Bailey v. Peters et al

Filing 74

MEMORANDUM OPINION: The Court GRANTS National Fire's motion for summary judgment 60 and DENIES Bailey's motion for summary judgment 57 . The court will enter a separate order that dismisses counts III and IV with prejudice. Signed by Judge Corey L Maze on 1/7/2025. (LCB)

FILED
2025 Jan-07 AM 11:32
U.S. DISTRICT COURT
N.D. OF ALABAMA

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ALABAMA
MIDDLE DIVISION
JIMMY BAILEY,
Plaintiff,
v.

Case No. 4:22-cv-278-CLM

ALICIA PETERS, et al.,
Defendants.
MEMORANDUM OPINION
Alicia Peters burned Jimmy Bailey’s rental property. Bailey sued
Peters and his insurer, National Fire and Marine Insurance Company.
(Doc. 1-1). The court granted default judgment against Peters. (Doc. 47).
So only the claims between Bailey and National Fire remain. Both parties
ask the court to grant summary judgment in their favor on the claims
between them; National Fire seeks summary judgment on both counts,
breach of contract and bad faith (doc. 60), while Bailey seeks judgment
only on breach of contract (doc. 57). As explained, the court finds that no
reasonable jury could rule for Bailey on either claim, so the court will
GRANT National Fire’s motion and DENY Bailey’s motion.
BACKGROUND
Bailey owned a rental duplex. Peters leased and burned the duplex.
Peters has been indicted for arson but not yet tried.
National Fire insured the duplex. While the policy covers fire loss,
it also contains the following exclusion:

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CAUSES OF LOSS-SPECIAL FORM
B. Exclusions
2. We will not pay for loss or damage caused by or resulting
from any of the following:
(h) Dishonest or criminal acts by you, any of your partners,
members, officers, managers, employees (including leased
employees), directors, trustees, authorized representatives
or anyone to whom you entrust the property for any purpose
...
(Doc. 61-17) (emphasis added).
National Fire determined that Bailey had entrusted the apartment
to Peters when he leased it to her, then let her move in. Finding that
Peters had acted criminally when she burned the property, National Fire
refused to cover Bailey’s fire loss.
Bailey sued. He disputes entrusting Peters with the property and
disputes that Bailey committed a criminal act. Bailey claims that the
failure to pay his claim amounts to breach (Count III), and application of
the criminal act exclusion is bad faith (Count IV).
STANDARD
In considering cross-motions for summary judgment, the court
views the facts “in the light most favorable to the non-moving party on
each motion.” See Chavez v. Mercantil Commercebank, N.A., 701 F.3d 896,
899 (11th Cir. 2012). Summary judgment is appropriate when there is no
genuine dispute of material fact and the moving party is entitled to
judgment as a matter of law. FED. R. CIV. P. 56(a). A genuine dispute of
material fact exists when “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).

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DISCUSSION
Bailey has two pending claims: breach of contract (Count III) and
bad faith (Count IV). The court considers the claims in that order.
A.

Breach of Contract

As explained in the background, Bailey’s claim depends on whether
the criminal act exclusion applies. That issue breaks down into three
parts: (1) did Bailey own the property; (2) did Bailey entrust Peters with
the property; and, (3) did Peters damage the property by committing a
criminal act?
1. Property Ownership
National Fire argues that Bailey cannot prove he owns the rental
property. (Doc. 66, p. 27). But Bailey has submitted persuasive evidence
of property ownership. See (Doc. 68-1, (Deed to Jimmy Bailey for 2004
Sanders Avenue)); (doc. 68-2 (Tax Assessor’s Record for 2004 Sanders
Avenue)). Because the court must view this evidence in a light most
favorable to Bailey, the court finds that a reasonable juror could find that
Bailey had an insurable interest in the property.
2. Entrustee Status
The parties agree that Bailey leased 2004 Sanders Avenue, Unit B,
to Ms. Peters. (Doc. 71, p. 3); doc. 63, p. 4). But they disagree over whether
leasing and transferring possession of property qualifies as entrustment.
Bailey claims he never entrusted Peters with the property. (Doc. 611, p. 60). According to Bailey, “rent” and “entrust” have different
meanings. (Doc. 71, p. 11); (doc. 68-5, p. 20–21). Bailey understands
entrustment to require a confidential relationship—something lacking in
the landlord-tenant relationship. (Doc. 71, p. 11). In support of this
reading, Bailey points to all other listed categories of excluded individuals
under the policy. (Doc. 71, p. 13). Unlike partners, trustees, or managers
who could financially gain from insurance proceeds, Peters, as a tenant,

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would never be in line to receive insurance money Bailey receives to cover
the fire damage.
National Fire counters that the leasing of property and the giving
of keys both show entrustment. See Grover Com. Enters., Inc. v. Aspen Ins.
UK, Ltd., 202 So. 3d 877, 881 (Fla. Dist. Ct. App. 2016). National Fire says
that these acts establish that Bailey “surrender[ed] [the] property with
confidence regarding its care, use, or disposal,” which alone is enough to
show entrustment. (Doc. 63, p. 26).
The court agrees with National Fire. Interpretating insurance
policies is a question of law for the district court. Fireman’s Fund Ins. v.
Tropical Shipping and Const. Co., 254 F.3d 987, 1003 (11th Cir. 2001).
And the court must “give[] words in the policy their common, everyday
meaning and interpret[] them as a reasonable person in the insured’s
position would have understood them.” See State Farm Mut. Auto Ins. v.
Brown, 26 So. 3d 1167, 1169 (Ala. 2009).
The exclusion’s language is broad; it excludes “criminal acts done by
. . . anyone to whom you entrust the property for any purpose.” Taking
money in exchange for allowing a person to live on your property without
your presence is one reason (i.e. “any purpose”) for giving that person
responsibility to take care of your property. This plain reading is backed
by the Alabama Supreme Court’s definition of “entrustment” as
“commit[ting] something to another with a certain confidence regarding
his care, use or disposal of it.” Prill v. Marrone, 23 So.3d 1, 10 (Ala. 2009).
Undisputed evidence shows that Bailey leased the duplex to Peters,
gave her the keys, and allowed her to dwell in the property. (Doc 61-1
p.31); (doc. 61-7, p. 1-2). Bailey testified that he trusted Peters with the
duplex once she took the keys and possession:
Q:

She had possession of the property at the time she
started the fire, correct?

A:

I assume.

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Q:

And you trusted with possession of the property when
you gave her the keys after she signed the lease, correct?

A:

Right.

Doc. 61-1, p. 41. So there is no genuine dispute about entrustment as
defined by the Alabama Supreme Court, and no reasonable juror could
find that Bailey did not trust Peters with his property. That Bailey’s trust
was ultimately misplaced is a risk that falls on Bailey, not National Fire.
3. Dishonest or Criminal Act
Trust, however, doesn’t end the matter. The exclusion applies only
if “[d]ishonest or criminal acts” caused the fire.
1. No genuine dispute: National Fire determined that Peters burned
the duplex, thus committing a criminal act. National Fire presents this
evidence (plus more) to support its contention that no reasonable juror
could find that a criminal act did not occur:
•
•
•
•
•
•
•
•
•
•
•

Peters jumped out of the bedroom window where the fire started;
Police found Peters hiding, holding a lighter and pipe;
Peters had soot on her hands;
Peters admitted she had been smoking her pipe;
Peters told police she started the fire with the lighter because
she was trying to burn hell down;
Officers found Peters’ purse and ID in the freezer (a common
place to protect papers from fire);
Fire officials ruled out other sources of the fire, including the
stove, breaker panel, refrigerator, microwave, and candles;
The fire marshal determined that Peters started the fire near the
front of Peters’ bedroom dresser;
The fire marshal determined that the electrical outlet 3-4 feet
from the apparent origin could not have caused the fire;
National Fire’s fire investigator also determined that the
electrical outlet did not cause the fire; and,
Peters was charged with arson.

(Doc. 63, statement of undisputed facts ¶¶ 10-59).

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The court’s rules required Bailey to start his brief in opposition with
his disputes with National Fire’s facts “in separately numbered
paragraphs that coincide with those of the moving party’s claimed
undisputed facts . . . followed by a specific reference to those portions of
the evidentiary record upon which the dispute is based.” (Doc. 2, p.17).
Bailey did not dispute any of the above facts in the required manner. See
(doc. 71). Instead, he wrote his own section of “disputed facts” that
insinuate either (a) the electrical outlet caused the fire or (b) Peters
caused the fire because of mental defect. Id., ¶¶ 25-35.
The court rejects Bailey’s attempt to create a dispute over the fire’s
origin for several reasons. First, Bailey failed to confront National Fire’s
evidence as required by the court’s initial order, which plainly states the
consequence of this failure: “All material facts set forth in the statement
required of the moving party will be deemed to be admitted for summary
judgment purposes unless controverted by the response of the party
opposing summary judgment.” Because Bailey fails to controvert National
Fire’s facts at ¶¶ 10-59, the court treats them as admitted. Second,
Bailey’s counter statement about the electrical outlet is based on pure
speculation. Two officials deemed it could not have caused the fire, and
Bailey offers no testimony or evidence that it could have caused it. Pure
speculation does not create a genuine dispute of fact. Third, the court
granted Bailey default judgment against Peters on the theory that Peters
either intentionally burned the duplex or negligently and wantonly
allowed it to burn, as Bailey alleged in Counts 1-2. (Doc. 1-1). At some
point, Bailey will prove the damages caused by Peters. (Doc. 47, p.2).
Bailey cannot simultaneously argue that (a) Peters owes him damages for
burning his duplex and (b) Peters had noting to do with the fire.
In short, there is no genuine dispute that Peters caused the fire that
burned Bailey’s duplex.
2. Criminal act, not conviction: Bailey alternatively argues that,
even if National Fire can prove Peters burned his duplex, Peters’ act was
not a “criminal act” because she has yet to be convicted. Plus, there is a

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chance Peters won’t be convicted because a jury might find her not guilty
by reason of insanity. (Doc. 62-8, p. 33, 37).
The court rejects this argument because a conviction isn’t necessary
to prove that an act was “dishonest or criminal.” Again, interpreting the
exclusion clause is a question of law for the court. The word “act” is not
synonymous with the word “conviction”; one can commit a criminal act
without a jury finding him guilty of the act. Assume, for example, a
masked man robs a bank at gunpoint and is never caught. A criminal act
certainly occurred, even if a criminal conviction didn’t.
So it doesn’t matter if the State cannot find Peters and bring her to
trial. Nor does it matter if Peters appears, and a jury finds her not guilty
by reason of insanity. The policy exclusion still applies because there is no
genuine dispute of fact that Peters set fire to Bailey’s duplex, and the court
finds as a matter of law that one person setting fire to another person’s
property is a “dishonest or criminal act” as that term is used in the policy.
—
To sum up, there is no genuine issue of material fact that (a) Bailey
entrusted Peters with the duplex and (b) Peters committed a dishonest or
criminal act that burned the duplex. Because Bailey’s policy excludes
coverage in this factual circumstance, no reasonable juror could find that
National Fire breached its contract. The court will therefore GRANT
National Fire’s motion to dismiss Count III.
B.

Bad Faith

National Fire alone asks the court to grant summary judgment on
Count IV, bad faith. (Doc. 63, p. 29). The court will grant that motion.
An insured can’t establish bad faith without first establishing
breach of contract. See Walker v. Life Insurance Co. of N. Am., 59 F.4th
1176, 1186 (11th Cir. 2023). An insured also can’t establish bad faith if
the insurer had an arguable reason for denying coverage See id. at 1183–
85. As explained in Part A, no reasonable juror could find that National

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Fire breached its contract with Bailey. Because Bailey can’t establish
breach, he also can’t establish bad faith.
Further, even if Bailey’s claim for breach had survived summary
judgment, the court would still grant summary judgment on bad faith.
National Fire had an arguable reason for denying Bailey’s claim: National
Fire’s plausible finding that the criminal act exclusion precluded Bailey’s
request for coverage.
For either reason, National Fire is entitled to summary judgment
on Count IV, bad faith.
CONCLUSION
For these reasons, the court GRANTS National Fire’s motion for
summary judgment, (doc. 60), and DENIES Bailey’s motion for summary
judgment, (doc. 57). The court will enter a separate order that dismisses
Counts III and IV with prejudice.
DONE and ORDERED on January 7, 2025.
_________________________________
COREY L. MAZE
UNITED STATES DISTRICT JUDGE

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