Prosperity Village Townhome Association, Inc. et al v. State Farm Fire and Casualty Company
Filing
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ORDER granting 14 Motion for Partial Summary Judgment. Signed by Senior Judge Graham Mullen on 8/29/2014. (eef)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
CHARLOTTE DIVISION
CIVIL ACTION NO. 3:13-cv-00363
PROSPERITY VILLAGE TOWNHOME
ASSOCIATION, INC., INDIVIDUALLY,
DOING BUSINESS AS, AND ALSO KNOWN
AS PROSPERTY VILLAGE HOMEOWNERS'
ASSOCIATION, INC. AND PROSPERITY
VILLAGE HOMEOWNERS ASSOCIATION,
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Plaintiffs,
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vs.
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STATE FARM FIRE AND CASUALTY
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COMPANY,
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Defendant.
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__________________________________________)
ORDER
This matter is before the Court upon Defendant’s Motion for Partial Summary Judgment
(Doc. No. 14). This matter has been fully briefed and is ripe for disposition. For the reasons
stated below, the Court grants the Defendant’s motion.
FACTUAL BACKGROUND
This case arises out of an insurance coverage dispute over a claim by the Plaintiff for
storm-related hail damage to roofs. Plaintiff is the homeowners association of a 30 building
townhome property that sustained damage in a storm on May 11, 2011. Plaintiff filed a claim
with Defendant State Farm Fire and Casualty Company (“State Farm”) on October 12, 2011.
After the claim was filed, State Farm retained independent adjusting company E.A.
Renfroe to inspect the community for storm-related damage. John Kurek, an independent
adjuster with E.A. Renfroe, inspected the property. Mr. Kurek inspected the roofs of every
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building and found some covered damage, but states that he also found some non-covered
mechanical damage.
On November 9, 2011, Plaintiff’s property manager contacted Mr. Kurek and asked that
Mr. Kurek inspect the property with Duane Brewer from Allphase Exteriors, Inc. (“Allphase”).
The property manager had previously hired Allphase to inspect the property for damage.
On November 11, 2011, Mr. Kurek and Mr. Brewer inspected the property together.
During the inspection, Plaintiff’s then contractor, Mr. Brewer, agreed with Mr. Kurek’s
assessment regarding the scope of the storm-related damage. After the inspection, Mr. Kurek
created an estimate for the storm-related damage and determined the covered damage totaled
$73,720.03. Mr. Kurek called Plaintiff’s property manager to review State Farm’s findings and
informed him Mr. Brewer agreed on the scope of storm-related damage.
State Farm reviewed Mr. Kurek’s findings and estimate, and approved his request for
payment. State Farm sent the estimate and payment to Plaintiff on November 12, 2011. State
Farm did not have any further correspondence with Plaintiff or Plaintiff’s representatives until
May 10, 2012.
On May 10, 2012, State Farm received a packet from Public Adjuster Matt Latham which
included an agreement to engage him as Plaintiff’s public adjuster and an estimate from Roof 911
indicating the property needed repairs in the amount of $1,428,209.72. The packet also included a
report from Shields Engineering Group indicating Mr. Shields had inspected five of the thirty
buildings and determined all of the roofs needed complete replacement. Based on the packet,
State Farm determined an additional inspection was necessary. On May 23, 2012, Claims
Representative Adrienne Sanders spoke to Mr. Latham regarding the need for an additional
inspection by State Farm. On June 5, 2012, State Farm hired engineering firm Applied Building
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Sciences (“ABS”) to inspect the property to determine if there was any additional storm-related
damage that State Farm missed. That same day, Ms. Sanders sent Mr. Latham a letter informing
him of State Farm’s decision to hire ABS.
ABS inspected the community on June 21, 2012 – June 22, 2012. Five ABS team
members conducted the inspection in order to efficiently cover the entire community. The team
included: two licensed professional engineers, an engineer in training, a registered roof consultant,
and an Architecture Intern. ABS inspected every roof, building, and building envelope to
determine if there was any storm-related damage to the property. ABS determined the roofs were
10-13 years old and there were significant construction and installation problems with the roofing
shingles which were not storm related. ABS also determined there were some hail strikes on the
roofing shingles, but most of the damage was non-functional (aesthetic), which is not considered
hail damage under industry standards. ABS also observed only cosmetic damage to the standing
seam metal roofs, which does not affect its functionality. ABS ultimately determined there was
minimal storm- related damage, the shingles were serviceable, and there were not enough
damaged shingles to warrant complete roof replacement. ABS also determined the metal vents
and standing seam metal roofs did not need replacement because the damage was only aesthetic.
State Farm received ABS’s report on July 12, 2012.
Ms. Sanders reviewed ABS’s report and reconciled it with State Farm’s estimate to ensure
State Farm paid for all of the storm-related damage, and ultimately determined State Farm had
actually overpaid the claim based on ABS’s report. On August 6, 2012, Ms. Sanders informed
Mr. Latham of ABS’s findings and State Farm sent the report, which included thousands of
photographs, to Mr. Latham on August 9, 2012.
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On August 22, 2012, Mr. Latham e-mailed Ms. Sanders disputing ABS’s findings and
complaining the shingles could not be repaired because the shingles were discontinued. On
September 5, 2012, Ms. Sanders sent a letter in response to Mr. Latham’s e-mail explaining State
Farm’s position on the roofs and the discontinued shingles. On November 26, 2012, Mr. Latham
sent State Farm an architect’s report by Ronald Goodstein. State Farm reviewed Mr. Goodstein’s
report and sent Mr. Latham a letter indicating State Farm did not see anything in the report that
would support a change in State Farm’s original decision. State Farm continued to disagree with
Plaintiff’s estimated cost to replace the metal seam roofing and Plaintiff’s contention the roofs
needed complete replacement. Plaintiffs filed this lawsuit on May 17, 2013.
DISCUSSION
Plaintiff has sued Defendant for breach of contract, bad faith, breach of fiduciary duty, and
unfair and deceptive trade practices (“UDTP”). After Defendant filed the present Motion for
Partial Summary Judgment seeking to dismiss all three of Plaintiff’s extra-contractual claims,
Plaintiff agreed to drop its claims for breach of fiduciary duty and bad faith. Accordingly, the
only issue before the Court is whether summary judgment should be granted as to Plaintiff’s
claim for UDTP.
“The court shall grant summary judgment if 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). When making this determination, the court must view the facts and draw
reasonable inferences in the light most favorable to the party opposing the summary judgment
motion. Scott v. Harris, 550 U.S. 372, 378 (2007). Unsupported speculation, however, is
insufficient to defeat a motion for summary judgment. Evans v. Techs. Applications & Serv. Co.,
80 F.3d 954, 960 (4th Cir. 1996).
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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). A motion
for summary judgment must be granted if, after adequate time for discovery and upon motion,
the nonmoving party “fails to make a showing sufficient to establish the existence of an element
essential to that party’s case, and on which that party will bear the burden of proof at trial.”
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); see also Anderson, 477 U.S. at 252 (“The
mere existence of a scintilla of evidence in support of the [nonmovant’s] position will be
insufficient.”). In response to a motion for summary judgment, “[t]he opposing party cannot rest
on the pleadings alone, but must designate specific facts in affidavits, depositions, answers to
interrogatories or admissions that establish that there is a genuine issue for trial.” Celotex, 477
U.S. at 324. “Mere disagreement with the movant’s asserted facts is inadequate if not supported
by the record.” Blis Day Spa, LLC v. Hartford Ins. Group, 427 F. Supp. 2d 621, 628 (W.D.N.C.
2006).
“To establish a claim under the Unfair and Deceptive Trade Practices Act (“UDTPA”),
N.C. Gen. Stat. § 75-1.1(a), a complainant must show: 1) an unfair or deceptive act or trade
practice, 2) in or affecting commerce 3) which proximately caused injury to plaintiffs.” Id. at
634. An act is unfair and deceptive “when it offends established public policy as well as when
the practice is immoral, unethical, oppressive, unscrupulous, or substantially injurious to
consumers.” Id. (citing Marshall v. Miller, 302 N.C. 539, 548 (1981)). North Carolina courts
have held that an insurance company violates the UDTPA by engaging in unfair settlement
practices outlined in N.C. Gen. Stat. § 58-63-15(11). Gray v. North Carolina Ins. Underwriting
Ass’n, 352 N.C. 61, 71, (2000). These unfair settlement practices include:
a. Misrepresenting pertinent facts or insurance policy provisions relating to
coverages at issue;
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b. Failing to acknowledge and act reasonably promptly upon communications
with respect to claims arising under insurance policies;
c. Failing to adopt and implement reasonable standards for the prompt
investigation of claims arising under insurance policies;
d. Refusing to pay claims without conducting a reasonable investigation based
upon all available information;
e. Failing to affirm or deny coverage of claims within a reasonable time after
proof-of-loss statements have been completed;
f. Not attempting in good faith to effectuate prompt, fair and equitable settlements
of claims in which liability has become reasonably clear;
g. Compelling [the] insured to institute litigation to recover amounts due under an
insurance policy by offering substantially less than the amounts ultimately
recovered in actions brought by such insured;
h. Attempting to settle a claim for less than the amount to which a reasonable man
would have believed he was entitled;
i. Attempting to settle claims on the basis of an application which was altered
without notice to, or knowledge or consent of, the insured;
j. Making claims payments to insureds or beneficiaries not accompanied by [a]
statement setting forth the coverage under which the payments are being made;
k. Making known to insureds or claimants a policy of appealing from arbitration
awards in favor of insureds or claimants for the purpose of compelling them to
accept settlements or compromises less than the amount awarded in arbitration;
l. Delaying the investigation or payment of claims by requiring an insured
claimant, or the physician, of [or] either, to submit a preliminary claim report and
then requiring the subsequent submission of formal proof-of-loss forms, both of
which submissions contain substantially the same information;
m. Failing to promptly settle claims where liability has become reasonably clear,
under one portion of the insurance policy coverage in order to influence
settlements under other portions of the insurance policy coverage; and
n. Failing to promptly provide a reasonable explanation of the basis in the
insurance policy in relation to the facts or applicable law for denial of a claim or
for the offer of a compromise settlement.
N.C. Gen. Stat. § 58-63-15(11)(a)-(n). The determination of whether an act or practice is an
unfair or deceptive practice is a question of law for the court. Blis, 427 F. Supp. 2d at 634; see
Ellis v. Northern Star Co., 326 N.C. 219 (1990).
Plaintiff has premised its UDTP claim on an alleged violation of the Unfair Claim
Settlement Practices Act by formulaically reciting every act listed in N.C. Gen. Stat. 58-6315(11)(a)- (n); however, Plaintiff has failed to present any evidence in support of its allegations.
First, several of the listed acts are not even arguably related to the facts herein. Plaintiff has
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failed to set forth any evidence to show any of the listed acts in § 58-63-15(11)(a)(i)(j)(k) and (l)
are relevant to its claim. Further, when Plaintiff was specifically asked about any evidence it has
to support any of these alleged acts, Mr. Jacobelli, the HOA President, indicated he did not have
personal knowledge regarding these allegations and he was relying on statements from Plaintiff’s
public adjuster regarding State Farm’s actions. Plaintiff’s public adjuster, Mr. Latham, who
handled the insurance claim for Plaintiff, did not offer any evidence in support of these
allegations, and he admitted his only criticism of State Farm relates to its assessment of the scope
of the damage. Accordingly, because no evidence has been presented in support of any of these
allegations, none of these alleged violations of N.C. Gen. Stat. § 58-63-15(11) can support
Plaintiff’s claim that State Farm committed unfair and deceptive trade practices.
With regard to § 58-63-15(11)(b)(e) and (n), State Farm has set forth evidence that it
conducted a thorough and timely investigation of the claim and promptly informed Plaintiff’s
representatives that State Farm did not agree with Plaintiff’s assessment of the scope of damage.
The undisputed facts show State Farm promptly investigated the claim, paid what it determined
was the coverage damage within a reasonable time, and promptly responded to all
communications with respect to the claim. Mr. Jacobelli contends in his deposition that State
Farm took too long to respond to Plaintiff during the claim handling, but he admits he has no
personal knowledge of the timeliness of State Farm’s responses and is relying on statements
from Mr. Latham. When Mr. Latham was questioned about State Farm’s timeliness in handling
the claim, he did not have any criticisms related to the timeliness of the claim handling, and he
indicated he did not have any criticism other than his disagreement with State Farm over the
scope of damage. Mr. Latham also admitted he did not have any criticisms regarding the time it
took for State Farm to inspect the property. Based on Mr. Latham’s testimony regarding State
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Farm’s handling of the claim, and Plaintiff’s failure to produce any evidence showing State
Farm’s handling of the claim was not timely, the undisputed facts show State Farm did not delay
the investigation, fail to deny the claim within a reasonable time, fail to promptly respond to
communications regarding the claim, or fail to promptly provide a reasonable explanation for the
denial of part of the claim.
With regard to N.C. Gen. Stat. § 58-63-15(11)(c)(d)(f) and (m), State Farm has produced
evidence that it implemented reasonable standards for its investigation and attempted to settle the
claim in good faith based on multiple inspections. The undisputed facts show State Farm
diligently conducted multiple thorough inspections of the property, reviewed Plaintiff’s
conflicting estimates, quickly relayed its findings to Plaintiff, and promptly paid Plaintiff for the
undisputed portions of the claim. Mr. Jacobelli testified he did not feel State Farm did a thorough
inspection of the property, but admitted he was not there for the inspections and he did not have
any evidence to support his contention. Plaintiff has failed to articulate any specific failures in
State Farm’s inspection and investigations that could support this claim. Further, the evidence
actually shows Mr. Kurek and ABS thoroughly inspected every building on the property. Mr.
Kurek and ABS representatives both testified they inspected all 30 buildings, sheds, and the pool
house, which included inspecting the roof of every building. The inspection also included
walking around every building and climbing on every roof to ensure accurate findings. Plaintiffs
own experts only inspected one-fifth of the buildings and they did not even inspect the roof of
every building before making their opinions regarding the damage. Finally, after State Farm
conducted multiple inspections, State Farm made a good faith payment to Plaintiff for the
undisputed portion of the claim.
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Plaintiff, in its response in opposition to Defendant’s motion, complains generally about
the “practices and methodology utilized by Defendant,” describing its methods as
“unscrupulous.” (Doc. No. 19-8.) In support of its argument, Plaintiff submits the affidavit of
Mr. Latham, Plaintiff’s adjuster, in which Mr. Latham essentially indicates his disagreement with
the methodology of Defendant’s consultant and his resulting recommendation, which Latham
opines was “unsupported and reckless.” (Doc. No.19-1.) However, in Mr. Latham’s deposition,
he was questioned at length regarding any issues he experienced with State Farm’s handling of
the claim. Mr. Latham repeatedly admitted that other than the disagreement over the scope of
the damages, he did not have any criticism of how the claim was handled. Mr. Latham even
agreed with Defense counsel’s statement that, in a nutshell, Plaintiffs’ disagreement with State
Farm is over the scope of the damages. During the course of Mr. Latham’s deposition he had
ample opportunities to voice any concerns with the adjusters’ handling of the claim, but he
declined.
A party cannot be allowed to create an issue of material fact “simply by contradicting his
or her own previous sworn statement (by, say, filing a later affidavit that flatly contradicts that
party's earlier sworn deposition) without explaining the contradiction or attempting to resolve the
disparity.” Cleveland v. Policy Mgmt. Sys. Corp., 526 U.S. 795, 806 (1999). Mr. Latham’s
sworn deposition testimony clearly shows Plaintiff’s only issue with State Farm stems from the
disagreement regarding the scope of damages, not State Farm’s handling of the claim. The
disagreement over the scope of damages is at the heart of the breach of contract claim, but it is
not sufficient to support an unfair and deceptive trade practices claim.
With regard to N.C. Gen. Stat. § 58-63- 15(11)(g) and (h), State Farm has submitted
evidence that it reasonably based its payment of the insurance claim on multiple inspections and
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Plaintiff has failed to present any evidence showing State Farm ever believed the disputed
portion of the claim was valid, but disputed it for the purpose of forcing Plaintiff to settle for less
than what was owed. There is clearly a factual dispute regarding the scope of the storm-related
damage, but that is not sufficient to survive summary judgment on an UDTP claim. There is a
difference between State Farm’s payment and the damages Plaintiff is requesting, but State
Farm’s payment was reasonable because it is based on multiple independent inspections. The
payment was based not only on an independent adjustor’s findings and an engineering firm’s
findings, but also one of Plaintiff’s own contractor’s findings. Mr. Kurek testified that Plaintiff’s
contractor from Allphase agreed with his findings regarding the storm-related damage. As
several inspectors and engineers agree with State Farm’s findings and payment, there can be no
argument that State Farm has not attempted to settle the claim for far less than a reasonable man
would believe Plaintiff is entitled.
Finally, there is no evidence showing State Farm believed the claim was valid, but
disputed its validity to force Plaintiff to settle for less. The undisputed evidence from Plaintiff’s
own public adjuster actually shows State Farm never agreed with Plaintiff’s position regarding
the storm-related damage. State Farm paid the undisputed portions of the claim and Plaintiff has
failed to present any evidence showing State Farm believed the claim was valid.
Plaintiff has failed to present any evidence showing State Farm engaged in unfair claim
settlement practices and Plaintiff’s own representative admits he has no complaints regarding
how State Farm handled the claim process. Accordingly, the Court finds as a matter of law that
State Farm has not engaged in unfair and deceptive trade practices. Accordingly,
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IT IS THEREFORE ORDERED THAT Defendant’s Motion for Partial Summary
Judgment is hereby GRANTED.
Signed:
2014
11
August
29,
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