Allstate Indemnity Company v. Dixon et al
ORDER denying 135 Defendants/Counterclaim Plaintiffs' motion for summary judgment; granting in part and denying in part 141 Plaintiff/Counterclaim Defendants motion for partial summary judgment Signed on 8/18/16 by District Judge M. Douglas Harpool. (Guemmer, Jared)
IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF MISSOURI
ALLSTATE INDEMNITY COMPANY,
JOSEPH DIXON and CASEY DIXON,
LORETTA BAILEY AGENCY, INC. and
Counterclaim Defendants. )
Case No. 6:14-cv-03489-MDH
Before the Court are cross Motions for Summary Judgment (Doc. 135, 141). The Court
has carefully considered the motions and their accompanying arguments, and hereby DENIES
Defendants/Counterclaim Plaintiffs’ Motion for Summary Judgment (Doc. 135) and GRANTS
IN PART AND DENIES IN PART Plaintiff/Counterclaim Defendant’s Motion for Summary
Judgment as to Counts IV, V, and VI (Doc. 141).
On February 14, 2014, Joseph Dixon and Casey Dixon purchased property at 791 State
Hwy T, West Plains, Missouri, for $120,000. Around the end of February 2014, Mr. Dixon
contacted Loretta Bailey Agency, Inc., which serves as an insurance agency for Allstate
Indemnity Company, seeking an insurance policy covering the dwelling and all personal
property on the land. Bethany Flenniken, a licensed insurance agent and employee of Loretta
Bailey Agency, Inc., provided insurance premium quotes for $116,411, $300,000 and $479,857.
The quote for $479,857 was based on a computation of the actual cash value of the real property
generated partially based on the square footage of the property, which was originally estimated
as 4800 square feet.
On March 10, 2014, the parties entered into an insurance agreement providing dwelling
coverage for $479,857 and personal property coverage for $60,000. The insurance policy was
written and bound by Ms. Flenniken. On March 13, 2014, Allstate requested an inspection of the
property. Following this inspection, Ms. Flenniken increased the square footage of the property
in the policy to 7796 square feet. A new computation of the actual cash value of the real property
returned a value of $732,855. During her deposition, Ms. Flenniken stated that she did not
inform the Dixons of the new estimation of the property’s actual cash value.
On the evening of April 12, 2014, a fire damaged the dwelling and personal property, and
the Dixons later submitted a claim under the insurance policy seeking $532,857. Allstate
Indemnity Company filed this action seeking declaratory judgment regarding its rights and
obligations under the insurance policy. Allstate asserted that the policy did not provide coverage
under the circumstances for either of two reasons: (1) Defendants concealed or misrepresented
material facts when they told Allstate that neither they, nor anyone at their direction,
intentionally started the fire; or (2) Defendants are barred from recovering under the policy
because they, or someone at their direction, started the fire.
Joseph Dixon and Casey Dixon filed a counterclaim against Allstate for breach of
contract and vexatious refusal to pay, the latter of which is governed by Mo. Rev. Stat. §§
375.296 and 375.420. The Dixons also joined claims against third parties Loretta Bailey Agency,
Inc. and Bethany Flenniken as agents of Allstate for general negligence, negligent omission, and
negligent representation. The Dixons alleged that Ms. Flenniken, as an employee of Loretta
Bailey Agency, Inc., was negligent when she failed to inform the Dixons that the estimated
actual cash value of the home had changed from $479,857 to $732,855. The Dixons also alleged
that Ms. Flenniken negligently represented to them that personal property purchased for the
purpose of using the dwelling as a bed and breakfast would be covered by the personal property
policy. Allstate was joined as a defendant to these negligence claims based on agency theories of
liability. The Court received a Notice of Settlement regarding the claims against Loretta Bailey
Agency, Inc. and Bethany Flenniken. The Dixons continue to pursue all claims against Allstate,
including the negligence claims.
The Dixons filed a Motion for Summary Judgment for all of their claims and Allstate’s
arson defense. Allstate filed a Motion for Summary Judgment regarding Counts IV, V, and VI of
the Dixons’ counterclaim. After full briefing on each of the issues, the matter is now ripe for
STANDARD OF REVIEW
Summary judgment is proper if, viewing the record in the light most favorable to the nonmoving party, there is no genuine issue of material fact and the moving party is entitled to
judgment as a matter of law. Fed. R. Civ. P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 32223 (1986). “Where there is no dispute of material fact and reasonable fact finders could not find
in favor of the nonmoving party, summary judgment is appropriate.” Quinn v. St. Louis County,
653 F.3d 745, 750 (8th Cir. 2011). Initially, the moving party bears the burden of demonstrating
the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323. If the movant meets
the initial step, the burden shifts to the nonmoving party to “set forth specific facts showing that
there is a genuine issue for trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). To
do so, the moving party must “do more than simply show there is some metaphysical doubt as to
the material facts.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586
As to the Dixons’ Motion for Summary Judgment, the Court finds there are genuine
issues of material fact regarding Allstate’s arson defense, Count I of the counterclaim alleging
breach of contract, and Count II of the counterclaim alleging vexatious refusal to pay. Therefore,
the court denies the Dixons’ Motion for Summary Judgment as to those issues. As to Allstate’s
Motion for Summary Judgment, the Court finds no genuine issues of material fact and holds that
Allstate is entitled to judgment as a matter of law regarding Counts IV and V of the counterclaim
alleging general negligence and negligent omission. Therefore, the Court grants Allstate’s
Motion for Summary Judgment on those issues. However, as to Count VI of the counterclaim,
alleging negligent misrepresentation, the Court concludes that no live controversy currently
exists due to the legal positions taken by the parties, denies both parties’ motions for summary
judgment, and defers ruling on the issue of mootness until the issue can be taken up on a motion
for directed verdict.
A. Count I – Breach of Contract / Allstate’s Arson Defense
Allstate’s complaint seeking declaratory judgment and the Dixons’ breach of contract
counterclaim are two sides of the same coin. If summary judgment is improper as to Allstate’s
arson defense, it is also improper as to the Dixons’ breach of contract claim. Thus, the Court will
address them together.
The Dixons’ argument for summary judgment rests upon the premise that Allstate, as a
matter of law, cannot submit sufficient evidence such that a jury could find four “elements” of an
insurer’s arson defense. 1 However, Missouri courts have repudiated this analysis of arson
defenses, stating, “Missouri law . . . is not so regimented.” Farm Bureau Town & Country Ins.
Co. of Mo. v. Shipman, 436 S.W.3d 683, 685 (Mo. Ct. App. 2014) (noting the analysis of arson
defenses set out in Fleming and rejecting it). Instead, Missouri law requires only a single factual
determination: Whether the insured intentionally caused or procured the fire. Id. Furthermore,
the insurer is permitted to demonstrate arson through circumstantial evidence. Id.
The Court finds that genuine disputes of material fact exist regarding whether the Dixons
intentionally caused or procured the fire. Viewing the record in the light most favorable to
Allstate, the record shows that genuine issues of material fact exist such that a reasonable factfinder could find in favor of Allstate. First, Mr. Dixon and Donald Hitch each confirmed there
were no pre-existing issues within the property that might have served as a source of the fire.
Furthermore, all appliances were turned off, no candles were burning, and the house was locked.
The Dixons left the property between 8:00 p.m. and 8:30 p.m., and Mr. Dixon was the last
person to leave the property. He was inside for roughly 5-8 minutes.
According to Terry Decker, one of the Allstate experts, the fire was discovered at 9:11
p.m. According to Robert Wysong, Allstate’s second expert, the fire had fully engulfed the house
by 9:22 p.m. Mr. Wysong concluded that the fire had either been burning for more than one hour
prior to discovery, or the fire had multiple points of origin. Mr. Decker concluded that the fire
was likely burning when the Dixons left the property, or shortly after they left. While none of the
This element-based analysis was set out in Nationwide Mut. Fire Ins. Co. v. Fleming, 750 F. Supp. 996, 999 (E.D.
Mo. 1990). In that case, the court stated that “[t]he elements are: (1) the incendiary nature of the fire; (2) motive on
the part of the insured to set the fire; (3) opportunity for the insured, or someone acting on the insured's behalf, to set
the fire; and (4) inculpating circumstances which are relatively strong.” Id.
experts who investigated the fire could conclusively determine whether the fire was incendiary
or accidental, this fact is not dispositive. A fact-finder will have the opportunity to hear the
factual determinations and analyses of the various retained experts and reach their own
conclusions regarding whether the fire was incendiary or accidental.
Second, three months prior to the fire, the Dixons entered into a contract to purchase the
property for $120,000. On March 10, 2014, the Dixons acquired an insurance policy for
$479,857 for the dwelling and for $60,000 for personal property. The fire damaged the property
on April 12, 2014. By the time of the fire, the Dixons invested $13,400 into the property. As a
result of the destruction of the property, Allstate became obligated to pay the remainder of the
mortgage in the amount of $107,526.29. Prior to obtaining the insurance policy, Mr. Dixon made
inquiries regarding cost replacement coverage.
Based on these facts, the Court holds that a genuine dispute of material fact exists
because a reasonable fact-finder could find in favor of Allstate regarding the question of whether
the Dixons intentionally caused or procured the fire. Therefore, summary judgment is denied as
to Allstate’s arson defense.
Furthermore, because a fact-finder could reasonably find in favor of Allstate based on its
arson defense, the Court denies the Dixons’ motion for summary judgment regarding its breach
of contract claim.
B. Counts II and III – Vexatious Refusal to Pay
The Dixons seek summary judgment on their claim that Allstate violated Mo. Rev. Stat.
§§ 375.296 and 375.420, which provide for additional damages if an insurer refuses to pay a
claim and that refusal was “vexatious and without reasonable cause.” Missouri law requires the
Dixons to prove three elements in order to prevail on a claim for vexatious refusal to pay: (1)
The Dixons must have had an insurance policy with Allstate; (2) Allstate refused to pay a claim
on that policy; and (3) Allstate’s refusal was without reasonable cause or excuse. Hensley v.
Shelter Mut. Ins. Co., 210 S.W.3d 455, 464 (Mo. Ct. App. 2007); Mo. Rev. Stat. § 375.420. The
Eighth Circuit has noted that Sections 375.296 and 375.420 are penal in nature and that their
purpose is to “deter the insurer from vexatiously refusing to pay ‘after becoming aware that it has
no meritorious defense’ to the insured’s claim.” State of Mo. ex rel. Pemiscot County, Mo. v.
Western Sur. Co., 51 F.3d 170, 174 (8th Cir. 1995) (quoting Morris v. J.C. Penney Life Ins. Co.,
895 S.W.2d 73, 76 (Mo. Ct. App. 1995)). “The existence of a litigable issue, either factual or
legal, does not preclude a vexatious penalty where there is evidence the insurer's attitude was
vexatious and recalcitrant.” DeWitt v. Am. Family Mut. Ins. Co., 667 S.W.2d 700, 710 (Mo. banc
1984). However, the continued open question of whether Allstate has an arson defense to the
Dixons’ insurance claim necessarily precludes a finding by the Court, at the summary judgment
stage, that Allstate acted without reasonable cause or excuse when it refused to pay the Dixons’
claim. Such a question of reasonableness belongs in the hands of the fact-finder once it has
determined whether the Dixons are entitled to recover under the insurance policy.
C. Counts IV and V – Negligence and Negligent Omission
At the time the policy was bound, and prior to Allstate’s inspection, the estimated square
footage of the property was 4800 square feet, and the actual cash value of the dwelling was
estimated at $479,857. Following the inspection, which revealed that the dwelling was 7798
square feet, the estimated actual cash value of the dwelling was $732,855. The Dixons claim that
Allstate was negligent when its agents failed to inform the Dixons of the new estimated “actual
cash value” of the property following the inspection.
“In any action for negligence, the plaintiff must establish that (1) the defendant had a
duty to the plaintiff; (2) the defendant failed to perform that duty; and (3) the defendant's breach
was the proximate cause of the plaintiff's injury.” Parr v. Breeden, 489 S.W.3d 774, 778 (Mo.
banc 2016) (quoting Martin v. City of Washington, 848 S.W.2d 487, 493 (Mo. banc 1993)). The
key issue here is whether Allstate, through its agents, owed the Dixons a duty to inform them of
the increased estimated value of the property. “The question of whether a legal duty exists is a
question of law for the court to decide. Essential to the finding of a duty is ‘the existence of a
relationship between plaintiff and defendant that the law recognizes as the basis of a duty of
care.’” Manzella v. Gilbert-Magill Co., 965 S.W.2d 221, 225 (Mo. Ct. App. 1998) (quoting
Bunker v. Ass’n of Mo. Elec. Co-op., 839 S.W.2d 608, 611 (Mo. Ct. App. 1992)) (internal
“The scope of the agency of either an agent or a broker normally is limited to procuring
the insurance requested by the insured.” Emerson Electric Co. v. Marsh & McLennan Cos., 362
S.W.3d 7, 13 (Mo. banc 2012). “[N]either agents nor brokers have a duty to advise the insured
on its insurance needs or on the availability of particular coverage, unless the specifically agree
to do so.” Id. The Eighth Circuit, in analyzing Missouri law, has stated that “Missouri law does
not require an insurance agent to appraise and evaluate its customers’ business.” State Auto Prop.
& Cas. Ins. Co. v. Boardwalk Apartments, L.C., 572 F.3d 511, 515 (8th Cir. 2009). However, the
duty owed by an agent “may vary depending on the relationship of the parties and any
agreements between them.” Emerson Electric, 362 S.W.3d at 20. Thus, even if no general duty
exists, the duty owed by an insurer may nonetheless expand based on the relationships or
agreements between the parties. Id.
In Manzella, the insured claimed that the agents had “a duty to advise the [insured] of the
amount of insurance they required to cover the anticipated losses for their deli business, and that
[the agents] negligently breached that duty.” 965 S.W.2d at 225 (emphasis added). The Missouri
Court of Appeals rejected this assertion, stating that it was the insured’s responsibility to “take
care of [their] own financial needs and expectations” before entering the marketplace to procure
insurance coverage. Id. at 226 (quoting Farmers Ins. Co., Inc. v. McCarthy, 871 S.W.2d 82, 85
(Mo. Ct. App. 1994)).
The Court holds that Allstate, through its agents, owed no general duty to inform the
Dixons of the increased actual cash value of their property. Therefore, a duty to inform could
exist only if some special relationship or extended agency agreement was formed. Emerson
Electric, 362 S.W.3d at 13; see also Manzella, 965 S.W.2d at 227.
The Dixons argue that a provision in the contract binding the insurance policy created an
expanded duty. The provision is as follows:
[Allstate] uses local agencies to assist customers with their insurance decisionmaking process by providing customers with information and high-quality
service. These agencies provide numerous services to customers on the
company’s behalf. Agencies are paid a commission by the company for selling
and servicing the company’s insurance policies and may be eligible to receive
additional compensation and rewards based on performance. 2
Under Missouri law, insurance contracts are to be given their plain meaning. Blevins v. State
Farm Fire & Cas. Co., 961 S.W.2d 946, 949 (Mo. Ct. App. 1998). “The key to the interpretation
of the contract is whether the contract language is ambiguous or unambiguous . . . . [A]mbiguity
in language is found where that language could be reasonably construed in different ways.” Id.
(internal citations omitted). A court may not distort the language of an insurance contract to
The Dixons rely only upon the first sentence: “[Allstate] uses local agencies to assist customers with their
insurance decision-making process by providing customers with information and high-quality service.” However,
the Court cannot ignore the remainder of the “Important Notice.”
create ambiguity where none exists. Id. “Where there is no ambiguity in the contract, it is our
duty to enforce it as written.” Id.
The Court holds that the “Important Notice” did not create an expanded duty. The Dixons
argue that the notice constituted a promise by Allstate that its agents would provide information
and advice regarding customers’ insurance needs, and that this promise created an expanded duty
to inform them of the new estimated actual cash value of the dwelling. However, this Notice is
not a promise. It is a disclosure statement intended to inform customers that Allstate’s insurance
agents receive commissions from Allstate for selling insurance. The first sentence, upon which
the Dixons rely, is solely intended to provide context to the disclosure. The Notice, when read as
a whole, cannot reasonably be interpreted to place a duty upon Allstate to go beyond its general
legal obligations. 3
Therefore, neither Allstate nor its agents owed the Dixons a duty to inform them that the
modification in square footage of the dwelling increased the estimated actual cash value of the
property. Where there is no duty, there is no negligence. For these reasons, the Court grants
Allstate’s Motion for Summary Judgment as to Counts IV and V.
D. Count VI – Negligent Representation
The Dixons have framed Count VI as being “merely anticipatory,” in that they
expect Allstate to assert that some of the personal property destroyed in the fire would not be
covered by the personal property policy because the Dixons intended to use it for business
purposes (Doc. 162, pg. 37). If Allstate makes such an argument, Count VI is intended to serve
as a countermeasure: The Dixons will argue that Ms. Flenniken negligently misinformed them
The Dixons point out that Loretta Bailey and Bethany Flenniken stated, in their depositions, that they consider it
important to inform customers of information like an increase in the actual cash value of property. Providing this
information may constitute a good business practice, but good business practices do not necessarily give rise to legal
when she stated the property would be covered under the personal property policy, and they
relied on those statements to their detriment. Allstate, in its Reply Suggestions, responded by
stating in no uncertain terms that it will not proceed in such a manner:
Let Allstate be clear, it will not take a position at trial that [the Dixons’] personal
property is not covered because it was being used for a business or a commercial
purpose. Allstate’s position . . . will be that [the Dixons’] personal property is not
covered because [they] concealed and/or misrepresented material facts regarding
the nature and extent of [the Dixons’] personal property claim, and that neither
they, nor anyone at their direction, started the fire.
(Doc. 179, pg. 48).
Additionally, the Court understands that the parties intend to stipulate that Allstate will
not make this argument. In light of this acknowledgement by Allstate and the intent of the parties
to stipulate, the Court questions whether a live controversy remains as to Count VI. The parties
agree that the property in question cannot be denied coverage on the basis that the Dixons used it
for business purposes. There can be no tort if the denial of coverage is unrelated to Ms.
Flenniken’s allegedly inaccurate statements. Count VI was asserted based solely on the
possibility Allstate might make an argument that it now states it will not make.
Federal courts are limited to deciding “Cases” and “Controversies.” U.S. Const. Art. III;
Chafin v. Chafin, 133 S. Ct. 1017, 1023 (2013). A litigant may invoke the jurisdiction of a
federal court only if they have “suffered, or [are] threatened with, an actual injury traceable to
the defendant and likely to be redressed by a favorable judicial decision.” Chafin, 133 S. Ct. at
1023. “Federal courts may not ‘decide questions that cannot affect the rights of litigants in the
case before them . . . .” Id. (quoting Lewis v. Cont’l Bank Corp., 494 U.S. 472, 477 (1990)). The
requirement that federal courts limit themselves to deciding cases or controversies subsists
throughout the proceedings. Id. A case is moot “when it is impossible for a court to grant any
effectual relief whatever to the prevailing party.” Id. (quoting Knox v. Service Employees, 132 S.
Ct. 2277, 2287 (2012). “A case is not moot so long as the parties retain any ‘concrete interest,
however small, in the outcome of the litigation.” In re Steward, ___ F.3d ___, No. 15-1988, 2016
WL 3629028, at *6 (8th Cir. July 7, 2016) (quoting Chafin, 133 S. Ct. at 1023). Where the court
is being asked to address “a hypothetical state of facts,” Article III denies the court the power to
decide the question. Lewis, 494 U.S. at 477 (quoting North Carolina v. Rice, 404 U.S. 244, 246
Given the parties’ current positions, the Court concludes that it no longer has the power
to decide Count VI. However, the parties’ legal positions may change and the controversy may
come back to life. The Court will address this issue as part of a motion for directed verdict, when
the evidence and arguments submitted to the fact-finder will be clear, and the status of the
controversy can be conclusively determined.
Therefore, the Court denies both parties’ Motions for Summary Judgment regarding
Count VI. Furthermore, the Court defers ruling on the issue of mootness until the appropriate
time at trial, when the issue may be taken up as part of a motion for directed verdict.
For the foregoing reasons, the Court DENIES Defendants/Counterclaim Plaintiffs’
Motion for Summary Judgment on all counts. The Court GRANTS Plaintiff/Counterclaim
Defendant’s Motion for Summary Judgment as to Counts IV and V and DENIES
Plaintiff/Counterclaim Defendant’s Motion for Summary Judgment as to Count VI.
IT IS SO ORDERED:
Date: August 18, 2016
/s/ Douglas Harpool_____________
UNITED STATES DISTRICT JUDGE
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