American National Property and Casualty Company v. Stutte et al

Filing 40

REPLY to Response to Motion re 37 MOTION to file 20 Answer to Complaint Second Amended Counterclaim,, filed by Carol Ann Stutte, Laura Jean Stutte. (Hardin, Jonathan)

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

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

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CIVIL ACTION
NO. 3:11-CV-219

REPLY IN SUPPORT OF THE STUTTES’ MOTION FOR
LEAVE TO FILE SECOND AMENDED COUNTERCLAIM
The opposition of Plaintiff/Counter-Defendant American National Property & Casualty
Company (“ANPAC”) to the Stuttes’ Motion for Leave to File a Second Amended Counterclaim
fails for two independent reasons – and it unintentionally undermines ANPAC’s pending motion
for partial summary judgment, all as discussed below.
ANPAC’s opposition fails first because ANPAC does not and cannot dispute that newly
discovered facts provide additional support for the Stuttes’ existing counterclaims of bad faith
refusal to pay an insured loss and violation of the Tennessee Consumer Protection Act
(“TCPA”). ANPAC’s opposition fails second because ANPAC is wrong on the law when it
argues that the Stuttes’ claims for negligent and intentional infliction of emotional distress would
be futile.

But perhaps the most important lesson one takes from ANPAC’s paper is that

discovery is necessary because there are deep disputes over whether ANPAC was acting in good
faith or was intentionally trying to railroad the Stuttes, as seems more apparent with each new
fact.
Under the liberal amendment standard of Federal Rule of Civil Procedure 15(a), leave to
amend the Stuttes’ pleading should therefore be granted.
The New Facts are Relevant to the Existing Counterclaims and May Be Pleaded
ANPAC does not dispute that the newly discovered facts pleaded by the Stuttes provide
additional support for their existing counterclaims for bad faith and violation of the TCPA.
These newly discovered facts include that ANPAC conducted a shoddy and one-sided
investigation because (a) it has ignored the Stuttes’ October 8, 2010 cell phone bill, which
plainly indicates that the Stuttes were in the Nashville area before, during and after the
September 4, 2010 fire that destroyed their home, contrary to the conclusion of ANPAC’s
purported cell phone expert, and (b) its private investigator turned a blind eye to important
exculpatory evidence, including cell phone bills and time-stamped digital photographs, offered
by a witness, Lora Lee Black, who accompanied the Stuttes on their trip to Nashville. 1
ANPAC’s sole objection to the Stuttes’ Motion for Leave is that the new counterclaims
the Stuttes seek to add – negligent and intentional infliction of emotional distress – are futile
because such causes of action are not recognized in Tennessee. 2 Even if ANPAC’s assertion
were true (and it is not, as discussed below), it would not affect whether the Stuttes should be
permitted to plead additional facts to support their existing counterclaims. As set forth more
1

These allegations are set forth in paragraphs 26-34 and 51-52 in the Stuttes’ proposed Second
Amended Counterclaim. (See Dkt. No. 37-1.)

2

The Stuttes’ claims for negligent and intentional emotional distress are set forth in paragraphs
54-73 in the proposed Second Amended Counterclaim. (See Dkt. No. 37-1.)

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fully in the Stuttes’ Supplemental Memorandum in Opposition to ANPAC’s Motion for Partial
Summary Judgment (Dkt. No. 36) and the Stuttes’ Motion for Leave (Dkt. No. 37), the Stuttes’
ongoing investigation has uncovered additional evidence that ANPAC’s investigation was
incompetent, deceptive, biased, and unfair – evidence which is clearly relevant to the Stuttes’
bad faith and TCPA claims. ANPAC offers no reason why amendment is inappropriate as to
these existing claims.
Tennessee Law Recognizes the Stuttes’ New Tort Claims
ANPAC’s sole objection to the Stuttes’ Motion for Leave – that the requested
amendment “is futile because Tennessee does not recognize the cause of action [the Stuttes]
attempt to assert” – is plainly incorrect. ANPAC’s Resp. at 4 (Dkt. No. 38). Courts applying
Tennessee law have repeatedly made clear that an insured may assert claims against an insurer
for the infliction of emotional distress where the conduct alleged goes beyond an insurer’s mere
refusal to pay an insurance claim. See, e.g., Mathis v. Allstate Ins. Co., 959 F.2d 235 (6th Cir.
1992) (though ruling that a simple refusal to pay an insurance claim does not suffice, noting that
the tort of infliction of emotional distress against an insurer is actionable in Tennessee);
Chandler v. Prudential Ins. Co., 715 S.W.2d 615, 622 (Tenn. Ct. App. 1986) (stating that
insurers may be sued for “outrageous conduct”); Lyons v. Farmers Ins. Exchange, 26 S.W.3d
888, 893 (Tenn. Ct. App. 2000) (stating that a claim against an insurer for infliction of emotional
distress exists where the conduct alleged “is so outrageous that it is not tolerated by a civilized
society”); Graham v. Liberty Mutual Ins. Co., No. 08-299, 2009 WL 1034942, at *3 (E.D. Tenn.
Apr. 17, 2009) (stating that allegations of bad faith and outrageous conduct can support a claim
for infliction of emotional distress against insurer); Rice v. Van Wagoner Cos., 738 F. Supp. 252,

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253 (M.D. Tenn. 1990) (holding that extreme and outrageous conduct are sufficient to support
claim for infliction of emotional distress against insurer).
The Stuttes’ infliction of emotional distress claims, as well as their TCPA and statutory
bad faith claims, are not premised on ANPAC’s mere refusal to pay their insurance claim.
Rather, those claims are based on ANPAC’s shoddy and one-sided claims investigation, the
outcome of which led to ANPAC publicly accusing the Stuttes of arson and insurance fraud. See
ANPAC’S Memo in Support of Mot. for Partial Summ. J. (Dkt. No. 28) (“In its Complaint,
ANPAC asserted the defense o[f] arson as well as the intentional act exclusion and the
concealment of fraud provision contained in the policy.”).
None of the four cases cited by ANPAC stands for the proposition that Tennessee courts
do not recognize common law tort claims for negligent or intentional infliction of emotional
distress against an insurer. The first two cases address an entirely different issue – whether
extra-contractual damages may be a component of the relief requested for other claims, such as
those for breach of contract and statutory bad faith. See Crocker v. Aero Mayflower Transit Co.
Inc., 1992 WL 232149, at *2 (Tenn. Ct. App. Sept. 22, 1992) (no punitive damages for breach of
contract claim); Mid-South Milling Co., Inc. v. Loret Farms, Inc., 521 S.W.2d 586, 588-89
(Tenn. 1975) (no extra-contractual damages for breach of warranty claim).
The third case cited by ANPAC states the undisputed rule that, due to the available
remedy of statutory bad faith, there is no common law tort for bad faith of an insurer in
Tennessee. See Cracker Barrel Old Country Store, Inc. v. Cincinnati Ins. Co., F. Supp. 2d 970,
972 (M.D. Tenn. 2008).

This rule, though, is irrelevant to whether the Stuttes’ separate

emotional distress claims can proceed. The final case cited by ANPAC also relates to the
exclusivity of the statutory bad faith penalty when asserting a claim for an insurer’s bad faith

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handling of a claim. See Persian Galleries, Inc. v. Transcontinental Ins. Co., 38 F.3d 253, 260
(6th Cir. 1994) (insured could not maintain claim against insurer under TCPA where allegations
all consisted of bad faith failure to process claim, which was exclusively actionable under bad
faith statute). In addition to its irrelevance to the question of whether the Stuttes’ emotional
distress claims are actionable, the Persian Galleries case has been superseded by subsequent
Tennessee Supreme Court decisions. See Myint v. Allstate Ins. Co., 970 S.W.2d 920, 925-26
(Tenn. 1998) (holding that the bad faith statute is not the exclusive means of bringing an action
for unfair or deceptive acts or practices against an insurance company); Gaston v. Tenn. Farmers
Mut. Ins. Co., 120 S.W.3d 815, 822 (Tenn. 2003) (permitting insured to sue insurer for bad faith
handling of a claim under both the TCPA and the bad faith statute).
The cases cited by ANPAC are all inapposite to the present situation. The Stuttes are not
asking for emotional distress damages as part of their breach of contract or bad faith claims, nor
are the Stuttes alleging that their emotional distress simply flowed from ANPAC’s refusal to pay
their claim. Rather, they seek to hold ANPAC responsible for the serious harm, such as high
blood pressure, depression and anxiety, that its faulty claims handling has caused them. The
Stuttes’ claims for negligent and intentional infliction of emotional distress are separate from
their contractual claims, and are clearly recognized against insurers in Tennessee. ANPAC has
provided no support for its contrary assertion.
Discovery is Necessary and Appropriate on the New Claims and the Old
ANPAC’s response also raises arguments that unintentionally undermine ANPAC’s
Motion for Partial Summary Judgment. For example, ANPAC asserts that the Stuttes’ cellular
telephone records do not contradict the opinions of ANPAC’s cell phone expert, and ANPAC
asserts that the sworn affidavit of Lora Lee Black is “suspect.” ANPAC’s Resp. at 4 (Dkt. No.

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38). These evidentiary and credibility issues raised by ANPAC are clear examples of the
genuine factual disputes that exist surrounding the Stuttes’ counterclaims. As laid out more fully
in the Stuttes’ Response and Supplemental Memorandum in Opposition to ANPAC’s Motion for
Partial Summary Judgment (Dkt. Nos. 30 and 36), the Stuttes’ counterclaims involve questions
of fact that can be determined only after there has been a full opportunity to conduct discovery
into ANPAC’s conduct (there has been no discovery to date in this case). The existence of these
genuine factual disputes also further shows that ANPAC has failed to demonstrate that the
Stuttes’ Motion for Leave is futile.
Based on the foregoing reasons, the Stuttes respectfully request that the Court GRANT
the Stuttes’ Motion for Leave to File a Second Amended Counterclaim.

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Dated: March 1, 2012

Respectfully submitted,

/s/ Seth A. Tucker
Seth A. Tucker (pro hac vice)
Scott J. Levitt (pro hac vice)
Jonathan G. Hardin (pro hac vice)
COVINGTON & BURLING LLP
1201 Pennsylvania Avenue NW
Washington, DC 20004-2401
Tel: [phone]
Fax: [phone]
Email: [e-mail]
[e-mail]
[e-mail]

Peter J. Alliman (BPR No. 5984)
WHITE, CARSON & ALLIMAN, P.C.
135 College Street
Madisonville, TN 37354
Tel: [phone]
Fax: [phone]
Email: [e-mail]
Attorneys for Defendants Carol Ann Stutte
and Laura Jean Stutte

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CERTIFICATE OF SERVICE
I hereby certify that on this 1st day of March, 2012, a copy of the foregoing REPLY IN
SUPPORT

OF

MOTION

FOR

LEAVE

TO

FILE

SECOND

AMENDED

COUNTERCLAIM was filed electronically using the Court’s Electronic Filing System. Notice
of this filing will be served through the Electronic Filing System to parties or counsel who are
Filing Users, and by first-class mail to any party or counsel who is not served through the
Electronic Filing System.

/s/ Jonathan G. Hardin
Jonathan G. Hardin (pro hac vice)
COVINGTON & BURLING LLP
1201 Pennsylvania Avenue NW
Washington, DC 20004-2401
Tel: [phone]
Fax: [phone]
Email: [e-mail]

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