Christmas v. Nationwide Mutual Insurance Company
ORDER granting in part and denying in part 45 Motion for Summary Judgment; granting in part and denying in part 49 Motion for Summary Judgment; granting 55 Motion File Attachments to Memorandum in Support of Motion for Summary Judgment Out o f Time; denying 70 Motion for Evidentiary Ruling to Deem Statements Admitted; denying 72 Motion in Limine. Counsel is reminded to read the order in its entirety for critical deadlines and information. Signed by Senior Judge James C. Fox on 7/7/2014. (Edwards, S.)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NORTH CAROLINA
BARBARA L. CHRISTMAS,
NATIONWIDE MUTUAL INSURANCE
This matter is before the court on the parties’ cross motions for summary judgment [DE45, -49] and various evidentiary motions [DE-55, -70, -72]. The motions have been fully briefed
and are ripe for resolution. For the reasons that follow, the Plaintiff’s motion for summary
judgment [DE-49] is ALLOWED in part and DENIED in part and the Defendant’s motion for
summary judgment [DE-45] is ALLOWED in part and DENIED in part. Plaintiff’s motion to
file evidentiary documents out of time [DE-55] is ALLOWED, but her motion to deem
statements admitted by Nationwide [DE-70] is DENIED. Plaintiff’s motion to exclude affidavit
and testimony of Defendant’s experts [DE-72] is DENIED.
I. FACTUAL BACKGROUND
On March 12, 2009, Plaintiff Barbara Christmas’s home was partially destroyed in a fire.
The Franklinton, North Carolina home had four bedrooms, three baths and was over 2,447 square
feet. The parties dispute whether the home was a total loss. Before the fire, Christmas purchased
home insurance coverage from Nationwide and she was current on her premiums at the time of
the fire. The policy provided for a total dwelling cost replacement limit of $213,905, as well as
coverage for living expenses and personal property. Christmas promptly notified Nationwide of
the fire, who examined the property and assigned a replacement value of $94,842.88.
Christmas inherited the residence from her mother, Gladys Davis. Prior to her death, Ms.
Davis obtained a reverse mortgage from Financial Freedom, which became due upon Ms.
Davis’s death. When Christmas inherited the property, she failed to make any payments on the
mortgage debt and Financial Freedom began foreclosure proceedings. The foreclosure sale was
set for July 29, 2009, over four months after the fire. Inexplicably, Financial Freedom bid the
full amount of the outstanding debt ($129,222.00) at the foreclosure sale, thereby extinguishing
any interest it had in the property.
Before the foreclosure sale, Nationwide issued a check in the amount of $94,842.89,
payable to both Financial Freedom and Christmas to cover the replacement cost of the home.
The check stated it would be valid for 180 days. At some point after receiving the check,
Christmas contacted Nationwide and asked it to remove Financial Freedom’s name from the
check. This aroused Nationwide’s suspicions, and upon further investigation Nationwide
discovered the home was in foreclosure.
When Nationwide received this information, it stopped payment on the check prior to the
180-day expiration period and initiated an investigation regarding how the dwelling replacement
payment should be distributed. Nationwide ultimately determined Christmas was not entitled to
the replacement cost payment. Nationwide reasoned that because the mortgage debt exceeded
the replacement cost, Christmas had no insurable interest in the property at the time of the loss.
Nationwide noted that Financial Freedom would have been entitled to the proceeds, but since it
extinguished its interest in the property after the fire, Nationwide was not required to pay the
dwelling cost replacement to anyone. Nationwide did pay Christmas approximately $91,600 for
the loss of her personal property and for living expenses. However, Nationwide, after
approximately seven months, stopped providing the living expenses payments. While awaiting
resolution of this matter, Christmas has been living with various relatives. Christmas has been
forced to live apart from her husband because their relatives are not able to accommodate both of
them in the same residence. When Nationwide ultimately informed Christmas that she would not
receive the dwelling replacement payment, this breach of contract and unfair and deceptive trade
practices suit followed. Christmas seeks compensatory and punitive damages, as well as
A. Standard of Review
At summary judgment, the court must examine the evidence presented by both parties and
determine if there is a need for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S.
574, 587 (1986); Greater Balt. Ctr. for Pregnancy Concerns, Inc. v. Mayor & City Council of
Balt., 721 F.3d 264, 283 (4th Cir. 2013). The court examines “whether the evidence presents a
sufficient disagreement to require submission to a jury or whether it is so one-sided that one party
must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986).
Where the moving party shows that the evidence is so one-sided that it should prevail as a matter
of law, the burden shifts to the nonmoving party to come forward with affidavits, depositions,
answers to interrogatories, or other evidence demonstrating that there is a genuine issue of
material fact that requires trial. Celotex Corp. v. Catrett, 477 U.S. 317, 324-25 (1986);
Matsushita, 475 U.S. at 587; Pension Benefit Guar. Corp. v. Beverley, 404 F.3d 243, 246-47 (4th
Cir. 2005). An issue of fact is genuine if a reasonable jury could find for the nonmoving party.
Liberty Lobby, 477 U.S. at 248. A fact is material if proof of the fact might affect the outcome of
the case under the substantive law. Id. The facts should be viewed in the light most favorable to
the nonmoving party and all reasonable inferences should be made in favor of the nonmoving
party. Id. at 255; Smith v. Va. Commonwealth Univ., 84 F.3d 672, 675 (4th Cir. 1996).
B. The Contract Language and the Parties’ Insurable Interests
This case presents the issue of who (if anyone) receives the dwelling replacement
insurance payment in the event a home in foreclosure is destroyed in a fire but the mortgagee
nevertheless bids the full amount of the mortgage debt at a subsequent foreclosure sale, thereby
extinguishing its interest in the property. Nationwide argues that under the insurance contract,
Christmas’s recovery is limited to her insurable interest at the time of the loss. At that time,
according to Nationwide, Christmas had no insurable interest in the property because she owed
more on the property than Nationwide’s adjuster determined was the replacement cost. The
insurance contract contains both a “mortgage clause” and an “insurable interest clause.” The
mortgage clause provides, “if a mortgagee is named in this policy, any loss payable under
Coverage A or B will be paid to the mortgagee and you, as interests appear.” Insurance Policy
[DE-45-1]; Mem. of Law in Supp. of Def.’s Mot. for Summ. J. [DE-48] at 2-3. The insurable
interest clause, in turn, provides “[e]ven if more than one person has an insurable interest in the
property covered, we will not be liable in any one loss: (1) [t]o an insured for more than the
amount of such insured’s interest at the time of loss; or (2) [f]or more than the applicable limit of
liability.” Insurance Policy [DE-45-1]; Mem. of Law in Supp. of Def.’s Mot. for Summ. J. [DE48] at 2.
The parties do not dispute that North Carolina law governs this dispute. In North
Carolina, “[a]n ‘insurable interest’ arises if the peril against which insurance is made would bring
upon the named insured, by immediate and direct effect, some pecuniary loss or if the named
insured would derive some pecuniary benefit from the preservation of the insured property.”
Jerome v. Great Am. Ins. Co., 52 N.C. App. 573, 578, 279 S.E.2d 42, 45 (1981) (citations
omitted). Importantly, “a grantor retains an insurable interest in property after its conveyance
where he remains personally liable for a debt secured by the insured property . . . .” Id.; see also
Tech Land Dev. Inc. v. South Carolina Ins. Co., 57 N.C. App. 566, 568, 291 S.E.2d 821, 823
(1982) (“Both the mortgagor and mortgagee have an insurable interest in mortgaged property.
The mortgagor’s interest is in the full value of the property. He has an equitable right of
redemption which may be exercised from the time of default until the expiration of the ten-day
upset bid period in the event of foreclosure.”).
In Tech Land, the North Carolina Court of Appeals addressed the distribution of
insurance proceeds when a home in foreclosure is damaged by fire. Id. at 569-70, 291 S.E.2d at
823-24. As relevant to this case, when a home is damaged prior to the foreclosure sale but the
mortgagee purchases the property at the foreclosure sale anyway, the Court of Appeals held,
“courts allow the purchasing mortgagee to retain under the mortgage clause [of the insurance
contract] those proceeds amounting to any deficiency [between the debt amount and the purchase
price] after foreclosure. The mortgagor recovers the remainder of the proceeds.” Id. at 569, 291
S.E.2d at 823. Thus, in the event a mortgagee successfully bids the full amount of the mortgage
debt at the foreclosure sale despite the fire damage, there is no “deficiency” it can collect from
the insurance proceeds and its interest in the property is extinguished. This is the general rule.
See, e.g., Lee v. Royal Indem. Co., 108 F.3d 651, 653-54 (6th Cir. 1997) (Tennessee law);
Calvert Fire Ins. Co. v. Environs Dev. Corp., 601 F.2d 851, 856 (5th Cir. 1979) (discussing rule
in various state jurisdictions); Rosenbaum v. Funcannon, 308 F.2d 680, 684 (9th Cir. 1962)
(California law); Nationwide Mut. Fire Ins. Co. v. Wilborn, 291 Ala. 193, 198, 279 So.2d 460,
464-65 (1973) (Alabama law); Rodriguez v. First Union Nat’l Bank, 61 Mass. App. Ct. 438, 44243, 810 N.E.2d 1282, 1286 (2002) (Massachusetts law); Countrywide Home Loans v. Allstate
Ins. Co., 246 S.W.3d 515, 517 (Mo. App. w.d. 2007) (Missouri law).
In this case, there is no dispute Financial Freedom extinguished its interest at the
foreclosure sale by bidding the full amount of the debt despite the fire damage. The issue is
whether Christmas, also a named insured on the policy, should receive the insurance proceeds in
these circumstances. Nationwide maintains that Tech Land stands for the proposition that
Christmas had no insurable interest at the time of the loss because her mortgage debt exceeded
the replacement cost.1 According to Nationwide, because Financial Freedom was entitled to the
entire amount of the insurance proceeds at the time of the loss under Tech Land, that means
Christmas had no insurable interest with respect to the dwelling replacement payment.
Nationwide also argues Christmas would be unjustly enriched if the mortgagee cancelled her
debt and she received the replacement payment. Christmas, for her part, maintains that Tech
Land requires that the dwelling payment be paid to her in full, noting that Tech Land requires
that the “remainder” of the insurance proceeds goes to the mortgagor after the mortgagee receives
The parties also dispute the cost of replacing or repairing the property, which Nationwide
determined was $94,842.88. Christmas maintains the replacement amount is over $200,000. This issue
is addressed below.
its deficiency. Tech Land, 57 N.C. App. at 568, 291 S.E.2d at 823.
In the court’s view, Tech Land does not support Nationwide’s position that Christmas’s
insurable interest is limited to her equity in the property (the difference between the value of the
property and the debt owed on the mortgage). Tech Land simply does not address the issue
presented by this case, which is who should receive the full insurance payment in the event the
mortgagee extinguishes its interest in the property after it is damaged. The Tech Land discussion
of the mortgagee’s deficiency interest in the payment applies when the mortgagee does not bid
the entire amount of the debt at the foreclosure sale. Tech Land, 57 N.C. App. at 569, 291 S.E.2d
at 823. In that event, the mortgagee is entitled to the deficiency from the insurance proceeds. Id.
But that does not mean the mortgagor’s insurable interest is limited solely to her equity in the
property. In fact, Tech Land specifically contemplated that both the mortgagor and mortgagee
retain insurable interests in the property simultaneously. See Tech Land, 57 N.C. App. at 568,
291 S.E.2d at 823 (“Both the mortgagor and mortgagee have an insurable interest in mortgaged
property. The mortgagor’s interest is in the full value of the property. He has an equitable right
of redemption which may be exercised from the time of default until the expiration of the ten-day
upset bid period in the event of foreclosure.”); see also Jerome, 52 N.C. App. at 578, 279 S.E.2d
at 45 (“[A] grantor retains an insurable interest in property after its conveyance where he remains
personally liable for a debt secured by the insured property . . . .”). Of course, an insurance
company is not required to pay both the mortgagor and the mortgagee when the property is
damaged. But there is no risk of double payment in this case because Financial Freedom
extinguished its interest at the foreclosure sale.
Other courts have rejected Nationwide’s position. In Lee v. Royal Indemnity Co., 108
F.3d 651 (6th Cir. 1997), the Sixth Circuit considered whether an insurance company must pay
insurance proceeds to a mortgagor after the mortgagee extinguished its interest at a post-fire
foreclosure sale. Rejecting the precise argument Nationwide advances here, the Sixth Circuit
held, “once a mortgagee’s interest in the policy is extinguished through subsequent acts, any
interest it had in the policy reverts back to the policy holder or other persons entitled to collect
under the policy.” Id. at 654-55. The Royal Indemnity court also convincingly rejected the
insurance company’s argument that the parties’ relative interests in the insurance proceeds were
“fixed” as of the time of the loss:
[i]f the parties interests are forever fixed at the time of the loss, Royal Indemnity
would still be liable to [the mortgagee], a proposition that is not only counter to
[established law that a mortgagee extinguishes its right to insurance proceeds by
bidding the full amount of the debt at the foreclosure sale], but also contrary to Royal
Indemnity’s own position, which is that it is entitled to a reduction of the payout, not
that it owes [the mortgagee] the money.
Id. at 656. This is precisely the self-contradictory position that Nationwide takes in this case. It
argues the interests are fixed as of the time of the loss, but that Financial Freedom’s subsequent
acts can extinguish its interest. That is simply illogical. As in Royal Indemnity, when Financial
Freedom’s subsequent acts extinguished its interest in the proceeds, Financial Freedom’s interest
in the proceeds at the time of the loss reverts back to Christmas, the other named insured on the
Nationwide argues the contract language overcomes the Royal Indemnity holding. As
noted above, the contract provides in relevant part that “[e]ven if more than one person has an
insurable interest in the property covered, we will not be liable in any one loss: (1) [t]o an insured
for more than the amount of such insured’s interest at the time of loss.” Insurance Policy [DE-
45-1]; Mem. of Law in Supp. of Def.’s Mot. for Summ. J. [DE-48] at 2. This language does not
sufficiently distinguish this case from Royal Indemnity. As an initial matter, this is not a case
where “more than one person has an insurable interest in the property covered.” Financial
Freedom has extinguished its insurable interest in the property and therefore there is no issue
with apportioning payment among two named insureds in this case. The phrase “we will not be
liable in any one loss to an insured for more than the amount of such insured’s interest at the time
of the loss” is only applicable when “more than one person has an insurable interest.” See
Insurance Policy [DE-45-1]; Mem. of Law in Supp. of Def.’s Mot. for Summ. J. [DE-48] at 2.
Furthermore, Christmas had an insurable interest at the time of the loss. North Carolina
law contemplates that two persons (or entities) may have an insurable interest in the same
property simultaneously. See Tech Land, 57 N.C. App. at 568, 291 S.E.2d at 823 (“Both the
mortgagor and mortgagee have an insurable interest in mortgaged property. The mortgagor’s
interest is in the full value of the property.”); Jerome, 52 N.C. App. at 578, 279 S.E.2d at 45
(“[A] grantor retains an insurable interest in property after its conveyance where he remains
personally liable for a debt secured by the insured property . . . .”). As these cases make clear,
Christmas’s insurable interest is not limited to her equity in the property; she retained an
insurable interest “in the full value of the property” at the time of the loss. Tech Land, 57 N.C.
App. at 568, 291 S.E.2d at 823. While her interest may have been subordinate to the
mortgagee’s interest at the time of the loss, that does not preclude her from recovering her
“interest at the time of the loss” in the event the mortgagee extinguishes its interest. Under Tech
Land, that interest is the full value of the property.
Of course, Nationwide would not have been liable to both Financial Freedom and
Christmas if Financial Freedom had not extinguished its interests at the foreclosure sale. That
result is obviously precluded by the insurance contract and Tech Land. See id. at 569, 291 S.E.2d
at 823 (“When insured property is damaged prior to foreclosure, courts allow the purchasing
mortgagee to retain under the mortgage clause [of the insurance contract] those proceeds
amounting to any deficiency after foreclosure. The mortgagor recovers the remainder of the
proceeds.”). Tech Land indicates that a mortgagee’s rights to insurance proceeds are superior to
the mortgagor’s rights in the event of a loss, up to the amount of the debt. However, Tech Land
does not stand for the proposition (as Nationwide argues) that the mortgagor’s insurable interest
is limited to her equity in the property. Instead, as explained above, the mortgagor retains a
secondary insurable interest in the full value of the property, and, if the mortgagee extinguishes
its interest at a later date, the mortgagor becomes entitled to the proceeds. See Royal Indem., 108
F.3d at 654-55 (“[O]nce a mortgagee’s interest in the policy is extinguished through subsequent
acts, any interest it had in the policy reverts back to the policy holder or other persons entitled to
collect under the policy.”)
Throughout all of the lengthy briefing in this case, Nationwide ignores the fact that
Christmas paid all of her insurance premium payments and the policy was fully enforceable at the
time of the loss. Nationwide is contractually obligated to pay a named insured the dwelling
replacement payment in these circumstances. Contrary to Nationwide’s argument that it would
be an “inequitable result” for Christmas to recover, Nationwide is the one that would be unjustly
enriched if it does not pay Christmas in these circumstances. See Royal Indem., 108 F.3d at 656
(“To hold [that the insurance company is not liable to the mortgagor if the mortgagee
extinguishes its interest] would mean that Royal Indemnity would not have to pay anyone for
most of the value of the insurance policy on the dwelling, a result that is clearly at odds with the
premiums paid to it. . . . In fact, [if the court were to hold the insurance company is not liable in
these circumstances], we believe that Royal Indemnity would be the one unjustly enriched.”);
Sprouse v. N. River Ins. Co., 81 N.C. App. 311, 322, 344 S.E.2d 555, 563 (1986) (“Defendant
contracted and accepted premiums to cover the fire damage, not particular property interests. The
Sprouses remained liable on the entire note, and Mid-State had a valid claim for that amount.
How the Sprouses and Mid-State divided the proceeds is immaterial to the insurer.”). While it is
true that Christmas’s mortgage debt has been cancelled and now she will receive the dwelling
replacement payment, that fact does not mean Nationwide is entitled to accept insurance
payments from Christmas, insure her against the precise loss that occurred in this case, and then
refuse to pay her when she has a legitimate claim.
In sum, the court finds that Christmas is entitled to the dwelling replacement payment in
these circumstances. Under North Carolina law, Christmas retained an insurable interest at the
time of the loss and her insurable interest was not limited to the equity she had in the property at
the time of the loss. While the contractual language contemplates apportioning payment between
two named insured as the interests existed at the time of the loss, subsequent acts by the
mortgagee can extinguish its interest in the insurance proceeds. In that circumstance, Nationwide
must pay the other named insured on this valid insurance contract. To hold otherwise would
allow Nationwide to accept payments on a policy and then refuse payment under the policy
despite a valid claim.
D. Dwelling Replacement Cost
Because Nationwide breached the insurance contract by failing to pay Christmas the
dwelling replacement cost, the measure of damages in this case will be the cost of replacing or
repairing the property. Of course, this is limited by the total dwelling replacement coverage limit
of $213,905. However, within that limitation, the parties vigorously dispute the total
replacement cost. Christmas argues the house is a total loss and will need to be demolished and
rebuilt from scratch. She estimates the cost of replacing the property will be $204,500. She
arrives at this figure using an appraisal report by John Neese [DE-63-1] and a Broker Price
Opinion by Rochelle Moon [DE-63-2], each of whom indicate that the property is a total loss.
Christmas has also identified an expert witness, Mr. George Raynor, III, who has 41 years
experience in the construction business, and who estimates the total cost to rebuild the home will
be approximately $204,500. Nationwide maintains the home is not a total loss and the cost of
repairing the property is $94,842.88, relying on an investigation by its adjustor, Frank Baker, and
an appraisal report by Joel Tate.
Nationwide seeks exclusion of all the evidence Christmas relied on in determining her
replacement cost. Nationwide argues the reports from Ms. Moon and Mr. Neese are inadmissible
hearsay and that Raynor’s expert opinion is inadmissible under Federal Rule of Evidence 702 and
Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993). Christmas responds that
Raynor’s testimony satisfies the Daubert standard and that the business records exception to the
hearsay rule renders the Moon and Neese affidavits admissible.
As Nationwide notes, the admissibility of Raynor’s testimony must be analyzed under the
Supreme Court’s decisions in Daubert and Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999).
The court, in its “gatekeeping” role, must conduct a “preliminary assessment of whether the
reasoning or methodology underlying the testimony is . . . valid and of whether that reasoning or
methodology properly can be applied to the facts in issue.” Daubert, 509 U.S. at 592-93. The
plaintiff bears the burden of proving its proffered expert satisfies the Daubert standard. Dunn v.
Sandoz Pharms. Corp., 275 F. Supp. 2d 672, 676 (M.D.N.C. 2003).
In light of the significance of these issues,2 the court will set a pretrial hearing to
determine the admissibility of Raynor’s opinion under the Daubert/Kumho Tire framework. The
parties are directed to read the Daubert and Kumho Tire opinions and research how other courts
have addressed the admissibility of expert construction contractor testimony under Daubert. The
parties should also file additional briefing on this issue prior to the hearing. At the hearing (the
parameters of which are explained below), the parties will also be afforded an opportunity to
argue all of their evidentiary objections related to the cost of replacing Christmas’s home,
including the admissibility of the Moon and Neese affidavits. As noted below, it appears
Christmas also challenges the reliability of the Joel Tate appraisal, which Nationwide relied on to
some degree in determining the $94,842.88 replacement cost. Assuming this is also a Daubert
objection, the parties should also address this at the hearing and in the pretrial briefing.3 Finally,
the parties also should be prepared to address at the hearing whether a trial is necessary in the
event the court excludes Raynor’s opinion.
E. Living Expenses
Christmas also maintains that she is entitled to further living expenses payments as a
result of Nationwide’s breach. The relevant policy provision reads, “[Nationwide will cover
Indeed, it appears to the court that if Raynor’s testimony/report is excluded, Christmas has no
other evidence of the replacement cost
The court will not set a specific page limitation on this briefing, but the court requests that the
parties be as concise as possible. No responses or replies will be allowed.
living expenses] for the shortest time required to repair or replace the damage or, if you
permanently relocate, the shortest time required for your household to settle elsewhere.”
Nationwide Resp. Br. [DE-58] at 9. It appears Nationwide paid approximately $22,986.07 out of
a policy limitation of $34,225 in living expenses. Christmas fails to explain how this amount,
paid over a period of seven months, was not sufficient to cover living expenses over “the shortest
time required to repair or replace the damage or [to] permanently relocate.” As Nationwide
notes, this language does not require it to pay living expenses indefinitely.
The language also does not condition the living expenses payment on the payment of the
replacement cost of the property. See Gaston Cnty. Dyeing Mach. Co. v. Northfield Ins. Co., 351
N.C. 293, 300, 524 S.E.2d 558, 563 (2000) (“‘[I]f the meaning of policy is clear and only one
reasonable interpretation exists, the courts must enforce the contract as written . . . .”); Woods v.
Nationwide Mut. Ins. Co., 295 N.C. 500, 505-06, 246 S.E.2d 773, 777 (1978) (same). It appears
to be Christmas’s position that the “shortest time required to repair or replace the damage” has
not expired because she is not financially able to repair the property without the replacement
payment. But that interpretation exposes Nationwide to indefinite liability every time an insured
is not financially able to pay for the repairs. Suppose, for example, that Financial Freedom had
not extinguished its interest in this case and it received the full dwelling replacement cost
payment. Under Christmas’s interpretation of the living expenses clause, she would be entitled
to indefinite living expenses (up to the policy limitation) because Nationwide did not disburse the
replacement cost to her and she was not otherwise financially able to make the repairs herself.
As Nationwide notes, that result is inequitable. The more natural reading of the living expenses
clause is that Nationwide will pay living expenses for the shortest time period required to repair
the property or permanently relocate generally, without regard to the insured’s financial ability to
fully rebuild the damaged property. Under this interpretation, Christmas must show that seven
months was not sufficient time to repair the property or permanently relocate. Christmas fails to
address this issue and therefore she has not satisfied her burden of demonstrating that Nationwide
breached the living expenses clause of the contract.4 Accordingly, Nationwide is entitled to
summary judgment on Christmas’s request for additional living expenses payments.
F. Unfair and Deceptive Trade Practices
Christmas also brings a claim under North Carolina’s Unfair and Deceptive Trade
Practices Act (UDTPA), N.C. Gen. Stat. § 75-1.1 et seq. To establish a violation of North
Carolina’s UDTPA, a plaintiff must show: (1) an unfair or deceptive act or practice, (2) in or
affecting commerce, and (3) which proximately caused injury to the plaintiff. Gray v. North
Carolina Ins. Underwriting Ass’n, 352 N.C. 61, 68, 529 S.E.2d 676, 681 (2000). “When an
insurance company engages in conduct manifesting an inequitable assertion of power or position,
including conduct which can be characterized as unethical, that conduct constitutes an unfair
trade practice.” Johnson v. First Union Corp., 128 N.C. App. 450, 458, 496 S.E.2d 1, 6 (1998)
(internal quotation marks omitted). Although not required to maintain a UDTPA claim, courts
Christmas fails to explain in any detail why she is entitled to additional living expenses in her
brief, apparently assuming that she is automatically entitled to them because Nationwide breached the
dwelling replacement clause. Because the parties specifically separated the living expenses and
replacement cost provisions in the contract, and neither provision is conditional on payment under the
other, Christmas must demonstrate that Nationwide breached the living expenses provision itself to be
entitled to additional living expense payments. See Rouse v. Williams Realty Bldg. Co. Inc., 143 N.C.
App. 67, 69-70, 544 S.E.2d 609, 612 (2001) (“[W]hen presented with [insurance] policy language that is
explicit, [o]ur courts have a duty to construe and enforce the policy as written, without rewriting the
contract or disregarding the express language used.” (internal quotation marks omitted)). This, Christmas
has not done.
often look to North Carolina’s insurance law statutes to determine if a particular practice is unfair
or deceptive within the meaning of the act. Country Club of Johnston Cnty., Inc. v. United States
Fid. & Guar. Co., 150 N.C. App. 231, 243-44, 563 S.E.2d 269, 277-78 (2002). As relevant here,
in Gray the North Carolina Supreme Court concluded that a violation of North Carolina General
Statute 58-63-15(11)(f) is an unfair and deceptive trade practice under § 75-1.1. Gray, 352 N.C.
at 73, 529 S.E.2d at 684. Section 58-63-15(11)(f) prohibits “not attempting in good faith to
effectuate prompt, fair and equitable settlements of claims in which liability has become
reasonably clear.” Id.
A reasonable jury could not find that Nationwide violated North Carolina’s UDTPA.
Upon receiving notice of the fire, Nationwide immediately initiated an investigation and
provided Christmas with emergency funds to assist her with living expenses during the
investigation. Under the personal property and living expenses policy provisions, Christmas (or
vendors acting on her behalf) were paid approximately $91,600. Christmas does not seriously
dispute that she has been treated fairly with respect to these payments. Christmas Depo. [DE-473] at 73. There is no record evidence that Nationwide’s refusal to pay the dwelling replacement
cost was anything more than an honest belief that Nationwide did not owe the payment. The law
in this area is not entirely settled and it is possible that an appellate court could accept
Nationwide’s argument that Christmas’s insurable interest at the time of the loss was limited to
her equity in the property. Given the uncertainty of whether Nationwide even owed the insurance
payment in this case, there is nothing in the record suggesting Nationwide was “not attempting in
good faith to effectuate prompt, fair and equitable settlements of claims in which liability has
become reasonably clear.” Gray, 352 N.C. at 73, 529 S.E.2d at 684. Although Christmas lists a
variety of alleged violations of § 58-63-15(11), most of them fail for the same reason: there is no
evidence in this case that Nationwide’s denial of her claim was anything more than a reasonable
(if potentially erroneous) interpretation of the relevant law.5 Accordingly, Nationwide’s motion
for summary judgment as to the unfair and deceptive trade practices claim is ALLOWED and the
claim is DISMISSED.
III. REMAINING MOTIONS
Christmas also moves to have eighty-three of her requests for admissions deemed
admitted [DE-70]. This motion is DENIED. Counsel submitted 108 requests for admissions in
this case and Nationwide stopped providing a substantive response after the twenty-fifth request,
erroneously believing that the parties’ Rule 26(f) report contained a limit on the number of
requests for admissions. Instead of conferring with Nationwide in an attempt to resolve the issue
and (assuming that did not work), filing a motion to compel responses, counsel waited until the
summary judgment briefing to argue that each of these eighty-three responses should be deemed
admitted. The court would only consider deeming these requests for admission admitted if there
was some record evidence of the parties’ good faith attempts to resolve this issue during
discovery and, failing that, a motion to compel responses. Waiting until the summary judgment
briefing to argue that the these requests should be deemed admitted is gamesmanship.6
Christmas’s remaining allegations of UDTPA violations are also without merit. For example,
Christmas argues Nationwide’s decision to stop payment on the check prior to the 180-day expiration
period is an unfair and deceptive trade practice. But Christmas fails to acknowledge that Nationwide
stopped payment on the check after she called Nationwide and asked to have Financial Freedom removed
from the check. In these circumstances, it was entirely appropriate for Nationwide to stop payment on
the claim and investigate who should receive the proceeds.
The court has also reviewed the lengthy list of requests for admissions that Christmas argues
should be deemed admitted. Except for the handful of requests related to the cost to repair the [cont.]
Christmas has also filed a motion in limine [DE-72] to exclude various witness affidavits
Nationwide submitted in support of its motion for summary judgment and to exclude these
witnesses’ testimony at trial. The first affidavit is from Nationwide’s expert James Pendergrass,
who submitted a lengthy affidavit in which he discussed Christmas’s insurable interest at the
time of the loss. Christmas seeks to exclude this affidavit because it allegedly offers a legal
conclusion. In light of the court’s ruling above, it appears this issue is moot. The sole issue
remaining in this case for trial is the amount of the dwelling replacement payment Nationwide
owes Christmas. It does not appear Pendergrass’s affidavit is relevant to that issue and the
motion to exclude his affidavit is therefore DENIED AS MOOT. For the same reason, the
request to exclude the deposition testimony of Scott Brown is also DENIED AS MOOT. As
explained below, if Christmas believes any of Brown or Pendegrass’s affidavits/testimony are
pertinent to the remaining issue in this case and wishes to object on the basis that their testimony
offers only legal conclusions, she may do so prior to trial.
Christmas also seeks to exclude various appraisal reports from Joel Tate. Because the
court has found that a genuine issue of material fact exists as to the dwelling replacement cost,
the admissibility of the appraisal reports will need to be decided prior to trial. However, as
explained above with respect to Nationwide’s request to exclude the testimony of Christmas’s
expert, the court will address this issue with the parties in the context of a pretrial Daubert
hearing. Ruling on the admissibility of the Tate appraisals without holding a Daubert hearing
would be premature at this juncture and prejudicial to Nationwide (just as ruling on the
property, none of the requests, assuming they were deemed admitted, would have affected the court’s
ultimate decision in this case.
admissibility of Christmas’s expert without giving her a full opportunity to be heard on her
expert’s reliability would be prejudicial to Christmas). Accordingly, the motion in limine [DE72] is DENIED without prejudice to raise the issues again at the pretrial hearing (explained in
more detail below).
Finally, for the first time in her summary judgment brief, Christmas argues she is entitled
to damages for her emotional distress. Although emotional distress damages are available in a
limited class of breach of contract actions in North Carolina, this is not one of those cases.
Johnson v. Ruark Obstetrics & Gynecology Assocs., 327 N.C. 283, 301, 395 S.E.2d 83, 96
(1990). The request for emotional distress damages is therefore DENIED.
IV. TRIAL SCHEDULING
For the foregoing reasons, the sole issue remaining in this case for trial is the dwelling
replacement cost, which will be the measure of damages for Nationwide’s breach of contract.
Because the UDTPA claim has been dismissed, there is no basis for punitive or “treble” damages
in this case. Although the court does not perceive a reason for granting attorney’s fees in this
standard breach of contract action, a motion for attorney’s fees should be brought after the close
of the case. See Fed. R. Civ. P. 54(d).
This matter is set for trial during the undersigned’s August 4, 2014 term of court. As the
court has previously explained, the undersigned does not hold separate criminal and civil terms
of court. That means each term of court will begin with approximately a week of criminal
matters, which may include some criminal trials. Criminal trials always take precedence over
civil trials due to constitutional and statutory speedy trial requirements. Therefore, this trial
likely will not begin until at least August 11, 2014 and potentially later. Approximately a week
before the term is set (in this case, the week of July 28), the court will have a better idea of its
criminal schedule and it will communicate with the parties regarding setting a more definitive
date. To the extent possible, the court will attempt to accommodate the parties’ schedules.
However, if the parties must have a date certain for the trial prior to that time, they are free to
consent to magistrate judge jurisdiction.
As explained above, there are a number of outstanding issues regarding the admissibility
of the expert testimony in this case. The court’s practice for civil trials is to schedule a pretrial
hearing, in which it will rule (to the extent possible) on all evidentiary issues prior to trial. This
will include the court’s Daubert gatekeeping responsibilities. The court will set this hearing for
August 6, 2014,7 though it may need to change this date depending on the court’s criminal
calendar. In preparation for this hearing, the parties must complete the following on or before
August 4, 2014:
1. Each party shall file any motions in limine and the required pretrial briefs related to the
court’s gatekeeping function under Daubert. As explained above, if Christmas intends to
challenge the Tate appraisal on Daubert grounds, the parties should address this issue in the
pretrial briefing in addition to the admissibility of the Raynor testimony.
2. Each party shall submit to chambers, the deposition transcript, reports and curriculum
vitae of each opinion8 witness that the party intends to call at trial, whether as a live witness, or
by written or video deposition. No witness whose materials are not presented to the court as
The court will ensure the parties have a full day to address these issues. The date is also
relatively firm. The court will contact the parties if an emergency criminal matter necessitates
rescheduling but that is unlikely.
The parties are advised that this court refers to “expert” witnesses as “opinion” witnesses.
herein directed will be permitted to testify at trial in person or through deposition.
3. The parties shall jointly submit to chambers the depositions of any witness whose
testimony at trial will be presented via deposition, with the objections of Christmas underlined in
green, and the objections of Nationwide underlined in red.
The parties are reminded that the proposed pretrial order is also due on July 14, 2014.
The court recognizes the parties have already submitted a proposed pretrial order at docket entry
84. However, that order should be modified to reflect the sole remaining issue in this case: the
amount of the dwelling replacement payment Nationwide owes Christmas. Jury instructions
must be submitted four calendar days prior to the trial date. For example, in the event the court
schedules this trial for August 11, 2014, jury instructions are due on or before August 7, 2014.
Finally, the court appreciates the parties’ patience in waiting for the summary judgment
order. The court also recognizes that it is requiring a significant number of submissions from
counsel in a relatively short time frame. The court is prepared to try this case during the August
4 term if the parties can be ready. However, if the parties need additional time to work on some
of these submissions, the court is open to moving this case (and the pretrial conference) to a later
term of court. The court’s remaining terms of court in 2014 include: September 29, 2014,
November 3, 2014, and December 1, 2014. As explained above, the trial would not start until
approximately one week after these dates, at the earliest. The parties should file a motion to
continue if they want to move the case to a later term of court. If no motion to continue is filed
before the proposed pretrial order is due, the parties must submit that order by the deadline.
For the foregoing reasons, the parties’ cross motions for summary judgment [DE-45, -49]
are both ALLOWED in part and DENIED in part. Christmas's motion for summary judgment
[DE-49] is ALLOWED as to liability on the breach of contract claim and DENIED as to the
UDTPA claim. Nationwide's motion for summary judgment [DE-45] is ALLOWED as to the
UDTP A claim (count two) and DENIED as to the breach of contract claim. The sole remaining
issue in this case is the damages Nationwide owes to Christmas for breaching the contract,
measured solely by the cost of replacing or repairing the property. Plaintiffs motion to file
evidentiary documents out of time [DE-55] is ALLOWED, but her motion to deem statements
admitted by Nationwide [DE-70] is DENIED. Plaintiffs motion to exclude affidavit and
testimony ofDefendant's experts [DE-72] is DENIED. The Clerk of Court is DIRECTED to
schedule and notice a pretrial hearing in this case for August 6, 2014.
This the _2 day of July, 2014.
Senior United States District Judge
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