T. MICHAEL PUTNAM, Magistrate Judge.
This matter is before the court on the motion for summary judgment filed by defendant Allstate Insurance Company ("Allstate"). (Doc. 24). The defendant has supported its motion with a brief and evidentiary materials. (Doc. 25). The plaintiff has filed an opposition to the motion for summary that is also supported with evidentiary material. (Docs. 29, 30). In reply to the plaintiff's opposition, the defendant has filed a responsive brief. (Doc. 31). The parties have consented to the jurisdiction of the undersigned pursuant to 28 U.S.C. § 636(c). Having reviewed the arguments, evidence, and pleadings in this matter, the undersigned finds that the motion is due to be denied as to plaintiff's breach of contract claim and granted as to plaintiff's bad faith claim.
Under Federal Rule of Civil Procedure 56(a), summary judgment is proper "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The party asking for summary judgment "always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of `the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact."
Once the moving party has met his burden, Rule 56 "requires the nonmoving party to go beyond the pleadings and by her own affidavits, or by the `depositions, answers to interrogatories, and admissions of file,' designate `specific facts showing that there is a genuine issue for trial.'"
After the plaintiff has properly responded to a proper motion for summary judgment, the court "shall" grant the motion if there is no genuine issue of material fact, and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). The substantive law will identify which facts are material and which are irrelevant.
Applying these standards to the evidence in the record, the following facts are taken favorably to the non-moving plaintiff, and inferences are drawn in favor of the non-moving plaintiff.
This is an insurance case where the coverage dispute arises out of a house fire that occurred on September 20, 2009, at 3240 Pine Hill Road, Moody, Alabama. The home was owned by Sarah Shires with a joint right of survivorship with her daughter, Merri Waller. Six days prior to the fire, on September 14, 2009, Shires passed away. At the time of her death, Shires lived with her daughter in Pittsburgh, Pennsylvania. Shires moved out of the Alabama residence in 2005 or 2006. (Doc. 25-9, Exh. I, Waller Depo. p. 12). After she moved out of the home, her granddaughter, Valerie Dunning, lived at the residence for at least one year. Dunning moved out of the home at some point in 2008. (Doc. 25-9, Exh. I, Waller Depo. p. 12). No one was living at the home in September 2009 when it caught fire and was heavily damaged.
After her mother's death, Waller assumed possession of the property and provided notice of the fire to the defendant, Allstate Indemnity Company ("Allstate") on September 21, 2009. Allstate insured the subject property under a homeowner's insurance policy. Since the inception of the policy, the premium notices for this Alabama residence were mailed to Pittsburgh, Pennsylvania. There is no dispute that the insurance policy at issue in this litigation was in force at the time of the loss.
It is undisputed that no one resided at the Moody residence for at least thirty days preceding the fire. In fact, the evidence establishes that no one lived at the home at any time after Dunning moved out in 2008. Waller paid Larry Paul, a neighborhood resident, to oversee and take care of the home after her mother moved away from the residence. Paul would oversee the property, which included keeping up the yard and making minor repairs to the home. Paul had keys to the house and Waller considered him the caretaker of the home.
In June 2009, Paul contacted Karen Menefee, who was a licensed general contractor at the time, to undertake repair work on the Shires' home.
Menefee did not obtain a building permit in connection with the work she performed at the subject property because, she testified, one is not necessary for "a small amount of work." (Doc. 25-9, Exh. K, Menefee Depo. p. 74). Menefee also testified, however, that some of the work she undertook was a "pretty big job" that she would not consider as a minor repair. (Doc. 25-9, Exh. K., Menefee Depo. p. 112-113). Menefee was still completing the repairs to the home on September 20, 2009, when it caught on fire.
The evidence establishes that the repairs Menefee undertook at the subject property included the following:
Menefee testified that at the time of the fire she still had not completed all the projects she planned to undertake. The unfinished work included painting the baseboards in the bathroom and completing the sunroom, a room that needed both windows and carpet replaced. Menefee also testified that she had equipment in the house when it caught on fire. That equipment included a power paint sprayer, remaining paint, paint rollers, paint pans, a duet pull saw, a skill saw, a drill, a generator, and two gas heaters.
After Waller notified Allstate of the fire, it began a claim investigation. The claim history submitted in support of Allstate's summary judgment motion, reports that Waller advised Allstate, on September 22, 2009, that the home was vacant and the property was for sale. (Doc. 25-2, Exh. B, Claim History Report, p. 3). Allstate assigned the claim to dwelling adjuster Mark Burchfield, who inspected the property and photographed the scene on September 24, 2009. Allstate also retained certified fire investigator, Terry Beckham, to conduct an origin and cause examination at the subject property.
After Beckham completed his initial site inspection, he drove from the subject property to the Moody Fire Department. There, Beckham learned that it had rained on the night of September 20, 2009. While the firefighters did not report any lightning on the night of the fire, the fact that it had rained "caused [Beckham] concern that [he] may have a weather related fire." Based on this concern, Beckham conducted a lightning strike analysis by running a STRIKEnet report. STRIKEnet reports indicate whether the National Lightning Detection Network detected lightning for a given time period and location.
In this case, Beckham generated two STRIKEnet reports for the subject property on the date of the fire. The first time Beckham ran a STRIKEnet report he used the mailing address of the subject property, 3420 Pine Hill Road, Moody, Alabama, 35004. The results of that report indicated that two lightning strikes were detected within a five mile radius of the mailing address, the parameter used by Beckham in generating the report. The first strike occurred at 11:09 p.m. and was located .9 miles from the mailing address. The second strike was located 4.1 miles from the mailing address.
In the second STRIKEnet report, Beckham utilized the GPS coordinates for the subject property instead of the mailing address. Beckham explained in his deposition that he was concerned that the mailing address did not "match up with the structure's location," so he decided to use the GPS coordinates for a more accurate location.
While Beckham's investigation was ongoing, and prior to the submission of his final report regarding the origin and cause of the fire, Burchfield (the initial dwelling adjuster) requested that Allstate's Special Investigations Unit ("SIU") become involved in the investigation of the claim. SIU accepted the referral of the claim and SIU adjuster, Mike Rocchio, was assigned to the matter. The decision to involve SIU was informed by the fact that the property was vacant and Beckham's initial investigation had ruled out all natural heat sources as a cause of the fire. Upon assignment of the claim, Rocchio conducted a physical inspection of the property and a neighborhood canvas, where he interviewed one gentlemen who reported the house had been empty for quite some time. Rocchio also took a recorded statement from Waller over the phone. Waller stated that the house had not been occupied in 2 ½ years and that no property remained there. Waller also stated that she had called an Allstate agent to advise that her mother had moved out of the house and to place a change of address request. (Doc. 30-9, Exh. 4, p. 16). Waller's statement was recorded on October 14, 2009.
On October 15, 2009, Beckham issued his report to Allstate and rendered an opinion that the "fire [was] incendiary in nature and was caused by the intentional ignition of combustible materials."
In support of its Motion for Summary Judgment, Allstate submits the report of fire investigator Terry Beckham, who opined that the subject fire originated in the left rear portion of the structure and "was caused by the intentional ignition of combustible materials." Plaintiff disputes that the fire was caused by arson and relies on the analysis of origin and cause expert, William "Chip" Bush.
To investigate the subject fire, Bush reviewed and studied the photographs taken by Beckham. Bush also visited the Moody fire department on two occasions and interviewed Captain Littleton, the first firefighter to arrive at the scene of the fire. When Bush interviewed Littleton, he showed him the photographs from the burned property to refresh his memory of the fire. Littleton told Bush that he conducted a "walk around" of the property when he arrived at the scene and that the only fire he could see was coming from the back of the house. Littleton did not see any fire coming out of the windows. (Doc. 30-10, Exh. F, Bush Depo. p. 84). Bush did not visit the subject property because Littleton told him there was nothing there, that it was "clean." (Doc. 30-10, Exh. F, Bush Depo. p. 84).
Based on his experience, review of the scene photographs, and witness interviews, Bush classified the cause of the subject fire as "undetermined." He disagrees with Beckham's conclusion that the fire "was caused by the intentional ignition of combustible materials" for several reasons, but primarily because there are no burn patterns in the kitchen. For Bush, the lack of burn patterns emanating from the kitchen area (where Beckham believes the fire started) is inconsistent with the conclusion that the fire started from someone piling up combustibles and setting them on fire. Bush testified: "I don't see fire patterns on the inside of the structure to indicate to me that that's what happened." Bush also testified that if you piled up a "bunch of combustible material" and set it on fire in a room with a window, then the fire is going to exit out of the window. (Doc. 30-10, Exh. F, Bush Depo. p. 106). In this case, the fire did not exit out of the windows, indicating to Bush that it started inside a wall or an electrical box that got energized by a surge of electricity through a lightning strike. (Doc. 30-10, Exh. F, Bush Depo. p. 184). He also considers the "intense discoloration" of metal on the meter base as indicative of lightning. Bush classifies the fire as undetermined, however, he testified that it was "very possible" that a lightning strike caused the fire. Bush further testified that he may have "absolutely called it a lightning strike" had he looked at the scene.
In opposing summary judgment, plaintiff also submitted an affidavit from John Davis, a resident of Pinehill Road who lived "one house over from" the subject property. (Doc. 30-4, Exh. D, Davis Aff. p. 1). Davis attests that on the night of September 20, 2009, he was on his back porch, smelled smoke, and then noticed that the subject property was burning on the side of the house where the electrical box was located. At the time Davis smelled the smoke, it had been raining and lightning in the area. Davis did not see any fire come out of the windows of the burning house.
Allstate has moved for summary judgment on all the claims filed against it. (Doc. 24). Plaintiff concedes that Allstate is entitled to summary judgment on the claims of negligent adjustment of a claim and negligent supervision of employees; leaving the breach-of-contract and bad faith claims for adjudication. (Doc. 29).
Allstate's summary judgment motion turns on the proposition, as it must, that plaintiff's breach of contract claim fails as a matter of law. According to Allstate, the reason the claim fails is due to the vacancy of the property at the time of the fire and evidence that the fire was intentionally set — two factors, it contends, that disqualify a claim from coverage under the subject policy's vandalism exclusion. Plaintiff opposes summary judgment by arguing three principal points: (1) the vandalism exclusion is ambiguous, (2) the property was under construction at the time of the fire, and (3) the cause of the fire should have been classified as "undetermined," not intentionally-set. The adverse positions taken by the parties raise issues concerning the validity and reach of the vandalism exclusion — these issues, however, are ancillary to the central inquiry of causation.
The subject insurance policy provides that it covers "sudden and accidental direct physical loss to property" caused by "fire or lightning." The policy does not, however, provide coverage for instances of vandalism or malicious mischief if:
Under both the coverage provision (fire and lightning) and the coverage exclusion (vandalism in a vacant home), causation drives the coverage inquiry. Because Allstate is relying on a coverage exclusion, it ultimately bears the burden of proving its applicability.
In this case, both parties have submitted evidence supporting different theories on causation. Allstate concludes that the fire was intentionally set and has submitted evidence in the form an origin and cause report that substantiates that conclusion. Plaintiff contends that the cause of the fire cannot be determined, submitting evidence from its expert it was "very possible" a lightning strike caused the fire. Plaintiff's expert further testified that he may have "absolutely called it a lightning strike" had he looked at the scene. (Doc. 30-10, Exh. F, Bush Depo. p. 158). In short, the experts disagree as to the cause of the fire. These divergent opinions showcase the hallmark of summary judgment analysis — whether a material fact is genuinely disputed. Here, the cause of the fire is not only disputed, but also material to the issue of Allstate denying plaintiff's insurance claim. Given the factual dispute over the cause of the fire, the jury, not this court, must decide whether Allstate appropriately denied the plaintiff's claim. To that end, the jury can weigh the evidence and evaluate the expert testimony, deciding which expert they believe and what theory of causation most likely explains how and why the subject property burned.
Because there is a fact question as to what caused the fire, the court cannot rule, as a matter of law, that Allstate properly denied the plaintiff's claim under the vandalism exclusion. Although Bush offers only a "likely" cause of the fire, the court cannot say that Allstate's evidence relating to the cause is so overwhelming that no reasonable juror could accept the plaintiff's alternative theory, and thus there remains a justiciable issue of fact. Again, the vandalism exclusion is only implicated if the fire was intentionally set — and here there is conflicting evidence as to causation.
Given the evidence before the court at this juncture, a reasonable juror could find that there is insufficient evidence that the fire was intentionally set. A reasonable juror could conclude, based on plaintiff's evidence, that Allstate had failed to prove that the fire was intentionally set and, therefore, that the vandalism exclusion applied. It is at least conceivable that a reasonable juror could find that lightning caused the fire. Because a reasonable juror could find that the fire was caused by some reason other than being intentionally set, a reasonable juror could, concomitantly, find that the defendant breached its insurance contract by failing to pay the plaintiff's claim. Consequently, the defendant's motion for summary judgment is due to be denied on the breach-of-contract claim.
Plaintiff claims that Allstate acted in bad faith by failing to pay her insurance benefits under a homeowner's policy that was in force at the time the insured property was destroyed. Specifically, plaintiff alleges that "no arguable reason exists that would preclude the coverage of the said loss and the honoring of the said claim and as such the Defendants are guilty of a bad faith failure to honor and pay. . . ." (Doc. 1, Compl. ¶ 20). The defendant seeks summary judgment on this claim, arguing that when it denied the claim it had a legitimate basis for believing that the vandalism and malicious mischief policy provision applied to exclude the claim. The defendant also contends that the evidence establishes a thorough investigation by Allstate prior to rendering a decision on the plaintiff's claim.
Under Alabama law, a bad faith claim usually requires that the plaintiffs show that they are entitled to a directed verdict on the contract claim.
In opposition to summary judgment, plaintiff attempts to prove abnormal bad faith by arguing that: (1) Allstate recklessly failed to investigate the claim because the defendant never asked plaintiff if the home was under construction at the time of the fire; (2) Allstate's investigator failed to follow a "Causation Investigation Guide" and therefore did not complete his investigation; (3) Allstate's investigator concluded the fire was incendiary before he received the results of the second lightning strike analysis report; and (4) Allstate relied upon an ambiguous vacancy exclusion to deny the subject claim. The court is unpersuaded that any of these allegations, even if true, constitute abnormal bad faith as contemplated under Alabama law.
Plaintiff contends that the failure of SIU adjuster, Mike Rocchio, to ask the plaintiff if the subject home was under construction evidences abnormal bad faith. The court disagrees. The evidence before the court is that Rocchio took a recorded statement from the plaintiff where she stated that the house had not been occupied in 2 ½ years and that no property remained there. Rocchio also testified:
(Doc. 30-2, Rocchio Depo. p. 94). At most, the court finds that any shortcomings in Rocchio's questioning of the plaintiff evinces bad judgment, not bad faith. Similarly, the alleged failure of Rocchio to follow a manual, which allegedly would have prompted a discussion about any remodeling or renovation, may constitute bad judgment or negligence, but it does not constitute bad faith.
Plaintiff also claims bad faith on the basis of "undeniable" evidence that Allstate fabricated a reason to deny her claim. Proof of the fabrication, plaintiff claims, is a discrepancy about when Allstate's fire investigator (Beckham) determined the cause of the fire. Beckham testified that he did not determine the cause of the fire until after he received the results of the second lightning detection report. The record indicates, however, that Beckham verbally reported to Allstate that the cause of the fire was incendiary two days prior to receiving the second test results. This inconsistency, plaintiff argues, is undeniable evidence that Allstate fabricated a reason to deny her claim. The court cannot agree. Both lightning detection reports eliminated lightning as a cause of the fire. So, even if Beckham concluded that the fire was incendiary before he received the results from the second detection report, he did so based upon the information from the first report which, for Beckham, ruled out lightning as a cause of the subject fire. Beckham's opinions did not change on the basis of the second report and there is no evidence of fabrication on Allstate's part. Simply put, the court cannot connect the necessary dots between the allegation that Allstate committed bad faith, by fabricating a reason to deny the claim, and Beckham's testimony.
Lastly, plaintiff contends that Allstate is guilty of abnormal or extraordinary bad faith on grounds that it relied on an ambiguous policy exclusion to deny her claim. Plaintiff claims that the vacancy exclusion is ambiguous because a "policy holder could misinterpret arson as a separate peril not be included in the vandalism or malicious mischief peril section of the policy."
In this case, vandalism is not defined in the subject insurance policy. Alabama precedent instructs, however, that "[i]n determining whether an ambiguity exists, a court should apply the common interpretation of the language alleged to be ambiguous."
The decision to dispense with the directed verdict breach-of-contract predicate in certain bad faith cases was informed by "extraordinary" circumstances where the Alabama Supreme Court found that it would be inappropriate to "allow the insurer to obtain a judgment as a matter of law on the bad faith claim by putting on evidence sufficient to defeat the plaintiff's motion for directed verdict on the breach of contract claim."
Accordingly, consistent with the foregoing discussion of the evidence presented by defendants in support of the motion for summary judgment, and in light of the plaintiff's submission in response, this court determines that genuine issues of material fact exist as to whether the defendant breached the contract of insurance with the plaintiff and therefore summary judgment is DENIED on the breach-of-contract claim. Regarding the bad faith claim, the court finds that the plaintiff has failed be present substantial evidence of bad faith and therefore summary judgment is GRANTED on that claim. On the agreement of the plaintiff, the court also GRANTS summary judgment as to plaintiff's claims of negligent adjustment of a claim and negligent supervision of employees.
A separate order will be entered in accordance with the findings set forth herein.
