Wells v. State Farm Fire and Casualty Company

Filing 116

ORDER AND REASONS denying Plaintiff's 74 Motion for Partial Summary Judgment and Defendant's 80 Motion for Summary Judgment, as stated herein. Signed by Judge Susie Morgan on 11/14/2013. (tsf)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
MCREYNOLD WELLS,
Plaintiff

CIVIL ACTION

VERSUS

NO. 13-120

STATE FARM FIRE AND
CASUALTY COMPANY,
Defendant

SECTION “E”

ORDER & REASONS
Before the Court are Plaintiff’s motion for partial summary judgment,1 which
Defendant opposes,2 and Defendant’s motion for summary judgment,3 which Plaintiff
opposes.4 After hearing argument on both motions, the Court took them under submission.
For the following reasons, the motions are DENIED.
BACKGROUND
This dispute between Plaintiff McReynold Wells and Defendant State Farm Fire &
Casualty Company arises out of a fire in the attic of Plaintiff’s home in Tickfaw, Louisiana,
on the morning of May 8, 2011. State Farm insured the property, but denied Wells’s
insurance claim and voided his policy, asserting that its investigation revealed Wells
committed arson. Wells disputes that conclusion, asserting that he was not home at the
time of the fire and had no financial motive to commit arson. Wells now moves for
summary judgment on State Farm’s defense of arson to his claim under the insurance
policy. State Farm moves for summary judgment on that claim for payment, asserting that
1

R. Doc. No. 74.

2

R. Doc. No. 87.

3

R. Doc. No. 80.

4

R. Doc. No. 88.
1

Wells breached his obligations under the insurance contract to provide a sworn statement
of loss and that Wells has come forward with no evidence to support his claim against State
Farm for bad faith failure to pay his insurance claim.
STANDARD OF LAW
Summary judgment is appropriate only “if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show that there
is no genuine issue as to any material fact and that the moving party is entitled to a
judgment as a matter of law.” Fed. R. Civ. P. 56; see also Celotex Corp. v. Catrett, 477 U.S.
317, 322-23 (1986).
If the dispositive issue is one on which the moving party will bear the burden of proof
at trial, the moving party “must come forward with evidence which would ‘entitle it to a
directed verdict if the evidence went uncontroverted at trial.’” Int’l Shortstop, Inc. v.
Rally’s, Inc., 939 F.2d 1257, 1263-64 (5th Cir. 1991). If the moving party fails to carry this
burden, the motion must be denied. If the moving party successfully carries this burden,
the burden then shifts to the non-moving party to show that a genuine issue of material fact
exists. Id. at 322-23. Once the burden has shifted, the non-moving party must direct the
Court’s attention to something in the pleadings or other evidence in the record that sets
forth specific facts sufficient to establish that a genuine issue of material fact does indeed
exist. Id. at 324.
If the dispositive issue is one on which the non-moving party will bear the burden
of proof at trial, however, the moving party may satisfy its burden by simply pointing out
that the evidence in the record is insufficient with respect to an essential element of the
2

non-moving party’s claim. See Celotex, 477 U.S. at 325. The nonmoving party must then
respond, either by “calling the Court’s attention to supporting evidence already in the
record that was overlooked or ignored by the moving party” or by coming forward with
additional evidence. Celotex, 477 U.S. at 332-33 & 333 n.3.
“An issue is material if its resolution could affect the outcome of the action.”
DIRECTV Inc. v. Robson, 420 F.3d 532, 536 (5th Cir. 2005). When assessing whether a
material factual dispute exists, the Court considers “all of the evidence in the record but
refrains from making credibility determinations or weighing the evidence.” Delta & Pine
Land Co. v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 398 (5th Cir. 2008); see also
Reeves v. Sanderson Plumbing, Inc., 530 U.S. 133, 150-51 (2000). All reasonable
inferences are drawn in favor of the non-moving party. Little v. Liquid Air Corp., 37 F.3d
1069, 1075 (5th Cir. 1994). There is no genuine issue of material fact if, even viewing the
evidence in the light most favorable to the non-moving party, no reasonable trier of fact
could find for the non-moving party, thus entitling the moving party to judgment as a
matter of law. Smith v. Amedisys, 298 F.3d 434, 440 (5th Cir. 2002).
ANALYSIS
I.

Plaintiff’s Motion for Partial Summary Judgment

Wells asserts that the Court should grant summary judgment on State Farm’s arson
defense because there is no genuine issue of fact with respect to whether Wells was in dire
financial straits, so State Farm is not entitled to this defense as a matter of law. Under
Louisiana law, arson is an affirmative defense against the requirement to pay an insurance
claim for a fire. Sumrall v. Providence Wash. Ins. Co., 60 So. 2d 68, 69 (La. 1952). In
3

order to succeed on this defense, the insurer must show that (1) the fire was of an
incendiary origin and (2) the plaintiff was responsible for setting the fire. Id. When, as
here, there is no direct evidence of arson, “the insurer may prove its case by circumstantial
evidence.” Arena v. Allstate Ins. Co., 2000 WL 422395, at *6 (quoting Chisholm v. State
Farm Fire & Cas. Co., 618 So. 2d 1059, 1062 (La. Ct. App. 1993)). “To do so, it does not
have to prove its case beyond a reasonable doubt; it must simply exclude every reasonable
hypothesis but that the plaintiff is responsible for the fire.” Id. (citing Rist v. Commercial
Union Ins. Co., 376 So. 2d 113 (La. 1979) & Sumrall, 60 So. 2d at 69). “Proof of motive plus
establishment of the incendiary origin of the fire, in the absence of credible rebuttal
evidence, is sufficient to sustain the affirmative defense of arson.” Id. (citing Sumrall, 60
So. 2d at 70)).
The incendiary nature of the fire is disputed, and Wells does not appear to contend
that summary judgment is proper on the basis that there is no genuine issue as to whether
the fire was set as opposed to accidental. Instead, Wells asserts that State Farm has not
come forward with sufficient evidence of his motive to commit arson, such that it is
permissible to infer he was responsible for setting the fire. In support, Wells claims that
cases require proof of “dire financial circumstances” before it is permissible to infer from
circumstantial evidence that an insured had the requisite motive sufficient to support a
finding the insured set the fire.5 The case Wells cites for this proposition, Kennair v. State

5

R. Doc. No. 74-1, p. 8 (“Financial motive sufficient to commit arson is
shown by demonstrating that the plaintiff insured is in “dire financial
circumstances.”).
4

Farm Fire & Casualty Co., 44 F.3d 1004 (5th Cir. 1994) (per curiam) (unpublished), does
not contain the word “dire.” Instead, the Fifth Circuit simply noted plaintiffs’ financial
situation was dismal and that “State Farm presented evidence that the [plaintiffs] had a
financial motive to burn their house. Before the fire, the [plaintiffs] attempted to sell their
house. Despite having invested more than $80,000 in the house, the [plaintiffs] were
forced to lower the asking price from $50,000 to $34,000.” Id. at *2.
Other cases Wells cites for this proposition do contain his “dire” language though.
For example, in Kelly v. Commercial Union Insurance Co., 709 F.2d 973 (5th Cir. 1985),
the Fifth Circuit stated:
The defendant attempted to establish at trial that the plaintiffs were in dire
financial straits and that a friend of theirs . . . had set the fire at their request.
The trial court was not convinced that the plaintiffs' financial status was such
as would motivate a person to burn down his property and the court found
that the defendant had not proved that [the friend] “had anything to do with
setting this fire.” The record does not indicate that these findings were
clearly erroneous.
Id. at 976. The Louisiana Second Circuit used similar language when it reversed a trial
court’s finding of fact that the plaintiff had sufficient motive to commit arson, writing: “We
do not feel State Farm has shown the dire financial condition or other motivation required
for us to say it is more probable than not [plaintiff] was responsible for the destruction of
his home.” Wallace v. State Farm Fire & Cas. Ins. Co., 345 So. 2d 1004, 1008 (La. Ct. App.
1977).6 Louisiana law controls this state law claim, and the Court concludes that Louisiana
6

State Farm asserts that a plaintiff may have a motive to commit arson
other than dire financial straits. To the extent State Farm means to
suggest a person may have a motive to commit arson, e.g., out of revenge
or to make money (because, for example, the property is overinsured
5

law requires State Farm to prove that Wells was in “dire financial straits” before it would
be proper for a jury to infer from circumstantial evidence that he had the motive necessary
to commit arson.
Although this is a demanding burden, “[w]hether or not an insurer has adequately
established the defense of arson is a factual determination.” Arena v. Allstate Ins. Co.,
2000 WL 422395, at *6 (citing B. Bennett Mfg. Co. v. S. Carolina Ins. Co., 692 So. 2d 1258,
1269 (La. Ct. App. 1997)). So long as the insurer comes forward with some evidence the
insured was in financial straits that a reasonable person could believe were dire, there is a
question of fact concerning plaintiff’s motive. See Neuman v. Mauffray, 771 So. 2d 283,
286 (La. Ct. App. 2000) (“A motion for summary judgment requiring a judicial
determination of subject facts, such as motive, intent or knowledge, is rarely appropriate.”).
State Farm has come forward with evidence of Wells’s dire financial situation
sufficient to survive summary judgment. There is evidence in the record that Wells had a
balloon payment coming due (in the amount of approximately $110,000) the month the fire
was set.7 Wells had only $9,000 in his checking account at that time, and there is evidence
Wells had a negative cash flow. Even if, as Wells contends, he was eligible to renegotiate
this payment, there is no guarantee Wells’s bank would have agreed to a renegotiation (he

taking in account of any indebtedness on the property), the Court agrees.
But there is no evidence in this case Wells stood to make much if any profit
from this fire, that the vacant property was for some reason more valuable
to Wells than his home of twenty-five years, or that he had a personal
motive such as revenge to commit arson.
7

R. Doc. No. 74-1, p. 4.
6

had recently been turned down for a reverse mortgage),8 and the prospect of defaulting on
such a large balloon payment and Wells’s negative cash flow provide sufficient evidence of
financial motive to create a jury question whether Wells faced dire financial straits.
II.

Defendant’s Motion for Summary Judgment

State Farm moves for summary judgment, asserting that Wells is barred from
bringing suit because he failed to submit a sworn proof of loss and State Farm’s good faith
reliance on its arson defense precludes Wells from recovering on his cause of action for a
bad faith failure to pay his claim. Neither argument provides a basis for summary
judgment.
It is true that Wells’s policy contains within it a requirement to “submit to [State
Farm], within sixty days after the loss, your signed, sworn proof of loss,”9 and it is
undisputed that Wells did not submit a sworn proof of loss within sixty days (and that he
has still not submitted a sworn proof of loss). State Farm asserts this precludes Wells from
bringing suit, as another term of his policy states: “No action shall be brought unless there
has been compliance with the policy provisions.”10
Louisiana law does not “regard a cooperation clause as ‘an escape hatch’ that an
insurer may use to flee from liability.” Kovesdi v. Allstate Indemnity Co., 2010 WL

8

The renegotiation was not guaranteed, as another credit check would have
been required. R. Doc. 87, pp. 8–9 & record cites.

9

R. Doc. No. 80-1, p. 9.

10

R. Doc. No. 80-1, p. 9.
7

3835893, at *6 (E.D. La. Sept. 24, 2010).11 Thus, for an insurer to obtain dismissal based
on the plaintiff’s failure to provide sworn statements and the like, the insurer must “show
a diligent effort to obtain [the requested] information.” Nat'l Union Fire Ins. Co. of
Pittsburgh, Pa., v. Cagle, 68 F.3d 905, 912 (5th Cir. 1995) (citing Pelas v. Am. Employer's
Ins. Co., 299 So.2d 815, 816 (La. Ct. App. 1974)). In addition, the insurer must show that
“the breach on the part of the insured [was] both material and prejudicial to [it].” Williams
v. Lowe, 831 So.2d 334, 336 (La. Ct. App. 2002); accord Desadier v. Safeway, 712 So.2d
925, 928 (La. Ct. App. 1998); Freyou v. Marquette Cas. Co., 149 So. 2d 697, 699–700 (La.
Ct. App. 1963). Whether or not State Farm was diligent in its effort to obtain a sworn state
of loss from Wells, State Farm has not even attempted to show the required prejudice. That
is perhaps because, at this point—after substantial discovery and deposition testimony—it
would be quite difficult to show prejudice based on the lack of a piece of paper.
State Farm’s assertion that it is entitled to summary judgment on Wells’s bad faith
or arbitrary and capricious failure-to-pay claim under Louisiana Revised Statutes 22:1892,
22:1973(B)(5), is also without merit. While a reasonable jury could, as discussed above,
conclude that Wells committed arson, a reasonable jury could also conclude that he did not
and that State Farm reached the contrary conclusion in bad faith (by, for example, the way
it handled the investigation process). The fact that today, after all the facts have come to

11

The clauses on which State Farm relies are clearly cooperation clauses, and
its theory for escaping liability is one of breach-by-the-insured. The fact
that some non-binding authority fails to discuss a prejudice requirement
in connection with breach of a cooperation clause does not change the fact
Louisiana cases impose this requirement.
8

light through discovery, a reasonable jury could conclude Wells committed arson does not
dispose of the reasonableness of State Farm’s arson determination at the time it denied
Wells’s claim. In any event, bad faith, like the motive at issue in State Farm’s arson defense,
is quintessentially a question of fact.
CONCLUSION
For the foregoing reasons, Wells’s motion for partial summary judgment and State
Farm’s motion for summary judgment are both DENIED.
New Orleans, Louisiana, this 14th day of November, 2013.

_____________________________
SUSIE MORGAN
UNITED STATES DISTRICT JUDGE

9