KEITH STARRETT, District Judge.
For the reasons provided below, the Court awards Counter-Claimants Mt. Carmel Ministries, Alpha Christian School, and Seaway Bank and Trust Company $1,693,035.31 in benefits under the insurance policy issued by Counter-Defendant GuideOne Elite Insurance Company.
The Court provided the factual background of this case in a previous opinion. GuideOne Elite Ins. Co. v. Mt. Carmel Ministries, No. 2:13-CV-134-KS-MTP, 2015 U.S. Dist. LEXIS 912, at *2-*4 (S.D. Miss. Jan. 6, 2015). On April 7-10, 2015, the Court held a bench trial. At the close of the trial, the Court granted GuideOne's motion for judgment as a matter of law as to Mt. Carmel and Seaway's claims for punitive and extra-contractual damages. The Court later set a briefing schedule [183] for the only remaining issue in the case: the amount of contractual damages due under the policy for the tornado damage to the subject buildings. After consideration of the parties' briefs and the evidence presented at trial, the Court finds as follows.
Citing general principles of contract law, Mt. Carmel argues that it should recover consequential damages — all reasonably foreseeable damages caused by GuideOne's failure to perform its contractual duties. Mississippi law is quite clear on this issue: "[I]nsurers who are not liable for punitive damages may nonetheless be liable for consequential or extra-contractual damages (e.g., reasonable attorney fees, court costs, and other economic losses) where their decision to deny the insured's claim is without a reasonably arguable basis but does not otherwise rise to the level of an independent tort." Broussard v. State Farm Fire & Cas. Co., 523 F.3d 618, 628 (5th Cir. 2008) (citing Andrew Jackson Life Ins. Co. v. Williams, 566 So.2d 1172, 1186 n. 13 (Miss. 1990)).
In two previous opinions [150,] this Court held that GuideOne had a reasonably arguable basis for denying coverage. GuideOne, 2015 U.S. Dist. LEXIS 912 at *15-*16; GuideOne Elite Ins. Co. v. Mt. Carmel Ministries, No. 2:15-CV-134-KS-MTP, 2015 U.S. Dist. LEXIS 42681, at *5 (S.D. Miss. Apr. 1, 2015). At trial, the Court granted GuideOne's motion for judgment as a matter of law as to Mt. Carmel's claims for extra-contractual damages. The law of the case, therefore, is that Mt. Carmel is only entitled to the benefits owed under the policy — specifically, the "direct physical loss of or damage to" the subject buildings caused by the tornado.
The Court's ultimate goal in applying an insurance policy is to "render a fair reading and interpretation of the policy by examining its express language and applying the ordinary and popular meaning to any undefined terms." Corban v. United Servs. Auto. Ass'n, 20 So.3d 601, 609 (Miss. 2009). "In Mississippi, insurance policies are contracts, and as such, they are to be enforced according to their provisions." Id.
Nationwide Mut. Ins. Co. v. Lake Caroline, Inc., 515 F.3d 414, 419 (5th Cir. 2008); see also Corban, 20 So. 3d at 609; Guidant Mut. Ins. Co. v. Indem. Ins. Co. of N. Am., 13 So.3d 1270, 1281 (Miss. 2009); United States Fid. & Guar. Co. v. Martin, 998 So.2d 956, 963 (Miss. 2008).
The policy
It is undisputed that a tornado is a "Covered Cause of Loss," and that Buildings A, B, and C are "Covered Properties," described in the Declarations as "Risk No. 001" (A) and "Risk No. 002" (B, C).
Next, the policy explains how the loss is paid:
Therefore, GuideOne agreed to pay for a loss according to one of these four methods, at their option.
The policy's "Valuation Condition" provides the method to determine the replacement cost or value of damaged property:
However, according to the Declarations,
Accordingly, the "Actual Cash Value" endorsement
The policy provides the following definition of "actual cash value":
Therefore, according to the policy, GuideOne is obligated to pay "direct physical loss of or damage to" Buildings A, B, and C caused by the tornado.
Seaway argues that GuideOne elected the "replacement cost" option under the "Loss Payment" condition — paying "the cost of repairing or replacing the lost or damaged property . . . ." Seaway contends that this option is a direct reference to the second definition of "actual cash value" — "the cost to repair or replace covered property with material of like kind and quality, subject to a deduction for deterioration, depreciation or obsolescence" — and that GuideOne elected to use the second definition of "actual cash value."
However, while the policy grants GuideOne such an option in the "Loss Payment" section,
Even if GuideOne's adjusters represented to Mt. Carmel that it would value and pay the claim according to a certain method, under Mississippi law, an insured may not reasonably rely on representations made by an insurer's agent that are contrary to the terms of the policy. See Leonard v. Nationwide Mut. Ins. Co., 499 F.3d 419, 438 (5th Cir. 2007); Ross v. Citifinancial, Inc., 344 F.3d 458, 464 (5th Cir. 2003). Oral representations can only modify a policy if it is ambiguous. Leonard, 499 F.3d at 438 (citing Am. States Ins. Co. v. Natchez Steam Laundry, 131 F.3d 551, 555 (5th Cir. 1998)). As outlined above, the policy is not ambiguous.
To the extent Seaway and Mt. Carmel argue that GuideOne is equitably estopped from paying "market value" based on its adjusters' representations, "doctrines like equitable estoppel that allow insureds to procure rights at variance with a written insurance policy can not be used to extend coverage not otherwise provided by the policy." Id. at 441 (citing Kubow v. Hartford Cas. Ins. Co., 475 F.3d 672 (5th cir. 2007); St. Paul Fire & Marine Ins. Co. v. Vest Transp. Co., 666 F.2d 932, 948 (5th Cir. 1982); Morris v. Am. Fidelity Fire Ins. Co., 173 So.2d 618 (Miss. 1965)). Even if equitable estoppel could extend coverage not provided by the policy, it would not be applicable here as an insured can not reasonably rely on oral representations contrary to the terms of the policy. Id. at 438.
Finally, GuideOne's representatives' interpretations of the policy — whether provided while they adjusted Mt. Carmel's claim, during their depositions, or at trial — are irrelevant to the Court's decision. "The interpretation of an insurance policy is a question of law, not one of fact." Minn. Life Ins. Co. v. Columbia Cas. Co., 164 So.3d 954, 967-68 (Miss. 2014); see also Epperson v. SOUTHBank, 93 So.3d 10, 17 (Miss. 2012). No amount of testimony by any witness will alter the policy's terms, which the Court must enforce as written. Epperson, 93 So. 3d at 17.
The policy includes an "Agreed Value" endorsement,
The declarations
Therefore, the "Agreed Value" endorsement eliminates the policy's coinsurance penalty, which is not relevant to this case, and it has no bearing on the valuation of Mt. Carmel's loss or the amount owed under the policy.
Seaway and Mt. Carmel apparently argue that the "Agreed Value" endorsement constitutes an agreement that the policy limits are the "actual cash value" or "market value" of the buildings. However, that is not what the "Agreed Value" endorsement provides, and neither Seaway nor Mt. Carmel have cited any provision of the policy to support their position. To the extent they base this argument on the testimony and representations of GuideOne's representatives, the Court again notes that an insured may not reasonably rely on representations made by an insurer's agent that are contrary to the terms of the policy. See Leonard, 499 F.3d at 438; Ross, 344 F.3d at 464. Oral representations can only modify a policy if it is ambiguous, Leonard, 499 F.3d at 438, and the "Agreed Value" endorsement
Furthermore, as noted above, "[t]he interpretation of an insurance policy is a question of law, not one of fact." Minn. Life Ins. Co., 164 So. 3d at 967-68; see also Epperson, 93 So. 3d at 17. Therefore, any witness's interpretation of the "Agreed Value" endorsement is irrelevant to the Court's analysis. No amount of testimony or other evidence will alter the policy's terms, which the Court must enforce as written. Epperson, 93 So. 3d at 17.
Mt. Carmel and Seaway argue that Miss. Code Ann. § 83-13-5 applies to this case. That statute provides, in relevant part:
MISS. CODE ANN. § 83-13-5. Mt. Carmel and Seaway argue that Mississippi law prevents GuideOne from arguing that the "actual cash value" of the buildings is less than the "agreed value" stated in the policy.
By its plain terms, this statute only applies to losses where the building is "totally destroyed by fire." Id.; see also Remel v. State Farm Fire & Cas. Co., No. 1:07-CV-126-LTS-RHW, 2009 U.S. Dist. LEXIS 15616, at *9 (S.D. Miss. Feb. 25, 2009); Lamb v. Liberty Mut. Ins. Co., No. 1:06-CV-976-HSO-JMR, 2008 WL 625021, at *3 (S.D. Miss. Feb. 29, 2008); Jackson, supra note 3, § 15:11. The subject buildings were not "totally destroyed by fire." Therefore, Miss. Code Ann. § 83-13-5 is inapplicable.
As provided above, Mt. Carmel is obligated to pay for "direct physical loss of or damage to" Buildings A, B, and C caused by the tornado,
First, the Court heard testimony from Douglas McColl, Seaway's expert in the field of property damage assessment. McColl and his team inspected the properties on June 23-25, and July 9-10, 2014. He produced a detailed 650-page report on the damage to Buildings A, B, and C.
McColl provided the following summary valuation
These figures have been depreciated based on the particular building material under consideration, condition, age, and McColl's own visual inspection and experience.
The problem with McColl's estimate is that it is based on an inspection that occurred on June 23-25, and July 9-10, 2014 — sixteen to seventeen months after the tornado of February 10, 2013. McColl admitted that his estimate included damage that occurred both during and after the tornado, and that he could not delineate between damage directly caused by the tornado and damage caused by other factors during the subsequent months. During a series of questions from the Court, McColl confirmed that certain damage in the basement of Building B was caused by water intrusion after the tornado. He also testified that it was raining during his inspections of the property, and that he observed water entering the buildings while he inspected them. He admitted that he did not review any photographs of the buildings taken closer to the tornado's occurrence.
Overall, McColl was a thorough and credible witness, and he provided an intricately detailed estimate of damages. The Court has no reason to doubt his knowledge and experience. McColl's estimate would be quite useful to the Court if it were determining the cost to repair or replace Mt. Carmel's property damaged by the tornado and months of water intrusion, exposure to the elements, and humidity. But, as noted above, GuideOne is only obligated to pay for the "direct physical loss of or damage to" Buildings A, B, and C caused by the tornado
The Court also heard testimony from David Landry, Mt. Carmel's expert in architecture and the preparation of building repair estimates. Landry visited the site on January 16, 2014, and July 29, 2014. During his first visit, he viewed 95-99% of the rooms in Buildings A, B, and C, took photographs, measured the rooms, and identified the repair work that needed to be done. During the second visit, he confirmed the findings from his initial visit, and he later produced a report and estimate.
Landry described his estimate as a "preliminary type cost estimate" that would be provided to a property owner prior to receiving a final bid from a general contractor. He calculated a subtotal of hard construction costs and added a variety of "soft costs," which he claimed were calculated by applying a percentage to the non-depreciated hard construction costs. He testified that he based his estimates on his own knowledge and experience, consultations with third-party vendors, and actual prices in this geographical area. He then added the soft costs to the depreciated hard construction costs to reach a grand total. His findings are summarized as follows:
While Landry's summary is lengthier, his actual report is substantially less detailed and precise than McColl's. As demonstrated by the Court's footnotes above, Landry's report and testimony provided little clarity as to how and/or why he calculated certain costs in the manner he chose. For example, to calculate $330,542.17 in sales tax, he had to have applied the 3.63% tax rate to a subtotal of $9,105,844.90,
Landry's opinion also suffers from the same problem as McColl's: he inspected the buildings months after the tornado. The tornado occurred on February 10, 2013. Landry inspected the buildings on January 16, 2014 — eleven months after the tornado — and July 29, 2014 — over seventeen months after the tornado. It appears that his estimate was based primarily on what he viewed during the January 16, 2014, inspection. Landry admitted at trial that he did not attempt to calculate the cost of repairs before the months of water intrusion and exposure following the tornado. He stated he "had no idea of the condition of the building prior to that." As noted above, GuideOne is only obligated to pay for the "direct physical loss of or damage to" Buildings A, B, and C caused by the tornado
Finally, the Court heard testimony from Tom Stockdale, GuideOne's expert in construction engineering, construction estimating, and construction project management. Stockdale works for GC3, formerly GuideOne Taylor Ball, a subsidiary of GuideOne. He sent a team of five people to Hattiesburg from March 29, 2013, through April 5, 2013, because he believed that one or two people could not effectively scope the buildings. The team took approximately 2,102 photographs. They directly observed every room in Buildings A, B, and C, and generated a scope of loss. Rick Trower, a member of the on-site team and estimator under Stockdale's supervision, used Xactimate to prepare an estimate based on the scope of loss. Stockdale's report
Stockdale's report provided the following summary valuation of Mt. Carmel's damages:
Stockdale testified that these figures included 3% overhead and 10% profit. He also testified that they were not based on the cheapest possible repairs, but that Xactimate uses median prices. Although Stockdale's summary was brief, his full estimate was as thorough and detailed as McColl's.
When directly asked why GC3's estimate was so much lower than McColl's and Landry's, Stockdale testified:
This testimony is consistent with Stockdale's report, in which he stated that the "disparity in time of observation plays a major role in explaining the difference in the valuations of the damages." He continued: "GC3, LLC's estimates reflect the value of the damages caused by the tornado whereas the other two firms' estimates reflect the damages caused by the tornado in conjunction with more than a year of deterioration."
As the Court has noted, the law of the case is that Mt. Carmel is not entitled to extra-contractual or consequential damages, and GuideOne is only obligated to pay for the "direct physical loss of or damage to" Buildings A, B, and C caused by the tornado.
Mt. Carmel and Seaway argue that the Court should not credit Stockdale's testimony because he did not personally view the damage. However, experts routinely base their opinions on information from third-party sources or reports from their own employees. A team from GC3 viewed the property and contributed to the scope of loss, and a member of that team, Rick Trower, prepared the estimate under Stockdale's supervision. Therefore, the GC3 estimate is, in fact, based on personal observation.
Mt. Carmel and Seaway also argue that Stockdale's testimony is inherently suspect because GC3 is a subsidiary of GuideOne. However, if the Court discredited every expert witness with a potential interest in his client's success at trial, it would never believe the testimony of any expert witness. Even a third party expert has a pecuniary interest in his client's success, insofar as he presumably desires repeat business. Regardless, neither Mt. Carmel nor Seaway presented any evidence that GC3's status as a subsidiary of GuideOne had any effect on its deliberative process or conclusions.
GC3's estimate did not include items which Stockdale admitted should be included in a final estimate. Stockdale testified that GC3's estimate did not include a structural engineering fees or the cost of asbestos and mold testing. As Stockdale admitted that these items would be included in a final estimate, the Court will supplement GC3's estimate with the appropriate figures as provided in McColl's or Landry's reports.
As for depreciation, no party has convinced the Court that their expert's depreciation method was more appropriate or accurate than the others. Landry applied a 50% depreciation rate to the roofs and a 15% depreciation rate to all other hard construction costs, but he admitted that determining an appropriate depreciation rate was outside his area of expertise. McColl applied varying depreciation rates depending on the particular building material under consideration, its condition, age, and his own visual inspection and experience. As noted above, he effectively applied a 12.2% depreciation rate. Stockdale used Xactimate to calculate the depreciation rate, and the program applied depreciation rates of approximately 9.3% to Building A, and approximately 16.75% to Buildings B and C. At least two of the experts trust Xactimate enough to use it in preparing their estimates, and it is undisputed that the program is widely used in the insurance industry. Accordingly, the Court will accept the depreciation rates provided by Xactimate and used by Stockdale.
Therefore, the Court finds that the "amount it would cost to repair or replace"
Seaway was the only party who presented evidence of market value. Their expert in real estate appraisal, Martin Winfree, provided an appraisal report.
Winfree testified that some portions of the buildings were functionally obsolete. He stated in his report that "buildings purchased for use as relatively small places of worship sell regularly," but "large places of worship such as the subject property sell only infrequently. Such properties are rarely placed on the market for sale, and there are only a handful of potential buyers for this type of property." Accordingly, Winfree had to look outside this geographical area to find comparable sales, and considered facilities in Mississippi, Alabama, and Louisiana. These comparable sales indicated "values for the subject ranging from $13.44 to $37.28 per square foot," and Winfree settled on "a conclusion toward the upper end of the range" — $32.50 per square foot.
As provided above, Mt. Carmel's loss is determined on an "actual cash value" basis. The value of the loss is the lesser of 1) the "amount it would cost to repair or replace" Buildings A, B, and C "with material of like kind and quality, subject to a deduction for deterioration, depreciation or obsolescence;" or 2) the "market value" of Buildings A, B, and C, "based upon recent sales of comparable property . . . ."
Mt. Carmel argues that the building limits are increased by an additional $1,000,000 for debris removal, but it is not clear whether Mt. Carmel contends it is entitled to additional benefits for debris removal. Regardless, the argument is irrelevant because Mt. Carmel settled any claim it might have had for debris removal. During trial, the parties met with the Magistrate Judge and settled all policy claims "except the building damage, structural damage" to Buildings A, B, and C.
GuideOne argues that Mt. Carmel failed to mitigate its damages. Both the Policy and Mississippi common law required Mt. Carmel to mitigate its damages. First, the Policy provides the following condition:
The Policy also includes the following exclusion:
Therefore, the Policy required Mt. Carmel to "take all reasonable steps" to protect the buildings from additional damage after the tornado, and it excluded from coverage all damage caused by Mt. Carmel's failure to do so. Clauses like these are enforceable under Mississippi law. See, e.g. Glens Falls Ins. Co. v. Linwood Elevator, 130 So.2d 262, 271 (Miss. 1961) (submission of mitigation question to jury was not error where policy required insured to use all reasonable means to save and preserve property after a loss).
Mississippi common law imposes similar requirements. In general terms, "one should take steps to mitigate damages." Papa v. Miss. Farm Bureau Cas. Ins. Co., 573 So.2d 761, 763 (Miss. 1990). It is one's duty to "take reasonably proper steps to avoid an accident or injury to . . . property after having knowledge of the danger." Barkley v. Miller Transporters, Inc., 450 So.2d 416, 420 (Miss. 1984). In the context of a property insurance claim, an insured has "a duty within a reasonable time after [the] original damage to remedy the faulty situation and prevent . . . subsequent damage." Travelers Indem. Co. v. Rawson, 222 So.2d 131, 135 (Miss. 1969). However, "where funds are necessary to meet the situation and the injured person is without the funds, he is excused from the effort." Adams v. U.S. Homecrafters, Inc., 744 So.2d 736, 739 (Miss. 1999). Failure to mitigate is an affirmative defense, and the defendant has the burden of proof. Mason v. S. Mortg. Co., 828 So.2d 735, 739 (Miss. 2002) (citing Wall v. Swilley, 562 So.2d 1252, 1258 (Miss. 1990)).
Most of the testimony about Mt. Carmel's mitigation efforts focused on tarps which were installed on the roofs of the buildings. At some point during the days or weeks following the tornado, Balfour Construction installed tarps on the roof of the sanctuary, Building A. Wind blew them off relatively soon afterward, but another group of volunteers reattached them. A group of Mennonites put tarps on the roof of Education Building B, and Temple Baptist Church put tarps on the roof of Education Building C. All of these materials and services were donated to Mt. Carmel.
The evidence indicates that Mt. Carmel never replaced the initial tarps. Rather, they attempted to reattach them when necessary. Seaway's expert, McColl, testified that tarps of this sort will only last "three to four months, depending on the environmental conditioning," but that they are generally effective during that time. According to testimony from GuideOne's expert, Stockdale, the tarps were still on the roofs on March 29, 2013, approximately six to seven weeks after the tornado. GC3's photographs confirm this testimony. However, the tarps had deteriorated by the time GuideOne's expert, Landry, inspected the premises on January 16, 2014. Landry testified that tarps had been installed, but that they had not been maintained.
The evidence indicates that the tarps' deterioration made an overwhelming difference in the condition of the property. Photographs taken during GC3's inspection — only six to seven weeks after the tornado, when the tarps were still installed — showed substantially less damage than photographs taken during McColl's inspection — sixteen to seventeen months after the tornado, when the tarps had been gone for some time. McColl described the water damage he observed: "Massive water damage, buckled floors, ceilings on the floor. Extremely dark. Covered with mold, both — to use a lay term, black mold, fuzzy mold. It is not a — it was a hostile inside environment." He also confirmed that water damage in the basement of the education building was caused by water intrusion after the tornado. Finally, he testified that it was raining during his inspection, and that he observed rain falling inside the building.
Reverend Fairley, the church's senior minister, could not tell the Court how long the tarps remained on the buildings, but he confirmed that when the tarps were gone, the level of water intrusion increased. At one point, Fairley testified that Mt. Carmel was "still covering roofs on the sanctuary right now," and that "people just went up and re-covered it." But then he immediately contradicted himself and stated that "[l]ast summer, . . . during 2014, was really the last major effort we could do to the tarps." Regardless, his testimony that the church was "still covering roofs" is contradicted by the experts' testimony, reports, and photographs — as well as the Court's own viewing of the property.
In the end, the Court concludes that Mt. Carmel's failure to maintain tarps on the roofs of the buildings significantly contributed to the damages observed by its own and Seaway's expert. As noted above, Landry and McColl admitted that their estimates included damage caused by water intrusion during the months after the tornado. The disparity in the photographs taken by GC3's team six to seven weeks after the tornado and those taken by McColl sixteen to seventeen months after the tornado demonstrates the extent of the damage caused by Mt. Carmel's failure to maintain tarps on the roofs. In the Court's opinion, the most credible, simplest explanation for this disparity is that provided by Stockdale: that Mt. Carmel's failure to maintain the tarps was "responsible for a lot of the extensive damage that has been viewed by the Mount Carmel and Seaway experts to the structure below and the finishes . . . ."
As for the feasibility of maintaining tarps on the roofs, it is undisputed that the sanctuary's roof is high, and that its slope is very steep. McColl testified that a rope and harness team would be necessary, and Reverend Fairley testified that church members were hesitant to get on the roof because of its height and/or pitch. Fairley also testified that one of the education buildings had a slate roof which was slippery. Stockdale admitted that there were approximately 60,000 square feet of roof across all three buildings — almost an acre and a half. He also admitted that the sanctuary's roof had a steep pitch, that it was very high, and that one would require expertise and equipment to maintain the tarps on the sanctuary.
Nevertheless, Stockdale testified that maintaining tarps on the roofs was "very feasible." Only the initial installation of tarps on the sanctuary was performed by professionals. Although the testimony is unclear as to who reattached the sanctuary tarps after they blew off, amateur volunteers installed the tarps on the education buildings. The Court further notes that Reverend Fairley testified that Mt. Carmel members reattached and/or made adjustments to the tarps at various times during their lifespan. Conspicuously absent from Fairley's testimony, however, was any indication that the church sought an estimate for professional installation of tarps, rental of equipment to do so, or the purchase of materials. Rather, Mt. Carmel appears to have relied on the initial donations of materials and labor, without any attempt to replace the tarps once they deteriorated.
Mt. Carmel contends that maintaining tarps on the roofs was not feasible because it did not have sufficient funds to do so. It is undisputed that GuideOne did not advance any funds to Mt. Carmel for mitigation of damages. However, it is also undisputed that the church received a lot of volunteer labor after the tornado. All the initial tarps on the roofs were donated and installed free of charge. Fairley testified that the immediate clean-up on Buildings B and C was done by volunteers from around the community, and that some of the clean-up on Building A was done by volunteers. The church did not pay any of these workers. In fact, Reverend Fairley could not identify any specific expenditures on clean-up or mitigation, beyond providing meals for volunteers.
As for the church's financial situation, the testimony was vague, at best, and inconsistent, at worst. Fairley initially testified that the church paid Balfour Construction to put tarps on the sanctuary's roof, but he could not provide any details of the alleged transaction. He later contradicted his own testimony and confirmed that Balfour donated the materials and labor. Similarly, he testified that Mt. Carmel was "still covering roofs on the sanctuary right now," and he immediately contradicted himself and confirmed that the church had ceased any attempts at mitigation.
Anthony Harris, Mt. Carmel's Chairman of the Board of Deacons, testified that the church's tithes and offerings declined after the tornado, but he could not provide any specific figures. In fact, although he is the Chairman of the Deacons, Mr. Harris could not tell the Court the church's past or current monthly budget.
It appears to be undisputed that the church's membership declined after the tornado, and that it had been declining prior to the tornado. Fairley testified that he believed the church's budget was somewhere between $30,000 to $40,000 a month before the tornado, but he provided no figure for after the tornado. Both Harris and Fairley testified that the church's day care center and school generated income before the tornado, but the church's financial statements indicate that the school operated at a net loss. Reverend Fairley testified that income from another category on the financial statement had been directed to the school, but when asked specific questions about the source of that alleged income and the end to which it was directed, he was unable to provide any answers. Fairley also testified that the church employed a third-party accountant to manage its finances, but Mt. Carmel failed to present any testimony or records from the accountant to bolster its financial evidence.
Mt. Carmel has not made a mortgage payment since January 2013. Under its forbearance agreement with Seaway, Mt. Carmel would have been required to make payments of $12,500.00 in February, March, and April 2013. It is uncertain what their mortgage payment would have been after April 2013, but prior to its most recent default, the church paid Seaway $10,000.00 a month. The Court further notes that Mt. Carmel has not paid for property insurance since GuideOne attempted to cancel the Policy in the fall of 2012.
After the tornado, Mt. Carmel removed wet and damaged personal property from the buildings after the tornado, cleared debris from inside and outside the buildings, pulled up wet carpet, mopped up water inside the buildings, and attempted to dry out some of the furniture and other personal property. According to Reverend Fairley, the immediate post-tornado clean-up lasted five to six weeks. He later testified that volunteers worked at the church for months. The church tried to fight off mildew and mold by cleaning with bleach, but Reverend Fairley testified that "it just got to the point where we just couldn't do that anymore, so we just shut certain sections of the buildings off." Therefore, at some point between the tornado and the trial, Mt. Carmel closed off Building B and ceased all mitigation efforts.
It is undisputed that Mt. Carmel took initial steps to mitigate its damages. The church cleared debris from the buildings, attempted to salvage personal property, and mopped up water. It accepted donated labor and materials to put tarps over the roofs, and as time went on, the church tried to fight off mold and mildew by cleaning with bleach. However, at some point after these initial mitigation efforts, Mt. Carmel stopped mitigating its damages. The church did not maintain tarps on the roofs. It closed off the most damaged portions of the education buildings, and it stopped trying to prevent mold and mildew growth. The disparity among the experts' photographs and damage estimates demonstrates that the church's cessation of mitigation efforts caused the buildings to suffer more damage than they would have otherwise.
Mt. Carmel contends that it did not have enough money to mitigate its damages, but the evidence of the church's financial situation is so vague that the Court does not find it credible. Candidly, the Court is not inclined to credit the conclusory testimony from Reverend Fairley and Mr. Harris about the church's financial situation, as neither witness was able to provide specific answers to questions regarding the church's income and expenditures before or after the tornado. Although Reverend Fairley testified that a third party accountant managed the church's finances, Mt. Carmel did not call the accountant as a witness. The Court assumes that the Church maintained bank accounts, but Mt. Carmel failed to present any account statements. Likewise, the church failed to provide copies of its tax returns or supporting documentation.
In conclusion, the Court finds that Mt. Carmel failed to mitigate its damages, and that this failure caused it to sustain greater damages than it would have otherwise. At a minimum, it would have been feasible for the church to maintain tarps on the roofs and continue to treat mold and mildew with bleach. Ultimately, the church's failure to mitigate its damages is irrelevant to the Court's decision insofar as the policy requires GuideOne to pay the "amount it would cost to repair or replace"
The policy contains no provision requiring Seaway, Mt. Carmel's mortgagee, to mitigate the damages to the property. GuideOne argues that Seaway had a common-law duty to mitigate its damages, but it has cited no Mississippi case law imposing a duty to mitigate on a mortgagee who is not in possession of the collateral property. The Mississippi Supreme Court has held that the equitable defense of "impairment of collateral" imposed no "duty upon the mortgagee, in a mortgage covering real estate collateral, who is not even in possession of the real estate, to look after, care for, maintain and upkeep same." West Point Corp. v. New N. Miss. Fed. Sav. & Loan Ass'n, 506 So.2d 241, 244 (Miss. 1986). The West Point case is not precisely on-point with this one, but the general principles expressed in it are applicable here. Seaway was not in possession of the property, and it was not obligated to exercise its right to foreclose on the property. See id. at 242-43 (mortgagee may pursue remedy at law or equitable remedy of foreclosure, as he deems advantageous to himself); Fleisher v. S. AgCredit, FLCA, 108 So.3d 948, 954 (Miss. Ct. App. 2012). That being the case, it had no duty to maintain the property. West Point, 506 So. 2d at 244.
"State law governs the award of prejudgment interest in diversity cases." Meaux Surface Prot., Inc. v. Fogleman, 607 F.3d 161, 172 (5th Cir. 2010). "An award of prejudgment interest rests in the discretion of the awarding judge. Under Mississippi law, prejudgment interest may be allowed in cases where the amount due is liquidated when the claim is originally made or where the denial of a claim is frivolous or in bad faith." Hans Constr. Co. v. Drummond, 653 So.2d 253, 264 (Miss. 1995); see also Liberty Mut. Fire Ins. Co. v. Canal Ins. Co., 177 F.3d 326, 339 (5th Cir. 1999). "No award of prejudgment interest is allowed where the principle amount has not been fixed prior to judgment." Preferred Risk Mut. Ins. Co. v. Johnson, 730 So.2d 574, 577 (Miss. 1998). "Prejudgment interest has been denied where there is a bona fide dispute as to the amount of damages as well as the responsibility for the liability therefor." Upchurch Plumbing, Inc. v. Greenwood Utils. Comm'n, 964 So.2d 1100, 1116 (Miss. 2007). An award of prejudgment interest would be inappropriate here because the amount due on Plaintiff's claim was not liquidated until the entry of this opinion, and the Court previously determined
"Federal law governs postjudgment interest in federal cases, including diversity cases." Tricon Energy Ltd. v. Vinmar Int'l, Ltd., 718 F.3d 448, 456 (5th Cir. 2013). "Postjudgment interest is not discretionary but `shall be calculated from the date of the entry of the judgment, at a rate equal to the weekly average 1-year constant maturity Treasury yield.'"Id. (quoting 28 U.S.C. § 1961(a)). Therefore, the Court awards Mt. Carmel and Seaway postjudgment interest as provided by 28 U.S.C. § 1961.
For the reasons provided above, the Court finds that Counter-Defendant GuideOne Elite Insurance Company is required to pay Counter-Claimants Mt. Carmel Ministries, Alpha Christian School, and Seaway Bank and Trust Company $1,693,035.31 in benefits under the subject insurance policy. The Court awards postjudgment interest in the amount provided by 28 U.S.C. § 1961, and it will enter a Final Judgment consistent with this opinion.
SO ORDERED AND ADJUDGED.
