Eagley v. State Farm Ins. Co.

• Decision Date: 29 September 2015
• Docket Number: 13-CV-6653P
• Parties: STEVEN P. EAGLEY and MELISSA EAGLEY, Plaintiffs, v. STATE FARM INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Western District of New York

STEVEN P. EAGLEY and MELISSA EAGLEY, Plaintiffs,
v.
STATE FARM INSURANCE COMPANY, Defendant.

13-CV-6653P

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF NEW YORK

September 29, 2015

DECISION & ORDER

PRELIMINARY STATEMENT

Plaintiffs Steven P. Eagley and Melissa Eagley ("plaintiffs") sued defendant State Farm Insurance Company ("State Farm") in New York Supreme Court for breach of contract, alleging that State Farm breached the homeowner's insurance policy that it had issued to plaintiffs by failing to pay covered losses caused by a fire at their residence. (Docket # 1-1). Pursuant to 28 U.S.C. §§ 1332(a) and 1441, State Farm removed the action to this Court, invoking diversity jurisdiction. (Docket # 1). State Farm thereafter filed its answer, which asserts various affirmative defenses, including fraud and breach of the policy's cooperation provision. (Docket ## 1, 5). The parties have consented to the disposition of this case by a United States magistrate judge, pursuant to 28 U.S.C. § 636(c). (Docket # 7). Currently pending before the Court is State Farm's motion for summary judgment. (Docket # 16).

STATE FARM'S MOTION FOR SUMMARY JUDGMENT

State Farm seeks summary judgment dismissing the complaint in its entirety. (Id.). First, State Farm contends that plaintiffs breached the cooperation provision of the

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insurance policy by failing to answer certain questions during their examinations under oath ("EUOs"), to subscribe to their EUOs, and to produce records and documents requested by State Farm. (Docket # 16-10 at 4-12). According to State Farm, the duty to cooperate is a condition precedent to coverage, and each of the alleged breaches is a complete defense to plaintiffs' claim for payment under the policy. (Id.). Additionally, State Farm maintains that plaintiffs breached the policy by failing to timely submit compliant proof of loss forms for the contents and additional living expenses coverage under the policy. (Id. at 14-18). Finally, State Farm moves to strike plaintiffs' expert reports on the grounds that they are untimely. (Id. at 12-14).

Plaintiffs counter that genuine issues of material fact preclude summary judgment. (Docket # 22-15 at 3-5). First, they contend that the materiality of the questions posed during their EUOs is a question of fact, precluding this Court from concluding that their refusal to answer constituted willful non-compliance with the policy's cooperation provision. (Id.). Second, they assert that they subscribed to the transcripts on January 27, 2013. (Docket ## 22-1; 22-14 at ¶¶ 22-23). Third, they maintain that the proof of loss forms that they submitted substantially complied with the terms of the policy. (Docket # 22-15 at 3-5). Fourth, with respect to the failure to produce documents, they contend that the terms of the policy did not obligate them to provide State Farm with their expert reports. (Id.). Finally, they maintain that State Farm waived their purported noncompliance by failing to disclaim in a timely manner after their alleged noncompliance.¹ (Id.).

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A. Factual Background

The following facts are undisputed unless otherwise noted. On May 14, 2010, a fire caused the total loss of plaintiffs' residence (the "2010 fire"). (Docket ## 16-12 at ¶ 9; 22-14 at ¶ 9; 24-5 at ¶ 9). At the time, plaintiffs were insured under a homeowners insurance policy issued by State Farm. (Id.). They submitted a claim pursuant to that policy, and State Farm paid the claim. (Id.).

On October 5, 2011, plaintiffs notified State Farm that they had sustained another residential fire (the "2011 fire"). (Docket ## 16-12 at ¶ 2; 22-14 at ¶ 2; 24-5 at ¶ 2). At the time of the 2011 fire, plaintiffs were insured under a homeowners policy issued by State Farm.² (Docket ## 16-12 at ¶ 3; 22-14 at ¶ 3; 24-5 at ¶ 3). The policy provided, in relevant part:

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:

d. as often as we reasonably require:

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

(b) examinations under oath;

* * *

6. Suit Against Us. No action shall be brought unless there has been compliance with the policy provisions . . . .

See (Docket ## 16-3 at 23-24; 22-11 at 17-18).

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After receiving notice of the 2011 claim, State Farm commenced an investigation of the claim and began evaluating plaintiffs' coverage for the claim. (Docket ## 16-12 at ¶ 4; 22-14 at ¶ 4; 24-5 at ¶ 4). In connection with their investigation of the 2011 fire, State Farm conducted EUOs of both Melissa and Steven Eagley on two separate days, March 19, 2012 and November 19, 2012. (Docket ## 16-12 at ¶ 16; 22-14 at ¶ 16; 24-5 at ¶ 16).

During the March 19, 2012 EUO, Steven and Melissa Eagley both testified that after the 2011 fire they lived at Melissa Eagley's aunt's house for approximately one month. (Docket ## 16-7 at 11; 16-8 at 39). After that, they began renting a house located at 7 Pleasant Street, Clifton Springs, New York for a monthly fee. (Docket ## 16-7 at 12; 16-8 at 39). Melissa Eagley testified that the owner of the house was a friend of her mother's who lived in Arizona and with whom they had a lease agreement (the "owner"). (Docket # 16-8 at 39-40). According to Melissa, they agreed to pay the owner $1,200 per month, an amount which included utilities. (Id. at 39). Melissa testified that the owner told them that they did not have to make payment until after State Farm paid the insurance claim. (Id.). Melissa testified that they had stayed at the same residence after the 2010 fire as well. (Id.).

During the November 19, 2012 EUO, Steven Eagley testified that Melissa had been arrested and charged with insurance fraud the previous week arising out of their 2010 insurance claim, and that he too had been arrested in connection with that "incident." (Docket # 16-7 at 29, 31). Steven testified that he and his family continued to live at the 7 Pleasant Street residence, although he was unsure whether they had a written lease agreement. (Id. at 38). According to Steven, the owner had not yet charged them for their use of the house because the insurance claim had not been paid, but he believed that there was an agreement concerning how much they would pay. (Id.). He testified that he was unsure of the agreed-upon amount. (Id.).

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Steven testified that they had lived at the 7 Pleasant Street residence following the 2010 fire as well, but he did not know whether there was a written lease agreement with the owner. (Id. at 39). Counsel for State Farm asked Steven whether the owner had charged them for their stay in the residence following the 2010 fire. (Id.). Plaintiffs' counsel objected to the question, contending that questions pertaining to the prior claim were not relevant to the investigation of the 2011 fire claim and were the subject of a pending criminal investigation. (Id.). Counsel for State Farm responded that the issue of prior claims was relevant, especially with respect to the claim for additional living expenses. (Id.). Following a brief exchange, plaintiffs' counsel stated, "I'm not going to have him answer questions that - it's the subject of a current criminal investigation." (Id.). Counsel for State Farm responded:

Of course, I just need to warn you guys that I believe that State Farm has a reason and a good-faith basis to ask these questions to determine, among other things, the reasonableness of the ALE [additional living expenses.] Whether or not ALE was charged in the past, whether or not it's being charged now, whether or not there was any insurance fraud committed with respect to the prior claim with respect to the ALE, and so I have to continue to ask these questions.

(Id.).

Plaintiffs' counsel reiterated his position that information concerning the prior claim was not relevant. (Id.). Counsel for State Farm replied:

I just need to continue with the warning to say that, because I believe there's a good-faith basis to ask the questions, should you elect not to answer the questions, I just have to put the reservation of rights to let you know that your claim could be denied for that reason. It's up to you.

(Id. at 39-40). Counsel for State Farm then asked approximately fourteen questions relating to whether and how payments were made to the owner for the period during which the Eagley family lived at 7 Pleasant Street following the 2010 fire. (Id. at 40-41). After each of the

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questions, plaintiffs' counsel instructed Steven not to answer, and he did not answer the questions. (Id.).

A similar exchange occurred during Melissa Eagley's November 19, 2012 EUO. (Docket # 16-8). Counsel for State Farm questioned Melissa about her agreement with the owner for their post-2011 fire stay at 7 Pleasant Street, and she testified that they had a written lease agreement to pay $1,200 monthly rent, but the rent had not yet been paid because the owner "is just waiting for reimbursement from State Farm so we can...