Edgewood Manor Apartment Homes LLC v. Rsui Indemnity Co.
782 F. Supp. 2d 716
E.D. Wis.2011Background
- RSUI issued Mississippi-policy for Edgewood Manor/Southland following Katrina; policy includes replacement cost and code upgrade coverage with two-year repair/replacement condition and tenants’ improvements provisions.
- Westchester Policy provides primary coverage and specific replacement cost rules, including that replacement costs are not paid until repairs are completed and within stated time limits.
- After Katrina, Westchester paid its policy limit; RSUI paid the excess actual cash value but not replacement cost or ordinance/law proceeds; no repairs occurred by early 2009.
- Southland considered selling the property; RSUI asserted a no-transfer clause and that rights under the policy could not be transferred or assigned, limiting post-loss proceeds.
- Edgewood Manor later asserted an insurable interest and asserted assignment of post-loss proceeds; RSUI denied assignment/transfer and asserted defense based on contract terms and Mississippi law.
- The court ultimately applied Mississippi law to interpret the policy and evaluated standing, assignment, and coverage issues at summary judgment stage.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to sue | Edgewood Manor has an insurable interest via ownership/assignment | Southland held insurable interest; no valid assignment shown | Standing found for Edgewood Manor pending trial; uncertainties remain regarding extent of assignment |
| Code upgrades coverage timing | RSUI waived two-year deadline by letters and did not preserve deadline | No express waiver; waiver cannot create coverage; six letters reserved rights | Summary judgment for RSUI on code upgrade proceeds; waiver not found; two-year deadline discharged without extension |
| Replacement cost coverage (condition precedent) | Repairs/replacement could be satisfied by assignee; condition precedent excused by repudiation | Repairs not completed within policy time; repudiations ambiguously defined | Issue of whether repudiation excused the condition is for trial; material facts remain in dispute |
| Assignment/proceeds vs. rights under policy | Post-loss assignment of proceeds valid despite no-transfer clause | No-transfer clause prohibits transfer of rights; assignment not permitted | Assignment of post-loss proceeds analyzed; Mississippi law likely permits assignment of proceeds; trial needed to determine scope of assignment and interests |
| Bad-faith/extrajudicial damages | RSUI acted in bad faith by denying/ delaying payment | RSUI had arguable basis for denial; no gross malice or willful conduct | Bad-faith and punitive damages claims dismissed; RSUI’s conduct found arguable and not proven with egregious intent; issue reserved for trial on assignment/coverage nuances |
Key Cases Cited
- Great S. Nat'l Bank v. McCullough Envtl. Servs., Inc., 595 So.2d 1282 (Miss. 1992) (assignment of claims after loss allowed; prevents insurer's risk increase)
- Conrad Brothers v. John Deere Ins. Co., 640 N.W.2d 231 (Iowa 2001) (assignment of proceeds post-loss permitted when condition precedent exists)
- Straz v. Kan. Bankers Sur. Co., 986 F. Supp. 563 (E.D. Wis. 1997) (anti-assignment clauses limited to pre-loss assignments; post-loss assignment allowed)
- Scott v. Star Windshield Repair, N/A (Minn. 2009) (Star Windshield Repair reversed on key assignment issues (Minn. 2009))
- Wilson v. State Farm Fire & Cas. Co., 761 So.2d 913 (Miss. Ct. App. 2000) (extracontractual damages and bad faith standards under Mississippi law)
- Warwick v. Matheney, 603 So.2d 330 (Miss. 1992) (anticipatory breach principles regarding conditions precedent)