Luckett v. Allstate Indemnity Company et al
Filing
150
ORDER granting in part and denying in part 137 Motion for Summary Judgment. Allstate's Motion for Summary Judgment is granted as to the following claims: tortious breach of contract, bad faith, gross negligence, and negligence. Allstate's Motion for Summary Judgment is denied as to the breach of contract claim. Signed by District Judge Kristi H. Johnson on 2/12/2021. (KJ)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF MISSISSIPPI
NORTHERN DIVISION
JENNIFER LUCKETT
V.
PLAINTIFF
CIVIL ACTION NO. 3:18-CV-275-KHJ-LGI
ALLSTATE INDEMNITY COMPANY
DEFENDANT
ORDER
This action is before the Court on Allstate Indemnity Company’s Motion for
Summary Judgment [137]. After reviewing the arguments, evidence, and applicable
law, this Motion is granted in part and denied in part.
I.
Background
A. Procedural History
This case stems from a house fire on Castilian Springs Road in Durant,
Mississippi (“the Castilian Springs house”). Plaintiff Jennifer Luckett (“Luckett”)
filed a claim for benefits under a renter’s insurance policy she bought from Allstate
Indemnity Company (“Allstate”). After investigating, Allstate denied Luckett’s
claim, stating Luckett materially misrepresented her status as a renter,
fraudulently requested mileage reimbursement, and breached a policy condition
when she failed to produce all requested documents. [143-10].
After the claim denial, Luckett sued Allstate in Holmes County Circuit Court
for breach of contract and bad faith breach of contract and Allstate removed the
case to this Court. [1-1]. Luckett moved to remand asking the Court to allow her to
certify that she did not seek more than $75,000 in damages. [1-2]. The Court
reserved ruling on Luckett’s motion and allowed her to submit an affidavit agreeing
to not seek an amount greater than $75,000, which would destroy federal diversity
jurisdiction. [1-2]. Luckett filed such an affidavit, and the Court remanded the case
to state court. [1-3, 4].
Luckett then filed a second Complaint in Holmes County Circuit Court
against Allstate and added two individuals: Barry Makamson and Wilbur Jordan,
who Luckett identified as agents, employees, and servants of Allstate. [1-5]. The
facts and causes of action in the second Complaint are nearly identical to those in
the first—both complaints arise out of the same fire loss and cite the same renter’s
insurance policy.
Luckett moved to dismiss her first lawsuit. [1-6]. The state court granted her
motion. [1-7]. Her second lawsuit, like her first, did not specify the amount of
damages she sought. Allstate served requests for admissions asking Luckett to
admit that the damages sought were no greater than $75,000. Luckett denied that
she was not seeking more than $75,000 in her second lawsuit, despite the affidavit
she submitted in her first lawsuit. [1-8]. As a result, Allstate removed the second
case to this Court based on federal diversity jurisdiction. [1-1]. Luckett moved to
remand. The Court denied Luckett’s request for remand and dismissed Defendants
Barry Makamson and Wilbur Jordan [24]. Allstate is the only remaining Defendant.
Luckett alleges that Allstate breached/tortiously breached the renter’s
insurance agreement, acted wrongfully and in bad faith, negligently failed to train
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and supervise their agents, and acted grossly negligent in denying Luckett’s fire
loss claim. [1-5]. In its Motion for Summary Judgment, Allstate argues that the
renter’s insurance policy is void ab initio because Luckett misrepresented material
facts when applying for the policy and when filing her insurance claim. [138].
Allstate also claims that Luckett materially breached her obligations under the
renter’s insurance policy when she refused to provide Allstate with her bank
statements during its investigation of Luckett’s fire loss claim. Id. Luckett responds
that the Allstate agent fraudulently prepared Luckett’s renter’s insurance
application. And while Luckett does not dispute that she misrepresented her
mileage reimbursement claim, she contends her actions were not a material breach
of her renter’s insurance policy. [143].
B. Evidence Presented
In the spring of 2013, Shirley Stewart showed Luckett and Luckett’s mother
the Castilian Springs house. [137-13], at20:5-17. At that time, the house was owned
by Margaret Davenport, Ms. Stewart’s aunt, who lived in California. [137-13] at
10:23-11:3. Ms. Davenport gave Ms. Stewart permission to rent out the house. [13713] at 13:3-10. Before 2013, Ms. Stewart rented the Castilian Springs house to at
least three tenants, who would usually pay $400 to $500 per month for rent. [13713] at 14:10-15:1. These tenants paid in cash that Ms. Stewart would pick up from
the Castilian Springs house or arrange for the tenants to drop off to her. [137-13] at
16:13-15, 21:17-21.
At some point after Ms. Stewart showed Luckett the Castilian Springs house,
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Luckett moved into the house and began paying utilities. [137-13] at 17:18-21; [1378] at 75-76. On or around May 22, 2015, Luckett bought an Allstate renter’s
insurance policy (“the Policy”) for the Castilian Springs house for $18,000. [137-11]
at 15:18-19, 19:2-4. During the application process, Luckett told Allstate that she
was renting the Castilian Springs house. 1 [137-3] at 74:24-75:6; [137-1] at 39:15-17.
This policy was the first time that Luckett had ever bought renter’s insurance, and
she had no other insurance policies with Allstate. [137-1] at 50:2-7; [137-11] at
29:16-18. About eight days after Luckett bought the insurance, she increased
coverage from $18,000 to $40,000. [137-2]; [137-5] at 6-10.
Under the policy terms, Allstate agreed to pay for a covered loss of personal
property up to the limit on liability if Luckett satisfied the policy conditions.
Luckett had to provide all accounting records, bills, invoices, and other vouchers or
certified copies, which Allstate reasonably requested to examine, and to submit to
examinations under oath and sign a transcript of this examination. [137-2] at 25.
Allstate also agreed to cover additional living expenses Luckett incurred if the
covered property was uninhabitable because of a direct physical loss. [137-2] at 23.
Allstate did not agree to cover any loss in which Luckett concealed or
misrepresented a material fact or circumstance. [137-2] at 18. Neither
“misrepresentation” nor “concealment” is defined in the policy. [137-5] at 47:1848:18.
Luckett argues that neither the application nor the Allstate agent asked if she was
renting the Castilian Springs house. [143] at ¶ 6. This is contradicted by Luckett’s 2015
examination under oath and her 2020 deposition. [137-3] at 74:24-75:6; [137-1] at 39:15-17.
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In the early morning of June 9, 2015, the Durant County Fire Department
responded to a call about a fire at the Castilian Springs house. [137-15]. The fire
department declared the house a total loss. Id. Later, Luckett submitted a claim
against Allstate for the value of the personal property that the fire destroyed.
Luckett also submitted a request for mileage reimbursement, claiming that she
drove to and from her place of employment, Canton Public School District, during
the summer of 2015. [137-3] at 66:24-67:9. Luckett, however, did not work at
Canton Public School District during the summer of 2015. [137-3] at 11:7-17; [137-1]
at 17:2-9. 2
During its investigation, Allstate requested Luckett’s bank statements, credit
card statements, pay stubs, invoices, receipts, tax statements, and any other
evidence showing income, expenses, or the value of the personal property that the
fire destroyed. [137-6]. Luckett produced some, but not all, of the requested
documents. [137-1] at 70:3-11; [137-5] at 46:11-47:15. In her September 17, 2015
examination, Luckett told Allstate she had a SunTrust bank account, but she did
not produce any bank statements from SunTrust. [137-3] at 19:8-11; [137-5] at 23:220.
After its investigation, Allstate denied Luckett’s claim because she breached
the policy’s concealment clause and the requirements for what an insured must do
Luckett mentions in her response to Allstate’s summary judgment motion that she may
have traveled to work for a reason which did not warrant a time stamp in her time sheet
but has cited no evidence to support this allegation. Luckett stated in her examination
under oath and her deposition, however, that she did not work at school during the summer
of 2015 and that there would not be any reason besides work for her to go to school. [137-3]
at 11:7-17; [137-1] at 17:2-9.
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after a loss. Allstate stated that Luckett misrepresented her status as a renter of
the Castilian Springs house, overstated the value of the property damaged by the
fire, submitted claims for losses which Luckett did not incur, and failed to produce
all documents requested by Allstate. [137-8] at 28-29. Feeling aggrieved, Luckett
sued.
Luckett’s status as a renter is disputed. Luckett claims she entered into an
oral rental agreement with Ms. Stewart after touring the house. [137-1] at 25:2527:4. She also claims Ms. Stewart told her that she could move in if she did
necessary repairs and improvements on the house. [137-1] at 26:21-27:4. Luckett
states that she paid for these repairs and paid $400 to $500 per month in rent by
leaving cash for Ms. Stewart at Luckett’s mother’s house or giving cash directly to
Ms. Stewart at the Castilian Springs house. [137-1] at 34:20-35:1; [137-3] at 14:2-17,
24:14-25. Luckett admits that she stopped paying rent when she learned the house
was in foreclosure. [137-1] at 35:8-36:4.
Luckett’s mother’s testimony both confirms and contradicts Luckett’s
testimony. Her mother testified that Luckett and Ms. Stewart reached an
agreement for Luckett to move into the Castilian Springs house during the initial
showing. [137-12] at 19:22-21:14, 23:12-19. Luckett’s mother also testified that Ms.
Stewart allowed Luckett to make repairs and improvements to the house prior to
moving in and that Luckett made these repairs. 3 [137-12] at 18:24-19:7, 24:13-25:4.
The extent of these repairs is disputed. Luckett claims that she cleaned the house,
replaced the bathroom floor, replaced wall paneling, repainted, and put in new carpet. [1373] at 16:24-17:7. Luckett’s mother claims that Luckett only cleaned the house, pulled up all
the carpet, and replaced wall paneling. [137-12] at 25:10-26:24.
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Luckett’s mother denied any knowledge of an arrangement between Luckett and
Ms. Stewart involving rent money. [137-12] at 8:21-9:10, 29:20-30:7. Luckett’s
mother also testified that Luckett learned the Castilian Springs house was in
foreclosure while Luckett was living in the house. [137-12] at 50:22-51:8.
Ms. Stewart disputes Luckett’s testimony. She says that Luckett and her
mother toured the Castilian Spring house, but the parties never reached an
agreement for Luckett to move into the house. [137-13] at 20:5-17, 27:12-15. Ms.
Stewart also claims she never collected any rent from either Luckett or Luckett’s
mother. [137-13] at 25:25-26:8. She admits she knew Luckett had moved into the
house and claims that she was trying to evict Luckett when the fire occurred. [13713] at 32:2-15.
There is also conflicting evidence about whether Luckett overstated the value
of the personal property that the fire destroyed. Luckett requested reimbursement
for almost $31,000 of personal property that she claimed to have bought during the
two years before the fire. [137-8] at 52-68; [138] at 19. Adding up the income from
Luckett’s tax returns, Allstate asserts that Luckett’s average income from 20122015 was $12,099.33. [138] at 19. Allstate claims this is direct evidence showing
Luckett overstated the value of her property. That said, Luckett claims her mother
and sister bought some items the fire destroyed. [137-3] at 98:1-4, 99:25-100:3,
101:17-20, 102:7-11, 104:19-105:3, 125:1-4. Luckett’s mother denies purchasing
anything for her daughter. [137-12] at 44:23-46:15.
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II.
Legal Standard
Summary judgment is appropriate when “the movant shows that 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). “A fact issue is ‘material’ if its resolution could
affect the outcome of the action.” Levy Gardens Partners 2007, L.P. v.
Commonwealth Land Title Ins. Co., 706 F.3d 622, 628 (5th Cir. 2013) (citation
omitted).
A party seeking to avoid summary judgment must set forth specific facts
showing that there is a genuine issue for trial. Fed. R. Civ. P. 56(c). A dispute is
genuine “if the evidence is such that a reasonable jury could return a verdict for the
nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The
Court views the evidence and draws reasonable inferences in the light most
favorable to the nonmovant. Duval v. N. Assur. Co. of Am., 722 F.3d 300, 303 (5th
Cir. 2013).
III.
Analysis
Federal courts sitting in diversity jurisdiction must apply the forum state’s
substantive law. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938). For that
reason, this Court will look to the substantive law of Mississippi to resolve the
substantive legal issues presented.
Allstate argues that Luckett breached the renter’s insurance policy in several
ways. First, Allstate asserts that Luckett violated the policy’s concealment clause
when Luckett misrepresented: (1) that she drove to and from work during the
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summer of 2015, (2) her status as a legal renter of the Castilian Springs house, and
(3) the value of Luckett’s property that the fire destroyed. Allstate also argues
Luckett breached the terms of the renter’s insurance policy by failing to produce all
documents Allstate requested.
Allstate also seeks summary judgment on Luckett’s tortious breach of
contract, gross negligence, and bad faith claims, arguing that there is no evidence
Allstate acted recklessly or committed an intentional wrong in its investigation
denying Luckett’s claim. Finally, Allstate seeks summary judgment on Luckett’s
negligence claim, arguing that Allstate did not violate a legally recognized duty by
denying her claim. This Court will address each of these arguments in turn.
A. Breach of Contract
Allstate argues that Luckett failed to sufficiently plead breach of contract.
But Luckett explicitly alleges that Allstate “breached the contractual homeowner’s
insurance agreement” and that “[a]s a result, [Luckett] sustained injuries.” [1-5].
The Complaint sufficiently notifies Allstate of a breach of contract cause of action,
especially given breach of contract is a necessary element of tortious breach of
contract. Robinson v. S. Farm Bureau Cas. Co., 915 So. 2d 516, 520 (Miss. Ct. App.
2005); see also Maness v. K & A Enters. of Miss., 250 So. 3d 402, 414 (Miss. 2018)
(defining breach of contract as (1) the existence of a valid contract and (2) a breach
of the contract).
On the merits, Allstate says that it properly denied Luckett’s claim because
Luckett breached the renter’s insurance agreement when she violated the policy’s
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concealment clause and the clause governing what an insured must do after a loss.
Concealment clauses entitle an insurer to know all facts that are material to the
insurer’s rights so that the insurer can decide upon its obligations and protect itself
against false claims. Edmiston v. Schellenger, 343 So. 2d 465, 466-67 (Miss. 1977).
To establish that an insured has breached the concealment clause of an insurance
contract, an insurer must show by a preponderance of evidence that the statements
by the insured were false, material, and knowing and willfully made. McCord v.
Gulf Guar. Life Ins. Co., 698 So. 2d 89, 92 (Miss. 1997).
Courts interpret materiality broadly and look to whether a fact was material
when the insured made the representation. Edmiston v. Schellenger, 343 So. 2d
465, 466-67 (Miss. 1977). A false statement is material if the truth probably or
reasonably would have affected the insurer’s decision to execute the agreement or if
the truth prevented the insurer from investigating or pursuing a valid legal defense
to the contract. See Sanford v. Federated Guar. Ins. Co., 522 So. 2d 214, 217 (Miss.
1988); Edmiston, 343 So. 2d at 467; see also Material Misrepresentation, Black’s
Law Dictionary (11th ed. 2019) (defining material misrepresentation as “[a] false
statement that is likely to induce a reasonable person to assent or that the maker
knows is likely to induce the recipient to assent”).
Termination of a contract, however, is only appropriate where: (1) a party
materially breaches a contract such that the party fails to substantially perform an
essential part of the contract; (2) the breach substantially defeats the purpose of the
contract; or (3) the breach is vital to the existence of the contract. UHS-Qualicare,
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Inc. v. Gulf Coast Cmty. Hosp., Inc., 525 So. 2d 746, 756 (Miss. 1987). Whether a
party materially breached a contract is generally a question of fact. Sanford, 522 So.
2d at 217.
1.
Luckett’s false mileage claim
Luckett admits that she filed a claim for mileage reimbursement to and from
her job in June 2015. [137-3] at 66:24-67:9. Luckett also admits that she did not
work during the summer of 2015 and that she would not have any reason to travel
to work when she was not working. [137-1] at 17:2-9. As a result, this Court finds
that Luckett’s mileage reimbursement claim was based, at least in part, on a false
statement. The Court must now consider whether this misrepresentation was
material when Luckett filed her claim for additional living expenses.
Allstate argues Luckett’s misrepresentation is material because Allstate
relied on Luckett’s misrepresentation to reimburse her for additional living
expenses. Luckett asserts this misrepresentation is not material to the entire
insurance contract to render it void. Although Luckett’s misrepresentation was
material to her claim for additional living expenses, the Court must consider
whether this misrepresentation was material to Luckett’s claim for personal
property damage—the basis of this lawsuit.
Allstate cannot claim that but for Luckett’s misrepresentation it would not
have issued the renter’s insurance policy. Sanford, 522 So. 2d at 217. When Luckett
filed her mileage claim, Allstate had already issued the renter’s insurance policy
and was in the middle of its investigation. Since Luckett’s misrepresentation came
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after Allstate issued the renter’s insurance policy, Allstate could not have
reasonably relied on this statement to issue the policy.
Additionally, Luckett’s false claim for mileage did not prevent Allstate from
investigating any defenses to Luckett’s claim for personal property damage. Allstate
relies on Edmiston to show that Luckett’s misrepresentation was material. 343 So.
2d at 466. There, the insured lied about where he was in the days following a fire
that destroyed the insured’s property. Id. The court found this information material
because the misrepresentation prevented the insurance company from investigating
the cause of the fire. Id. at 467. Here, unlike in Edmiston, Luckett’s mileage
misrepresentation did not prevent Allstate from investigating the cause of the fire
or pursuing any valid defenses. Therefore, although Luckett’s misrepresentation is
material to her claim for additional living expenses, it is not material to Luckett’s
claim for personal property damage. And even if the misrepresentation were
material to Luckett’s claim for property damage, whether this misrepresentation
constitutes a material breach of the insurance contract is a question of fact.
Sanford, 522 So. 2d at 217. This Court denies summary judgment on this ground.
2.
Luckett’s legal status as a renter
Allstate argues that other witnesses contradict Luckett’s testimony about her
rental of the Castilian Springs house. Luckett admits she told Allstate she was
renting the Castilian Springs house when she bought the renter’s insurance policy.
[137-1] at 39:15-17; [137-3] at 74:24-75:6. She and her mother both testified Luckett
entered into an oral agreement with Ms. Stewart to rent the house and Ms. Stewart
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encouraged Luckett to make repairs to the house in exchange for occupying the
house. [137-1] at 25:25-27:4; [137-12] at 18:24-19:7, 19:22-21:14, 23:12-19, 24:1325:4.
Although Allstate points to several inconsistencies in the record, evaluating
conflicting evidence to determine whether a contract exists is a question of fact for
the jury to decide. Jackson HMA, LLC v. Morales, 130 So. 3d 493, 497-98 (Miss.
2013). Because Luckett and her mother testified that Luckett entered into an oral
agreement to move into the Castilian Springs house in exchange for repairing the
house and that Luckett made these repairs, the Court finds that a genuine issue of
material fact exists as to whether an oral rental agreement existed and denies
summary judgment on this ground.
3.
Luckett’s financial condition and property value
Allstate argues that Luckett overstated the value and the age of her personal
property when making her property damage claim. There is conflicting evidence
about who bought several of Luckett’s listed items. Luckett claims that her mother
and sister bought several of the listed items, but Luckett’s mother denies having
purchased any items for Luckett’s home. [137-3] at 98:1-4, 99:25-100:3, 101:17-20,
102:7-11, 104:19-105:3, 125:1-4; [137-12] at 44:23-46:15. Because the Court cannot
consider witness credibility and must view the evidence in the light most favorable
to Luckett for purposes of summary judgment, N. Assur. Co. of Am., 722 F.3d at
303, the Court finds that there is a genuine issue as to whether Luckett overstated
the value of her personal property.
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4.
Luckett’s refusal to provide all documents Allstate
requested
Allstate claims that Luckett violated the policy term that required Luckett to
give “all accounting records, bills, invoices and vouchers, or certified copies which
we may reasonably request to examine.” [137-8], at 29. To determine whether
Luckett breached the contract, this Court must determine whether Allstate’s
request for Luckett’s bank accounts was reasonable. “[R]easonableness is a question
of fact[,]” however, and, as such, must be submitted to a jury. Hawkins v. Heck Yea
Quarter Horses, LLC, 249 So. 3d 400, 405-06 (Miss. 2018).
Even if Allstate’s request were reasonable as a matter of law, there is a
genuine issue as to whether Luckett materially breached the insurance contract.
Luckett produced at least some of the requested documents, and she claims that she
complied with Allstate’s request in good faith. In contrast, though, Luckett admitted
to having a SunTrust bank account in 2015 yet did not produce her bank
statements from this account. Allstate claims this is a material breach of the
contract because bank statements could document other sources of income and
document purchases made with a debit card or by check. These are questions of fact
that the Court cannot resolve at this stage of litigation, especially when viewing the
evidence in the light most favorable to Luckett. Sanford, 522 So. 2d at 217. The
Court therefore denies summary judgment on this ground.
B. The Remaining Claims
Allstate is entitled to summary judgment on Luckett’s remaining claims for
tortious breach of contract, bad faith, gross negligence, and negligence. Tortious
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breach of contract occurs when a party breaches a contract with an “intentional
wrong, insult, abuse, or negligence so gross as to constitute an independent tort.”
Robinson, 915 So. 2d at 516. Because Luckett has presented no evidence showing
Allstate’s conduct in its investigation or denial constitutes an independent
intentional tort, this Court grants summary judgment for Allstate on Luckett’s
tortious breach of contract claim.
A claim for bad faith requires that an insurer lacked an arguable basis for
denying the claim, committed a willful or malicious wrong, or acted with gross and
reckless disregard for the insured’s rights. Liberty Mut. Ins. Co. v. McKneely, 862
So. 2d 530, 533 (Miss. 2003). Allstate had an arguable basis to deny Luckett’s
claim—the belief that Luckett had misrepresented her status as a renter—and
Luckett has presented no evidence that Allstate committed a willful or malicious
wrong or acted with gross and reckless disregard for her rights. The Court therefore
grants summary judgment for Allstate on Luckett’s bad faith claim.
Gross negligence occurs when a party acts recklessly indifferent to
consequences without making any substantial effort to avoid these consequences.
Ezell v. Bellsouth Telecomms., Inc., F. Supp. 149, 152 (S.D. Miss. 1997) (quoting
Dame v. Estes, 101 So. 2d 644 (Miss. 1958)). Luckett has presented no evidence that
Allstate acted with reckless indifference in its investigation or denial of her claim.
On the contrary, Allstate conducted several witness interviews and requested
multiple documents relating to Luckett’s claim. As a result, this Court cannot find
that Allstate acted with reckless indifference. The Court therefore grants summary
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judgment for Allstate on Luckett’s gross negligence claim.
A party who seeks to establish ordinary negligence must show that a
defendant breached its duty of care to the plaintiff and this breach injured the
plaintiff. Sanderson Farms, Inc. v. D. D. McCullough, 212 So. 3d 69, 76 (Miss. 2017).
Every contract comes with a common law duty of care, skill, and reasonable
experience. Clausell v. Bourque, 158 So. 3d 384, 391 (Miss. Ct. App. 2015). There is
no genuine issue, however, as to whether Allstate breached this duty in denying
Luckett’s claim under the rental insurance agreement. Luckett declined to even
address Allstate’s ordinary negligence argument and has presented no facts
showing Allstate failed to act with care, skill, and reasonable experience in denying
her claim. This Court therefore finds no genuine issue of material fact exists for
Luckett’s negligence claim, and summary judgment is appropriate.
IV.
Conclusion
This Court has considered all arguments. Those not explicitly addressed in
this Order would not have changed the outcome. Because material facts are in
dispute, Allstate’s Motion for Summary Judgment [137] is DENIED on this claim:
•
Breach of contract.
Because there are no material facts in dispute, Allstate’s Motion for
Summary Judgment [137] is GRANTED on these claims:
•
Tortious breach of contract,
•
Bad faith,
•
Gross negligence, and
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•
Negligence.
SO ORDERED AND ADJUDGED this the 11th day of February, 2021.
s/ Kristi H. Johnson
UNITED STATES DISTRICT JUDGE
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