…This evidence, viewed in the light most favorable to the Spansels, tends to show their claim was denied on October 19, before an adjustor had set foot on their property, reviewed photographs of the loss, or received any data other than the property’s location along Bay St. Louis. State Farm management affirmed this denial based solely on the property’s proximity to the Gulf of Mexico. This creates question for the jury as to whether State Farm lacked a legitimate arguable reason for denial of wind coverage under the homeowner’s policy…State Farm is not entitled to judgment as a matter of law on whether it lacked an arguable, legitimate reason for denial.
Because there is evidence that State Farm denied the claim without any adjustment or investigation, a question of fact exists as to whether State Farm acted at least in reckless disregard of the Spansels’ rights under the policy. Therefore, State Farm is not entitled to judgment as a matter of law on this portion of the bad faith claim either.
Next, the Spansels seek a declaratory judgment that the anti-concurrent clause is ambiguous and unenforceable. The anti-concurrent clause is cited in the previous section. State Farm argues that this clause has been held unambiguous and enforceable by the Fifth Circuit. Since that time, the Mississippi Supreme Court has rejected this contention. Corban, 20 So. 3d at ¶48. Corban held that the anti-concurrent clause was ambiguous and unenforceable to the extent that it purported to exclude any wind loss if it occurred separately from and in any sequence to excluded water loss. Id. at ¶¶32, 40-41. State Farm has not shown it is entitled to summary judgment on this portion of the declaratory judgment claim.
Although Judge Guirola granted most of State Farm’s motion, his reliance of decisions made by other members of the court and/or other courts makes his Memorandum Opinion and Order Granting in Part and Denying in Part Partial Summary Judgment extremely interesting reading. However, before looking further at his Opinion – Order, his Order Denying State Farm’s Motion in Limine to Exclude Evidence merits a mention:
State Farm argues [the Spansels]…should not be able to testify to the improvements and additions they made to the property after they bought it because they have no documentation of these renovations. The Court has considered the parties’ submissions and the relevant legal authority. The motion is denied.
Prior to Hurricane Katrina, the Spansels purchased a vacation home in Pass Christian, Mississippi. The Spansels testified that, before the hurricane, they made certain various renovations and they constructed a shed and gazebo. The Spansels gave the cost of these improvements and the names of the contractors that performed them. State Farm does not want the Spansels to testify to any of this because they have not produced any documents verifying the testimony, and State Farm questions the Spansels’ ability to accurately remember these matters.
What State Farm attacks is the Spansels’ credibility concerning the improvements they made to their home prior to Katrina. The credibility of witnesses and the weight of their testimony is for the jury to determine. That the Spansels may not be accurate and exact witnesses is not a matter for the Court and not a basis to exclude the testimony. State Farm points to no case where a property owner was not allowed to testify about his or her property because that testimony was not accompanied by documentary evidence… The objections State Farm raises may be addressed through cross-examination and contrary evidence.
The irony in State Farm’s not wanting the Spansels to testify without documentation and the Company’s lack of documentation to backup the denial of the Spansel’s claim should not be lost – which brings us back to Judge Guirola’s Opinion-Order:
State Farm argues that its legitimate arguable reason for denying the Spansels’ claim was State Farm’s determination that the loss was caused by flooding. The Spansels point to evidence that State Farm did not know what caused the loss, denied the claim without benefit of a site inspection or engineering report, and later acknowledged that some money is owed but has not unconditionally tendered any amount.
First, the parties disagree about when the denial took place. The Spansels argue it was on October 19, 2005, and State Farm argues it was October 24. On September 28, 2005, State Farm wrote the Spansels, “The damage to your property may have been caused by wind and water… On October 3, State Farm requested an engineer to determine the cause of loss. Three days later, State Farm again wrote the Spansels that it was continuing to try and determine what portion of the loss was caused by wind. On October 19, State Farm instructed the engineer, “Please cancel this assignment. . . . If you have already inspected this loss, do not write the report. Send your investigation material with your bill.” (Def.’s Mot. Summ. J. Ex. I at 100042). No investigation material is in the file.
On this same date, the adjuster recorded that he sent the Spansels a letter of denial “based upon flood being cause of loss and not an insured event. File ready to close without payment.” Id. at 100121. He spoke with the Spansels on October 21. On October 22, the adjuster’s supervisor Paula Roberts asked him, “Where are photos and logs of your investigation for this claim? We need proximity to water, etc. per investigation of wind and water protocols.” Id. State Farm’s wind and water protocol required an investigation be documented in the file to determine the wind versus water causation. He responded that he inspected the property and took pictures for the first time on October 22. He noted there was debris in trees 25 feet above grade. He continues:
There was a GE washer . . . and . . . dryer. . . . [The home] was 100 feet from the water. . . . However, based upon investigation of the other risks I have reviewed in the area, there is no question that it was washed away by water reaching at least 25 feet above grade. I have talked with the Insureds and they understand the position S[tate] F[arm] is taking and why. Id. at 100120.
There is no evidence of what other risks in what defined area he reviewed nor when he reviewed them. State Farm management then agreed the home was “completely destroyed by storm surge” based solely on the home’s “[c]lose proximity to Gulf as shown in photos.” Id. There are no photos in the claim file provided to the Court. The photos that State Farm provides on summary judgment reveal that there is a tree limb projectile piercing the top of the washing machine at about a forty-five degree angle. There is also an uprooted tree, a few felled trees, and several slanted trees.
This evidence, viewed in the light most favorable to the Spansels, tends to show their claim was denied on October 19, before an adjustor had set foot on their property, reviewed photographs of the loss, or received any data other than the property’s location along Bay St. Louis. State Farm management affirmed this denial based solely on the property’s proximity to the Gulf of Mexico.
Interestingly, the Spansels acknowledge their property was underinsured – a fact Judge Guirola cites in determining the issue of replacement cost value does not apply:
The Spansels are Louisiana residents who own land along Bay St. Louis in Pass Christian, Mississippi. On the property, at the time of Hurricane Katrina, was their two-story vacation home, gazebo, shed, and pier and boathouse extending into the bay. When the Spansels purchased the property in 2000, the home appraised for $319,000. The couple spent $100,000 since that time renovating the home, and then they constructed the gazebo and shed. The Spansels insured the dwelling, other structures, and personal property via flood and homeowner’s policies. The flood policy had limits of $148,400 for the home and $100,000 for contents. The homeowner’s policy had limits of $138,300 for the home, $13,830 for dwelling extension, $103,725 for contents, no limit for loss of use, and $2,500 for jewelry.
On August 29, 2005, Hurricane Katrina struck the Mississippi Gulf Coast, approximately twenty-seven miles west of the Spansels’ property. Katrina destroyed the gazebo, shed, and severely damaged the home. All that was left was the home’s concrete slab, sections of the second-story porch, the back exterior stairs, and some remnants of cinder block walls. The Spansels made claims under both policies. State Farm paid the limits on the flood policy and denied coverage under the homeowner’s policy…
Pursuant to an agreement with the Mississippi Department of Insurance, State Farm sent notification to the Spansels that they could participate in a re-evaluation and mediation of the homeowner’s claim. State Farm’s re-evaluation of the claim was $20,141.30…
Judge Guirola’s bottom line is well-supported:
…Defendant State Farm Fire and Casualty Company’s  Motion for Partial Summary Judgment should be and is hereby GRANTED as to the declaratory judgment claims on the water exclusion and hurricane deductible, misrepresentation, intentional infliction of emotional distress, breach of fiduciary duty, Mississippi Valued Property Statute, indemnity, unjust enrichment, reformation, and specific performance. The remainder is DENIED.
Nonetheless, I can’t help but wonder how many times the State Farm-MID mediation process produce similar results that shortchanged policyholders.