Kuehn v State Farm: From a simple ass to an ass-clown. Team State Farm sets new lows courtesy of the insurance defense bar.

Nowdy has been doing yeoman’s work keeping Slabbed stocked with material in my absence but when she emailed me the recent case activity in Kuehn v State Farm I knew it was time to get back into the game. To bring everyone up to speed I highly recommend Nowdy’s two previous posts on this case which can be found here and here.  The long story greatly shortened is the Kuehn’s invoked a policy provision called appraisal, a process involving three professionals that calculate the amount due under the policy in question. State Farm had “adjusted” the claim and paid the Kuehn’s the whopping sum of $10,765. The appraisers found $174,812 of covered damage. The Farm, through their Oxford based lawyers, went postal and now the case is before Judge Senter.

An interesting case twist came about during the deposition of State Farm appraiser John Minor in February of this year. During that depo it became very apparent State Farm lawyers H. Scot Spragins and Lucky Tucker had crossed the line from being legal advocates to agents of State Farm. When that fact became clear to Kuehn lawyer Earl Denham that such was indeed the case, Mr Minor’s depo was shut down with Mr Spragin’s acquiescence and State Farm hired new lawyers.

I wrote that short synopysis because I felt the need to refresh myself on the case. My memory’s reputation is impeccable but reading State Farm’s very curious case filings left me confused as to the events that lead us to this point – to the point where new State Farm lawyer John Banahan was misleading positing a rossmillerian fantasy of epic proportions.  IMHO these filings are of the type that wastes valuable court time and short changes other policyholders that have now been waiting over three and a half years for their day in court.

First Banahan begins by trying to salvage the reputations of Hal “Scot” Spragins and Lucky Tucker and their Oxford based law firm Hickman, Goza & Spragins with a rambling 19 page nonsensical response to the plaintiff’s DQ motion. There is no text in the document worth quoting as the brief has no basis in the reality of this case as it relies on the notion that three appraisers determined the cause of damage rather than the extent of covered damage, an assertion State Farm’s own appraiser vigorously denied.

Next up Banahan filed the obligatory motion for summary judgment and he included this memorandum in support of his motion. Again it is a curious 21 page read that relies on the standard State Farm meme that flood is somehow a super peril that negates their obligations to cover wind damage that occured before the flood waters arrived. Banahan also goes after the Kuehn’s designated appraiser, Lewis O’Leary, claiming he was biased and not disinterested. It also relies on the unsupported notion the appraiser determined causation instead of the damages that were covered under the Kuehn’s State Farm homeowners policy. Unfortunately for the three State Farm stooges in Banahan, Spragins and Tucker, State Farm appraiser John Minor has quite a story to tell, which brings us back to the realities of the case and the contrived and bogus arguments used by State Farm’s lawyers to deny the Kuehn’s their insurance coverage.

First we start with the Kuehn’s reply to Banahan’s DQ opposition motion. Kuehn attorney Earl Denham has well documented his arguments by attaching the entire depo of State Farm appraiser John Minor to his 75 page filing. Denham seems very sharp as he lets State Farm stooges Tucker and Spragins hang themselves. Rather than quote from Mr Denham’s filing to start let’s backtrack to Nowdy’s second post on Kuehn which covered the Kuehn’s fruitless efforts to have State Farm honor the appraisal in detail:

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.

Plaintiffs fired back ……..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 Spragins’ correspondence with 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.

As I observed in a comment I left to Nowdy’s earlier post it gets far better :

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.

Unfortunately there is also work for the dishonest man willing to abuse the legal system for a corporate paymaster. We do know Spragins and Tucker made the appraisal process the issue  as Earl Denham points out:

6. State Farm apparently conducted dozens of appraisals in Mississippi following Hurricane Katrina, and twenty or so were done specifically by State Farm’s designated appraiser in the Kuehn matter, John Minor. One of two things had to have happened in this case: either the Kuehn’s appraisal was conducted in exactly the same manner as the rest of them, or it alone was conducted differently. If it was conducted in the same manner as the rest of the appraisals, why were the others paid while this one was not? If it was conducted differently from all of the other appraisals, the question is why was it conducted differently?

7. Minor testified repeatedly that Spragins and Tucker attempted to get him to perform this particular appraisal differently from the others he had done for State Farm, even though other personnel at State Farm instructed him to the contrary, both in the past and during the Kuehn appraisal. See Exhibit “B,” Second Deposition of John Minor (March 10, 2009), pp. 102-104, 107-108, 110-111, 114-115, 133-135, 146.

8. There is evidence from which a trier of fact could certainly conclude that State Farm’s attorneys, Spragins and Tucker, attempted to introduce impropriety and ambiguity into the appraisal process as to the Kuehns’ claim so that later State Farm could claim the appraisal was conducted inappropriately. In fact, Minor repeatedly asked to resign from the Kuehn appraisal because of disturbing conversations he was having with Spragins and Tucker; however, Tucker, according to Minor, told Minor that he was not allowed to resign because the chancery court had designated him as the appraiser, all of which is nonsense. See Exhibit “B,” Second Deposition of John Minor, pp. 108, 109, 168, 173-174. This utterly false representation prevented Minor, who, because of Spragins and Tucker, “desperately” wanted to resign, from quitting the appraisal.

9. Tucker and Spragins, both through their representations and their omissions to Minor, attempted to “set up” the Kuehns (as well as Minor; see Exhibit “B,” Second Deposition of John Minor, p. 108) in such a way as to further interfere with the appraisal process as outlined by the policy language, delay the payment of the Kuehns’ claim, and pursue their own anti appraisal agenda on behalf of State Farm. According to Minor’s testimony, the attorneys communicated with him during the appraisal process in such as way as to make him feel they were trying to “blackball” him, or “play dirty pool,” and he felt threatened. See Exhibit “B,”Second Deposition of Minor, pp.159-161. This is the man that State Farm, through Lucky Tucker and Scot Spragins, hired. The only specific instructions regarding the appraisal which Minor could actually remember were squarely in contradiction to what is actually provided for by the subject policy.

Mr Denham continues his damning indictment of Spragins and Tucker on the bottom of page 8:

However, the only clear instruction Minor could remember Tucker giving him was completely in contradiction to this. Tucker instructed Minor to appraise the entire loss, including both water and wind damage. See, e.g., Exhibit “A,” First Deposition of John Minor, p. 18. Hence, Tucker clearly gave him erroneous instructions as to how to conduct the appraisal process.

10. Tucker later asserted, on multiple occasions, that the appraisal in this case was conducted properly and appropriately under the terms of its policy of insurance. See Exhibit “E,” E-mail chain between Earl Denham and Lawrence Tucker. Mr. Tucker states first, on May 30, 2008, that “the Kuehns’ loss has been appraised.” Then, on May 30, 2008, Mr. Tucker states, “I have reviewed the attached Chancery Court Order commanding appraisal. It has been complied with in full.” It should be noted that the Chancery Order referred to commands that the parties comply with appraisal under the terms of State Farm’s policy. Mr. Tucker then goes on to state, “An appraisal in accord with that language has already occurred – we selected an appraiser, you selected an appraiser, the appraisers selected an umpire, and together they determined the total amount of loss sustained by the Kuehns.”

Mr. Tucker, once again, states, “The appraisal process is now complete. The total amount of the [covered] loss sustained by the Kuehns as a result of Hurricane Katrina has been determined and no determination as to wind/water has been made.” In light of the communications we now know had already taken place at this time, Tucker was obviously attempting to play both sides of the coin here in order to benefit State Farm. It could not be clearer that Tucker, and potentially other members of his firm, will be essential witnesses in this litigation, especially with regard to the breach of contract, fraud and bad faith claims.

Clearly Spragins and Tucker are skilled in abusing the court system to the benefit of their client State Farm. The record clearly indicates the Kuehn’s tried every honest method available to get State Farm to honor their homeowner policy to no avail. This case gives us a clear window in many of the underhanded tactics unethical corporate lawyers use to delay, deny and deceive on behalf of their big business clients. They do it because judges allow it.

sop

12 thoughts on “Kuehn v State Farm: From a simple ass to an ass-clown. Team State Farm sets new lows courtesy of the insurance defense bar.”

  1. Amen brother! The last sentence DOES SAY IT ALL!

    We need Congress to raise the amount in controversy for diversity jurisdiction to $500,000.00. That would solve all the problems with ideologues (sic?) ruling based on ideology as opposed to the law.

  2. Also, how can SF complain when the gentleman “only contemplated damage above the flood line?” The flood line deosn’t tell you squat other than flood water entered the home AT SOME POINT AND TIME.

    Today, in Louisiana, such a loss adjustment is per se bad faith under 22: 1893, formerly 22:658 and subjects the insurer to penalties under 22:1973, formerly 22:1220.

  3. State Farm wants to be a much loved and feared company. As Machiavelli pointed out its a hard trick to pull off. Machiavelli would be proud of their expert application of his work.

  4. I made a homeowners claim against my HO-B for a covered water damage event, and the SF claims supervisor (in a letter) stated: “State Farm has accepted coverage for these claims…” The first claim rep assigned to work the claim, who also lived in my home town and never inspected the distinct claim I made, filed three additional claims without my knowledge or approval. Needless to say, SF non-renewed my policy. Anyway, long story short, I was a 30-plus year agent for SF when this happened, and subsequent lawsuit filed against SF for bad faith claims, etc., SF terminated my Agent’s Agreement on April 10, 2008. Retaliation? I believe it is.

  5. In the lawsuit I filed against SF, bad faith claims, breach of contract, etc., the lawyers engaged by SF manufactured evidence, producing same in the record of the court. What’s is more, defense counsel representing the remediation company that was co-defendant in the suit manufactured photos of a two-floor residential dwelling to show the damages of the residence in the lawsuit. MY HOME IS A ONE-FLOOR RESIDENCE. The defendants refused to honor lawful subpoenas demanding material witnesses appear and be deposed, and answer questions regarding the manufactured and misleading bad facts evidence the defense attorneys produced in the record of the court, and the judge refused to honor motions for sanctions against the attorneys and granted the defendants motions for summary judgment.

  6. The post is very significant for a number of reasons.

    Thanks for bringing this case to everyone’s attention.

    It will make it into our library and should be in every attorney’s library still representing policyholders against State Farm.

    Great job!

  7. Thanks for all the comments. Mr. Ch3ckMat3, was your judge’s last name Ozerden or Engelhardt? Policyholders stand no chance at getting justice before either one IMHO.

    There are others too in the La Eastern district such as Ginger Berrigan and a couple of the magistrates. And of course we have Edith Jones at the 5th Circuit.

    The sad thing about Ozerden is he clerked for a judge we consistently hear good things about – Judge Eldon Fallon. Evidently Ozerden’s subsequent private practice representing insurers erased any concept of justice he might have picked up from Fallon.

    sop

  8. I have about 1800 appraisals spanning 4 decades and John Voelpel has about 1000. Including John Minor’s work in this area, the group is collectively over 3000 Appraisals. It is unlikely that there will ever be an appraisal panel that comes together and reaches a unaminous decision again, with 3000+ Appraisals to their credit.

    The original appraisal clause in this country, dating back to the late 1700’s, actually instructs the panel to go back and readjust the claim to see if the original adjuster “got it right” (copies of same are available upon request). I have a collection of Memorandum of Appraisals published by the insurance industry itself over the last 65 years and all of them support the notion that this fundamental step of taking the causation that is at issue and reestimating the value of the loss as the result of that causation alone, is still the basis today of modern appraisals. Starting with Uniform Standand #3925 (circa 1940’s) and extending through today with Appendix 30C & 30E in “INSURING REAL PROPERTY”, a treatise on insurance, Stephen Cozen (Cozen & O’Conner), General Editor. All of these MOM’s first set out the causation for the panel to use as a “filter” and second, request that we set the dollar value of those damages. If this mindset as to how an appraisal is to be conducted has remained consistent within the industry, this relatively new twist on how appraisals should be conducted seems to fly in the face of 216 years of tradition and the printed, internal materials that support just the opposite impressions.

  9. Mr. O’Leary:

    That was an extremely informative, professional and diplomatic posting; especially considering what you could have said.

  10. It was all that an more, Rick. Thank you very much, Mr. O’Leary, for honoring the slabbed with your comment.

    I’m certain I’m not the only one who would like to know more about the appraisal process – or the only one who has noticed the insurance defense bar is skilled in adding fiction to just enough fact to make it appear the whole of what they say is factual.

    If there is anything not on your website that you think would be helpful, you can email anything you think would be helpful, you can email Sop at earning04 at gmail.com and he can also tell you how to fax.

    I hope you will continue to read and comment – and that our readers will check out the great information on your site
    http://www.insuranceclaimconsulting.com

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