs to pursue punitive damages against him.
Neither can the Court find any egregious, willful action on the part of Defendant RHIS which would justify punitive damages against them. While the Court makes no determination whether RHIS properly conducted its inspection of the home, the Court cannot find any basis for permitting the plaintiffs to pursue punitive damages against Defendant RHIS. The Court will GRANT Defendants' Motions for Summary Judgment with respect to all Plaintiffs' claims for punitive damages.
III. CONCLUSION
The Court finds that there are still genuine issues of material fact remaining in Plaintiffs' claims against Defendant RHIS and Defendant Davis. Therefore, the Summary Judgment Motions filed by Defendants RHIS and Richard Davis are DENIED in part. The Court will GRANT, however, Defendants' Motions for Summary Judgment with respect to any claims by Plaintiffs for punitive damages.
Defendant Lititz Mutual Insurance Company's Motion for Summary Judgment is GRANTED. The Court finds that there are no genuine issues of material fact remaining as to the cause of the microbial contamination and that, therefore, Plaintiffs' only remaining claims against Defendant Lititz involve a legal issue of interpretation of the insurance policy. Because the Court finds that the property damage suffered by Plaintiffs is not covered by the insurance policy, Defendant Lititz Mutual Insurance Company's Motion for Summary Judgment is GRANTED.
IT IS SO ORDERED.