ERIC F. MELGREN, District Judge.
Plaintiff The Travelers Indemnity Company ("Travelers") is suing Defendant P1 Group, Inc. ("P1") to recover the amount it paid under an insurance contract with McPherson Hospital (the "Hospital"). Before the Court are the Parties' cross-motions for partial summary judgment (Doc. 46 and 49). For the following reasons, the Court denies P1's motion and grants in part and denies in part Travelers' motion.
Travelers is an insurance company that provided property insurance to the Hospital, which operates in McPherson, Kansas. Travelers is subrogated to the rights of the Hospital in this case. P1 provides facilities maintenance services, including plumbing repairs, to the Hospital. As part of these services, P1 replaced a drain pipe in the Hospital's mechanical room.
On October 18, 2016, the Hospital experienced flooding that damaged its property. The flooding resulted from a burst water softener drain line—installed by P1—in the Hospital's mechanical room. After a nurse discovered the flooding during the morning shift, the Hospital discharged all patients and closed for the remainder of October 18. The Hospital reopened on October 19, but doctors did not complete scheduled surgeries on the 19th or 20th. The Hospital resumed surgeries on the 21st.
The Hospital's insurance policy with Travelers stated:
The contract stated that in exchange for insuring the Hospital, Travelers was subrogated "to the extent of our [Travelers'] payment" to the Hospital. The Hospital also had a deductible for business interruption damages. The contract stated, in relevant part:
This deductible prohibited the Hospital from makings claims for the 72 hours immediately following the physical damages. As such, the deductible period for the flood damage began on October 18 and terminated on October 20.
Following the flood, the Hospital filed a business interruption claim with Travelers. Travelers calculated the Hospital's business interruption damages based on financial information provided by the Hospital's controller, Tania Thompson. Thompson indicated that the Hospital delayed—but did not entirely cancel—surgeries scheduled for October 18-20. The Hospital eventually performed those postponed surgeries. Based on this information, Travelers' accountant, Jeffrey Perry, calculated the Hospital's damages.
The Hospital's insurance policy with Travelers included the following terms governing Travelers' determination of any business interruption damages:
Perry did not determine business interruption damages for October 18-20, because those days were within the deductible period. Rather, Perry calculated that the business interruption damages by averaging the income the Hospital received on a daily basis from July 1, 2015 through June 30, 2016, and then comparing this to the income the Hospital actually received on October 21-23. Perry found that the Hospital suffered $69,631.92 in business interruption damages on October 21-23. Travelers paid this amount to the Hospital.
Bryan Cline, P.E., provided a report on behalf of the Hospital as an expert witness. In it, he states that the damage resulting from the broken water line can be attributed to the following causes:
Cline further testified that an unidentified Culligan's Water franchisee ("Culligan's") installed the plastic pneumatic lines for the control valves of the water softener system in a manner that made them vulnerable to inadvertent damage. Cline's report states that Culligan's should have installed valves that closed if the pneumatic lines failed or disconnected, which would have stopped the flow of water through the pipe system.
Travelers brought this suit alleging that P1 negligently installed the water softener drain line in the Hospital's mechanical room, causing it to burst and flood the room, resulting in $237,008.24 in damages which includes $69,631.92 in lost business income. P1 now moves for partial summary judgment on Travelers' lost business income claim. Travelers moves for partial summary judgment on P1's comparative fault contentions.
Summary judgment is appropriate if the moving party demonstrates that there is no genuine issue as to any material fact, and the movant is entitled to judgment as a matter of law.
Travelers alleges that it is subrogated to the legal rights of the Hospital, including the Hospital's right to recover any potential lost business income from P1. P1 argues that Travelers is not subrogated to the Hospital's right to recover lost business income because Travelers was not required to pay those damages under the insurance contract and it therefore mistakenly paid $69,631.92 to the Hospital when it was not contractually obligated to.
"Subrogation is the right of one who has paid an obligation which another should have paid to be indemnified by the other."
An insurance policy is a contract and the interpretation of a contract is a question of law.
The plain language of the insurance contract is unambiguous. It stated that Travelers was subrogated "to the extent of our [Travelers'] payment" to the Hospital. This clause limits the amount—but not the type—of damages Travelers can recover in a subrogation action. It cannot recover amounts otherwise owed to the Hospital. For instance, if the Hospital suffered $100 in damages from a tortfeasor, and for whatever reason Travelers determined that it only owed the Hospital $70 under the insurance policy, then Travelers could pursue the tortfeasor to recuperate the $70, but not the remaining $30. Any damages the Hospital suffered beyond Travelers' policy payment can be recovered by the Hospital alone, not Travelers.
P1 disputes the type of damages that Travelers can recover via this subrogation action. P1 also disputes the method of calculating the Hospital's damages; namely, whether lost business income can include postponed surgeries. These are ultimately factual issues for a jury to decide.
Additionally, P1 argues that Travelers mistakenly and unreasonably paid the Hospital for lost business income during the deductible period and as a result, Travelers cannot recover those amounts. To support its argument, P1 relies on a footnote in the Tenth Circuit's decision in Weir v. Federal Insurance Company.
The Court denies P1's motion for partial summary judgment on Travelers' lost business income calculations. P1 disputes that Travelers is subrogated to the extent of its entire payment to the Hospital, arguing that Travelers mistakenly paid for lost business income. But the insurance contract between Travelers and the Hospital clearly limits the amount, but not the type, of damages that Travelers could recover in a subrogation action. Whether the Hospital actually lost business income due to the flood is a central question of fact for a jury. Furthermore, there is no evidence that Travelers paid the Hospital for lost business income in bad faith. P1 can dispute Travelers' method of calculating its payments at trial, but it cannot defeat Travelers' claim at this stage of the proceeding. As such, the Court denies P1's motion for partial summary judgment.
Under a theory of comparative fault, P1 argues that the Hospital, Travelers, Culligan's, "all engineers," and "all contractors" were negligent or otherwise at fault in causing or contributing to the cause of the flood. Travelers moves for summary judgment on this comparative fault claim, arguing that, since expert witness testimony thus far fails to specifically identify relevant standards of care, P1 has failed to provide evidence supporting a necessary element of its comparative negligence defense.
As a preliminary matter, P1 argues that Travelers' motion for summary judgment is actually an untimely objection to P1's expert witness disclosure pursuant to Rule 26. The pertinent part of Rule 26 reads:
The Court concludes that Travelers' motion for summary judgment is not an untimely objection to P1's expert witness disclosure. Travelers' arguments do not go to technical flaws in the expert testimony, but rather attack the testimony's sufficiency in establishing essential elements of the comparative fault claim. It does not object to the witness's qualifications, past history, compensation, or method and basis for opinions. Travelers simply argues that the expert failed to provide any evidence to establish a necessary element of P1's comparative negligence claim. As such, the Court will not deny Travelers' motion on the basis of P1's Rule 26 argument.
Moving on to the substance of Travelers' motion for summary judgment, the Court now considers P1's comparative fault defense. "Under comparative fault, a plaintiff may recover damages so long as the plaintiff's negligence is less than the collective causal negligence of the other parties to the occurrence; but those damages are diminished in proportion to the plaintiff's own negligence."
Travelers argues that expert testimony is required to establish the relevant standard of care under P1's negligence claim. "Whether expert testimony is necessary to prove negligence is dependent on whether, under the facts of a particular case, the trier of fact would be able to understand, absent expert testimony, the nature of the standard of care required of defendant and the alleged deviation from the standard."
The Court concludes that expert testimony is required to establish the standard of care governing the design, installation, and maintenance of the Hospital's mechanical room. Architectural and engineering design, plumbing installation, and industrial mechanical-room maintenance are not within the general purview of a common juror's knowledge. The subject matter is complex and the language alien and technical. Without hearing expert testimony on the standards of care common to such things, a trier of fact would not be able to understand the nature of the standard of care required of the Hospital, Travelers, Culligan's, or the engineers and contractors in this case.
The Court concludes that P1 has shown sufficient evidence establishing the standards of care for the Hospital and Culligan's. However, P1 has failed to establish the standards of care for Travelers, "all engineers," and "all contractors." As to the Hospital's operation of its mechanical room, P1's expert, Bryan Cline, reported multiple factual bases to allow a juror to reasonably conclude that the Hospital was partially at fault for the flood. P1 contends that the Hospital discharged hot water into the water softener drain line when it knew it should not have, that the Hospital failed to install supporting braces for the pipe, and that it knew the pipe was sagging due to the lack of braces. These allegations imply a standard of care and support P1's argument that the Hospital's actions contributed to the flooding. Cline's report implies that the Hospital should have acted differently, according to a common standard of care under those circumstances. Based on the testimony given in the expert report, the average juror possesses a sufficient basis of knowledge to determine—at least by implication—whether the Hospital negligently operated its mechanical room. As such, the Court denies Travelers' motion for partial summary judgment as to P1's comparative negligence claim against the Hospital.
The Court further concludes that P1 has established standards of care for Culligan's installation of the commercial water softener system at the Hospital. Cline's report indicated that Culligan's failed to install certain protective systems around the water softener line. Similar to before, the report contains enough factual allegations to establish, via inference, the relevant standard of care that Culligan's should have observed. If Culligan's failed to install various fail-safe mechanisms, it is implied that it should have installed them. A reasonable juror could logically deduce the standards of care Culligan's should have observed based on Cline's report. The Court therefore denies Travelers' motion for summary judgment as to P1's comparative fault defense concerning Culligan's.
Next, the Court concludes that P1 has failed to establish the standard of care—or even a causal link—for Travelers' alleged negligence. While P1 lumps Travelers in with the Hospital, engineers, and contractors in sharing comparative negligence, it fails to allege any facts or supply any expert testimony on both the standard of care and causation elements. Quite frankly, the Court would be surprised if an insurance company caused damage to its client's property. The Court concludes that P1 has failed to provide evidence showing that Travelers—as an independent actor—caused the flood, or what standard of care it should have observed under the circumstances.
Lastly, the Court concludes that P1 has failed to meet its evidentiary burden for the comparative fault of "all engineers" and "all contractors" in designing and building the Hospital. P1's allegations lack specificity as to which engineers or contractors share fault in the flood damages. Rather, P1 alleges that engineers negligently designed the mechanical room and contractors negligently constructed, maintained, and operated it. These are merely cursory allegations and for that reason alone they succumb to summary judgment. Notably, P1 fails to provide any testimony, expert or otherwise, indicating the applicable standard of care governing these unidentified actors' conduct. Such a lack of evidence requires the Court to grant summary judgment to Travelers as to P1's comparative negligence defense concerning "all engineers" and "all contractors."
P1 has partially succeeded and partially failed to carry its burden to present factual allegations supporting all elements of its comparative negligence claims. Because standards of care governing the design, installation, and maintenance of the Hospital's mechanical room require alien terminology and unfamiliar technological complexities, P1 must point to expert testimony in the record establishing such standards. P1 points to enough expert testimony to establish standards of care governing the Hospital and Culligan's actions but fails to do so for Travelers, all engineers, and all contractors. As such, the Court denies in part and grants in part Travelers' motion for partial summary judgment on P1's comparative negligence claims.
Finally, P1 asks the Court to permit additional briefing so that it can move to amend the scheduling order. "A schedule may be modified only for good cause and with the judge's consent."
The Court declines P1's request for additional briefing to move to amend the scheduling order because P1 has failed to show good cause. Had P1 exercised due diligence during the discovery period, it would have sought and produced evidence to support each element of its comparative fault claim. At this late stage in the proceedings, allowing P1 to find an expert to testify as to the standards of care required for an unidentified number of actors and actions would significantly prejudice Travelers and substantially disrupt and delay the orderly and efficient trial of the case. Although P1 did not act in bad faith in excluding expert witness testimony in regard to its comparative fault claims, it nevertheless possessed ample time during discovery to obtain such evidence. Travelers would be unable to easily cure the prejudice against it and would likely have to significantly alter its strategy for the case. Therefore, under the discretion given to it in Rule 16, the Court denies P1's request to submit additional briefing on the matter.
