Awadh et al v. Farm Bureau Mutual Insurance
MEMORANDUM DECISION granting 27 Motion for Summary Judgment. Because this order disposes of all the claims at issue in the case, the Clerk of Court is directed to enter judgment in favor of Defendant and close the case. Each party shall bear his, her and its own fees and costs. Signed by Judge Dale A. Kimball on 7/18/16. (jlw)
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH
NASER AWADH and STACY AWADH,
Case No. 1:13CV145DAK
FARM BUREAU MUTUAL
Judge Dale A. Kimball
This matter is before the court on Defendant’s Motion for Summary Judgment pursuant
to Rule 56 of the Federal Rules of Civil Procedure. On June 16, 2016, the court held a hearing
on the motion. At the hearing, Plaintiffs were represented by Matthew G. Wadsworth and Jacob
Cowdin, and Defendant was represented by Paul M. Belnap. The court has carefully considered
the materials submitted by the parties, as well as the facts and law relevant to the motion. Now
being fully advised, the court issues the following Memorandum Decision and Order.
This case involves a dispute over insurance benefits that Plaintiffs claim are owed under
their homeowner’s insurance policy for a skid loader that went missing from their property on or
about April 22, 2009. Farm Bureau issued homeowners’ insurance coverage to the Awadhs
during the relevant policy period of June 4, 2008, through June 4, 2009. The Policy stated, “We
cover direct physical loss to or of covered property ‘caused by’ theft, attempted theft and loss of
property from a known location when it is likely that the property has been stolen.”
On or about April 22, 2009, Plaintiffs made a claim with Farm Bureau for the loss of the
skid loader. Farm Bureau assigned Terry Fairman, a senior claim field representative, to handle
the claim. Fairman took a recorded statement from Naser Awadh. Awadh informed Fairman
that the skid loader had been missing for more than two years and that he had filed a report with
the local sheriff. Awadh also informed Fairman that he had originally purchased the skid loader
for his company.
Farm Bureau requested a copy of the sheriff’s report and sent Plaintiffs a theft loss
statement to complete. Awadh completed the theft loss statement and indicated that he had
informed the sheriff’s office that he had previously rented the skid loader to James Montalvo,
who he suspected of taking the machine. Fairman again contacted Awadh and confirmed that
Awadh had rented the skid loader to Montalvo.
Plaintiffs’ homeowners’ policy, which is intended to cover mainly household personal
property, provides a $2500 limit of insurance coverage for property on the residential premises
“used primarily for any business purpose.” Based on the information Farm Bureau had regarding
the skid loader, Farm Bureau determined that the skid loader was business property and tendered
the $2500 business property limit to Plaintiffs. However, Plaintiffs refused that tender, claiming
the skid loader was personal, not business, property.
Because of Plaintiffs' refusal to accept the $2500 payment, Farm Bureau continued its
investigation and assigned Paul Cully to investigate the claim. Cully contacted the investigating
officer at the Weber County Sheriff's Office and learned that the office had cancelled its
investigation into the alleged theft based on its determination that no criminal theft occurred.
The sheriff's office concluded it was a civil dispute between Awadh and James Montalvo. The
officer informed Cully that the parties had agreed that Montalvo would purchase the skid loader
from Plaintiffs and the payments had been made. Cully then spoke to Montalvo, who stated that
he and Awadh were in a dispute over the payments relating to the sale of the skid loader and that
he took the skid loader upon the advice of counsel because it was his position that he had paid for
the skid loader in full.
Based on Cully’s investigation, Farm Bureau concluded that there was no coverage for
the loss of the skid loader because it had not been stolen, but was repossessed as part of a civil
dispute. Farm Bureau then engaged the law firm of Christensen & Jensen to review the claim.
As part of its review, Christensen & Jensen learned that Awadh had filed a civil suit against
Montalvo arising out of his repossession of the skid loader. Christensen & Jensen obtained
pleadings and records filed as part of the civil lawsuit between Awadh and Montalvo. The
records included a copy of a $13,000 cashier’s check Montalvo paid to Awadh and a document
purporting to be a bill of sale.
Based on this information, Christensen & Jensen consulted with Farm Bureau and sent a
letter denying coverage for Plaintiffs’ claim on the basis that the skid loader had not been stolen
and, therefore, was not covered under the policy. As part of the denial, Farm Bureau reserved all
of its rights under the Policy, including the right to continue its investigation based on any
additional information. Farm Bureau encouraged Plaintiffs’ counsel to provide any additional
information or documents relating to the coverage issues.
Plaintiffs, however, initiated this action, alleging claims for breach of contract and a bad
faith breach of the implied covenant of good faith and fair dealing. Plaintiffs allege that Farm
Bureau breached the Policy terms indicating that it would provide coverage for “loss to or of
covered property caused by theft, attempted theft, and loss of property from a known location
when it is likely that the property has been stolen.” Compl. ¶ 36, Ex. 2. Plaintiffs further allege
that Farm Bureau acted in bad faith in failing to fully and fairly investigate the claim in a timely
manner and concluding that there was insufficient evidence that a theft had or likely had
occurred. Id. ¶¶ 51-52, 60-61. As a result of the alleged breach, Plaintiffs claim that they have
“been deprived of business projects because the absence of the Skid Loader inhibits the projects
they can accept.” Id. ¶¶ 42, 66. Awadh testified that if he was still in possession of the skid
loader, he would have accepted various business projects that involved the machine.
During discovery in this case, Awadh testified in his deposition that he purchased the skid
loader with money from a personal account, although he did not have any information regarding
that account. Awadh also testified that after 2007 the skid loader belonged to him personally and
he talked to someone at Farm Bureau at that time about whether he needed to have special
insurance to have the skid loader at his house. He claims that his agent told him that he put it on
his home insurance. Awadh could not name his agent and had no notes of the conversation, but
he stated that his homeowner’s insurance indicated that the skid loader was under his
homeowner’s insurance and indicated an email referencing it. However, the email was sent in
2011 and involved a different skid loader than the one that went missing in 2009.
Defendant’s Motion for Summary Judgment
Farm Bureau moves for summary judgment, arguing that Plaintiff’s bad faith and breach
of contract claims both fail as a matter of law. Plaintiffs, however, assert that there are questions
of fact as to whether the skid loader was stolen and whether it was business or personal property
which preclude summary judgment.
A. Bad Faith Claim
Farm Bureau argues that Plaintiffs’ bad faith claim fails because whether the skid loader
was stolen was fairly debatable and, thus, not actionable as bad faith under Utah law. “A federal
court sitting in diversity applies the substantive law . . . of the forum state.” Signature Dev. Co.
v. Royal Ins. Co., 230 F.3d 1215, 1218 (10th Cir. 2000). Under Utah law, the denial of an
insurance claim is reasonable, as a matter of law, if the insured’s claim is fairly debatable. Saleh
v. Farmers Ins. Exch., 133 P.3d 428 (Utah 2006). Whether an insurance claim is “fairly
debatable” under the facts of a case is a question of law. Prince v. Bear River Mut. Ins. Co., 56
P.3d 524, 535 (Utah 2002). A claim is “fairly debatable” where there is evidence presented that
creates a factual issue as to the claim’s validity. Id.
Utah courts have held that reliance on expert reports or an investigating agency’s report
provides a good faith basis for an insurer’s defense. Id. In this case, Farm Bureau’s investigator
spoke with the investigating officer at the Weber County Sheriff’s Office, who informed him that
they had dropped their investigation of the purported theft because they determined that the
dispute was simply a civil issue between Awadh and Montalvo. Montalvo claimed that the
parties had agreed to the purchase of the skid loader and that he had made the payments. The
Farm Bureau investigator also interviewed Montalvo, who informed him that he had agreed to
purchase the skid loader and a dispute between the parties arose over payment and the
attachments that were to be included in the sale. Montalvo claimed that Awadh repossessed the
skid loader as a result of the dispute and Montalvo took it back on the advice of counsel.
Farm Bureau gave the investigator’s information to an independent law firm, Christensen
& Jensen, to review. Christensen & Jensen also discovered that Awadh had initiated a civil
lawsuit against Montalvo arising out of the dispute over the skid loader. The civil lawsuit
involved a counterclaim against Awadh based on an alleged bill of sale and the copy of a
cashier’s check that Montalvo had paid to Awadh. Based on the Sheriff’s determination not to
pursue the theft allegation, the civil lawsuit, and Farm Bureau’s interview of Montalvo, Farm
Bureau denied Awadh’s claim on the basis that no theft had occurred.
Plaintiffs take issue with Farm Bureau relying on Montalvo’s allegedly fraudulent
statements and unsavory actions. However, there was evidence to support Montalvo’s assertions,
the Weber County Sheriff’s office appeared to credit his assertions, and Farm Bureau relied on
the Weber County Sheriff’s office and the opinion of an independent law firm investigating the
matter. The undisputed facts establish that at the time Farm Bureau made its coverage decision,
there was significant evidence indicating that the skid loader had not been stolen, but had been
repossessed by Montalvo, who claimed ownership of the machine.
In Callioux v. Progressive Ins. Co., 745 P.2d 838 (Utah Ct. App. 1987), the insurer
denied coverage for their insured’s automobile based on an arson expert’s determination that the
loss was the result of arson. The insured was criminally charged with arson but found not guilty
by a jury. The court, however, found as a matter of law that the insured could not have
established a bad faith claim based on the denial because there was ample evidence to suggest the
insured may have committed arson, even though he was ultimately found not guilty. Id. at 842.
In this case, there is ample evidence to support Farm Bureau’s denial. Even if it is
ultimately established that Montalvo stole the skid loader, there was evidence supporting Farm
Bureau’s decision at the time. Based on all the evidence Farm Bureau uncovered in its
investigation, it was fairly debatable whether the skid loader was stolen and Farm Bureau acted
reasonably in denying Plaintiffs’ claim. Whether the skid loader was actually stolen is irrelevant
to the present motion and Farm Bureau’s fairly debatable defense. And, Plaintiffs’ arguments that
a fact finder would need to make findings about the intent of Farm Bureau’s agents,
representatives, and investigators misses the mark. Plaintiffs have failed to point to any evidence
that Farm Bureau’s agents or representatives acted inappropriately. Because it was fairly
debatable whether the skid loader was stolen, Farm Bureau’s denial of Plaintiffs’ claim on those
grounds cannot be the basis for a bad faith claim. Therefore, the court dismisses Plaintiffs’ bad
B. Breach of Contract Claim
Farm Bureau also seeks summary judgment on Plaintiffs’ breach of contract claim,
arguing that the skid loader was business property and it complied with the terms of the
insurance contract when it tendered the $2500 business property limit in response to Plaintiffs’
claim. Plaintiffs contend, however, that the skid loader was personal property and there is
sufficient evidence supporting their contention for the issue to be decided by a jury.
“[A]n insurance policy is merely a contract between the insured and the insurer and is
construed pursuant to the same rules applied to ordinary contracts.” Alf v. State Farm Fire &
Cas. Co., 850 P.2d 1272, 1274 (Utah 1993). If the language in a policy is clear and unambiguous
“the policy language is construed according to its usual and ordinary meaning.” Id. An insurer
may “exclude from coverage certain losses by using language which clearly and unmistakably
communicates to the insured the specific circumstances under which the expected coverage will
not be provided.” Alf, 850 P.2d at 1275.
In this case, Plaintiffs’ homeowner’s policy provided a $2500 limit of insurance coverage
for property on the residential premises “used primarily for any business purpose.” The parties
do not contend that this limit is ambiguous or unclear. Rather, the parties factually dispute
whether the skid loader was used primarily for any business purpose.
Farm Bureau contends that the evidence clearly demonstrates that the skid loader was
purchased by Plaintiffs’ business and there is no evidence the skid loader was transferred from
Plaintiffs’ business to Plaintiffs personally. In a recorded statement with Farm Bureau in
connection with his claim, Awadh told Terry Fairman that he had originally purchased the skid
loader for his company. In his deposition in this case, Awadh similarly testified that his company
bought the skid loader in 2004. Although Awadh also testified in his deposition that he bought
the skid loader with a personal bank account, he did not provide any information or records
regarding the account and could not identify even the bank at which the account might have been.
In contradiction to his testimony that he bought the skid loader with a personal account,
Awadh also testified that he later bought the skid loader from his company for one dollar. The
point of buying a skid loader, worth several thousand dollars, for only one dollar would
obviously be to document the change in ownership. But again, Awadh has no records or
documentation of that transaction.
Plaintiffs argue that, at the time the skid loader went missing, they were using the skid
loader as personal property for snow removal at their home. Plaintiffs contend that they had no
business, licensed or otherwise, that the skid loader was attached to or used to benefit. It is
undisputed, however, that Plaintiffs had used the skid loader for business purposes and rented it
to Montalvo for substantial rental payments. In addition, Awadh testified that if he had the skid
loader he would have rented it or used it for business purposes. Thus, Plaintiffs seek damages
for lost business profits in this case.
Additionally, Plaintiffs assert that their Farm Bureau agent later represented to Awadh
that a skid loader, similar to the one in this case, would be covered as household personal
property. An email from Jaisha Richardson, a sales associate with Farm Bureau, indicates that a
skid loader could have been covered as household personal property. However, the email in
question was sent in November 2011, several years after the skid loader at issue in this case had
gone missing, and it involved a different skid loader. Farm Bureau does not dispute that a skid
loader could be household personal property. However, those are not the facts of this case.
Moreover, Ms. Richardson was not involved in a coverage investigation and did not have any
information with respect to how the skid loader was being used. Although Plaintiffs contend that
Farm Bureau should have concluded the same for the skid loader at issue in this case, the facts
and circumstances are easily distinguishable.
Farm Bureau argues that Plaintiffs cannot merely claim to be using the skid loader as
personal property at the time it was taken without any evidence to support such a claim.
The undisputed evidence establishes that Awadh bought the skid loader for his business, used the
skid loader for business purposes, rented the skid loader to Montalvo, and intended to use the
skid loader for business purposes or to rent it in the future. Plaintiffs conveniently claim that the
skid loader was business property, then private property when it was taken, and then intended to
be used in the future as business property.
Contrary to Plaintiffs’ assertion, the rental of the skid loader was more than a mere onetime business use. Montalvo paid Plaintiffs $17,000 in rental payments over seven months.
Awadh testified that if Montalvo had paid $1,900 more, he would have continued leasing the
skid loader on an indefinite, monthly basis. In this case, Plaintiffs seek $200,000 in future rental
costs involving the machine. In addition, Awadh testified that if he had the skid loader he may
have engaged in other business opportunities. Plaintiffs apparently contend that it does not
matter how much past or future income they would have received from the skid loader, so long as
it was not being used for profit at the moment it went missing. But it is undisputed that they
rented the skid loader in the past and intended to rent it in the future or use it for their own
Farm Bureau has actual record evidence to support its position that the skid loader was
business property. Plaintiffs have only self-serving statements that the skid loader was personal
property. Awadh asserts he initially bought it with a personal account, but he gives no
information or records in relation to the account. Awadh testified that he bought the skid loader
from his business for one dollar, but again there is no record or documentation of the sale that
would be conducted solely for the purpose of changing ownership. Awadh further testified that,
at the time the skid loader went missing, he had no business and he was using the skid loader for
personal snow removal at his home. But, he claims damages for the loss of rental income from
not having the skid loader. While there are several unsupported assertions supporting Plaintiffs
position, there is actual evidence supporting Farm Bureau’s position. At the summary judgment
stage, Plaintiffs must do more than make unsupported, self-serving assertions. Even if there was
a brief hiatus in which the skid loader was not rented out, the evidence demonstrates that the skid
loader was “primarily” used for business purposes. The court concludes that no reasonable juror
could conclude otherwise. Accordingly, the court concludes that there is no basis for Plaintiffs’
breach of contract claim and Farm Bureau is entitled to summary judgment.
Based on the above reasoning, Defendant’s Motion for Summary Judgment is
GRANTED. Because this order disposes of all the claims at issue in the case, the Clerk of Court
is directed to enter judgment in favor of Defendant and close the case. Each party shall bear his,
her and its own fees and costs.
DATED this 18th day of July, 2016.
DALE A. KIMBALL
United States District Judge
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