ALETA A. TRAUGER, District Judge.
Pending before the court is a Motion for Summary Judgment (Docket No. 15) filed by the defendant, State Farm Fire and Casualty Company ("State Farm"), to which the plaintiffs, James and Belinda Walsh (the "Homeowners"), have filed a Response in opposition (Docket No. 30), and State Farm has filed a Reply (Docket No. 34). For the reasons stated herein, the motion will be granted.
This insurance dispute arises from allegations that State Farm, a provider of property insurance coverage to the Homeowners, denied the Homeowners' insurance claim for damage to their property that was caused by sinkhole activity, despite the fact that the Homeowners had met all conditions of the policy and the policy covered sinkhole damage. (Docket No. 1-2.) It is undisputed that the Homeowners' residential property (the "Property") was insured by State Farm, that their policy includes sinkhole damage (but not other types of damage to the land rather than the dwelling), and that the Homeowners' insurance claim submitted on September 15, 2014 for damages to their dwelling and surrounding land (the "Claim") was denied by State Farm on the grounds that the damage was not caused by sinkhole activity or any other covered calamity. The dispute in this action focuses solely on whether State Farm was justified in its denial of the Claim.
It is further undisputed that, upon receiving the Claim, State Farm sent representative Jeremy Moran to visit the Property and to observe the damage on September 19, 2014. On September 23, 2014, State Farm retained Conestoga-Rovers & Associates ("CRA") to investigate the damage to the Property and determine the cause. It is undisputed that CRA is a preferred vendor for State Farm and that it has regularly conducted investigations related to sinkhole claims and provided expert testimony in lawsuits over denied sinkhole claims on behalf of State Farm. Further, it is undisputed that State Farm did not provide to the Homeowners its contractual agreement with CRA for the investigation done on the Claim, nor did it disclose to the Homeowners the rate at which CRA was compensated for its investigation.
On October 1, 2014, CRA inspected the Property. On November 4, 2014, CRA issued a report of its findings, certified by Tennessee licensed geologists Bernd T. Rindermann and Norman R. Meeks, Tennessee licensed geotechnical engineer Steven A. Janosik, and licensed structural engineer Charles N. Stewart.
It is further undisputed that, on December 1, 2014, State Farm sent a letter to the Homeowners, explaining that the Claim would be denied based on the findings in the CRA Report. On March 10, 2015, counsel for the Homeowners sent a letter to State Farm, disputing the denial of the Claim and requesting that the Claim be reopened for further review. On April 13, 2015, State Farm responded, affirming the denial of the Claim but inviting the Homeowners to submit any information supporting their challenge to the decision. There is no evidence in the record that the Homeowners ever submitted any additional information to State Farm.
According to the Gulati Report, Mr. Gulati did not conduct any testing or investigation of his own into the damage to the Property. Rather, the Gulati Report is based solely on Mr. Gulati's review of the CRA Report. The Gulati Report makes the following conclusion: "Florida Testing & Environmental, Inc. does not concur with CRA's conclusions in that it is our professional opinion that based on the data presented sinkhole activity is present at the subject residence. It is my opinion that structural damage has occurred at the subject residence." (Docket No. 16-1, p. 3.) The Gulati Report later concludes that "adverse impact due to sinkhole activity at the subject residence cannot be ruled out" (id. at p. 4), but nowhere in the Gulati Report is there a definitive finding that the damage to the Property that is the subject of the Claim was caused by sinkhole activity.
(Id. at p. 4.) Mr. Gulati does not explain the methodology he applied to reach the conclusion that sinkhole activity is present on the Property, let alone explain the methodology to support his finding that such sinkhole activity may have caused the damage to the Property that is the subject of the Claim.
On June 19, 2015, the Homeowners filed a breach of contract claim against State Farm in the Circuit Court for Sumner County, Tennessee. The Homeowners further allege bad faith and malicious conduct by State Farm and seek punitive as well as compensatory damages. (Id.) The action was removed to federal court on September 28, 2015. (Docket No. 1.)
On February 24, 2017, State Farm filed a Motion for Summary Judgment (Docket No. 15), along with a Memorandum in support (Docket No. 16), and a Statement of Undisputed Material Facts with attachments (Docket No. 17). State Farm argues that it is justified in its position that the damage to the Property was not caused by sinkhole activity or any calamity covered by the Homeowners' policy and, thus, the Claim was rightly denied. State Farm also argues that the Gulati Report is inadmissible as evidence that the damage to the Property was caused by sinkhole activity, because it does not meet the standard for an admissible expert opinion under Rule 26(a)(2)(B).
On May 5, 2017, the Homeowners filed a Response in opposition (Docket No. 30), along with a Response to State Farm's Statement of Undisputed Material Facts (Docket No. 31), and a number of exhibits (Docket Nos. 32-33). Attached to the Homeowners' Response is the Affidavit of Sonny Gulati, which reiterates that he reviewed the CRA Report and adds that it is Mr. Gulati's professional opinion that 1) sinkhole activity is a cause of the damage to the Property; and 2) "CRA's opinions are inadequate, and not supported by the data presented." (Docket No. 30-3, ¶¶5-6.) There is no additional explanation given for how these conclusions were reached.
On May 19, 2017, State Farm filed a Reply. (Docket No. 34.)
Rule 56 requires the court to grant a motion for 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). If a moving defendant shows that there is no genuine issue of material fact as to at least one essential element of the plaintiff's claim, the burden shifts to the plaintiff to provide evidence beyond the pleadings, "set[ting] forth specific facts showing that there is a genuine issue for trial." Moldowan v. City of Warren, 578 F.3d 351, 374 (6th Cir. 2009); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). "In evaluating the evidence, the court must draw all inferences in the light most favorable to the non-moving party." Moldowan, 578 F.3d at 374 (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)).
At this stage, "`the judge's function is not . . . to weigh the evidence and determine the truth of the matter, but to determine whether there is a genuine issue for trial.'" Id. (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986)). But "[t]he mere existence of a scintilla of evidence in support of the [non-moving party's] position will be insufficient," and the party's proof must be more than "merely colorable." Anderson v. Liberty Lobby, 477 U.S. 242, 249, 252 (1986). An issue of fact is "genuine" only if a reasonable jury could find for the non-moving party. Moldowan, 578 F.3d at 374 (citing Anderson, 477 U.S. at 252).
Tennessee Law provides as follows:
Tenn. Code. Ann. § 56-7-130(d) (the "Sinkhole Statute").
The Homeowners' claims in this action hinge on a dispute as to whether sinkhole activity caused the damage to the Property underlying the Claim. The Homeowners mischaracterize State Farms' position to be that the dispute is solely about whether State Farm followed the Sinkhole Statute and that compliance with the Sinkhole Statute renders State Farm "immune from suit." (Docket No. 30, p. 5.) To the contrary, State Farm's position is that, having complied with the Sinkhole Statute, State Farm can only be liable for breach of contract if the Homeowners can show that such reliance was improper. The court agrees with this assertion. While it is true that the undisputed evidence shows that State Farm complied with the Sinkhole Statute in denying the Claim, evidence that the damage to the Property was, nevertheless, caused by sinkhole activity could still provide a basis for the Homeowners to prevail on their claim for breach of contract. The Homeowners are, thus, correct in their argument that the CRA Report's finding that sinkhole activity did not cause the damage underlying the Claim does not resolve this dispute. The question before the court on the pending motion, however, is whether the Homeowners have offered evidence of sinkhole damage that would properly support a triable issue of fact as to whether the CRA Report was incorrect and/or State Farm's reliance on it improper. As discussed more fully below, the Homeowners have no such evidence and, therefore, their claim for breach of contract must be dismissed.
The Homeowners are correct that State Farm is asserting a Daubert challenge to exclude the opinions of their expert witness, Sonny Gulati. Because the Gulati Report is central to the Homeowners' claim, the court will first consider whether it is admissible before turning to the question of whether the evidence in the record can properly support a triable issue of fact.
Expert testimony in federal court is governed by Federal Rule of Evidence 702, which states:
In its "gate-keeping" role, a trial court must evaluate the relevance and reliability of all expert testimony, whether the testimony offered is "scientific" or not. Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 147 (1999) (citing Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 589-90 (1993)). Also, under Rule 26(a)(2)(B), an expert report must contain "a complete statement of all opinions the witness will express and the basis and reasons for them." Failure to disclose this information in the expert report mandates exclusion of the expert's opinion on motion, at a hearing, or at trial, unless the violation was harmless or substantially justified. Fed. R. Civ. P. 37(c)(1); see also R.C. Olmstead, Inc. v. CU Interface, LLC, 606 F.3d 262, 271-72 (6th Cir. 2010).
The Gulati Report is inadmissible because it contains no explanation of the methodology used or the application of the methodology to the facts justifying the conclusion that sinkhole activity was present at the Property and cannot be ruled out as the cause of the damage underlying the Claim. Moreover, the Gulati Report does not explain the methodology by which it determines that the CRA Report, or the investigation on which it was based, is in some way inaccurate or unreliable. The Gulati Report, thus, does not meet the criteria of Daubert or Rule 702 and may not be introduced as evidence that the damage to the Homeowners' property was caused by sinkhole activity. Nor can the Gulati Report be used to show that the CRA Report is incorrect or that it was improper for State Farm to rely on it.
Further, even if the court were to find admissible Mr. Gulati's opinion that he is unable to rule out sinkhole activity as the cause of the damage to the Homeowners' property for the reasons enumerated in his report, this does not provide sufficient evidence to support the legal claim at issue in this action. Mr. Gulati does not have the same expertise as the authors of the CRA Report, nor did he conduct any additional testing or investigation. The fact that he in unable, from his professional standpoint and based on his review of the data, to rule out sinkhole activity as the cause of the damage giving rise to the Claim does not show that the CRA Report was incorrect or inaccurate in its finding that sinkhole activity was not the cause of the damage, given the expertise of the parties who prepared the CRA Report. Nor does it show that State Farm breached its statutory or contractual obligations to the Homeowners in relying on the CRA Report to deny the Claim.
Because the court finds — for the reasons discussed above — that Mr. Gulati's expert opinions are not admissible under Rule 702 and Daubert, and because there is no other evidence of sinkhole activity having caused the damage to the Property or of breach of contract by State Farm, the court finds that there is no triable issue of fact as to the Homeowners' breach of contract claim. Further, since the Homeowners have failed to place evidence in the record to support a finding that State Farm breached its contract with the Homeowners, they certainly cannot proceed with a claim that State Farm did so in bad faith.
Finally, the Homeowners cite the fact that they made a demand to State Farm to reconsider the Claim as grounds to allow them to pursue their claim for bad faith. While such a demand is necessary under the Tenn. Code Ann. § 56-7-105, it is not sufficient. As a matter of law, the Homeowners need to have evidence in the record to support their claim in order to proceed. Because they do not, there is no triable issue of fact as to whether State Farm acted in bad faith. The Homeowners argue that the burden is on State Farm to show that its process for selecting experts to investigate sinkhole claims is unbiased, but they cite no authority for this proposition. To the contrary, the burden is on the Homeowners, as plaintiffs in this action, to show that there is a triable issue of fact. Because they have not met this burden, their claims will be dismissed.
For the foregoing reasons, State Farm's Motion for Summary Judgment will be granted and this action will be dismissed.
An appropriate Order will enter.
