Double Trouble Doubled Down – Kuehn v State Farm

Remember the Kuehn’s of Double Trouble Kuehn v State Farm?

On February 28, 2008, the appraisal process concluded, and the umpire and the parties’ appraisers signed an Award setting forth the appraisal amount of $174,811.80…counsel for State Farm Fire told the appraisers and the umpire that the Award did not specify which part was for wind…the appraisers and umpire rewrote the Award to indicate that the entire amount was for wind damage.

Well, I ran into their case when I was looking at recent filings and decided to take a look and see how things were going.

We left them back in February shortly after Counsel for Plaintiffs learned during the deposition of State Farm’s designated appraiser, John Minor, on or about February 6, 2009, that counsel for State Farm will be, at the very least, necessary and material witnesses in this action. Counsel for State Farm recognized this fact and the deposition was halted.

John Banahan had just stepped in as new counsel for State Farm and requested an extension on the period of discovery on the appraisal issue until March 31 that would move the deadline for motions back to mid-April.

What happened between then and now would be easier to explain if this case had not bounced between state and federal court twice since  Hurricane Katrina. Wait, I take that back!  Let’s take a closer look at this case.

Hurricane Katrina ravaged their insured property, causing destruction to the structure and its contents.  On September 27, 2005 an adjuster for State Farm inspected the property.  The time line and documents that follow tell the story.

January 4, 2006
State Farm Fire…informed Plaintiffs that it would not cover the loss beyond what was already paid, which was $10,765.48.pages-from-kuehn-v-state-farm-41

April I, 2006
Mr. Kuehn wrote to State Farm Fire to follow up on his prior request to participate in the appraisal processpages-from-kuehn-v-state-farm-2

June 21, 2006
Plaintiffs filed a Complaint for Injunctive and Declaratory Relief in the Chancery Court of Jackson County, Mississippi, seeking tocompel State Farm to comply with the terms of its contract and go through with the appraisal process.

July 28,2006
State Farm Fire filed the Notice of Removal to the United State District Court and also filed its Answer to the Complaint contesting the requested appraisal.

August 17,2006
Plaintiffs filed their Motion to Remand.

August 24, 2006
U. S. Magistrate Judge entered an Order Staying Case pending a ruling on Plaintiffs’ Motion to Remand.

August 29, 2006
State Farm Fire filed its Motion to Conduct Remand Related Discovery and for Additional Time to Respond to Plaintiffs’ Motion to Remand, which the Federal Court granted, allowing limited discovery on the appraisal Issue.

So, what is the first thing we notice with our closer look? We know State Farm is a WYO company for the NFIP and we know a WYO company is required to move disputed NFIP claims from state to federal court.  However, we also know Plaintiff’s Complaint is about the private coverage purchased from State Farm.  Consequently, we see no basis for State Farm moving this case to federal court.

Apparently, Judge Senter saw none either judging by the docket report from federal court.

January 19,2007
Judge Senter entered an Order of Remand on granting Plaintiffs’ Motion to Remand and remanded the case to the Chancery Court of Jackson County, Mississippi.

On the other hand, as we look closer, we clearly see the reason Plaintiff’s were requesting an Appraisal under the terms of their policy.  The $10,765.48 payment from State Farm was enclosed with an itemized list of covered damages.pages-from-kuehn-itemized-claim-payment-2

The Chancellor in Jackson County saw the basis for seeking an Appraisal (and hopefully got the name of the painter willing to work at State Farm’s price and took it home to his wife!)

April 24, 2007
The Chancery Court of Jackson County entered an Order granting Plaintiffs’ request for an appraisal and ordered each party to designate an appraiser within 30 days.

May 29,2007
Plaintiffs filed their Designation of Appraiser

June 14, 2007
State Farm Fire filed its Designation of Appraiser on or about this date.

February 28, 2008
The appraisal process concluded, and the umpire and the parties’ appraisers signed an Award setting forth the appraisal amount of $174,811.80.

Naturally, the Plaintiff’s were ready to move on at this point.  However, no check was forthcoming – only correspondence between their attorney, Earl Denham, and those representing State Farm, Lawrence Tucker and Scot Spragins.

kuehn-lawyer-correspondence1akuehn-lawyer-correspondence-2aOn August 29, 2008, the Kuehn’s filed suit in federal court, starting the current docket with a nine-count Complaint against State Farm charging both bad faith and fraudulent claims practices.

WHEREFORE, PREMISES CONSIDERED, your Plaintiffs demand judgment against the Defendants, and in particular Defendant, State Farm Fire, of actual damages in the amount of the appraisal Award, or in the alternative, in the amount of limits of liability of their insurance policy, and other sums they should have been paid under the insurance policy, extra-contractual damages and punitive damages in an amount sufficient to make Plaintiffs whole and deter future wrongful conduct of the Defendants, and in particular Defendant, State Farm Fire, together with all costs attorneys’ fees and pre- and post-judgment interest. Plaintiffs request any further relief that may be appropriate.

Banahan entered swinging after the Tucker and Spragins stepped aside.  Defendant’s Memorandum in support of its motion to quash/for protective order (re: subpoenas of its consel) and for interim stay claims Plaintiffs cannot make the requisite showing that State Farm’s counsel is in exclusive possession of non-privileged information that is not only relevant but also crucial to this case.

Plaintiffs fired back with a Response charging, Had Lawrence “Lucky” Tucker and H. Scot Spragins not inserted themselves into the appraisal process and, as agents for State Farm, attempted to direct the appraisal process and caused it to be handled differently from the twenty to thirty other appraisals conducted by State Farm by appraiser John Minor in the wake of Hurricane Katrina, there would not be an issue here.

In the Reply that followed, Banahan argued, Plaintiffs’conclusory assertion that State Farm’s counsel “put themselves in the place they now find themselves by actively attempting to influence the appraisal process … regardless of how the appraisal was actually conducted,” does not make it so. “How the appraisal was actually conducted”is the key issue in this dispute.

I disagree and believe Spagins’ correspondencewith State Farm’s appraiser supports my position:

With all due respect, you and others did not perform an appraisal as that term has been used under the policy and the law’s of Mississippi and other states. Appraisal does not equate to adjustment. It is a more restrictive term. Adjustment includes the determination of the cause and scope of the loss. The law is clear that the appraisal clause is NOT a proper means to resolve these type disputes. We, as attorneys for State Farm Fire, believe this is exactly what occurred here. You and others reached some consensus as to what damage was caused by wind vs. water. Coverage decisions are left solely to the parties and, if they cannot agree, these decisions are relegated to the courts-·and not appraisers–unless agreed otherwise. The appraisal clause should be used, according to the policy and established law, only to establish the cost of damage which both parties agree was covered.

Spragins was responding to this message from the appraiser:

I have gotten a number of phone calls from the umpire and other appraiser on this loss. They identify the award has not been paid. I will stress to you that I was very careful to complete this appraisal the same as I did every other one for State Farm after Katrina. If you or Scot have any questions of me please feel free to call. The award amount was for wind only.

Can you guess my position?  It should be easy as it’s much the same as my opinion about McIntosh.

13 thoughts on “Double Trouble Doubled Down – Kuehn v State Farm”

  1. What we are seeing here is see that Scot Spragins is a lawyer about on par with those scumbags at Ungarino & Eckert,, willing to do ANYTHING and I mean anything to make a corporate buck.

    But now he is a witness and hopefully the Mississippi bar will be notified of Spragins’ behavior which appears to have crossed from beyond advocacy to agency. I also believe sanctions are in order.

    sop

  2. This is a very interesting and detailed post. But what interests me most is something that I’ve seen a few times before: the homeowner’s carrier deducting from its payments “overpayments” or “advances” made under the WYO flood policy. I’m sure Sop could tell us how that would balance out on some ledger(s).

    In other words, if an insured was “overpaid” with U.S. Treasury funds on his flood claim, how in the world does State Farm take that benefit on the homeowner’s side? And did the Farm then pay that $2,500 back to the Fed. Govt.? If State Farm cannot show that it repaid the Fed. Govt on this claim, guess what we have here?

  3. You mean besides the Mississippi version of the State Farm hired gun? FEMA/NFIP of old had their heads firmly inserted up Marc Racicot’s rear end. Now, who knows but I’m certain we can find out. I know if I were Earl Denham I’d want to know. Perhaps this is the reason Senter, seeing cases like this where the evidence is literally bitch slapping him across his face, realized the error of his way in Ex Rel Rigsby.

    If you google Spragins you’ll see Rossie and NMC @ folo were all cuddled up with him and I guarantee you this won’t see the light of day over at Rossie’s blog just like he has been very quiet about Senter’s discovery order in Ex Rel Rigsby. He chose not to publish the comment I left one week ago today on that very topic.

    Of courses these are the type cases (especially after we apply sunshine) that State Farm experiences their come to Jesus moments and pays up big so their bad behavior is hushed up. Like Gagne they were just a tad too greedy in applying the ol’ corporate boot to the throat thus this thread.

    If you want a prime example of what kind of person was leading the Dick Scruggs lynch mob you have exhibit A in Scot Spragins. Dick Scruggs proved himself a crook but these other cats ain’t no friends of mine.

    Sometimes I get the urge to bathe repeatedly after seeing how the court system really works.

    sop

  4. A single Interrogatory and a single Request for Production of Documents would answer the question. For example: “Please produce all documents, including electronic data, which reflect State Farm’s reimbursement of FEMA/NFIP for an overpayment under the Kuehn’s flood policy.”

    I hope their lawyers will make such a request.

  5. Rick is 100% correct again. I was shocked to see that SF deducted the overpayment from the homeowner’s claim. I have heard from others that it happened, but have not seen it myself until right there.

    That is what jumped out me initially.

  6. The deduction of the overpayment is standard here or that’s my understanding. It’s the question I’ve been asking for some time and obviously not making my point very well.

    It’s part of the thinking, also common here, that accepting a flood payment is an admission of flood damage re: the motion in Gagne asking Judge Senter to reconsider prior rulings and State Farm citing a decision of Judge Ozerden in his ruling in Fowler. I keep asking where there is a supporting federal regulation as I don’t find one.

    As to Spragins, I think there is some basis in law for the view of “appraisal” but it simply didn’t apply in this case as the damage in question wasn’t as confined as it the SF position makes it appear. Re: the motion, response, and reply I linked.

  7. Great post Nowdy. I was searching for a word which would properly describe the claims process of State Farm in this case and this is the one I came up with—vindictive.

    But really its probably not the right word. I think vindictive is too emotive. While their customer may have emotions in this matter, State Farm is less about emotion and more about strategy.

    So I think the better word is—derail. This entire claims process is just one attempt after anouther to derail the proper adjustment of the claim.

    Good job Nowdy for documenting the process and good job of Kuehn’s lawyer for playing the derail game so well.

    I think conceptually you can imagine a person being railroaded and thus deprived of justice. This is a case where someone is trying to be derailed from justice.

    Shame on you Mr. Spragins for playing such games with other peoples lives. Your momma must be proud of you boy?

    de?rail?
    1. to cause (a train, streetcar, etc.) to run off the rails of a track.
    2. to cause to fail or become deflected from a purpose; reduce or delay the chances for success or development of: Being drafted into the army derailed his career for two years.

    3. (of a train, streetcar, etc.) to run off the rails of a track.
    4. to become derailed; go astray.

  8. Nowdy this post is excellent but it leaves out some wording in the correspondence I think says it all and it’s pretty obvious Scot Spragins has been drinking too much of his own koolaid. You may also remember Spragins was also the one who tried to have Provost Umphrey DQ’d from the cases they took after Scrugg’s conviction.

    I know this, John Minor of Complete General Contractors, Inc. sounds like the protypical honest construction professional of the variety I deal with day in and day out in my day job. His pedigree includes:

    John G. Minor is president of Complete General Contractors, Inc., (general contractors, experts and appraisers) and a licensed instructor certified by the North Carolina Department of Insurance. Mr. Minor is a third-generation contractor and has committed his career to the understanding of why buildings fail and the repairs necessary to restore them in full. Complete General Contractors, Inc., serves the Southeast out of their home base in Gulf Breeze, Florida, and is a licensed general contractor in North Carolina, South Carolina and Florida. Complete, Inc. the parent corp. has been serving the South East originally out of Wrightsville Beach N.C. since 1997.

    This is what Mr Minor had to say to Spragins and it well sums things up:

    I completely accept your reasoning and legal acumen. Unfortunately I am a simple appraiser and was given an appraisal to conclude and had to go with what I had. I feel that if the judge directed it to appraisal and you could not avert It then I was left with my job to do. I did at your request complete an appraisal of the whole damages ( hurricane) and presented it to the panel and to your office with the the hope you could take that to the court for your purpose. I also asked to be relieved of my post prior to finalizing knowing I was caught in a short place. I wouid have never accepted the assignment that you identify you made. In the future I suggest you might call me personally so I could refuse these type of assignments right up front.

    I agree that these claims are very difficult when they include wind and flood but I also suggest that we were very skilled appraisers and only contemplated the wind damage that which was above the flood line and not excluded by SF. My award was an excellent settlement but I suggest you are arguing the process not my result. This appraisal panel has more than 70 years of combined experience in the field and the umpire on this file has completed several hundred appraisals, the other appraiser more than that and I am no rookie. I feel we had the experience to do what we did and I asked many others whom I respect in the industry. Until you have this experience, I will go with my peers. That may put me out of a job but so be it, there Is always work for an honest man.

    Mr Minor really deserves his own post. So many lawyers are so ate up with themselves they’re too dumb and blind to know when a “simple appraiser” has handed them their ass.

    This really is too rich.

    sop

  9. Vindictive was pretty accurate IMHO, Steve. It’s as if the company is “personally offended” by a policyholders questioning the handling of their claim.

    State Farm’s “defense” is a “slash and burn” offense and it’s really hard to read these cases and not feel the policyholder’s pain.

    The sense of betrayal must be unbearable because we all have invested so much trust in our insurer only to find the industry as a whole views its customers with contempt. They want to be in the investment business and appear to be barely be able to tolerate the way they have to earn the money.

    You can see that intolerance extends to their agents and brokers and in short order that part of the business will be managed by technology. Those jobs will be gone. That’s heart-breaking.

    As Sop and I have said from day one, we care about all our friends and neighbors that have been slabbed, including those we buy our insurance from.

  10. Great catch, Sop. Readers should always look at the attached documents as they tell more of the story from both points of view.

    I’m surprised no one has commented about the basis for moving this case to federal court the first time since there was no dispute over a NFIP claim. I was hoping someone could offer an educated guess if not an explanation.

    You are right about Mr. Minor deserving a post of his own – and it should include the other appraiser and the umpire as I believe all three agreed about the extent of the wind damage.

  11. I believe the basis for removal was complete diversity under 28 U.S.C. 1332. In fact, I don’t see how the case was remanded unless, a local agent was named as a defendant.

  12. NRB, the amount in controversy was the $10,765.08 payment for wind damage which would not meet the $75,000 threshold.

  13. Nowdy, wasn’t it moved to federal court based on “we know a WYO company is required to move disputed NFIP claims from state to federal court ” but then remanded because “we also know Plaintiff

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