Phoenix East Association, Inc. v. Westchester Surplus Lines Insurance Company
Filing
68
ORDER GRANTING in part and DENYING in part 57 Motion for Summary Judgment. Defendant's motion for summary judgment is GRANTED with respect to the bad faith claim and DENIED with respect to the contract claim. Count II is dismissed with prejudice, as set out. Signed by District Judge William H. Steele on 02/05/2024. (cjr)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
PHOENIX EAST ASSOCIATION, INC., )
)
Plaintiff,
)
)
v.
) CIVIL ACTION 22-0495-WS-B
)
WESTCHESTER SURPLUS LINES
)
INSURANCE COMPANY, etc.,
)
)
Defendant.
)
ORDER
This matter is before the Court on the defendant’s motion for summary judgment.
(Doc. 57). The parties have filed briefs and evidentiary materials in support of their
respective positions, (Docs. 57, 60, 66, 67), and the motion is ripe for resolution. After
careful consideration, the Court concludes that the motion is due to be granted in part and
denied in part.
BACKGROUND
According to the complaint, (Doc. 1), the defendant issued the plaintiff a policy of
insurance (“the Policy”) covering a condominium complex (“the Property”). The
Property was damaged by Hurricane Sally in September 2020. The plaintiff made a
claim on the Policy, but the defendant found that the damages fell below the Policy’s
deductible and made no payment on the claim. The complaint alleges that the actual
amount of covered damages exceeds $6 million. Count I alleges breach of contract,
while Count II alleges bad faith. The defendant seeks summary judgment as to both
claims.
DISCUSSION
Summary judgment should be granted only if “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 seeking summary judgment bears “the initial burden to show the
district court, by reference to materials on file, that there are no genuine issues of material
fact that should be decided at trial.” Clark v. Coats & Clark, Inc., 929 F.2d 604, 608
(11th Cir. 1991). The moving party may meet its burden in either of two ways: (1) by
“negating an element of the non-moving party’s claim”; or (2) by “point[ing] to materials
on file that demonstrate that the party bearing the burden of proof at trial will not be able
to meet that burden.” Id. “Even after Celotex it is never enough simply to state that the
non-moving party cannot meet its burden at trial.” Id.; accord Mullins v. Crowell, 228
F.3d 1305, 1313 (11th Cir. 2000); Sammons v. Taylor, 967 F.2d 1533, 1538 (11th Cir.
1992).
“When the moving party has the burden of proof at trial, that party must show
affirmatively the absence of a genuine issue of material fact: it must support its motion
with credible evidence ... that would entitle it to a directed verdict if not controverted at
trial. [citation omitted] In other words, the moving party must show that, on all the
essential elements of its case on which it bears the burden of proof, no reasonable jury
could find for the nonmoving party.” United States v. Four Parcels of Real Property,
941 F.2d 1428, 1438 (11th Cir. 1991) (en banc) (emphasis in original); accord Fitzpatrick
v. City of Atlanta, 2 F.3d 1112, 1115 (11th Cir. 1993).
“If the party moving for summary judgment fails to discharge the initial burden,
then the motion must be denied and the court need not consider what, if any, showing the
non-movant has made.” Fitzpatrick v. City of Atlanta, 2 F.3d 1112, 1116 (11th Cir.
1993); accord Mullins, 228 F.3d at 1313; Clark, 929 F.2d at 608.
“If, however, the movant carries the initial summary judgment burden ..., the
responsibility then devolves upon the non-movant to show the existence of a genuine
issue of material fact.” Fitzpatrick, 2 F.3d at 1116. “If the nonmoving party fails to
make ‘a sufficient showing on an essential element of her case with respect to which she
2
has the burden of proof,’ the moving party is entitled to summary judgment.” Clark, 929
F.2d at 608 (quoting Celotex Corp. v. Catrett, 477 U.S. 317 (1986)) (footnote omitted);
see also Fed. R. Civ. P. 56(e)(2) (“If a party fails to properly support an assertion of fact
or fails to properly address another party’s assertion of fact as required by Rule 56(c), the
court may … consider the fact undisputed for purposes of the motion ….”).
In deciding a motion for summary judgment, “[t]he evidence, and all reasonable
inferences, must be viewed in the light most favorable to the nonmovant ….”
McCormick v. City of Fort Lauderdale, 333 F.3d 1234, 1243 (11th Cir. 2003).
“Therefore, the [non-movant’s] version of the facts (to the extent supported by the
record) controls, though that version can be supplemented by additional material cited by
the [movants] and not in tension with the [non-movant’s] version.” Rachel v. City of
Mobile, 112 F. Supp. 3d 1263, 1274 (S.D. Ala. 2015), aff’d, 633 Fed. Appx. 784 (11th
Cir. 2016).
“There is no burden upon the district court to distill every potential argument that
could be made based upon the materials before it on summary judgment.” Resolution
Trust Corp. v. Dunmar Corp., 43 F.3d 587, 599 (11th Cir. 1995); accord Gennusa v.
Canova, 748 F.3d 1103, 1116 (11th Cir. 2014).
Moreover, “a passing reference to an
issue in a brief [i]s insufficient to properly raise that issue.” Transamerica Leasing, Inc.
v. Institute of London Underwriters, 430 F.3d 1326, 1331 n.4 (11th Cir. 2005). The Court
accordingly limits its review to those arguments the parties have expressly and
adequately advanced.
“A party asserting that a fact cannot be or is genuinely disputed must support the
assertion by … citing to particular parts of materials in the record,” and “[t]he Court
need consider only the cited materials ….” Fed. R. Civ. P. 56(c)(1)(A), (c)(3) (emphasis
added). By local rule, “[t]he movant must file a brief that includes … all facts relied
upon, each supported by a specific, pinpoint citation to the record ….” Civil Local Rule
56(a)(1) (emphasis added), and the Court need not consider factual assertions
unsupported by such pinpoint citations. Jones v. Unity Behavioral Health, LLC, 2021
WL 5495578 at *1, *4 (11th Cir. 2021). As this Court has noted, “[t]he Court will not
3
scour an entire deposition transcript to seek out evidentiary support for defendant’s
statement.” Ivy Marine Consulting, LLC v. Monarch Energy Partners, Inc., 2019 WL
1173356 at *4 (S.D. Ala. 2019); accord Foster v. Bridgestone Americas Tire Operations,
LLC, 2013 WL 1363962 at *5 n.12 (S.D. Ala. 2013).
I. Breach of Contract.
An essential element of a claim for breach of contract is “the plaintiff[’s]
performance under the contract.” Childs v. Pommer, 348 So. 3d 379, 387 (Ala. 2021)
(internal quotes omitted). The defendant seeks summary judgment because the plaintiff
“failed to perform under the contract in at least two respects,” viz., the plaintiff “failed to
provide requested information and provided inadequate time to investigate the loss.”
(Doc. 57 at 10).
Applying the Rachel standard, the version of the relevant facts that the Court must
accept for present purposes is as follows:
The Property was damaged by Hurricane Sally on September 16, 2020. The
plaintiff gave the defendant notice of the loss one week later. The defendant assigned the
claim to an independent adjusting firm (“McLarens”) on September 25, 2020, and
McLarens inspected the Property the following day.
On October 20, 2020, after its inspection and a review of records, McLarens
emailed the plaintiff’s Association Manager (“Johnson”) a loss estimate of approximately
$447,000, explaining that this figure fell below the applicable deductible of $570,000 and
asking the plaintiff to submit any documents (such as estimates and invoices) showing
actual costs so that a final determination of damages could be made. (Doc. 57 at 4; Doc.
57-10 at 2; Doc. 66 at 2).
On October 29, 2020, McLarens emailed Johnson to advise that it would close its
file in 30 days if it did not receive anything further; on November 17, 2020, McLarens
emailed Johnson asking if there were any additional costs that would push the loss over
the deductible and asking for a response. (Doc. 57 at 4; Doc. 57-10 at 1; Doc. 66 at 2).
Johnson, however, did not receive these emails. (Doc. 66-2 at 2).
4
There were no further communications between the parties or their representatives
for almost ten months. On September 10, 2021, Johnson emailed McLarens’ senior vicepresident (“Hellman”) and invoked the appraisal process. (Doc. 60-1 at 10; Doc. 66 at 4;
Doc. 66-2 at 2, 10). Hellman did not respond until Johnson called him on November 12,
2021. (Doc. 66 at 4; Doc. 66-2 at 2).1
On more than one unidentified occasion in 2021 and 2022, Johnson left voicemails
with Hellman informing him that the plaintiff was still investigating the claim and
inquiring about the status of appraisal. (Doc. 66 at 5; Doc. 66-2 at 3).
On or about June 30, 2022, Johnson mailed a package of documents to the
defendant, with a cover letter reiterating the plaintiff’s position that its request for
appraisal should be honored. (Doc. 66 at 5; Doc. 66-2 at 2-3, 12). The submitted
documents included: (1) an executed proof of loss; (2) an estimate from the Howarth
Group; (3) a report from RJH and Associates; (4) a report from SouthernCat; and (5) a
report from Forensic Building Science. (Doc. 57-12; Doc. 66 at 5; Doc. 66-2 at 2-3).
RJH and Associates provided a professional engineer to inspect and assess the building’s
roof. (Doc. 66 at 7; Doc. 66-1 at 2). SouthernCat developed a bid for general conditions
work for the repair project. (Id.). Forensic Building Science was retained to inspect and
assess the scope and cause of damage. (Id.).
On July 29, 2022, the defendant responded that the request for appraisal was
premature because the defendant had been given no opportunity to review or consider the
$6.1 million figure expressed in the proof of loss. (Doc. 57 at 5-6; Doc. 57-13 at 3-4;
Doc. 66 at 3).
In August 2022, the defendant submitted the claim for a separate, independent
review and investigation by an engineering firm and a building consultant. These
1
The defendant cites an undifferentiated mass of 250 pages of deposition transcript for
the proposition that, in response to the plaintiff’s invocation of the appraisal process, “the insured
was informed that it needed to present its valuation of the claim so this Defendant could consider
it and determine whether it agreed or disagreed with the valuation.” (Doc. 57 at 5). Because the
defendant failed to provide pinpoint citations to the record supporting this proposition, the Court
disregards it.
5
consultants inspected the building in late August and mid-September 2022. (Doc. 57 at
6; Doc. 66 at 3). The engineering firm, but not the building consultant, delivered its
report in late October 2022. (Id.).
The plaintiff filed suit on December 15, 2022. (Doc. 1). At that time, the building
consultant had not delivered its report, and the defendant’s investigation of the claim was
ongoing. (Doc. 57 at 6; Doc. 66 at 3; Doc. 66-8). The building consultant’s report
arrived on or about January 9, 2023. (Doc. 66 at 16; Doc. 66-4 at 6).
As noted, the defendant argues that the plaintiff breached the Policy in two
respects: by not providing requested information and by not providing the defendant
adequate time to investigate the loss. In order to prevail on motion for summary
judgment, the defendant must show both that the Policy imposes these contractual
obligations on the plaintiff and that, given the version of the facts set forth above, it is
uncontroverted that the plaintiff failed to perform one or more of these obligations.
A. Failing to Provide Requested Information.
The defendant identifies two clauses addressing the provision of requested
information:
You must see that the following are done in the event of loss or damage
to Covered Property:
…
(5) At our request, give us complete inventories of the damaged and
undamaged property. Include quantities, costs, values and amount of
loss claimed.
…
(7) Send us a signed, sworn proof of loss containing the information we
request to investigate the claim. You must do this within 60 days after
our request. We will supply you with the necessary forms.
(Doc. 57 at 8; Doc. 57-1 at 23).
As to subparagraph (5), the defendant argues that the plaintiff “fail[ed] to timely
provide inventories of the damaged Property, despite requests for the same.” (Doc. 57 at
9). The defendant identifies these requests as McLarens’ emails of October 20, October
29, and November 17, 2020. (Id. at 11; Doc. 57-15 at 2).
6
None of these communications expressly request the plaintiff to provide
“inventories.” Instead, and without any reference to the Policy beyond its deductible,
they ask the plaintiff: to “advise if you have any actual costs (estimates/invoices) to
submit for review and consideration”; to “confirm your agreement that this loss will not
pierce the applicable deductible,” with a warning that “[w]e will close our file in 30 days,
if we do not received [sic] anything further”; and to “advise” whether “there [are] any
additional costs to claim that will push this loss over the deductible.” (Doc. 57-10 at 12). The defendant has offered no authority or analysis to support its assumption that the
emails request inventories rather than some other/lesser information, and the Court will
not supply the deficiency. See generally Ex parte Clark, 728 So. 2d 135, 141 (Ala. 1998)
(the insurer’s right to require the production of documents is governed by the language of
the policy, which is to be strictly construed against the insurer) (plurality opinion).
In addition, while it is uncontroverted that McLarens sent these emails, Johnson
denies receiving them. Even could any of the emails be construed as requesting
inventories, the defendant has not attempted to show that the plaintiff could be in breach
of the Policy by failing to honor a request it did not receive. Again, the Court will not
construct or support an argument on the defendant’s behalf.
As to subparagraph (7), the defendant posits that, after receiving the proof of loss,
it “requested additional information from Plaintiff, which Plaintiff did not provide”
before filing suit. (Doc. 57 at 2). Assuming for argument that such a failure might
violate the plaintiff’s duties under subparagraph (7), the defendant in its statement of
undisputed facts neither asserts that it made such a request nor points to any evidence that
it did so.2 Nor has it shown that the information allegedly requested extended beyond the
reports that the defendant denies were submitted but that the plaintiff’s evidence shows
were submitted contemporaneously with the proof of loss. The defendant has therefore
failed to make a threshold showing that the plaintiff violated subparagraph (7).
2
If such evidence is buried within the 250 pages of deposition transcript the defendant
dumped on the Court, it is to be disregarded for reasons stated previously.
7
The defendant repeatedly notes that the plaintiff first submitted documentation of
its loss almost two years after Sally struck. (Doc. 57 at 9, 11). That is indeed a long
time, but the defendant identifies no provision of the Policy or of Alabama law that
required the plaintiff to submit documentation more promptly or be barred from recovery.
Once again, the Court will not develop an argument for the defendant’s benefit.
B. Filing Suit Prematurely.
The defendant asserts that the plaintiff “breached the conditions of the Policy by
failing to allow Defendant sufficient time to evaluate the claimed damages once [the
plaintiff] finally provided the information.” (Doc. 57 at 9). The defendant elaborates that
the plaintiff “filed suit before Defendant had a fair opportunity to evaluate the claim.”
(Id. at 11-12).
The defendant identifies no Policy provision guaranteeing it a minimum amount of
time to consider a claim before suit may be filed. Instead, it relies on the provision that
“[n]o one may bring a legal action against us under this Coverage Part unless … [t]here
has been full compliance with all of the terms of this Coverage Part ….” (Doc. 57 at 9;
Doc. 57-1 at 11). This simply begs the question of what Policy term or terms had not
been fully complied with when suit was brought.
The defendant posits that it “has a contractual right to investigate the loss and
reach informed conclusions as to the scope of damages.” (Doc. 57 at 12). Many policies,
in the Court’s experience, expressly affirm the insurer’s right and duty to investigate, but
the defendant points to no such provision in the Policy.3 In any event, there is a world of
difference between a contractual right to investigate a loss and a contractual prohibition
on filing suit before the insurer has completed an investigation it deems satisfactory. The
defendant offers no authority recognizing such a prohibition under the language of this or
3
The Court declines to peruse the 81-page Policy on the defendant’s behalf in search of
such a provision.
8
any other policy, and no explanation how such a bar could be teased out of a policy that
contains no express prohibition.
Instead, the defendant cites several cases for the proposition that an insurer “has a
right to seek all information relating to an insured’s claim so that the insurer may
adequately and thoroughly investigate the claim to determine its obligations under the
contract.” (Doc. 57 at 12).4 In each of the cited cases, the insurer had invoked its
specific investigatory rights, as granted by policy language, and the insured’s
corresponding post-loss duties (to produce documents and/or to sit for examination under
oath), and the insured had filed suit without complying with the insurer’s requests. Under
such circumstances, the insured had failed to satisfy all contractual conditions precedent
to any obligation on the insurer to pay. E.g., Nationwide Insurance Co. v. Nilsen, 745 So.
2d 264, 267 (Ala. 1998). As noted in Part I.A, the defendant has failed to establish a
violation of any Policy provision.
C. Submitting an Amended Proof of Loss.
On October 2, 2023, the plaintiff submitted an amended proof of loss, identifying
the amount of loss as just south of $16.5 million ($10.4 million more than expressed in
the initial proof of loss). (Doc. 66-5). The defendant complains that it had no pre-suit
opportunity to evaluate this post-suit increase. (Doc. 57 at 11). The submission of an
amended proof of loss, the defendant says, precluded it from exercising “its right to
provide Plaintiff a report on the conditions that allegedly support the supplemental proof
of loss” and “hindered this Defendant’s right to investigate the loss.” (Id. at 12).
The implicit premise of the defendant’s argument is that an insured is precluded
from seeking in a civil lawsuit a higher figure than it presented to the insurer before filing
suit. The defendant, however, cites no authority for this (or any other) proposition. Once
4
The defendant improperly failed to provide pinpoint citations to any of these cases.
E.g., Coleman v. Unum Group Corp., 2016 WL 5539625 at *3 n.3 (S.D. Ala. 2016); Hughes v.
Houssiere, Durant & Houssiere, LLP, 2011 WL 4807713 at *1 (S.D. Ala. 2011); Stallworth v.
Hassan, 2008 WL 1836733 at *1 n.1 (S.D. Ala. 2008).
9
more, the Court declines to develop and support an argument on the defendant’s behalf.
Parenthetically, the right to provide reports on which the defendant relies applies only to
pre-loss inspections of the Property that “relate only to insurability and the premiums to
be charged.” (Doc. 57 at 7; Doc. 57-1 at 13).
II. Bad Faith.
Alabama law recognizes two forms of bad faith: “normal” and “abnormal.”
These are not two torts but a single tort “with different options for proof.” State Farm
Fire and Casualty Co. v. Brechbill, 144 So. 3d 248, 257-58 (Ala. 2013).
The plaintiff
invokes both.
“We have repeatedly held that the tort of bad-faith refusal to pay a claim has four
elements – (a) a breach of insurance contract, (b) the refusal to pay claim, (c) the absence
of arguable reason, (d) the insurer’s knowledge of such absence – with a conditional fifth
element: (e) if the intentional failure to determine the existence of a lawful basis is 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.” Brechbill, 144 So. 3d at
258 (internal quotes omitted). “Thus, for the tort of bad-faith refusal to pay, requirements
(a) through (d) represent the ‘normal’ case. Requirement (e) represents the ‘abnormal’
case.” Id. (internal quotes omitted).
A. Fall 2020.
The defendant argues that it did not deny the plaintiff’s claim in late 2020 but
merely “closed the file” when the plaintiff failed to respond to McLarens’ emails stating
the claim fell below the deductible. (Doc. 67 at 8). Absent reasoning or legal authority,
which the defendant does not provide, the Court cannot conclude as a matter of law that
the defendant did not deny the plaintiff’s claim in 2020.
The Brechbill Court described the sort of reason envisioned by the third element
as “arguable,” “legitimate,” and “debatable,” and it also spoke of a “lawful basis” for
denying a claim. 144 So. 3d at 258, 260. Since the tort’s inception, these terms have
10
been used interchangeably.5 “The ‘debatable reason’ under [element] (c) above means an
arguable reason, one that is open to dispute or question.” National Security Fire &
Casualty Co. v. Bowen, 417 So. 2d 179, 183 (Ala. 1982). The defendant asserts that
McLarens’ assessment, following an inspection of the Property, that the amount of loss
fell below the deductible constitutes an arguable reason for denying the claim, especially
given the plaintiff’s failure to respond to McLarens’ invitation to submit materials
indicating a higher figure. (Doc. 57 at 15). The plaintiff offers no disagreement with this
unremarkable proposition.
The plaintiff questions the thoroughness of McLarens’ investigation, (Doc. 66 at
6), but only in connection with its contract claim. (Id. at 14). Even had the plaintiff done
so in order to support an abnormal bad faith claim, the effort would fail. The Brechbill
decision makes clear that the conditional fifth element is a potential substitute for the
fourth element, but not for the third element, which the plaintiff must prove in every case.
“Regardless of whether the claim is a bad-faith refusal to pay or a bad-faith refusal to
investigate, the tort of bad faith requires proof of the third element, absence of legitimate
reason for denial ….” 144 So. 3d at 258. “The existence of an insurer’s lawful basis for
denying a claim is a sufficient condition for defeating a claim that relies upon the fifth
element of the insurer’s intentional or reckless failure to investigate.” Id. (emphasis in
original). Thus, “[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.” Id. at
260. “[R]egardless 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.” Id. at 259 (emphasis added).
5
See Gulf Atlantic Life Insurance Co. v. Barnes, 405 So. 2d 916, 924 (Ala. 1981) (“‘No
lawful basis’ … means that the insurer lacks a legitimate or arguable reason for failing to pay the
claim. [citation omitted] That is, when the claim is not fairly debatable, refusal to pay will be
bad faith ….”).
11
B. Fall 2022.
The defendant assumes that the plaintiff’s submission of a proof of loss in
September 2022 could constitute a re-submission of its claim. The defendant, however,
says it has not denied the claim. (Doc. 57 at 14-15). It is uncontroverted that the
defendant tasked an engineering firm and building consultant with investigating the loss,
that the defendant was still awaiting the building consultant’s report when the plaintiff
filed suit, and that the defendant’s investigation of the claim was ongoing. The plaintiff
itself insists that investigating its claim “is a lengthy and challenging process.” (Doc. 66
at 15). Nothing in these facts remotely suggests a denial of the plaintiff’s claim. The
plaintiff neither identifies any evidence that the defendant actually denied its claim at any
time after presentation of the proof of loss nor asserts that there has been a constructive
denial of the claim. See generally State Farm Fire & Casualty Co. v. Slade, 747 So. 2d
293, 317 n.6 (Ala. 1999) (addressing actual and constructive denials).
As to the third element, the plaintiff asserts only that the building consultant’s
report indicates damages of almost $620,000, or almost $50,000 over the deductible, yet
the defendant, without an arguable reason, did not pay the plaintiff this modest sum.
(Doc. 66 at 21-22).6 As the defendant points out, (Doc. 67 at 9), this report at most set up
a conflict with the McLarens report, which continued to provide an arguable basis for
non-payment.
The plaintiff focuses its attention on what it believes is evidence of the fifth
element, i.e., the abnormal case. (Doc. 66 at 17-21). The short answer is, without both a
denial and the lack of an arguable reason for a denial, the remaining elements of a bad
faith claim are irrelevant. In any event, the plaintiff’s arguments regarding the fifth
element lack merit.
In the ‘abnormal’ case, bad faith can consist of: 1) intentional or reckless
failure to investigate a claim, 2) intentional or reckless failure to properly
subject a claim to a cognitive evaluation or review, 3) the manufacture of
a debatable reason to deny a claim, or 4) reliance on an ambiguous portion
6
The plaintiff neglected to present evidence of the report’s contents, but the defendant
appears to accept the accuracy of the plaintiff’s figures.
12
of a policy as a lawful basis for denying a claim.
Jones v. Alfa Mutual Insurance Co., 1 So. 3d 23, 32 (Ala. 2008) (internal quotes omitted).
The plaintiff first asserts that the defendant “stopped investigating or adjusting” its
claim “when litigation was instituted.” (Doc. 66 at 17). The evidence on which the
plaintiff relies states only that no inspections have occurred since January 2023, not that
all investigation or adjusting was halted in December 2022. (Id. at 16; Doc. 66-3 at 12).
At any rate, the plaintiff does not characterize this alleged cessation of activity as a
“failure to investigate” that could support the fifth element, nor does it identify any
further investigation the defendant should have, but did not, undertake.
In a related vein, the plaintiff notes that the defendant did not respond to its
October 2023 amended proof of loss. (Doc. 66 at 16-17; Doc. 66-2 at 3). This, it says,
violated the Policy, which provides that “[w]e will give notice of our intentions within 30
days after we receive the sworn proof of loss.” (Doc. 57-1 at 24). A failure to respond is
not a failure to investigate, and the plaintiff alleges no such failure.
Next, the plaintiff argues that when its lawyer asked to see the claim file, the
defendant “refused to provide even basic claim correspondence or its own estimates.”
(Doc. 66 at 17). The brief, opaque deposition excerpt on which the plaintiff relies fails to
identify the timing, background, or content of any such request, (Doc. 66-4 at 5),
rendering the allegation incapable of assessment. Nor does the plaintiff identify any legal
requirement that an insurer divulge its claim file to the insured or its lawyer. Finally, the
plaintiff does not explain how such a failure could fall within any of the four categories
of abnormal bad faith recognized by Alabama law.
The plaintiff complains that the defendant has no written policies or procedures
regarding claims handling. (Doc. 66 at 18). This proposition is supported by the
evidence, (Doc. 66-3 at 2-3; Doc. 66-4 at 3), but it does not of itself support a claim of
abnormal bad faith, because the absence of such written policies or procedures does not
of itself indicate a failure to investigate or any other recognized ground of such a claim.
The plaintiff’s final and primary argument asserts that the defendant has
improperly relied on a Policy provision prohibiting any “legal action against” the
13
defendant “unless … [t]he action is brought within 2 years after the date on which the
direct physical loss or damage occurred.” (Doc. 57-1 at 11). According to the plaintiff:
such a provision is unenforceable under Alabama law; the defendant knew this; the
defendant nevertheless did not tell plaintiff’s counsel the provision was unenforceable;
the defendant instead talked counsel into a 90-day tolling agreement, lasting into
December 2023; when that agreement neared its expiration, the defendant offered another
tolling agreement, but without offering the plaintiff any consideration (the
unenforceability of the Policy provision rendering an extension of time “worthless”); the
plaintiff declined to agree to another extension and instead filed suit in December 2023;
and the defendant now argues, as addressed in Part I.B, that the action should be
dismissed because the plaintiff filed suit prematurely. The plaintiff concludes that the
defendant has manufactured a debatable reason to deny the plaintiff’s claim and is relying
on an ambiguous policy provision as its debatable reason. (Doc. 66 at 17-18, 19-21).
The Policy provision is not ambiguous. It means exactly what it says, as plaintiff’s
counsel himself expressly recognized at the time. (Doc. 66-6 at 3). Nor was plaintiff’s
counsel (a lawyer eleven years out of law school) hoodwinked by the defendant’s claim
specialist (repeatedly dismissed by the plaintiff as a novice only four years out of college)
regarding the enforceability of the provision. On the contrary, plaintiff’s counsel noted in
his initiating communication with the defendant that the provision “is contrary to and
unenforceable under Alabama law.” (Id.).7 Nor did the defendant talk the plaintiff into a
tolling agreement; instead, it was plaintiff’s counsel, in that same initial communication,
who proposed such an agreement. (Id.). Finally, the defendant did not force or trick the
plaintiff into filing suit; rather, the plaintiff, for reasons it has failed to place in the record,
declined the defendant’s invitation to extend the tolling agreement and instead filed this
lawsuit. (Doc. 66-7 at 2). As addressed in Part I.B, the defendant has failed to
demonstrate that this action was filed fatally prematurely but, even had it done so, it did
7
The plaintiff recognizes that the provision ineffectually seeks to shorten Alabama’s sixyear statute of limitations for contract actions and its two-year (from accrual) statute of
limitations for bad faith actions. (Doc. 66 at 19).
14
not “manufacture” this debatable reason; instead, the plaintiff elected to file suit in
December 2022 despite knowing it was under no legal compulsion to do so.
CONCLUSION
For the reasons set forth above, the defendant’s motion for summary judgment is
granted with respect to the bad faith claim and denied with respect to the contract claim.
Count II is dismissed with prejudice.
DONE and ORDERED this 5th day of February, 2024.
s/ WILLIAM H. STEELE
UNITED STATES DISTRICT JUDGE
15
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?