LeBlanc v. Travelers Home & Marine Insurance Company

Filing 186

ORDER for the reasons stated inthe order...plaintiff's motion for partial summary judgment 125 and 137 are denied; defendant's motion for summary judgment 123 is denied insofar as it seeks judgment as to plaintiff's bad faith claim but granted as to the availability of punitive damages...parties' motions to strike 156 and 158 are denied...see order for specifics. Signed by Honorable Joe Heaton on 07/13/2011. (lam)

IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF OKLAHOMA
TABER LEBLANC,
Plaintiff,
vs.
THE TRAVELERS HOME AND
MARINE INSURANCE COMPANY,
Defendant.

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NO. CIV-10-00503-HE

ORDER
Plaintiff Taber LeBlanc filed this action against The Travelers Home and Marine
Insurance Company (“Travelers”) asserting breach of contract and bad faith claims arising
from a dispute over damage to plaintiff’s house.

Plaintiff, a professional homebuilder,

constructed a home for his family around mid-2006 in Edmond, Oklahoma. Travelers issued
a “High Value Homeowner’s Policy” to plaintiff which was in force at the time of a February
10, 2009, tornado which passed through plaintiff’s neighborhood. The tornado caused
substantial damage to plaintiff’s house, and Travelers—per the recommendations of its
insurance adjuster, Scott Dau—made certain payments to plaintiff under the policy. Disputes
eventually arose as to the scope and amount of the loss attributable to the tornado as well as
other matters.
In July 2009, Travelers invoked the appraisal process under the policy as a means of
resolving certain matters in dispute. The appraisal process resulted in an umpire being
designated, who ultimately concluded the damage to plaintiff’s house was attributable to the
tornado and that the applicable loss was $1,614,052. The appraisal process did not resolve

the parties’ differences, however, as defendant challenged the scope and nature of the
umpire’s award. Defendant tendered certain additional amounts (less than the umpire’s
award) to plaintiff after the umpire’s determination. This suit followed.
The court previously addressed the parties’ motions as to certain appraisal issues. See
Order [Doc. #89]. The court concluded, in part, that the umpire exceeded the scope of his
authority by resolving issues of causation in addition to determining the amount necessary
to restore the house to its prior condition. Both parties have since filed motions for summary
judgment. While other motions are also at issue,1 this order addresses only the motions for
summary judgment and the related motions to strike.
The standard for summary judgment is familiar. Summary judgment is appropriate
only “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). The court views the
evidence and any reasonable inferences that might be drawn from it in the light most
favorable to the nonmoving party. Swackhammer v. Sprint/United Mgmt. Co., 493 F.3d
1160, 1167 (10th Cir. 2007). Applying this standard, the court concludes plaintiff’s motion
should be denied and that defendant’s motion should be granted in part and denied in part.

DISCUSSION
1

See Defendant’s Motion to Exclude the Supplemental Reports and Opinions of Plaintiff’s
Experts [Doc. #118]; Defendant’s Motion to Exclude Plaintiff’s Claim for Replacement of the Home
[Doc. #120]; Plaintiff’s Motion in Limine or, in the alternative, Daubert Motion [Doc. #121];
Defendant’s Motion to Exclude Opinions and Testimony of Plaintiff’s Expert [Doc. #136];
Defendant’s Motion to Supplement Final Witness and Exhibit List [Doc. #170].

2

Plaintiff’s motion for summary judgment seeks both a determination that defendant
breached the insurance contract in certain specific ways and that it breached the duty of good
faith and fair dealing.

Insofar as the contract claim is concerned, plaintiff seeks a

determination that Travelers breached the insurance contract in various ways by particular
actions it took in the course of adjusting plaintiff’s claim. The court concludes, in light of
the contract language as to when payment is due,2 and the relatively minor nature of some
or all of the referenced disputes in the context of the overall contract claim dispute,3 that
summary judgment is inappropriate as to plaintiff’s contract claim. Further, as to the bad
faith claim and as discussed more fully below, plaintiff’s claim barely survives the
defendant’s summary judgment motion.

Plaintiff does not come remotely close to

establishing a basis for summary judgment in his favor on his bad faith claim, and his motion
is, as to that claim, frivolous. Plaintiff’s motion will be denied as to all claims.
Defendant’s motion for summary judgment, which is directed to plaintiff’s bad faith
claim and his request for punitive damages, presents a considerably closer question.
Plaintiff relies on a long list of claimed deficiencies in the handling of his claim, which he

2

The insurance policy provides that Travelers would pay their insured “60 days after we
[Travelers] receive your proof of loss and . . . “[r]each an agreement with you.” [Doc. #124-41]
(emphasis added).
3

The summary judgment rule permits, but does not require, the court to address individual
facts that may be part of a broader issue or claim. See Fed.R.Civ.P. 56 (a) & (g). With respect to
subsection (g), the 2009 comments note: “Even if the court believes that a fact is not genuinely in
dispute, it may refrain from ordering that the fact be treated as established. The court may conclude
that it is better to leave open for trial facts and issues that may be better illuminated by the trial of
related facts that must be tried in any event.”

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says add up to bad faith under Oklahoma law.
The tort of bad faith was first recognized by the Oklahoma Supreme Court in
Christian v. American Home Assur. Co., 577 P.2d 899 (Okla. 1978).4 It arises from the
insurer’s implied duty to deal fairly and act in good faith with its insured. Southern
Hospitality, Inc. v. Zurich American Ins. Co., 393 F.3d 1137, 1142 (10th Cir. 2004). The
duty is not breached if the insurer refuses to pay a claim or litigates a dispute with its insured
if there is a legitimate dispute as to coverage or the amount of the claim. Otherwise put,
“[t]he insurer will not be liable for the tort of bad faith if it ‘had a good faith belief, at the
time its performance was requested, that it had a justifiable reason for withholding payment
under the policy.’” Oulds v. Principal Mut. Life Ins. Co., 6 F.3d 1431, 1436 (10th Cir. 1993)
(quoting McCoy v. Oklahoma Farm Bureau Mut. Ins. Co., 841 P.2d 568, 572 (Okla. 1992)).
Under Oklahoma law, the minimum level of culpability necessary to establish bad
faith liability against an insurer “is more than simple negligence, but less than the reckless
conduct necessary to sanction a punitive damage award against [an] insurer.” Badillo v. Mid
Century Ins. Co., 121 P.3d 1080, 1094 (Okla. 2005). The question thus becomes whether
plaintiff has produced evidence sufficient to create a justiciable question as to a basis for a
bad faith finding. In other words, has he produced evidence sufficient to show some
misconduct or mishandling of his claim that arises to something more than simple
negligence. The court concludes that he has, though by the slimmest of margins.

4

As this is a diversity action, the substantive law of Oklahoma applies.

4

As a threshold matter, the court notes the difficulty occasioned by the manner in
which plaintiff has responded to defendant’s motion. Rule 56 and the related local rule
contemplate that a summary judgment motion will state the facts that a movant believes to
be undisputed, as defendant has done here. The response must then begin with “a section
which contains a concise statement of materials facts to which the party asserts genuine
issues of fact exist,” with additional requirements as stated in the rule. L.Cv.R. 56.1(c). What
the rule does not contemplate, and what plaintiff has liberally done in his submissions, is to
infuse most of his responses to defendant’s proffered facts with substantial amounts of
argument or partisan spin. He objects to certain facts “to the extent” that they implicate some
argument he does not like. He also responds through (in addition to direct responses to the
facts urged by defendant) a very lengthy and detailed list of “counter” facts, many of which
have no obvious connection to any matter raised by defendant’s submissions and many of
which also include substantial argument rather than factual matters. The result is a huge
mass of data, much of it stated in such argumentative terms that it cannot even be
preliminarily evaluated without in-depth review of the original sources cited. In any event,
while there is obviously a place for argument in a summary judgment brief, plaintiff’s brief
missed the mark as to its location. The result is a brief which, through a hyper-partisan
presentation of factual matters, unnecessarily complicated the court’s task. However,
mindful of the standard that, at this stage, all inferences from the evidence are to be drawn
in favor of the non-movant, the court simply notes the problem and addresses the merits

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issues as best it can.5
Plaintiff relies on a lengthy list of claimed deficiencies in the conduct of defendant
and its adjuster Scott Dau as the basis for his bad faith claim. Considered individually, none
of them appear to rise to the status of the more-than-negligence standard contemplated by
Oklahoma law. And considered collectively, they create a justiciable issue only by the
thinnest of margins.
The central dispute in this case, at least in terms of potential impact on the size of any
contract-based recovery by plaintiff, is the extent to which the damages to plaintiff’s house
were the result of the 2009 tornado or were the result of pre-existing structural problems such
as with the basement support trusses. The parties’ submissions make clear that there is a
substantial issue in this regard. Given the existence of a legitimate dispute as to coverage and
causation, the fact that defendant declined on this basis to pay the full damages sought by
plaintiff does not support a bad faith claim. See Southern Hospitality, Inc., 393 F.3d at 1142
(Under Oklahoma law, “[i]f there is a legitimate dispute about coverage, an insurer’s decision
to refuse to pay a claim or to litigate a dispute is not a breach of the duty of good faith . . .
.”). Moreover, there is nothing inherently improper in defendant’s submission of certain
issues to the appraisal process contemplated by the insurance contract. The dispute as to the
scope of what was submitted to appraisal is itself a matter of legitimate dispute. See Order
5

Based on these and related issues, defendant moved to strike plaintiff’s responses. [Doc.
#156]. Predictably, plaintiff then moved to strike the defendant’s motion to strike. [Doc. #158].
As exciting as the exercise might be, the court declines to explore further the intricacies of the
parties’ positions as to the adequacy of plaintiff’s responses or the related efforts of defendant which
arguably evade the page limits for briefs set by the local rules.

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[Doc. #89]. As a result, plaintiff’s reliance on either the defendant’s position as to causation
generally, or to its position with respect to the appraisal process and/or its scope, are
unpersuasive as a basis for a bad faith claim.
Plaintiff urges that the assignment of Dau to act as the adjuster on his claim is an
indication of bad faith, citing Dau’s lack of training in Oklahoma procedures and related
legal concepts. It is clear that Dau was an adjustor with 20-plus years experience in the field,
including some with high-end homeowner’s policies such as plaintiff’s. He was based in
Texas, though licensed as an adjustor in Oklahoma since 2007. Plaintiff notes that Dau had
no specific training in Oklahoma law but does not identify any aspect of Oklahoma law
which appears to be both unique to Oklahoma and pertinent to an issue in this case.6 The
adjustor’s lack of familiarity, when quizzed at his deposition, with legal concepts such as the
“efficient proximate cause doctrine,” “concurrent causation” and the like, strike the court as
proving little or nothing as to the fitness of Dau, a non-lawyer, to perform the claims
handling tasks assigned to him. The court finds nothing in the assignment of Dau to
plaintiff’s claim to be evidence of bad faith.
Plaintiff objects that Dau unreasonably relied on plaintiff or others to do the
investigation of his claim. To the extent that plaintiff objects to Dau’s reliance on “others,”
such as engineers or similar specialists, as part of his investigation, the objection is
unpersuasive. It is clear that the central dispute in this case would require the expertise of

6

Dau expressed familiarity, based on general claims handling standards, with the principle
that an insurance company and its agents must deal fairly and reasonably with their insured.

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engineers and others to assist in properly adjusting plaintiff’s claim. An adjustor’s reliance
on such experts is to be expected and is likely essential. It does not suggest a basis for bad
faith.
The evidence as to Dau’s reliance on plaintiff in the investigation similarly does not
suggest bad faith or other unreasonable conduct. There are no doubt circumstances in which
it would be unreasonable for an adjustor to rely on its insured for involved investigations or
for complex determinations of damages. But such circumstances are not suggested by the
evidence here. This plaintiff, Mr. LeBlanc, was a somewhat unique insured. He not only
owned the house that is the subject of this dispute, but he also built it. He was the general
contractor as to the house and had substantial experience with various subcontractors who
had participated in its building or otherwise worked in the area.7 In these circumstances, the
evidence does not suggest unreasonable conduct by defendant in relying on plaintiff for
various aspects of the investigation. Indeed, it suggests the treatment of the plaintiff was in
some respects more deferential than would have been the norm. For example, Dau invited
plaintiff to select an engineer to do the initial analysis of the house, rather than waiting for
an engineer selected by defendant. In any event, the court concludes plaintiff’s submissions
do not suggest a basis for bad faith based on defendant’s alleged over-reliance on plaintiff
or others in making its investigation.8
7

Mr. LeBlanc was apparently also formerly employed by an insurance company and had
experience as an insurance adjuster. [Doc. #124-20].
8

Plaintiff’s related argument—that defendant did not do an adequate investigation of the
truss issue prior to the appraisal process—is similarly unpersuasive. The undisputed evidence is

8

Plaintiff argues defendant acted improperly in issuing a payment check that was tied
to a release of claims, arguably contrary to Oklahoma law. He further argues that defendant
delayed in issuing a replacement check. The court is unpersuaded. The evidence indicates
the check tendered by defendant lacked the sort of “release” language that is proscribed by
Oklahoma law. Further, there is no indication of a request for re-issuance of the check with
different language until substantially later in the case.
Plaintiff argues that the amount tendered to plaintiff after completion of the appraisal
process was an impermissible “low ball” offer because the reserve established by defendant
for plaintiff’s claim far exceeded the amount of the check. He relies on evidence that
defendant increased its reserve after the appraisal award was issued. Internal reserves
established by an insurance company are an estimate of potential liability in connection with
a claim. They do not represent the insurer’s judgment as to what a plaintiff should recover.
See generally, Signature Dev. Cos. v. Royal Ins. Co. Of Am., 230 F.3d 1215, 1224 (10th Cir.
2000) (Reserve calculations are “merely an amount [the insurer] set aside to cover potential
future liabilities.”). As such, and particularly given the post-appraisal timing of the reserve
determination involved here, the evidence as to the difference between defendant’s reserve
for this claim and its payments on the claim does not support an inference of bad faith.
Plaintiff also relies on various “mistakes” made by Dau in the course of handling the

that the parties initially went forward with an engineering firm selected by plaintiff, that the repairs
to the trusses and/or basement support were made as suggested by that engineer, and that, for at
least some period of time, the parties thought any issue as to the trusses had been resolved.

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claim.9 In plaintiff’s view, the mistakes add up to approximately $60,000 in adjustments or
additional payments made over the course of the handling of the claim, with a significant
portion of the payments coming after filing of this suit and various developments in it. In
most storm-damage cases , “mistakes” totaling $60,000 in the handling of a claim would be
a strong indicator of something more than ordinary negligence. Here, that inference is not
so obvious. This case involves a very expensive home. The homeowner’s policy in issue
had property coverage on the dwelling of $1,937,000. See Doc. #125-2.10 The policy
included a number of coverages and provisions unique to high-end homes which resulted,
in light of the types of damage involved here, in an adjustment process of considerably more
complexity than might be expected in a “routine” storm claim. Some of the mistakes were
di minimus in the circumstances existing here or appear to be the sort of “moving target”
adjustments as might occur with any complex claim.11 Most were immediately corrected
after they were identified.12 Considered individually, each of the mistakes appear to be
nothing more than negligent mistakes which, as noted above, are not a basis for a bad faith

9

Plaintiff suggests that certain of the mistakes “rise to the level of outright
misrepresentations,” see Doc. #146, p. 23, but the court sees nothing in the evidence cited by
plaintiff to suggest any intentional misrepresentation.
10

The policy also included other property coverages ($193,000 for “other structures”;
$1,452,750 for personal property; $968,500 for loss of use).
11

Plaintiff is now claiming far more in contract damages than were even hinted at by him or
the engineers at the outset of the claims process.
12

In some cases, it appears the mistakes were not brought to the attention of Dau and
defendant until Dau was confronted with them at his deposition.

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claim under Oklahoma law. See Nat’l Mut. Cas. Co. v. Britt, 218 P.2d 1039, 1042 (Okla.
1950) (“It takes something more than mere mistake to constitute bad faith.”) (citation
omitted); Bailey v. Farmers Ins. Co., Inc., 137 P.3d 1260, 1264 (Okla. Civ. App. 2006)
(“Insurers are free to make legitimate business decisions (and mistakes) regarding payment,
as long as they act reasonably and deal fairly and in good faith with their insureds.”). The
court concludes, however, that the cumulative effect of evidence as to all the “mistakes” as
to this insurance claim, including their number and total dollar value, are sufficient to create
a justiciable issue as to bad faith. As noted above, at this stage a court must draw the factual
inferences in favor of the non-moving party, here the plaintiff. Doing so, and giving plaintiff
the benefit of the uncertainty in Oklahoma law as to where the line is drawn between simple
negligence and something more, the court concludes plaintiff has presented evidence
sufficient to preclude summary judgment on his bad faith claim.
Punitive damages is another matter. As noted above, Oklahoma law recognizes that
the showing necessary for punitive damages is higher than that for making out a bad faith
claim as a substantive matter. See Badillo, 121 P.3d at 1094. To warrant submission of a
request for punitive damages to a jury in these circumstances, plaintiff must present evidence
“of conduct rising to the level of reckless disregard or malice on the part of [Travelers].” Id.
at 1105. The Oklahoma Supreme Court “has recognized that the availability of punitive
damages in a case by an insured against his/her insurer for breach of the implied duty of good
faith and fair dealing is not automatic, but rather is governed by the standard applicable in
other tort cases.” Id. at 1106. Submission of the issue of punitive damages to a jury may be
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improper, even where there is evidence to support recovery of actual damages. Id. Further,
under Oklahoma law, the basis for punitive damages must be shown by clear and convincing
evidence. Id. at 1105 (citing 23 Okla. Stat. § 9.1).13 Here, as discussed above, the evidence
is barely sufficient to survive summary judgment on the substantive bad faith claim. For the
reasons indicated, the court concludes plaintiff has not produced evidence sufficient to create
a justiciable issue as to a request for punitive damages. Defendant’s motion will therefore
be granted as to the punitive damages issue.
SUMMARY
For the reasons stated, plaintiff’s motion for partial summary judgment [Doc. Nos.
125 & 137] is DENIED. Defendant’s motion for summary judgment [Doc. #123] is
DENIED insofar as it seeks judgment as to plaintiff’s bad faith claim but is GRANTED as
to the availability of punitive damages. The parties’ motions to strike [Doc. Nos. 156 & 158]
are DENIED.
Still at issue are motions raising Daubert concerns, issues as to supplementation of
reports and opinions, issues as to the extent of plaintiff’s requested recovery, and defendant’s
request to supplement lists. Those will be dealt with in due course, likely on a short fuse
basis, if the case is not resolved at the settlement conference scheduled for July 14, 2011.

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The quantum of proof necessary to establish a particular issue may properly be considered
on summary judgment. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 254-5 (1986).

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IT IS SO ORDERED.
Dated this 13th day of July, 2011.

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