Hallmark Specialty Ins. Co. v. Phx. C&D Recycling, Inc.

Full title: HALLMARK SPECIALTY INSURANCE COMPANY, Plaintiff/Counterclaim Defendant, v…

Court: United States District Court, S.D. Iowa, Central Division.

Date published: Jan 22, 2020

527 F. Supp. 3d 1032 (S.D. Iowa 2020)

Opinion

No. 4:18-cv-00443-JAJ-SBJ

2020-01-22

HALLMARK SPECIALTY INSURANCE COMPANY, Plaintiff/Counterclaim Defendant, v. PHOENIX C&D RECYCLING, INC., and R&A Properties, Inc., Defendants/Counterclaimant.

Michael W. Thrall, Matthew A. McGuire, Nyemaster Goode PC, Des Moines, IA, Angela Aggie Zanin, Pro Hac Vice, Rebecca R. Weinreich, Pro Hac Vice, Stephen V. Kovarik, Pro Hac Vice, Lewis Brisbois Bisgaard & Smith LLP, Los Angeles, CA, Seth Ian Weinstein, Pro Hac Vice, Lewis, Brisbois, Bisgaard & Smith, New York, NY, for Plaintiff/Counterclaim Defendant. Michael S. Jones, Jordan Ryan Hutchinson, Patterson Law Firm LLP, Des Moines, IA, for Defendants/Counterclaimant.

JOHN A. JARVEY, Chief Judge

Michael W. Thrall, Matthew A. McGuire, Nyemaster Goode PC, Des Moines, IA, Angela Aggie Zanin, Pro Hac Vice, Rebecca R. Weinreich, Pro Hac Vice, Stephen V. Kovarik, Pro Hac Vice, Lewis Brisbois Bisgaard & Smith LLP, Los Angeles, CA, Seth Ian Weinstein, Pro Hac Vice, Lewis, Brisbois, Bisgaard & Smith, New York, NY, for Plaintiff/Counterclaim Defendant.

Michael S. Jones, Jordan Ryan Hutchinson, Patterson Law Firm LLP, Des Moines, IA, for Defendants/Counterclaimant.

OPINION AND ORDER REGARDING THE PARTIES’ CROSS-MOTIONS FOR SUMMARY JUDGMENT

JOHN A. JARVEY, Chief Judge

This action arises from a fire at a trash recycling plant that damaged buildings and equipment. The insurer brought an action for declaratory judgment alleging that it did not breach the pertinent insurance policy or act in bad faith in connection with its adjustment of the claims of the property owner and the recycling company arising from the fire. The recycling company brought a counterclaim for damages against the insurer for breach of contract, breach of fiduciary duty, and bad faith. The property owner stipulated to entry of declaratory judgment against it, and the court entered the requested consent judgment.

This action is now before the court on the remaining parties’ cross-motions for summary judgment. Specifically, on November 1, 2019, the insurer filed its Motion For Summary Judgment [Dkt. No. 38]. The recycling company filed its Resistance [Dkt. No. 46] on November 22, 2019, and the insurer filed its Reply [Dkt. No. 53] on December 5, 2019. On November 12, 2019, the recycling company filed its Motion For Summary Judgment [Dkt. No. 42]. The insurer filed its Resistance [Dkt. No. 47] on December 3, 2019, and the recycling company filed its Reply [Dkt. No. 54] on December 10, 2019.

This action is also before the court on two other motions by the insurer. Specifically, on December 3, 2019, the insurer filed its Motion To Strike Portions Of Affidavits ... Submitted In Support Of [Defendant's] Motion For Summary Judgment [Dkt. No. 48]. That same day, the insurer also filed its Motion To Strike Portions Of The Affidavits ... Submitted In Resistance To [Plaintiff's] Motion For Summary Judgment [Dkt. No. 50]. The recycling company filed its Resistances [Dkt. Nos. 56 and 57] on December 17, 2019. The insurer filed its combined Reply [Dkt. No. 58] in support of both of its Motions To Strike on December 23, 2019.

For the reasons stated below, the insurer's November 1, 2019, Motion For Summary Judgment [Dkt. No. 38] is GRANTED in its entirety ; the recycling company's November 12, 2019, Motion For Summary Judgment [Dkt. No. 42] is GRANTED in part and DENIED in part ; and the insurer's December 3, 2019, Motion To Strike Portions Of Affidavits ... Submitted In Support Of [Defendant's] Motion For Summary Judgment [Dkt. No. 48] and its December 3, 2019, Motion To Strike Portions Of The Affidavits ... Submitted In Resistance To Hallmark's Motion For Summary Judgment [Dkt. No. 50] are both DENIED as moot . I. INTRODUCTION

A. Factual Background

The parties have filed comprehensive statements of facts, additional facts, and responses to statements of facts. These statements go far beyond the scope of the specific allegations of bad faith and breach of contract on which the parties’ cross-motions for summary judgment turn. Furthermore, the court finds that it would be most beneficial to focus on specific factual matters in relation to specific allegations of bad faith and breach of contract. Therefore, what is presented, here, is a factual synopsis that is intended to provide context for the parties’ motions. More specific factual matters will be addressed in the court's analysis of the cross-motions for summary judgment.

Defendant and counterclaimant Phoenix C&D Recycling, Inc., (Phoenix) and defendant R&A Properties, Inc., (R&A) are owned and managed by Anthony (Tony) Colosimo and his brother Robert (Bobby) Colosimo. Bobby is the president of Phoenix and Treasurer of R&A. Tony is the Treasurer of Phoenix and President of R&A. Plaintiff Hallmark Specialty Insurance Company (Hallmark) provided insurance to Phoenix and R&A pursuant to a Hallmark Commercial Property Policy effective April 16, 2017, to April 16, 2018. The Policy provided for a maximum of approximately $6.5 million in coverage. Hallmark had cancelled the Policy for non-payment on June 6, 2017, but later reinstated the Policy when the premium was paid.

At the time of the insurance loss at issue, Phoenix operated a recycling plant located in Des Moines, Iowa, on property owned by R&A under a lease agreement with R&A. R&A owned the real property and certain buildings, identified here as Buildings 1 and 3, and Phoenix owned the "Hoop building," which is also identified here as Building 2. Phoenix's income came primarily from "tip scale" fees that contractors paid to dump construction and demolition debris at the site, but Phoenix also recycled construction debris and produced biofuel from wood materials. At the time of the July 2017, fire, approximately 18,000 tons of biofuel were stacked in two piles at the site. Phoenix had been involved in a series of administrative actions concerning the accumulation of biofuel on the site. On June 19, 2017, Phoenix, R&A, and Polk County entered into an agreement pursuant to which "R&A and Phoenix ... agree[d] not to transport or deliver any construction debris, demolition material or any other materials or ‘anything’ else onto the site until such time as they obtain consent from the County." R&A had filed for bankruptcy and was at risk of losing the property, while Phoenix had not paid monthly rent for several years, and its tax returns showed losses in four of the five tax years prior to July 2017.

On July 6, 2017, a fire began in a pile of biofuel material located at the southeast corner by Building 3. According to an August 16, 2017, report by Hallmark's fire cause and origin consultant, the cause of the fire was self-heating of processed biofuel, i.e. , spontaneous combustion. The fire damaged buildings, machinery, and various materials at the plant. Hallmark received notice of the fire loss on or about July 10, 2017.

Hallmark assigned Property Claims Supervisor Bryan C. Jones to the claimed loss. In the course of Hallmark's subsequent adjustment of the loss, Jones hired numerous consultants and experts. Among them was HSNO, an accounting firm, to address any claim for loss of business income, although at the time Hallmark contacted HSNO on October 12, 2017, Phoenix had not filed a specific claim of loss of business income. Jones also hired mechanical engineer Larry Baxter of Cherokee Machinery Consultants (CMC) as another consultant to assess damage to equipment.

Over the next several months, Hallmark made various payments to Phoenix on the loss from the July 6, 2017, fire. Hallmark contends that it ultimately paid $2,079,189.57 on the loss: $242,551.23 for buildings; $1,392,922.00 for equipment; $410,666.34 for lost business income; and $33,050 for extra expenses. This total included what Hallmark describes as a final "compromise" payment on July 6, 2018, in the amount of $1,254,968, which Hallmark contends consisted of $281,822 for business income and extra expenses and $973,076 for equipment. Phoenix does not dispute that it received these payments, but disputes the timeliness of payments, the amounts paid for various categories of coverage, and the correctness of Hallmark's determinations and calculations.

B. Procedural Background

Hallmark filed its Complaint For Declaratory Relief, initiating this action, on November 13, 2018. Hallmark seeks judicial declarations that it did not breach the Policy and did not act in bad faith in connection with its adjustment of R&A's and Phoenix's claims arising out of the July 6, 2017, fire. In addition, Hallmark seeks attorney's fees and costs of suit incurred and such other relief as the court deems just and proper.

Phoenix initially moved to dismiss Hallmark's Complaint for lack of subject matter jurisdiction, but Phoenix later withdrew that motion. Phoenix filed its Answer on February 27, 2019, denying Hallmark's claims for declaratory relief. Phoenix also asserts counterclaims for breach of contract, breach of fiduciary duty, and bad faith. Phoenix seeks compensatory, punitive, and exemplary damages, as well as attorney's fees, expenses, and interest. Hallmark filed its Answer To Counterclaim on March 20, 2019, denying Phoenix's counterclaims. On June 3, 2019, R&A filed a Stipulation For Entry Of Declaratory Judgment Against Defendant R&A Properties, Inc., Only, and the court entered a Stipulated Consent Judgment against R&A on August 26, 2019.

The cross-motions for summary judgment by Hallmark and Phoenix and the motions to strike by Hallmark now before the court followed in November and December 2019.

II. THE MOTIONS TO STRIKE

The court will first consider Hallmark's Motions To Strike Affidavits, because those motions relate to what record the court can consider on the cross-motions for summary judgment. Hallmark asserts that numerous paragraphs of the affidavits that Phoenix has offered in support of Phoenix's Motion For Summary Judgment and resistance to Hallmark's Motion For Summary Judgment should be stricken, because they lack foundation, fail to demonstrate personal knowledge, are hearsay, are improper opinion testimony or improper expert opinion, are irrelevant, are speculative, or contradict prior testimony.

Hallmark is correct that Rule 56(c)(4) of the Federal Rules of Civil Procedure provides as follows:

(4) Affidavits or Declarations . An affidavit or declaration used to support or oppose a motion must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant or declarant is competent to testify on the matters stated.

FED. R. CIV. P. 54(c)(4). Hallmark is also correct that " ‘a party cannot defeat summary judgment by submitting an affidavit or declaration contradicting his or her earlier deposition testimony[.]’ " Garrison v. ConAgra Foods Packaged Foods, LLC , 833 F.3d 881, 886 n.3 (8th Cir. 2016) (quoting Lykken v. Brady , 622 F.3d 925, 933 (8th Cir. 2010) ); Taylor v. Cottrell, Inc. , 795 F.3d 813, 818 (8th Cir. 2015) (same, citing Popoalii v. Corr. Med. Servs. , 512 F.3d 488, 498 (8th Cir. 2008), and Camfield Tires, Inc. v. Michelin Tire Corp. , 719 F.2d 1361, 1365 (8th Cir. 1983) ). On the other hand, "an affidavit may be submitted to clarify ambiguities or confusion in deposition testimony." Taylor , 795 F.3d at 818 (citing City of St. Joseph, Mo. v. Sw. Bell Tel. , 439 F.3d 468, 476 (8th Cir. 2006) ). The affiant must provide an explanation for the inconsistencies with prior deposition testimony, however. Stewart v. Rise, Inc. , 791 F.3d 849, 861 (8th Cir. 2015).

The court declines the parties’ invitation to make a paragraph-by-paragraph assessment of the admissibility of the challenged parts of the affidavits. Rather, the court simply will not consider any portion of an affidavit that contradicts prior testimony, without explanation, see Garrison , 833 F.3d at 885 n.3 ; Stewart , 791 F.3d at 861, or would otherwise be inadmissible, see FED. R. CIV. P. 54(c)(4). Consequently, Hallmark's Motions To Strike Affidavits are both denied as moot .

III. THE CROSS-MOTIONS FOR SUMMARY JUDGMENT

Having determined the extent to which it will consider challenged parts of the record, the court turns to the parties’ cross-motions for summary judgment. The court begins its analysis with a summary of the standards for summary judgment.

A. Standards For Summary Judgment

Rule 56 of the Federal Rules of Civil Procedure provides that "[a] party may move for summary judgment, identifying each claim or defense—or part of each claim or defense—on which summary judgment is sought." FED. R. CIV. P. 56(a). It provides, further, that a "court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(a). As the Eighth Circuit Court of Appeals recently explained,

"The movant ‘bears the initial responsibility of informing the district court of the basis for its motion,’ and must identify ‘those portions of [the record] ... which it believes demonstrate the absence of a genuine issue of material fact.’ " Torgerson v. City of Rochester , 643 F.3d 1031, 1042 (8th Cir. 2011) (en banc) (alterations in original) (quoting Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ). "If the movant does so, the nonmovant must respond by submitting evidentiary materials that set out ‘specific facts showing that there is a genuine issue for trial.’ " Id. (quoting Celotex Corp. , 477 U.S. at 324, 106 S.Ct. 2548 ). "The nonmovant ‘must do more than simply show that there is some metaphysical doubt as to the material facts.’ " Id. (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 586–87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) ).

Mensie v. City of Little Rock , 917 F.3d 685, 688 (8th Cir. 2019).

As the Eighth Circuit Court of Appeals has reiterated, " ‘[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.’ " Villanueva v. City of Scottsbluff , 779 F.3d 507, 510 (8th Cir. 2015) (quoting Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ). Once the parties have met their burdens, the court may grant summary judgment only "[w]here the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party." Torgerson , 643 F.3d at 1042-43 (internal quotation marks and citations omitted). Also, " ‘[w]here ... the unresolved issues are primarily legal rather than factual, summary judgment is particularly appropriate." Ritchie Capital Mgmt., LLC v. Stoebner , 779 F.3d 857, 861 (8th Cir. 2015) (quoting In re Cochrane , 124 F.3d 978, 981-82 (8th Cir. 1997) ).

Here, the parties’ cross-motions for summary judgment encompass all their claims and counterclaims. Furthermore, the parties’ claims and counterclaims involving alleged bad faith and breach of contract are essentially mirror images. Consequently, the court finds it appropriate to consider whether summary judgment is appropriate claim-by-claim, rather than to consider the motions in turn.

B. Withdrawn Or Undisputed Claims

In its Motion, Hallmark asserts that Phoenix's counterclaim for breach of fiduciary duty fails as a matter of law, because Iowa does not recognize such a cause of action in the context of first-party insurance claims. Phoenix responds that it does not resist Hallmark's Motion as to the breach of fiduciary duty counterclaim. Therefore, Hallmark's Motion For Summary Judgment is granted as to Phoenix's breach of fiduciary duty counterclaim.

Phoenix asserts that Hallmark has no basis for its prayer for attorney's fees. In response, Hallmark asserts that its prayer for attorney's fees is moot, because Hallmark withdrew that prayer. Although it is not otherwise clear from the docket when or how Hallmark withdrew its prayer for attorney's fees, Hallmark's intent to do so is now clear from its response to Phoenix's Motion. Therefore, Phoenix's Motion For Summary Judgment is granted as to Hallmark's prayer for attorney's fees.

C. The Bad Faith Claim

Both parties seek summary judgment in their favor on Hallmark's claim for declaratory judgment that Hallmark did not act in bad faith in connection with its adjustment of Phoenix's claims arising out of the July 6, 2017, fire. Both parties also seek summary judgment in their favor on Phoenix's counterclaim that Hallmark did act in bad faith.

1. Arguments of the parties

Hallmark argues, in essence, that it relied on the conclusions of eleven consultants retained to assess Phoenix's claim and paid various categories of benefits as the information from the consultants warranted. Hallmark argues that Phoenix failed to provide adequate information to support larger or earlier payments and, indeed, failed to provide any explanation or analysis regarding why it believed Hallmark's assessments of the claims were wrong. Thus, Hallmark contends that it did not act in bad faith by failing to pay claims for particular benefits throughout the periods those claims were fairly debatable.

In resistance to Hallmark's motion and in support of its own, Phoenix argues that Hallmark acted in bad faith in several respects. The instances of Hallmark's alleged bad faith, set out in the order in which they arose, are the following: (1) denying or delaying payment for $124,800 for removal and installation of wiring even though Hallmark knew by August 8, 2017, that Phoenix was entitled to that payment; (2) failing to issue payment on October 18, 2017, for equipment loss and repair in accordance with Hallmark's own expert's recommendations; (3) failing to pay $200,000 for business income interruption as requested by Phoenix on December 1, 2017; (4) failing to include in a payment on January 9, 2018, normal operating expenses for Phoenix's work at the 2017 Iowa State Fair, while deducting Phoenix's earnings from the Fair; (5) assuming that Phoenix had undergone a total shutdown after the fire as the basis for calculating an inadequate business income interruption payment on January 9, 2018; and (6) denying any payment for payroll on January 9, 2018, and thereafter denying or delaying the payroll payment, based on limitations and mistakes in HSNO's business income interruption calculations.¹

1 Phoenix asserts fewer grounds for defeating Hallmark's motion for summary judgment as to bad faith than it asserts in support of its own motion for summary judgment on that issue. Phoenix's resistance to Hallmark's motion was filed after its own motion, so that it might be construed as abandoning or waiving grounds for its bad faith claim that are not repeated in its resistance to Hallmark's motion. Nevertheless, out of an abundance of caution, the court will consider all of Phoenix's grounds for asserting that Hallmark acted in bad faith, whether those grounds are asserted in support of Phoenix's resistance to Hallmark's summary judgment motion or in support of Phoenix's own summary judgment motion.

2. Iowa standards for a bad-faith claim

As the Iowa Supreme Court has explained, "A first-party bad-faith claim involves ‘an insured's attempt to recover for his or her own losses allegedly covered under the insurance policy.’ " Thornton v. Am. Interstate Ins. Co. , 897 N.W.2d 445, 461 (Iowa 2017) (quoting Johnson v. Farm Bureau Mut. Ins. , 533 N.W.2d 203, 207 (Iowa 1995) ). The Iowa Supreme Court found it "was ‘appropriate to recognize the first-party bad faith tort [(1)] to provide the insured an adequate remedy for an insurer's wrongful conduct’ because traditional breach of contract damages would not always be adequate to compensate for bad faith[,] [(2)] the alternative remedy of intentional infliction of emotional distress was inadequate due to its limited applicability," and (3) the tort claim "was justified ‘by the nature of the contractual relationship between the insurer and insured.’ " De Dios v. Indem. Ins. Co. of N. Am. , 927 N.W.2d 611, 616 (Iowa 2019) (quoting Dolan v. Aid Insurance Company , 431 N.W.2d 790, 790, 794 (Iowa 1988) (en banc)).

a. Elements of the claim

As the Iowa Supreme Court has also explained,

We adopted the test for bad faith applied by the Wisconsin Supreme Court in Anderson v. Continental Insurance Company :

To show a claim for bad faith, a plaintiff must show the absence of a reasonable basis for denying benefits of the policy and defendant's knowledge or reckless disregard of the lack of a reasonable basis for denying the claim.

[ Dolan , 431 N.W.2d at 794 ] (quoting Anderson , 85 Wis.2d 675, 271 N.W.2d 368, 376 (1978) ).

De Dios , 927 N.W.2d at 616. Thus, to establish a first-party bad-faith claim against an insurer—for worker's compensation or other coverage—the Iowa Supreme Court has repeatedly recognized that the plaintiff must show the following elements: " ‘(1) that the insurer had no reasonable basis for denying benefits under the policy and, (2) the insurer knew, or had reason to know, that its denial was without basis.’ " Thornton , 897 N.W.2d at 461–62 (worker's compensation insurance case quoting McIlravy v. N. River Ins. , 653 N.W.2d 323, 329 (Iowa 2002), also a worker's compensation insurance case, in turn quoting United Fire & Cas. Co. v. Shelly Funeral Home, Inc. , 642 N.W.2d 648, 657 (Iowa 2002), a general liability insurance case). "The first element is objective; the second is subjective." Id. at 465 (citing Rodda v. Vermeer Mfg. , 734 N.W.2d 480, 483 (Iowa 2007) ). Although both elements of a first-party bad-faith claim are cast in terms of "denial" of benefits, "Iowa law recognizes a common-law cause of action against an insurer for bad-faith denial or delay of insurance benefits." Rodda , 734 N.W.2d at 483 (emphasis added) (citing Dolan , 431 N.W.2d at 794 ).

i. The "no reasonable basis" element

As to the first, objective element of a bad-faith claim, in Thornton , the Iowa Supreme Court explained,

"A reasonable basis for denying insurance benefits exists if the claim is ‘fairly debatable’ as to either a matter of fact or law." [ McIlravy , 653 N.W.2d at 329 ] (quoting Gibson [v. ITT Hartford Ins.] , 621 N.W.2d [388,] 396 [(Iowa 2001)]). A fairly debatable claim is one that is "open to dispute on any logical basis." Id. (quoting Bellville [v. Farm Bureau Mut. Ins.] , 702 N.W.2d 468, 473 (Iowa 2005) ). "Stated another way, if reasonable minds can differ on the coverage-determining facts or law, then the claim is fairly debatable." Bellville , 702 N.W.2d at 473.

The fact that the insurer's position is ultimately found to lack merit is not sufficient by itself to establish the first element of a bad faith claim. The focus is on the existence of a debatable issue, not on which party was correct.

Id. (citations omitted).

Whether an issue of fact is debatable can ordinarily be decided by the court. Id. "That is because ‘[w]here an objectively reasonable basis for denial of a claim actually exists, the insurer cannot be held liable for bad faith as a matter of law.’ " Id. (quoting Gardner v. Hartford Ins. Accident & Indem. Co. , 659 N.W.2d 198, 206 (Iowa 2003) ). "[C]ourts and juries do not weigh the conflicting evidence that was before the insurer; they decide whether evidence existed to justify denial of the claim." Id. at 474 (quoting State Farm Lloyds, Inc. v. Polasek , 847 S.W.2d 279, 285 (Tex. App. 1992) ). In many cases, a directed verdict or summary judgment for the insurer dismissing the bad-faith claim may be appropriate because some evidence existed to justify its denial as a matter of law. See, e.g., id. ; Sampson v. Am. Standard Ins. , 582 N.W.2d 146, 152 (Iowa 1998) (holding district court properly decided bad faith as a matter of law when insured's injuries were debatable); Thompson v. U.S. Fid. & Guar. Co. , 559 N.W.2d 288, 292 (Iowa 1997) (deciding as a matter of law a claim is fairly debatable when evidence showed that claimant ingested drugs the day before his work injury); Cent. Life Ins. v. Aetna Cas. & Sur. Co. , 466 N.W.2d 257, 263 (Iowa 1991) (holding motion for directed verdict by insurer should have been granted because of reasonable dispute as to value of claim).

Thornton , 897 N.W.2d at 465–66.

A few additions to this recitation are warranted. First, "[t]he reasonable basis for denying the claim ... must exist at the time the claim is denied." Seastrom v. Farm Bureau Life Ins. Co. , 601 N.W.2d 339, 346 (Iowa 1999) ; Sampson v. Am. Standard Ins. Co. , 582 N.W.2d 146, 150 (Iowa 1998).

Second, as the Iowa Supreme Court has explained, "an insurer has a right to conduct an investigation concerning claims made by its insured." Sampson , 582 N.W.2d at 151 (citing cases). Even so, "[i]n first-party insurance situations, there is ‘no clearly defined duty of investigation’ on an insurer; the insurer ‘may require the insured to present adequate proof of loss before paying the claim.’ " Bellville , 702 N.W.2d at 478 (quoting N. Iowa State Bank v. Allied Mut. Ins. Co. , 471 N.W.2d 824, 828 (Iowa 1991) ). Moreover, " ‘Iowa law is clear that an imperfect investigation, standing alone, "is not sufficient cause for recovery if the insurer in fact has an objectively reasonable basis for denying the claim." ’ " Villarreal v. United Fire & Cas. Co. , 873 N.W.2d 714, 728 (Iowa 2016) (quoting Morgan v. Am. Family Mut. Ins. Co. , 534 N.W.2d 92, 98 (Iowa 1995), in turn quoting Reuter v. State Farm Mut. Auto. Ins. Co. , 469 N.W.2d at 250, 254–55 (Iowa 1991) ).

Third, "the fact that experts disagreed with [the insurer's] valuation of its insured's claim is insufficient to establish bad faith." Bellville , 702 N.W.2d at 475. Instead, "[t]here must be evidence that the basis for [the insurer's] valuation was unreasonable." Id. (emphasis in the original). More specifically,

This court has held that "[a]n insurance company is not obligated to disregard the opinion of its own expert in favor of the insured's expert's opinion." Morgan , 534 N.W.2d at 97. Similarly, the insurer here was not obligated to disregard the opinion of the investigating officer simply because different conclusions could be drawn from the facts revealed by the officer's investigation. See Szumigala v. Nationwide Mut. Ins. Co. , 853 F.2d 274, 280–81 (5th Cir. 1988) (holding insurer reasonably relied on investigating officer's report notwithstanding insured's contention that insurer failed to adequately consider circumstances detracting from officer's conclusion that insured was at fault in accident); cf. Bushey v. Allstate Ins. Co. , 164 Vt. 399, 670 A.2d 807, 810 (1995) (holding insurer could rely on independent medical witness notwithstanding evidence contrary to expert's opinion). The officer's objectively prepared report, which placed the blame for the accident on Bellville, clearly provided a reasonable basis for the insurer's conclusion that Bellville's fault could be as high as 30%. See Szumigala , 853 F.2d at 280–81 (holding report of deputy who investigated accident, placing blame on insured, provided insurer with a reasonable basis to deny uninsured motorist benefits).

Bellville , 702 N.W.2d at 477–78.

Fourth, while the insurer may rely on its own experts or findings of investigators, it cannot escape liability for bad faith by delegating its authority to a third-party claims administrator, who might then arbitrarily deny a claim for benefits with impunity. See De Dios , 927 N.W.2d at 621. Rather, the insurer remains vicariously liable for the actions of a third party as its agent, and the insurer retains the burdens of any nondelegable duties imposed by statute or regulations. Id.

ii. The "knowledge" element

Only if the court determines, on the first, objective element—asking whether the insurer had no reasonable basis upon which to deny the insured's claim for benefits—is the court required to turn to the second, subjective element—asking whether the insurer knew, or reasonably should have known, that its basis for denying the insured's claim was unreasonable. See Rodda , 734 N.W.2d at 483. The Iowa Supreme Court has explained the relationship between the required "knowledge" and the insurer's investigation, as follows:

An insurer's negligent or sub-par investigation or evaluation of a claim is relevant to the fact finder's determination of whether the insurer should have known its denial lacked a reasonable basis. Reuter , 469 N.W.2d at 254 ; Bad Faith Actions § 5:08, at 5–42 ("[A] breach of the duty to investigate constitutes a substitute for knowledge."). But "an improper investigation, standing alone, is not sufficient cause for recovery if the insurer in fact has an objectively reasonable

basis for denying the claim." Reuter , 469 N.W.2d at 254–55 ; accord Seastrom v. Farm Bureau Life Ins. Co., 601 N.W.2d 339, 347 (Iowa 1999) ; Bad Faith Actions § 5:08, at 5–42 (stating a negligent investigation "does not constitute bad faith by itself").

Bellville , 702 N.W.2d at 474–75.

b. Summary judgment on bad faith claims

The Iowa Supreme Court has held that, for an insurer to succeed on a motion for summary judgment on a bad-faith claim by an insured, the insurer " ‘must demonstrate that a reasonable trier of fact could not determine that the [insurer] lacked a reasonable basis for denying or delaying payment of the claim." Rodda , 734 N.W.2d at 483 (quoting Galbraith v. Allied Mut. Ins. Co. , 698 N.W.2d 325, 328 (Iowa 2005)) ; accord Torgerson , 643 F.3d at 1042-43 (the court may grant summary judgment under Rule 56 only "[w]here the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party" (internal quotation marks and citations omitted)).

3. Instances of alleged bad faith

The court finds that this is a case in which summary judgment for the insurer dismissing the bad-faith claim as a matter of law is appropriate. See Thornton , 897 N.W.2d at 465 ("In many cases, a directed verdict or summary judgment for the insurer dismissing the bad-faith claim may be appropriate because some evidence existed to justify its denial as a matter of law."). This is so, because as to each of the instances of Hallmark's alleged bad faith, Phoenix has failed to show as a matter of law or to generate a genuine issue of material fact that Hallmark's delay or denial of benefits was not "fairly debatable," either as a matter of fact, see id. ("Whether an issue of fact is debatable can ordinarily be decided by the court."), or as a matter of law, see id. (a claim may be fairly debatable as a matter of law); Ritchie Capital Mgmt. , 779 F.3d at 861 (" ‘[W]here ... the unresolved issues are primarily legal rather than factual, summary judgment is particularly appropriate." (quoting In re Cochrane , 124 F.3d at 981-82 )). The court will explain this conclusion as to each of the instances of alleged bad faith in turn.

a. Failure to pay for wiring removal and installation

Phoenix contends that Hallmark acted in bad faith by denying or delaying payment for $124,800 for removal and installation of wiring. The pertinent consultant for Hallmark, Larry Baxter of CMC, included an estimate of $124,800 to remove and install wiring damaged by the fire in his report dated July 31, 2017. Pl.’s App. 788 (spreadsheet from 07/31/17 CMC report by Baxter of equipment RCV, ACV, and repair costs for equipment in Buildings 1 and 2).² This amount was included in the replacement cash value (RCV) for equipment in Building 1 (as $12,500 labor cost, plus 20% contingency) and Building 2 (as $37,500 labor cost and $54,000 replacement of wiring and conduit, plus 20% contingency). See id. at 923 (Jones's spreadsheet of equipment RCV, ACV, and repair costs for equipment in Buildings 1 and 2). No RCV was paid for equipment in Buildings 1 and 2 before July 6, 2018, however, because Hallmark contended that the Policy did not require payment of RCV until the equipment was repaired or replaced.

2 Whenever a document appears in more than one appendix, the court will cite to its appearance in the Plaintiff's Appendix [Dkt. No. 38].

Phoenix argues that Hallmark knew by August 8, 2017, that Phoenix was entitled to receive $124,800 for removal and replacement of wiring. Phoenix also argues that Hallmark has admitted it had no reason to dispute Baxter's calculation, but Hallmark did not pay for the wiring damage in the October 19, 2017, payment, and has never done so. Hallmark argues that it properly allocated the cost to remove and install wiring to RCV and that the parties’ dispute about when Phoenix would be entitled to RCV under the Policy continued until July 6, 2018. Hallmark contends that the July 6, 2018, "compromise" payment included the $124,800 for removal and installation of wiring and electrical components for equipment, where the payment was based on Phoenix's suggested numbers.

The court concludes, as a matter of law, that even after Hallmark accepted Baxter's estimate of the costs to remove and install wiring and electrical components, Hallmark had a reasonable legal basis to fairly debate how much of the estimated amount to pay under the policy. See Thornton , 897 N.W.2d at 465 (a reasonable basis to debate a claim may be a matter of fact or law). This is so, because the cost to remove and install wiring was plausibly included in the RCV for equipment, as a replacement cost rather than a repair cost. Furthermore, Hallmark knew that the Iowa Supreme Court had interpreted comparable policy language as not requiring payment of RCV until the associated equipment was actually repaired or replaced. Compare Pl.’s App. 439 (Policy § G(3)(d)), with Pierce v. Farm Bureau Mut. Ins. Co. , 548 N.W.2d 551, 554 (Iowa 1996). These facts establish that payment for the removal and installation of wiring was open to dispute on a "logical basis." Thornton , 897 N.W.2d at 465 ("A fairly debatable claim is one that is ‘open to dispute on any logical basis.’ " (quoting McIlravy , 653 N.W.2d at 329 )). Thus, payment of the entire $124,800 estimate was "fairly debatable" as a matter of law when Hallmark made a payment for equipment loss on October 18, 2017, which was only for the ACV of equipment that could not be repaired and for the repair costs of equipment that could be repaired, including a 20% contingency, but minus the applicable $25,000 deductible. Id. (" ‘A reasonable basis for denying insurance benefits exists if the claim is "fairly debatable" as to either a matter of fact or law.’ " (quoting McIlravy , 653 N.W.2d at 329 )). Furthermore, the record shows that the parties’ dispute about payment for RCV, where the equipment in question had not been repaired or replaced, continued until the "compromise" payment was made on July 6, 2018.

In short, no reasonable juror could conclude that Hallmark had no reasonable basis to deny payment of the cost of removal and installation of wiring and electrical components prior to July 6, 2018. Rodda , 734 N.W.2d at 483 (standard for summary judgment on a bad-faith claim); accord Torgerson , 643 F.3d at 1042-43 (standard for summary judgment under Rule 56 ). Similarly, no reasonable juror could conclude that the full costs of removal and installation of wiring and electrical components were not included in the "compromise" payment, where that payment was based on Phoenix's calculation of unpaid RCV and other allegedly unpaid claims. Id. ; accord Torgerson , 643 F.3d at 1042-43.

Hallmark, not Phoenix, is entitled to summary judgment on a bad faith claim based on failure to pay this part of Phoenix's insurance claim.

b. Failure to pay for equipment loss and repair

Phoenix argues that Hallmark also acted in bad faith by failing to issue payment on October 18, 2017, for equipment loss and repair in accordance with Hallmark's own expert's recommendations. Baxter reported to Hallmark that the RCV of the equipment was $1,226,400; that the ACV of the equipment was $368,520; that repair costs were $93,600; and that the cost for removal and installation of wiring was $124,800. Pl.’s App. 788 (spreadsheet from 07/31/17 CMC report by Baxter of equipment RCV, ACV, and repair costs for equipment in Buildings 1 and 2). The record shows that Hallmark accepted Baxter's estimates for equipment loss. Compare id., with id. at 923 (Jones's spreadsheet of equipment RCV, ACV, and repair costs for equipment in Buildings 1 and 2). On October 18, 2017, however, Hallmark paid only $200,720 for equipment loss and repair. Jones calculated the October 18, 2017, payment for equipment loss as follows: For Building 1, $13,200 to repair salvageable items, and $7,720 for ACV of non-repairable items, and for Building 2, $80,400 to repair salvageable items, and $59,400 for ACV for non-repairable items, including 20% continencies for all amounts, totaling $225,720, then reduced by the applicable $25,000 deductible to $200,720. Id. at 923 (Jones's spreadsheet of equipment RCV, ACV, and repair costs for equipment in Buildings 1 and 2 showing values used in his email), 926-27 (email from Jones to Phoenix explaining the calculation); see also id. at 788 (spreadsheet from 07/31/17 CMC report by Baxter showing the same values). Jones did not include any payment of $124,800 for wiring removal and installation, because it was allocated to RCV. Id. at 923 (Jones's spreadsheet of equipment RCV, ACV, and repair costs for equipment in Buildings 1 and 2), 439 (Policy § G(3)(d)).

Phoenix argues that, on October 18, 2017, Hallmark should have paid at least the ACV of $368,520 plus $124,800 for wiring removal and installation, consistent with Baxter's report. Phoenix argues that Hallmark calculated the reduced payment of $200,720 by eliminating repair costs, making a 20% reduction for contingency, and not including the cost of wiring removal and installation. Phoenix argues this shows Hallmark's practice of ignoring information, even from its own experts. Hallmark counters, again, that any amount for equipment loss not included in the October 18, 2017, payment was not due under the terms of the policy prior to repair or replacement of the equipment.

Much as with the last instance of alleged bad faith, the court concludes that, even if Hallmark accepted Baxter's estimates, Hallmark had a reasonable legal basis to fairly debate how much of the estimated amounts to pay under the policy. See Thornton , 897 N.W.2d at 465 (a reasonable basis to debate a claim may be a matter of fact or law). This is so, as to $124,800 for the costs of removal and installation of wiring, for the reasons explained in the previous subsection. Furthermore, Hallmark reasonably understood the policy to require payment of ACV, unless the property was repaired or replaced, at which time payment of RCV would be appropriate. See Pl.’s App. 439 (Policy § G(3)(d)). Thus, the record shows that Jones reasonably calculated the October 18, 2017, payment for equipment as follows: For Building 1, $13,200 to repair salvageable items, and $7,720 for ACV of non-repairable items, and for Building 2, $80,400 to repair salvageable items, and $59,400 for ACV for non-repairable items, including 20% continencies for all amounts, totaling $225,720, then reduced by the applicable $25,000 deductible to $200,720. Id. at 92-93 (email from Jones to Phoenix explaining the calculation), 923 (Jones's spreadsheet of equipment RCV, ACV, and repair costs for equipment in Buildings 1 and 2 showing values used in his email), 788 (spreadsheet from 07/31/17 CMC report by Baxter showing the same values).³ Thus, once again, no reasonable juror could conclude that Hallmark had no reasonable basis to issue payment on October 18, 2017, for equipment loss and repair in the amount of $200,720, even though that amount was less than Hallmark's own expert's reported ACV of $368,520 for all equipment and did not include $124,800 for removal and installation of wiring. Rodda , 734 N.W.2d at 483 (standard for summary judgment on a bad-faith claim); accord Torgerson , 643 F.3d at 1042-43 (standard for summary judgment under Rule 56 ).

3 The court finds that Phoenix's alternative version of Jones's calculations is not reasonably supported by and is not an accurate or reasonable interpretation of the language of paragraph 86 of Hallmark's Complaint, on which Phoenix relies. Such allegations about the calculations unsupported by specific facts are insufficient to raise an issue for trial and need not be accepted by the court. See, e.g., Williams v. Wells Fargo Bank, N.A. , 901 F.3d 1036, 1039 (8th Cir. 2018).
--------

Hallmark, not Phoenix, is entitled to summary judgment on a bad faith claim based on failure to pay this part of Phoenix's insurance claim.

c. Failure to pay $200,000 for business income interruption

Phoenix also alleges that Hallmark acted in bad faith by failing to pay $200,000 for business income interruption benefits as requested by Phoenix on December 1, 2017. The Policy provided coverage for "business income," defined to mean "Net income (Net Profit or Loss before income taxes) that would have been earned or incurred; and ... Continuing normal operating expenses incurred, including payroll." Pl.’s App. at 441 (Business Income (And Extra Expense) Coverage Form), § A(1)(a)-(b). The Policy also provided coverage for "Extra Expense," defined as "necessary expenses you incur during the ‘period of restoration’ that you would not have incurred if there had been no direct physical loss or damage to property caused by or resulting from a Covered Cause of Loss." Id. (§ 2(b)).

On December 1, 2017, counsel for Phoenix sent a letter to HSNO, providing documents in response to HSNO's November 2, 2017, request, including financial statements for 2015, 2016, and through October 2017, and stating, "[t]he business income/extra expense loss exceeds $530,000." Id. at 944-45. Phoenix's counsel also sent a letter dated December 1, 2017, to Hallmark requesting "that Hallmark issue a check of at least $200,000 for partial payment of business income losses and extra expenses incurred as a result of the July 6, 2017 fire." Id. at 967.

At the time of Phoenix's December 1, 2017, request for payment of at least $200,000 of business income losses and extra expenses, id. at 967-68, Phoenix had not provided financial information for any period after October 2017. Id. at 944-45 (forwarding financial information through October 2017). The December 1, 2017, letter from Phoenix expressly admits that "[t]he financial statements for November have not yet been finalized." Id. at 968. The justification Phoenix gave for an "immediate need for partial payment of $200,000 for business income/extra expenses" was an estimate of expenses "for labor, loader & excavator, maintenance & supplies, rent & lease, fuel, vehicles, office expense, utilities, professional fees, insurance & bond expense, and bank charges & penalties total[ing] over $187,000 from the date of the fire through the end of November [2017]." Id.

On December 15, 2017, HSNO sent Hallmark a detailed statement of its calculation of business income loss "for advance purposes," broken down month-by-month, totaling $28,774.34. Id. at 984-86. On December 20, 2017, HSNO emailed Jones its preliminary calculations confirming a business income loss of $28,774.34, and indicating 94.16% of expenses were "non-continuing." Id. at 986. The cover email stated this calculation of business income loss was subject to "additional discussions, and new information, including continuing payroll." Id. at 992. In an email to Phoenix dated December 26, 2017, Jones explained to Phoenix that the calculation in HSNO's report "is indeed preliminary in nature, as it is understood that additional information has been requested which may have an impact on their final calculations." Id. at 1004.

Phoenix returned a Proof of Loss signed by Robert Colosimo for $28,774.34 for business income loss and extra expenses, with a letter dated December 28, 2017. Phoenix's letter stated that it "d[id] not agree with Hallmark's calculation of $28,774.34" and complained that Hallmark had "offer[ed] no reasonable explanation as to why only $28,774.34 is paid by Hallmark at this time." Id. at 1024. The letter contended that Phoenix had already provided sufficient information, reiterated some of the requested information, and reiterated Phoenix's demand for a partial payment for business income and extra expenses in the amount of $200,000. Id. at 1024-25. Hallmark made the payment for loss of business income in the amount of $28,774.34 on January 9, 2018. In a January 10, 2018, letter, Phoenix complained that Hallmark's "accountant's formula for calculating business income loss is ridiculous," adding that "[c]ommon sense should tell you that the bills Phoenix has paid are necessary." Id. at 1032.

Phoenix argues that, notwithstanding post-fire financial information it provided showing continued expenses in almost every category, the HSNO report of December 20, 2017, categorized 94% of Phoenix's expenses as non-continuing operating expenses. Phoenix contends that it was unreasonable for Hallmark to rely on HSNO's report in light of Phoenix's financial statements. Indeed, Phoenix argues that HSNO was biased in Hallmark's favor because of its prior relationship with Hallmark. Hallmark argues that Phoenix focuses on the subjective element of a bad faith claim by asserting that Hallmark should have known HSNO's calculations were wrong in light of Phoenix's financial statements. Hallmark argues that Phoenix ignores the proper question for the first element of a bad faith claim, which is whether evidence existed to justify denial of the claim. Here, Hallmark contends that the January 9, 2018, payment of $28,774.34 was justified by HSNO's analysis of information available at that time, while Phoenix's demand was not supported by any documentation or calculation. Hallmark points out that an insurer is not required to disregard the opinion of its own expert.

The court concludes, as a matter of law, that Hallmark had a reasonable basis—this time, a factual one—to fairly debate how much to pay for business income interruption under the policy, notwithstanding that Phoenix demanded $200,000. See Thornton , 897 N.W.2d at 465 (a reasonable basis to debate a claim may be a matter of fact or law). As to this instance of alleged bad faith, it is particularly important to recognize that "[c]ourts and juries do not weigh the conflicting evidence that was before the insurer; they decide whether evidence existed to justify denial of the claim." Id. (internal quotation marks and citations omitted). As a matter of law, Hallmark did have evidence that justified denial of the demand for $200,000 of business income interruption benefits.

First, Hallmark was not required to disregard HSNO's opinion about the amount of business income interruption benefits to pay as of December 2017 or January 2018 in favor of the amount Phoenix demanded based on Phoenix's submission of raw income and expense data. Bellville , 702 N.W.2d at 477. This is true, even if different conclusions could be drawn from the financial records submitted by Phoenix. Id. Those records, as noted above, were only through October 2017, and Phoenix had not yet provided finance records for November 2017 or later.

Second, Phoenix made no attempt to calculate from the financial records submitted how much "Net Income ... would have been earned or incurred," nor had Phoenix demonstrated that all of the expenses incurred were "normal operating expenses" or "extra expense[s]" as defined in the Policy. Pl.’s App. at 441 (Policy definitions); see also Bellville , 702 N.W.2d at 478 (explaining, "[I]n first-party insurance situations, there is no clearly defined duty of investigation on an insurer; the insurer may require the insured to present adequate proof of loss before paying the claim." (internal quotation marks and citations omitted)). Furthermore, Phoenix has not pointed to any analysis or calculation showing why at the time that a partial payment of $28,774.34 was made, any of the information shown in its October 2017 and earlier financial statements demonstrated that HSNO's calculation of business income loss within the coverage of the Policy was wrong. Id. at 475 (disagreement is not enough to establish bad faith; rather, the insured must present evidence that the basis for the insurer's valuation was unreasonable). Simply complaining that "common sense" would show that the expenses paid were "necessary" and that HSNO's calculations were "ridiculous" does not establish adequate proof of loss within the meaning of the Policy.

Third, even if Hallmark's investigation, which relied on HSNO, was "imperfect," that contention, standing alone, is not sufficient to establish bad faith. Villarreal , 873 N.W.2d at 728. As Hallmark contends, Phoenix's assertion that Hallmark should have known HSNO's calculations were wrong from Phoenix's financial records is unavailing. That contention imports a second-element inference regarding knowledge that the insurer had no reasonable basis to deny a claim from a shoddy investigation into the first-element determination of whether the insurer had some evidence to support its denial. Compare Bellville , 702 N.W.2d at 474-75 (explaining the inferences about the "knowledge" element that may be drawn from a shoddy investigation), with Villarreal , 873 N.W.2d at 728 (explaining that an imperfect investigation does not establish bad faith if the insurer has an objectively reasonable basis for denying a claim); see also Thornton , 897 N.W.2d at 465-66 (explaining that the fact that an insurer is ultimately found to be wrong does not establish bad faith). Similarly, without any analysis by Phoenix at the time the payment was made showing why HSNO's calculations were wrong, Hallmark simply would not have had a reason to know that HSNO's calculations were wrong or that it was not reasonable to rely on HSNO's calculations.

Also, contrary to Phoenix's contentions, this is not a situation in which Hallmark used HSNO as a third-party claims administrator, rendering Hallmark liable for HSNO's arbitrary denial of a claim, under De Dios , 927 N.W.2d at 621. The record shows that HSNO was used as an investigator or expert to determine facts and render an opinion, not as a third-party claims administrator, where Hallmark ultimately adjusted all of the claims, including business income interruption. HSNO's objectively prepared report, as an investigator of Phoenix's claimed business income interruption, clearly provided Hallmark with a reasonable basis to deny Phoenix's December 1, 2017, demand for $200,00 for business income interruption. Cf. Bellville , 702 N.W.2d at 477-78.

Thus, once again, no reasonable juror could conclude that Hallmark had no reasonable basis to issue a payment for only $28,774.34 for business income interruption, despite Phoenix's December 1, 2017, demand for at least $200,000. Rodda , 734 N.W.2d at 483 (standard for summary judgment on a bad-faith claim); accord Torgerson , 643 F.3d at 1042-43 (standard for summary judgment under Rule 56 ).

Hallmark, not Phoenix, is entitled to summary judgment on a bad faith claim based on failure to pay this part of Phoenix's insurance claim.

d. Failure to pay normal operating expenses for the 2017 Iowa State Fair

Phoenix alleges that Hallmark also acted in bad faith by failing to include in a payment on January 9, 2018, normal operating expenses for Phoenix's work at the 2017 Iowa State Fair, while deducting Phoenix's earnings from the Fair. Phoenix's financial statement for January 1, 2017, through December 31, 2017, Pl.’s App. at 950, reflects that Phoenix had income earned from the State Fair in August through October 2017 totaling $129,651.25, and expenses for the State Fair for the same months totaling $75,828.80.

HSNO's December 20, 2017, report on business interruption, id. at 994-1000, reflects a different method to calculate business income loss. HSNO used actual income and expenses to project future income and expenses to determine, among other things, calculated monthly revenue loss and trend percentage, id. at 996; monthly revenue trend percentages, id. at 997; and non-continuing expenses and non-continuing expense percentages, id. at 998-1000; all of which resulted in a calculated business income loss by subtracting non-continuing expense percentage from calculated revenue loss to determine calculated business income loss, id. at 995. That calculated business income loss was $28,774.34. Id.

As mentioned, above, the cover email forwarding this report to Hallmark stated this calculation of business income loss was subject to "additional discussions, and new information, including continuing payroll." Id. at 992. As also mentioned, above, in a January 10, 2018, letter, Phoenix complained that Hallmark's "accountant's formula for calculating business income loss is ridiculous." Id. at 1032.

Phoenix argues that its financial statements for August, September, and October 2017 show that its total expense for the Iowa State Fair were $75,828.80 and that those expenses were one of the few items that Hallmark classified as a continuing normal operating expense in its December 20, 2017, analysis. Phoenix argues that Hallmark, nevertheless, deducted Phoenix's State Fair revenue of $129,651.25 when calculating Phoenix's lost revenue, but Hallmark did not increase the business income interruption payment by the associated expenses. Phoenix argues that this resulted in an underpayment of $75,828.80, and this underpayment would have been obvious to Hallmark. Hallmark responds that, while Phoenix selects line items to attempt to show bad faith failure to pay more business income losses sooner, Hallmark reasonably relied on HSNO's calculations. Hallmark also points out that, while Phoenix again confuses "no reasonable basis" element standards and "knowledge" element standards, Hallmark had no reason to know that HSNO's calculations were not reasonable.

First, the court notes that the record shows that HSNO did not calculate business income losses by comparing earnings and expenses item by item (that is, HSNO did not offset expenses from the State Fair against earnings from the State Fair, nor did HSNO deduct itemized earnings while adding itemized expenses to determine business income loss to determine business income interruption benefits). See Pl.’s App. at 994-1000. The court concludes, as a matter of law, that Hallmark had a reasonable basis, HSNO's report, to fairly debate how much to pay for business income interruption under the policy, notwithstanding that Phoenix believes it was underpaid $75,820.80 for expenses for the State Fair. See Thornton , 897 N.W.2d at 465 (a reasonable basis to debate a claim may be a matter of fact or law). HSNO's report justified the amount that Hallmark paid for business income interruption in January 2018. Id. Hallmark was not required to disregard HSNO's opinion about the amount of business income interruption benefits to pay in January 2018 in favor of the amount Phoenix now believes should have been paid for a specific item. Bellville , 702 N.W.2d at 477.

Moreover, again, Phoenix's assertion that Hallmark should have known HSNO's calculations were wrong imports a second-element inference regarding the "knowledge" element that is inapplicable to the "no reasonable basis" element. Compare Villarreal , 873 N.W.2d at 728 (explaining that an imperfect investigation does not establish bad faith if the insurer has an objectively reasonable basis for denying a claim), with Bellville , 702 N.W.2d at 474-75 (explaining the inferences about the "knowledge" element that may be drawn from a shoddy investigation); see also Thornton , 897 N.W.2d at 465-66 (explaining that the fact that an insurer is ultimately found to be wrong does not establish bad faith). With no analysis by Phoenix at the time the payment was made showing why HSNO's calculations were wrong, Hallmark simply would not have had a reason to know that HSNO's calculations were wrong or that it was not reasonable to rely on HSNO's calculations. Simply complaining that HSNO's calculations were "ridiculous" does not establish adequate proof of loss. Bellville , 702 N.W.2d at 475 (disagreement is not enough to establish bad faith; rather, the insured must present evidence that the basis for the insurer's valuation was unreasonable).

Thus, once again, no reasonable juror could conclude that Hallmark had no reasonable basis to issue a payment for only $28,774.34 for business income interruption, despite Phoenix's assertion that Hallmark did not properly offset State Fair expenses against State Fair earnings in calculating that payment. Rodda , 734 N.W.2d at 483 (standard for summary judgment on a bad-faith claim); accord Torgerson , 643 F.3d at 1042-43 (standard for summary judgment under Rule 56 ).

Hallmark, not Phoenix, is entitled to summary judgment on a bad faith claim based on failure to pay this part of Phoenix's insurance claim.

e. Assuming a total shutdown after the fire

Phoenix argues that Hallmark acted in bad faith by assuming that Phoenix had undergone a total shutdown after the fire as the basis for calculating an inadequate income interruption payment made on January 9, 2018. Hallmark received information shortly after the fire suggesting that Phoenix had ceased operations some time before the fire, including the following: an independent adjuster reported on July 28, 2017, that the manufacturer of the pelletizer equipment and the sole supplier of the parts necessary to keep the equipment running expressed doubt that Phoenix's machines had been running, Pl.’s App. at 775; another consultant reported on July 28, 2017, that the pelletizer machines "appear[ed] to have been disassembled for quite some time prior to fire," id. at 777; and an equipment expert reported on July 31, 2017, that the plant was not in operation "for more than a year, possibly two" before the fire, id. at 782. On December 1, 2017, Phoenix provided notice to Hallmark that Phoenix would be "relocating its equipment," outlined estimates of some of the expenses involved, and set out some of the payroll costs during the previous four weeks for breaking down equipment for the move. Id. at 967-68. That same day, Phoenix provided financial information indicating that it was still generating income and incurring expenses after the fire. Id. at 944-66.

Phoenix argues that Hallmark has admitted that, when HSNO provided its report in December 2017, HSNO assumed that Phoenix had underdone a total shutdown after the fire, but by December 1, 2017, Phoenix had provided Hallmark with post-fire financial statements clearly reflecting that Phoenix was continuing to generate revenue and incur expenses during the months after the July 6, 2017, fire. Indeed, Phoenix argues that Hallmark knew that Phoenix was moving equipment to a new location to continue operations. Hallmark responds that it properly relied on HSNO's calculations for a preliminary payment of business interruption benefits. Furthermore, Hallmark argues that there was considerable information available to Hallmark shortly after the fire indicating that Phoenix had ceased operations sometime before the fire, which Hallmark was entitled to investigate, and that, subsequently, it was entitled to investigate whether Phoenix was financially viable. Hallmark argues that even once it was aware that Phoenix intended to move its operations, Hallmark reasonably needed to determine whether there was coverage for moving equipment, where Phoenix had planned to move prior to the loss, so that moving expenses might not be a direct result of the fire.

As was the case with some of the previous allegations of bad faith, the court concludes, as a matter of law, that Hallmark had a reasonable basis—HSNO's report—to fairly debate how much to pay for business income interruption under the Policy, notwithstanding that Phoenix believes it had provided information showing continuing operations. See Thornton , 897 N.W.2d at 465 (a reasonable basis to debate a claim may be a matter of fact or law). HSNO's report justified the amount that Hallmark paid for business income interruption in January 2018. Id. Hallmark was not required to disregard HSNO's opinion about the amount of business income interruption benefits to pay in January 2018 in favor of the amount Phoenix now believes should have been paid based on continuation of its business. Bellville , 702 N.W.2d at 477. Moreover, HSNO's report assumed continued income and expenses for Phoenix through the remainder of 2017. See Pl.’s App. at 994-1000.

Also, there is no question that Hallmark had a factual basis to fairly debate whether Phoenix had been in operation prior to the fire, based on reports that the equipment appeared not to have been in operation at the time of the fire and for some time before that, see Pl.’s App. at 775, 777, 782, and to fairly debate whether Phoenix could continue operation after the fire, based on information that R&A was in bankruptcy and likely to lose the property, information that the buyer of the property did not want Phoenix to continue operations on the property, and information that Phoenix was also in serious financial and regulatory trouble. Finally, Hallmark had a legal basis to fairly debate whether moving expenses were covered under the Policy, where moving expenses were not necessarily or unambiguously an "extra expense" incurred as a result of the fire, but reasonably appeared to be a result of the failure of R&A's and/or Phoenix's business. Id. at 441 (Business Income (And Extra Expense) Coverage Form) at § A(2)(b) (defining "Extra Expense" as "necessary expenses you incur during the ‘period of restoration’ that you would not have incurred if there had been no direct physical loss or damage to property caused by or resulting from a Covered Cause of Loss").

Thus, no reasonable juror could conclude that Hallmark had no reasonable basis to issue a payment for only $28,774.34 for business income interruption, despite Phoenix's assertion that Hallmark did not properly consider information about its continued operations. Rodda , 734 N.W.2d at 483 (standard for summary judgment on a bad-faith claim); accord Torgerson , 643 F.3d at 1042-43 (standard for summary judgment under Rule 56 ).

Hallmark, not Phoenix, is entitled to summary judgment on a bad faith claim based on failure to pay this part of Phoenix's insurance claim.

f. Denying payment for payroll on and after January 9, 2018

The last allegation of bad faith is that Hallmark denied any payment for payroll on January 9, 2018, and thereafter denied or delayed any payroll payment, based on limitations and mistakes in HSNO's business income calculations. As pointed out more than once, above, on December 1, 2017, Phoenix provided financial information through October 2017, showing payroll expenses, Pl.’s App. at 944-45, and requested $200,000 in business interruption coverage, where one of the listed categories of expenses justifying such a payment was "labor," id. at 967-68. On December 12, 2017, Phoenix emailed Hallmark asking, "What is the status of business income payment?" Id. at 970.

On December 15, 2017, HSNO emailed Jones at Hallmark that "[a]s soon as you confirm continuing payroll and applicable deductible I will resend a version [of the calculation for business interruption loss] for distribution to the insured." Id. at 1002. On December 18, 2017, HSNO emailed again asking, "[H]ave you been able to confirm applicable duration of ordinary payroll and deductible?" Id. at 1001. On December 26, 2017, Jones responded, "Upon reviewing the Business Income Coverage Form, it appears that [business income interruption] includes payroll for the entire ‘period of restoration.’ Therefore, your report needs to include payroll, if it does not already." Id. at 1001. As explained, above, HSNO's calculation of the amount of business income interruption coverage in its December 20, 2017, report did not specifically indicate payment of payroll or any other specific item, but it did calculate business income interruption based on both revenue and expenses, including labor. Id. at 994-1000. Again, the cover email sending the report stated that the calculation of business income loss was subject to "additional discussions, and new information, including continuing payroll." Id. at 992. Phoenix returned a Proof of Loss for $28,774.34, but reiterated its demand for a partial payment for business income and extra expenses in the amount of $200,000. Id. at 1024-25. In an email to Phoenix dated December 26, 2017, Jones explained to Phoenix that the calculation in HSNO's report "is indeed preliminary in nature, as it is understood that additional information has been requested which may have an impact on their final calculations." Id. at 1004. Hallmark made a payment of $28,774.34 on January 9, 2018.

Phoenix argues that Hallmark knew that payroll was covered as a business interruption loss and, indeed, Jones advised HSNO that its calculation of business interruption loss should include payroll. Nevertheless, HSNO categorized all payroll as 100% non-continuing, and Jones did not wait for any correction before authorizing the January 9, 2018, payment for only $28,774.34. Phoenix also argues that, in its December 1, 2017, correspondence with Hallmark, Phoenix's calculation of post-fire expenditure, which totaled at least $187,000, included payroll. Hallmark responds that, even now, Phoenix cannot state a specific dollar amount that Hallmark should have paid for payroll on January 9, 2018, or why such amount was payable under the Policy. Hallmark reiterates that the insurer is not required to ignore its expert's conclusions.

As was the case with some of the previous allegations of bad faith, the court concludes, as a matter of law, that Hallmark had a reasonable basis—HSNO's report—to fairly debate how much to pay for business income interruption under the Policy, notwithstanding that Phoenix believes it had provided information showing continuing payroll expenses. See Thornton , 897 N.W.2d at 465 (a reasonable basis to debate a claim may be a matter of fact or law). HSNO's report justified the amount that Hallmark paid for business income interruption in January 2018. Id. Hallmark was not required to disregard HSNO's opinion about the amount of business income interruption benefits to pay in January 2018 in favor of the amount Phoenix now believes should have been paid to include payroll. Bellville , 702 N.W.2d at 477. HSNO's report assumed continued income and expenses, including payroll, for Phoenix through the remainder of 2017. See Pl.’s App. at 994-1000. Also, contrary to Phoenix's suggestions, Jones's instruction to HSNO that business income interruption "includes payroll for the entire ‘period of restoration’ " so that HSNO's "report needs to include payroll, if it does not already," id. at 1001, is not an admission that Phoenix was due all the payroll it claimed, but only a clarification that HSNO should include payroll covered by the terms of the business income interruption coverage in the Policy in its future reports.

Moreover, Phoenix cannot claim that Hallmark acted in bad faith because it unduly hurried to make the payment of $28,774.34 in January 2018 without waiting for updated calculations from HSNO addressing payroll issues. First, bad faith ordinarily consists of an unreasonable delay or denial of payment, not a hurried payment, see Rodda , 734 N.W.2d at 483, particularly where that payment was acknowledged by Hallmark to be partial and preliminary. Pl.’s App. at 1004. Second, Phoenix had made a demand for some payment for business income interruption on December 1, 2017, id. at 967-68; pressed Hallmark about that payment on December 12, 2017, id. at 970; and reiterated a demand for payment on December 28, 2017, id. at 1024-25. Phoenix's reversal of course, now, asserting that Hallmark hurried a payment is having it both ways, not evidence that Hallmark acted in bad faith.

Thus, no reasonable juror could conclude that Hallmark had no reasonable basis to issue a payment for only $28,774.34 for business income interruption, despite Phoenix's assertion that Hallmark did not properly consider information about its payroll. Rodda , 734 N.W.2d at 483 (standard for summary judgment on a bad-faith claim); accord Torgerson , 643 F.3d at 1042-43 (standard for summary judgment under Rule 56 ).

Hallmark, not Phoenix, is entitled to summary judgment on a bad faith claim based on failure to pay this part of Phoenix's insurance claim.

4. Summary

The court concludes, as a matter of law, that Hallmark had a reasonable basis to dispute each of the amounts that Phoenix alleges were paid, or not paid, in bad faith. Because Hallmark has defeated Phoenix's bad faith claim on the first, objective, "no reasonable basis" element, there is no need for the court to reach the second, subjective, "knowledge" element. See Thornton , 897 N.W.2d at 461-62, 465 (stating the elements and explaining that, where there is an objectively reasonable basis for denial of a claim, the insurer cannot be held liable for bad faith as a matter of law); Rodda , 734 N.W.2d at 483 (explaining that the insured must show that the insurer lacked a reasonable basis to deny or delay payment of the claim to obtain summary judgment on a bad faith claim). Consequently, Hallmark, not Phoenix, is entitled to summary judgment on both Hallmark's claim for declaratory judgment that it did not act in bad faith and on Phoenix's counterclaim that Hallmark did act in bad faith concerning Phoenix's insurance claim.

D. The Breach Of Contract Claim

Hallmark also seeks summary judgment that it did not breach the Policy covering Phoenix's loss from the July 6, 2017, fire, arguing that, if anything, it overpaid Phoenix's claim by approximately $975,357. In addition to its bad-faith counterclaim, Phoenix asserts a counterclaim for breach of contract. Phoenix argues that Hallmark breached the Policy (and acted in bad faith) by failing and refusing to pay $124,800 to Phoenix promptly for damage to electronic components and removal and installation of wiring and breached the Policy by limiting coverage for damage to the "hoop" building to $80,000. Although the Iowa Supreme Court has held that a final judgment on a breach of contract claim would bar a bad faith claim, it has not held the reverse. Villarreal , 873 N.W.2d at 729. Thus, despite judgment against Phoenix on its bad faith counterclaim, the court will consider in turn Phoenix's two allegations of breach of contract. First, however, the court will consider the Iowa standards for breach of contract.

1. Iowa standards for breach of contract

As the Iowa Supreme Court has explained,

To prove a breach of contract claim, a party must show:

(1) the existence of a contract; (2) the terms and conditions of the contract; (3) that it has performed all the terms and conditions required under the contract; (4) the defendant's breach of the contract in some particular way; and (5) that plaintiff has suffered damages as a result of the breach.

Molo Oil Co. v. River City Ford Truck Sales, Inc. , 578 N.W.2d 222, 224 (Iowa 1998). The first three elements address the existence of a contract. The last two elements address the breach of the contract and the damages caused by the breach.

Iowa Mortg. Ctr., L.L.C. v. Baccam , 841 N.W.2d 107, 110–11 (Iowa 2013).

Whether a contract has been breached often requires interpretation of the contract. As the Iowa Supreme Court has explained, " ‘Interpretation of a contract is a legal issue unless the interpretation of the contract depends on extrinsic evidence.’ " Alta Vista Properties, LLC v. Mauer Vision Ctr., PC , 855 N.W.2d 722, 726 (Iowa 2014) (quoting Pillsbury Co. v. Wells Dairy, Inc. , 752 N.W.2d 430, 435 (Iowa 2008) ). The Iowa Supreme Court summarized the ordinary rules of contract construction and interpretation as follows:

Generally, when we interpret contracts, we look to the language contained within the four corners of the document. Clinton Physical Therapy Servs., P.C. v. John Deere Health Care, Inc. , 714 N.W.2d 603, 615 (Iowa 2006). "In the construction of written contracts, the cardinal principle is that the intent of the parties must control, and except in cases of ambiguity, this is determined by what the contract itself says." Iowa R. Civ. P. 6.904(3)(l); see also Peak v. Adams , 799 N.W.2d 535, 543 (Iowa 2011). If the intent of the parties is clear

and unambiguous from the words of the contract itself, we will enforce the contract as written. Am. Soil Processing, Inc. v. Iowa Comprehensive Petroleum Underground Storage Tank Fund Bd. , 586 N.W.2d 325, 329 (Iowa 1998).

If the language of the contract is ambiguous, then we engage in interpretation in order to determine "the meanings attached by each party at the time the contract was made." Clinton Physical Therapy Servs. , 714 N.W.2d at 615 (quoting E. Allan Farnsworth, Contracts § 7.9, at 458 (3d ed. 1999)). To the extent necessary to reveal the parties’ intent, extrinsic evidence is admissible. Id.

DuTrac Cmty. Credit Union v. Radiology Grp. Real Estate, L.C. , 891 N.W.2d 210, 216 (Iowa 2017) ; see also Golden v. Stein , No. 418CV00331JAJCFB, 2019 WL 3991072, at *8–9 (S.D. Iowa June 20, 2019). Furthermore, a contractual term is interpreted in "the context of the agreement as a whole," Koenigs v. Mitchell County Bd. of Supervisors , 659 N.W.2d 589, 594 (Iowa 2003), and the court will not place a "nonsensical meaning" on a contractual term, Harrington v. Univ. of N. Iowa , 726 N.W.2d 363, 370 (Iowa 2007).

2. Instances of alleged breach of contract

a. Failure to pay $128,400 for wiring

As explained in more detail in § III(C)(3)(a), above, beginning on page 16, Hallmark's consultant included an estimate of $124,800 to remove and install wiring damaged by the fire in his report dated July 31, 2017. Pl.’s App. 788 (spreadsheet from 07/31/17 CMC report by Baxter of equipment RCV, ACV, and repair costs for equipment in Buildings 1 and 2). Hallmark allocated this amount to RCV for Buildings 1 and 2. See id. at 923 (Jones's spreadsheet of equipment RCV, ACV, and repair costs for equipment in Buildings 1 and 2). No RCV was paid for equipment in Buildings 1 and 2 before July 6, 2018, however, because Hallmark contended that the policy did not require payment of RCV until the equipment was repaired or replaced.

Phoenix argues that the Policy included coverage for damage to property, so that it covered the $124,800 claimed to remove and install wiring damaged by the fire. Phoenix asserts that Hallmark breached the Policy, as a matter of law, by failing to pay the $124,800 Hallmark's consultant determined was the cost to remove and install damaged wiring. Hallmark argues that the record shows that it overpaid Phoenix's claim by at least $975,357. Thus, Hallmark contends, where there are no damages for breach of contract, there can be no breach of contract.

The court concludes that the dispositive elements of this breach of contract claim are the terms of the Policy, breach, and damages. See Baccam , 841 N.W.2d at 110–11. The court concluded, above, in § III(C)(3)(a), that the cost to remove and install wiring was plausibly included in the RCV for equipment, as a replacement cost, rather than a repair cost. The court now holds, as a matter of law, that such allocation was proper under the terms of the Policy. Also as explained, above, the Iowa Supreme Court has interpreted policy language comparable to the RCV provision of the Policy, § G(3)(d), see Pl.’s App. at 439, as not requiring payment of RCV until the associated equipment was actually repaired or replaced. Pierce v. Farm Bureau Mut. Ins. Co. , 548 N.W.2d 551, 554 (Iowa 1996). Thus, as a matter of law, there was no breach of the Policy when Hallmark failed to pay RCV prior to July 6, 2018, where the wiring was not actually repaired or replaced. Furthermore, even though there is no evidence of an itemized payment for $124,800 for wiring removal and installation, there is no dispute that Hallmark paid all amounts demanded by Phoenix for RCV for equipment, whether or not repaired or replaced, in its "compromise" payment on July 6, 2018. Phoenix has failed to generate a genuine issue of material fact that it was not overpaid, where it has not generated a genuine issue of material fact (or even asserted) that all the equipment was replaced or repaired. Thus, Phoenix cannot show damages as a matter of law. Mensie , 917 F.3d at 688 (the party resisting summary judgment must generate genuine issue of material fact on the pertinent questions).

Hallmark, not Phoenix, is entitled to summary judgment on this alleged breach of contract.

b. Limiting coverage of the "hoop" building to $80,000

Phoenix asserts that Hallmark also breached the Policy by limiting coverage for damage to the "hoop" building to $80,000. The Commercial Property Declarations page of the Policy shows a limit of insurance of $6,481,889 for "all" locations and "all" buildings, although it lists separate kinds of coverage as "Real Property," "business Personal Property excluding All Stock," "Business Interruption/Extra Expense," and "Leased and Rented Mobile Equipment." Pl.’s App. at 404. The Occurrence Limit of Liability endorsement to the Policy provides that the limit on Hallmark's liability is the least of three calculations. Id. at 491 (§ 1(a)-(c)). The calculation on which Hallmark relies is "[t]he Total stated value for each scheduled item of property insured at the location which had the loss as shown on the latest Statement of Values on file with this Company, less applicable deductibles and primary and underlying excess limits." Id. (§ 1(b)) (adding, "If no value is shown for a scheduled item then there is no coverage for the item."). The Statement of Values attached to the Policy states the value of Building 2, the "hoop" building, as $80,000. Id. at 502. A value of $80,000 for Building 2 is also shown in the Premises Information form for that building in Phoenix's application for insurance. Id. at 514. On the other hand, the application indicates that Phoenix was seeking "Blanket Building, Personal Property & Inland Marine" coverage, rather than coverage for "scheduled" values for the buildings, id. at 513, although certain equipment is shown with values as "Scheduled Items" in the application, id. at 518.

Phoenix argues that the Policy is—or at least was intended to be—written on a blanket basis, because the Policy lists a single coverage amount of $6,481,889, and the application confirms an intention to obtain blanket coverage. Phoenix contends that blanket coverage means that there is no limit of coverage to $80,000 for the "hoop" building. Phoenix also argues that there is, at the very least, an ambiguity between the Policy Declarations page and the Occurrence Limit of Liability endorsement, as well as an ambiguity between "scheduled" and "Statement of Values." Phoenix argues that the Policy must be construed in the light most favorable to the insured. Hallmark disputes Phoenix's interpretations of the Policy and the existence of any ambiguity. Hallmark also argues, again, that it overpaid Phoenix's claims, so Phoenix has no damages from the alleged breach of the Policy by failing to pay more than $80,000 for damage to the "hoop" building.

Assuming, without deciding, that the Policy either did not contain a limit of $80,000 on coverage for the "hoop" building or that the Policy is ambiguous on that point, Phoenix still has not generated genuine issues of material fact on the "breach" and "damages" elements of a breach of contract claim. See Baccam , 841 N.W.2d at 110–11. As to "breach," Phoenix has not pointed to any evidence that the value of the "hoop" building exceeded $80,000. At best, Phoenix has pointed to evidence that Jones listed damages to the hoop building exceeding $80,000, citing an April 2, 2018, email from Jones to Phoenix. That email states that Hallmark had already issued a payment of $77,951.78 for the "structure for the canopy as well as cleaning of the block foundation wall" for the "hoop" building, but that Phoenix had provided an estimate that building tear-down and removal for the "hoop" building would be another $47,550. Pl.’s App. at 1127. There is no necessary correlation between the cost to tear-down and remove a building and the building's ACV or RCV. Furthermore, although Jones reiterated in the email that the Policy limit for the "hoop" building was $80,000, he "allow[ed] for an additional $25,000 on top of the building limit" by using the $25,000 policy limit for debris removal coverage, in the event that the cost to remove a covered building exceeds the limit of liability under the Policy. Id. Thus, Hallmark did, in fact, pay more than the $80,000 limit for the "hoop" building ($77,951.78 previously paid, plus $2,048.22 remaining of the "hoop" building limit, plus $25,000 additional debris removal coverage, for a total of $105,000). Phoenix has failed to generate a genuine issue of material fact that it was not overpaid, where it has not generated a genuine issue of material fact (or even asserted) that the "hoop" building was replaced or repaired, or that it was actually removed. Thus, Phoenix cannot show damages as a matter of law. Mensie , 917 F.3d at 688 (the party resisting summary judgment must generate genuine issue of material fact on the pertinent questions).

Hallmark, not Phoenix, is entitled to summary judgment on this alleged breach of contract.

3. Summary

The court concludes, as a matter of law, that Hallmark did not breach the Policy in either of the ways that Phoenix has alleged. Thus, Hallmark's Motion For Summary Judgment on the issue of breach of contract is granted , while Phoenix's Motion For Summary Judgment on its breach of contract counterclaim is denied .

E. The Prayer For Punitive Damages

The last issue now before the court is Hallmark's motion for summary judgment on Phoenix's claim for punitive damages. Hallmark disputes that Phoenix has pointed to any evidence demonstrating the required willful and wanton behavior. Phoenix contends that it has done so. The court finds that the dispositive issue is rather different from the one argued by the parties. Because the court has resolved the underlying substantive claims against Phoenix, Phoenix's punitive damages claim is moot, and Hallmark is entitled to summary judgment on that claim.

IV. CONCLUSION

Upon the foregoing,

IT IS ORDERED that

1. Plaintiff and counterclaim defendant Hallmark's November 1, 2019, Motion For Summary Judgment [Dkt. No. 38] is granted in its entirety ;

2. Defendant and counterclaimant Phoenix's November 12, 2019, Motion For Summary Judgment [Dkt. No. 42] is granted as to Hallmark's prayer for attorney's fees, but otherwise denied ;

3. Hallmark's December 3, 2019, Motion To Strike Portions Of Affidavits ... Submitted In Support Of [Defendant's] Motion For Summary Judgment [Dkt. No. 48] is denied as moot ; and

4. Hallmark's December 3, 2019, Motion To Strike Portions Of The Affidavits ... Submitted In Resistance To Hallmark's Motion For Summary Judgment [Dkt. No. 50] is denied as moot .

IT IS FURTHER ORDERED that 1. Plaintiff Hallmark did not act in bad faith in connection with the adjustment of claims by defendant Phoenix arising out of the July 6, 2017, fire; and

2. Plaintiff Hallmark did not breach the Commercial Property Policy effective April 16, 2017, to April 16, 2018, in connection with the adjustment of claims by defendant Phoenix arising out of the July 6, 2017, fire.

JUDGMENT SHALL ENTER ACCORDINGLY.