Blakely v. USAA Cas. Ins. Co.
| Decision Date | 05 December 2011 |
| Docket Number | Civil No. 2:06-CV-00506 BSJ |
| Parties | ALAN BLAKELY and COLELYN BLAKELY, Plaintiffs, v. USAA CASUALTY INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — District of Utah |
On February 16, 2011, this court docketed the mandate of the court of appeals in the above-entitled action. (See Mandate, filed February 16, 2011 (dkt. no. 138).) The court of appeals had affirmed this court's August 7, 2009 Order granting summary judgment against the plaintiffs Alan and Colelyn Blakely ("the Blakelys") on their claims against USAA Casualty Insurance Company ("USAA") for breach of express contract and intentional infliction of emotional distress, but reversed "the district court's dismissal of their claim for breach of the implied covenant of good faith and fair dealing as frivolous under Rule 16." Blakely v. USAA Cas. Ins. Co., 633 F.3d 944, 951 (10th Cir. 2011).1
Following remand, court and counsel conferred at a March 1, 2011 Status Conference as to what remains to be decided in this case. The court set a schedule for further motion practice and provisionally calendared a continued Final Pretrial Conference.2 (See Minute Entry, dated March 1, 2011 (dkt. no. 142).)
On April 15, 2011, USAA filed another motion for summary judgment, this time on the Blakelys' "remaining claim for breach of the implied covenant of good faith and fair dealing,"accompanied by a supporting memorandum with exhibits.3 Counsel for the Blakelys filed a memorandum in opposition, also with exhibits,4 to which counsel for USAA filed a reply.5 The court reviewed the memoranda and exhibits and the motion was calendared for hearing on May 24, 2011.
At the May 24th hearing, L. Rich Humpherys appeared on behalf of the Blakelys; S. Baird Morgan and Zachary E. Peterson appeared on behalf of USAA. The court heard and considered the arguments of counsel, and took the matter under advisement. (See Minute Entry, dated May 24, 2011 (dkt. no. 152).)
Having reviewed and examined the memoranda and exhibits submitted by the parties, as well as the prior record in this proceeding, and having considered the arguments made by counsel at the May 24th hearing in light of the pertinent legal authority, this court now concludes that USAA's motion for summary judgment should be granted to the extent it is based upon USAA's "fairly debatable" defense under Utah law.
Once again, the following operative facts are not genuinely at issue:
1. On August 29, 2002, a fire occurred in the unfinished basement of plaintiffs' home in Bountiful, Utah. The Blakelys and USAA agree that this fire was caused by acts or omissions of athird party, Stone Touch. Stone Touch worked on refinishing the cement floor of the unfinished basement of the Blakelys' home. In the process of this work, fumes from the sealant being used were ignited by the water heater pilot light and the fire resulted.6
2. At the time of the fire loss, the Blakelys were insured under a homeowner policy issued by USAA and covering the premises in question.7
3. The Blakelys reported the loss to USAA and within 24 hours a local claim adjuster, Curtis Camp, arrived at the premises, conducted an initial inspection and assessment and authorized both the securing of the premises and temporary living accommodations for the Blakelys.8
4. The Blakelys requested and were paid for two nights' accommodation at the Grand America Hotel in Salt Lake City. Thereafter, the Blakelys requested and USAA paid for temporary living accommodations at a rental home in the Blakelys' neighborhood and did so through November 30, 2002. All of these payments were made under the Additional Living Expense (ALE) provision of the USAA policy.9
5. During the initial adjustment process, the Blakelys attempted to hire the builder of their home, Ivory Homes, Inc., to repair the home. The builder declined because it did not do fire restoration work. The Blakelys considered other options, and then agreed to use Phipps Construction, a contractor pre-approved and urged by USAA, and they signed an agreement with Phipps Construction for the restoration and repair work.10
6. A principal concern raised by the Blakelys as to Phipps Construction's structural remodel and restoration plan (under the Dwelling coverage of the USAA policy) concerned the number of joists in the basement ceiling and main level floor that required replacement or significant repair work.11
7. Phipps Construction retained an independent structural engineer, Mr. Donald Barfuss, whose inspection of the Blakelys' homes was conducted on September 9, 2002. Mr. Barfuss issued an engineering report12 identifying which joists needed replacement, which could be repaired, and which needed cleaning or treatment by the contractor.13
8. The joist replacement/repair recommendations in the Barfuss report were implemented by Phipps Construction or its subcontractors.14
9. By mid-November, 2002, Phipps Construction completed the work recommended in the Barfuss report and its repair and restoration work in the Blakelys' home. At that point, still unresolved were some odor and cleaning issues and some personal property claims—claims which USAA submits had ostensibly been resolved and paid by not later than July of 2003, but which the Blakelys insist still remained unresolved.15
10. By July of 2003, USAA had made the following payments to the Blakelys or on the Blakelys' behalf: $47,789.94 for dwelling/structural damage; $37,832.70 for unscheduled personal property; and $7,709.56 for temporary housing, totaling $93,332.20.16
11. By July of 2003, the Blakelys were still not satisfied with the extent of the floor joist restoration work performed by Phipps Construction pursuant to the Barfuss report, and with the cleaning, repair and restoration of their home and its contents.17 But instead of making further demand for payment by USAA of additional amounts within the dwelling, contents and temporary housing coverage under their USAA policy, and instead of invoking the contractual remedies available under the terms of that policy to resolve the issue,18 the Blakelys changed course.
12. On July 1, 2003, the Blakelys commenced a civil lawsuit against the basement flooring contractor (Stone Touch) for damages, property and personal injury resulting from the August 29, 2002 fire. See Alan Blakely and Colelyn Blakely vs. Desert Rose Roofing, Inc., dba Stone Touch, et al., Civil No. 030914762 (3d Dist. Ct., filed July 1, 2003). Plaintiffs were represented in that action and all related proceedings by attorney Rex Bushman. A year later, on July 20, 2004,USAA filed a motion to intervene in that lawsuit, which was granted.19
13. Shortly after USAA intervened in the Stone Touch litigation, the Blakelys notified USAA that they had identified additional losses that they had not previously submitted to USAA. Specifically, the Blakelys' attorney, Rex Bushman, wrote to USAA: "It has become apparent in depositions that plaintiffs have not applied for a significant amount of their losses to their insurer, USAA, because of extreme disappointment with the contractor USAA hired to make remedies for the fire and which while in the process of facilitating remedies offered such a poor performance that further damages were caused my clients."20
home owner's policy.22
The Blakelys' new loss inventory estimated a total repair cost for their dwelling of $303,890.00 and an estimated replacement cost for damaged personal property of $207,133.50.
15. In response to this renewed claim for additional losses, USAA responded and requested additional information regarding the claims in a letter from Robert Sawyer, a USAA claims adjuster, to Rex Bushman, dated August 27, 2004.23 Mr. Sawyer noted that "the information recently supplied to USAA regarding additional claims appears to have some overlap in comparing what USAA has paid for the loss and what is being additionally claimed."
16. The Blakelys received this letter, and in response, Alan Blakely wrote:
Given the demands placed upon us at the present time with regard to our ongoing litigation [against Stone Touch], it is our preference to delay the matter of additional claims against USAA for the time being. We therefore request that further examination of this issue be delayed pending the resolution of our action against Stone Touch.
(Letter from Alan Blakely to Robert Sawyer, dated September 9, 2004.24 )
17. On October 13, 2004, the Blakelys' attorney Rex Bushman sent USAA another letter in which he clarified their position: (Letter from Rex Bushman to Ralph Tate, dated October13, 2004 (emphasis added).25 )
18. Yet as things progressed, the Blakelys realized that despite clear liability, Stone Touch would not...
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