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.
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.
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.
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.
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.
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.
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.
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.