SETO et al v. STATE FARM INSURANCE COMPANY
Filing
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MEMORANDUM OPINION AND ORDER granting 39 Motion in Limine to Preclude Evidence of Claim-Handling; granting in part and denying in part 41 Motion in Limine to Preclude Evidence of Additional Living Expenses; and granting 43 Motion in Limine to Preclude Evidence of Replacement Cost Damages.Signed by Judge Terrence F. McVerry on 05/21/2012. (bsc)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
HAROLD G. SETO and
ROSEMARY SETO,
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Plaintiffs,
v.
STATE FARM INSURANCE COMPANY,
Defendant.
2:10-cv-00505
MEMORANDUM OPINION AND ORDER OF COURT
In anticipation of trial, Defendant has filed three (3) Motions in Limine. The Motions
have been fully briefed and are ready for disposition. The Motions will be addressed seriatim.
Motion in Limine to Preclude Evidence of Claim-Handling (Document No. 39)
Pursuant to Fed. R. Evid. 401, 402, and 403, Defendant seeks to exclude evidence of
alleged bad faith, including its claim-handling, investigations and handling of coverage,
involving the two fires of undetermined cause that occurred in Plaintiffs’ home on December 24,
2008 and March 2, 2009.
On January 11, 2012, the Court granted Defendant’s Motion for Partial Summary ruling
that, as a matter of law, Plaintiffs had failed to demonstrate that there were genuine issues of
material fact that State Farm acted in bad faith. The only remaining issue for the fact-finder,
therefore, is whether Defendant breached the parties’ contract when it failed to pay additional
benefits under the policy.
The Court finds that evidence of Defendant’s handling of Plaintiffs’ claims is not
admissible because it is not relevant to determining whether Plaintiffs are entitled to additional
benefits under the terms of the Policy. Further, the Court finds that the probative value of any
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evidence of how Defendant handled Plaintiffs’ claim is substantially outweighed by its danger of
unfair prejudice, confusing the issues, misleading the jury, undue delay, wasting time, or
needlessly presenting cumulative evidence. See Fed.R.Evid. 403.
Accordingly, this Motion in Limine is GRANTED and any evidence of Defendant’s
alleged bad faith, including its claim-handling, investigations and handling of coverage,
involving the two fires of undetermined cause that occurred in Plaintiffs’ home on December 24,
2008 and March 2, 2009, will not be permitted.
Motion in Limine to Preclude Evidence of Additional Living Expenses (Document No. 41)
As part of their breach of contract claim, Plaintiffs are seeking Additional Living
Expenses (“ALE”) for the time period during which they resided in Florida - from April 2009 to
February 2010. Fact discovery closed in this case on November 30, 2010. To date, the only
documentation submitted to State Farm regarding these Florida living expenses are the first four
pages of a five-page lease, which does not contain the signature page, and copies of twelve (12)
deposit slips, which do not have any information which identifies the Plaintiffs as the payers of
the deposited amounts.
Defendant argues that because the Court stated in its Memorandum Opinion in which it
granting partial summary judgment on the bad faith claim that “Plaintiffs have simply failed to
produce sufficient documentation to support their claim for additional ALE benefits,” that
Plaintiffs should be precluded from introducing evidence of ALE at trial. Plaintiffs respond that
only their bad faith claim was dismissed as a matter of law and it remains for the jury to
determine whether Defendant has breached the parties’ contract for refusing to pay additional
ALE benefits.
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The sole issue before the Court at the summary judgment stage was whether Defendant
had acted in bad faith when it denied Plaintiffs’ claim for ALE benefits. The Court did not rule
as a matter of law that Plaintiffs’ had failed to produce sufficient documentation to support their
breach of contract claim. With that said, however, Plaintiffs will not be allowed to introduce
any documentary evidence at trial to establish alleged additional living expenses which has not
heretofore been produced to Defendant. Accordingly, this Motion in Limine is GRANTED IN
PART and DENIED IN PART.
Motion in Limine to Preclude Evidence of Replacement Cost Damages (Document No. 43)
As part of their breach of contract claim, Plaintiffs contend that they are owed
“Replacement Cost” damages. The Loss Settlement provision of the Policy at issue specifically
provides that when a dwelling is damaged or destroyed, Defendant will pay replacement / repair
costs as follows:
(1) until actual repair or replacement is completed, we will pay only the
actual cash value at the time of the loss of the damaged part of the property, up to
the applicable limit of liability shown in the Declarations, not to exceed the cost
to repair or replace the damaged part of the property;
(2) when the repair or replacement is actually completed, we will pay the
covered additional amount you actually and necessarily spend to repair or replace
the damaged part of the property, or an amount up to the applicable limit of
liability shown in the Declarations, which is less;
(3) to receive any additional payments on a replacement cost basis, you must
complete the actual repair or replacement of the damaged part of the property
within two years after the date of loss, and notify us within 30 days after the work
has been completed; and
(4) we will not pay for increased costs resulting from enforcement of any
ordinance or law regulating the construction, repair or demolition of a building or
other structure, except as provided under Option OL - Building Ordinance or Law
Coverage.
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Homeowners Policy, Section I - Loss of Settlement, Coverage A - Dwelling, 1.A1a (1) - (4)
(emphasis added). Defendant contends that Plaintiffs are precluded from seeking replacement /
repair costs under the clear terms of the policy because Plaintiffs have failed to replace, rebuild
or repair the subject dwelling. Defendant has paid to Plaintiffs total benefits of approximately
$384,000.00, which includes, inter alia, $190,980.00 for the estimated “actual cash value of the
dwelling.
Plaintiffs respond that only Paragraph a(1) of the Policy governs this issue as “Plaintiffs
have been unable to repair or replace their home because they still haven’t even received the
actual cash value for their home. This is because the parties disagree as to what the actual cash
value is. As a result, the Setos have been unable to enter into a contract with a builder to replace
/ repair their home.” Br. at 2. In support of their position, Plaintiffs rely upon Ferguson v.
Lakeland Mutual Insurance Company, 596 A.2d 883 (Pa. Super. 1991), a case in which the
Pennsylvania Superior Court struck down as void against public policy a provision which
required the insureds to advance the cost of replacement with no guarantee that they would be
reimbursed.
The Court finds, however, that the case sub judice is distinguishable from Ferguson for a
number of reasons. The insurer in Ferguson had denied liability; thus, the insured “could have
only received replacement value . . . after expending the replacement or repair funds and
obtaining a judicial determination concerning liability.” As the trial court in Rotell v. Erie Ins.
Group, 53 Pa.D. & C. 4th 533, 544 (Pa. Com. Pl. 2001), noted, for a plaintiff to prevail under
the Ferguson analysis, the following elements are necessary: “(1) insurer’s denial of liability;
(2) insureds’ “unsavory” choice of either accepting actual cash value or expending a large sum in
replacement costs without a guarantee of reimbursement; and (3) any payment of replacement
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value by insurer hinges on either expending funds or obtaining a judicial determination of
liability.”
In the instant case, Defendant has admitted liability and has paid Plaintiffs total benefits
of approximately $384,000.00, which includes $190,980.00 for the estimated “actual cash value”
of the dwelling; $162,700.00 for their personal property; and $30,425.00 for additional living
expenses. Defendant did not condition additional replacement cost payments upon receiving a
judicial determination of liability; rather it conditioned the benefits upon Plaintiffs’ compliance
with the stated Policy procedures. Thus, unlike the claimants in Ferguson, Plaintiffs’
replacement benefits were guaranteed to the extent that Plaintiffs demonstrated that they had
replaced or repaired the damaged property.
The Policy at issue clearly states that if the homeowners choose not to replace or repair
their destroyed / damaged dwelling, then they are limited to recovering “Actual Case Value” of
the subject dwelling, i.e., the “Replacement Cost Value,” less depreciation. In this case,
Plaintiffs admit that they did not replace, rebuild, or repair the subject dwelling. Rather, it is
undisputed that after receiving the $190,000.00 from Defendant, Plaintiffs razed the dwelling
and sold the property for $15,000.00. Accordingly, the Court finds that Plaintiffs are not entitled
to “Replacement Costs” under the clear and unambiguous terms of the Policy.
This Motion in Limine is therefore GRANTED and Plaintiffs are precluded from
asserting a claim for Replacement Costs at the time of trial and, as a result, are also precluded
from proffering evidence of Replacement Cost damages at trial.
So ORDERED this 21st day of May, 2012.
BY THE COURT:
s/ Terrence F. McVerry
United States District Court Judge
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cc:
Charles C. Gentile, Esquire
Gentile Law Offices
Email: charles.c.gentile@gmail.com
Noah Geary, Esquire
Email: noahgeary@ngearylawoffices.net
Daniel L. Rivetti, Esquire
Robb Leonard Mulvihill LLP
Email: drivetti@rlmlawfirm.com
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