Darmer v. State Farm Fire & Cas. Co.

• Decision Date: 31 January 2020
• Docket Number: Civil No. 17-4309 (JRT/KMM)
• Citation: 611 F.Supp.3d 726
• Parties: Steven DARMER, Plaintiff, v. STATE FARM FIRE AND CASUALTY COMPANY, Defendant.
• Court: U.S. District Court — District of Minnesota

611 F.Supp.3d 726

Steven DARMER, Plaintiff,

v.STATE FARM FIRE AND CASUALTY COMPANY, Defendant.

Civil No. 17-4309 (JRT/KMM)

United States District Court, D. Minnesota.

Signed January 31, 2020

Edward E. Beckmann, BECKMANN LAW FIRM, LLC, 3800 American Boulevard West, Suite 1500, Bloomington, Minnesota 55431, for petitioner.

Lehoan T. Pham, Michelle D. Christensen, and Scott G. Williams, HKM LAW GROUP, 30 East Seventh Street, Suite 3200, Saint Paul, MN 55101, for defendant.

MEMORANDUM OPINION AND ORDER ON PARTIES' MOTIONS FOR SUMMARY JUDGMENT

JOHN R. TUNHEIM, Chief Judge

Plaintiff Steven Darmer's residence was badly damaged by fire in November 2016. Darmer filed a claim with his insurer, Defendant State Farm Fire and Casualty Company ("State Farm"). Unsatisfied with State Farm's adjustment of his claims, Darmer has brought suit against State Farm alleging breach of contract, insurance bad faith, violation of the Minnesota Human Rights Act, and negligent supervision, and requesting declaratory judgment on several issues related to the insurance policy. Before the Court are two Motions for Partial Summary Judgment. Darmer seeks partial summary judgment on his breach of contract and statutory interest claims, as well as his demand for an appraisal. State Farm requests partial summary judgment dismissing Darmer's claims of insurance bad faith, violation of the Minnesota Human Rights Act, and negligent supervision.

For the reasons set forth below, the Court will grant State Farm's motion for summary judgment in full. As to Darmer's motion for partial summary judgment, the Court will deny summary judgment on Darmer's request for appraisal and on Darmer's claim that he suffered a constructive total loss in May 2017. Finally, the Court will deny summary judgment for Darmer and instead grant summary judgment sua sponte for State Farm on Darmer's claims that he suffered a legal total loss in November 2016 and that he suffered a constructive total loss in December 2016.

BACKGROUND

On November 15, 2016, a fire damaged Darmer's residence. (Decl. of Steve Darmer ¶ 2, Nov. 16, 2017, Docket No. 12.) Darmer filed a claim with his insurer, State Farm. (Aff. of Jene Jenkins-Jones ("Jenkins-Jones Aff.") ¶¶ 3–4, Dec. 7, 2017, Docket No. 18.)

I. THE POLICY

Darmer has a homeowners-insurance policy with State Farm. (Decl. of Troy D. Brown ¶ 14, Ex. N (the "Policy") at 356, Nov. 16, 2017, Docket No. 14.)¹ Several provisions of the Policy are relevant to the current motions:

Total Loss – Coverage A

The limit of liability shown in the Declarations for Coverage A – Dwelling is the amount we will pay when there is a total loss to the dwelling caused by a Loss Insured. No deductible applies to the loss to the dwelling. This does not prevent the payment of an amount greater than the Coverage A limit of liability (wherever shown) when: 1. you elect to replace the dwelling; and 2. Option ID – Increased Dwelling Limit is shown in the Declarations.

...

Concealment or Fraud

With respect to any occurrence or loss caused by fire, we do not provide any coverage to the insured who has: ... (2) after a loss, willfully and with intent to defraud; concealed or misrepresented any material fact or circumstance relating to this insurance.

...

Coverage C – Loss of Use

1. Additional Living Expenses . When a Loss Insured causes the residence premises to become uninhabitable, we will cover the necessary increase in cost you incur to maintain your standard of living for up to 24 months. Our payment is limited to incurred costs for the shortest of: (a) the time required to repair or replace the premises; (b) the time required for your household to settle elsewhere; or (c) 24 months.

...

Section I – Loss Settlement ... Coverage A – Dwelling

1. A1 – Replacement Cost Loss Settlement – Similar Construction

a. We will pay the cost to repair or replace with similar construction and for the same use on the premises shown in the Declarations, the damaged part of the property covered under Section 1 – Coverages, Coverage A – Dwelling ... subject to the following:

(1) until actual repair or replacement is completed, we will pay only the actual cash value at the time of the loss of the damaged part of the property, up to the applicable limit of liability shown in the Declarations, not to exceed the cost to repair or replace the damaged part of the property;

(2) when the repair or replacement is actually completed, we will pay the covered additional amount you actually and necessarily spend to repair or replace the damaged part of the property, or an amount up to the applicable limit of liability shown in the Declarations, whichever is less.

...

Section I – Conditions

...

2. Your Duties After Loss. After a loss to which this insurance may apply, you shall see that the following duties are performed:

a. give immediate notice to us or our agent.

... c. prepare an inventory of damaged or stolen personal property. Show in detail the quantity, description, age, replacement cost and amount of loss. Attach to the inventory all bills, receipts and related documents that substantiate the figures in the inventory;

d. as often as we reasonably require:

(1) exhibit the damaged property;

(2) provide us with records and documents we request and permit us to make copies;

(3) submit to and subscribe, while not in the presence of any other insured:

(a) statements; and

(b) examinations under oath; and

...

e. submit to us, within 60 days after the loss, your signed, sworn proof of loss which sets forth, to the best of your knowledge and belief:

(1) the time and cause of the loss;

...

(5) specifications of any damaged building and detailed estimates for repair of the damage;

(6) an inventory of damaged or stolen personal property described in 2.c;

(7) receipts for additional living expenses incurred and records supporting the fair rental value loss; and

...

4. Appraisal. If you and we fail to agree on the amount of loss, either one can demand that the amount of the loss be set by appraisal.... The appraisers shall then set the amount of the loss.

...

8. Loss Payment . We will adjust all losses with you. We will pay you unless some other person is named in the policy or is legally entitled to receive payment. Loss will be payable 60 days after we receive your proof of loss and:

a. reach agreement with you;

b. there is an entry of a final judgment; or

c. there is a filing of an appraisal award with us.

(Id. at 358, 364, 374, 381, 383–84)

II. STATE FARM'S ADJUSTMENT

A. Proof of Loss

In December 2016, Darmer submitted his proof of loss, as required by the Policy, to State Farm. (Jenkins-Jones Aff. ¶ 9, Ex. 1.) Darmer claimed $524,800 for the dwelling and other structures and $330,624 for personal property and Additional Living Expenses ("ALE") but did not include the itemization required by State Farm. (Id. ) A few months later, Darmer submitted a revised proof of loss, which substantially increased the claimed losses: $767,023.66 for the dwelling, $141,046.65 for other structures, $944,793.68 for personal property, and $1,098,987.05 for ALE. (Jenkins-Jones Aff. ¶ 19, Ex. 10.) Darmer's new proof of loss request totaled $2,950.951.04. (Id. ) State Farm claims it was concerned by these increases, and by Darmer's lack of cooperation in its investigation. (Id. ¶¶ 5, 7, 22–25.)

B. Dwelling

Darmer's policy includes coverage for the Dwelling and Dwelling Extension, as well as Increased Dwelling coverage. (Policy at 357.) The relevant limits of Policy A are $419,840 for the dwelling and $41,984 for the dwelling extension, for a total of $461,824. (Decl. of Edward E. Beckmann ("Beckmann Decl.") ¶ 2, Ex. A at 3, June 25, 2019, Docket No. 288.) Darmer's additional dwelling coverage, called Option ID, provides an additional $83,968 for the dwelling. (Id. ) In total, the policy limits for the dwelling (excluding additional sums for debris removal and landscaping) are $545,792. (Id. )

The relevant language of Darmer's policy as to his dwelling states that when there is a total loss, State Farm will pay policy limits. (Policy at 358.) Otherwise, State Farm will only pay "the actual cash value at the time of the loss," and will pay the remainder of coverage "when the repair or replacement is actually completed." (Id. at 381.)

Within three weeks of the fire, State Farm issued $259,337.85 to Darmer, as State Farm's calculated actual cash value. (Aff. of Tom Finney ("Finney Aff") ¶ 9, Aug. 28, 2018, Docket No. 108.) As its estimate updated or changed, State Farm made additional actual cash value payments to Darmer. (Id. ¶ 11.) In January 2017, State Farm paid $47,036.93; in April 2017 State Farm paid $13,565.81; on May 19, 2017, State Farm paid $55,100.72; on May 26, 2017, State Farm paid $18,343.69. (Id. ) However, State Farm explains that this money was for the actual cash value—those payments were not for the repair or replacement, because State Farm had not received a repair contract from Darmer. (Id. ¶¶ 12–13.)

While waiting for Darmer's repair contract, State Farm made several internal repair cost estimates. On December 9, 2016, State Farm estimated the cost to repair or replace the dwelling at $517,614.44. (Beckmann Decl. ¶ 4, SEALED Ex. C at 8, Docket No. 291.) On May 19, 2017, State Farm issued another estimate, and determined the replacement cost for the dwelling to be $605,433.13. (Id. ¶ 8, Ex. G at 16, Docket No. 288.) Eventually, in August 2017, Darmer submitted a repair contract to State Farm, estimating a total repair cost of $954,385.05. (Sixth Affidavit of Scott G. Williams ("6^th Williams Aff.") ¶ 5, Ex. 3 at 49, June 3, 2019, Docket No. 237.) Darmer signed the report contract on August 23, 2017. (Id. at 53.) Within days of receiving what it understood to be a valid repair contract, State Farm issued the remainder of the policy limits. (Finney Aff. ¶ 13.) State Farm later learned that Darmer had also signed an amendment to the repair contract the same day, lowering the total repair cost to $519,135.09. (6^th Williams Aff., ¶ 7, Ex. 5 at 127.) This...