Hoffman et al v. State Farm Fire and Casualty Company
Filing
86
MEMORANDUM OPINION (Order to follow as separate docket entry) re 55 MOTION for Summary Judgment filed by State Farm Fire and Casualty Company. Signed by Magistrate Judge Martin C. Carlson on November 16, 2016. (kjn)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
JENNIFER HOFFMAN,
JOSHEWA SINK,
Plaintiffs
v.
STATE FARM FIRE
AND CASUALTY COMPANY,
Defendants
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Civil No. 4:14-CV-1978
(Magistrate Judge Carlson)
MEMORANDUM OPINION
I.
INTRODUCTION
In July 2013, a fire broke out in the basement of the Bloomsburg,
Pennsylvania home of Jennifer Hoffman and Joshewa Sink.
When the fire
department arrived shortly after the relatively small fire was discovered, it had
already been extinguished and no water or fire retardant was necessary.
Nevertheless, the fire caused some smoke and soot damage to the basement and
first floor interior of the home, and the fire department initially indicated that the
blaze was caused by a nearby junction box.
Accordingly, firefighters
recommended that the plaintiffs turn off power to the home, rendering it
uninhabitable.
Ms. Hoffman and Mr. Sink’s home was covered by an insurance policy
issued by State Farm Fire and Casualty Company (“State Farm”). State Farm
assigned the loss to Scott Fleming, a claim adjuster. State Farm also promptly
provided the homeowners with contact information for a third-party servicer who
would assist them in securing temporary housing and furnishings while the home
was repaired and the fire investigated. Before the claim was adjusted, however,
State Farm had the scene inspected by an origin and cause investigator (“O&C
investigator”) who identified several factors which suggested that the fire had been
deliberately set, and which cast doubt on the fire department’s initial belief that the
fire was the result of an electrical malfunction in a junction box. These findings
caused State Farm to open an investigation into the claim. This investigation
played out over the following five months, subject to several delays, but ultimately
resulted in State Farm finding that the claim was covered by the homeowners’
insurance policy.
Ultimately, State Farm indemnified the plaintiffs nearly
$150,000 in losses to the home and personal property stemming from the fire.
The plaintiffs were dissatisfied with State Farm’s adjustment of the claim,
and with the length of time that the investigation and claims process took. They
also were frustrated by what they claimed was unprofessional treatment by State
Farm representatives, and with State Farm’s refusal to pay for a number of
expenses that the plaintiffs insist were attributable to the fire itself, but which State
2
Farm found were not directly related to the fire or, in some instances, were highly
suspicious, including claims for more than $6,000 in electrical work that it now
appears had nothing to do with the plaintiffs’ home. Accordingly, they filed this
civil action, bringing one count for breach of contract, and one count under
Pennsylvania’s bad-faith law. The case was initially filed in state court, and was
removed to this Court on October 13, 2014. The action was subsequently referred
to the undersigned for pretrial management, and the parties later consented to have
this Court preside over all further proceedings, through and including trial if
necessary.
Following the close of discovery, State Farm has moved for summary
judgment on both of the plaintiffs’ claims. The motion is fully briefed and ripe for
disposition. Following review of that motion, the Court finds that the plaintiffs
have failed to come forward with sufficient evidence to support their bad-faith
claim. Despite having had ample opportunity to identify evidence in the record to
substantiate this claim – which, under Pennsylvania law, must be proven by clear
and convincing evidence – the plaintiffs have relied upon bare allegations and
narrative argument that does little more than summarize bad-faith law in
Pennsylvania, without showing how the facts of this particular case could support a
claim under the statute. Despite reading the parties’ briefs and the evidence that
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the defendant submitted in the light most favorable to the plaintiff, the Court
concludes that summary judgment is warranted on this claim.
The plaintiffs’ claim for breach of contract presents a somewhat closer, and
narrower, issue. This claim essentially boils down to the plaintiffs’ assertion that
State Farm has breached the insurance contract by failing to make payments that
fully indemnified the plaintiffs’ claimed losses to their home, personal property
and alternative living arrangements following the fire. In reviewing this claim, it
appears that the plaintiffs’ damages claims have shifted, morphed and
transmogrified over time. In its current form these claims now include claimed
expenses that were not identified until well after discovery had closed, and even
include claims for repairs that undisputed evidence now shows were never even
performed at the plaintiffs’ home.
Review of the record in this case reveals very little support for the plaintiffs’
contract claim, something that is perhaps most apparent in the plaintiffs’ brief
opposing the defendant’s motion for summary judgment. Whereas State Farm has
provided a lengthy factual statement, with pinpoint citation to scores of exhibits,
documentary evidence and testimony, the plaintiffs have not filed a countervailing
statement of facts, and instead appear to be inviting the Court to scour the
defendants’ exhibits in an effort to find disputed material facts. The plaintiffs fail
to respond in any meaningful way to State Farm’s apparently undisputed assertion
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that the plaintiffs are seeking recovery for amounts that were not spent on their
home, and for amounts that the plaintiffs elected to spend to put new carpet
throughout their home, despite State Farm having paid to have the wood floors
refinished. Similarly, the plaintiffs offer nothing of substance in response to State
Farm’s refusal to pay for the installation of multiple windows, which the plaintiffs
elected to do after discovering that one of the windows in their home had been
cracked – but with no evidence that this single cracked window was caused
directly by the fire. It appears that rather than provide evidentiary support and
legal argument to support their contract claim, the plaintiffs instead would have the
Court find that disputed issues must exist because there is a disagreement over the
amount of money that State Farm has provided in response to the claims. Upon
careful consideration of the parties’ moving papers, the evidence that the
defendants have provided, and the near total absence of record citation offered by
the plaintiffs, the Court concludes that the plaintiffs have failed to come forward
with timely and substantive evidence necessary to surmount State Farm’s motion
with respect to the breach-of-contract claim.
Accordingly, for the reasons that follow, the defendant’s motion for
summary judgment will be granted.
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II.
FACTUAL BACKGROUND1
On or about July 12, 2013, a fire occurred in the basement of the plaintiffs’
Bloomsburg, Pennsylvania home. At the time of the loss, the home was insured
under a policy of homeowners insurance with State Farm at Policy No. 78-B8M375-7 (the “policy”).
(Doc. 55, Ex. B.)
The policy was considered “new
business,” as Jennifer Hoffman purchased the policy on June 26, 2013,
approximately three weeks before the fire occurred. (Id., Ex. C.) The policy
provides coverage for Accidental Direct Physical Loss that occurs during the
policy period. (Id., Ex. B, at p. 7, § I – Losses Covered.)
No one was home when the fire occurred. Instead, the fire was discovered
by Joshewa Sink, Ms. Hoffman’s boyfriend, who also lived at the home. Mr. Sink
called the fire department, but by the time firefighters arrived, the blaze had been
1
Before delving into the factual record, the Court is constrained to observe that
despite being obliged to provide a counterstatement of material facts under Local
Rule 56.1, the plaintiffs have elected instead to “rely upon the exhibits attached to
Defendant’s Motion[.]” (Doc. 58, p. n.1.) Remarkably, the plaintiffs’ own factual
statement set forth within their brief provides scant citation to any evidence at all,
and instead often relies upon reference to allegations or, in many instances, mere
argument. The failure to direct the Court and the defendant to actual evidentiary
support is inadequate in responding to a motion for summary judgment, where the
nonmoving party is obliged to show that there are disputed issues of material fact
that require a trial, and to support these factual assertions with citation to actual
evidence in the record. To the extent that the plaintiffs have not properly disputed
the facts that State Farm has presented and supported with evidentiary citation,
those facts have been accepted as true. See Local Rule 56.1.
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extinguished and no water was used. (Id., Ex. C, State Farm Fire Notes at page
SF0081; Ex. oo, Deposition of Joshewa Sink (“Sink Dep.”) at 210:17-19 and
212:1-21.)
Ms. Hoffman notified State Farm about the fire on the day it occurred.
(Doc. 55, Ex. C, at SF0081.) She informed the insurer that the fire department
indicated that there had been an electrical malfunction in the electrical junction box
on a joist in the basement which had caused wiring to melt and drip down onto an
elliptical machine. (Id.) Ms. Hoffman stated that the fire chief provided her with
this information, but acknowledged that she had no information about any
investigation that he may have undertaken. (Id.)
Upon receiving notice of the fire, State Farm immediately arranged for the
plaintiff and her family to obtain alternate housing under Coverage C of the policy,
which provided for alternative living expenses (“ALE”), through a third party
called ALE Solutions. (Id.) On July 13, 2013, State Farm approved an advance
payment of $1,500 to assist the plaintiffs in their relocation. (Id., at SF0080.)
On July 17, 2013, less than a week after the fire occurred, State Farm
arranged for Lee McAdams, the O&C Investigator, to perform an inspection of the
home. (Id., Ex. D.) McAdams concluded that the fire could not have originated as
the fire department believed because the junction box on the joist was not the
source of ignition, and there was no source of ignition on the elliptical machine,
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though the fire appeared to have started underneath of it. Based upon these
observations, McAdams determined that the fire had been intentionally set. (Id.)
Upon receiving the O&C Investigator’s report, State Farm assigned the
plaintiffs’ claim to State Farm’s Special Investigation Unit (SIU) for further
evaluation. (Id. at SF0079-0080.) According to State Farm’s records, there were
several factors identified that give rise to further investigation, including the fact
that the policy had been purchased just a few short weeks prior to the fire; the fact
that Ms. Hoffman’s divorce decree had been entered the day of the fire, which
required her to sell the house and split the proceeds within one year or otherwise
pay her ex-husband $15,000; and the O&C Investigator’s finding that the fire had
been set. (Id. at SF0079.) There may have been other factors that were cause for
suspicion as well, including the fact that the electrical system in the home was not
up to code and would need to be overhauled – something that was known since the
plaintiffs had originally listed the home for sale, but later removed the listing so the
updates could be made. (Doc. 55, Ex. I, Hoffman Dep. at 90:17-25, 91:1-2,
100:21-25, 101:1-11.)
On July 24, 2013, State Farm notified the plaintiffs that the investigation
into the loss remained ongoing, and that State Farm would not be offering
coverage at that time. However, State Farm also was in communication with
restoration services to mitigate further damage to the home, something that was
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confirmed by letter to the plaintiffs dated July 25, 2013. (Id., Ex. C at SF0078; Ex.
E, Letter.) In addition, while the investigation was undertaken, State Farm asked
ALE to help the plaintiffs to secure temporary housing. (Id.)
State Farm’s letter to the plaintiffs requested that they provide sworn
statements regarding the proof of loss, a personal property inventory, and recorded
statements as required under the terms of the policy. (Id., Exs. E, B, F.) At the
same time, State Farm continued its investigation into the loss by arranging for an
electrical engineer, Bruce Crowley, to inspect and evaluate the fire loss. (Id., Ex.
C, at 75.) Mr. Crowley’s review of the fire scene confirmed the findings of the
O&C Investigator, and concluded that the origin of the fire was neither the
electrical box nor the elliptical machine. (Id., Ex. G.)
State Farm took the recorded statements of Joshewa Sink and Jennifer
Hoffman on July 31, 2013. (Id., Ex. C at SF0076.) On August 20, 2013, State
Farm issued another advance payment of $1,500 for ALE. (Id., Ex. C at SF0064;
Ex. K.)
After taking the plaintiffs’ statements, and in response to the information
they provided, State Farm requested additional information, including signature
and notary stamps on the statement of loss, signed authorization forms, copies of
cell phone records, divorce documents, realtor documents, mortgage documents,
and a worksheet of daily living expenses. (Id., Ex. L.) On August 28, 2013, the
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SIU claims representative, Ted Marziani spoke to Jennifer Hoffman and explained
that State Farm had found that the fire did not originate in either the junction box
or the elliptical machine and that the investigation remained ongoing. (Id., Ex. C,
at SF0062.)
Mr. Marziani wrote again on September 3, 2013, to notify Ms. Hoffman that
the sworn statement of loss had been accepted, but the investigation into the fire’s
cause was continuing and, therefore, no settlement offer could be made at that
time. (Id., Ex. M.) On the same day, State Farm issued a reservation of rights
letter stating that questions remained regarding the origin of the fire. (Id., Ex. N.)
This letter also requested that the plaintiffs submit to examinations under oath
(EUO), and identified Scott Grenoble as the attorney who would conduct them.
(Id.) The policy authorizes State Farm to take EUOs. (Id. and Ex. B, at 13.)
Ms. Hoffman spoke with Scott Grenoble and confirmed the plaintiffs’
availability for EUOs to take place on September 18, 2013. (Id., Exs. O, and I,
Hoffman Dep. at 364:4-18.) However, when the day came to take the EUOs, the
plaintiffs did not keep the appointment. (Id., Ex. I, Hoffman Dep. at 364:4-18.)
The plaintiffs’ decision not to participate in the EUOs was apparently the product
of their retention of a public adjuster, Scott Luscavage, who notified State Farm on
September 17 that he was representing the plaintiffs and that they would not be
attending. (Id., Ex. C at SF0058 and Ex. P.)
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Mr. Luscavage requested that State Farm continue the EUOs to a later date,
and Mr. Grenoble responded by requesting contact to coordinate the rescheduling.
(Id., Ex. Q.) Mr. Luscavage did not respond to this letter, and Mr. Grenoble
ultimately notified Mr. Luscavage by letter dated October 11, 2013, that the EUOs
would take place on October 28.
(Id., Ex. R.)
Shortly thereafter, however,
plaintiffs retained a lawyer who coordinated with State Farm to have the EUOs
rescheduled to November 22, 2013. (Id., Ex. S, Letter from Scott Grenoble to
Michael Fiorillo dated November 13, 2013.)
The EUOs were completed on
November 22, 2013.
Following the EUOs, the plaintiffs were requested to provide State Farm
with cell phone records that had previously been requested but not delivered. (Id.,
Ex. U.) By letter dated December 16, 2013, the plaintiffs’ attorney responded with
the requested information. (Id., Ex. V.)
On December 24, 2013, following receipt of the final information from the
plaintiffs, State Farm determined that coverage for the loss would be offered, and
State Farm’s claims representative called the plaintiffs’ lawyer and public adjuster
to communicate that coverage decision, and also confirmed this decision by letter.
(Id., Ex. C at SF0043 and Ex. W.)
As noted, while the SIU was being undertaken, State Farm had also
coordinated with a mitigation company to inspect and evaluate the plaintiffs’ home
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for smoke-related issues. (Id., Ex. E.) The company that State Farm retained, ReBuilders Plus, inspected the property and submitted a report on August 1, 2013,
which included an itemized list of restorable and unrestorable items, and provided
recommendations regarding mitigation. (Id., Ex. J.) The report also included
photographs of the home that depict the post-fire loss. (Id., at 875-1007.) On
August 6, 2013, State Farm authorized pre-cleaning and other suggested mitigation
steps. (Id., Ex. C at SF0074.) As part of that process, Re-Builders Plus used a
company called Dial Electronics to clean electronic items. The cleaning process
was completed in December and State Farm paid for that service. (Id., Ex. C at
45.)
Meanwhile, the plaintiff’s public adjuster, Scott Luscavage, prepared a
building estimate for structural damage under Coverage A of the policy on October
16, 2013. (Id., Ex. X at SF1164-1173.) This estimate was furnished during the
period when State Farm was continuing to investigate the cause of the fire, and
before State Farm had agreed to offer coverage for the loss. State Farm inspected
the property two weeks after making this determination, on January 3, 2014. (Id.,
Ex. C at 41.) State Farm representative, Scott Fleming, and representative of ReBuilders Plus and the plaintiffs participated in the inspection. (Id., Ex. C at
SF0041 and Ex. Y.)
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Following the inspection, Mr. Fleming prepared an estimate for $51,100.69
in replacement cost value. The calculated actual value was $39,293.18, with
reimbursable depreciation of $9,006.23, overhead and profit reimbursable
depreciation of $1,801.28, and a deductible of $1,000. (Id., Ex. Z.) On January
14, 2014, State Farm paid the actual cash value of $39,293.18, less than one month
after the coverage decision had been made. (Id., Ex. Y.) The amount tendered
differed markedly from an estimate that Scott Luscavage prepared, mostly because
Mr. Luscavage included in his estimate costs for removing and replacing drywall
and insulation. State Farm declined to provide coverage for these repairs, since
Re-Builders Plus had determined that because the fire was so small and contained,
it was insufficient to pressurize the interior of the home, which would have
necessitated the repairs. (Id.)
In addition, Mr. Luscavage stated that he believed there was fire-related soot
behind the drywall, and in response State Farm arranged for carbon testing of the
alleged soot on February 3, 2014, and noted these findings:
PA [public adjuster] expressed Larry’s [Larry Scheib
from Re-Builders Plus] findings were incorrect and
investigation was not thorough. CR agreed to open walls
to investigate. Larry cut 2 holes on LR front wall and 1
hole on LR right wall . . . . Larry made openings in
upstairs bath and rear bedroom with similar results to
down stairs. Accessed front room which had drywall and
insulation. No soot found to insulation and did not
appear to be same cavity as [from living room] wall.
Also inspected attic and no soot found in attic. Larry
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took a sample of soot in the basement and a sample from
every access to send out for carbon analysis to determine
if carbon present in wall cavities and if so what kind.
Larry made good point that in the past home could have
had coal burning furnace for many years.
(Id., Ex. C at SF0038.) Because the sponge test inside the walls were found to be
insufficient, tape samples were taken on February 20, 2014, and sent to another
third party, EMSL Analytical Inc., for testing and evaluation. EMSL issued a
report on March 11, 2014, finding an 80% concentration of soot in the basement
where the fire occurred, but no traces of soot on the upper levels and only a clear
trace of char in some of the rooms on the first floor. (Def. SMF ¶¶ 57-58.) The
analysts concluded that the soot did not affect the main and second floor wall
cavities, and that the trace amount of char behind some walls was the result of
normal soiling. (Id. ¶ 59; Ex. C, at SF0033-34; Ex. aa.) State Farm had this
assessment further reviewed by the O&C investigator, Mr. McAdams, who noted
the presence of a furnace in the basement and concluded:
The basement did have heavy smoke damage, but the
limited fire damage would not allow a heavy pressure
buildup moving the smoke much further than any
blocked areas in the walls. Some smoke and soot
staining was found around some vents and receptacle in
some areas of the first floor, but this would be expected
as the smoke rose from the basement just below. There
should not be any significant charring in the walls since
the fire did not progress very far away from the fire near
floor level.
(Doc. 55, Ex. bb.)
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State Farm provided the plaintiffs with copies of the EMSL report and
McAdams report on April 15, 2014, and April 30, 2014. (Id., Exs. ee and ff.)
Notably, the plaintiffs did not undertake any independent soot or carbon testing
and analysis, and the plaintiffs have offered no countervailing evidence that would
contradict that set forth in either report that State Farm commissioned, and hence
have not demonstrated with actual evidence that first-floor repairs of the extent
claimed were necessary or warranted, or that State Farm’s refusal to make certain
payments for improvements the plaintiffs elected to make amounted to a breach of
State Farm’s contractual duty.
The plaintiffs also elected to replace a number of windows in the home, and
submitted a bill to State Farm in the amount of $2,445.52. (Id., Ex. nn, p. 3.)
Joshewa Sink, during his deposition, testified that the windows were not damaged
in the fire or shortly after it occurred. (Id., Ex. oo, Sink Dep., at 45-54.) For her
part, Ms. Hoffman attested that the windows were replaced because she determined
that one of the windows had a crack in the pane and she felt it was appropriate to
replace all four windows rather than the one that was damaged. (Id., Ex. I,
Hoffman Dep. at 246:15-25.)
The plaintiffs also decided to make improvements to the flooring throughout
the home following the fire, even though State Farm had already paid money to
have the hardwood floors refinished, which it did because of its duty to pay the
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cost of repair or replacement with similar construction any parts of the property
directly damaged by the fire.2 Prior to the fire, the plaintiffs’ home was laid
primarily with hardwood flooring. Thus, the front bedroom had hardwood floors
and an area rug, as did the second floor hallway. Following the fire, the plaintiffs
elected to install carpeting in these areas. (Id., Ex. oo, Sink Dep. at 89:13-25, 90:45, 91:14-19, 95:5-20, 99:20-25, 100:1-25, 101:1-16.)
When asked why the
plaintiffs decided to carpet the second floor – the expense of which they submitted
to State Farm – the plaintiffs acknowledged that the carpeting was unrelated to the
loss. (Id., Ex. oo, at 95:25 – 96:1-8.) The plaintiffs also submitted a bill to State
Farm for $2,450 for the installation of padding and laminate flooring on the first
floor even though State Farm had already paid to have the hardwood floors
refinished; notably, the flooring work was undertaken by JJ Family Contracting,
which is a business operated by the plaintiffs. (Id., Ex. oo, nn, cc.) State Farm
balked at paying for the carpeting and laminate flooring after paying $3,128.83 to
refinish the hardwood floors that had incurred damage. (Id., Ex. cc.)
State Farm also worked with the plaintiffs to calculate the reimbursable
depreciation that was recoverable upon proof of repairs, which the policy provided
The insurance policy specifically provides that “[State Farm] will pay the cost to
repair or replace with similar construction and for the same use on the premises
shown in the Declarations, the damaged part of the property covered under
SECTION I COVERAGES, COVERAGE A – DWELLING.” (Doc. 55, Ex. B, at
11.)
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2
for. (Id., Ex. B, at 11 Section I – Loss Settlement, Coverage A – Dwelling.) On
June 28, 2014, the plaintiffs met with State Farm’s claims adjuster, Scott Fleming,
to discuss any outstanding issues and payments. (Id., ex. cc.) The parties came to
an agreement following that meeting, which was confirmed by letter dated July 9,
2014, and the payment of $18,149.28 in recoverable depreciation and additional
costs for damage to the home. (Id.)
The same letter provided a summary of loss detailing the coverages and
payments for damages to the home under Coverage A of the policy. The total paid
for damage to the dwelling was $60,452.02, which included an initial payment of
$39,293.18; a supplemental payment for wall damage of $2,009.56; and a final
payment of reimbursable depreciation of $18,149.28. (Id., Exs. cc, dd.)
The policy also provided coverage for losses to the plaintiff’s personal
property damaged in the fire under Coverage B. The plaintiffs’ public adjuster
provided State Farm with a contents estimate/list on October 16, 2013, and claimed
$70,009.98 for listed items that were damaged. (Id., Ex. X, at SF1174-1183.) This
amount was later increased by $2,326.70. (Id., ex. jj.) As part of the adjustment of
this claim, State Farm asked Re-Builders Plus to provide an estimate for the listed
items, and asked Dial Electronics to provide an estimate for the cost to clean the
electronics listed. In addition, CRDN was retained to evaluate and estimate the
costs for cleaning the clothing on the second floor of the home. (Id., Ex. J, Ex. C
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at SF0040-41.) Numerous items in Re-Builders Plus’ list were found to be no
longer salvageable, and State Farm paid the plaintiffs $20,549.97 in the undisputed
portion of the contents claim on January 14, 2014 – meaning items that State Farm
and the plaintiffs agreed needed to be replaced. (Id., Exs. I, ii, and gg.) Other
items were determined to be salvageable or restorable, and State Farm agreed to
pay only the amounts necessary to have these items restored, cleaned or otherwise
salvaged unless the plaintiffs provided information sufficient to dispute that
conclusion. (Id., Ex. ff.) Still other items, including furniture, art, and a rifle,
required further information from the plaintiffs before payment could be
considered. (Id.) According to State Farm, the insurer made a number of attempts
to resolve the contents claim with the public adjuster, but the parties could not
come to an agreement. Thereafter, the plaintiffs worked directly with State Farm –
even after the lawsuit had been filed – to continue negotiating payment for
personal items, and State Farm made an additional payment on July 9, 2014,
bringing the total paid under the Contents coverage to $35,045.51, with available
recoverable depreciation of $16,542.93. (Id., Exs. dd, hh.)
The plaintiffs have also brought claims under Coverage C, for alternate
living expenses (ALE). In the complaint, the plaintiffs complain about the service
provided by ALE Solutions, including the fact that no replacement home in the
Bloomsburg area was located and the plaintiffs found their own accommodations
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in Berwick, Pennsylvania, approximately 25 miles away. (Compl., ¶¶ 19-20.)
According to State Farm, relying on online mapping software, the three-bedroom
home that the plaintiffs elected to rent was actually located 12 miles from their
house in Bloomsburg, and the plaintiffs acknowledged that there was very little
housing stock available nearby for short-term rental. (Doc. 55, Ex. I, Hoffman
Dep. at 130:11-25, 131:1-16.)
Ms. Hoffman also acknowledged that ALE
Solutions worked with her to find available housing while her family was in a
hotel. (Id., at 117:3-16, 130;24-25, 131:1-15.) The plaintiffs also conceded that
arrangements made to rent a closer home fell through, not because of fault with
ALE Solutions, but because an issue arose with the current lessees. (Id., at 131132.) When the plaintiffs were eventually able to move into the rental home in
Berwick, it is conceded that ALE Solutions handled the arrangements for this
move, including negotiating the lease. (Id., at 118-119.) According to State Farm,
and apparently undisputed by the plaintiffs, State Farm has paid for all housing
expenses, gas expenses, utility bills, moving charges, rental furniture bills, and
other expenses relating to the ALE stemming from the fire loss. (Def. SMF ¶ 118.)
Notwithstanding this evidence, the plaintiffs initiated this lawsuit claiming
that State Farm’s claims handling was egregiously lacking in professionalism and
badly mishandled, and that State Farm breached its contractual duties by
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shortchanging the plaintiffs for a number of expenses. Review of the record
reveals a lack of evidentiary support for this assertion.
First, the plaintiffs have alleged that State Farm breached its duties under
Coverage A, for the home itself, by failing to pay $3,009.56, but it is unclear how
the plaintiffs came up with this figure. Ms. Hoffman, in her deposition, testified
that the figure was determined by comparing the adjustment that State Farm came
up with against the amount that State Farm paid; but Ms. Hoffman conceded that
she did not know whether the amount included depreciation and the plaintiffs’ own
deductible.
(Id., Ex. I, at 133-34.)
State Farm has provided documentation
showing that the calculated replacement cost of the dwelling was $60.452.02, with
a paid amount of $59,452.02, less a $1,000 deductible. (Id. at ¶122, Exs. C, Y, ee.,
cc.)
The plaintiffs’ claim is further confusing in that it was purportedly
supplemented by information from counsel that included a statement of claimed
building damages dated July 2, 2014, which stated that the plaintiffs had provided
receipts documenting damages under Coverage A totaling $62,684.37. (Def. SMF
¶¶ 123-124, Ex. nn.) The letter also erroneously claims that the plaintiffs had only
received $41,302.74 in payment from State Farm, which is contradicted by the
documentary evidence that State Farm has provided, and is also materially
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different from the amount of additional loss under Coverage A that the plaintiffs
claim in the complaint.
Of particular note here is the fact that the amounts claimed by the plaintiffs
under Coverage A -- $62,684.37 – includes $6,500 for an invoice from Charles
Franklin of MFF Electric that new undisputed evidence obtained during this
litigation shows had nothing to do with work done on the plaintiffs’ home, but
likely related to work performed on another house where the plaintiffs’ business, JJ
Family Contracting, was doing work. (Id., Ex. rr, at 10-11.) The record also
reveals that numerous claimed losses were later conceded by the plaintiffs to be not
related to the fire, which when taken away from the amount that State Farm
actually paid under Coverage A reveal that State Farm paid more than the
plaintiffs’ legitimately claimed in losses to the dwelling. (Def. SMF ¶ 128.)
The complaint also makes a claim for $16,542.93 for losses to contents of
the home under Coverage B. Yet, during her deposition, Ms. Hoffman testified
that she had “no idea” how she came up with that amount. It now appears that the
plaintiffs were seeking recovery of certain depreciation to the contents, although
the evidence on this score is somewhat unclear. What is clear is that under the
terms of the policy, in order to recover for claimed depreciation the plaintiffs were
required to repair or replace personal items and provide proof of the repairs or
replacement to State Farm. (Id., Ex. B, at 12.) As noted above, many of the items
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claimed had been determined by State Farm to be capable of cleaning or repair –
something that was communicated to the plaintiffs in February, 2015, when it was
explained that no additional payments could be made unless and until the plaintiffs
provided further information. (Id., Ex. pp.) State Farm has represented, and it
does not appear disputed, that the plaintiffs did not provide this further
documentation, and Ms. Hoffman testified during her deposition that all receipts
related to the loss had been submitted to State Farm. (Id., Ex. I, Hoffman Dep. at
115-116.) During that deposition, State Farm’s counsel asked Ms. Hoffman to
submit anything else that she might have within two weeks so that it could be
considered, and Ms. Hoffman said that she would do so. (Id.) Nevertheless, Ms.
Hoffman did not furnish State Farm with any additional information for several
months, until approximately one week before State Farm filed the instant motion,
when the plaintiffs’ counsel sent State Farm a letter – well after discovery in this
case had closed, and after the two-year deadline for submitting receipts to prove
recoverable depreciation under the policy.3
Although State Farm has presented this information and evidence in defense
against the plaintiffs’ claims in this litigation, the insurer has nevertheless
represented that its claims representative will evaluate the belated submissions to
determine whether any further recovery beyond that already paid is available.
(Doc. 55, at 41 n.20.)
22
3
III.
STANDARD OF REVIEW
Rule 56(a) of the Federal Rules of Civil Procedure provides as
follows:
A party may move for summary judgment, identifying
each claim or defense – or the part of each claim or
defense – on which summary judgment is sought. 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.
The court should state on the record the reasons for
granting or denying the motion.
Fed. R. Civ. P. 56(a). For purposes of Rule 56, a fact is material if proof of its
existence of nonexistence might affect the outcome of the suit under the applicable
substantive law. Haybarger v. Laurence Cnty. Adult Prob. & Parole, 667 F.3d
408, 412 (3d Cir. 2012) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
248 (1986)). For an issue to be genuine, “all that is required is that sufficient
evidence supporting the claimed factual dispute be shown to require a jury or judge
to resolve the parties’ differing versions of the truth at trial.”
Id. (quoting
Anderson, 477 U.S. at 248-49).
Accordingly, in support of a motion for summary judgment, the moving
party must show that if the evidence of record were reduced to admissible evidence
in court, it would be insufficient to allow the non-moving party to carry its burden
of proof. See Celotex v. Catrett, 477 U.S. 317, 323 (1986). Provided the moving
23
party has satisfied this burden, “its opponent must do more than simply show that
there is some metaphysical doubt as to the material facts.” Scott v. Harris, 550
U.S. 372, 380 (2007). Instead, if the moving party has carried its burden, the nonmoving party must then respond by identifying specific facts, supported by
evidence, which show a genuine issue for trial, and may not rely upon the
allegations or denials of its pleadings. See Martin v. Godwin, 499 F.3d 290, 295
(3d Cir. 2007); see also Fed. R. Civ. P. 56 (c).
In adjudicating the motion, the court must view the evidence presented in the
light most favorable to the opposing party, Anderson, 477 U.S. at 255, and draw all
reasonable inferences in the light most favorable to the non-moving party, Big
Apple BMW, Inc. v. BMW of North America, Inc., 974 F.2d 1358, 1363 (3d Cir.
1992). Where the non-moving party’s evidence contradicts the movant’s, then the
non-movant’s must be taken as true. Id. Additionally, the court is not to decide
whether the evidence unquestionably favors one side or the other, or to make
credibility determinations, but instead must decide whether a fair-minded jury
could return a verdict for the plaintiff on the evidence presented. Id. at 252; see
also Big Apple BMW, 974 F.2d at 1363. In reaching this determination, the Third
Circuit has instructed that:
To raise a genuine issue of material fact . . . the opponent
need not match, item for item, each piece of evidence
proffered by the movant. In practical terms, if the
24
opponent has exceeded the “mere scintilla” threshold and
has offered a genuine issue of material fact, then the
court cannot credit the movant’s version of events against
the opponent, even if the quantity of the movant’s
evidence far outweighs that of its opponent. It thus
remains the province of the factfinder to ascertain the
believability and weight of the evidence.
Id. In contrast, “[w]here the record taken as a whole could not lead a rational trier
of fact to find for the non-moving party, there is no genuine issue for trial.”
Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)
(internal quotation marks omitted); NAACP v. North Hudson Reg’l Fire & Rescue,
665 F.3d 464, 476 (3d Cir. 2011).
IV.
DISCUSSION
As noted, the plaintiffs have brought two claims in this action, one for
breach of contract and one for bad faith. These claims are addressed separately
below.
A.
Breach of Contract
The plaintiffs claim that State Farm breached its contractual obligations
under the policy by failing to pay damages incurred to the dwelling, personal
property, and for alternate living arrangements while the home was remediated.
This claim does not maintain that State Farm failed to indemnify the plaintiffs;
instead, the plaintiffs apparently take issue only with the amount of monies that
State Farm has paid for their claimed losses. Yet, while the plaintiffs quarrel with
25
this reimbursement, in many instances they acknowledge that they have no idea
how they arrived at higher cost figures, admit that they sought reimbursements for
home improvements that were unrelated to the fire, and submit bills for payment
which simply, and undeniably, do not reflect work done on their home. The Court
finds that the plaintiffs have failed to come forward with sufficient evidence in
support of this narrow contract claim. The Court further finds that the undisputed
evidence that was timely submitted indicates both: (1) that the plaintiffs failed
adequately to support their claim for damages; and (2) strongly suggests that the
plaintiffs were, in fact, overpaid in at least one instance by improperly seeking
reimbursement for electrical work that the plaintiffs had contracted to be done on
another property.
Under Pennsylvania law, a plaintiff bringing a claim for breach of contract
must establish three elements to prevail: (1) the existence of a contract; (2) a
breach of a duty imposed by that contract; and (3) resultant damages. Pennsy
Supply Inc. v. American Ash Recycling Corp., 895 A.2d 595, 600 (Pa. Super. Ct.
2006). In general, a breach of contract claim will not be sustained where the
insurer has paid proceeds of the policy, since if the plaintiff has received
everything that was due under the policy, there can be no damages. Fitzpatrick v.
State Farm Ins. Companies, No. 09-1498, 2010 WL 2103954, *2 (W.D. Pa. May
25, 2010); Amitia v. Nationwide Mut. Ins. Co., No. 3:08cv335, 2009 WL 111578,
26
*3 (M.D. Pa. Jan. 15, 2009). Pennsylvania courts have, moreover, established a
general rule that “it is a necessary prerequisite . . . for the insured to show a claim
within the coverage provided by the policy.” Betz v. Erie Ins. Exchange, 957 A.2d
1244, 1256 (Pa. Super. Ct. 2008) (citing Miller v. Boston Ins. Co., 218 A.2d 275,
278 (Pa. 1966)).
At summary judgment, therefore, it is incumbent upon the
nonmovant-insured to point to evidence to support a claim for damages that is
owed under the policy. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475
U.S. 574, 587 (1986).
State Farm’s defense to the breach of contract claim is straightforward: the
insurer argues that there can be no claim for breach here because State Farm
indemnified the plaintiffs for all of the recoverable losses they incurred to their
home and personal property and the ancillary costs for replacement housing, and
because the plaintiffs have not come forward with any timely evidence to show
that the insurer failed to meet its obligation to indemnify for any loss claimed.
Indeed, State Farm points to evidence in the record that would show that the
insurer actually overpaid for losses claimed due to the fire, and appropriately
declined payment for claims for damages not directly caused by the fire or for
which the plaintiffs did not provide substantive support. In addition, State Farm
notes that the plaintiffs have belatedly sought recovery of amounts paid for a
27
security deposit on their temporary housing, despite the documented fact that it
was State Farm that made this payment in the first instance. (Doc. 62, Ex. A.)
At the outset, the Court is constrained to underscore that in response to the
defendants’ thorough moving papers, which carefully detail the insurer’s conduct,
calculations and payments made in the adjustment of this claim, the plaintiffs were
obligated to come forward with some evidence to support their claims that State
Farm breached its duty to indemnify. Simply put, they have not done so, but have
consistently obfuscated both their claimed damages and the support for those
damages. Instead, it appears that the plaintiffs maintain that if they assert –
however belatedly – that they are owed more, or that they take issue with the
insurer’s adjustment of the claim, they are automatically entitled to a jury trial on a
breach of contract claim. The plaintiffs are incorrect on this score, and their failure
to sustain their contract claim with sufficient evidentiary support is now fatal to
that claim. Moreover, their wholly belated efforts to thrust upon the defendants an
entirely new calculation of damages, after the close of discovery and immediately
prior to the defendant moving for summary judgment is simply unreasonable. The
shortcomings are highlighted in the plaintiffs’ brief where they seem to present an
entirely new calculation of damages, one that dramatically exceeds that sought in
the original complaint, and even the amount that was later demanded in July 2015
28
when counsel and the public adjuster came up with still a different figure, and one
that failed to account accurately for the amounts that State Farm had already paid.
There is no dispute that following its investigation into a suspicious fire,
State Farm agreed to indemnify the plaintiffs for their losses. State Farm has
presented evidence showing the timeline of its adjustment, its efforts to negotiate
with the plaintiffs and their representatives, the calculations for the damages, and
the reasons that State Farm gave for declining certain payments that the plaintiffs
sought, on the grounds that there was limited support for those claims, or because
they were otherwise not recoverable as direct losses from the fire. Other than to
demand that State Farm make further payments, the plaintiffs have offered no
credible evidence to support their evolving damages calculation. State Farm has
not only demonstrated the absence of evidence offered in support of many
categories of damages and the mathematical errors that the plaintiffs and their
adjuster have made in calculating their claims, but the insurer has also carefully
detailed instances where the plaintiffs have sought payments for work that was
performed by a subcontractor for work done on a different property, and where
they have sought reimbursement for home improvements such as windows and
flooring that were also not shown to be direct losses.
Indeed, the record is
undisputed that the plaintiffs are seeking recovery of amounts paid for carpeting
and laminate flooring that they agreed under oath was not necessitated by the fire,
29
even after State Farm had paid to remediate the flooring on the first floor that was
affected.
Review of the plaintiffs’ brief, moreover, reveals no citation to any evidence
of record in support of their claim for breach of contract; instead, the plaintiffs rely
on argument and bare assertions which are insufficient as a matter of law in
response to a properly supported motion for summary judgment.
Since the
plaintiffs’ breach of contract claim is limited to a dispute over the amounts that
were paid for damages directly related to the fire, they were obligated to come
forward with timely evidence that would at least create a disputed issue of material
fact with respect to State Farm’s claim adjustment in this case, and they have not
done so, and the evidence of record reveals not only that the plaintiffs have been
fully indemnified for their claim, but may in fact have been overpaid in some
instances.
B.
Bad Faith
The plaintiffs devote the majority of their argument to their bad faith claim,
where they have claimed that State Farm violated Pennsylvania’s bad faith statute,
42 Pa. Cons. Stat. Ann. § 8371. The plaintiffs alleged that State Farm’s bad faith
was evidenced by the insurer failing to act promptly on the plaintiffs’ claims,
conducting a slow and meandering investigation into the fire, failing to conduct a
reasonable investigation and make timely payment on the claim, and failing to
30
negotiate a reasonable settlement of the plaintiffs’ claims. The evidence shows
otherwise.
Under Pennsylvania law, “[i]n an action arising under an insurance policy, if
the court finds that the insurer has acted in bad faith toward the insured,” the court
can award the claimant interest, punitive damages, court costs and attorney fees.
42 Pa. Cons. Stat. Ann. § 8371. The Third Circuit has explained “bad faith” in this
context as follows:
“Bad faith” on part of insurer is any frivolous or
unfounded refusal to pay proceeds of a policy; it is not
necessary that such refusal be fraudulent. For purposes
of an action against an insurer for failure to pay a claim,
such conduct imports a dishonest purpose and means a
breach of a known duty (i.e., good faith and fair dealing),
through some motive of self-interest or ill will; mere
negligence or bad judgment is not bad faith.
Nw. Mut. Life Ins. Co. v. Babayan, 430 F.3d 121, 137 (3d Cir. 2005). Although an
insurer’s conduct need not be fraudulent to rise to the level of bad faith, “mere
negligence of bad judgment is not bad faith.” Id. (quoting Brown v. Progressive
Ins. Co., 860 A.2d 493, 501 (Pa. 2004). The insured bears the burden of showing
that “the insurer breached its duty of good faith through some motive of selfinterest or ill will.” Id. “To recover for bad faith, ‘a plaintiff must show by clear
and convincing evidence that the insurer (1) did not have a reasonable basis for
denying benefits under the policy and (2) knew or recklessly disregarded its lack of
a reasonable basis in denying the claim.’” Post v. St. Paul Travelers Ins. Co., 691
31
F.3d 500, 522 (3d Cir. 2012) (quoting Condio v. Erie Ins. Exch., 899 A.2d 1136,
1143 (Pa. Super. Ct. 2006)). The defendant can defeat a plaintiff’s claim by
demonstrating that it had a reasonable basis to deny the claim.
Id. at 523.
Furthermore, “[a]t the summary judgment stage, the insured’s burden in opposing a
summary judgment motion brought by the insurer is ‘commensurately high
because the court must view the evidence presented in light of the substantive
evidentiary burden at trial.” Babayan, 430 F.3d at 137 (quoting Kosierowski v.
Allstate Ins. Co., 51 F. Supp. 2d 583, 588 (E.D. Pa. 1999) (citing Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 255 (1986)); see also Verdetto v. State Farm
Fire and Cas. Co., 837 F. Supp. 2d 480, 484 (M.D. Pa. 2011) (“[I]n order to defeat
a motion for summary judgment, a plaintiff must show that a jury could find by
‘the stringent level of clear and convincing evidence’ that the insurer lacked a
reasonable basis for its handling of the claim and that it recklessly disregarded its
unreasonableness.”), aff’d 510 F. App’x 209 (3d Cir. 2013); McCabe v. State Farm
Mut. Auto. Ins. Co., 36 F. Supp. 2d 666, 669 (E.D. Pa. 1999).
It is not bad faith for an insurance company to “conduct a thorough
investigation into a questionable claim.” Babayan, 430 F.3d at 138. Accordingly,
courts applying Pennsylvania law have found that an insurer satisfies its burden by
“showing ‘a reasonable basis’ for investigating a claim, and is thus entitled to
judgment as a matter of law, where it demonstrates the existence of certain ‘red
32
flags’ which prompted it to further investigate an insured’s claim.” Verdetto, 837
F. Supp. 2d at 484 (quoting Brown v. Liberty Mut. Ins. Group, 2001 U.S. Dist.
LEXIS 781, *8-11, 2001 WL 87741, *3-4 (E.D. Pa. Jan. 30, 2001)).
In this case, the record amply supports State Farm’s defense that certain “red
flags” existed that justified it in undertaking an investigation into the cause of the
fire and the plaintiffs’ claims, including the fact that the insurance policy had been
purchased immediately prior to the fire and the determination by two fire experts
that it had been caused by arson. The record also reveals that, rather than wasting
time, State Farm began an investigation immediately, while at the same time
advancing money to the plaintiffs for immediate needs such as clothing and hotel
expenses. The record further shows that although State Farm promptly undertook
investigation into the fire’s cause, the plaintiffs contributed directly to the duration
of the investigation by delaying their examinations under oath, which State Farm
had requested, roughly two months earlier. During this investigation, State Farm
continued to pay the plaintiffs’ housing and living expenses, despite the ongoing
nature of the investigation and the possibility that at the end of that process
coverage would not be offered. Although the plaintiffs complain about having
spent some time at a Holiday Inn, Ms. Hoffman also acknowledged that this was
not due to any fault on State Farm’s behalf, but was due entirely to a lack of
housing options in the immediate area.
33
Contrary to the plaintiffs’ unsubstantiated claims that State Farm was
unresponsive, as discussed in the factual background to this memorandum State
Farm has attached correspondence and other documents to its appendix which
evidence that the insurer routinely and appropriately responded, and that attendant
delays in the initial investigation and ultimate adjustment of the claim were not
solely or even principally attributable to State Farm. Indeed, the evidence shows
that after State Farm concluded its investigation into the cause of the fire, which
itself was subject to some delay on the part of the plaintiffs, the insurer made an
initial payment on the claim within weeks and continued to make additional
payments as the plaintiffs provided documentation.
The plaintiffs have not
responded with any countervailing evidence to support their assertion that State
Farm’s conduct of the investigation was unreasonable, overlong, unjustified, or
undertaken for improper purpose. Instead, in response to the defendants’ motion,
the plaintiffs have offered little more than a narrative overview of the law of bad
faith in Pennsylvania. Their own allegations are insufficient to overcome the
defendants’ motion where they are unaccompanied by timely evidence that comes
close to meeting the high bar applicable in claims of bad faith, which requires clear
and convincing evidence that the insurer acted frivolously or was motivated by
self-interest or ill will in denying benefits. Terletsky v. Prudential Prop. & Cas.
Ins. Co., 649 A.2d 680, 688 (Pa. Super. Ct. 1994). The plaintiffs have not shown
34
that State Farm lacked a reasonable basis to deny benefits, or to undertake an
investigation into a claim that was marked by at least two red flags.
Indeed, the plaintiffs’ response relies on the evidence that the defendant
compiled and submitted in this case, and essentially invites the Court to wade into
that evidence in order to find some evidence that could rise to the level needed for
the plaintiffs to carry their burden on this claim. This invitation is antithetical to
good summary judgment practice, and the plaintiffs would do well to remember
that “'[j]udges are not like pigs, hunting for truffles buried in the record.’ Doeblers'
Pa. Hybrids, Inc. v. Doebler, 442 F.3d 812, 820 n.8 (3d Cir. 2006) (quoting United
States v. Dunkel, 927 F.2d 955, 956 (7th Cir. 1991)).” United States v. Dentsply
Int'l, Inc., No. 12-7199, 2016 WL 1403991, at *1 (E.D. Pa. Apr. 11, 2016)
Further, by adopting this approach, the plaintiffs do not effectively dispute the
defendants’ documented timeline with respect to the handling of the claim, and
they cannot rely upon unsubstantiated allegations in order to survive the
defendants’ motion on a claim upon which they bear the burden of proof by clear
and convincing evidence.
IV.
CONCLUSION
There is no dispute that in response to a basement fire that caused some
damage to the home, State Farm investigated the fire after becoming aware of
cause for suspicion regarding the cause of the fire. That investigation concluded
35
after several months, and was delayed in substantial part by the plaintiffs
themselves. After that investigation ended and coverage was offered, State Farm
ultimately paid the plaintiffs nearly $150,000 in benefits for damage to the
dwelling, for personal items, and for alternate living expenses. There remained
some dispute between the parties over the extent of coverage offered, but
ultimately the plaintiffs have undermined their claim by causing their damages
calculation to fluctuate wildly over time, and to remain unsupported by timely
evidence. Likewise, the plaintiffs have not offered sufficient evidence to support a
bad faith claim, particularly in light of the elevated standard of proof applicable to
that claim. Summary judgment is, therefore, warranted.4
An order consistent with this memorandum shall issue separately.
4
Having concluded that State Farm is entitled to summary judgment on both of
the claims in this case, the remaining pending motions in this case, including
motions to exclude late-filed evidence and motions in limine (Docs. 61, 63, 65, 67)
will be denied as moot.
36
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