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Advance Cable Co., LLC v. Cincinnati Insurance Co., LLC

United States Court of Appeals, Seventh Circuit

June 11, 2015

CINCINNATI INSURANCE COMPANY, Defendant-Appellant, Cross-Appellee

Argued: December 11, 2014.

Appeals from the United States District Court for the Western District of Wisconsin. No. 13-cv-229-wmc. William M. Conley, Chief Judge.

For Advance Cable Company, LLC, Pinehurst Commercial Investments, LLC, Plaintiffs - Appellees (14-2620, 14-2748): Charles David Schmidt, Attorney, Anthony K. Murdock, Attorney, Halloin & Murdock, S.C., Milwaukee, WI.

For Cincinnati Insurance Company, Defendant - Appellant (14-2620, 14-2748): Stephanie L. Dykeman, Attorney, Mark W. Rattan, Attorney, Litchfield Cavo, Brookfield, WI.

Before WOOD, Chief Judge, and FLAUM and MANION, Circuit Judges.


Page 744

Wood, Chief Judge.

On April 3, 2011, Middleton, Wisconsin, was pelted with hail. Predictably, some structures were damaged, including the metal roof of a building located at 2113 Eagle Drive. The owners, Advance Cable Company and Pinehurst Commercial Investments (to which we refer collectively as Advance), submitted a claim to their insurance company, Cincinnati Insurance, but they were not satisfied with its response. Cincinnati took the position that the damage was cosmetic and thus excluded from the policy, while Advance thought the damage was more extensive and covered by the policy; indeed, Advance believed it was entitled to reimbursement for a new roof. It brought this diversity action

Page 745

in federal court to resolve the matter. The district court granted summary judgment for Advance on the coverage question, but it rejected Advance's argument that Cincinnati acted in bad faith when it refused to pay for the new roof. We affirm.


In 2010, Advance obtained an insurance policy from Cincinnati on two properties in Middleton, one of them at 2113 Eagle Drive. (Pinehurst entered the picture because it owned the building and was added to the policy as a named insured in 2011. Its presence has no effect on our analysis.) Only a few of the policy's provisions concern us. Under the heading " Coverage," the policy says, " We will pay for direct physical 'loss' to Covered Property at the 'premises' caused by or resulting from any Covered Cause of Loss." The policy defines " Covered Causes of Loss" as " risks of direct physical loss," and then defines " loss" as " accidental loss or damage." It does not define " direct" or " physical." The parties do not dispute that the " Covered Property" includes the building at 2113 Eagle Drive; that building is specifically listed in the " Schedule of Locations" in the policy.

After the hailstorm rolled through Middleton in April 2011, Mike Larson, Advance's president, filled out a form reporting damage to the Eagle Drive property and another building. That same month, Larson inspected the roof at 2113 Eagle Drive with Curt Jorgenson, a senior claims representative for Cincinnati. Jorgenson spotted some dents, but he saw little other evidence of damage. In June 2011, Jorgenson sent Larson an " estimate for hail damage to your building," in which he " note[d] some dents to soft metal roof vents and AC fins" but stated that he " did not observe any damage to roofing." Jorgenson estimated that the building required $1,894.74 in repairs. The next month, Jorgenson sent Larson a check representing the estimated damages to both of Advance's buildings, minus a $1,000 deductible, for a total of $1,512.70.

The story did not end there. Approximately six months later, in January 2012, Advance was considering selling the Eagle Drive building. The potential buyer, Welton Enterprises, decided to have the roof inspected. Unlike Jorgenson, Welton's inspector reported that there was " definitely hail damage." (Cincinnati disputed at summary judgment that the Welton inspector was referring to the Eagle Drive property, but the district court properly found no genuine dispute of fact on this question given the cover email's reference to " the Eagle Drive roof." ) This opinion prompted Advance to ask Jorgenson to reopen Advance's claim. He did so and arranged for a new inspection of the roof. The resulting report covered both of Advance's buildings in Middleton. It noted that " [m]etal roof panel denting characteristic of hail impact was found on several buildings. Dents related to hail impact varied in size from barely discernable to approximately 1" in 1 [ sic ] diameter." Under the heading " Discussion," the report opined that the denting " will not affect the ...

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