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No Coverage for Fire Loss Claim Fee

In this case involving a breach of contract action filed by a condominium association’s property management company against an insurance company, concerning the scope of a policy issued to the condo association, the Alexandria U.S. District Court says defendant carrier is not responsible for paying a 10-percent insurance claim processing fee the association agreed to pay under the property management agreement, to cover costs in the wake of a fire that damaged 16 units  and resulted in a $2.5 million loss claim.

The main issue before the court is whether the insurance policy underlying this litigation requires defendant Nationwide to pay plaintiff Capital Property Management Corporation for costs incurred by Capitol in connection with the terms of a management agreement entered into by Capital and the Gunston Corner Condominium Association, which hired Capital to serve as the property manager. Specifically, the court must determine what constitutes an “extra expense” under the policy.

The court grants summary judgment to Nationwide. Capitol lacks standing to asserts its claim for the construction management fee because the association never assigned the right to this fee to Capitol. Also, Capitol has failed to meet its burden of proving that the policy provides coverage for the insurance claim processing fee. And in any event, the insurance claim processing fee does not meet the definition of “extra expense.” Finally, Capitol’s bad faith claims fail as a matter of law, as Virginia law does not recognize an independent cause of action for bad faith and Capitol has not demonstrated that Nationwide breached the terms of the policy.

Capitol Property Mgmt. Corp. v. Nationwide Property & Cas. Ins. Co. (Lee) No. 1:16cv664, June 5, 2017; USDC at Alexandria, Va.; C. Thomas Brown for plaintiff; Elizabeth S. Skilling for defendant. VLW 017-3-295, 21 pp.