Davis v. State Farm Fire and Casualty Company

Filing 31

MEMORANDUM OPINION - There being no genuine issues of material fact, State Farms motion for summary judgment is GRANTED as to Daviss breach of contract and bad faith claims, and this action will be DISMISSED WITH PREJUDICE. A separate order will be entered. Signed by Magistrate Judge John H England, III on 9/13/2017. (KEK)

FILED
2017 Sep-13 AM 11:04
U.S. DISTRICT COURT
N.D. OF ALABAMA

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
ELIZABETH DAVIS,
Plaintiff,
v.
STATE FARM FIRE AND CASUALTY
COMPANY,

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Case No.: 2:15-cv-02226-JHE

Defendant.
MEMORANDUM OPINION1
Plaintiff Elizabeth Davis (“Davis”) initiated this action against Defendant State Farm Fire
and Casualty Company (“State Farm”) alleging state law claims for breach of contract and bad
faith. (Doc. 1). Davis contends State Farm failed to adequately investigate her claim after her
house burned and acted in bad faith when it failed to pay her claim in accordance with the terms
of the policy. (See id.). State Farm has moved for summary judgment. (Doc. 24). The motion is
fully briefed and ripe for review. (See docs. 26-29). For the reasons stated below, State Farm’s
motion for summary judgment will be GRANTED.
I. Standard of Review
Under Rule 56(a) of the Federal Rules of Civil Procedure, 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.” Rule 56 “mandates the entry of summary judgment, after adequate
time for discovery and upon motion, against a party who fails to make a showing sufficient to

1

In accordance with the provisions of 28 U.S.C. § 636(c) and Federal Rule of Civil
Procedure 73, the parties have voluntarily consented to have a United States Magistrate Judge
conduct any and all proceedings, including trial and the entry of final judgment. (Doc. 9).
1

establish the existence of an element essential to that party’s case, and on which that party will
bear the burden of proof at trial.” Celotex Corp. v. Catrett, 447 U.S. 317, 322 (1986). The moving
party bears the initial burden of proving the absence of a genuine issue of material fact. Id. at 323.
The burden then shifts to the nonmoving party, who is required to “go beyond the pleadings” to
establish there is a “genuine issue for trial.” Id. at 324. (citation and internal quotation marks
omitted). A dispute about a material fact is genuine “if the evidence is such that a reasonable jury
could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
248 (1986).
The Court must construe the evidence and all reasonable inferences arising from it in the
light most favorable to the non-moving party. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157,
(1970); see also Anderson, 477 U.S. at 255 (all justifiable inferences must be drawn in the nonmoving party’s favor). Any factual disputes will be resolved in Plaintiff’s favor when sufficient
competent evidence supports Plaintiff’s version of the disputed facts. See Pace v. Capobianco,
283 F.3d 1275, 1276-78 (11th Cir. 2002) (a court is not required to resolve disputes in the nonmoving party’s favor when that party’s version of the events is supported by insufficient evidence).
However, “mere conclusions and unsupported factual allegations are legally insufficient to defeat
a summary judgment motion.” Ellis v. England, 432 F.3d 1321, 1326 (11th Cir. 2005) (per curiam)
(citing Bald Mtn. Park, Ltd. v. Oliver, 836 F.2d 1560, 1563 (11th Cir. 1989)). Moreover, “[a] mere
‘scintilla’ of evidence supporting the opposing party’s position will not suffice; there must be
enough of a showing that the jury could reasonably find for that party.” Walker v. Darby, 911
F.2d 1573, 1577 (11th Cir. 1990) (citing Anderson, 477 U.S. at 252).
II. Summary Judgment Facts
Until January 2013, Davis, together with her husband, Ed Davis, lived in the home located

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at 220 Thomas Road, Hayden, Alabama. (Doc. 24-2 at 4, 6 (12:8-13, 18:17-19:1)). Until at least
November 29, 2013, the Davises insured this house through a homeowners’ policy provided by
State Farm. (Doc. 24-5).
In January 2013, the couple separated, and Davis moved in with her mother in Hoover,
Alabama. (Doc. 24-2 at 6 (19:4-20:1)). At that point, the Davises’ son, Wesley, moved into the
house in Hayden due to concerns about vandalism. (Id. at 6-7 (20:19-21:3)). Wesley lived in the
house in the months leading up to, and on the date of, the fire.2 (Doc. 24-7 at 4 (11:1-20)). Davis
characterized her financial situation in the months leading up to the fire as “bad.” (Doc. 24-2 at
14-15 (52:23-53:3)). Davis was a legal secretary earning $38,000.00, annually. (Id. at 12-13
(43:10-18, 46:4-9)). Mr. Davis was not contributing financially, so Davis was paying for all of the
bills herself, but could not manage all of the expenses. (Id. at 15 (53:4-12)). She was about three
months behind on her mortgage at the end of 2013. (Id. (54:1-6)). Davis had a new car note and
was paying the bills on the house. (Id. (54:14-21, 56:20-21)). Davis’s checking account had a
negative ending balance on her November 2013 statement. (Id. at 18 (68:11-20); doc. 24-3 at 1).
The account had four overdraft fees in November 2013, and on December 12, 2013, the ending
balance was $34.90. (Doc. 24-2 at 19 (69:4-11); doc. 24-3 at 1-5).
In September 2013, Davis bought a new car and asked State Farm to change her mailing
address to her mother’s house in Hoover. (Doc. 24-2 at 32-33 (124:16-125:2)). When State Farm
received the information about the address change, it sent a cancellation notification for the
homeowners’ policy on November 5, 2013, to the insured because the house was no longer owner-

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Mr. Davis moved out of the subject home and into an apartment in October 2013. (Doc.
24-2 at 6-7 (20:19-20, 21:1)). Davis testified it was her intention to move back into the house
after Mr. Davis moved out, (id.at 7, 34 (21:12-17, 132:3-5)), but she was still living at her
mother’s house after Mr. Davis moved out in October 2013, (id. at 6 (19:19-20:5)).
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occupied. (Doc. 24-8 at 12, 14 (43:14-44:9, 51:4-52:19)). After receiving the notice, on November
5, 2013, Davis called Agent Kim Lee’s office. (Doc. 24-2 at 31 (118:15-119:2); doc. 24-3 at 20).
Regarding the call, Davis testified as follows:
She said well, we thought you weren’t living there anymore. I said that’s not
correct, my property is there. I stay with my mom there during the week when I’m
working. I didn’t get into it with her that I had separated from my husband. And I
said well, add it back in. But changing that address and all, that’s not correct.
(Doc. 24-2 at 31 (118:23-119:8).3 State Farm then reinstated the policy on November 7, 2013.
(Doc. 24-9 at 13 (46:16-21)). State Farm contends the November 2013 notice regarding whether
the home was owner-occupied was entirely separate from the cancellation it contends Davis later
instructed on November 29, 2013. (Doc. 24-8 at 12 (43:14-44:9); doc. 24-10 at 14 (50:2-12)).
Davis’s State Farm premiums were set up to automatically draft from her checking account
at the end of November 2013, and she was concerned about an overdraft. (Doc. 24-2 at 29, 55
(110:18-111:4, 112:16-20, 213:10-17)). If the State Farm premium drafted, Davis knew it would
bounce, leading to a snowball effect where other charges to her bank account would also bounce.
(Id. at 34 (132:9-23)).

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Later, Davis participated in the following exchange:

Q: [A]fter you left in January 2013, you may have gone to the house two or three
more times –
A: Uh-huh.
Q: -- after that?
A: I don’t know how many times, but I did go back to the house.
...
Q: [W]hen I was asking you about living in Hoover, you said it was normal for me
to stay with her, Gladys, during the week and at the subject home on the weekends.
Were you going back to Hayden like every weekend or was it just a few times?
A: Just a few. I did not go back up there every weekend.
(Doc. 24-2 at 54 (211:18-212:15)).
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On November 29, 2013, Davis called State Farm Agent Kim Lee’s office, but because no
one was there,4 she was routed to the State Farm Customer Response Center (“CRC”). (Doc. 242 at 29 (110:10-18); doc. 24-9 at 9 (31:8-17)). According to her deposition testimony, Davis
reported to the CRC representative she did not have enough money to pay the premium and
requested the automatic draft stop. (Doc. 24-2 at 29, 35 (110:17-19, 133:11-19)).
Following the conversation, the CRC representative, Matthew Castillo entered two
“remarks” or notes relating to Davis’s homeowners’ policy. First, Castillo typed a note at 8:16
AM CST stating “Insured is requesting to cancel policy, no reason given from insured. Effective
as of 11/29/2013.” (Doc. 24-9 at 12 (41:10-13); doc. 24-9 at 23). Another note, dated November
29, 2013, entered by Castillo one minute later at 8:17 AM CST, states “Customer declined making
payment using another payment method. The Recurring Monthly will be reinstated automatically
when payment is received. To prevent a cancellation notice being sent on the account, the payment
is due by 11-28-2013.” (Doc. 24-11 at 20). The CRC representative’s note was transferred to
Agent Kim Lee’s office, and when that office reopened the following Monday, her staff person,
Jamie Stewart, reviewed the note from the CRC representative. (Doc. 24-11 at 8 (26:1-9)). That
day, December 2, 2013, Davis spoke with Stewart on the phone. (Doc. 24-2 at 31 (117:19-118:4);
doc. 24-11 at 8 (27:19-21)). Following the call, Stewart entered a note stating “she canceled the
house and only paid on the cars and life insurance today. Changed Status from: Incomplete to:
Complete.” (Doc. 24-11 at 20). However, this note was connected to Castillo’s note regarding
suspension of recurring monthly payment. (Id.). In connection with Castillo’s note regarding a
request for cancellation, Stewart wrote “I made a change today to have this done. Changed Status

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November 29¸ 2013, was the Friday after Thanksgiving.
5

from Incomplete to: Complete.” (Doc. 24-9 at 23). Another note stated “CANCEL POLICY PER
CALL FROM ELIZABETH.” (Doc. 24-11 at 19). Stewart testified that she would have obtained
information from Davis as to the date Davis wanted the cancellation to become effective and that
it is “always [her] practice to verify [the effective date] with the customer.” (Doc. 24-11 at 9 (29:921)). She further testified that she doesn’t note that she asks the customer to verify the effective
date because “The request notes itself,” meaning that “When we put in the request for the
cancellation, it will not allow us to submit anything without an effective date.” (Id. (30:13-20)).
Stewart testified she manually entered the cancellation effective date as November 29, 2013, in
the cancellation request for Davis’s homeowners’ policy. (Id. (31:12-22)). Once Stewart entered
a cancellation request, it was transmitted to underwriting. (Doc. 24-10 at 22 (83:13-16, 84:23-25),
35).

Underwriting received the request on December 3, 2013.

(Id. at 23 (86:9-11), 35).

Underwriting understood the cancellation request to mean that the insured requested policy
cancellation with an effective date of November 29, 2013. (Id. at 23 (86:8-16), 35).
No payment was made on the homeowners’ policy between November 29, 2013 and
December 13, 2013. (Doc. 24-2 at 44 (169:8-170:8)). Because Davis had stopped the automatic
draft on November 29, 2013, she provided a credit card number to Stewart to pay for the auto and
life insurance policies in the amount of $169.25. (Id. at 36, 41 (137:3-10, 158:16-23); doc. 24-11
at 8 (28:12-16)). In a recorded statement taken during the investigation, the following exchange
occurred regarding the November 29, 2013 phone call:
Q: [Jordan Justice] Okay Ms. Davis um can you please uh tell me uh from my
understanding is you called their main office on November 29th and requested the
cancellation of your policy can you please explain uh what took place then?
A: [Davis] Well I I knew that I had gotten a thing in the mail I knew that they were
fixing to automatically deduct $ 478.70 and I knew that I did not have that amount
in my checking account right then and I didn’t want it to get over drafted.
Q: Uh so it was w- um when did you call the office r- uh and request that they
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cancel it?
A: Uh it was on n- November the 29th.
...
Q: Okay okay all right now the the 29th request you said you called and requested
it because I understand there was the draft was fixing to come out of your account
and you didn’t have it in there and that’s when you called in and request that the
policy be canceled?
A: yeah
(Doc. 24-3 at 16-17). Later, at her disposition, Davis testified that she instructed the representative
not to draft the money from her account, but did not recall other instructions or the language she
used during the November 29th phone call. (Doc. 24-2 at 55 (213:14-214-8)). When asked if
either of his parents told him what was going on with the insurance after the fire, Davis’s son
testified that he thought Davis told him State farm had paid off the mortgage, but she did not know
what was going to happen with the contents of the house. (Doc. 24-7 at 13-14 (48:21-495)). When
asked why, Davis’s son answered that he thought his mother told him “she had called and said
cancel it, but then Dad had called and said do not cancel it, what I remember.” (Id. at 14 (49:710)).
At several times during her deposition Davis was asked what she asked State Farm to do
when she called on November 29, 2013. During one of these exchanges, Davis testified as follows:
Well, I had gotten a notice from them – notice a notice from them. I had talked to
the girl previously in Kim Lee’s office and she had told me that my insurance was
good until December 10th. And when I called this guy and talked with – it was a
male that I talked with on the 29th and told him that I did not have the money in
the bank for him to draft the premium right then. It was my thinking and intention
and understanding that if I didn’t make a payment before the 10th that nothing was
going to happen because they had told me I was good until December the 10th, that
I was covered until December 10th.

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(Doc. 24-2 at 30 (114:9-115:2)).5 At other times during the deposition, when asked about the
November 29, 2013 phone call, Davis testified as follows:
I don’t recall that I said the words he used. I wasn’t there when that statement was
transcribed. I called him, called State Farm, told him not to take the money out.
(Doc. 24-2 at 43 (165:16-20)).
Well, it would have been around the 28th, 29th would be the reason I called them
then to say they are fixing to draft it, I don’t have enough.
Q: Were your instructions to -- well, was the point of your call to say don’t
draft it, don’t take the money out.
A: Don’t draft it.
Q: And you don’t recall any other instructions you would have given to
them at the time?
A: Not specifically.
Q: So if the person at State Farm you talked to says you asked to cancel the
policy, you don’t –
A: I would say I don’t recall what language I used in that phone call.
(Id. a t 55 (213:14-214:7)).
After hearing about Davis’s inability to pay the homeowner’s policy premium,6 on
December 4, 2013, Mr. Davis deposited $400.00 in their joint checking account so Davis could
pay for the insurance. (Doc. 24-2 at 35 (134:10-136:3); doc. 24-3 at 1). Even after receiving the
funds from Mr. Davis, Davis did not attempt to pay the premium on the homeowners’ policy until
after the fire loss (which occurred on December 7, 2013). (Doc. 24-2 at 42 (162:4-164:21)).

Notably, as discussed infra, Davis did not attempt to pay the homeowner’s premium
until December 13th. (Doc. 24-4 at 2).
6
At her deposition, Davis testified she called Mr. Davis and said she had called the
insurance company because she didn’t have enough money to pay the premium. (Doc. 24-2 at 35
(134:11-14)).
5

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On December 9, 2013, when the State Farm Payment Plan did not receive funds due, State
Farm sent an automatic notice to Davis. (Doc. 24-3 at 22, doc. 24-4 at 1, doc. 24-8 at 17 (61:2162:3)). The notice included the homeowners’ premium, but also included the life and auto
insurance premiums. (Doc. 24-3 at 22, doc. 24-4 at 1). Although State Farm contends it considered
the homeowners’ policy cancellation was effective on November 29, 2013, State Farm Payment
Plan had not learned of the cancellation at the time it sent the automatic notice. (Doc. 24-10 at 15
(54:4-11). State Farm Payment Plan was notified of the alleged November 29, 2013 cancellation
after underwriting finished processing the request on December 17, 2013. (Id. (55:22-56:2). On
December 13, 2013, a week after the December 7, 2013 loss, Davis wrote a check to State Farm
for the policy premium. (Doc. 24-4 at 2). Bank records indicate that on December 12, 2013, there
was only $34.90 in the Davises’ joint account. (Doc. 24-3 at 1).
On December 17, 2013, State Farm sent a confirmation to Davis that her insurance was
cancelled, effective November 29, 2013. (Doc. 24-3 at 21). Ten business days elapsed between
underwriting’s receipt of the cancellation request (December 3, 2013) and State Farm’s
confirmation of cancellation (December 17, 2013). (Doc. 24-10 at 10 (35:8-10, 15-17)).
During the interim, on December 7, 2013, there was a fire at the 220 Thomas Road house
in Hayden, Alabama. (Doc. 24-2 at 8 (25:1-9)). The cause of the fire remains unknown. (Id.).
Wesley Davis, Davis’s son, was at the home during the fire. (Doc. 24-7 at 11 (15-22)). Wesley
Davis informed Mr. Davis about the fire, and Mr. Davis informed Davis. (Doc. 24-2 at 7 (24:823)). Mr. Davis notified State Farm of the fire on December 7, 2013. (Id.at 28 (106:14-107:2)).
Claim Specialist Jordan Justice investigated the claim, recommending denial to his Team
Manager, Eddie Travelstead, who approved the denial of the claim. (Doc. 24-8 at 20, 36 (75:116; 139:7-18)). Justice and Travelstead worked together throughout the investigation. (Doc. 24-

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12 at 4-5 (11:11-12:6, 16:9-19)). Justice received the assignment on December 7, 2013, and began
his investigation by speaking with the State Farm agent on December 9, 2013. (Doc. 24-8 at 23
(85:13-86:13)). Justice testified:
Yeah, on December 9th I Spoke to the State Farm agent that morning and the
insured had canceled their policy on November 29th, 2013, and this was keyed into
the system and a refund for the premium not used will be sent to the insured. Talked
about the date of loss was on December 7th, 2013, after the cancellation request
took place. Agent was going to email me documentation showing the cancellation
request by the insured was completed, you know, then I was going to move forward
with my investigation.
(Id. (86:2-13)). After this conversation, Justice contacted underwriting and confirmed the effective
date of the purported cancellation. (Id. (88:6-8)). As to cancellation, the policy provided as
follows:
5. Cancellation.
a. You may cancel this policy at any time by notifying [State Farm] in writing
of the date cancellation is to take effect. We may waive the requirement
that the notice be in writing by confirming the date and time of cancellation
to you in writing.
(Doc. 24-6 at 31). Travelstead testified it was his understanding that when making a cancellation
request, the insured selects the effective date, and State Farm goes with what the insured requests.
(Doc. 24-12 at 5 (13:20-14:1)). He further explained that “the effective cancellation date would
be the date that the policy is no longer in force. It is canceled that day.” (Id.). When asked about
the provision of the policy waiving the requirement that the insured’s request be in writing by State
Farm confirming the date and time of cancellation in writing, Travelstead testified that, to his
knowledge, based on the policy language, there was no timeframe. (Id. (14:11-15:4)).
On December 16, 2013, Justice requested a copy of the confirmation of cancellation sent
to Davis. (Doc. 24-8 at 24 (92:13-16)). Justice also spoke with a State Farm Payment Plan
representative about the December 9, 2013 notice sent to Davis.
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(Id. at 25 (94:2-10)).

Furthermore, he took recorded statements from both Davis and her agent’s staff person, Jamie
Stewart. (Id. (95:7-11); doc. 24-11 at 10-11 (36:19-37:7), 34-36).
On January 28, 2014, State Farm sent a letter to the Davises explaining that State Farm had
concluded its investigation, finding that there was no active policy in force on the date of the loss.
(Doc. 24-8). State Farm paid off the Davises’ mortgage because the mortgage company had no
way of knowing that the policy had been purportedly canceled.7 (Doc. 24-12 at 16 (57:5-58:17)).
During the Summer of 2014, Justice received a letter from a lawyer representing Davis, raising
additional issues as to the cancellation, which led State Farm to conduct an additional investigation
into the claim. (Doc. 24-8 at 25 (96:8-12)). At that time, Justice also took Mr. Davis’s recorded
statement.8 (Id. (96:2-12)).

After conducting the additional investigation, State Farm again

determined that no policy was in force on the date of the loss and notified Davis that its decision
to deny coverage stood. (Doc. 24-2 at 46 (179:7-20); doc. 24-4 at 4).
Prior to the fire loss, State Farm had made the decision to “Non-Renew” the Davises’
policy, which would be applied to the next renewal term, July 2014. (Doc. 28-4 at 17 (67:15-22)).
This information was contained in the underwriting file. (Doc. 28-5 at 21 (81:23-82:10)).
Although Davis’s counsel contends Justice would have known about the non-renewal decision,

Regarding State Farm’s decision to pay the Davis’s mortgage after the fire, Davis
contends that Travelstead testified that State Farm satisfied the mortgage under Paragraph 10,
Mortgage Clause, Letter C, which states “[i]f this policy is canceled by us, the mortgagee shall
be notified at least 10 days before the cancellation takes effect.” (Doc. 26 at 13-14 (citing doc.
24-12 at 16 (57:2-12, 59:3-8)). Travelstead corrected this testimony in his deposition, explaining
that because the mortgagee was unaware of the purported cancellation request and would not
have had a chance to protect its interest before cancellation became effective, State Farm decided
to protect the mortgagee’s interest. (Id. at 16-17 (57:14-19, 62:13-21)). State Farm’s Rule
30(b)(6) witness on claims-related questions testified to the same. (Doc. 28-5 at 9 (35:1-5)).
8
Since that time, but before Davis filed her complaint, Mr. Davis passed away. (Doc.
24-2 at 4 (12:16-20)). The divorce, that had been filed on January 15, 2014, was dismissed. (Id.
at 8-9 (26:21, 27:1, 28:14-16, 31:1-2)).
7

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(doc. 26 at 13), counsel cites no evidence to support this assertion, and it appears Davis’s counsel
never questioned Justice about the non-renewal decision, (see doc. 24-8).
In an email sent on December 16, 2013, between members of State Farm’s underwriting
department, Mitch Moore, apparently referring to Davis’s claim, states: “Since they both appear
out, can you handle today? Claims is a little nervous about this one . . . .” (Doc. 27-3 at 38).
Davis sought no other information about the meaning of this email. Justice testified that “I don’t
know why that person put that. I mean, we wasn’t [sic] nervous or anything in regards to this. I
don’t know why they would put that in an email.” (Doc. 24-8 at 3 (8:3-6)).
III. Analysis
A. Breach of Contract
A “policy” has been defined as a “(a) written contract of . . . insurance.” Ala. Code §2714-1(1) (1975). In Alabama, an insurance contract is essentially like all other contracts and is
governed by general rules of contract law. Pate v. Rollinson Logging Equip., Inc., 628 So. 2d 337
(Ala. 1993). A “breach of contract” occurs when there is a failure by one of the parties to the
contract to perform any promise that forms the whole or part of the contract without a legal excuse
for doing so. Dickinson v. Cosmos Broadcasting Co., Inc., 782 So. 2d 260 (Ala. 2000). To prevail
on a breach of contract claim, Davis must prove (1) the existence of a valid contract binding the
parties, (2) her own performance under the contract, (3) State Farm’s non-performance, and (4)
damages. See Jones v. Alfa Mut. Ins. Co., 875 So. 2d 1189, 1195 (Ala. 2003). Specifically, State
Farm contends Davis cannot establish there was a valid contract of insurance on the date of loss
(December 7, 2013), because Davis cancelled her policy, effective November 29, 2013, and
therefore the court should grant summary judgment as to the breach of contract claim. (Doc. 24
at 15).

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1. Did Davis Request Cancellation of the Policy Effective November 29, 2013?
When cancellation is a defense in a breach of contract action, the insurer has the burden of
proving the policy was cancelled. Mid-State Homes, Inc. v. Cherokee Ins. Co., 284 So. 2d 274,
275 (Ala. 1973). “[I]n the absence of a restrictive statutory provision, the parties to an insurance
contract may specify the method by which it may be canceled and the parties are thereby bound. .
. . [A]n insurance policy may be canceled according to its terms.” Id. at 276. State Farm points
to the cancellation provision of Davis’s homeowners’ policy, which allows an insured to cancel
the policy at any time in writing, or for State Farm to waive the writing requirement by “confirming
the date and time of cancellation to [the insured] in writing[,]” (doc. 24-6 at 31), and argues Davis
exercised her right under the policy to cancel the policy at any time by verbal request, and State
Farm confirmed her request in writing (albeit after the loss, on December 18, 2013), resulting in
no policy being in force on the date of loss, (doc. 24 at 15). Davis argues there is a genuine issue
of material fact as to whether Davis canceled the homeowners’ policy and that the cancellation
provision of the policy is ambiguous. (Doc. 26 at 15-21).
The potential question of fact here is: What did Davis say during the November 29, 2013
phone call with CRC Representative Castillo; more specifically, did Davis request State Farm
cancel her homeowners’ insurance policy during that phone call? The repeated contention in
Davis’s response brief is that she did not request cancellation of her homeowners’ policy; however,
this assertion is not supported by the evidence counsel cites. See Dudley v. Gandy, No. 7:11-cv4170-LSC, 2014 WL 5020102, at *5 (N.D. Ala. Oct. 7, 2014) (“Counsels’ unsupported statements
in a memorandum are not evidence for purposes of summary judgment”). Specifically, the
deposition excerpts cited do not support the assertion that Davis did not request cancellation of her
homeowners’ policy. (Doc. 26 at 4, 15; see doc. 24-2 (132:1-5, 133:18-19, 165:19-20; and 213:5

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to 214:7)). Davis’s actual testimony, and whether it creates a question of fact, will be discussed
below.
The evidence Davis requested cancellation of her homeowners’ policy during the
November 29, 2013 phone call is as follows: (1) two notes or “remarks” Castillo entered on
November 29, 2013, memorizing the phone call; (2) three notes or “remarks” Stewart entered after
her phone call with Davis on December 2, 2013; and (3) the transcript of Davis’s recorded
statement taken by Justice during the investigation. Castillo’s notes from November 29, 2013,
state “Insured is requesting to cancel policy, no reason was given from insured. Effective as of
11/29/13[,]” which was entered at 08:16:20AM CST, and “Customer declined making a payment
using another payment method. The Recurring Monthly will be reinstated automatically when
payment is received. To prevent a cancellation notice being sent on the account, the payment is
due by 11-28-2013[,]” which was entered at 08:17:26 AM CST.9 (Doc. 24-9 at 23; doc. 24-11 at
20). Stewart’s notes from her December 2, 2013 call with Davis state: “CANCEL POLICY PER
CALL FROM ELIZABETH[,]” which was entered at 12:06:38 PM CST, and “she canceled the
house and only paid on the cars and life insurance today,” which was entered at 4:50:41 PM CST
with the description “Suspended Recurring Monthly Payment,” and “I made a change today to
have this done Changed States from: Incomplete to: Complete, which was entered at 4:52:59 PM

Davis argues the court should look at Castillo’s second note as supporting her
contention that she did not intend to cancel her policy, but merely requesting the automatic
payments be stopped. (Doc. 26 at 15-16). This is illogical. One minute before this note,
Castillo entered a remark stating “Insured is requesting to cancel policy, no reason given from
insured.” (Doc. 24-9 at 23). Furthermore, the second note regarding “Suspended Recurring
Monthly Payment” states that “[t]o prevent a cancellation notice being sent on the account, the
payment is due by 11-28-2013.” (Doc. 24-11 at 20). The note was entered on November 29,
2013, the same day as the phone call. (Id.). Thus, the deadline to submit payment to prevent a
cancellation notice from being sent out had passed; i.e., with the cancellation of the recurring
monthly payment, a cancellation notice would issue.
9

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CST with the description “Request for Cancellation.” (Doc. 24-11 at 19-20; doc. 24-9 at 23).
Excerpts from Davis’s recorded statement taken after the fire and during the investigation, include:
Q: [Jordan Justice] Okay Ms. Davis um can you please uh tell me uh form my
understanding is you called their main office on November 29th and requested the
cancellation of your policy can you please explain uh what took place then?
A: [Davis] Well I I knew that I had gotten a thing in the mail I knew that they were
fixing to automatically deduct $ 478.70 and I knew that I did not have that amount
in my checking account right then and I didn’t want it to get over drafted.
Q: Uh so it was w- um when did you call the office r- uh and request that they
cancel it?
A: Uh it was on n- November the 29th.
...
Q: Okay okay all right now the the 29th request you said you called and requested
it because I understand there was the draft was fixing to come out of your account
and you didn’t have it in there and that’s when you called in and request that the
policy be canceled?
A: yeah
(Doc. 24-3 at 16-17).
The evidence Davis points to in support of the assertion that she did not request to cancel
her homeowners’ policy during the November 29, 2013 call is thin at best. Davis never testified
that she did not request cancellation of her policy. Instead, Davis testified she could not remember
the specific instructions she gave on November 29, 2013, other than not to draft the premium out
of her account. (Doc. 24-2 at 55 (213:14-214:7)). Davis’s testimony that is the most advantageous
to her position is that she believed she had coverage until December 10, 2013, and that it would
not have not been logical for her to cancel her policy, but only to request State Farm not draft the
premium from her account. (Doc. 24-2 at 30 (114:9-115:2)). Specifically, Davis states “[i]t was
my thinking and intention and understanding that if I didn’t make a payment before the 10th that
nothing was going to happen because they had told me I was good until December the 10th, that I
was covered until December 10th.” (Id.). And, “I don’t think that I would have said cancel on
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that date, because why would I have canceled it on the 29th if I knew I had good insurance until
the 10th.” (Id. (116:11-15)).
Taking Davis’s testimony as true, that she did not intend to cancel her homeowner’s policy
when she called State Farm on November 29, 2013, there is still the undisputed evidence of Davis’s
December 2, 2017 phone call with Stewart, and Stewart’s testimony that Davis confirmed the
policy cancellation and cancellation date of November 29, 2013. (Doc. 24-11 at 9 (29:9-21, 31:233:4)). Furthermore, during her deposition, Davis does not dispute the records or recollection of
State Farm representatives. Specifically, after responding that she did not recall any other
instructions she would have given during the November 29, 2013 call, Davis was asked “So if the
person at State farm you talked to says you asked to cancel the policy, you don’t – ” and Davis
answered “I would say I don’t recall what language I used in that phone call.” (Doc. 24-2 at 55
(214:3-7)).
Additionally, on December 2, 2013, Davis paid the life and auto insurance premiums, but
not the homeowners’ policy premium. (Doc. 24-11 at 20). And, although Mr. Davis deposited
$400.00 in their joint account on December 4, 2013, after he learned Davis did not pay the
homeowners’ policy premium, (doc. 24-2 at 35 (134:10-136:3); doc. 24-3 at 1), Davis did not
attempt to pay on the policy until December 13, 2013, almost a week after the fire loss. (Doc. 242 at 42 (162:4-164:21)).
Although it may not have been Davis’s intention to cancel the homeowners’ insurance
policy when she called State Farm on November 29, 2013, it is undisputed that at some point
during either the November 29, 2013 and/or December 2, 2013 call, Davis requested or at least
agreed to cancellation of her policy, effective November 29, 2013. To create a factual issue
sufficient to defeat summary judgment, Davis asks the court to infer that this undisputed evidence

16

misstates what she said, during the call and further asks the court to ignore the fact she offers no
evidence to dispute State Farm’s evidence. While the court must draw all reasonable inferences
in favor of Davis, this inference is not reasonable.
2. Is the Cancellation Provision Ambiguous?
Davis contends State Farm’s cancellation policy permitting the insured to cancel his or her
policy is ambiguous. (Doc. 26 at 17-21). The issue of whether a contract is ambiguous is a
question of law for the court to decide. McDonald v. U.S. Die Casting & Dev. Co., 585 So. 2d
853, 855 (Ala. 1991) (“If the terms within a contract are plain and unambiguous, the construction
of the contract and its legal effect become questions of law for the court. . . . “). The terms of an
insurance policy are ambiguous only if the policy’s provisions are reasonably susceptible to two
or more constructions or there is reasonable doubt or confusion as to their meaning. United
Services Auto. Ass’n v. Smith, 329 So. 2d 562 (Ala. Civ. App. 1976). In determining whether
ambiguity exists, a court should apply the common interpretation of the language alleged to be
ambiguous. See Ala. Farm Bureau Mut. Cas. Co. v. Goodman, 188 So. 2d 268, 270 (Ala. 1966).
This means the terms of the insurance policy should be given a rational and practical construction.
Green v. Merrill, 308 So. 2d 702 (Ala. 1975). A court cannot consider the language in the policy
in isolation, but must consider the policy as a whole. Turner v. United States Fidelity & Guar.
Co., 440 So. 2d 1026 (Ala. 1983).
The policy, in relevant part, provides as follows:
5. Cancellation.
a. You may cancel this policy at any time by notifying [State Farm] in writing
of the date cancellation is to take effect. We may waive the requirement
that the notice be in writing by confirming the date and time of cancellation
to you in writing.

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(Doc. 24-6 at 31). Given its content and context in the policy, it is clear this provision is referring
to methods by which an insured can initiate cancellation. It begins with “You may cancel . . .” and
the next paragraph provides methods of cancellation State Farm can initiate. Also, the language
of the policy itself unambiguously allows an insured to request cancellation by providing the date
on which it is to take effect, and State Farm then confirms that in writing. Specifically, the first
sentence sets forth one method of cancellation, by the insured’s writing informing State Farm of
the date cancellation should take effect. The second sentence provides a second method of
cancellation by referring back to the first method, removing one requirement, and adding another.
In “waiv[ing] the requirement that the notice be in writing,” the provision modifies the first method
of cancellation as follows: “You may cancel this policy at any time by notifying us in writing of
the date cancellation is to take effect.” Thus, by using the second method, the insured may cancel
the policy at “any time” by simply notifying State Farm “of the date cancellation is to take effect.”
Then, to finalize this second method of insured-initiated cancellation, State Farm merely confirms
the “date and time of cancellation” in writing. The provision is both simple and unambiguous.
Although it does not appear Alabama courts have addressed cancellation language similar
to the language in Davis’s homeowners’ policy, other courts have determined that where a policy
provides for cancellation by the insured at “any time,” the effective date of cancellation is the date
requested by the insured. Considering nearly identical policy language,10 a Kansas appellate court

10

The cancellation policy language in Benton stated:
4. Cancellation
How You May Cancel. You may cancel your policy by notifying us in writing of
the date to cancel, which must be later than the date you mail or deliver it to us.
We may waive these requirements by confirming the date and time of cancellation
to you in writing.
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held that the insured’s verbal request to cancel the policy was effective as of the date requested by
the insured. State Farm Mut. Auto. Ins. Co. v. Benton, 113 P.3d 266, 269 (Kan. Ct. App. 2004).
Specifically, that court explained “[r]egardless of what procedure State Farm had as its internal
processing of the cancellation request, [the insured] conveyed his intention of cancelling the policy
to agent Swinney and understood State Farm would cancel the coverage on the [subject vehicle]
effective January 3, 2001, at 12:01 a.m.” Id. Likewise, the Tenth Circuit has construed a policy
permitting cancellation by the insured at “any time”11 and stating “[i]f and when an insurance
company receives an unequivocal request that a policy . . . be cancelled, the policy is effectively
cancelled as of the date requested; neither the consent of or action by the insurer is necessary.”
Comm. Standard Ins. Co. v. Farmers Alliance Mut. Ins. Co., 385 F.2d 826, 830 (10th Cir. 1967);
see also Allstate Ins. Co. v. Cipriani, 629 So. 2d 183, 184 (Fla. Dist. Ct. App. 1993) (holding that
even where the policy only provided for written cancellation, a call by the insured to his agent’s
office was sufficient to cancel the policy because “provisions permitting written cancellation
generally are considered to be for the benefit of the insured”). Davis’s attempts to distinguish
Benton and Cipriani are unpersuasive. (Doc. 26 at 18-19). Davis is correct that the court in Benton
held that the insurer did not have a duty to inform the plaintiff that her husband had canceled her
vehicle insurance. 113 P.3d at 269. However, the Benton court also addressed the cancellation of
the policy, id., and the Kansas court’s language regarding cancellation is instructive. As for

113 P.3d at 268.
11
The policy in Commercial Standard contained this provision:
This policy shall be cancelled at any time at the request of the insured, in which
case this Company shall, upon demand and surrender of this policy, refund the
excess of paid premium above the customary short rates for the expired time.
385 F.2d at 830 n.5.
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Cipriani, Davis argues that there was no question of fact in that case as to whether the plaintiff
contacted the insurance company to cancel her policy and points to the fact that the plaintiff had a
history of contacting the insurance company to add and remove policies. (Doc. 26 at 19). While
the facts in Cipriani are not identical to those in this case, its persuasive effect remains. The
Florida appellate court relied on the conclusion that policy provisions providing that cancellation
must be in writing are generally considered to be for the benefit of the insurer and thus subject to
waiver by the insurer. Cipriani, 629 So. 2d at 184.
Furthermore, without an express provision stating otherwise, it would be illogical to allow
an insurer’s delay in providing written confirmation to effect or nullify the insured’s cancellation.
As the undisputed evidence demonstrates, Davis called State Farm on both November 29, 2013
and December 2, 2013, to stop her recurring monthly payment and expressed her intent to cancel
the policy. This fulfilled the first part of the policy provision that the insured notify State Farm of
when the cancellation is to take effect. State Farm then confirmed the date and time of the
cancellation in writing to Davis on December 18, 2013, fulfilling the second part of the provision,
that confirmation of cancellation be in writing. As Davis points out, (doc. 26 at 19), the policy
does not provide a timeframe within which confirmation of cancellation must be made to the
insured. State Farm did confirm the cancellation to Davis in writing within ten business days of
her request.
The State Farm Payment Plan notice sent to Davis on December 9, 2013, (doc. 24-3 at
22), does not change or undo the cancellation. At the time an insured requests cancellation of a
policy, that request “fixes the rights and liabilities of the parties as of the date of such request, and
the fact that the insurer later wrote the insured declaring a subsequent date for cancellation does
not operate to delay the cancellation.” 2 COUCH ON INSUR. § 31:36 (citing Atlantic Fire Ins. Co.

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of Raleigh v. Smith, 80 P.2d 216 (Okla. 1938)); see also Commercial Standard, 385 F.2d 831 (the
insurer sending an inconsistent notice of cancellation after the insured’s cancellation “do[es] not
revivify the cancelled policy.”). Moreover, Davis received the notice no earlier than December 9,
2013, after the December 7, 2013 fire loss, and thus could not have relied on the notice for any
purpose. The rights and liabilities of the parties were fixed on November 29, 2013, then confirmed
on December 2, 2013, and any subsequent action by State Farm, even if inconsistent, did not
resurrect the policy or delay cancellation.
To survive a motion for summary judgment, there must be sufficient evidence from which
a jury could reasonably find for Davis. See Walker v. Darby, 911 F.2d 1573, 1577 (11th Cir. 1990)
(citing Anderson, 477 U.S. at 252). “A mere ‘scintilla’ of evidence will not suffice.” Id. As
outlined above, the evidence establishes that Davis asked, or at least agreed, for the homeowners’
policy to be canceled, effective November 29, 2013, (doc. 24-11 at 19, doc. 24-9 at 23), and autodrafts stopped because she did not have sufficient funds in her account, (doc. 24-11 at 20). The
only evidence that could possibly be construed as being to the contrary is a single passage from
her deposition in which she testifies that “it was my thinking and intention and understanding that
if I didn’t make a payment before the 10th that nothing was going to happen.” (Doc. 24-2 at 30
(11:9-115:2)). This is no more than a “mere ‘scintilla.’” Furthermore, in light of the undisputed
evidence from the December 2, 2013 phone call in which Davis confirms her cancellation request,
effective November 29, 2013, and her repeated failure to dispute that she requested to cancel her
policy, no reasonable juror could conclude that Davis did not request cancellation. See Scott v.
Harris, 550 U.S. 372, 379-80 (2007) (explaining that if the non-movant’s evidence is so
thoroughly discredited by the rest of the record evidence that no reasonable jury could accept it,
the evidence fails to establish the existence of a genuine issue of fact requiring jury determination).

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Despite repeated arguments from Davis’s counsel, there is simply no evidence to dispute the
evidence establishing that Davis requested to cancel her homeowners’ policy, effective November
29, 2013. State Farm is due summary judgment on the breach of contract claim.
B. Bad Faith
Davis contends State Farm’s bad faith refusal to pay and bad faith failure to investigate has
caused her to suffer damages. (Doc. 24 at 23). The elements for the tort of bad faith are as follows:
(1) an insurance contract between the parties and a breach thereof; (2) an intentional refusal to pay
the insured’s claim; (3) the absence of any reasonably legitimate or arguable reason for that refusal
(the absence of a debatable reason); (d) the insurer’s actual knowledge of the absence of any
legitimate or arguable reason; and (e) if the intentional failure to determine the existence of a
lawful basis if relied upon, the plaintiff must prove the insurer’s intentional failure to determine
whether there is a legitimate or arguable reason to refuse to pay the claim. National Sec. Fire &
Cas. Co. v. Bowen, 417 So. 2d 179, 183 (Ala. 1982); see also State Farm Fire & Cas. Co. v.
Brechbill, 144 So. 3d 248, 257-58 (Ala. 2013) (clarifying that there is only one tort for bad faith
in Alabama, whether based on refusal to pay or refusal to investigate). To establish an insurer’s
bad faith, a plaintiff must go beyond a mere showing of non-payment and prove a bad faith nonpayment, a non-payment without any reasonable grounds for dispute. Bowen, 417 So. 2d 179, 183
(Ala. 1982). The plaintiff must show the insurance company had no legal or factual defense to the
insurance claim. Id.
“The plaintiff asserting a bad faith claim bears a heavy burden.” Shelter Mut. Ins. Co. v.
Barton, 822 So. 2d 1149, 1154 (Ala. 2001). “Bad faith . . . is not simply bad judgment or
negligence. It imports a dishonest purpose and means breach of known duty, i.e., good faith and
fair dealing, through some motive of self-invest or ill will.” Brechbill, 144 So. 3d at 159-60. Here,

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as explained above, there is no evidence a homeowners’ insurance contract existed between the
parties on the day of the loss to be breached. Without breach of contract, there can be no bad faith.
Id. at 257-58.
Additionally, notwithstanding the absence of a contract, any bad faith claim under Alabama
law requires a plaintiff to prove, among other things, the absence of any reasonably legitimate or
arguable reason for an intentional refusal to pay the insured’s claim, i.e., the absence of a debatable
reason for the denial. Id. at 257. If the insurer’s investigation “established a legitimate or arguable
reason for refusing to pay,” that is sufficient. Id. State Farm’s investigations concluded the
homeowners’ policy was no longer in force on December 7, 2013, the date of loss. Davis cannot
establish the elements required under Brechbill.
There is no dispute State Farm conducted two separate and thorough investigations of
Davis’ claim: one in December 2013/January 2014 and another in the summer of 2014. Both
investigations showed that Davis called and requested cancellation of her policy on November 29,
2013. During the investigation, Davis never contended that she did not request policy cancellation
(as her brief now alleges). Additionally, Davis points to no evidence that State Farm would have
had the opportunity to evaluate during its investigation that would raise a question as to the
substance of Davis’s telephone calls to State Farm on November 29, 2013 and December 2, 2013.
To the contrary, State Farm’s investigation revealed Davis asked for the homeowners’ policy to
be canceled on November 29, 2013, (doc. 24-11 at 19, doc. 24-9 at 23), and auto-drafts stopped
because she did not have sufficient funds in her account, (doc. 24-11 at 20). This was confirmed
by a phone call to her agent’s office three days later, on December 2, 2013. (Id.). A single email
stating that “[c]laims is a little nervous about this one” from someone outside of the investigation,
and without context, does not create a bad faith claim. Furthermore, Davis’s arguments based on

23

State Farm’s decision to satisfy the mortgage are misplaced. Travelstead clarified his testimony
regarding payment of the mortgage within minutes; allowing Davis to use the unclarified testimony
as a “gotcha” moment is not justified. Furthermore, Davis points to no evidence Justice knew
Davis’s policy was in a “non-renew” status for the following year or how that fact would influence
his investigation. Finally, the impact of any communications with Davis after the loss and their
impact on Davis, or when the denial letter was sent to Davis are irrelevant in assessing State Farm’s
investigation.
Because State Farm’s investigation revealed the policy was no longer in force on the date
of loss, there was a legitimate or arguable reason for refusing to pay. There are no genuine issues
of material fact, and State Farm is entitled to summary judgment on Davis’s bad faith claim.
IV. Conclusion
There being no genuine issues of material fact, State Farm’s motion for summary judgment
is GRANTED as to Davis’s breach of contract and bad faith claims, and this action will be
DISMISSED WITH PREJUDICE. A separate order will be entered.
DONE this 13th day of September, 2017.

_______________________________
JOHN H. ENGLAND, III
UNITED STATES MAGISTRATE JUDGE

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