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October 22–29, 2017, marks the fifth anniversary of SuperstormSandy striking the East Coast, leaving major devastation in itswake. Many property owners are still trying to rebuild and tosettle claims with insurers. In one recent case, a federal districtcourt in New Jersey has ruled that a jury would have to decidewhether an insured and its insurer had reached a settlement of theinsured's Superstorm Sandy claim for wind damage to its propertybefore the insured had filed its lawsuit.

Coleman Enterprises, Co., a private business operated andpartially owned by Peter McKeown, owned a two-story building in SeaBright, N.J., that consisted of four commercial units on the firstfloor and six apartments on the second floor. On Oct. 29, 2012, thebuilding sustained wind and flood damage during Superstorm Sandy, and Colemansubmitted a claim to its insurance carrier, Scottsdale InsuranceCompany, for wind damage.

Differing estimates

Scottsdale retained Nelson Architectural Engineers, Inc., toevaluate the building and determine whether any distress had beencaused by Sandy. On Dec. 13, 2012, Robin Kemper, a licensedprofessional engineer employed by Nelson, inspected the building.Kemper prepared a report dated Jan. 4, 2013, that estimated thecost to repair the wind damage to be $314,222.49.

On Jan. 22, 2013, Coleman retained United American Contractorsto work with its insurers and address the storm damage to thebuilding. United prepared an estimate, finding the cost to repairthe wind damage to be $585,156.24.

During the next few months, United and Scottsdale exchangedestimates and discussed the appropriate costs to repair theportions of the building that had sustained wind damage. GeorgeLester handled the negotiations on behalf of United, and ScottRothman participated in the negotiations on behalf ofScottsdale.

On March 24, 2013, Rothman submitted a revised repair estimateof $469,714.65 to Lester, which included certain items and expensesthat Lester had requested, but that were not included within theprior repair estimate obtained by Scottsdale. Rothman's emailstated, “Attached is revision for discussion purposes.”

On March 25, 2013, Lester replied:

I looked through the estimate. You added the items. We will workoff your estimate. If we have any code upgrades required by thecity, may we supplement those items if incurred? What should I tellMr. McKeown the time frame will be for the payment? I am going toproceed with the repairs. Thank you for your help in thematter.

On March 26, 2013, Rothman sent an email response to Lester thatstated, “I have requested authority to issue payment and should doso w/in a week or so.” Rothman informed Lester that he woulddiscuss policy limitations on mold remediation and any code issuesdirectly with Coleman. He also asked Lester for an estimate ofcompletion.

On April 9, 2013, Rothman sent McKeown a letter that stated:

As you are aware, an agreement was reached on the replacementcost loss of covered damage to the structure subject to terms,conditions and limits of the policy, with United AmericanContractors in the amount of $470,714.65…. Previous paymentstotaling $280,649.61 have been issued and a payment of $156,575.68is forthcoming under separate cover…. Once again, note that alloptions under the policy of insurance remain at your disposal, andacceptance of this check will not waive any of your rights underthe policy of insurance.

Coleman cashed Scottsdale's checks, totaling $437,225.29, butnever made repairs to the building. In October 2014, Coleman'scounsel sent Scottsdale a repair estimate prepared by JohnTricozzi, who determined the cost to repair the damage caused bythe wind to be $917,110.62.

Scottsdale refused to pay for the balance owed on the Tricozziestimate, and Coleman filed suit against Scottsdale for breach ofcontract and breach of the implied covenant of good faith and fairdealing.

Scottsdale moved for summary judgment. Among other things,Scottsdale argued that it was entitled to judgment in its favor onColeman's claims because Coleman and Scottsdale had entered intoa binding settlement agreement as a result of the emailexchanges between Lester of United and Rothman of Scottsdale.

For its part, Coleman argued that United did not have theauthority to bind it to any settlement and that, even if United didhave such authority, no settlement had ever been agreedto.

5 disputed issues

The district court ruled that disputed issues of material factprecluded the summary resolution of the parties' differing views onthe purported settlement agreement. In its decision, the districtcourt noted the following disputed issues:

1. Whether United had authority to bind Coleman to anysettlement;
2. Whether Lester and Rothman's email exchange constituted therequisite intent that the total payment to Coleman out of theinsurance policy would be limited to $470,714.65;
3. Whether the parties had agreed to the scope of the damages andthe cost to repair those damages;
4. The import of Scottsdale continuing to adjust the claim withColeman after the purported settlement; and
5. Why Scottsdale had not requested that Coleman sign arelease.

The district court ruled that Coleman had met its burden todefeat summary judgment by providing sufficient material facts thatdisputed Scottsdale's. The court concluded that it was for a juryto decide whether the parties had entered into an enforceablesettlement agreement that precluded Coleman from pursuing itslawsuit against Scottsdale.

The case is Coleman Enterprises Co. v. Scottsdale Ins.Co.

Steven A. Meyerowitz, Esq., is the director of FC&S Legal,the editor-in-chief of the Insurance Coverage Law Report, and thefounder and president of Meyerowitz Communications Inc. Email himat [email protected].