Berkshire Hathaway Direct Insurance wants a federal judge to weigh in after a Tennessee hotel loss, spotlighting what happens when policyholders and insurers disagree on damage control.
On Aug. 25, Berkshire Hathaway Direct Insurance Company filed a complaint in the U.S. District Court for the Middle District of Tennessee, asking for clarity on what it owes after a series of headaches at 7 Star Hospitality’s hotel in Mt. Juliet, Tennessee. The case is a window into the real-world push and pull between insurance companies and property owners when disaster strikes – and who’s on the hook for what.
Here’s what’s at stake: Berkshire Hathaway issued a commercial property insurance policy to 7 Star Hospitality, with Wilson Bank & Trust as the mortgage holder. The trouble started after a loss at the property, which was reported to the insurer for a period between Oc. 5, 2023, and Feb. 15, 2024. According to the complaint, Berkshire Hathaway alleges that 7 Star did not take reasonable steps to mitigate further damage after the loss, as required by the policy.
The complaint details a timeline of events, referencing reports from independent adjusters and communications between the parties. On March 1, 2024, independent adjuster Steve Bluemel inspected the property and reported to Berkshire Hathaway that there was mold growth in several rooms and water in the premises. Bluemel advised on March 4, 2024, that 7 Star had retained a public adjuster, but mitigation had not yet started. On March 15, 2024, Bluemel forwarded an email to Berkshire Hathaway indicating that 7 Star had decided to use Vovo Design, LLC for mitigation and emergency services, but as of March 22, 2024, mitigation work had not begun.
Berkshire Hathaway advanced a total of $190,000 to 7 Star to cover immediate expenses, including mortgage payments. On April 1, 2024, Berkshire Hathaway made a site visit and observed that mitigation was not sufficient, with water still present and windows open, and that the property was not adequately secured.
On April 3, 2024, Bluemel advised Berkshire Hathaway that the insured had decided to allow ServPro to intervene, but noted the result of inadequate mitigation efforts to date. On April 8, 2024, a letter from public adjuster Dennis J. Kurttila was included in the record, stating that the insured had retained his firm to represent its interests in the insurance claim.
A second Reservation of Rights letter was issued by Berkshire Hathaway to 7 Star on July 23, 2024, with a copy sent by email to Ahmed Dhanani on July 24, 2024. On July 26, 2024, Jason Marrero of Alex M. Sill Company emailed Berkshire Hathaway addressing the reservation of rights letter. Marrero stated that the “work was not able to start once the need was identified because the insured had no authorization to do so for at least 10-20 days post loss, until the mortgage holder authorized the demolition.”
Berkshire Hathaway states that it paid $1,047,309.28 on July 26, 2024, for the undisputed settlement of the building claim, and $296,131.27 on July 26, 2024, on the business income loss claim. 7 Star’s public adjuster, Jason Marrero, circulated a 7/26/2024 itemization of payments made to date to his team at Sill Company that same date.
The complaint also details that 7 Star sought additional advances for mortgage payments and a business interruption claim of $680,885.00. After a subsequent Reservation of Rights to 7 Star on December 20, 2024, Berkshire Hathaway continued to investigate the claim and requested further documentation.
The complaint references policy language, specifically Section V, which states: “You must see that the following are done in the event of loss to Covered Property: ... (4) Take all reasonable steps to protect the Covered Property from further damage by a Covered Cause of Loss. If feasible, set the damaged property aside and in the best possible order for examination.”
Berkshire Hathaway is asking the court to declare that it has fulfilled its obligations under the policy and is not responsible for any additional amounts claimed by 7 Star Hospitality or Wilson Bank & Trust. The insurer is also seeking recovery of costs and attorney’s fees.
As this is an initial complaint, no final decision has been made.
