Fiztgerald et al v. American Family Mutual Insurance Company

Filing 47

OPINION AND ORDER: Plaintiffs motion for summary judgment 35 is GRANTED with respect to the motion for a money judgment enforcing the appraisal award, and plaintiff is awarded $13,097.02. Plaintiffs motion for summary judgment is otherwise DENIED. Defendants motion to strike 42 is DENIED. The request for oral argument is DENIED as unnecessary. See formal OPINION AND ORDER. Signed on 10/6/2015 by Chief Judge Ann L. Aiken. (rh)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
STACEY FITZGERALD and BRIAN
THORNTON,
Plaintiffs,
vs.
AMERICAN FAMILY MUTUAL INSURANCE
COMPANY,
Defendant.

R. Scott Taylor
Brandon G. Braun
Clinton L. Tapper
Nickolaus N. Gower
Taylor & Tapper
400 E 2nd, Ste. 103
Eugene, Oregon 97401
Attorneys for plaintiff$

Page 1 - OPINION AND ORDER

Case No. 6:14-cv-497-AA
OPINION AND ORDER

Ryan J. Hall
Cole Wathen Leid Hall PC
303 Battery Street
Seattle, WA 98121
Attorney for defendant
AIKEN, Chief Judge:
Plaintiffs Brian Thornton

("Thornton")

and Stacy Fitzgerald

move for summary judgment against Defendant American Family Mutual
Insurance

Company

related

to

fire

damage

to

their

personal

property.

For the reasons set forth below, plaintiffs' motion is

granted in part and denied in part.
BACKGROUND
Plainti£fs own a piece of real property in Reedsport, Oregon.
There are three buildings on the property:
guest cottage,
caught fire.

and a pole barn.

the pole barn
it had to be

Although the guest cottage did not burn, it

sustained heat damage

damaged.

2013,

Damage to the barn was so extensive,

completely rebuilt.

interior.

On May 31,

the main residence, a

to the exterior and water damage to

the

Personal property inside the guest cottage also was
The main residence sustained minor smoke damage.

All

disputes regarding damage to the structures have been resolved. 1
The only issues remaining before the court pertain to amounts owed

1

Before plaintiffs filed this lawsuit, defendant paid the
limit under the policy for the damage to the pole barn, and also
paid to repair the smoke damage to the main dwelling.
In ,
addition, the parties agree any dispute about structure coverage
of the guest cottage now moot.
See Doc. 39-2 (email from
defendant's counsel to plaintiffs' counsel confirming the
parties' oral "agree[ment] that based upon the appraisal ruling,
there is no need to adjudicate any further the issue of limits
and structure coverage").
Page 2 - OPINION AND ORDER

by defendant under the policy due to damage to plaintiffs' personal
property and to trees on the property.
I. Personal Property
At
policy
both

the

time

of the

policy")

(~the

~actual

cash

amount

and

First,
equal

personal property. 2

plaintiffs were

issued by defendant.

value"

personal property.
settlement

fire,

This

insured under

a

The policy provided

~replacement

cost"

coverage

for

the insured is entitled to receive a

to

the

actual

payment

cash

is made

value

whether

of

covered

the

insured

actually repaired or replaced any of the damaged personal property.
Second, to the extent that the actual cash value settlement does
not exceed the coverage limit, the insured can obtain additional
payment for replacement costs.

To obtain such payment, the insured

must actually replace the property within one year of the date of
the loss.
a

receipt,

The insured pays the initial replacement cost, submits
and

the

insurer

pays

the

difference

between

the

replacement cost and the actual cash value already paid for that
item.
Plaintiffs
occurred.

notified

Defendant

defendant

retained

about

Enservio,

valuation company, to visit the loss site,

the
Inc. ,

fire
a

the

day

contents

it
and

inspect the property,

~Actual cash value" is not defined in the policy.
Courts
sometimes equate actual cash value with fair market value, and
other times define it as replacement cost minus depreciation.
See Schnitzer v. S.C. Ins. Co., 661 P.2d 300, 303 & n.3 (Or. Ct.
App. 198 3) (citing case law supporting both definitions) ;
Director v. S.C. Ins. Co., 619 P.2d 649, 651 (Ct. App. Or. 1980)
(describing ~ubmission of the question of the meaning of ~actual
cash value" to a jury) . · The precise definiiion of actual cash
value is not at issue in this case.
2

Page 3 - OPINION AND ORDER

and generate
Plaintiffs,
valuations

a

personal property loss

inventory

through their public adjuster,
in

the

Defendant

inventory.

("inventory") .

disputed some of the
invited plaintiffs

to

submit documentation supporting higher valuation for the disputed
items.

In the first three months after the fire, defendant issued

to plaintiffs actual cash value payments totaling $67,180.45.
On March 2 6,

2014,

plaintiffs

alleging breach of contract,

filed this diversity action

negligence,

infliction of emotional distress.

fraud,

Plaintiffs

and intentional
alleged multiple

misrepresentations during the adjustment of the personal property
loss, including:
a. Defendant wrongfully claiming that 46 out of 664 items
listed· on
the
personal
property
inventory
were
depreciated 100%;
b. Defendant making numerous mathematical errors in
calculating the [actual cash value] of Plaintiffs'
personal property; and
c. Defendant changed replacement value and brands from
Plaintiffs' original inventory without authority or
approval from Plaintiffs.
Pl.'s Compl.

~

During

20.

discovery,

plaintiffs

submitted

internet

pricing

information supporting a higher valuation for certain items in the
inventory.

Enservio updated the inventory as a result of that

information and made other corrections.

As

a

result of these

changes, defendant issued additional actual cash value payments to
plaintiffs totaling $11,570.26.
In April 2014, defendant extended by 6 months the contractual
deadline

for

submitting

Page 4 - OPINION AND ORDER

receipts

in

support

of

claims

for

replacement costs.

As of June 2015, defendant had paid plaintiffs

a total of $21,296.22 in replacement costs.
In February 2015,
characterized

as

"an

the parties entered into a
agreement

intended

to

stipulation,

provide

the

most

efficient and cost effective resolution of all three components of
this

suit."

valuation

Doc.

of

25

claimed

at

1.

items

The

three

(personal

components

were

property/structure);

" ( 1)
(2)

policy interpretation/structure limits; and (3) extra-contractual
claims."
Regarding valuation disputes,

the parties agreed "to submit

any and all issues regarding Plaintiffs'
claims to appraisal for resolution."
all rights related to (1)
(2)

attorney

fees.

contents and structure

Doc. 25 at 2.

They reserved

applicable limits under the policy; and

The

2arties

further

agreed

that

"issues

regarding policy interpretations/structure limits will be resolved
by dispositive motions."

Doc.

25 at

3.

Finally,

the parties

agreed to resolve any extra -contractual claims not

resolved by

dispositive motions through mediation.
After an appraisal hearing, the umpire concluded defendant's
actual cash value payments to date had undervalued plaintiffs'
losses.

The

difference

between

the

umpire's

evaluation

and

defendant's valuation was primarily attributable to defendant's ( 1)
application of a 100% depreciation rate, a rate "inconsistent with
industry standards," to

66 i terns of personal property;

and

misidentification of brands, which led to incorrect pricing.
37-5 at 2.

( 2)
Doc.

The net appraisal award to plaintiffs was $13,097.02.

Page 5 - OPINION AND ORDER

Doc. 37-6 at 2.

Defendant mailed plaintiffs a check for the full

amount of the award, but plaintiffs declined the check, refusing to
"settle this case for the amount owed on contents without an award
of attorney fees and costs."
to deposit the funds
motion

was

granted

Doc. 37-8 at 1.

Defendant then moved

in this court's registry.
(doc.

41)

and

the

funds

Doc.
have

38.

The

since

been

deposited.
II. Damage to Trees
The policy covered fire damage to "trees, plants, shrubs and
lawns on the insured premises."

Doc. 37-1 at 8.

Plaintiffs allege

the fire destroyed nine trees and severely damaged seven other
trees.
the

Defendant agrees that although seven trees were damaged,

inspection

after

the

fire

revealed

no

destroyed

trees.

Defendant paid to prune the seven damaged trees in an effort to
save them.

Plaintiffs allege the damaged trees subsequently died.

Plaintiffs, however, did not submit a claim for tree damage to
the appraiser.

After plaintiffs'

lawyer raised the tree damage

issues in an email after the appraisal hearing, defendant's lawyer
noted the trees had not been a subject of that hearing.

Plaintiffs

did not ask the umpire to reopen proceedings or otherwise address
their claim regarding the trees.
STANDARDS
Summary

judgment

is

appropriate

dispute as to any material
judgment as a matter of law."

fact

if

"there

is

genuine

and the movant is entitled to

Fed. R. Civ. P. 56(a).

law on an issue determines the materiality of a fact.
Page 6 - OPINION AND ORDER

no

Substantive
T.W. Elec.

Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th
Cir. 1987).
the

Whether a reasonable jury could return a verdict for

nonmoving party determines

the

authenticity of

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248

a

dispute.

(1986).

The moving party has the burden of establishing the absence of
a genuine issue of material fact.
Corp . v . Catrett ,
shows

the

Fed. R. Civ .. P. 56(a); Celotex

4 7 7 U . S . 31 7 , 3 2 3 ( 19 8 6 ) .

absence

of

a

genuine

issue

If the moving party

of

material

fact,

the

nonmoving party must go beyond the vleadings and identify facts
which

show a

judgment

is

genuine

issue

inappropriate

for
if

trial.

Id.

reasonable

at

324.

jurors,

"Summary

drawing

all

inferences in favor of the nonmoving party, could return a verdict
in

the

nonmoving party's

favor."

Diaz

v.

Eagle

Produce

Ltd.

Partnership, 521 F.3d 1201, 1207 (9th Cir. 2008).
Special rules of construction apply when evaluating a summary
judgment motion:

(1) all reasonable doubts as to the existence of

genuine issues of material fact
moving

party;

and

(2)

all

should be resolved against the

inferences

to

be

drawn

from

the

underlying facts must be viewed in the light most favorable to the
nonmoving party.

T.W. Elec., 809 F.2d at 630.
DISCUSSION

I. Judgment to Enforce Appraisal Award
Plaintiffs first move this court to judicially confirm the
appraisal

award.

The

heart

of

this

eligibility for statutory attorney fees.

dispute

is

plaintiffs'

Oregon law provides

[I]f settlement is not made within six months from the
date proof of loss is filed with an insurer and an action
Page 7 - OPINION AND ORDER

is brought in any county of this state upon any policy of
insurance of any kind or nature, and the plaintiff's
recovery exceeds the amount of any tender made by the
defendant in such action, a reasonable amount to be fixed
by the court as attorney fees shall be taxed as part of
the costs of the action and any appeal thereon.
Or.

Rev.

Stat.

§

742.061(1).

Plaintiffs

seek to

convert

the

appraisal award into a money judgment because such a judgment is a
prerequisite to qualifying for attorney fees under the statute.
Triangle Holdings, II, LLC v. Stewart Title Guaranty Co., 337 P.3d
1013, 1019 (Or. Ct. App. 2014), review dismissed, 354 P.3d 697 (Or.
2015).
Defendant asserts the attorney fees statute is inapplicable in
First,

this case.

defendant contends payment of the appraisal

award cannot be a
because

the

"recovery" within the meaning of the statute

appraisal

process

was

undertaken

pursuant

insurance contract and not as part of this litigation.

to

the

Defendant

correctly notes the contract provides for appraisal in the event
the contracting parties fail to agree on the amount of loss.

But

that does not separate the appraisal process from this litigation.
The

parties

appraisal

agreed

only

to

after

settle

their

plaintiffs

valuation

filed

this

dispute
lawsuit,

through
via

a

stipulation expressly stating it was "an agreement intended to
provide the most efficient and cost effective resolution of all
three components of this suit."

Doc. 25 at 1.

Once converted into

a money judgment, the appraisal award will be a "recovery" within
the meaning of the statute.
Defendant next argues the attorney fees statute does not apply
because

it

paid

all

claims

Page 8 - OPINION AND ORDER

within

six

months

of

receiving

plaintiffs'
was

proof of loss.

plaintiffs'

appraisal

Defendant alleges the proof of loss
hearing

evidence

valuation of the damaged peisonal property.

supporting

higher

If correct, plaintiffs

are ineligible for attorney ,fees because defendant attempted to
tender payment of the full appraisal award within six months of the
hear_ing.
Defendant's

argument

is

construction of the phrase

based

~proof

on

an

impermissibly

of loss."

~Proof

the purposes of the attorney fees statute means

narrow

of loss" for

~[a]ny

event or

submission that would permit an insurer to estimate its obligations
(taking into account the insurer's obligation to investigate and
clarify uncertain claims)
Co.,

190 P.3d 372,

377

"

(Or.

Scott v. State Farm Mut. Auto.
2008).

Ins.

An insured provides proof of

loss-and the statutory clock starts ticking-whenever the insurer
has
to

~an

form

adequate opportunity for investigation .
an

intelligent

estimate

before it is obliged to pay."
Ins. Co., 311 P.3d 497,

503

of

its

rights

is

ambiguous

or

and

liabilities

Zimmerman v. Allstate Prop. & Cas.

(Or. 2013)

(quoting

Farm Ins. Co., 985 P.2d 796, 800 (Or. 1999)).
itself,

. to enable it

insufficient

to

~If

allow

Dockins v. State
a submission, by
the

insurer

to

estimate its obligations, it nevertheless will be deemed sufficient
if

it

provides

enough

information

to

allow

investigate and clarify uncertain terms.'"

Id.

the

insurer

'to

(quoting Dockins,

985 P.2d at 801).
Defendant faults plaintiffs for failing to
inventory or a marked up inventory" and
Page 9 - OPINION AND ORDER

~submit[]

~inexplicabl[y]

their own
deci[ding]

not to forward .

proof of higher value" to defendant.

Resp. Mot. Summ. J.

22,

24.

Def. 's

Contrary to defendant's suggestion,

however, there is no statutory requirement that an insured propose
a

particular valuation of the

valuation with documentation. 3

loss

or

challenge

the

insurer's

However helpful the documentation

supporting higher pricing might have been to defendant, plaintiffs
were under no duty to provide it on penalty of losing their right
to attorneys fees.
Here,
defendant

plaintiffs provided proof of loss when they provided
notice

of

the

fire

on

May

triggered defendant's

obligation to

months

remained

later,

valuation

of

there

plaintiffs'

2013.

That

notice

investigate the loss.

active

losses.

31,

disputes

regarding

Accordingly,

the

Six
the

statutory

requirement mandating no settlement within six months of the filing
of proof of loss has been met here.
Finally,

defendant asserts its willingness to pay the full

appraisal award renders a money judgment unnecessary.

In Triangle

Holdings, the Oregon Court of Appeals cautioned "an insurer should
not be able to defeat the insured's entitlement to attorney fees by
making it impossible for the insured to obtain a
concededly

meritorious

claim."

3

337

P.3d

at

judgment on a

1018.

That

is

The insurance contract requires the insured to provide the
insurer with "a detailed list of the damaged property, showing
the quantities, when and where acquired, original cost, current
value, and the amount of loss claimed." Doc. 37-1 at 12. But
plaintiffs' duties under the contract do not determine the
meaning of "proof of loss" under the statute.
See Dockins, 985
P.2d at 799 ("[C]ase law from this court establishes that the
term [proof of loss] encompasses more than the ordinary, policybased meaning.")
Page 10 - OPINION AND ORDER

precisely the situation here.

The parties agreed the appraisal

process would determine all valuation issues in this case.
expressly

reserved

the

issue

of

attorneys

obtained an appraisal award in their favor.

fees.

They

Plaintiffs ·

Oregon law is clear

the award must be converted into a money judgment before plaintiffs
are able to pursue their properly reserved right to statutory fees.
Id.

at 1019.

amounts

to

Plaintiffs are under no obligation to accept what
an

attorney fees.

offer

to

See id.

settle
at

the

1018

valuation

dispute

without

(noting "plaintiff could have

agreed to dismiss its claim only in exchange for an amount that
included attorneys fees" but "did not pursue" that option) .
Plaintiffs' motion for summary judgment with respect to the
appraisal is granted, and plaintiffs are awarded $13,097.02.
II. Damage to Trees
Plaintiffs

next

assert

they

compensate them for tree damage.

are

entitled

to

$8,000

to

Defendant argues plaintiffs are

barred from raising this claim because they failed to raise it in
the appraisal process.

I agree with defendant.

"[T]he interpretation and enforceability of [a] stipulation
. [is] governed by the basic principles of contract law."

Fred

Hutchison Cancer Research Ctr. v. United of Omaha Life Ins. Co.,
821 F. Supp. 644, 647

(D. Or. 1993).

"A written contract must be

read as a whole and every part interpreted with reference to the
whole."

Sharkey's Inc.

v.

1983) .

Page 11 - OPINION AND ORDER

Covalt,

704 F.2d 426,

435

(9th Cir.

Plaintiffs concede they presented no evidence at the appraisal
hearing regarding tree damage.

They ar:gue they were under no

obligation to do so, however, because
and all issues

~he

stipulation provided "any

regarding valuation of Plaintiffs'

contents

and

structure claims" would be submitted "to appraisal for resolution."
Doc. 25 at 2.

Because trees fall under a supplementary coverage

provision,

rather than under the contents or structure coverage

provisions,

plaintiffs argue tree damage was not covered by the

stipulation.
If the appraisal section of the stipulation were the full
contract

between

interpretation.

the

parties,

I

would

agree

The stipulation begins by listing

the "three basic components" of this action:
i terns

plaintiffs'

But their reading makes little sense when the

stipulation is read as a whole.

claimed

with

(personal

" ( 1)

property I structure) ;

valuation of
(2)

policy

interpretation/structure limits; and (3) extra-contractual claims."
Doc.

25 at 1.

It further states "the parties have reached an

agreement intended to provide the most efficient and cost effective
resolution of all three components of this suit."

Id.

Because the

stipulation proposes a framework for resolving all components of
the action,

all claims must

fall

into one of the three listed

categories.
The claim related to the trees is not extra-contractual, nor
does it concern policy interpretation or policy limits.
is the only remaining category.

Valuation

While the fit is not perfect, as

the trees are not "personal property" or "structures" within the
Page 12 - OPINION AND ORDER

meaning of the policy, the specific references to personal property
and structure modify the broader category "valuation of claimed
items."

This

same

broader

heading

appears

in

the

"Action/Litigation Plan" section, which provides for "Valuation of
Claimed Items/Personal Property via Appraisal."
trees are claimed items.

Doc. 25 at 2.

The

Although the stipulation could have been

drafted with greater specificity,

I find the parties'

intent, as

expressed in the stipulation, was to resolve all disputes regarding
valuation through the appraisal process.

This extends to tree

"(

damage,

notwithstanding

the

"contents

and

structure

claims"

qualifiers.
Plaintiffs failed to submit evidence about the trees during
the appraisal process.

They declined to take any action even after

defendant pointed out their omission in an email.
waived their claim for tree damage payment.

Plaintiffs thus

Plaintiffs' motion for

summary judgment on this issue is denied, and claims related to the
trees are dismissed with prejudice.
III. Doctrine of Prevention
Finally, plaintiffs assert defendant's undervaluation of their
losses, and resulting underpayment of actual cash value, prevented
them

from

complying

with

replacement cost benefits.

the

procedures

necessary

to

obtain

Plaintiffs urge this court to excuse

them from complying with those procedures, thus entitling them to
actual replacement cost for all of their damaged personal property,
regardless of whether they actually replaced that property.
claim cannot be resolved on summary judgment.
Page 13 - OPINION AND ORDER

This

"[W] here
performance
plaintiff

the
of

is

a

conduct

of

contract

excused

'"

Anderson v. Allison,

the

defendant

provision

from

by

performing

471 P.2d 772,

774

has

under
(Or.

"[w] hether interference by one party to

a

the

plaintiff,"

the

prevented

the

that

provision.
In general,

1970).
contract

amounts

prevention so as to excuse performance by the other party .

to
is

a question of fact to be decided by the jury under all of the
proved facts and circumstances."

13 Williston on Contracts

39:3

§

(4th ed.).

But when an insurer denies coverage and refuses to pay

an

cash

actual

value

settlement,

some

courts

have

held

the

insurer's action prevented the insured from complying with the
replacement cost provisions of the contract as a matter of law.
See D & S Realty,
2012)

(N~b.

Inc. v. Markel,

(collecting

Kingsport Packaging Co.,
LEXIS 147181 at *3
inability
replacement

to

Inc.,

(E.D. Tenn.

comply

cost

cases);

with

coverage

the
is

Inc.,

816 N.W.2d 1, 17 & n.31

Harleysville Mut.

No.
Dec.

2:02-CV-235,
22,

policy

2011)

Ins.

2011 U.S.

to

v.

Dist.

("The defendants'

requirements

attributable

Co.

the

regarding
plaintiff's

refusal to honor their claim in the first instance.")
Here, there was no coverage denial.
of plaintiffs'

Defendant paid $67,180.45

actual cash value claims before the replacement

coverage period expired.

Since then,

defendant has

(1)

paid an

additional $11,570.26 in actual cash value; and (2) been assessed
an additional $13,097.02 in actual cash value via the appraisal
award.

Defendant thus undervalued plaintiffs' personal property

losses by approximately 27 percent.
Page 14 - OPINION AND ORDER

Plaintiffs contend defendant

prevented them from obtaining the full benefit of their replacement
cost coverage by systematically underestimating the actual cash
value of their personal property.
funds

they

had

available

to

They allege this reduced the

replace

damaged

i terns

within

the

replacement coverage period, thus preventing them from replacing as
much of their damaged personal property as they would have replaced
had they been paid immediately the full actual cash value of their
losses.
Several

genuine

questions

of

material

fact

remain.

The

parties dispute whether 27 percent is a substantial undervaluation.
They also dispute whether the undervaluation was intentional or the
product

of

a

good-faith

dispute

in

a

complex

process.

evidence in the record supports each party's theory.

Some

For example,

although there is evidence defendant directed Enservio to apply a
depreciation rate higher than the industry standard in determining
'

actual

cash

value,

defendant

also

replacement coverage term by 6 months.

extended

the

contractual

It cannot be determined at

this stage whether defendant's undervaluation of plaintiffs' losses
amounted to prevention. 4

Plaintiffs' motion for summary judgment

on this issue is denied.

4

Plaintiffs also argue defendant materially breached the
policy.
But their arguments regarding material breach mirror
their prevention arguments.
In any event, when there are
disputed facts, whether a breach is material cannot be determined
at the summary judgment stage.
McKeon v. Williams, 799 P.2d 198,
200 (Or. 1990).
Page 15 - OPINION AND ORDER

CONCLUSION
Plaintiffs' motion for summary judgment (doc. 35) is GRANTED
with respect

to the motion for

a money judgment enforcing the

appraisal award, and plaintiff is awarded $13,097.02.

Plaintiffs'

motion

for

Defendant's

motion

to

summary
strike

judgment

(doc.

42)

is
is

otherwise
DENIED. 5

DENIED.
The

request

for

oral

argument is DENIED as unnecessary.
IT IS SO ORDERED. ~

Dated

this~ of

October 2015.

Ann Aiken
United States District Judge

5

Defendant moves to strike Thornton's affidavit as lacking
foundation and improperly offering an expert opinion.
Thornton
does not make any statements in his affidavit that are legal or
expert opinions.
He makes appropriate statements as a percipient
witness about his expectations regarding the insurance contract,
as well as about what happened ·to the trees on his property.
Page 16 - OPINION AND ORDER