First Protective Ins. Co. v. Rike

Decision Date28 January 2021
Docket NumberNo. 4:20-CV-124-D,4:20-CV-124-D
Citation516 F.Supp.3d 513
CourtU.S. District Court — Eastern District of North Carolina
Parties FIRST PROTECTIVE INSURANCE COMPANY, Plaintiff, v. Linda RIKE, Defendant.

Jeffrey D. Keister, Stephen Kyle Pytlik, McAngus Goudelock and Courie, PLLC, Raleigh, NC, for Plaintiff.

Robert Henry Jessup, IV, Wesleigh Caroline Vick, Howard, Stallings, From, Atkins, Angell & Davis, P.A., Raleigh, NC, for Defendant.

ORDER

JAMES C. DEVER III, United States District Judge

On September 14, 2018, Hurricane Florence damaged Linda Rike's ("Rike" or "defendant") residence in Morehead City, North Carolina. Rike notified her insurance company, First Protective Insurance Company ("First Protective" or "plaintiff"), about the loss, but the parties could not agree on what First Protective owed Rike under the policy. As part of the claims process and pursuant to a provision in the insurance policy, First Protective invoked the appraisal process and each party chose an appraiser. On March 19, 2020, each appraiser signed an Appraisal of Insurance Claim Award Form ("Appraisal Award") detailing payments due to Rike. First Protective disputes the amount in the Appraisal Award due to Rike for loss of use of the property.

On June 19, 2020, First Protective filed a complaint against Rike seeking a declaratory judgment [D.E. 1]. First Protective seeks a declaration that the Appraisal Award is invalid. See id. On July 10, 2020, Rike answered, moved to dismiss for failure to state a claim, and counterclaimed for (1) breach of contract, (2) breach of the covenant of good faith and fair dealing, and (3) unfair and deceptive trade practices in violation of N.C. Gen. Stat. § 75-1.1 ("UDTPA") [D.E. 8].

On August 13, 2020, Rike moved for judgment on the pleadings under Federal Rule of Civil Procedure 12(c) [D.E. 11] and filed a memorandum in support [D.E. 12]. Rike asks the court to dismiss First Protective's declaratory judgment claim and to grant judgment on the pleadings concerning Rike's counterclaims. On September 17, 2020, First Protective responded in opposition [D.E. 17]. On September 30, 2020, Rike replied [D.E. 20]. As explained below, the court grants Rike's motion for judgment on the pleadings and dismisses First Protective's declaratory judgment claim that the Appraisal Award is invalid. The court also grants Rike's motion for judgment on the pleadings on her breach of contract counterclaim. The court denies Rike's motion for judgment on the pleadings on her counterclaim for breach of the covenant of good faith and fair dealings and her UDTPA counterclaim.

I.

First Protective issued a homeowner's insurance policy ("First Protective Policy" or "policy") covering Rike's residence in Morehead City, North Carolina, from May 18, 2018, to May 18, 2019. See Compl. [D.E. 1] 2; [D.E. 1-1]. The First Protective Policy contains a Duties After Loss provision which provides, in part:

SECTION I – CONDITIONS
...
C. Duties After Loss
In case of a loss to covered property, we have no duty to provide coverage under this policy if the failure to comply with the following duties is prejudicial to us. These duties must be performed either by you, an "insured" seeking coverage, or a representative of either:
...
5. Cooperate with us in the investigation of a claim;
...
8. Send to us, within 60 days after our request, your signed, sworn proof of loss which sets forth, to the best of your knowledge and belief:
...
g. Receipts for additional living expenses incurred and records that support the fair rental value loss ...

[D.E. 1-1] 25. The policy also contains an appraisal provision which provides, in part:

SECTION I – CONDITIONS
...
F. Appraisal
If you and we fail to agree on the value or amount of any item or loss, either may demand an appraisal of the loss. In this event, each party will choose a competent and impartial appraiser within 20 days after receiving a written request from the other. The two appraisers will choose an umpire. If they cannot agree upon an umpire within 15 days, you or we may request that a choice be made by a judge of a court of record in the state where the "residence premises" is located. The appraisers will separately set the amount of loss. If the appraisers submit a written report of an agreement to us, the amount agreed upon will be the amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will set the amount of loss. Each party will:
1. Pay its own appraiser; and
2. Bear the expenses of the appraisal and umpire equally.

Id. at 26 (emphasis added). The First Protective policy also contains a Loss Payment provision, which provides, in part, for the following:

SECTION I – CONDITIONS
...
J. 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 an 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 27 (emphasis added).

On September 15, 2018, First Protective began its loss adjustment of Rike's property when it transmitted a Catastrophe Claim Notification. See Compl. ¶ 12; Countercl. [D.E. 8] ¶ 8. On September 18, 2018, First Protective's estimator inspected Rike's property, established an estimate to repair the dwelling, provided First Protective an estimate, and First Protective issued payment to Rike under Coverage A (i.e., the dwelling). See Compl. ¶ 13; Countercl. ¶ 9. Rike did not agree with First Protective's estimate. On January 9, 2019, Rike provided an estimate for repairs to the property. See Compl. ¶ 14; Countercl. ¶ 9. Due to the significant difference between the two estimates, First Protective ordered another inspection of the property, which occurred on January 24, 2019. See Compl. ¶¶ 14–15; Countercl. ¶ 9. First Protective's second estimate was still significantly lower than Rike's estimate. See Countercl. ¶ 9.

On February 17, 2019, Rike hired StormPro Public Adjusters, L.L.C. ("StormPro") to assist her with documenting and negotiating her insurance claim with First Protective. See id. ¶ 10. StormPro sent an Appointment of Public Adjuster Form to First Protective, as well as StormPro's estimate for the cost of mitigation services needed to repair the property, with the caveat that this estimate was not final and the investigation continued. See id. ¶¶ 10–11; Compl. ¶ 16. On April 9, 2019, First Protective sent StormPro a letter asking for StormPro's estimate, indicating that it had not received all documentation needed to conclude Rike's claim and noting that it had not yet received documentation of losses under Coverage B, Coverage C, or Coverage D. See Compl. ¶¶ 17–18; Countercl. ¶ 12.1 On April 15, 2020, StormPro provided First Protective with its estimate, which contained estimates of losses under Coverage A and Coverage C. See Compl. ¶ 19; Countercl. ¶ 13. At this time, Rike had not provided documentation of losses under Coverage D. See Compl. ¶ 20.

On May 6, 2019, First Protective sent Rike (through StormPro) a Demand for Appraisal under the policy. It stated: "[First Protective h]ereby invokes the Appraisal provision under the conditions of your homeowner's insurance policy in order to resolve your entire claim in the above referenced claim. [First Protective's] demand for appraisal is based upon [First Protective's] understanding that the parties cannot agree upon the amount of your loss." [D.E. 8-2]; see Compl. ¶ 21; Countercl. ¶ 14. The letter also identified First Protective's chosen appraiser, Scott Mauldin ("Appraiser Mauldin"). See Compl. ¶ 21; Countercl. ¶ 14. On May 22, 2019, Rike notified Appraiser Mauldin that she selected John Robison ("Appraiser Robison") as her appraiser. See Compl. ¶ 23; Countercl. ¶ 15.

Over the next several months, Appraiser Robison and Appraiser Mauldin inspected Rike's property and produced their respective estimates of Rike's losses. See Compl. ¶¶ 24–25; Countercl. ¶ 16. At the time, Rike had not produced any documentation of losses under Coverage D. See Compl. ¶ 26. Appraiser Robison's estimate only contained estimates of losses under Coverage A and Coverage C. See id. ¶ 25. However, Appraiser Mauldin's estimate provided estimates of losses under Coverage A, Coverage C, and Coverage D, including a summary and breakdown as to the estimated losses under Coverage D. See Countercl. ¶ 17; [D.E. 8-3]. On March 19, 2020, Appraiser Mauldin and Appraiser Robison agreed on Rike's amount of loss. They completed and submitted an Appraisal of Insurance Claim – Award Form ("Award"), which identified the amount of loss they agreed upon under Coverage A, Coverage C, and Coverage D. The Appraisal Award expressly stated that both appraisers agreed on the value of Rike's loss under Coverage D. The Appraisal Award stated that it would be valid and binding if a majority of appraisers signed the Award, which they did. See Compl. ¶ 29; Countercl. ¶ 18.

On May 13, 2020, First Protective sent Rike a letter stating that it was paying her the appraisal amounts for Coverage A and Coverage C, but not Coverage D. See [D.E. 8-5]. Rike alleges that First Protective refused to pay Coverage D because "a claim for additional living expenses was not presented at any time before or during the appraisal until the final appraisal report with executed award was received on March 24, 2020, which was after the appraisal process was concluded," and the policy requires a disagreement as to the amount of loss in order to be ripe for appraisal. Countercl. ¶ 20; [D.E. 8-5].

II.

On June 19, 2020, First Protective filed suit seeking a declaratory judgment that the Appraisal Award is invalid and not binding. See Compl. at 12. First Protective contends that because Rike never presented documentation for any item or loss under Coverage D before First Protective demanded appraisal, Rike never substantiated a loss...

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