American National Property and Casualty Company v. Stutte et al

Filing 28

MEMORANDUM in Support of Motion re 27 MOTION for Partial Summary Judgment filed by American National Property and Casualty Company. (Attachments: # 1 Exhibit 1, # 2 Exhibit 2, # 3 Exhibit 3, # 4 Exhibit 4, # 5 Exhibit 5, # 6 Exhibit 6, # 7 Exhibit 7, # 8 Exhibit 8, # 9 Exhibit 9, # 10 Exhibit 10, # 11 Exhibit 11, # 12 Exhibit 12, # 13 Exhibit 13, # 14 Exhibit 14)(Kinsman, N)

02802-71561 (RER)

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TENNESSEE
AT KNOXVILLE

AMERICAN NATIONAL PROPERTY
AND CASUALTY COMPANY,
Plaintiff, Counterclaim-Defendant,
V.
CAROL ANN STUTTE; LAURA JEAN
STUTTE,
Defendants, Counterclaim- Plaintiffs,
and
CHASE HOME FINANCE, LLC,
Defendant.

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CIVIL ACTION
NO. 3:11-CV-219
JURY TRIAL DEMANDED

ANPAC’S MEMORANDUM IN SUPPORT OF MOTION FOR
PARTIAL SUMMARY JUDGMENT REGARDING PLAINTIFFS’ CLAIMS OF BAD
FAITH AND VIOLATION OF THE TENNESSEE CONSUMER PROTECTION ACT

Comes now American National Property and Casualty Company (”ANPAC”), by and
through counsel, pursuant to Federal Rule of Civil Procedure 56 and in support of its Motion
for Partial Summary Judgment regarding Carol Ann Stutte and Laura Jean Stutte’s claims for
the statutory bad-faith penalty and violation of the Tennessee Consumer Protection Act, would
state and show unto this Court as follows.
I.

BACKGROUND AND FACTS

This is an insurance case. On September 4, 2010, the insured premises located at
2715 Highway 360, Vonore, Tennessee 37885 and owned by Carol Anne Stutte and Laura

02802-71561 (RER)

Jean Stutte was destroyed by fire. Monroe County Sheriff’s Office Incident Report,
attached as Exhibit 1. The Citico Volunteer Fire Department responded to the fire,
receiving notification of the fire at 8:27 p.m. Young Report, p. 11, attached as Exhibit 2.
According to responding fire personnel, the fire was intense and involved multiple
explosions. Id. Someone had spray painted the word “QUEERS” on the garage. Carol
Stutte EUO, p. 45, attached as Exhibit 3.; Laura Stutte EUO, p. 90, attached as Exhibit 4.
The Stuttes claim this was a “hate crime” directed against them and in their initial report to
ANPAC, the loss was described in this general manner.1 As a result of the fire, the Stuttes
submitted a fire insurance claim to ANPAC requesting $206,000.00 for the dwelling,
$69,133.31 for destroyed personal property, and $1,142.15 for damage to other structures.
Sworn Statement in Proof of Loss, attached as Exhibit 5. In addition, the Stuttes have
claimed additional living expenses under the policy. Answer and Counterclaim, filed by the
Stuttes, Document 20.
The Stuttes blame neighbor Janice Millsaps for the fire and have filed suit against
her. Carol Stutte EUO, p. 22, 35-36, 39; Laura Stutte EUO, p. 63-64; Complaint and
Answer in Stutte v. Millsaps case, attached as collective Exhibit 6. The Stuttes claim that
before the fire, Millsaps refused to return a mis-delivered UPS package to them, bragged
about poisoning their dog, often entered their property uninvited, and even recently in
August of 2010, threatened to burn the Stuttes’ house down. Carol Stutte EUO, p. 29-33,
36, 78-79; Laura Stutte EUO, p. 73-80.
Upon being notified of the fire, ANPAC launched an extensive and thorough
investigation and began to handle the insurance claim.

Affidavit of Stacey Jennings;

1 http://www.metropulse.com/news/2010/sep/22/lesbian-couple-plans-life-after-losing-vonore-home/

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Affidavit of Gary Noland. Within two days of being notified of the fire, ANPAC had explained
to the Stuttes the loss process, had mailed them claim reporting forms, had engaged an
independent adjuster to scope the loss, had engaged a company called Bright Claims to
help the Stuttes prepare their personal property inventory forms, and begun the process of
obtaining temporary housing for the Stuttes. Affidavit of Stacey Jennings, ¶6; Laura Stutte
EUO, p. 83. ANPAC located and paid for temporary housing for the Stuttes. Laura Stutte
EUO, p. 13.
ANPAC also made the decision to hire and did hire an origin and cause expert, Gary
Young with EFI Global, to conduct an origin and cause investigation. Young Report. As
part of this investigation, Mr. Young examined the fire scene. Id. at p. 3-4. Mr. Young noted
evidence of an explosion at the residence and determined that the fire originated in the left
rear quadrant of the basement. Id. at p. 4-6. Mr. Young also observed signs that someone
had trailed an accelerant into the residence. Id. at p. 6-8.
While performing his debris examination and removal process, Mr. Young observed
faint odors of gasoline. Id. at p. 6-7. He also collected debris samples and sent the samples
to a laboratory, AK Analytical Services, Inc., for analysis by Dennis Akin. Id. at p. 8. A
report was sent to ANPAC from AK Analytical Services, Inc., indicating the presence of
ignitable liquids. AK Lab Report, attached as Exhibit 7; Young Report, p. 6, 8. As shown in
AK Analytical’s lab report, two of the debris samples contained evaporated gasoline. Id.
After ruling out other possible causes, Mr. Young opined that the fire was incendiary,
caused by the intentional application of a large amount of gasoline which was then ignited.
Id. at p. 7-8,11. The fire was also classified as incendiary by the Tennessee Bomb and
Arson Investigation Section, according to Special Agent Gary Elliott. Id. at p. 10.

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learn more about the facts and circumstances surrounding the loss, ANPAC requested that

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the Stuttes and Kimberly Holloway, also a resident of the insured premises, submit to
Examinations Under Oath, and they did so on December 21, 2010. The Stuttes reported
that at the time of the fire, they were in Nashville with Kimberly Holloway, and Lora Black
celebrating the fact that the Stuttes had been in the subject home for five years and had
completed remodeling it. Carol Stutte EUO, p. 6; Laura Stutte EUO, p. 94. While at the
Wildhorse Saloon in Nashville, Lora Black’s daughter called and told them that the house
was on fire. Carol Stutte EUO, p. 11; Laura Stutte EUO, p. 99-100. The group stayed at
the bar for a while, returned to the hotel, and then Carol Stutte decided to drive home later
that night. Carol Stutte EUO, p. 13-14. During her Examination Under Oath, Carol Stutte
described the problems she had encountered with Janice Millsaps, who she suspects of
setting the fire. Carol Stutte EUO, 29-33, 36.
The house was listed for sale at the time of the fire because the Stuttes allegedly
wanted to get away from Janice Millsaps. Carol Stutte EUO, p. 40-41. Witness Lora Black,
who allegedly accompanied the Stuttes to Nashville, stated that the Stutte house was going
to be shown by a realtor two or three times that weekend while the group was away in
Nashville. Affidavit of Gary Noland, ¶26. For this reason, they allegedly moved the vehicles
away from the house for aesthetics, reasoning that the house would look better to potential
buyers if the cars were parked away from the house. Id.
The Stuttes had moved belongings out of the house before the fire, including books,
tools, landscaping supplies, office supplies, family photos, and furniture. Carol Stutte EUO,
p. 51-53, 63. The removed items were taken to another house owned by the Stuttes,
located at 216 Depot Street, and to a storage unit. Id. at p. 53-55. Carol Stutte stated that
any gasoline containers on the property were empty before the fire and that there were no
other flammable liquids around. Carol Stutte EUO, p. 75-78.

02802-71561 (RER)

Kimberly Holloway is the adult daughter of Carol Stutte and was living with the
Stuttes at the time of the fire. Holloway was never involved with and never had any trouble
with neighbor Janice Millsaps, nor did she observe any threats being made against the
Stuttes by Janie Millsaps. Holloway EUO, p. 9-10, attached as Exhibit 8. Holloway reported
she went to Nashville with Laura and Carol Stutte and Lora Black. Id. at p. 16. While at the
Wildhorse Saloon, she received a call from one of Lora Black’s children who had called to
tell them about the fire. Id. The group stayed at the bar for approximately an hour and a
half and then went back to their hotel. Id. at p. 22. The group then remained at the hotel for
another two hours when Carol Stutte decided to drive home alone. Id. at 22-23. The next
day, Holloway, Laura Stutte, and Lora Black got a rental car, continued to explore
Nashville, and eventually drove home. Id. at 24-25.
ANPAC also interviewed several witnesses, including Eddie Hammondtree, Larry
Bookout, Carl Self, Pam Self, Catherine Daughtery, Gerald Daughtery, Jack Welch, Jade
Black, Lora Black, Jade Black, Kimberly Holloway, Janice Millsaps, Realtor Dan Watson,
Agent Eric Kurtz, Special Agent Gary Elliott with the Tennessee Bomb and Arson
Investigation Section, and Postmaster Mark Smith. Affidavit of Gary Noland, ¶ 9, 11, 14,
18, 20, 25, 29, 40, 44, 53, 61.
Witnesses Larry Bookout and Eddie Hammondtree had been fishing near the Stutte
house on the day of the fire. Their attention was drawn to the house when they heard a
large explosion, so they went to the house to make sure no one was inside or injured.
Affidavit of Gary Noland, ¶10. Larry Bookout stated that after he heard the explosion, he
smelled what appeared to be an odor of kerosene. Affidavit of Gary Noland, ¶12. Neither
man recalls anyone coming or going from the Stutte driveway on the day of the fire.
Affidavit of Gary Noland, ¶13. Witness Carl Self said that after he heard an explosion, he

02802-71561 (RER)

went to the house to make sure no one was inside. Affidavit of Gary Noland, ¶15. Carl Self
was able to see into the house due to the light provided by the flames. Affidavit of Gary
Noland, ¶17. He stated that he could see into the kitchen, sunroom, front bedroom, and
back bedroom, and that he did not see any furniture or pictures on the wall. Affidavit of
Gary Noland, ¶17.
Janice Millsaps has denied the Stuttes’ accusations. Affidavit of Gary Noland,
¶30.After being accused of starting the fire, Janice Millsaps voluntarily underwent and
passed a polygraph test. Affidavit of Gary Noland, ¶31. In addition, Monroe County
Detective Travis Jones examined Janice Millsaps’ fingers after the fire and found no
evidence of paint as would have been present if she had spray painted the word “QUEERS”
on the Stuttes’ garage on the night of the fire. Affidavit of Gary Noland, ¶47, 65. Notably,
other neighbors do not support the Stuttes’ characterization of Janice Millsaps. Affidavit of
Gary Noland, ¶48-55. After interviewing Janice Millsaps, Special Agent Elliott with the
Tennessee Bomb and Arson Department did not think that Ms. Millsaps had anything to do
with the fire. Affidavit of Gary Noland, ¶45.
During its investigation, ANPAC discovered what it reasonably perceived to be
inconsistencies in the Stuttes’ description of where they were and what they were doing on
the night of the fire. For example, although there were allegedly only four people
celebrating in Nashville that night, the receipt provided from the Wildhorse Saloon shows
that there were five (5) guests and that the ticket for (2) two sandwiches was paid for with
Lora Black’s credit card. Holloway EUO, p. 21; Carol Stutte EUO, p. 9; Laura Stutte EUO,
p. 103-104; Wildhorse Saloon Receipt, attached as Exhibit 9. While Carol Stutte later
decided to drive back to Vonore, it is puzzling why, upon learning that their home was on
fire, the Stuttes continued drinking at the Wildhorse Saloon and then later continued

02802-71561 (RER)

drinking at their hotel room in Nashville rather than return to Vonore immediately. Laura
Stutte EUO, p. 106. Lora Black, who accompanied the Stuttes to Nashville, reported that
the rental car company did not open the next day until the afternoon, so the remainder of
the group could not return home any sooner than they did. Affidavit of Gary Noland, ¶28.
However, National Car Rental represented that it opened for business at 6:00 a.m. the day
after the fire September 5, 2010. Affidavit of Gary Noland, ¶63. Also, while Lora Black
stated that the vehicles remaining at the Stutte property were moved for aesthetic purposes
since the house was going to be shown by a realtor two or three times the weekend of the
fire, Realtor Dan Watson told ANPAC that the house was not, in fact, scheduled to be
shown on the weekend of the fire. Affidavit of Gary Noland, ¶62.
Cell phone records from the Stuttes were also examined by a forensic expert, Kevin
Levy with TKR Technologies. Levy Forensic Report, dated May 3, 2011, attached as
Exhibit 10. Mr. Levy’s analysis of the cell tower records indicated that Carol Stutte was in
an area northeast of Vonore, towards Knoxville, Tennessee during the time period of
midnight to 2:00 a.m. on September 5, 2010. Id. In addition, Mr. Levy’s analysis of the cell
tower records indicated that Laura Stutte was in the Vonore area at approximately 3:00
a.m. on September 5, 2010, even though Laura Stutte claimed that she stayed in Nashville
and did not return to Vonore until the afternoon of September 5, 2010. Levy Forensic
Report; Laura Stutte EUO, p. 113. Further, Mr. Levy’s analysis indicated that there was no
conclusive evidence of travel to Nashville by either of the Stuttes and that the records
indicated northerly or northeast travel away from the direction of reported travel to
Nashville. Levy Forensic Report.
After performing its investigation, ANPAC made the decision to deny the fire loss
claim. The Stuttes’ insurance claim was denied by letter dated May 12, 2011. Denial Letter,

02802-71561 (RER)

attached as Exhibit 11. Before the insurance claim was denied, ANPAC paid $2,847.00 on
or about September 20, 2010 for temporary housing from September 15, 2010 through
October 15, 2010. Affidavit of Stacey Jennings, ¶7. ANPAC further paid $610.17 directly to
the Stuttes on February 11, 2011 for gas, water and sewer for the time period of October
19, 2010 through January 26, 2011. Affidavit of Stacey Jennings, ¶8. ANPAC further paid
$3,500.00 directly to the Stuttes on April 15, 2011 for a pet deposit, security deposit and
rent from November 1, 2010 through January 19, 2011. Affidavit of Stacey Jennings, ¶9.
The present lawsuit originated on May 13, 2011 when American National Property
and Casualty Company filed a Complaint for Declaratory Judgment against Carol Anne
Stutte, Laura Jean Stutte, and Chase Home Finance, LLC, seeking a judgment that the
policy is void and does not provide coverage for the September 4, 2010 fire loss. In its
Complaint, ANPAC asserted the defense or arson as well as the intentional act exclusion
and the concealment of fraud provision contained in the policy. In response to the
Complaint for Declaratory Judgment, the Stuttes counterclaimed against ANPAC, alleging
breach of contract, violation of the Tennessee Consumer Protection Act, and statutory bad
faith.
II. LAW AND ARGUMENT
A.

The Stuttes’ Claim for Statutory Bad Faith Fails as a Matter of Law.
Before an insured can recover under the bad faith penalty statute, “(1) the policy of

insurance must, by its terms, have become due and payable, (2) a formal demand for
payment must have been made, (3) the insured must have waited 60 days after making his
demand before filing suit . . . and, (4) the refusal to pay must not have been in good faith.”
Palmer v. Nationwide Mutual Fire Insurance Company, 723 S.W.2d 124, 126 (Tenn. Ct.
App. 1986). The Tennessee Supreme Court has stated that delay in settling a claim “does

02802-71561 (RER)

not constitute bad faith when there is a genuine dispute as to value, no conscious
indifference to the claim, and no proof that the insurer acted from ‘any improper motive.’”
Id. (citing Johnson v. Tennessee Farmers Mutual Ins. Co., 556 S.W.2d 750, 752 (Tenn.
1977).
An insurer has the right to assert the defenses available to it if made in good faith.
Id. “If an insurance company unsuccessfully asserts a defense and the defense was
made in good faith, the statute does not permit the imposing of the bad faith
penalty.” Id. (quoting Nelms v. Tennessee Farmers Mut. Ins. Co., 613 S.W.2d 481, 484
(Tenn. Ct. App. 1978) (Emphasis added).
In Palmer, the court of appeals reversed a jury’s imposition of the bad faith penalty.
Id. In that case, the plaintiffs suffered a fire loss to their home. The proof showed that on
the night of the fire, two separate fires occurred. Id. The fire chief testified that the second
fire had up to 14 separate points of origin. Id. at 127. The State Deputy Fire Marshall
testified that he investigated the premises and determined arson as the cause of the
second fire. Id. Based upon this information, the insurer denied the claim. Id. Based upon
this proof, the court of appeals stated that “[t]he record is devoid of any proof which would
warrant a bad faith penalty, and the court was in error in affirming the jury award of the
penalty.” Id.
In Williamson v. Aetna Life Insurance Company, the District Court for the Western
District of Tennessee faced a similar issue on a defendant’s motion for summary judgment.
Williamson v. Aetna Life Insurance Company, 2005 WL 3087861 (W.D. Tenn. Nov. 17,
2005). In that case, as here, the plaintiff sought damages under both the Tennessee
Consumer Protection Act and the Bad Faith Penalty Statute. Id. at *1. Plaintiff claimed that
the defendant insurer acted in bad faith in requiring her to submit proof of her disability and

02802-71561 (RER)

thereafter terminating her benefits. Id. The plaintiffs provided the court a laundry list of
more than 180 claims alleged to have been filed over a five year period that were allegedly
wrongfully denied by the insurer. Id. at 5. The plaintiff additionally argued that the insurer
unreasonably requested proof of her disability on numerous occasions even after she had
previously provided the requested information. Id.
In granting the summary judgment motion as to the TCPA claim, the court noted
that “[e]rroneous denial of a claim…unaccompanied by deceit or other misleading
conduct, does not constitute deception or unfairness.” Id. at *6 (quoting, Hamer v.
Harris, 2002 WL 31469213, *1 (Tenn. Ct. App. Feb. 18, 2002)(Emphasis added)). The
court noted that the insurance plan at issue allowed the request of proof of disability status
on a reasonable basis. Id. The court granted the motion for summary judgment on the
basis that the plaintiffs could offer no evidence that the insurer acted in any deceptive or
unfair manner. Id.
Likewise, the court granted the insurer’s motion for summary judgment on Plaintiffs’
bad-faith statutory claim. Id. at *8. After noting the proof required to make out a claim
under the statute, the court stated that the insured bears the burden of proof with regard to
the four requirements. Id. at *7. The court additionally stated that “[a] penalty is not
appropriate when the insurer’s refusal to pay rests on legitimate and substantial
legal grounds.” Id. (quoting, Tyber v. Great Central Ins. Co., 572 F.2d 562, 564 (6th Cir.
1978) (Emphasis added).
In Williamson, the defendant insurer specifically based its summary judgment motion
on the fourth prong of required proof that states that the insurer’s “refusal to pay was not in
good faith.” Id. As with the plaintiffs’ TCPA claim, the court reviewed the applicable facts
of the case and noted that the plaintiffs were unable to offer evidence that the insurer acted

02802-71561 (RER)

in any manner which could be considered bad faith. Id. at *8. Specifically, the court noted
that the insurer acted reasonably in requesting proof of disability status as the plaintiff’s
living arrangements, school status and location of residence changed from the first of such
requests to the request complained of by plaintiffs. Id. The court found that the insurer’s
reliance on those facts provided a reasonable basis for requesting proof of her status as
fully disabled. Id. Further, the court noted that the plaintiffs provided no basis for the
assertion that the insurer denied various claims in bad faith. Id. at *7. In fact, the court
noted that the insurer provided evidence of its various bases for denial of those claims. Id.
Based upon these findings, the court held as a matter of law that the defendant insurer
did not act in bad faith under the statute, and therefore granted the defendant’s
motion for summary judgment Id. at *8 (Emphasis added).

See also Order Granting

Defendant’s Motion for Partial Summary Judgment in Thompson v. State Farm Fire &
Casualty Company, 2:05-cv-02368-BBD-sta, W.D. Tenn, 9-17-2007), attached as Exhibit
14.
Likewise, in a fact set similar to the present case, in Zientek v. State Farm
International Services, Inc., the District Court for the Eastern District of Tennessee granted
a defendant insurer’s motion for summary judgment as to the plaintiff insured’s claim for
statutory bad-faith. Zientek v. State Farm International Services, Inc., 2006 WL 925063, *4
(E.D. Tenn. April 10, 2006). In making its determination, the court focused on the facts
presented. Id. at *2. Those facts revealed that the plaintiff was home alone at the time of
the fire, multiple points of origin were found, and the fire chief noted the ignition factor was
suspicious. Id. Further, the insurer hired a cause and origin expert to investigate the fire.
Id. The expert determined that the fire was likely caused by an accelerant and ignited by a
“human hand.” Id. at *3. The court first quoted the above mentioned law related to the

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required elements to prove entitlement to the statutory bad faith penalty. Id. The court
then stated that “[t]he bad faith penalty is not recoverable in every refusal of an
insurance company to pay a loss. . . . Id. at *4 (citation omitted) (Emphasis added).
Further, the court noted that an insurer has the right to rely upon available defenses
(emphasis added) and refuse payment of a claim if such is based upon substantial legal
grounds. Id.
The court stated that “no genuine issue of material fact exists regarding Defendant’s
refusal to pay . . . . The refusal to pay the claim was in good faith reliance on Chief
Rosemond’s Fire Report and the findings of Rowland’s investigation [sic]. . . . Defendant
had the benefit of all this information when it informed Plaintiffs on December 2, 2004 there
was a question as to whether Defendant is obligated to pay under the policy.” Id. Lastly,
the court found the record devoid of any inference that the insurer acted in bad faith beyond
the mere allegation by the plaintiff that the defendant refused to pay for the loss. Id.
In the case presently before the Court, after the loss, ANPAC conducted an
extensive and thorough investigation of the Stuttes’ insurance claim. ANPAC also made the
decision to hire and did hire an origin and cause expert, Gary Young with EFI Global, to
conduct an origin and cause investigation. Young Report. As part of this investigation, Mr.
Young examined the fire scene. Id. at p. 3-4. Mr. Young noted evidence of an explosion at
the residence and determined that the fire originated in the left rear quadrant of the
basement. Id. at p. 4-6. Mr. Young also observed signs that someone had trailed an
accelerant into the residence. Id. at p. 6-8.
While performing his debris examination and removal process, Mr. Young observed
faint odors of gasoline. Id. at p. 6-7. He also collected debris samples and sent the samples
to a laboratory, AK Analytical Services, Inc., for analysis by Dennis Akin. Id. at p. 8. A

02802-71561 (RER)

report was sent to ANPAC from AK Analytical Services, Inc., indicating the presence of
ignitable liquids. AK Lab Report; Young Report, p. 6, 8. As shown in AK Analytical’s lab
report, two of the debris samples contained evaporated gasoline. Id. After ruling out other
possible causes, Mr. Young opined that the fire was incendiary, caused by the intentional
application of a large amount of gasoline which was then ignited. Id. at p. 7-8, 11. The fire
was also classified as incendiary by the Tennessee State Bomb and Arson Investigation
Section, according to Special Agent, Gary Elliott. Id. at p. 10.
ANPAC also interviewed numerous witnesses (as mentioned above) during its
investigation. ANPAC also requested that the Stuttes and Kimberly Holloway submit to
Examinations Under Oath, and the Stuttes did so on December 21, 2010. Based on its
investigation, ANPAC denied the Stuttes’ insurance claim by letter dated May 12, 2011.
Denial Letter.
At the time of the insurance denial, ANPAC had or knew of at least the following
information:
(1)

An opinion from an experienced and reputable origin and cause expert that
the fire was incendiary. Young Report.
This is one of the required elements of arson in Tennessee.

(2)

An opinion from an experienced and reputable forensic scientist that samples
of debris collected from the fire scene contained ignitable liquids, namely
gasoline. AK Lab Report from Dennis Akin.
This supports the conclusion reached by the origin and cause expert that the
fire was incendiary, a required element of arson in Tennessee.

(3)

The Stuttes’ owned two pieces of real property, with three mortgages and
had a monthly car payment. In addition, they had credit cards, one of which
had a balance of approximately $7,000.00, another which had a balance of
approximately $2,000.00, and they owed Lumber Liquidators approximately
$4,000.00. The Stuttes also owed approximately $3,0000.00 to the IRS.
Laura Stutte EUO, p. 40-48, 51-53, 57.

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This is information that could be used to establish motive, one of the required
elements of arson in Tennessee.
(4)

The Stuttes’ home was for sale at the time of the fire. Laura Stutte EUO, p.
58; Affidavit of Gary Noland, ¶32, 61.
This is information that could be used to establish motive, one of the required
elements of arson in Tennessee.

(5)

At the time of the fire, the Stuttes wanted to move away from where they
lived and had wanted to sell the house for some time. Holloway EUO, p. 2728-29; Laura Stutte EUO, p. 62.
This is information that could be used to establish motive, one of the required
elements of arson in Tennessee.

(6)

A forensic report prepared by Kevin Levy analyzing the cell phone records of
the Stuttes did not support the assertions made by the Stuttes with respect to
their whereabouts on the day of the fire and the day after the fire. Levy
Forensic Report, dated May 3, 2011. The analysis did not indicate that the
Stuttes were in Nashville, at the time of the fire, as they reported.
This is information that could be used to establish opportunity, one of the
required elements of arson in Tennessee.

(7)

Only Laura Stutte, Carol Stutte, and Kimberly Holloway had keys to the
property. Laura Stutte EUO, p. 68.
This is information that could be used to establish opportunity, one of the
required elements of arson in Tennessee.

(8)

No one reported hearing the Stuttes’ dogs barking on the night of the fire,
despite the fact that the Stuttes have described the dogs as their “alarm
system.” Carol Stutte EUO, p. 60-61; Laura Stutte EUO, p. 108; Affidavit of
Gary Noland, ¶58.
This is information that could be used to establish opportunity, one of the
required elements of arson in Tennessee.

(9)

Recently before the fire, the Stuttes had removed important papers from the
property, including their insurance policy, titles to vehicles, tax returns, real
estate contract, living wills, divorce papers, family photos, clothing, guns,
furniture and other items. Laura Stutte EUO, p. 60-61, 85-86, 109-110.
Unusual.

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(10)

In at least four rooms of the home, there were no wall hangings or
furnishings. Affidavit of Gary Noland, ¶17.
Unusual.

(11)

A large amount of furniture was removed from the house during the two
weeks before the fire. Affidavit of Gary Noland, ¶21-22.
Unusual.

(12)

Before the fire, the Stuttes changed their mailing address at the post office
and electric company. Carol Stutte EUO, p. 83-84; Laura Stutte EUO, p. 8890; Affidavit of Gary Noland, ¶40-41.
Unusual

(13)

Shortly before the fire, the Stuttes increased their insurance coverage on the
house and the contents. Laura Stutte EUO, p. 80; Affidavit of Gary Noland,
¶43.
Unusual

(14)

Lora Black, who allegedly accompanied the Stuttes to Nashville, stated that
the vehicles remaining at the Stutte property were moved for aesthetic
purposes because the house was going to be shown by a realtor two or three
times the weekend of the fire. However, Realtor Dan Watson told ANPAC
that the house was not, in fact, scheduled to be shown on the weekend of the
fire. Affidavit of Gary Noland, ¶26,62.
Unusual

(15)

Lora Black, who accompanied the Stuttes to Nashville, reported that the
rental car company did not open the day after the fire until the afternoon, so
the remainder of the group could not return home any sooner than they did.
Affidavit of Gary Noland, ¶28. However, National Car Rental represented that
it opened for business at 6:00 a.m. the day after the fire September 5, 2010.
Affidavit of Gary Noland, ¶63.
Unusual

(16)

There is credible evidence indicating that Janice Millsaps did not set the
subject fire. Affidavit of Gary Noland, ¶48-55. For example, Millsaps
voluntarily underwent and passed a polygraph test. Affidavit of Gary Noland,
¶31, 46. In addition, Monroe County Detective Travis Jones examined
Millsaps’ fingers after the fire and found no evidence of paint as would have
been present if she had spray painted the word “QUEERS” on the Stuttes’
garage on the night of the fire. Affidavit of Gary Noland, ¶47, 65.

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This is evidence that tends to rule out Janice Millsaps as the potential
suspect for setting the subject fire.
See also Statement of Undisputed Material Facts submitted in support of this motion by
ANPAC.
In addition, after the denial, ANPAC obtained additional information supporting its
denial of the Stuttes’ insurance claim. The handwriting used to paint the word “QUEERS”
on the side of the Stuttes’ garage and the handwriting painted on plywood and used to label
boxes located at their Stuttes’ 216 Depot Street house appears to be very similar and
appears to have been written by the same person. Photographs of Handwriting, attached
as Collective Exhibit 12. As a result, ANPAC retained a handwriting expert, Theresa F.
Dean, to analyze the handwriting used in both places. It is Ms. Dean’s opinion, based on a
reasonable degree of certainty, that the person who spray painted the word “QUEERS” on
the Stuttes’ garage was probably the same person who authored the words spray painted
on plywood at the Stuttes’ 216 Depot Street House. June 6, 2011 Letter from Theresa F.
Dean, attached as Exhibit 13. This opinion suggests that it was one of the Stuttes who
wrote the word “QUEERS” on the Stuttes’ garage and supports the opportunity element of
the arson defense.
ANPAC also conducted follow-up witness interviews after the denial, including
interviews Detective Travis Jones, Tommy Self, and Rick Harris. Affidavit of Gary Noland,
¶64. The interviews of Tommy Self and Rick Harris indicate that it was the Stuttes, and
their friend Joe Neubert, who were aggressive and unfriendly to neighbors, as opposed to
the other way around. Affidavit of Gary Noland, ¶67-71. For example, Rick Harris and his
children, who were attempting to go fishing on public access land, were approached by an
angry and aggressive woman, either Carol or Laura Stutte, dressed in camouflage and

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carrying some type of assault rifle. Affidavit of Gary Noland, ¶68.
In order to prevail on a defense that an insured caused or procured the fire, the
insurer must show that (1) the loss was due to a fire of incendiary origin, (2) that the
insured had an opportunity to set the fire, and (3) that the insured had a motive to set the
fire. McReynolds v. Cherokee Insurance Co., 815 S.W.2d 208,211 (Tenn. Ct. App.
1991)(citing Harris v. Zurich Insurance Co., 527 F.2d 528 (8th Cir. 1975); McIntosh v. Eagle
Fire Co. of New York, 325 F.2d 99 (8th Cir. 1963); Ralls v. Northwestern National Insurance
Co., 238 F.Supp. 228 (E.D.Mo. 1965), see also, EGLI Holdings, Inc. v. Insurance Co. of
North America, 511 F.2d 957 (2d Cir. 1975); Boone v. Royal Indemnity Co., 460 F.2d 26
(10th Cir. 1972); accord 21B J. Appleman & J. Appleman, Insurance Law & Practice,
12682 (1980) (general rule is that "to establish a prima facie case of incendiarism for the
purpose of denying coverage under a fire policy, it is sufficient to show: arson by someone;
motive by the suspect; and unexplained circumstantial evidence implicating the suspect.").

An insurer does not have to prove that an insured was present at the time of the
ignition of the fire in order to prevail on the arson defense. Rather, an insurer may prove
arson by either direct or circumstantial evidence:
Arson cases typically are difficult to prove. It has been stated that it is rarely
"possible to prove the actual lighting of the match." . . . Therefore, "courts
have long recognized that [arson] can be established in civil cases by
circumstantial evidence." . . .
Arms v. State Farm Fire & Casualty Ins. Co., 731 F.2d 1245, 1249 (6th Cir. 1984) (applying
Tennessee law).
The defense of policy exclusion based on arson is an affirmative defense in
Tennessee as to which the insurer has the burden of proof. Herren v. Old Republic

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Insurance Co., 802 S.W.2d 628 (Tenn.Ct.App. 1990). The standard of review for the arson
defense is by a preponderance of the evidence, not beyond a reasonable doubt. Groves
v. Auto Owners Insurance Co., 459 F. Supp. 490 (E.D. Tenn. 1978); Hendrix v. Insurance
Co. of North America, 675 S.W2d 476 (Tenn. Ct. App. 1984); Livingston v. United States
Fire Insurance Co., 7 Tenn. App. 230 (1928)(Emphasis added).
In this case, ANPAC obviously would not be liable on a contract of insurance if the
Stuttes participated in or procured the burning of their house. Additionally, ANPAC is
obviously an insurance company who has an interest in deterring arson. ANPAC believed
at the time of denial that the subject fire was arson and had information indicating (1)
incendiary nature of the fire, (2) motive of the Stuttes to cause or procure the fire, and (3)
opportunity of the Stuttes to cause or procure the fire. Based on established principles of
law in Tennessee on arson, ANPAC’s beliefs at the time of denial were not only
reasonable, they were based on substantial legal grounds. See Zientek, 2006 WL 925063
at *4.
Nitpicking ANPAC’s investigation, creating immaterial disputes of fact and offering
explanations and arguments for the information considered by ANPAC at the time of denial
are not enough to avoid summary judgment on these particular issues. The only issue
before the Court presently is ANPAC’s good faith, not ANPAC’s perfection; and, for that
matter, the issue is not whether ANPAC was correct in its determination that the Stuttes
intentionally caused or procured the fire loss in question. The Stuttes are free to challenge
ANPAC’s evidence and argue at trial that ANPAC was ultimately wrong in its decision to
deny the claim. Likewise, the Stuttes are also free to argue at trial that the various expert
opinions rendered to ANPAC were erroneous or faulty. If a jury ultimately determines that
ANPAC has failed to prove one of the required elements of the defense of arson set forth

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above, it is in their exclusive province to do so and force ANPAC pay the Stuttes’ insurance
claim. However, the fact that a jury may ultimately disagree with ANPAC on any of the
elements of arson does not equate to bad faith conduct by ANPAC.
Being wrong in the end does not equate to bad faith. Hindsight is always 20/20. An
insurer has the right to assert the defenses available to it if made in good faith. Palmer v.
Nationwide Mutual Fire Insurance Company, 723 S.W.2d 124, 126 (Tenn. Ct. App. 1986).
“If an insurance company unsuccessfully asserts a defense and the defense was
made in good faith, the statute does not permit the imposing of the bad faith
penalty.” Id. (quoting Nelms v. Tennessee Farmers Mut. Ins. Co., 613 S.W.2d 481, 484
(Tenn. Ct. App. 1978) (Emphasis added). Based on the established law in Tennessee, the
arson defense, as well as the fraud and misrepresentation policy defense, is available to
ANPAC. The record and the undisputed facts establish that ANPAC has asserted the arson
defense and the subject policy provisions prohibiting recovery in good faith. Therefore, the
Stuttes’ claim for the bad faith penalty contained in Tennessee Code Annotated § 56-7-105
should be denied because it fails as a matter of law and ANPAC should be granted
summary judgment on this claim.
B.

The Stuttes’ Claim for Violation of the Tennessee Consumer Protection
Act Fails as a Matter of Law

As previously stated in ANPAC’s Memorandum of Law in Support of Motion to
Dismiss TCPA Allegations of Counterclaim, it is well settled in Tennessee that the mere
denial of an insurance claim, absent any deceptive, misleading, or unfair act, does not
violate the TCPA. In Fulton Bellows, LLC v. Federal Insurance Company, 662 F. Supp 2d
976 (E.D. Tenn. 2009), Judge R. Allan Edgar addressed this issue. In that case, the
insured sued Federal Insurance Company for breach of a Directors’ and Officers’ Liability

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insurance policy. At issue was whether the alleged wrongful discriminatory acts arose prior
to the inception date of the policy. Federal Insurance Company denied coverage and
refused to provide a defense for the insured in the underlying lawsuit because the evidence
indicated that the discriminatory acts arose prior to the inception date of the policy.
In its complaint, the insured alleged that Federal Insurance Company’s denial of
coverage constituted a violation of the TCPA. Judge Edgar dismissed the insured’s TCPA
claim because the insured could not demonstrate that Federal Insurance Company’s mere
denial of the claim was deceptive or unfair. In so ruling, Judge Edgar stated as follows:
Other state and federal court decisions have made clear that for the TCPA to
apply to the denial of insurance claims, the insured must allege that the
insurer violated the terms of the policy or acted unfairly in some other way.
See, e.g., Nautilus Ins. Co. v. In Crowd, Inc. No. 3:04-0083, 2005 U.S. Dist.
LEXIS 24567, 2005 WL 2671252 (M.D. Tenn. Oct. 19, 2005); Parkway
Assocs., LLC v. Harleysville Mut. Ins. Co., 129 Fed. Appx. 955, 960-61 (6th
Cir. 2005) (affirming district court’s award of summary judgment where
plaintiff failed to allege that defendant insurer misled or deceived it). Further,
a mere denial of an insurance claim, absent any deceptive, misleading of
[sic.] unfair act does [**56] not violate the TCPA. See e.g., Williamson v.
Aetna Life Ins. Co.., 481 F.3d 369, 378 (6th Cir. 2007) (affirming award of
summary judgment for insurer on plaintiff’s TCPA claim where at worse
insurer’s conduct amounted to an “erroneous denial” of a claim); Stooksbury
v. American Nat. Property and Cas. Co., 126 S.W.3d 505, 520 (Tenn. Ct.
App, 2003) (reversing trial court award of damages pursuant to the TCPA
where “no material evidence” existed “to support the jury’s conclusion that
Defendant engaged in deceptive or unfair acts”); Ginn v. American Heritage
Life Ins. Co., 173 S.W.3d 433, 445-46 (Tenn. Ct. App. 2004) (reversing jury
verdict on plaintiff’s TCPA claim where insurer simply maintained good faith,
although mistaken, belief that plaintiff materially misrepresented her
husband’s health).
Judge Edgar’s opinion, as well as the cases cited by Judge Edgar, stand for the proposition
that the mere denial of an insurance claim does not constitute a violation of the TCPA
absent evidence that the insurer deceived the insured about the terms of the policy of acted
unfairly in some other way.
The Stuttes’ counterclaim alleges that ANPAC violated the TCPA by denying their

02802-71561 (RER)

insurance claim and specifically makes the following allegations:
35.
ANPAC has engaged in unfair or deceptive acts or practices by
denying coverage for the Stuttes’ claim, cancelling the policy, and filing this
coverage action based on allegations ANPAC knows, or should know, to be
false, in an effort to avoid its obligation under the Policy.
36.
Specifically, ANPAC accused the Stuttes of destroying their home and
contents, and of committing concealment or fraud relating to their claim, even
though ANPAC knew, or should have known, that these allegations were
false based on evidence in its possession concerning the Stuttes
whereabouts at the time of the fire.
37.
As a direct result of these unfair or deceptive acts or practices, the
Stuttes had suffered and continue to suffer the ascertainable loss of money,
property, and/or other things of value, including, without limitation, insurance
proceeds for loss to their home and contents and additional living expenses,
attorney’s fees and other expenses in defending this litigation and attempting
to obtain coverage under the policy, lost earnings on the amounts wrongfully
withheld by ANPAC, and damage to their credit. In addition, the Stuttes are
entitled to recover treble damages, up to three times the actual damages
they have sustained, pursuant to Tenn. Code Ann. §47-18-109(a)(3).
Thus, the only basis of the counterclaim for damages under the TCPA is the denial
of the Stututes’ insurance claim. That alone is insufficient to state a cause of action under
the TCPA.
In addition, the “fact set” that would constitute a claim for violation of the Tennessee
Consumer Protection Act (TCPA) would be the same “fact set” necessary to substantively
prove a claim for statutory bad faith under Tennessee Code Annotated § 56-7-105. In the
present case, for the same reasons as stated above, as a matter of law, the Stuttes cannot
present facts at trial sufficient to establish that ANPAC acted unfairly or deceptively to
support a claim for violation of the TCPA. See e.g., Williamson v. Aetna Life Ins. Co., 2005
WL 3087861 (W.D. Tenn. Nov. 17, 2005); Zientek v. State Farm International Services,
Inc., 2006 WL 925063, *4 (E.D. Tenn. April 10, 2006); Stooksbury v. American National
Property and Casualty Company, 126 S.W.3d 505 (Tenn. 2004);

Order Granting

02802-71561 (RER)

Defendant’s Motion for Partial Summary Judgment in Thompson v. State Farm Fire &
Casualty Company, 2:05-cv-02368-BBD-sta, W.D. Tenn, 9-17-2007). Therefore, the
Stuttes’ claim for violation of the TCPA should be denied because it fails as a matter of law
and ANPAC should be granted summary judgment on this claim.

Conclusion
ANPAC relies upon the entire record in this cause, including, but not limited to, the
pleadings, the Examinations Under Oath of the Stuttes and Kimberly Howell, the reports
provided to ANPAC by the experts in this case, the witness interviews, its Statement of
Undisputed Facts, the Affidavit of Gary Noland, the Affidavit of Stacey Jennings, and this
Memorandum. ANPAC should be granted summary judgment on the Stuttes’ statutory bad
faith and Tennessee Consumer Protection Act claims because there can be no genuine
dispute of material fact that ANPAC acted in good faith in denying the Stuttes’ fire
insurance claim and did not otherwise act unfairly or deceptively.

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Respectfully submitted,

___s/ N. Mark Kinsman_________________
N. MARK KINSMAN, BPR No. 06039
Baker, Kinsman, Hollis, Clelland & Winer, P.C.
701 Market Street, Suite 1500
First Tennessee Building
Chattanooga, TN 37402-4825
[phone]
[e-mail]

___s/ Russell E. Reviere_________________
RUSSELL E. REVIERE, BPR No. 07166
Rainey, Kizer, Reviere & Bell, P.L.C.
209 East Main Street
P. O. Box 1147
Jackson, TN 38301-1147
[phone]
[e-mail]
Counsel for ANPAC

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CERTIFICATE OF SERVICE
The undersigned certifies that a true copy of this pleading or document was
served via the Court’s ECF filing system upon:
Peter J. Alliman
135 College Street
Madisonville, TN 37354
Tel: [phone]
Attorney for Carol Stutte and Laura Stutte
Seth A. Tucker
Scott J. Levitt
Jonathan G. Hardin
Darien S. Capron
1201 Pennsylvania Avenue NW
Washington, DC 20004-2401
Tel: [phone]
Attorneys for Carol Stutte and Laura Stutte

This the 25th day of October, 2011.
___s/ N. Mark Kinsman________________