KRISTI K. DuBOSE, District Judge.
This matter is before the Court on Defendant's Motion for Partial Summary Judgment (Docs. 44, 46), Plaintiff's reply (Doc. 51), and Defendant's response (Doc. 52). For the reasons discussed herein, Defendant's Motion for Partial Summary Judgment on Counts Two and Four of the Complaint (Doc. 1) is
On August 18, 2012, the VIP Nail Salon ("the salon"), located in Daphne, Alabama was intentionally set ablaze and sustained damages. (Doc. 51 at 8). Plaintiff Hau the Tran ("Tran") owned the salon. (Doc. 1-1 at 2). At the time of the fire, Tran's Toyota Avalon ("the vehicle") was parked behind the salon. (Doc. 51-2 at 69). The vehicle was also set on fire, resulting in damages. (Doc 1-1 at 2).
Tran had insurance coverage on both the salon and the vehicle through Defendant Allstate Insurance Company ("Allstate"). (Id., Docs. 44-2 and 44-3). After the fires, Tran made insurance claims on the salon and vehicle. (Doc. 51 at 8). The parties do not dispute that Tran was covered under Allstate policies at the time of the losses, the amount of the policies, the terms of the policies, or that Tran made a timely claim under the policies. (Id.).
The state fire marshal investigated the fires and concluded that they had been intentionally set. (Docs. 44 at 2 and 51 at 8). Allstate referred Tran's claims to Investigator Wilbur Jordan. Jordan engaged in an investigation which included interviews of Tran, employees of nearby businesses, the employment of private fire investigator Gary Jones, and collection of documentation regarding the salon and vehicle, the fires, and Tran's whereabouts before and during the fires. (Docs. 44-4 and 44-5). During the course of the investigation, Allstate determined that Tran had been having trouble with the business and had recently significantly changed her insurance coverage. (Id.). Additionally, Tran had rooms reserved at the Grand Casino in Biloxi, Mississippi in the days prior to the fires. (Doc. 51-2 at 124). Matches from the Grand Casino were recovered at the scene of the fires. (Id.). Fire investigator Gary Jones determined that gasoline had been used as an accelerant and there were no signs of forced entry at the salon, indicating that the person who set the fires would require access to the salon via keys. (Docs. 51 at 8 and 44-6 at 1-2).
Tran's salon insurance policy stated that Allstate would not cover "[i]ntentional or criminal acts of or at the direction of any persons insured, if the loss that occurs: a) may be reasonably expected to result from such acts; or b) is the intended result of such acts." (Doc. 44-2 at 27). The concealment and fraud section of the policy stated: "This policy is void if you intentionally conceal or misrepresent any material facts or circumstances, before or after loss." (Id. at 70).
Tran's vehicle insurance policy stated, "This policy shall be deemed void from its inception if it was obtained or renewed through material misrepresentation, fraud or concealment of material fact. This means that Allstate will not be liable for any claims or damages which would otherwise be covered had there not been material misrepresentation, fraud, or concealment of material fact." (Doc. 44-3 at 29).
As a result of its investigation, Allstate concluded that Tran had been involved in setting or causing the fires to be set. (Doc. 51-2 at 86-87). Allstate also determined that Tran had made material misrepresentations during the investigation regarding her whereabouts around the time of the fires, her financial status, and the value and contents lost in the fire. (Doc. 51-2 at 84-92). As a result, Allstate denied Tran's insurance claims on both the salon and the vehicle.
On August 18, 2014, Tran filed suit in the Circuit Court of Baldwin County Alabama alleging breach of contract, fraudulent suppression, fraud, and bad faith. Allstate removed this action to the U.S. District Court for the Southern District of Alabama on September 10, 2014. Allstate now moves for partial summary judgment on Tran's fraudulent suppression and fraud claim (Count Two) and bad faith claim (Count Four).
"The court shall grant summary judgment 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). Rule 56(c) provides as follows:
Fed. R. Civ. P. Rule 56(c). The party seeking summary judgment 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." Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir. 1991) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)). If the nonmoving party fails to make "a sufficient showing on an essential element of her case with respect to which she has the burden of proof," the moving party is entitled to summary judgment. Celotex, 477 U.S. at 323. "In reviewing whether the nonmoving party has met its burden, the court must stop short of weighing the evidence and making credibility determinations of the truth of the matter . . . the evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor." Tipton v. Bergrohr GMBH-Siegen, 965 F.2d 994, 998-999 (11th Cir. 1992).
Tran is a resident citizen of the state of Mississippi. (Doc. 1 at 3). Allstate is a corporation organized under the laws of the state of Illinois and authorized to do business as an insurance company in the state of Alabama. (Id.). The amount in controversy exceeds $75,000. This Court has diversity jurisdiction pursuant to 28 U.S.C. § 1332. Venue is proper because the events giving rise to this action occurred in Daphne, Alabama, within the Southern District of Alabama. 28 U.S.C. § 1391(b)(2) ("A civil action may be brought in—a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of the property that is the subject of the action is situated[.]").
Before addressing the parties' substantive contentions, the Court must decide what substantive law governs the claims in this diversity action. "A federal court in a diversity case is required to apply the laws, including principles of conflict of laws, of the state in which the federal court sits." Manuel v. Convergys Corp., 430 F.3d 1132, 1139 (11th Cir.2005) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941)). Tran asserts several claims involving insurance policies on both the salon and the vehicle. Both policies contain choice of law provisions. The vehicle policy states:
(Doc. 44-3 at 21)(emphasis added). The salon policy states:
(Doc. 44-2 at 27-28). In Alabama, the "right of parties to an agreement to choose a particular state's laws to govern an agreement" is well-settled, so long as choice-of-law provisions are not contrary to Alabama law or public policy. Cherry, Bekaert & Holland v. Brown, 582 So.2d 502, 506 (Ala. 1991); Craig v. Bemis Co., 517 F.2d 677, 680 (5th Cir. 1975). Nothing in the choice-of-law provisions contained in the policies is contrary to law or public policy. Further, the parties apply Alabama law in their briefing, and neither has argued that the law of any other jurisdiction should apply to Tran's claims. Therefore, the Court will apply Alabama law.
Allstate has moved for partial summary judgment on Counts Two and Four of the complaint. Count Two alleges fraud and suppression and Count Four alleges bad faith. (Doc. 1-1 at 8).
Count Two of Tran's complaint alleges:
(Doc. 1-1 at 8). According to Tran, Jordan told her that Allstate was going to pay her approximately $19,000 for the vehicle claim. (Doc. 53 at 13). However, Allstate did not pay Tran for the damages to the vehicle.
At her deposition, Tran was asked, "You told me about the conversation you had with Mr. Jordan that he was going to pay the $19,000 on the car. I'm not talking about that conversation. Did anyone at Allstate ever tell you anything that wasn't true except for that one conversation?" Tran responded, "[n]obody told me" and "[j]ust only him, only me and him."
Count Two
Wyeth, Inc. v. Weeks, 159 So.3d 649, 656 (Ala. 2014).
Under Alabama law, "[t]he elements of fraudulent suppression are: (1) the defendant had a duty to disclose an existing material fact; (2) the defendant concealed or suppressed that material fact; (3) the defendant's suppression induced the plaintiff to act or refrain from acting; and (4) the plaintiff suffered actual damage as a proximate result." Alabama Psychiatric Servs., P.C. v. 412 S. Court St., LLC, 81 So.3d 1239, 1247 (Ala. 2011)(internal quotations and citations omitted). Thus, in order to defeat a motion for summary judgment on either fraudulent suppression or misrepresentation, Tran must point to some evidence that she relied upon Allstate's alleged false representations.
Viewing the facts in the light most favorable to Tran, Allstate represented to Tran that she would be paid on her vehicle policy for the damages to the vehicle sustained as a result of the fire. (Doc. 51 at 33). With regard to the reliance elements of both causes of action, the following was elicited during Tran's deposition testimony:
(Doc. 53 at 15-16). Tran's own testimony specifically negates the reliance element of both a fraudulent suppression and a fraudulent misrepresentation claim, as she denies that she was induced to take any action as a result of Allstate's representations concerning payment for the vehicle. Moreover, Tran has failed to present any evidence of damage, i.e. credit damage.
When evaluating a fraud claim regarding the non-payment of an insurance claim, the Alabama Supreme Court has held:
Pugh v. S. Life & Health Ins. Co., 544 So.2d 143, 144 (Ala. 1988), as modified on reh'g (May 19, 1989)(internal citations omitted)(holding that a plaintiff alleging fraud in connection with refusal to pay an insurance claim constitutes fraud concerning the performance of a future act).
As previously discussed, Plaintiff fails to produce sufficient evidence of reliance or damages. Accordingly, Allstate's motion for summary judgment as to Tran's fraud claim is
Count Four alleges that Allstate acted in bad faith when it refused to pay Tran's claim. Under Alabama law, there is one tort of bad faith refusal to pay a claim, but there are two methods of proof: failure to pay and failure to investigate. The Alabama Supreme Court recently explained:
State Farm Fire & Cas. Co. v. Brechbill, 144 So.3d 248, 257-58 (Ala. 2013), reh'g denied (Jan. 17, 2014)(emphasis in original). "The plaintiff asserting a bad-faith claim bears a heavy burden." Shelter Mut. Ins. Co. v. Barton, 822 So.2d 1149, 1154 (Ala. 2001) (citing LeFevre v. Westberry, 590 So.2d 154, 159 (Ala.1991)). A "plaintiff must go beyond a mere showing of nonpayment and prove a bad faith nonpayment, a nonpayment without any reasonable ground for dispute." National Sec. Fire & Cas. Co. v. Bowen, 417 So.2d 179, 183 (Ala. 1982). "The right of an insurer to deny a claim on any arguable legal issue is to be as zealously guarded as is its right to decline benefits on any debatable issue of fact, the test of reasonableness being the same." Id.
"To defeat a bad faith claim, the defendant does not have to show that its reason for denial was correct, only that it was arguable." Liberty Nat. Life Ins. Co. v. Allen, 699 So.2d 138, 143 (Ala. 1997). "A bad-faith-refusal-to-investigate claim cannot survive where the trial court has expressly found as a matter of law that the insurer had a reasonably legitimate or arguable reason for refusing to pay the claim at the time the claim was denied." State Farm Fire & Cas. Co. v. Brechbill, 144 So.3d 248, 260 (Ala. 2013), reh'g denied (Jan. 17, 2014). "Ordinarily, if the evidence produced by either side creates a fact issue with regard to the validity of the [insurance] claim and, thus, the legitimacy of the denial thereof, the [bad faith] tort claim must fail and should not be submitted to the jury." Nat'l Sav. Life Ins. Co. v. Dutton, 419 So.2d 1357, 1362 (Ala. 1982).
Thus, in order to make a ruling on summary judgment, the Court must determine whether there is sufficient evidence for a jury to find that there is not even a debatable issue of fact as to whether Tran either burned or directed that her business and car be burned. As noted in Brechbill, supra, the Court must consider what was known to Allstate at the time of its denial of the claim. State Farm Fire & Cas. Co. v. Brechbill, 144 So.3d 248, 259 (Ala. 2013), reh'g denied (Jan. 17, 2014)(internal citations and quotations omitted).
At the time of the denial of the claims, the following, inter alia, had been determined by Allstate's investigation:
Tran responds by arguing that the conclusions reached by Allstate are based on "weak" evidence or that Tran is able to explain away the evidence that implicates her. However, the issue is not whether Tran's version of facts are stronger or credible. The issue is whether the conclusion reached from the known facts is debatable. No reasonable person could say that the conclusion reached by Allstate, that plaintiff directed or participated in the arson, is not a debatable issue of fact. "Alabama law is clear: . . . regardless of the imperfections of [the insurer's] investigation, the existence of a debatable reason for denying the claim at the time the claim was denied defeats a bad faith failure to pay the claim." State Farm Fire & Cas. Co. v. Brechbill, 144 So.3d 248, 259 (Ala. 2013), reh'g denied (Jan. 17, 2014)(internal citations and quotations omitted). Accordingly, Allstate's motion for summary judgment as to Count Four (bad faith) is
For the reasons discussed herein, Allstate's motion for summary judgment as to Counts Two and Four is
