Cunningham v. State Farm Fire & Cas. Co.

647 F.Supp.3d 985

Glen CUNNINGHAM and Nicole Gregory, Plaintiffs, v. STATE FARM FIRE AND CASUALTY COMPANY, Defendant

Case No. 6:21-cv-00264-MK

United States District Court, D. Oregon, Eugene Division

Signed December 27, 2022

R. Scott Taylor, R. Scott Taylor, Insurance Attorney, PC, Eugene, OR, Nick Gower, Gower Law LLC, Portland, OR, for Plaintiffs.

Robert Lee Winkler, II, Parks Bauer Sime & Winkler, LLP, Salem, OR, Jeremy C. Rice, Parks, Bauer, Sime, Winkler & Walker, Salem, OR, Michael J. Walker, Parks Bauer Sime Winlker and Fernety, LLP, Salem, OR, for Defendant.

OPINION AND ORDER

KASUBHAI, United States Magistrate Judge:

Plaintiffs Glen Cunningham and Nicole Gregory bring this action alleging claims arising from an insurance policy dispute with Defendant State Farm Fire and Casualty Company ("State Farm"). Compl., ECF No. 1. State Farm moved for summary judgment. Def.'s Mot. Summ. J., ECF No. 25 ("Def.'s Mot."). Plaintiffs opposed that motion. Pls.' Response, ECF No. 35. All Parties consented to jurisdiction by a U.S. Magistrate Judge. ECF No. 42. For the following reasons, the Court GRANTS in part and DENIES in part State Farm's motion for summary judgment.

BACKGROUND

Plaintiffs reside in Oregon. Compl. ¶ 2, ECF No. 1. Their property includes a dwelling with wooden decks, a shed, a loafing shed, a horse arena, a greenhouse, and a carport. Plummer Decl. 1-2, ECF No. 27. On March 8, 2019, a snowstorm caused damage to Plaintiffs' dwelling and dwelling extensions. Id. at 2. Plaintiffs initiated an insurance claim with the Defendant, their insurance provider, State Farm. Compl. ¶ 11. State Farm accepted the claim. Id. Plaintiffs' policy provides separate coverage limits for a dwelling and dwelling extensions. Plummer Decl. Ex. 101, ECF No. 27 (the "Policy"). Plaintiffs concede that State farm paid the policy limit for the dwelling extensions. Pls.' Response 3, ECF No. 35. State Farm's payments for the dwelling extensions are not in dispute. Id. at 12.

Initially, Plaintiffs hired a contractor to make repairs and replacements to the dwelling and dwelling extensions. Plummer Decl. Ex. 106, ECF No. 27. The contractor also subcontracted some of the work to other companies. Id. The contractor and subcontractors performed faulty repairs. Id. Plaintiffs filed a lawsuit against the contractor and one of its subcontractors for "faulty workmanship, faulty repairs, inadequate supervision, improper coordination, improper or defective materials, failure to properly inspect, improper design, inadequate materials, and/ or noncompliance with applicable building codes." Id. This case has since been settled and is not part of this litigation. Pls.' Response 3, ECF No. 35.

Plaintiffs and State Farm disagreed about the value of Plaintiffs' property damage claim. Plummer Decl. 3, ECF No. 27. Plaintiffs' policy contained a provision which stated:

"Appraisal. If you and we fail to agree on the amount of loss, both parties may agree to an appraisal of the loss and to be bound by the results of that appraisal. If both parties so agree, then each shall select a competent, disinterested appraiser . . . . The two appraisers shall then select a competent, impartial umpire. If the two appraisers are unable to agree upon an umpire . . . either may ask a judge of a court of record in the state where the residence premises is located to select an umpire. The appraisers shall then set the amount of the loss. If the appraisers submit a written report of an agreement to us, the amount agreed upon shall be the amount of the loss. If the appraisers fail to agree within a reasonable time, they shall submit their differences to the umpire. Written agreement signed by any two of these three shall set the amount of the loss. Each appraiser shall be paid by the party selecting that appraiser. Other expenses of the appraisal and the compensation of the umpire shall be paid equally by you and us."

The Policy 17, ECF No. 27. Pursuant to that provision, Plaintiffs requested an appraisal. Plummer Decl. Ex. 102, ECF No. 27. State Farm agreed to participate in the appraisal process. Id. at Ex. 103. Plaintiffs and State Farm chose their appraisers. Plummer Decl. Ex. 4, ECF No. 27 ("Appraisal Award"). Those appraisers agreed upon an "Umpire." Id. The appraisers reached agreement and valued the loss as follows:

   Replacement Cost Value  Actual Cash Value  Repairs to dwelling  $317,609.68  $233,881.82  Dwelling extension  $183,911.39  $135,428.90 

Id. (cleaned up; formatted table). The actual cash value is the "value of the damaged part of the property at the time of loss, calculated as the estimated cost to repair or replace such property, less a deduction to account for pre-loss depreciation." The Policy 20, ECF No. 27. The appraisers did not consider coverage when making their appraisal. Appraisal Award 1, ECF No. 27. However, the appraisers certified that they awarded the "values as shown . . . for the property on the date of loss of the 8th day of March, 2019." Id.

After the appraisers completed their duty, State Farm conducted an analysis of what damages were covered under the policy because "the appraisal process [did] not address any policy coverages or conditions." Plummer Decl. Ex. 105, ECF No. 27 ("Coverage Letter"). State Farm hired a "project estimator" from a general contractor company to evaluate whether the Policy covered the loss. Allen Decl. 1-2, ECF No. 47. The project estimator concluded that faulty workmanship, rot, mold, fungus, or wear and tear caused some of the damage to the master bedroom and exterior siding. Id. at 3-4.

State Farm informed Plaintiffs by letter of the damages not covered by the Policy and explained the denial of coverage. Coverage Letter 1, ECF No. 27. State Farm denied coverage for the same reasons provided by the project estimator. Id. Accounting for the reduction of policy deductibles, State Farm paid $263,115.53 for the losses to the dwelling and the dwelling extension. Compl. ¶ 20, ECF No. 1. Plaintiffs assert that State Farm failed to provide full payment for damage to the dwelling caused by the covered loss.

STANDARD OF REVIEW

Summary judgment is appropriate if the pleadings, depositions, answers to interrogatories, affidavits, and admissions on file, if any, show "that there is no genuine dispute as to any material fact and the [moving party] is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). Substantive law on an issue determines the materiality of a fact. T.W. Elec. Servs., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987). Whether the evidence is such that a reasonable jury could return a verdict for the nonmoving party determines the authenticity of the dispute. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

The moving party has the burden of establishing the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). If the moving party shows the absence of a genuine issue of material fact, the nonmoving party must go beyond the pleadings and identify facts which show a genuine issue for trial. Id. at 324, 106 S.Ct. 2548.

Special rules of construction apply when evaluating a summary judgment motion: (1) all reasonable doubts as to the existence of genuine issues of material fact should be resolved against the moving party; and (2) all inferences to be drawn from the underlying facts must be viewed in the light most favorable to the nonmoving party. T.W. Elec., 809 F.2d at 630.

DISCUSSION

Plaintiffs assert three claims for relief. First, Plaintiffs assert a breach of contract claim alleging that State Farm failed to pay the appraisal award. Compl. ¶¶ 15-28, ECF No. 1. Second, Plaintiffs assert that State Farm breached the duty of good faith and fair dealing. Id. at 29-31. Finally, Plaintiffs assert, alternatively, that State Farm failed to pay the full amount owed prior to the appraisal. Id. at 32-36. State Farm moves for summary judgment on all three claims. Def.'s Mot., ECF No. 25. The Court addresses those arguments in turn.

I. Breach of Contract

State Farm argues that it permissibly and correctly denied Plaintiffs' loss not covered under the Policy. Id. at 10. Accordingly, State Farm asserts that it did not breach the terms of the Policy. In making that argument, State Farm contends that either the appraisers did not make factual findings regarding causation, or alternatively, the appraisers were not entitled to make factual findings on causation. Def.'s Reply, 10-13, ECF No. 45. Furthermore, State Farm contends that it is for a court, not an appraiser, to determine whether damages are covered under the policy. Def.'s Mot. 10-11, ECF No. 25. Plaintiffs concede that coverage is determined by a court; however, Plaintiffs respond that a question of material fact exists on whether the disputed damage is covered. Pls.' Response 2, 6-10, ECF No. 35. The Court agrees with Plaintiffs that a genuine issue of material fact exists.

A. Coverage

The parties do not dispute State Farm covers accidental damage to the property, like the snowstorm, unless an exception applies. The policy states that State Farm "insure[s] for accidental direct physical loss to the property . . . except as provided in SECTION I - LOSSES NOT INSURED." Policy 31, ECF No. 27. Section I provides that the policy does not cover "any loss to the property described . . . caused by, one or more of the perils listed." Id. at 33. As relevant here, the Policy excludes coverage for rot, fungus, and faulty workmanship. Id. at 34-35.

B. Analysis of Material Facts

Viewing the facts in the light most favorable to the non-moving party a genuine issue of material fact exists as to whether the policy covered the disputed damage. A material fact is one that may affect the outcome of the case under the applicable law. Anderson, 477 U.S. at 248, 106 S.Ct. 2505. A dispute is genuine "if the evidence is such that a...