Bryant et al v. State Farm Fire & Casualty Company
OPINION AND ORDER denying 16 Plaintiffs Motion for Partial Summary Judgment, denying 13 State Farm's Motion for Partial Summary Judgment, and denying 42 Plaintiffs Motion to Compel Discovery. Signed by Judge Susan Webber Wright on 04/09/2013. (jak)
IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF ARKANSAS
MARK and LADONYA BRYANT,
STATE FARM FIRE AND
OPINION AND ORDER
Plaintiffs Mark and LaDonya Bryant bring this action against Defendant State
Farm and Fire Casualty Company (State Farm) alleging breach of contract and bad faith
in State Farm’s denial of a claim they made against their State Farm homeowner’s
insurance policy following the loss of their home in a fire on July 4, 2011. State Farm
contends Plaintiffs committed arson to collect the insurance proceeds and denied their
claim on that basis.
Before the Court are cross-motions for partial summary judgment. Plaintiffs move
for partial summary judgment [doc.#16] on their breach of contract claim. State Farm, in
turn, moves for partial summary judgment [doc.#13] on Plaintiffs’ tort of bad faith and
punitive damages claims. Responses and replies to these motions have been filed. Also
before the Court is a motion by Plaintiffs to compel discovery [doc.#42] to which State
Farm has responded in opposition. For the reasons that follow, the Court denies
Plaintiffs’ motion for partial summary judgment, denies State Farm’s motion for partial
summary judgment, and denies Plaintiffs’ motion to compel discovery.
Plaintiffs owned a home at 421 NW Third Street, Walnut Ridge, Arkansas, that
was insured under a homeowner’s policy issued by State Farm. The policy provides in
pertinent part as follows:
SECTION 1 – LOSSES INSURED
COVERAGE A – DWELLING
We insure for accidental direct physical loss to the property described in
Coverage A, except as provided in SECTION I – LOSSES NOT
COVERAGE B – PERSONAL PROPERTY
We insure for accidental direct physical loss to property described in
Coverage B caused by the following perils, except as provided in
SECTION I – LOSSES NOT INSURED:
1. Fire or lightning.
SECTION I – CONDITIONS
12. Intentional Acts. If you or any person insured under this policy causes
or procures a loss to property covered under this policy for the purpose of
obtaining insurance benefits, then this policy is void and we will not pay
you or any other insured for this loss.
SECTION I AND SECTION II – CONDITIONS
2. Concealment or Fraud. This policy is void as to you and any other
insured, if you or any other insured under this policy has intentionally
concealed or misrepresented any material fact or circumstance relating to
this insurance, whether before or after a loss.
Policy Number 04-CU-4580-4.
Plaintiffs purchased the home for approximately $60,000 and had insurance
coverage for $143,700. Plaintiffs state the estimated cost of replacement of their home is
in excess of $300,000.
At the time of the fire, Plaintiffs had temporarily moved to a $700 per month rental
property in nearby Imboden, Arkansas, leaving the Walnut Ridge house unoccupied.
Plaintiffs’ plan was to move temporarily while they performed certain renovations to their
home but their plan was delayed when an unexpected illness hospitalized Mark and
required a trip to the Mayo Clinic for treatment. At the time of the fire, no renovations
had been started or completed and no materials had been purchased. Plaintiffs state this is
because LaDonya’s father, Raymond Cain, who was largely responsible for coordinating
those repairs, was busy on a number of different issues and a major flood in the region
delayed his schedule. Mark also testified that he had someone look at the floors of the
house and was “shocked” that the estimate “was going to be a lot more money than what
we were expecting.”
Mark’s illness resulted in medical debt and caused him to miss over four weeks of
work and lose his remaining sick days. This medical debt caused the Plaintiffs to fall
behind on their mortgage payments. In addition, Mark was receiving 60% of his normal
salary under a long term disability policy at the time of the fire. However, despite the fact
that Plaintiffs were two months behind on their mortgage at the time of the fire given
Mark’s health situation, Plaintiffs have subsequently caught their mortgage up now that
Mark’s health has returned and they are current on their payments.
On the evening of July 4, 2011, LaDonya’s father was holding a Fourth-of-July
party at his shop in Hoxie, Arkansas. LaDonya left the rental house in Imboden at
approximately 1:00 p.m., going to purchase fireworks, food, and prepare for the party.
Mark followed with their children at approximately 3-3:30 p.m. and may have stopped
with the children at their school. In any case, he went to LaDonya’s parents’ house where
he met LaDonya.
Plaintiffs state that they remained either at LaDonya’s parents’ house or at the
party until 10:00 p.m. and that the only time anyone left the presence of the parties’
attendees was at 5:50 p.m. when LaDonya left to pick up her son, Gage, from his father’s
house in Bono, Arkansas. LaDonya states she was back with her son by 7:00 p.m. at her
parents’ house and Plaintiffs state that from 7:00 p.m. until 10:45 p.m. indisputable direct
evidence exists that Mark and LaDonya were at the party and then at LaDonya’s parents’
house afterwards. State Farm admits that Plaintiffs have produced affidavits from
multiple witnesses attesting to Plaintiffs’ whereabouts at the time of the fire but contests
the reliability of those affidavits “based on circumstantial evidence and the fact that
Plaintiffs’ home was burned.”
Plaintiffs were driving their separate vehicles away from LaDonya’s parents’
house at approximately 10:45 p.m. when they received a call notifying them that their
house was on fire. The Walnut Ridge Fire Department Incident Report indicates that the
alarm for the fire was sounded at 10:47 p.m. The fire department arrived on the scene at
10:52 p.m. State Farm’s cause and origin expert, Don Davis, who inspected the scene
twice and interviewed each Plaintiff, opines that the fire was caused by “human
intervention” and was started “by a device capable of producing an open flame, such as a
match, lighter or candle.” Davis states he did not find a match, lighter, or candle at the
scene, however, and the accelerant test came back negative. Davis initially stated he had
no idea how long the burn time for the fire was but later stated he would say the burn time
for the fire was less than one hour. When State Farm’s investigator, Bob Hamilton, was
asked if there was any information that he could share to identify who set the fire, he
responded, “No. I wish there was.”1
Following its investigation, State Farm denied Plaintiff’s claim in a letter dated
February 21, 2012, and voided their insurance policy as of the date of the July 4, 2011
fire. The denial was based on policy language concerning intentional acts and
concealment or fraud of material facts or circumstances in connection with the claim.
State Farm informed Plaintiffs it had denied their claim after a review of Plaintiffs’
examinations under oath, documents submitted, and other information obtained during
investigation because it determined:
1. You or some person insured under this policy caused or procured this
fire loss to property covered under this policy for the purpose of obtaining
Plaintiffs also state that Hamilton ignored the fact that the Fourth of July is one of the
worst nights for vandalism and fires and that he ignored testimony from Plaintiffs’ neighbor that
some kids were shooting fireworks near Plaintiffs’ house before the fire. Hamilton, however,
notes, inter alia, that there were no signs to indicate any forced entry into the house and that
Davis states the fire started in a closet. Hamilton additionally noted that fireworks typically start
a fire on the roof of a house.
2. Your intentional misrepresentation and concealment as to the material
facts and circumstances surrounding this loss;
3. Your intentional misrepresentations in the presentation of your claim;
. The loss was not caused by accidental direct physical loss.
The denial letter further stated, “For these and other good and valid reasons, both
known and unknown, State Farm Fire and Casualty Insurance Company respectfully
denies this claim.
Plaintiffs move for partial summary judgment on their breach of contract claim on
grounds that even if the Court accepts the opinion of State Farm’s cause and origin expert
that the fire was intentionally set (which Plaintiffs state they question but will accept for
purposes of their motion), State Farm has denied their claim with absolutely no evidence
connecting Plaintiffs with the fire. Plaintiffs state that indisputable and overwhelming
proof exists that Plaintiffs were at a Fourth-of-July party in a neighboring city at the time
the fire started and State Farm offers no evidence suggesting that Plaintiffs, or anyone
acting at their direction, started the fire. Plaintiffs argue that it is State Farm’s burden to
prove the arson exclusion in Plaintiffs’ homeowner’s policy and that because State Farm
simply cannot meet proof with proof to demonstrate a genuine issue of material fact with
respect to this issue, they are entitled to summary judgment on their breach of contract
State Farm, in turn, moves for partial summary judgment regarding Plaintiffs’ tort
of bad faith and punitive damages claims on grounds that Plaintiffs cannot present
evidence to support any act or failure to act so as to establish bad faith. State Farm argues
there is no genuine issue of material fact with regard to bad faith and punitive damages
and that it is entitled to judgment as a matter of law on those claims.
Summary judgment is appropriate when “the pleadings, the discovery and
disclosure materials on file, and any affidavits show that there is no genuine issue as to
any material fact and that the movant is entitled to a judgment as a matter of law.”
Fed.R.Civ.P. 56(c). The moving party “bears the initial responsibility of informing the
district court of the basis for its motion,” and must identify “those portions of [the record]
... which it believes demonstrate the absence of a genuine issue of material fact.” Celotex
Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once the moving party has properly
supported its motion for summary judgment, the nonmoving party must “do more than
simply show there is some metaphysical doubt as to the material facts.” Matsushita Elec.
Indus. Co. v. Zenith Radio, 475 U.S. 574, 586 (1986). The nonmoving party must
respond by submitting evidentiary materials that set out “‘specific facts showing ... a
genuine issue for trial.’” Celotex, 477 U.S. at 324 (quoting Fed.R.Civ.P. 56(e)). The
inferences to be drawn from the underlying facts must be viewed in the light most
favorable to the party opposing the motion. Matsushita, 475 U.S. at 587 (citations
omitted). Credibility determinations, the weighing of the evidence, and the drawing of
legitimate inferences from the facts are jury functions, not those of a judge. Reeves v.
Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000) (citation and quotation marks
omitted). However, “[w]here the record taken as a whole could not lead a rational trier of
fact to find for the nonmoving party, there is no ‘genuine issue for trial.’” Matsushita,
475 U.S. at 587 (citation omitted). “Only disputes over facts that might affect the
outcome of the suit under the governing law will properly preclude the entry of summary
judgment.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). “Factual disputes
that are irrelevant or unnecessary will not be counted.” Id.
The Court first addresses Plaintiffs’ motion for partial summary judgment on their
breach of contract claim. “[A] mere showing of arson does not automatically relieve the
insurer from liability under a fire policy excluding loss caused by the insured.” Haynes v.
Farm Bureau Mut. Ins. Co. of Arkansas, Inc., 11 Ark. App. 289, 292, 669 S.W.2d 511,
513 (1984). “It is also necessary to prove by direct or circumstantial evidence that the
insured set the fire or caused the house to be burned.” Id. The Arkansas Supreme Court
in Haynes observed:
There are ordinarily no eye witnesses to an act of arson because the
deliberate burning of an insured building by its owner is usually
accomplished alone and in secret. Any material fact in issue, however, may
be established by circumstantial evidence even though the testimony of
other witnesses may be undisputed. The fact that evidence is circumstantial
does not render it insubstantial as our law makes no distinction between
direct evidence of a fact and circumstances from which it might be inferred.
The circumstances may be such that different minds can reasonably draw
different conclusions from them without resort to speculation. Where there
are facts and circumstances in evidence from which reasonable minds might
reach different conclusions without resort to speculation the matter is an
issue of fact which must be submitted to the jury for its determination.
Id. (citation omitted). See also Allstate Ins. Co. v. Voyles, 76 Ark. App. 334, 340, 65
S.W.3d 457, 461 (2002) (same).
The Court finds that there are facts and circumstances from which reasonable
minds might reach different conclusions with regard to the question of arson without
resort to speculation and that the matter is thus an issue of fact which must be submitted
to the jury for its determination. Accordingly, the Court denies Plaintiffs’ motion for
partial summary judgment on their breach of contract claim.
The Court now turns to Plaintiffs’ tort of bad faith claim. The standard for
establishing a claim for bad faith on the part of an insurance company is rigorous and
difficult to satisfy. Unum Life Ins. Co. of America v. Edwards, 362 Ark. 624, 627, 210
S.W.3d 84, 87 (2005) (citation omitted). In order to state a claim for bad faith, a claimant
must allege that the defendant insurance company engaged in affirmative misconduct that
was dishonest, malicious, or oppressive. Id. (citations omitted). “[B]ad faith” is defined
as “dishonest, malicious, or oppressive conduct carried out with a state of mind
characterized by hatred, ill will, or a spirit of revenge.” Id. 362 Ark. at 628, 201 S.W.2d
at 87 (citation omitted).2 Negligence, bad judgment, nightmarish red tape, hardball,
delaying investigations for months, and failure to provide a reason for the company’s
initial refusal of payment does not constitute bad fath. Willis v. Shelter Mut. Ins. Co., No.
5:12-cv-101, 2012 WL 5818165, *1 (E.D. Ark. Nov. 15, 2012) (citation omitted). The
tort of bad faith does not arise from a mere denial of a claim; there must be affirmative
misconduct. Unum, 362 Ark. at 628, 201 S.W.2d at 88 (citations omitted).
In addition to referencing the above standards, Plaintiffs also reference the
Arkansas Trade Practices Act and Rule 43 of the Arkansas Insurance Department in
support of their bad faith claim. Rule 43 was intended to implement the Arkansas Trade
Practices Act. Design Professionals Ins. Co. v. Chicago Ins. Co., 454 F.3d 906, 911-912
(8th Cir. 2006). “The purpose of Rule 43 was to establish ‘certain minimum standards’ to
control how insurance companies settle claims.” Id. (quoting Ark. Ins. Rule 43, § 1).
While the Trade Practices Act gives the state authority to establish rules of conduct and to
punish offenders, it provides no private right of action to insureds for violations of the Act
or of regulations promulgated under the Act’s authority. Id.
State Farm argues that Plaintiffs’ bad faith claim is founded on Rule 43 and the
Trade Practices act and, thus, Plaintiffs have not asserted a viable bad faith claim as there
is no private right of action for violations of Rule 43 and the Trade Practices Act, an
Actual malice may be inferred from conduct and surrounding circumstances. Southern
Farm Bureau Cas. Ins. Co. v. Allen, 326 Ark. 1023, 1027, 934 S.W.2d 527, 529 (1996) (citation
alleged violation of Rule 43 and the Trade Practices Act does not constitute bad faith, and
the remedies under Rule 43 and the Trade Practices Act only apply where there is no bad
faith. In support of this argument, State Farm cites Aetna Casualty & Surety Co. v.
Broadway Arms Corp., 281 Ark. 128, 664 S.W.2d 463 (1984), which stated as follows:
[T]he Trade Practices Act is only an effort to clean up undesirable conduct
of insurers and the penalty and fees statute applies only to first party claims.
The penalty and fees statute is the primary remedy an insured has against an
insurer who fails or refuses to pay a claim when there is no bad faith. The
Trade Practices Act provides for procedures and penalties to be utilized by
the provisions of the act. Neither of these remedies deals with the area of
bad faith much less pre-empts it.
Notwithstanding that Plaintiffs reference Rule 43 and the Trade Practices Act in
support of their bad faith claim, the Court will allow Plaintiffs’ bad faith claim to proceed
under the standards governing the tort of bad faith as set forth in Arkansas case law and in
Arkansas’s bad faith jury instruction, Arkansas Model Jury Instructions, Civil § 2304
(2013). The Court finds on the basis of the record as it now stands that there are facts and
circumstances from which reasonable minds might conclude that State Farm made a
decision to ignore evidence obtained in its investigation that pointed to Plaintiffs’
truthfulness and cast doubt on the idea that they committed arson and made
misrepresentations. Cf. Cincinnati Life Ins. Co. v. Mickles, 85 Ark. App. 188, 203, 148
S.W.3d 768, 778 (2004) (in affirming jury’s bad-faith verdict against defendant insurance
company, court noted that “[w]hat we have in this case is not a mere failure to investigate.
[Defendant] made a decision to ignore evidence obtained in an investigation that pointed
to the applicant's truthfulness and cast doubt on the idea that she had made any
misrepresentations.”). Accordingly, the Court denies State Farm’s motion for partial
summary judgment on Plaintiffs’ tort of bad faith claim.3
Given that the Court has denied State Farm’s motion for partial summary judgment
on Plaintiffs’ tort of bad faith claim, the Court denies State Farm’s motion for partial
summary judgment on Plaintiffs’ punitive damages claim. See Employers Equitable Life
Ins. Co. v. Williams, 282 Ark. 29, 29-30, 665 S.W.2d 873, 873-874 (1984) (if an insurer is
found liable for bad faith, punitive damages are available; court noted that
“[c]ompensatory damages for bad faith in an occasional lawsuit would not deter the
wrongdoing insurance company, or others, from seeking a wrongful gain by similarly
victimizing hundreds of other policyholders. Punitive damages will have a deterrent effect
in a case of this type.”).4
The Court does not address at this time whether what may be deemed a violation of
Rule 43 and the Trade Practices Act is evidence of the tort of bad faith such that a jury
instruction to that effect is warranted. Cf. Broadway Arms, 281 Ark. at 135, 664 S.W.2d at 466
(reversing trial court for giving an instruction which omitted a portion of the relevant statute
from the Trade Practices Act; court noted that “[a] violation of the Trade Practices Act is not
necessarily evidence of bad faith” and “[a]ppellant properly objected to the court giving the
erroneous instruction ... which improperly stated that a violation of the statute was evidence of
bad faith and omitted a vital portion of the statute.”); Nathan Price Chaney, A Survey of Bad
Faith Insurance Tort Cases in Arkansas, 64 Ark. L. Rev. 853, 862-863 (2011) (noting that while
a violation of a statute is some evidence of negligence, a violation of the Trade Practices Act is
not necessarily evidence of bad faith and if offered, an instruction to this effect must have
support in the evidence; furthermore, if a jury instruction is offered that a violation of the Trade
Practices Act is evidence of deceit or bad faith, then the section of the Trade Practices Act relied
upon must have an element of scienter, and the instruction should contain all elements of the
statute, including elements referencing scienter or a pattern and practice of conduct).
Whether Plaintiffs’ bad faith and punitive damages claims get to a jury or whether those
claims survive a motion to set aside any verdict the jury may render are questions for another
The Court now turns to Plaintiffs’ motion to compel discovery [doc.#42].
Plaintiffs state that they deposed Bob Hamilton, the State Farm Investigator primarily
responsible for recommending the denial of this claim, on February 21, 2013. At this
deposition, state Plaintiffs, it was discovered that Hamilton did not make the
recommendation to deny the claim until approximately January 22, 2012, over six months
after the “target date” cited by State Farm as the date from which it reasonably anticipated
litigation. In addition, state Plaintiffs, it was determined that certain documents have
been redacted from this portion of the claims file for which the Plaintiffs can demonstrate
substantial need in supporting their bad faith claim against State Farm. Plaintiffs state
they have attempted to obtain this information from State Farm without the necessity of
Court intervention but were unsuccessful. Plaintiffs request a Court Order compelling the
production of the claims file pages which have been redacted from State Farm’s earlier
production and state that to the extent State Farm claims that any of this information
contains privileged communications, the Court should conduct an in camera review of
these documents for purposes of determining the applicability of any claimed privilege.
The Court finds that Plaintiffs’ motion to compel discovery is untimely as the
discovery cut off was February 1, 2013 [doc.#12] but Plaintiffs did not depose Hamilton
until February 21, 2013. While the Court’s Final Scheduling Order permitted the parties
to agree to conduct discovery beyond the discovery cut off, the Final Scheduling Order
makes clear that “the Court will not be available to resolve any disputes which arise
during the course of this extended discovery.” See Final Scheduling Order at p. 1
(emphasis in original) [doc.#7]. Accordingly, the Court denies Plaintiffs’ motion to
compel as untimely.5
For the foregoing reasons, the Court denies Plaintiffs’ motion for partial summary
judgment [doc.#16], denies State Farm’s motion for partial summary judgment [doc.#13],
and denies Plaintiffs motion to compel discovery [doc.#42].
IT IS SO ORDERED this 9th day of April 2013.
/s/Susan Webber Wright
UNITED STATES DISTRICT JUDGE
State Farm states that despite receiving production of the claim file and a detailed
privilege log in November 2012, Plaintiffs failed to contest the asserted privilege in due time.
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