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PLAINTIFF S’ ORIGINAL COMPLAINT PAGE 1
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF
TEXAS HOUSTON DIVISION
PARAGON HEALTHCARE GROUP LLC ;
and
BROOKSHIRE TX SNF MANAGEMENT ,
LLC DBA BROOKSHIRE RESIDENCE AND
REHABILITATION CENTER
and
BROOKSHIRE TX SNF REALTY, LLC
and
ROCKDALE TX SNF MANAGEMENT, LLC
dba ROCKDALE RESIDENCE AND
REHABILITATION CENTER
and
ROCKDALE TX SNF REALTY, LLC
and
SHARPVIEW SNF MANAGEMENT LLC dba
SHARPVIEW RESIDENCE AND REHABILITATION CENTER
and
SHARPVIEW TX SNF REALTY LLC
and
VICTORIA TX SNF MANAGEMENT, LLC dba VICTORIA RESIDENCE AND REHABILITATION CENTER
and
VICTORIA TX SNF REALTY, LLC
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CIVIL ACTION NO: ___________
Case 4:19-cv-04996 Document 1 Filed on 12/24/19 in TXSD Page 1 of 22
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PLAINTIFF S’ ORIGINAL COMPLAINT PAGE 2
and
WEBSTER SNF MANAGEMENT, LLC DBA WEBSTER RESIDENCE AND REHABILITATION CENTER
and
WEBSTER TX SNF REALTY LLC
and
WEST HOUSTON SNF MANAGEMENT LLC dba ROYAL OAKS RESIDENCE AND
REHABILITATION CENTER
and
WEST HOUSTON TX SNF REALTY LLC
and
WILLOWBROOK SNF MANAGEMENT, LLC DBA WILLOWBROOK RESIDENCE & REHABILITATION CENTER
and
WILLOWBROOK TX SNF REALTY, LLC
P laintiff s,
vs. AFFILIATED FM INSURANCE COMPANY
Defendant.
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PLAINTIFFS’ ORIGINAL COMPLAINT AND DEMAND FOR JURY TRIAL
Paragon Healthcare Group , LLC; Brookshire TX SNF Management , LLC dba Brookshire
Residence and Rehabilitation Center ; Brookshire TX SNF Realty , LLC ; Rockdale TX SNF
Management LLC dba Rockdale Residence and Rehabilitation Center ; Rockdale TX SNF Case 4:19-cv-04996 Document 1 Filed on 12/24/19 in TXSD Page 2 of 22
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PLAINTIFF S’ ORIGINAL COMPLAINT PAGE 3
Realty , LLC ; Sharpview SNF Management LLC dba Sharpview Residence and Rehabilitation
Center ; Sharpview TX SNF Realty LLC ; Victoria TX SNF Management, LLC dba Victoria
Residence and Rehabilitation Center ; Victoria TX SNF Realty, LLC ; Webster SNF
Management, LLC dba Webster Residence and Rehabilitation Center ; Webster TX SNR Realty
LLC ; West Houston SNF Management LLC dba Royal Oaks Residence and Rehabilitation
Center ; West Houston TX SNF Realty LLC ; Willowbrook SNF Management, LLC dba
Willowbrook Residence and Rehabilitation Center ; and Willowbrook TX SNF Realty LLC
(collectively, “Plaintiffs”) file this Original Complaint against Defendant Affiliated FM
Insurance Company , and would respectfully show the Court as follows:
I. PARTIES
1. Plaintiff Paragon Healthcare Group LLC (“Paragon”) is a Delaware limited
liability company with a principal place of business located at 1981 Marcus Avenue, Suite C129,
New Hyde Park, New York. Plaintiff Paragon provides consulting services to the owners and
operators of over twenty (20) post-acute care facilities (“Post- Acute Care Facility” or “Post -
Acute Care Facilities”) located in fifteen (15) counties throughout the State of Texas .
2. Plaintiff Brookshire TX SNF Management, LLC dba Brookshire Residence and
Rehabil itation Center (“Brookshire Management ”) is a Texas limited liability company with a
principal place of business located at 710 Hwy 359 S, Brookshire, Texas , where it operat es a
Post-Acute Care Facility (“Brookshire Rehab”) .
3. Plaintiff Brookshire TX SNF Realty, LLC (“Brookshire Realty” and collectively
with Brookshire Management and Brookshire Rehab, “Brookshire”) is a Texas limited liability
company with a registered agent for service of process , VCorp Services, LLC , located at 1999 Case 4:19-cv-04996 Document 1 Filed on 12/24/19 in TXSD Page 3 of 22
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Bryan St., Suite 900, Dallas, Texas . Brookshire Realty is the owner of the real property located
at 710 Hwy 359 S, Brookshire, Texas , where the operations of Brookshire Rehab are conducted.
4. Plaintiff Rockdale TX SNF Management LLC dba Rockdale Residence and
Rehabilitation Center (“Rockdale Management”) is a Texas limited liability company with a
principal place of business located at 222 South FM 487, Rockdale, Texas , where it operates a
Post-Acute Care Facility (“Rockdale Rehab”).
5. Plaintiff Rockdale TX SNF Realty, LLC (“Rockdale Realty” and collectively with
Rockdale Management and Rockdale Rehab , “Rockdale”) is a Texas limited liability company
with a registered agent for service of process, VCorp Services, LLC, loca ted at 1999 Bryan St.,
Suite 900, Dallas, Texas. Rockdale Realty is the owner of the real property located at 222 South
FM 487, Rockdale, Texas , where the operations of Rockdale Rehab are conducted.
6. Plaintiff Sharpview SNF Management LLC dba Sharpview Res idence and
Rehabilitation Center (“Sharpview Management”) is a Texas limited liability company with a
principal place of business located at 7505 Bellerive, Sharpview, Texas , where it operates a Post -
Acute Care Facility (“Sharpview Rehab”).
7. Plaintiff Sharp view TX SNF Realty LLC (“Sharpview Realty” and collectively
with Sharpview Management and Sharpview Rehab, “Sharpview”) is a Texas limited liability
company with a registered agent for service of process, VCorp Services, LLC, located at 1999
Bryan St., Sui te 900, Dallas, Texas. Sharpview Realty is the owner of the real property located at
7505 Bellerive, Sharpview, Texas , where the operations of Sharpview Rehab are conducted .
8. Plaintiff Victoria TX SNF Management, LLC dba Victoria Residence and
Rehabilitatio n Center (“Victoria Management”) is a Texas limited liability company with a Case 4:19-cv-04996 Document 1 Filed on 12/24/19 in TXSD Page 4 of 22
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principal place of business located at 114 Medical Drive, Victoria, Texas , where it operates a
Post-Acute Care Facility (“Victoria Rehab”).
9. Plaintiff Victoria TX SNF Realty, LLC ( “Victoria Realty” and collectively with
Victoria Management and Victoria Rehab , “Victoria”) is a Texas limited liability company with
a registered agent for service of process, VCorp Services, LLC, located at 1999 Bryan St., Suite
900, Dallas, Texas. Victoria Realty is the owner of the real property located at 114 Medical
Drive, Victoria, Texas , where the operations of Victoria Rehab are conducted.
10. Plaintiff Webster SNF Management, LLC dba Webster Residence and
Rehabilitation Center (“Webster Management ”) is a Texas limited liability company with a
principal place of business located at 750 North Texas Avenue, Webster , Texas , where it
operates a Post -Acute Care Facility (“Webster Rehab”).
11. Plaintiff Webster TX SNR Realty LLC (“Webster Realty” and collectively with
Webster Management and Webster Rehab , “Webster”) is a Texas limited liability company with
a registered agent for service of process, VCorp Services, LLC, located at 1999 Bryan St., Suite
900, Dallas, Texas. Webster Realty is the owner of the real pr operty located at 750 North Texas
Avenue, Webster, Texas , where the operations of Webster Rehab are conducted.
12. Plaintiff West Houston SNF Management LLC dba Royal Oaks Residence and
Rehabilitation Center (“West Houston Management”) is a Texas limited liability company with a
principal place of business located at 2939 Woodland Park Drive, Houston, Texas , where it
operates a Post -Acute Care Facility (“Royal Oaks Rehab”).
13. Plaintiff West Houston TX SNF Realty LLC (“West Houston Realty” and
collectively with We st Houston Management and Royal Oaks Rehab, “Royal Oaks ”) is a Texas
limited liability company with a registered agent for service of process, VCorp Services, LLC, Case 4:19-cv-04996 Document 1 Filed on 12/24/19 in TXSD Page 5 of 22
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PLAINTIFF S’ ORIGINAL COMPLAINT PAGE 6
located at 1999 Bryan St., Suite 900, Dallas, Texas. West Houston Realty is the owner of the real
property located at 2939 Woodland Park Drive, Houston, Texas , where the operations of Royal
Oaks Rehab are conducted.
14. Plaintiff Willowbrook SNF Management, LLC dba Willowbrook Residence and
Rehabilitation Center (“Willowbrook Management”) is a Texas limited liability company with a
principal place of business l ocated at 13631 Ardfield Drive, Houston, Texas , where it operates a
Post-Acute Care Facility (“Willowbrook Rehab”).
15. Plaintiff Willowbrook TX SNF Realty LLC (“Willowbrook Realty” and
collectively with Willowbrook Management and Willowbrook Rehab, “Willowbrook”) is a
Texas limited liability company with a registered agent for service of process, VCorp Services, LLC, located at 1999 Bryan St., Suite 900, Dallas, Texas. Willowbrook Realty is the owne r of
the real property located at 13631 Ardfield Drive, Houston, Texas , where the operations of
Willowbrook Rehab are conducted.
16. On information and belief, Defendant Affiliated FM Insurance Company
(“AFMIC”) is a fire and casualty insurance company that wa s formed under the laws of and has
its principal place of business in Rhode Island. Upon information and belief, at all times referred
to herein, AFMIC was licensed in Texas by the Texas Department of Insurance and engaged in the business of insurance in t he State of Texas, where it specializes in providing commercial
property insurance coverage for casualty losses including, but not limited to, property damage and business interruption losses caused by wind, water and flood associated with storms, hurrican es, tornadoes and other similar phenomenon. AFMIC may be served with process
through its registered agent, CT Corporation System, 1999 Bryan Street, Suite 900, Dallas, Texas 75201- 3140. Plaintiffs request that Summons be issued for AFMIC. Case 4:19-cv-04996 Document 1 Filed on 12/24/19 in TXSD Page 6 of 22
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II. JURISDICTION
17. This Court has jurisdiction over the subject matter of this action pursuant to 28
U.S.C. § 1332(a)(l) because Plaintiff s are citizen s of the State of Delaware and Texas and
Defendant AFMIC is a citizen of Rhode Island, and the amount in controversy exceeds
$75,000.00, exclusive of interest and costs.
III. VENUE
18. Venue is proper in the Southern District of Texas pursuant to 28 U.S.C. §
139l(a)(2) because a substantial part of the events or omissions giving rise to P laintiff s’ claim s
occurred within this District. All of the Post -Acute Care Facilities are located in the State of
Texas , and m any of the Post-Acute Care Facilities are located in this District. More particularly,
this action concerns real property and businesses located and operated in Houston, Harris
County , Texas. The insurance policy at issue on which Plaintiffs are identified as insureds was to
be performed within this D istrict, and losses under the policy that occurred in this D istrict
(including payments to be made to P laintiff s under the policy) wer e required to be made within
this District. Further, investigation, including communications to and from the parties and their
representatives and site visits, occurred within this District.
IV. NOTICE AND CONDITIONS PRECEDENT
19. Pursuant to Texas Insurance Code § 542A.003(D), pre -suit notice is impracticable
and, therefore, not required, as Plaintiffs have a reasonable basis to believe that there is
insufficient time to give pre -suit notice before the applicable limitations period will expire.
20. All other conditions precedent necessary to maintain this action have been
performed, have occurred, or have been waived by AFMIC , or AFMIC is otherwise estopped
from raising any conditions due to its conduct. Case 4:19-cv-04996 Document 1 Filed on 12/24/19 in TXSD Page 7 of 22
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V. FACTS
The AFMIC Policy
21. AFMIC issued to Paragon ProVision insurance policy number EQ827, effective
for the policy period from July 1, 2017 to July 18, 2018 (the “Policy”) . Brookshire, Rockdale,
Sharpview, Victoria, Webster, Royal Oaks, and Willowbrook are identified in the Declarations
pages as Additional Named Insureds. A true, accurate, and correct copy of the Policy is attached
hereto as Exhibit “A” and incorporated herein by reference.
22. The Policy broadly covers certain described properties against “ALL RISKS OF
PHYSICAL LOSS OR DAMAGE.” The properties owned b y Brookshire Realty, Rockdale
Realty, Sharpview Realty, Victoria Realty, Webster Realty, West Houston Realty, and
Willowbrook Realty and where the respective operations of Brookshire Rehab, Rockdale Rehab,
Sharpview Rehab, Victoria Rehab, Royal Oaks Rehab, and Willowbrood Rehab are conducted,
are identified as covered properties in the Location Schedule of the Declarations pages to the
Policy.
23. Subject to certain sub -limits of liability, AFMIC’s total limit of liability, including
any insured Business Interr uption loss, is the Policy Limit of $151,000,000 as a result of any one
occurrence.
The Loss
24. The Post -Acute Care Facilities owned or operated by P laintiffs Brookshire
Management, Brookshire Realty, Rockdale Management, Rockdale Realty, Sharpview
Managemen t, Sharpview Realty, Victoria Management, Victoria Realty, Webster Management,
Webster Realty, West Houston Management, West Houston Realty, Willowbrook Management
and Willowbrook Realty provide much needed temporary and permanent medical care and Case 4:19-cv-04996 Document 1 Filed on 12/24/19 in TXSD Page 8 of 22
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related services such as skilled nursing, hospice, home health and rehabilitation services to the
citizens of the State of Texas , in particular citizens who are elderly, impaired or otherwise unable
to care for themselves.
25. On or about August 25, 2017, Hurricane H arvey , recognized as one of the most
devastating natural disasters in United States history, made landfall on the Texas coast near
Corpus Christi as a Category 4 hurricane with 130 mile per hour winds . Hurricane Harvey made
landfall three (3) times in six (6) days. At its peak, on September 1, 2017, one -third of Houston
was underwater. Two (2) feet of rain fell in the first twenty -four (24) hours. Flooding forced
39,000 people from their homes to shelters. According to the National Hurricane Center,
Hurrica ne Harvey caused $125 billion in damages which is more than all other natural disasters
in U.S. history , except for Hurricane Katrina.
26. Hurricane Harvey did not spare the properties or operations where Plaintiffs
Brookshire, Rockdale, Sharpview, Victoria, R oyal Oaks, and Willowbrook conducted business
(collectively “Properties”) . Each sustained substantial damages , including, to varying degrees,
damages to roofs, HVAC, windows, walls, and flooring due to hurricane -force winds , water ,
water -intrusion, and flooding , which not only require d significant clean -up, repair , and
renovation of the buildings but also required adaptive changes to the buildings and properties to
make them compliant with current code requirements.
27. In addition, Plaintiffs Brookshire, Rockdale, Sharpview, Victoria, Royal Oaks ,
and Willowbrook also incurred substantial business income losses due to the interruption of the
operations of the Post -Acute Care Facilities by H urricane Harvey .
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Relevant Declarations/ Policy Provisions
28. The coverages i mplicated by the wind , water and flood damages caused by
Hurricane Harvey involve essentially two areas: physical damages to covered property and loss
of business income.
Physical Loss and Physical Damage
29. The Policy provide s “All Risk Coverage” (i.e., all risk of physical loss or damage )
at twenty -two ( 22) properties in Texas , including:
4. 710 Hwy 359 S, Brookshire, TX 77423, Index No. 002714.55 (Brookshire)
7. 222 South Fm 487, Rockdale, TX 76567, Index No. 002714.61 (Rockdale)
9. 114 Medical Drive, Victoria, TX 77904, Index No. 002714.71 (Victoria)
19. 2939 Woodland Park Drive, Houston, TX 77082, Index No. 074312.08 (Royal Oaks)
20. 13631 Ardfield Drive, Houston, TX 77070, Index No. 074312.09 (Willowbrook)
21. 750 North Texas Avenue, Webster, TX 77598, Index No. 074460.02 (Webster)
22. 7505 Bellerive Drive, Houston, TX 77036, Index No. 074387.64 (Sharpview)
The property insured includes “real property in which the insured has an insurable interest ” and
“personal property owned by the insured consisting of improvements and betterments in which
the insured has an insurable interest .” Declarations, E . Insurance Provided; Policy, All Risks
Coverage, A . Property Insured .
30. The All Risk Coverage under the Pol icy includes, but is not limited to, coverage
for damages caused by flood and wind; the costs associated with decontamination, debris
removal, and to temporarily protect or preserve insured property ; and the expenses incurred for
the fees/costs of professi onals such as auditors, accountants, architects, engineers and others.
31. The All Risk Coverage under the Policy also includes, but is not limited to
damages associated with demolition and the increased costs of construction “resulting from the
Insured’s obligation to comply with a law or ordinance, provided that: a) Such law or ordinance is enforced as a direct result of insured physical loss or damage at a location ; b) Such law or Case 4:19-cv-04996 Document 1 Filed on 12/24/19 in TXSD Page 10 of 22
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ordinance is in force at the time of such loss or damage; and c) Such locati on was not required to
be in compliance with such law or ordinance prior to the happening of the insured physical loss
or damage.” Declarations, F. Sub- Limits, Additional Coverages; Policy, D . Additional
Coverages, 10. Demolition and Increased Cost of Construction.
32. The Policy define s location as a “…location described in the Insurance Provided
clause of the Declarations section or included as Newly Acquired Property or Unnamed Property coverages.” As noted above, the Insurance Provided clause of the Declar ations (E . Insurance
Provided), describes, among other properties, the properties owned and operated by P laintiffs.
Business Interruption
33. The Policy also provide s insurance coverage for Business Interruption Loss “as a
direct result of physical loss or da mage of the type insured: 1. To property as described
elsewhere in this Policy and not otherwise excluded by this Policy; 2. Used by the Insured; 3. While at a location or while in transit as provided by this Policy; and 4. During the Period of
Liability a s described elsewhere in this Policy .” Declarations, F. Sub- Limits, Business
Interruption Coverage; Policy, Business Interruption, A . Loss Insured.
34. Per the express terms of the Policy, there are two metrics for the calculation of
Business Interruption Cove rage: Gross Profits and Gross Earnings. Declarations, Part F. Sub -
Limits, Business Interruption Coverage; Policy, B. Business Interruption Coverage, 1. Gross Earnings, 2. Gross Profits, 5. BI Select.
35. There also is coverage under the Policy for Extra Expens e “incurred by the
Insured of the following during the Period of Liability to: a) Temporarily continue as close to
normal the conduct of the Insured’s business; and b) Temporarily use the property or facilities of Case 4:19-cv-04996 Document 1 Filed on 12/24/19 in TXSD Page 11 of 22
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the Insured or others .” Declarations, F. Sub- Limits, Business Interruption Coverage; Policy, B.
Business Interruption Coverage, 4. Extra Expense.
36. Under the Policy, for Gross Earnings, Rental Income, or Extra Expense, the
Period of Liability for Business Interruption Coverage and Business Interruption Coverage
Extensions begins from the time of the insured loss or damage and ends when “[t]he lost or
damaged property could be repaired or replaced and made ready for production or business operations or services under the same or equivalent physical operating conditions that existed prior to the loss or damage .” Policy, Business Interruption, C. Period of Liability, 1 and 2(a).
37. The Period of Liability for Gross Profit is “the period starting from the time of
physical loss or damage of the type insured and ending no later than the period of time shown in the Declarations section during which the results of the business shall be directly affected by such damage .” The Period of Liability for Gross Profit in the Declarations Section is twelve
months. Decla rations, F. Sub- Limits, Business Interruptions Coverage.
The Claim s
38. As devastating as the physical damages and losses to the Properties were,
Plaintiffs were comforted by the fact that they had protected themselves against these potential
losses and a sure business disaster by securing the Policy .
39. Immediately after Hurricane Harvey , Plaintiffs promptly filed claims with
AFMIC , alerting it to the covered damages to the Properties and associated business interruption
losses.
40. AFMIC accepted the claims, assigned claim numbers , began making some
payments , and otherwise engag ed in the adjustment process . Case 4:19-cv-04996 Document 1 Filed on 12/24/19 in TXSD Page 12 of 22
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41. Approximately two months into the process, Plaintiffs notified AFMIC that an
environmental contractor/consultant had advised P laintiffs that the entire 1300 block of rooms at
Royal Oaks Rehab were suspect ed of having mold that required removal of substantial amounts
of sheetrock to evaluate the condition.
42. Shortly thereafter, P laintiffs advised AFMIC that there was no way to separate
mold that pre -existed Hurricane Harvey from the mold resulting from the hurricane and that the
condition required remediation. This placed AFMIC on notice, early in the adjustment process,
that the damages and remediation/mitigation were well beyond what originally had been
anticipated.
43. Approximately thirty (30) days later, in December 2017, P laintiffs met with
AFMIC to address Industrial Hygiene Protocols, the scope of repairs, time and material
estimates, the use of a Clerk of Works and discussions regarding building and other code
comp liance (“ Law & Ordinance” or “L&O”) .
44. In this time period, Plaintiffs had similar discussion with AFMIC relating to the
scope of repairs for remediation/renovation at other Properties also requiring L&O compliance.
45. The L&O discussions put AFMIC on notice of an important issue regarding the
remediation/renovation of the physical damage and losses to the Properties: a critical first step in the restoration of the Properties would require adaptive changes to bring the Properties into present code compliance, which had not been previously required by law because the
construction of the Properties pre -dated the changes to the applicable codes that were in effect at
the time of Hurricane Harvey . As noted above, the Policy includes L&O coverage.
46. Plaintiffs followe d up the December 2017 meeting in mid -January 2018 with
AFMIC and provided a proposed contract for Architectural Services that included a plan to Case 4:19-cv-04996 Document 1 Filed on 12/24/19 in TXSD Page 13 of 22
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identify the bulk of the code work prior to commencement of the remediation and renovation
work. P laintiffs a lso recommended that AFMIC and P laintiffs agree on a methodology.
47. Subsequently, Plaintiffs provided AFMIC with estimated damages, including the
Architectural and Engineering Fees (“A&E Fees”).
48. In April 2018, AFMIC notified P laintiffs that AFMIC would not c onsider any
costs associated with A&E Fees nor costs associated with any L&O issues , and that AFMIC
considered its existing budgets reasonable to cover the total Direct Damage repair expenses.
49. A few weeks later, AFMIC apparently changed course and hired an L&O
consultant to investigate, analyze, and likely minimize the impact of the L&O issues. Seven (7)
more months passed with no determination by AFMIC on the L&O issues.
50. Finally, on December 28, 2018—over a year after P laintiffs first brought the need
to address the L&O issues and their importance to the staging of the remediation and renovation
work in order to restore the Properties to AMFIC’s attention—AMFIC informed P laintiffs in a
meeting (the “December 28, 2018 Meeting”) that Plaintiffs had been corre ct from the beginning
for the need for an Architect and remediation specialist. AMFIC further advised that it would
employ a new consultant to review the architectural drawings for accuracy and presented the minimum amount of work to perform restoration.
51. Plaintiffs reiterated to AFMIC at the December 28, 2018 Meeting, as Plaintiffs
had previously throughout the adjustment process, that P laintiffs intended and continue to intend
to restore the Post -Acute Care Facilities. To that end, P laintiffs had agreed wi th AFMIC at
various stages on Time & Material rates for the contractors and on contract terms for the architects. Case 4:19-cv-04996 Document 1 Filed on 12/24/19 in TXSD Page 14 of 22
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52. During the December 28, 2018 Meeting, Plaintiffs and AFMIC agreed that a
contractor Hexagon would serve as “Clerk of the Works” and monitor the work being performed
by the various vendors to ensure that the work being performed and billed was consistent with
what was being observed . This would ultimately be used to determine the full cost of the
restoration, including the L&O work.
53. Subsequently , the remediation work bega n and Hexagon began clerking the work
as agreed. Reports from the field indicated that the process was working smoothly.
54. On October 10, 2019, however, P laintiffs inquired about payment for outstanding
invoices that were overdue an d unpaid. During that phone call, AFMIC again changed course,
informing Plaintiffs that AFMIC was “done with the claim .” This arbitrary and highly
prejudicial action by AFMIC was as perplexing as it was shocking under the circumstances.
55. In an effort to mi tigate the harm caused by AFMIC’s arbitrary and wrongful
decision, P laintiffs reiterated a prior request to extend the period to file Replacement Cost and
Increased Cost of Construction claims as well as an extension of the lawsuit filing period. AFMIC den ied these reasonable extension requests.
56. Plaintiffs ’ claims for damages and losses under the Policy for property damages ,
related losses and for business interruption losses exceed $73,000,000.
VI. CAUSES OF ACTION
Count One - Breach of Contract
57. Plaintiffs re -allege and incorporate each allegation contained in Paragraphs 1
through 56 of this Complaint as if fully set forth herein.
58. The Policy is a valid, binding , and enforceable contract between P laintiff s and
AFMIC . Case 4:19-cv-04996 Document 1 Filed on 12/24/19 in TXSD Page 15 of 22
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59. AFMIC breached the contract by refusin g to perform its obligations under the
terms of the Policy and pursuant to Texas law in relation to the Properties.
60. AFMIC ’s breach proximately caused injuries and damages to Plaintiff s.
61. All conditions precedent required under the Policy regarding the Prope rties have
been performed, excused, waived and/or otherwise satisfied by P laintiff ; or, in the alternative,
AFMIC is estopped from raising any conditions due to its breach of the contract.
Count Two – Violations of Texas Insurance Code, Unfair Settlement P ractices
62. Plaintiffs re -allege and incorporate each allegation contained in Paragraphs 1
through 56 of this Complaint as if fully set forth herein.
63. The conduct, acts, and/or omissions of AFMIC constitutes a violation of TEX. INS.
CODE § 541.060(a) . All viol ations under this article are actionable pursuant to T EX. INS. CODE. §
541.151(1).
64. AFMIC’s unfair settlement practices consist of the following :
a) misrepresenting to P laintiff s material facts or P olicy provisions relating to the
coverage at issue for the Pro perties (TEX. INS. CODE § 541.060(a) (1));
b) failing to attempt in good faith to effectuate a prompt, fair, and equitable
settlement of the c laims regarding the Properties, even though AFMIC’s
liability for covered damages to the Properties under the Policy w as
reasonably clear (TEX. INS. CODE § 541.060(a) (2)(A));
c) failing to promptly provide P laintiff s with a reasonable explanation of the
basis in the Policy, in relation to the facts or applicable law for AFMIC’s
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settlement of the c laims regarding the Properties (TEX. INS. CODE §
541.060(a) (3));
d) failing within a reasonable time to affirm or deny coverage of the c laims
regarding the Properties to P laintiff s or to submit a reservation of right s to
Plaintiff s (TEX. INS. CODE § 541.060(a) (4)(A)- (B)); and/or
e) refusing to pay P laintiff s' claims regarding the Properties without conducting
a reasonable investigation with respect to said c laims (TEX. INS. CODE §
541.060(a) (7)).
65. AFMIC also violated TEX. INS. CODE § 541.061 by engaging in unfair settlement
practices regarding the Properties by:
a) misrepresenting the insurance policy under which it affords property coverage
to Plaintiffs, by making an untrue statement of material fact (TEX. INS. CODE §
541.061( 1));
b) misrepresenting the insurance policy under which it affords property coverage to Plaintiffs, by failing to state a material fact that is necessary to make other
statements made not misleading (T
EX. INS. CODE § 541.061( 2)); and/or
c) misrepresenting th e insurance policy under which it affords property coverage
to Plaintiffs, by making a statement in such manner as to mislead a reasonably
prudent person to a false conclusion of material fact and failing to disclose a matter required by law to be disclosed, in violation of Texas Insurance Code §§ 541.061 and 541.002.
66. AFMIC knowingly committed the foregoing acts, with actual knowledge of the
falsity, unfairness, or deception of the foregoing acts and practices, in violation of T
EX. INS. Case 4:19-cv-04996 Document 1 Filed on 12/24/19 in TXSD Page 17 of 22
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PLAINTIFF S’ ORIGINAL COMPLAINT PAGE 18
CODE § 541.002(1) . Because each of the acts above, together and singularly, was done
“knowingly” and was a producing cause of Plaintiffs’ damages, Plaintiffs are entitled to treble
damages pursuant to Tex. Ins. Code § 541.152.
Count Three - Violations of Texas Insurance Code, Prompt Payment of Claims
67. Plaintiffs re -allege and incorporate each allegation contained in Paragraphs 1
through 56 of this Complaint as if fully set forth herein.
68. The claims related to the Properties are claims under an insurance policy with
AFMIC of whic h Plaintiffs’ gave AFMIC proper notice. AFMIC is liable for the claims related
to the Properties. AFMIC violated the Prompt Payment of Claims provisions found in T EX. INS.
CODE § 542.051, et seq . by:
a) Failing to acknowledge receipt of the claims for the Pr operties, to commence
investigation of the claims, and/or to request from Plaintiffs all items, statements, and forms that AFMIC reasonably believed would be required within the time constraints provided by T
EX. INS. CODE § 542.055;
b) Failing to notify Plain tiffs’ in writing of its acceptance or rejection of the
claims related to the Properties within the applicable time constraints provided
by TEX. INS. CODE § 542.056; and/or by delaying payment of the claims
related to the Properties following AFMIC’s recei pt of all items, statements,
and forms reasonably requested and required, longer than the amount of time
provided by T EX. INS. CODE § 542.058.
69. AFMIC’s violations of the Prompt Payment of Claims provisions of the Texas
Insurance Code are actionable pursuant to T EX. INS. CODE § 542.060. Case 4:19-cv-04996 Document 1 Filed on 12/24/19 in TXSD Page 18 of 22
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PLAINTIFF S’ ORIGINAL COMPLAINT PAGE 19
70. As a result of AFMIC’s violations of the Prompt Payment of Claims provisions,
Plaintiffs are entitled to their damages, plus penalty interest at the rate of eighteen percent (18%)
per annum and attorneys’ fees incurred in purs uing Plaintiffs’ claims.
Count Four : Breach of Duty of Good Faith and Fair Dealing
71. Plaintiffs re -allege and incorporate each allegation contained in Paragraphs 1
through 56 of this Complaint as if fully set forth herein.
72. AFMIC, as the property insurer, ha d a non- delegable duty to deal fairly and in
good faith with P laintiffs in the processing of Plaintiffs ’ claims. AFMIC breached this duty of
good faith and fair dealing by refusing to properly investigate the claims and denying or delaying the payment of i nsurance benefits when AFMIC knew or should have known that there was no
reasonable basis for denying or delaying payment of the required benefits.
73. As a proximate result of AFMIC’s breach of these legal duties, P laintiffs have
suffered damages.
Count Five : Estoppel
74. Plaintiffs re -allege and incorporate each allegation contained in Paragraphs 1
through 56 of this Complaint as if fully set forth herein.
75. AFMIC’s actions and inactions prevented completion of the buildings in the two -
year time period in the Policy for Replacement Cost and Increased Cost of Construction claims .
76. AFMIC’s actions and inaction lulled Plaintiffs into the belief that completion of
the buildings in the time period outlined in the Policy for Replacement Cost and Increased Cost
of Construc tion claims would not be required in order to recover for Replacement Cost and
Increased Cost of Construction claims. Case 4:19-cv-04996 Document 1 Filed on 12/24/19 in TXSD Page 19 of 22
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PLAINTIFF S’ ORIGINAL COMPLAINT PAGE 20
77. As a result of AFMIC’s actions, Plaintiffs sought a reasonable extension of time
to recover under the Policy for Replacement Cost and Incr eased Cost of Construction claims, but
AFMIC denied the request.
78. AFMIC is estopped from asserting Plaintiffs may not recover for Replacement
Cost and Increased Cost of Construction claims based on the failure to complete the renovations
of the Properties w ithin two years.
Count Six: Punitive /Exemplary Damages for Bad Faith
79. Plaintiffs re -allege and incorporate each allegation contained in Paragraphs 1
through 56 of this Complaint as if fully set forth herein.
80. AFMIC acted fraudulently and with malice (as that term is legally defined) in
denying and delaying P laintiffs’ claims for benefits.
81. Further, AFMIC had actual, subjective awareness of the risk involved, but
nevertheless proceeded with conscious indifference to the rights, safety, or welfare of P laintiffs.
82. As a result, Plaintiffs are entitled to punitive/exemplary damages from AFMIC.
VII. DAMAGES
83. As a result of AFMIC’s acts and/or omissions, Plaintiffs have sustained damages
in excess of the minimum jurisdictional limits of this Court.
84. In particular, Plain tiffs are entitled to the actual damages resulting from AFMIC’s
breach of contract, breach of common law duties, and violations of law. The damages associated with AFMIC’s conduct include the consequential loss to Plaintiffs’ economic welfare from the
wrongful denial and delay of benefits including loss of the property and business; and the other
actual damages permitted by law. In addition, P laintiffs are entitled to trebled damages, statutory
interest, and punitive/ exemplary damages as allowed by law . Case 4:19-cv-04996 Document 1 Filed on 12/24/19 in TXSD Page 20 of 22
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PLAINTIFF S’ ORIGINAL COMPLAINT PAGE 21
85. Plaintiffs engaged the undersigned counsel to prosecute this lawsuit against
AFMIC and agreed to pay reasonable and necessary attorneys’ fees and expenses through trial
and any appeal.
86. Plaintiffs seek an award of all reasonable and necessary attorneys’ fees incurred in
prosecuting their causes of action through trail and any appeal under § 38.001(8) of the Texas
Civil Practice and Remedies Code. Additionally, and/or in the alternative, Plaintiffs request an award of attorneys’ fees as permitted under the Texas Insurance Code.
87. Plaintiffs are further entitled under the law to the recovery of pre - and post -
judgment interest at the maximum legal rate. Further, Plaintiffs are entitled to costs of court as
allowed by law.
VIII. JURY DEMAND
88. Plaintiff s respectful ly request a trial by jury on all issues to which P laintiff s are so
entitled.
IX. PRAYER
WHEREFORE, PREMISES CONSIDERED, Plaintiff s respectfully pray that , upon
trial hereof, Plaintiffs recover such sums as would reasonably and justly compensate Plaintiff s in
accordance with the rules of law and procedure, as to actual, consequential, punitive/exemplary, statutory, and treble damages as may be found. Additionally, Plaintiffs pray for an award of
attorneys’ fees for the trial and any appeal of this case, fo r all costs of Court expended, for pre -
judgment and post -judgment interest as allowed by law, and for any other and further relief,
either at law or at equity, to which Plaintiffs may be entitled. Case 4:19-cv-04996 Document 1 Filed on 12/24/19 in TXSD Page 21 of 22
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PLAINTIFF S’ ORIGINAL COMPLAINT PAGE 22
Respectfully submitted,
WEYCER, KAPLAN, PULASKI & ZUBER, P.C.
BY: __ /s/ ANDREW M. CAPLAN ______
ANDREW M. CAPLAN
State Bar No. 0 376700
Federal Bar No. 7 810
11 Greenway Plaza, Suite 1400
Houston, Texas 77046
Tel: (713) 341- 1140
Fax: (713) 961- 5341
acaplan @wkpz.com
ATTORNEY- IN-CHARGE FOR PLAINTIFFS
OF COUNSEL::
JASON JOHNS
State Bar No. 24041191
Federal Bar No. 37221
11 Greenway Plaza, Suite 1400
Houston, Texas 77046
Tel: (713) 341- 1140
Fax: (713) 961- 5341
[email protected]
Case 4:19-cv-04996 Document 1 Filed on 12/24/19 in TXSD Page 22 of 22