Pheasantbrook Home Owners Ass'n v. Travelers Indemnity Co.
152 F. Supp. 3d 1342
D. Utah2016Background
- On December 1, 2011 PHOA sustained windstorm damage to multiple condominium buildings; Travelers accepted coverage subject to policy terms. PHOA hired contractor HWC to repair and later submitted a $540,897.70 supplement after completing work.
- Travelers previously issued payments and asserted that $1,357,535.92 represented the amount necessary to restore pre-loss condition; Travelers’ adjuster directed that supplements be submitted for review before incurring additional costs, though that procedure was not in the written policy.
- PHOA proceeded with broader repairs (including full roof replacements) and later submitted the Supplement supported by a Western Architecture (WA) report; Travelers’ consultants (Young & Associates) did not inspect post-construction and concluded the Supplement related to construction/maintenance defects and not wind damage.
- Travelers denied the Supplement for lack of pre-notice/inspection opportunity and because the WA Report identified construction/maintenance defects (excluded by policy); Travelers invited any new information but PHOA sued instead.
- Procedural posture: Travelers moved for summary judgment on PHOA’s breach of contract and breach of implied covenant of good faith and fair dealing claims; court granted summary judgment in part (denying summary judgment on contract claim) and granted it in part (awarding summary judgment for Travelers on the bad-faith claim under the "fairly debatable" defense).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether PHOA breached the policy cooperation clause by failing to notify Travelers before performing additional work | PHOA contends it cooperated: it notified Travelers of the larger scope, submitted the WA report when requested, and Policy contains no strict pre-work supplement timing requirement | Travelers contends PHOA secretly proceeded beyond the agreed scope, denied opportunity to inspect, and materially breached cooperation, excusing further payment | Disputed fact issue — summary judgment denied to Travelers on contract claim (genuine issue whether breach was uncured/material) |
| Whether Travelers fulfilled all obligations by paying the previously identified $1,357,535.92 | PHOA argues the payment did not foreclose supplements; contested whether there was an agreed scope and whether Supplement items were covered | Travelers argues payment satisfied its liability for wind-caused damage and supplements were properly denied as excluded or untimely | Disputed factual/legal issues — summary judgment denied to Travelers on contract claim (coverage of Supplement unresolved) |
| Whether Supplement items were excluded (wear/tear, faulty workmanship, code-related) | PHOA says Supplement reflects reasonable, necessary wind-related repairs (also citing manufacturer specs/code for some items) | Travelers says WA and its consultant show items relate to construction defects, maintenance, or were not required by code, so excluded | Disputed — cannot resolve at summary judgment; factual disputes remain about causation and coverage |
| Whether Travelers breached implied covenant (bad faith) by denying the Supplement | PHOA alleges bad faith denial/handling | Travelers argues denial was reasonably based on expert review and the claim was "fairly debatable" | Held for Travelers — summary judgment granted on bad-faith claim because denial was supported by reliance on outside expert and the claim was fairly debatable |
Key Cases Cited
- Adler v. Wal-Mart Stores, Inc., 144 F.3d 664 (10th Cir. 1998) (summary judgment standard)
- Beck v. Farmers Ins. Exch., 701 P.2d 795 (Utah 1985) (insurer’s duties in claim handling and bad-faith principles)
- Billings v. Union Bankers Ins. Co., 918 P.2d 461 (Utah 1996) (analysis of insurer obligations and bad-faith claim elements)
- Jones v. Farmers Ins. Exch., 286 P.3d 301 (Utah 2012) (clarifies limits on summary judgment for "fairly debatable" defense in bad-faith cases)
- Prince v. Bear River Mut. Ins. Co., 56 P.3d 524 (Utah 2002) (insurer entitled to deny claim where legitimate grounds exist)
- Aquagen Int'l Inc. v. Calrae Trust, 972 P.2d 411 (Utah 1998) (uncured material failure in contract performance may excuse counterparty performance)