Green v. Allstate Insurance Company
MEMORANDUM OF DECISION AND ORDER DENYING AS MOOT 313 Motion DENYING AS MOOT 328 Motion for Reconsideration. Signed by Judge Timothy M. Burgess on 6/5/14. (SRL, CHAMBERS STAFF)
THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ALASKA
JEFFREY R. GREEN,
Case No. 3:11-cv-00210-TMB
ALLSTATE INSURANCE COMPANY,
MEMORANDUM OF DECISION
Plaintiff Jeffrey Green (“Plaintiff” or “Green”) is the owner of a triplex at 411 E 46th
Place in Anchorage. 1 Green had a homeowner’s insurance policy with defendant Allstate
Insurance Company (“Defendant” or “Allstate”). 2 Wells Fargo Bank (“Wells Fargo”) is listed as
the mortgagee under the policy. 3 In October 2010, a fire damaged the top two units of the
triplex—the unit where Plaintiff lived and a rental unit. 4 On April 8, 2011, Allstate issued a
letter denying Green’s claim based on exclusions for loss of property due to “[i]ntentional or
criminal acts of or at the direction of the insured person” 5 after Allstate concluded that “the fire
Dkt. 359 at 1.
Id. at 1-2.
Dkt. 26-2 at 1; Dkt. 359 at 3.
loss was not accidental but intentional.” 6 In August 2011, Plaintiff filed suit against Defendant
alleging breach of contract and seeking compensatory and consequential damages. 7
A six day jury trial was held in June 2013 to determine whether Plaintiff’s loss was the
result of an intentional or criminal act by Plaintiff. 8 The Court declared a mistrial on June 24,
2013 after the jury failed to reach a verdict. 9 A second trial was held in September 2013. 10 The
jury reached a verdict in favor of Plaintiff on September 13, 2013, and found that the value of
Plaintiff’s personal property lost in the fire was $80,000. 11
Following trial, four issues remained to be decided by the Court: (1) the cost to repair or
replace Plaintiff’s residence; (2) the amount that Plaintiff is entitled to receive to repair or
replace his residence; (3) the amount of additional living expenses Plaintiff is entitled to receive;
and (4) the amount of lost rental income Plaintiff is entitled to receive. 12
The Court held a one day evidentiary hearing on January 3, 2014, at which the parties
presented exhibits and witness testimony. 13 The parties subsequently submitted written
responses to questions from the Court, proposed findings of fact and conclusions of law, and
Dkt. 26-2 at 2.
Dkt. 1. Plaintiff’s case was removed to federal court on October 19, 2011. Id.
Dkts. 174, 176, 177, 178, 182, 183.
See Dkts. 313, 325.
final summary arguments. 14 Federal Rule of Civil Procedure 52(a) provides that “[i]n an action
tried on the facts without a jury . . . the court must find the facts specially and state its
conclusions of law separately.” Having considered the testimony of the witnesses, exhibits
admitted into evidence, and the parties’ submissions, the Court makes the findings of fact and
conclusions of law set forth below. 15
FINDINGS OF FACT
Seven witnesses testified at the hearing on January 3, 2014. 16 Plaintiff testified
on his own behalf. The Court finds that Plaintiff’s testimony was generally credible; however, as
discussed below, Plaintiff’s testimony regarding certain issues was not corroborated by reliable
Plaintiff also called David Hermann, Mike Gallagher, Benjamin Oien, and
Douglas Lipinski. 17 Hermann is the owner of Action Environmental, a company that provides
asbestos abatement services. 18 Oien is a structural engineer who provides structural inspection
Dkts. 357, 358, 359, 354, 360.
In this memorandum of decision, the Court does not purport to recite all of the evidence
submitted and arguments made by the Parties, but rather focuses on the evidence and arguments
supporting the Court’s findings and conclusions. See Fed. R. Civ. P. 52(a) advisory committee’s
note (“[T]he judge need only make brief, definite, pertinent findings and conclusions upon the
contested matters; there is no necessity for over-elaboration of detail or particularization of
See Dkt. 341 at 1.
Dkt. 349 at 7.
and design for small commercial residential buildings. 19 Lipinski is the general manager for
Taylored Restoration. 20 The Court finds that the testimony of Hermann, Gallagher, Oien, and
Lipinski was generally credible.
Defendant called Laurie Brummett and Richard Gerwin. 21 Brummett is a staff
claim service adjuster at Allstate Insurance Company who reviewed Plaintiff’s claims file prior
to testifying. 22 Gerwin is “an estimator or project manager” at ServiceMaster of Alaska, a home
restoration business. 23 Gerwin was asked by Allstate to visit Plaintiff’s property prior to the
hearing to prepare an estimate for repairs. 24 The Court finds that the testimony of Brummett and
Gerwin was generally credible.
The Court admitted ten exhibits. 25 Plaintiff submitted a November 22, 2013
estimate for asbestos remediation from Action Environmental for $67,168; 26 building plans for
Plaintiff’s residence; 27 a November 2010 estimate for the repair of Plaintiff’s residence by
Id. at 41-42.
Id. at 54-55.
Dkt. 341 at 2.
Dkt. 349 at 149-50.
Id. at 179.
Id. at 180.
See Dkts. 341 at 1-2; 343.
Exhibit 118, admitted 1/3/13.
Exhibit 121, admitted 1/3/13; see Dkt. 349 at 27.
Taylored Restoration for $244,609.74; 28 a November 5, 2013 estimate to demolish and rebuild
Plaintiff’s residence prepared by Michael Gallagher at MG Construction for $595,500; 29 a
November 8, 2010 estimate from Action Environmental for asbestos remediation for $34,605; 30
and a November 1, 2010 estimate for asbestos remediation from Action Environmental for
Defendant submitted Plaintiff’s 2008 and 2009 tax returns; 32 Plaintiff’s
Department of Corrections Inmate Location Records; 33 Plaintiff’s November 29, 2010 sworn
statement and proof of loss; 34 and a January 2, 2014 estimate for repairs to Plaintiff’s residence
prepared by Rick Gerwin at ServiceMaster for $286,928.02. 35
Cost to Rebuild or Repair Plaintiff’s Residence, Plaintiff’s Lost Rental
Income, and Plaintiff’s Additional Living Expenses
The parties agree that asbestos was used in the construction of Plaintiff’s
residence and is therefore present in Plaintiff’s home. 36 Action Environmental provided an
Exhibit 122, admitted 1/3/13; see Dkt. 349 at 61.
Exhibit 125, admitted 1/3/13.
Exhibit 128, admitted 1/3/13; see Dkt. 349 at 16-17. Hermann testified that he was asked to
remove “a couple portions of the scope of the work from the first proposal” prior to creating the
second proposal. Id. at 17.
Exhibit 129, admitted 1/3/13. See Dkt. 349 at 14.
Exhibit C, admitted 1/3/13.
Exhibit H, admitted 1/3/13.
Exhibit I, admitted 1/3/13.
Exhibit L, admitted 1/3/13, at 38.
Dkt. 359 at 3.
estimate on November 1, 2010 for asbestos remediation in the two damaged units in Plaintiff’s
residence for $52,355. 37 Action Environmental provided a revised estimate on November 8,
2010 for $34,605.00. 38 The second estimate omitted abatement from the “common long entry
hallway” and “the long garage.” 39 Action Environmental provided an updated estimate dated
November 22, 2013 for asbestos remediation throughout the entire residence for $67,168. 40 The
revised estimate states that, unlike the previous estimate, it includes all interior areas of the
triplex, all three residential units, the large common entry way, hall, and long garage. 41
Craig Nelson of Taylored Restoration prepared an estimate for repair of
Plaintiff’s residence in October 2010. 42 The estimate for repair was $244,609.74, including
$45,997.46 for “general demolition.” 43
Michael Gallagher, a general contractor 44 hired by Plaintiff, prepared an estimate
in November 2013 to demolish and rebuild Plaintiff’s residence. 45 Gallagher’s estimate to
Exhibit 129. See Dkt. 349 at 14. The first proposal included “Units A & B, common long
entry hallway, the long garage and exterior debris piles.” Exhibit 129 at 1.
Id.; Exhibit 128. The second proposal included “Units, A & B, and the cleaning up of exterior
debris piles.” Id. at 1.
Compare Exhibit 129 at 1 with Exhibit 128 at 1.
Id. at 1.
Dkt. 359 at 2.
Id. at 3; Exhibit 122.
The Court takes judicial notice of Mr. Gallagher’s business license # 915385, available at
Exhibit L, Admitted 1/3/13.
rebuild Plaintiff’s residence is $595,500, which includes: $483,615 for rebuilding, and $111,885
for asbestos remediation, 46 demolition and dump fees, and landscape and clean-up. 47
Gallagher’s estimate is based on a calculation of approximately 2,200 square feet of living
space 48 at a cost of $175 per square foot and a 963 square foot garage 49 at a cost of $100 per
square foot. 50 The estimate obtained by Plaintiff is based solely on a price per square foot using
“standard builder grade” materials. 51 The estimate does not contain an itemized list of materials
and labor or state the cost of either. 52
Rick Gerwin, an estimator and project manager at ServiceMaster of Alaska hired
by Defendant, prepared an estimate to repair Plaintiff’s residence in January 2014. 53 Gerwin’s
total estimate for repairing Plaintiff’s residence is $286,928.02. 54 This estimate does not include
Gallagher arrived at $73,855 for asbestos remediation using Action Environmental’s $67,168
estimate for asbestos remediation plus a 10% “contractor markup.” Dkt. 359 at 10; see Exhibit
125, Admitted 1/3/13.
Dkt. 349 at 29.
Id. at 30.
Id. at 35.
Dkt. 349 at 38.
See id. at 38-39.
Exhibit L at 2.
costs for mold or asbestos remediation. 55 Gerwin’s estimate does contain an itemized list of
labor and materials with costs for each item. 56
Ben Oien, a structural engineer hired by Plaintiff who inspected Plaintiff’s
residence on October 3, 2013, testified that the residence “had been severely water-damaged
throughout . . . the framing and the foundation”; that there was “six or eight inches” of standing
water in the basement; that there is “black mold everywhere”; that the visible exterior studs are
water-damaged; that “most of the roof structure” and “a bunch of the upper walls” were damaged
beyond repair; that he would not certify the foundation of Plaintiff’s residence for use; and that
there is no portion of the existing structure that is useable for new construction. 57
Gerwin, a project manager at ServiceMaster of Alaska, testified for Defendant
that during his inspection of Plaintiff’s residence in December 2013 he observed “about six
inches of ice” on the bottom floor, a badly burned roof and “roof truss system,” and “apparent
water damage.” 58 According to Gerwin, “everything was frozen.” 59 Gerwin testified that he
believed the structure could still be repaired because “the framing, the structure seemed to be
intact,” but also stated: “However, normally what we would do is actually have a structural
engineer take a look at it once everything’s thawed out to determine whether it was compromised
Dkt. 359 at 5; see Exhibit L.
See Exhibit L at 2-37.
Dkt. 349 at 44, 49.
Id. at 180-81.
Id. at 181.
or not.” 60 Gerwin prepared an estimate for repair of Plaintiff’s residence that included testing for
asbestos and lead (but not removal) for $286,928.02. 61 Gerwin’s estimate includes $29,500 for
“general demolition,” which is described as: “Labor to remove all remaining contents, demo
ceilings and walls down to the framing, and remove roof.” 62 But Gerwin conceded that his bid
could change dramatically based upon the opinion of a structural engineer, 63 and testified that his
bid did not include the cost of hiring an industrial hygienist to create a cleanup protocol for
mold, 64 or the cost of lead and asbestos remediation. 65 Gerwin testified that ServiceMaster does
not do demolition and rebuilding. 66
The Court finds that Plaintiff’s residence must be demolished and rebuilt. Gerwin
testified that he would need to seek the opinion of a structural engineer before he repaired
Plaintiff’s residence to determine whether apparent flooding in the lower level of Plaintiff’s
residence caused damage to the foundation. Oien, a structural engineer, testified that Plaintiff’s
residence could not be repaired. Defendant presented no testimony from a structural engineer.
The evidence presented therefore supports a finding that Plaintiff’s residence cannot be repaired
and must be demolished and rebuilt.
Id. at 184.
Id. at 181; Exhibit L at 38.
Exhibit L at 2.
Dkt. 349 at 186.
Id. at 185.
Id. at 187-88.
Id. at 190.
Based on the evidence presented, the estimated cost of demolishing and
rebuilding Plaintiff’s residence is $595,500.00, including $483,615.00 for construction, plans,
and permits; $73,855 (Action Environmental’s estimated $67,168 plus a 10% “contractor
markup”) for asbestos remediation; $30,000 for demolition and dump fees; 67 and $8,000 for
landscape and clean up. 68
Coverage Limit Under Plaintiff’s Policy
Total Amount Available to Plaintiff Under Policy
Plaintiff’s property was insured in 2010 by a Deluxe Homeowner’s insurance
policy issued by Allstate. 69 Coverage A of the Allstate Deluxe Homeowner’s policy provides for
coverage of the structure; the facial amount under the policy is $349,000. 70
The facial limit of Coverage A is adjusted by the Building Structure
Reimbursement Endorsement to the policy, which raises the coverage by 20%; the facial limit
for Coverage A is therefore $418,800. 71
The Coverage A limit is further adjusted by additional provisions within the
policy, including the Debris Removal provision of the Additional Protection coverage, which
The Court notes that Gerwin’s estimate for “General Demolition,” which included removal of
all remaining contents, demolition of ceilings and walls down to the framing, and removal of the
roof, was $29,400.00. Exhibit L at 2.
See Exhibits 125, 118 at 2; Dkt. 359 at 10. Defendant provided an estimate from
ServiceMaster to repair Plaintiff’s residence, but provided no testimony or exhibits regarding the
cost to replace Plaintiff’s residence.
Dkt. 359 at 1.
Id. at 5.
Id.; see also Dkt. 357 at 4.
provides up to an additional 5% of the property coverage shown on the declarations—
$349,000—for additional demolition expenses. 72 The total available for demolition expenses is
The policy also provides
up to 10% of the insurance shown on the Policy Declarations under
Coverage A . . . to comply with applicable laws regulating the
construction, use, or repair of any property or requiring the tearing
down of any property after a covered loss to covered building
structures and when repair or replacement results in increased cost
due to the enforcement of these laws. 73
The Building Codes provision in the Alaska Amendatory Endorsement to Plaintiff’s Deluxe
Homeowner’s Policy further states: “The amount of insurance provided by this coverage is a
separate limit of liability, and is the maximum we will pay for any one loss. Coverage only
applies to that portion of the dwelling that was damaged due to a covered loss.” 74 The total
amount available to Plaintiff to comply with applicable laws regulating the construction or repair
Dkt. 359 at 5-6.
Dkt. 33-34 at 4. Defendant cites “Exhibit A, admitted on 9/11/13” and “Bates No. 100202”
for the proposition that “treatment or removal and disposal of contaminants, toxins or pollutants
as required to complete repair or replacement of that part of the building structure damaged by a
covered loss” falls within the policy limits. Dkt. 357 at 5. Defendant did not attach Exhibit A to
its briefing or file it for the Court, but Bates No. 100202 appears at Docket 34-33. See Dkt. 3433 at 11. The Building Codes provision appears in the Alaska Amendatory Endorsement to
Plaintiff’s Deluxe Homeowners Policy, and therefore supersedes this portion of Plaintiff’s
policy. See Dkt. 33-34 at 1, 4. It is thus unclear to the Court why Defendant contends that costs
incurred to abate asbestos in compliance with state law would fall within the policy limits. See
Dkt. 357 at 5 n.30.
Dkt. 33-34 at 4.
of property under the Building Codes provision is $34,900. Because state law regulates the
abatement of asbestos in remodeling and demolition jobs, 75 Plaintiff is entitled to this coverage.
The total amount available to Plaintiff under his policy for demolition, complying
with applicable laws for asbestos remediation, and rebuilding is $471,150.00.
Amount Remaining Following Allstate’s Payment to Wells Fargo
The parties agree that Wells Fargo is listed as Plaintiff’s mortgagee under the
policy and qualifies as the loss payee. 76
Wells Fargo submitted a claim as loss payee under the policy on August 2, 2012
for $332,998.43. 77 On September 4, 2012, Allstate made a payment to Wells Fargo for
$230,855.14 pursuant to the loss payee clause, 78 calculated by using Taylored Restoration’s
November 2010 estimate for repair for $244,609.74, 79 adding $9,664.36 for a flooring estimate
and $9,075.68 for emergency services and winterization work, and subtracting $22,418.96 for
recoverable depreciation, $9,075.68 for two prior payments made to Taylored Restoration, and
the policy’s $1,000 deductible. 80
See A.S. § 18.31.200 (“A person may not be employed to abate an asbestos health hazard
unless the person has been certified in a program approved by the Department of Labor and
Workforce Development under (a) of this section.”); 8 AAC 61.600 (“A person performing,
directly supervising, or monitoring asbestos abatement work must have a certificate issued under
8 AAC 61.720. The certificate must be in the person's possession when performing work subject
to AS 18.31.200. and must be shown to a representative of the department upon request.”).
Dkt. 359 at 1.
Id. at 6; Dkt. 315-2 at 1.
Dkt. 359 at 6.
Exhibit 122; Dkt. 315-1 at 3.
Dkt. 315-1 at 3.
Plaintiff’s policy states that if the insured does not repair or replace his or her
residence, “payment will be made on an actual cash value basis,” deducting for depreciation. 81 If
the structure is repaired or replaced within 180 days of the actual cash value payment, a claim for
additional payment may be made. 82 But Defendant has agreed through an arrangement with
Wells Fargo’s agent, MSI, 83 to allow Wells Fargo to complete repairs to Plaintiff’s residence and
submit claims for additional money under the policy, 84 including for the $22,418.96 of
recoverable depreciation withheld and any additional money required to make repairs to the
property, 85 by December 31, 2014. 86
The Court finds that Plaintiff is entitled to an additional $240,294.86 under his
policy, plus prejudgment interest, to rebuild his residence. Pursuant to the Lender’s Loss
Payable Endorsement in Plaintiff’s policy87 and the agreement between Wells Fargo and
Allstate, 88 Defendant shall provide the principal amount to Wells Fargo for rebuilding. 89
Dkt. 34-33 at 10.
MSI is the public adjuster who was hired by Wells Fargo to present Wells Fargo’s claim to
Allstate. Dkt. 349 at 159.
Dkt. 354 at 6.
Dkt. 357 at 5 n.25.
Dkt. 349 at 160.
See Dkt. 34-33 at 24.
Dkt. 354 at 6.
This is consistent with the Court’s order at Docket 322. See Dkt. 322 at 6.
Plaintiff’s Additional Living Expenses
Plaintiff’s policy covers payment for Additional Living Expenses (“ALE”).
Amendatory Endorsement AP 1233-1 amends the Additional Living Expense provision of
Plaintiff’s policy and states: “We will pay the reasonable increase in living expenses necessary
to maintain your normal standard of living when a direct physical loss we cover under Coverage
A . . . makes your residence premises uninhabitable.” 90 Plaintiff’s policy requires the insured to
“produce receipts for any increased costs to maintain [his or her] standard of living while [he or
she] reside[s] elsewhere.” 91
Immediately after the fire occurred in October 2010, Plaintiff received temporary
housing from the Red Cross for two to three days. 92 The Red Cross then paid for Plaintiff to stay
at the Parkwood Hotel for one night. 93 Allstate paid for Plaintiff to stay at the Executive Suites
for the next two nights and at the Captain Cook Hotel for approximately a month and a half. 94
Allstate paid these hotels directly. 95 Plaintiff then received permission from Defendant to enter a
month to month lease for an apartment that rented for $1,850 per month. 96 Defendant paid
$1,850 directly to Plaintiff’s landlord for the month to month lease. 97 Defendant continued to
Dkt. 34-34 at 2.
Dkt. 33-34 at 9.
Dkt. 359 at 3.
Id. at 115-16.
Id. at 116-17.
Id. at 110-11.
Id. at 3-4.
Id. at 111.
make monthly payments to Plaintiff’s landlord through May 2011. 98 When Defendant denied
Plaintiff’s claim, Defendant ceased making payments for ALE. 99
Plaintiff was incarcerated between January 23, 2011 and March 14, 2011;
between May 29, 2012 and June 16, 2012; and between September 6, 2012 and June 6, 2013. 100
Plaintiff testified that he moved into the shed at his triplex on June 1, 2011 after
Allstate denied his claim, and that he continued to split his time between the shed and the triplex
unit that was not destroyed by fire until he went to jail again on May 29, 2012. 101 When Plaintiff
was released on June 16, 2012, Plaintiff returned to the shed and triplex unit until he returned to
jail on September 6, 2012 for 273 days. 102 When Plaintiff left jail in June 2013, Plaintiff lived in
an apartment belonging to a friend; 103 and from July to September 2013, Plaintiff split his time
between that apartment and a home on the hillside while serving as a caretaker for one of his
third party custodians, Dr. Merchant. 104
Id. at 3-4.
Dkt. 359 at 4.
Plaintiff testified that he returned to jail around May 28, 2012 for about two weeks. Dkt. 349
at 90-92. Plaintiff’s Department of Corrections records indicate that Plaintiff was arrested on
May 29, 2012 and released to third party custody on June 16, 2012. See Exhibit H.
Dkt. 349 at 92.
Dkt. 349 at 92.
Id. at 93.
Plaintiff was ordered to remain in third party custody following his release from
jail on March 14, 2011, 105 and June 6, 2012. 106
Plaintiff lived with his third party custodians after his release on bail on June 6,
2013. 107 Plaintiff testified that he is currently living at the apartment belonging to a friend on
Muldoon, and that his third party custodian stays with him. 108 Plaintiff was provided with the
use of that apartment in exchange for his assistance with cleaning up the unit. 109 The rental unit
has no working boiler. 110
Plaintiff testified that he would like to use ALE payments from Allstate to rent his
own place, 111 but did not confirm that his third party custodian would be able to reside with him
at a new place. 112
Brummett testified that Plaintiff’s policy requires the insured to produce receipts
for any increased costs to maintain his or her standard of living after a loss, but conceded that
Dkt. 359 at 4.
Id. at 94.
Id. at 95.
According to Plaintiff’s Alaska Department of Corrections record admitted on January 3,
2014, Plaintiff was released on bail/bond on June 6, 2013 for 137 days; no third party custody
condition is indicated. The Court takes judicial notice that Plaintiff was released to third party
custody on this date, however, and that Plaintiff was released to third party custody again on
January 24, 2014 in Alaska v. Green, Case No. 3AN-14-00282CR (Alaska Super. Ct. filed Jan.
“there is no provision in [Plaintiff’s] policy that states” that an insured cannot receive ALE if the
insured does not have receipts for ALE incurred. 113 Brummett also indicated that receipts are
only required for expenses above a certain amount, testifying: “[S]ometimes we have to delve
into a gray area. But if you don’t have a receipt for a $15 meal, I’m not going to hold you to
that. If you don’t have a receipt for a $1,500 rental, I would probably hold you to that because
there is a huge difference between $15 and $1,500.” 114
Both Brummett’s testimony as well as Allstate’s payment of Plaintiff’s rent
through May 2011 support a finding that Allstate does not require its insureds to produce receipts
in order to receive payment for ALE. Allstate’s payment of $1,850 per month to Green
established that $1,850 was a “reasonable increase in living expenses necessary to maintain
[Green’s] normal standard of living [after] a direct physical loss [covered] under Coverage A . . .
[rendered Green’s] residence premises uninhabitable.” 115 Allstate’s payment for Green’s ALE
during his incarceration between January 23, 2011 and March 14, 2011, a total of 51 days, 116 and
for two months after Plaintiff was ordered to reside with a third party custodian following his
release, 117 indicates that it is not against Allstate’s policy to provide ALE to maintain a house
Dkt. 349 at 166.
Id. at 167.
Dkt. 34-34 at 2; see Zamarello v. Reges, 321 P.3d 387, 393 (Alaska 2014) (“The goal of
contract interpretation is to give effect to the parties' reasonable expectations ... [which] must be
gleaned not only from the contract language, but also from extrinsic evidence, including
evidence of the parties' conduct . . . .”) (quoting Miller v. Handle Constr. Co., 255 P.3d 984,
988–89 (Alaska 2011) (citations and internal quotation marks omitted)).
Id. at 4.
See Exhibit H, indicating Plaintiff was released to third party custody on March 14, 2011.
Defendant continued to pay $1,850 per month through May 2011.
after a covered loss occurs while the insured is away from his home due to incarceration or
court-ordered supervision by a third party custodian. 118 As the Court noted during the
evidentiary hearing, reading the policy to preclude Green from receiving ALE for periods of time
during which he was imprisoned or living with third party custodians simply because he was
away from home would also preclude members of the armed forces from obtaining ALE to pay
for temporary housing for their families and belongings for periods of time during which they are
deployed following a covered loss. Such a reading of the policy would be contrary to both “the
reasonable expectations of a layperson seeking coverage” 119 and a plain reading of the policy.
Plaintiff has not, however, presented evidence that he incurred or needed to incur
any additional living expenses while incarcerated or living with third party custodians in order to
store his belongings or provide shelter for dependents. To the contrary, Plaintiff argued at trial
that he had lost all of his belongings in the fire at issue. 120
Plaintiff testified that he lived with a third party custodian who claimed that he
resided at Plaintiff’s residence, 411 East 46th Place, following his release on June 6, 2013. 121
According to Plaintiff’s testimony, however, Plaintiff did not reside in his triplex with the third
party custodian during this time: Plaintiff lived in an apartment belonging to a friend until July
See Dkt. 249 at 167.
United Servs. Auto. Ass’n v. Neary, 307 P.3d 907, 910 (Alaska 2013) (noting that courts
construe insurance policies “to honor the reasonable expectations of a layperson seeking
See, e.g., Dkt. 349 at 107 (“When – when the fire took place, like I explained earlier, I lost
everything in the fire. . . . it hit me hard because I lost everything that I had worked for and
everything that I had accumulated during my 50-some-odd years of life. I just lost everything.”).
Dkt. 349 at 122-23; see Exhibit H.
2013; 122 and from July to September 2013, Plaintiff split his time between the apartment and a
home on the hillside. 123 Plaintiff paid no rent during this time. 124
The Court finds that Plaintiff is not entitled to any additional ALE because
Plaintiff has either been incarcerated or on release to third party custodians at all times following
the date when Allstate denied Plaintiff’s claim. 125 Plaintiff has presented no evidence to suggest
that he did incur, or that he would have incurred but was unable to afford, additional living
expenses during the time that he was incarcerated or on release to third party custodians.
Although Plaintiff indicates that he would like to rent his own apartment, Plaintiff is currently
under a “24-hour sight and sound” third party custodian order of release. 126
One possible exception to this finding is the two time periods in 2011 and 2012
during which Plaintiff resided at his residence between June 1, 2011 and May 29, 2012, and
between June 16, 2012 and September 6, 2012. Plaintiff testified that he moved between the
shed at his triplex and the unit of his triplex that had not been destroyed by the fire during these
Dkt. 349 at 92.
Id. at 93.
See Exhibit H; Exhibit G; Alaska v. Green, Case No. 3AN-11-00948CR (Alaska Super. Ct.
filed Jan. 23, 2011); Alaska v. Green, Case No. 3AN-12-09256CR (filed Sept. 16, 2012); Alaska
v. Green, Case No. 3AN-14-00282CR (Alaska Super. Ct. filed Jan. 10, 2014).
See Alaska v. Green, Case No. 3AN-12-09256CR (filed Sept. 16, 2012) (Temporary Order
for third party custody entered February 7, 2014); Alaska v. Green, Case No. 3AN-14-00282CR
(Alaska Super. Ct. filed Jan. 10, 2014) (Temporary Order for third party custody entered
February 7, 2014).
time periods. 127 Plaintiff’s Department of Correction records indicate that he was released to
third party custody prior to both time periods, 128 but Plaintiff did not present evidence that his
third party custodian was living with him at his residence. Plaintiff testified that he had an ankle
monitor when he was released in June of 2012 129 but provided no evidence to support this
testimony. If Plaintiff was permitted to wear an ankle monitor, or if Plaintiff’s custodian was
residing with Plaintiff at his residence during this time, Plaintiff would have been able to incur
additional living expenses while abiding by his order of release and thus would be entitled to
reimbursement for those expenses. Plaintiff may submit proof that he had an ankle monitor or
that his custodian resided with him during the times that Plaintiff lived at his residence in 2011
and 2012 to obtain up to fifteen months 130 of ALE at $1,850 per month. 131
Plaintiff’s Lost Rental Income
Plaintiff’s policy states: “We will pay your lost fair rental income from a covered
loss under Coverage A . . . less charges and expenses which do not continue, when a loss we
cover under Coverage A . . . makes the part of the residence premises you rent to others, or hold
for rental, uninhabitable. We will pay for lost fair rental income for the shortest time required to
See Dkt. 349 at 90-92. Although the unit Plaintiff inhabited was not destroyed by the fire,
Plaintiff’s triplex had no working utilities. See Dkt. 349 at 100. Plaintiff heated his shed with
propane. Id. at 84.
See Exhibit H (indicating that Plaintiff was released to a third party custodian on March 14,
2011 for 443 days, and on June 16, 2012 for 83 days).
Dkt. 349 at 121.
June 1, 2011 to May 29, 2012 is twelve months; June 16, 2012 to September 16, 2012 is
approximately 3 months, for a total of 15 months.
As noted below, Plaintiff shall submit such evidence no later than June 18, 2014. If Plaintiff
files such evidence, Defendant may respond no later than June 25, 2014. In the absence of a
filing by Plaintiff, the Court’s ruling shall stand.
repair or replace the part rented or held for rental.” 132 Plaintiff’s policy requires the insured to
produce “records supporting any claim for loss of rental income.” 133
Plaintiff testified that he “had no trouble renting” the two rental units of his
triplex, and that they were rented “all through 2010.” 134 Plaintiff testified that he charged $800
for the upstairs rental unit (“Unit C”) and $1,100 for the downstairs rental unit (“Unit B”). 135
Plaintiff contends that Unit C was rented at the time of the fire and that a new tenant had made a
deposit for Unit B and was due to take occupancy the next day. 136 But Plaintiff has provided no
evidence to support these claims.
To support his claim that Unit C was rented in 2010, Plaintiff cites (inaccurately)
testimony by Kevin Young, who testified that he had rented the unit for over a year and moved
out in September 2010. 137 But Mr. Young did not state the amount he paid to rent Unit C.
Plaintiff produced tax returns for 2008 and 2009 to support his position that he is
entitled to $1,900 per month in lost rental income, less expenses. 138 Plaintiff also produced an
Dkt. 34-34 at 3.
Dkt. 33-34 at 9.
Dkt. 349 at 105-06.
Id. at 105.
Dkt. 359 at 6.
Dkt. 358 at 7. Plaintiff cites Dkt. 348, Pg. 21-22, Pg. 25; Kevin Young’s testimony actually
appears in the transcript at Docket 347.
See Exhibit C (admitted at the January 3, 2013 evidentiary hearing by Defendant).
amended 2010 return. 139 Plaintiff did not include rental income in his 2010 tax return initially140
but filed an amended tax return after the trial in September 2013 to include a Schedule E with
omitted rental income, expenses, and depreciation. 141
In 2008, Plaintiff reported $10,300 in rental income, $23,875 in expenses, and
$11,425 in depreciation—a net loss of $25,000 related to the two rental units. 142 In 2009,
Plaintiff reported $11,000 in rental income, $15,069 in expenses related to his rental property,
and $12,252 in depreciation, resulting in a net loss related to the two rental units of $16,321 for
2009. 143 In 2010, Plaintiff reported $19,000 in rental income, $10,556 in expenses, and $8,242
in depreciation, resulting in a net gain of $202. 144
Plaintiff contends that the average amount of monthly “nonrecurring” rental
expenses was $100 per month. 145 But Plaintiff testified that a majority of his listed rental
expenses did not continue following the fire, including: auto and traveling, cleaning and
maintenance, insurance, repairs, “supplies,” taxes, utilities, internet, pest control, plumbing and
See Dkt. 358-1 (Schedule E of Plaintiff’s 2010 Return). Plaintiff contends that he provided
Defendant with this return in its entirety. Dkt. 358 at 7. Defendant did not admit this return at
the January 3, 2013 hearing.
Dkt. 349 at 102.
Id. at 103-104.
Dkt. 349 at 133; Exhibit E at 302139.
Dkt. 349 at 132; Exhibit E at 302123.
Dkt. 359 at 11.
electrical, and insurance premiums. 146 Plaintiff also testified that in 2010 he began requiring his
tenants to pay their own utilities, and that utilities were not listed as an expense in 2010. 147
The Court finds that Plaintiff has not provided sufficient support to establish that
his lost monthly “fair rental income” for Units B and C was $1,900 per month, or that his
average monthly nonrecurring rental expenses was $100 per month.
In light of the circumstances surrounding Plaintiff’s 2010 amended return, the
Court declines to rely on Plaintiff’s 2010 return in making its determination. Although
Plaintiff’s 2010 tax return is consistent with Plaintiff’s testimony that he received $1,900 per
month in rental income, Plaintiff concedes that he amended this tax return after the jury verdict
in September “when the issue of the returns became relevant and Mr. Green realized the error in
his original tax filing.” 148 The disparity between the amount stated on Plaintiff’s 2010 amended
return, which was prepared for use in this proceeding, and the amounts stated on Plaintiff’s 2008
and 2009 returns raises questions about the amount of rental income stated on Plaintiff’s 2010
return. The absence of any support for Plaintiff’s testimony regarding the amount he charged for
each unit, such as leases, bank statements, cancelled checks, or testimony from tenants, other
than Plaintiff’s amended 2010 tax return further calls into question Plaintiff’s claim that his
monthly “lost fair rental income” was $1,900.
Dkt. 349 at 147-48.
Id. at 148.
Dkt. 358 at 7.
The Court finds that the following “charges and expenses” listed on Plaintiff’s
2008 and 2009 tax returns 149 did not continue following the fire: auto and travel, cleaning and
maintenance, insurance, “commissions,” legal and other professional fees, repairs, utilities,
internet, pest control, plumbing and electrical, mortgage insurance premiums, and telephone. 150
The total for these expenses in 2008 was $12,088. The total for these expenses in 2009 was
In 2008, Plaintiff’s rental income less $12,088 in “charges and expenses” that did
not continue following the fire was negative $1,788 (a loss). 151 Plaintiff’s rental income for
2009 less $10,351 in “charges and expenses” that did not continue following the fire was $649,
or $54 a month. 152
CONCLUSIONS OF LAW
Plaintiff seeks to recover: (1) the cost of replacing Plaintiff’s residence, including
demolition and asbestos abatement; (2) consequential damages caused by Plaintiff’s breach of
contract; (3) compensation for additional living expenses (ALE) from June 2011 through the
present, future ALE, and prejudgment interest; and (4) lost fair rental income for Units B and C,
The Court does not find Plaintiff’s 2010 amended return to be a reliable source of
See Dkt. 349 at 147-48; Exhibit C at 302123, 302139. Although Plaintiff did not testify that
expenses for “commissions,” legal and other professional fees, and “telephone” no longer
continued after the fire, Plaintiff offered no support for a finding that these expenses, as they
relate to the rental units, continued after the fire. Expenses for mortgage interest and “other
interest” would have continued following the fire as expenses related to the triplex as a whole,
and not to the rental of the units.
See Exhibit C at 302139.
See Exhibit C at 302123.
less costs and expenses that did not continue following the fire. 153 Defendant has asserted a
number of legal arguments that, if accepted, would either preclude liability or reduce Plaintiff’s
damages. The Court’s conclusions of law on these issues are set forth below. 154
Cost to Rebuild Plaintiff’s Residence
As discussed above, based on the testimony presented, the Court finds that
Plaintiff’s residence must be demolished and rebuilt. The total amount available to Plaintiff
under his policy for demolition, complying with applicable laws for asbestos remediation, and
rebuilding is $471,150.00. 155
On September 4, 2012, Allstate made a payment to Wells Fargo as Plaintiff’s loss
payee for $230,855.14. 156 The Court therefore finds that Plaintiff is entitled to an additional
$240,294.86 under his policy to demolish and rebuild his residence, plus prejudgment interest. 157
Defendant shall issue the principal amount to Wells Fargo as Plaintiff’s loss payee to rebuild
Plaintiff’s residence, pursuant to the policy 158 and the parties’ agreement. 159
See Dkt. 359 at 12-15.
To the extent that any of the Court’s findings of fact are arguably conclusions of law, they
are not restated in this section and are incorporated herein by reference.
See supra Part II.C.1.
Dkt. 359 at 6.
See supra Part II.C.2.
See Dkt. 34-33 at 24.
See Dkt. 359 at 13 (Plaintiff states that Defendant “may issue payments to Wells Fargo and
Plaintiff jointly on the principal portion of this award in order to protect the secured party’s
interest.”); Dkt. 354 at 6, Dkt. 349 at 160 (Defendant has agreed to reimburse Wells Fargo for
additional money spent to repair or rebuild Plaintiff’s residence and recoverable depreciation
through December 31, 2014).
Plaintiff contends that he is entitled to $123,850.86 more than the policy limits as
consequential damages that were proximately caused when Defendant breached its contract with
Plaintiff by denying Plaintiff’s claim. 160
Plaintiff also seeks $80,000 in consequential damages because he has “suffered
hardship due to the deprivations he suffered over the last three years,” and claims that Defendant
“has not presented evidence to rebut the allegation that their breach caused Plaintiff hardship.” 161
Plaintiff cites a Court of Appeals of Indiana case in which the court held that
“reasonably foreseeable economic losses” arising from a good faith dispute between an insurer
and its insured may be recovered as consequential damages under a fire policy. 162 Defendant
cites a Southern District of Indiana case applying Indiana law for the proposition that
consequential damages are “generally precluded as a matter of law” where there is a good faith
dispute regarding coverage. 163
The Alaska Supreme Court has not ruled on whether consequential damages may
be awarded following good faith disputes between insurers and insureds.
Plaintiff seeks a total of $595,500 to rebuild his residence under the terms of his policy and
as consequential damages that were proximately caused by Defendant’s breach of contract with
Plaintiff. See Dkt. 359 at 13 (“The increased cost of replacing the home is a consequential loss
which is a direct and proximate result of Allstate’s breach of contract with the Plaintiff. Allstate
is liable for this amount irrespective of any policy limits.”).
Dkt. 359 at 17. Plaintiff also requests consequential damages for “the inconvenience and
hardship caused by the Defendant’s willful breach of the insurance contract.” Id.
See Rockford Mut. Ins. Co. v. Pirtle, 911 N.E.2d 60, 67-68 (Ind. Ct. App. 2009).
Dkt. 354 at 7 (citing Burleson v. Illinois Farmers Ins. Co., 725 F. Supp. 1489, 1494-95 (S.D.
The Court finds that Allstate denied Plaintiff’s claim in good faith after it
concluded that Plaintiff was responsible for the loss of his residence, 164 and that controlling
precedent does not support a finding that Plaintiff is entitled to an award of consequential
damages following Defendant’s good faith denial of Plaintiff’s claim. Even if controlling law
permitted an award of consequential damages, the Court finds that Plaintiff has failed to establish
that Defendant’s breach “was the cause in fact” 165 of the additional damage that occurred to his
residence between the time of the fire and the present. 166 The Court therefore declines to award
Plaintiff consequential damages.
Additional Living Expenses
On the basis of Plaintiff’s evidence, the Court concludes that Plaintiff is not
entitled to $1,850 in monthly ALE for rent during the periods of time Plaintiff was incarcerated
and during the times that Plaintiff was ordered to live with a third party custodian.
The Alaska Supreme Court has not ruled on whether additional living expenses
provisions like the one in Plaintiff’s policy require that the additional living expenses be incurred
before an insured may receive money for ALE. Defendant cites a 2011 case in which the Fifth
Circuit applying Louisiana law found that insureds were not entitled to ALE that had not been
See Dkt. 57 at 7-8 (August 7, 2012 Order dismissing Plaintiff’s claim for bad faith against
Rockford, 911 N.E.2d at 67.
The Court also notes that Plaintiff’s request for $80,000 in consequential damages for
hardship and suffering resulting from Defendant’s denial of his claim would not be supported by
the precedent Plaintiff cited; inconvenience and hardship are not “reasonably foreseeable
economic” damages. Rockford, 911 N.E.2d at 67-68 (emphasis added).
incurred. 167 Defendant also cites a Supreme Court of Alabama case in which the court found
that, “under the clear and unambiguous terms of the contract Allstate was under no duty to
provide any additional living expense payments” to the insured because the insured failed to
provide receipts for additional living expenses. 168
Although the ALE receipt provision in Plaintiff’s policy is identical to the
provision at issue in Hiley, the Court finds that the provision in Plaintiff’s policy does not require
an insured to produce receipts prior to receiving ALE. Reading the policy to require that
additional living expenses be incurred prior to reimbursement would preclude those who suffer a
total loss and are unable to pay for temporary living expenses from obtaining coverage for ALE.
Such a reading would be contrary to the reasonable expectations of an insured when obtaining an
insurance policy. 169 Further, Allstate’s conduct following Plaintiff’s loss—paying Plaintiff’s
landlord directly for monthly living expenses for seven months following Plaintiff’s covered
loss—and Plaintiff’s adjuster’s testimony that requirement of receipts prior to reimbursement
involves a “gray area” 170 weighs against a finding that the policy requires an insured to pay for
See French v. Allstate Indem. Co., 637 F.3d 571, 583 (5th Cir. 2011) (affirming district
court’s finding that, because Plaintiffs had not introduced evidence of any additional living
expenses actually incurred and continued to reside at their house, they were not entitled to
payments under the ALE provision of insurance policy). Defendant also cites an unreported
Northern District of California case, in which Allstate paid a $500 negotiated increase in
monthly expenses for a year to insureds who opted to live with family members rather than in a
hotel. See Cecena v. Allstate Ins. Co., No. 05-3178, 2007 WL 13245, at *6 (N.D. Cal. Jan. 16,
2007), which contradicts Allstate’s position regarding documentation.
Hiley v. Allstate, 562 So.2d 184, 191-92 (Ala. 1990).
See United Servs. Auto. Ass’n v. Neary, 307 P.3d 907, 910 (Alaska 2013) (noting that courts
construe insurance policies “to honor the reasonable expectations of a layperson seeking
See Dkt. 349 at 167.
ALE out of pocket and produce receipts for reimbursement. The Court does not construe this
provision of the policy to preclude payment of ALE in the event that an insured does not have
receipts, particularly when the insurer has established a precedent of paying the expenses
The Court nevertheless finds that Plaintiff is only entitled to ALE for periods of
time when he could reasonably have incurred additional living expenses. Plaintiff does not
contend that he incurred living expenses during the time he was incarcerated, or while he was
required to live with a third party custodian as a condition of release. 171 Plaintiff provided no
evidence that he had a need to, or would have been able to, rent an apartment even if Allstate had
continued to provide the money for him to do so, 172 with the possible exception of the time he
spent living at his triplex between June 1, 2011 and May 29, 2012, and June 16, 2012 and
September 16, 2012.
Because Plaintiff has been incarcerated or on release to third party custodians
since Allstate rejected his claim in May 2011 and has provided no support for a finding that he
incurred or needed to incur any additional living expenses during those times, the Court finds
that Plaintiff is not entitled to payment for any additional living expenses.
For example, Plaintiff presented no testimony or evidence that he incurred costs to store
belongings while he was in prison or while living with third party custodians.
To the contrary, the record indicates that Plaintiff’s possessions were lost in the fire, see Dkt.
349 at 107, and that Plaintiff has never been in need of a rental apartment because he was either
incarcerated or under a “24-hour sight and sound” third party custodian order of release since
Allstate rejected his claim in May 2011, see Exhibit H; Alaska v. Green, Case No. 3AN-1100948CR (Alaska Super. Ct. filed Jan. 23, 2011); Alaska v. Green, Case No. 3AN-12-09256CR
(filed Sept. 16, 2012); Alaska v. Green, Case No. 3AN-14-00282CR (Alaska Super. Ct. filed Jan.
If Plaintiff can produce evidence to show that he was living with his third party
custodian or permitted to use an ankle monitor during the two time periods in 2011 and 2012 that
he lived at his triplex while under court order to reside with a third party custodian, Plaintiff is
entitled to $1,850 per month in additional living expenses—the amount established by Allstate to
be a reasonable monthly additional living expense 173—for each month between June 1, 2011 and
September 16, 2012 that Plaintiff lived at his uninhabitable 174 residence. Plaintiff may submit
proof that that he had an ankle monitor or that his custodian resided with him during the times
that Plaintiff lived at his residence in 2011 and 2012 to obtain up to fifteen months 175 of ALE at
$1,850 per month, 176 plus prejudgment interest. Plaintiff shall submit such evidence no later
than June 18, 2014. Defendant may respond by June 25, 2014 if Plaintiff submits such
evidence. In the absence of a filing by Plaintiff, the Court’s ruling shall stand.
Lost Rental Income
The Court finds that Plaintiff is entitled to the total rental income less “charges
and expenses” that did not continue following the fire based on the rental income and expenses
reported on his most recent unamended tax return—his 2009 tax return. As discussed above, the
See supra Part II.C.
During the time that Plaintiff lived at his triplex, the triplex had no working utilities, see Dkt.
349 at 100, and Plaintiff heated his shed with propane. Id. at 84. The Court construes Allstate’s
initial award of ALE for the seven months following the fire as a concession by Defendant that
Plaintiff’s triplex was uninhabitable following the fire.
June 1, 2011 to May 29, 2012 is twelve months; June 16, 2012 to September 16, 2012 is
approximately 3 months, for a total of 15 months.
See supra Part II.D.
Court finds that this is the most credible evidence of Plaintiff’s actual rental income at the time
of the fire.
Plaintiff’s rental income for 2009 less “charges and expenses” that did not
continue following the fire was $649, or $54 a month. 177
The Court awards Plaintiff $54 in monthly rental income for each of the months
that Plaintiff has been displaced from his residence. Plaintiff’s total award for lost rental income
is $1,674, 178 plus prejudgment interest.
Plaintiff is entitled to $54 per month in lost rental income for each additional
month required to rebuild Plaintiff’s residence. Defendant shall pay Plaintiff $54 each month
beginning June 1, 2014 until Plaintiff’s residence is rebuilt.
If the period during which Plaintiff has been ordered to live with a third party
custodian ends before Plaintiff’s residence has been rebuilt, Plaintiff will be entitled to $1,850
per month in additional living expenses until he is able to return to his residence.
For the foregoing reasons, the Court finds and concludes that Defendant Allstate
Insurance Company is liable to Plaintiff Jeffrey R. Green in the amount of $241,968.86 for
rebuilding Plaintiff’s residence and for 31 months of lost rental income, plus prejudgment
See supra Part II.E; Exhibit C at 302123. The Court notes that the average annual expenses
that did not continue after the fire for 2008 and 2009 was $11,219.50—approximately $935 per
month. The average annual rental income for 2008 and 2009 was $10,650—approximately
$887.50 per month. The Court also acknowledges, however, that Plaintiff testified that he
charged $800 for one unit and $1,100 for the other unit, and that the units were rented
continuously until the fire. See Dkt. 349 at 105.
Plaintiff has been displaced from his home for 31 months as of May 2014.
interest. Defendant shall pay $240,294.86 to Plaintiff’s loss payee Wells Fargo pursuant to the
policy upon entry of judgment so that demolition and rebuilding can begin immediately.
Defendant shall pay Plaintiff the remaining award of $1,674 for lost rental income and all
prejudgment interest. Plaintiff is also entitled to $54 per month in lost rental income beginning
June 1, 2014 until Plaintiff’s residence is rebuilt.
In light of this order, Plaintiff’s outstanding motions at Docket 313 and Docket 328 are
DENIED as moot.
Dated at Anchorage, Alaska, this 5th day of June, 2014.
/s/ Timothy M. Burgess
TIMOTHY M. BURGESS
UNITED STATES DISTRICT JUDGE
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