Home Quest Mortg. LLC v. American Family Mut. Ins.

Decision Date12 October 2004
Docket NumberNo. 04-2066-JWL.,04-2066-JWL.
Citation340 F.Supp.2d 1177
PartiesHOME QUEST MORTGAGE LLC and Donna Huffman, Plaintiff, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, et al., Defendants.
CourtU.S. District Court — District of Kansas

Ira Dennis Hawver, Ozawkie, KS, for Plaintiff.


LUNGSTRUM, District Judge.

Plaintiffs Donna Huffman and the company that she founded, Home Quest Mortgage, LLC (Home Quest), filed this lawsuit against defendants for their alleged actions after a fire damaged the building in which Home Quest's offices were located. Plaintiffs assert claims under the Fair Housing Act (FHA), 42 U.S.C. §§ 3604, 3605, conspiracy in violation of 42 U.S.C. § 1985, and state law causes of action. The matter is presently before the court on the defendants' motions to dismiss plaintiffs' claims (docs. 2 & 8). For the reasons explained below, the court will grant these motions in their entirety. Specifically, the court will dismiss plaintiffs' FHA and § 1985 claims on their merits and will decline to exercise supplemental jurisdiction over plaintiffs' remaining state law claims.


The following facts are taken from the allegations in plaintiff's complaint and the court assumes the truth of these facts for purposes of analyzing defendants' motions to dismiss. Ms. Huffman is a real estate mortgage broker who founded Home Quest and began operating it out of her home in Oskaloosa, Kansas. As business expanded, Ms. Huffman purchased a two-story building on the center square in Oskaloosa to use for office space for Home Quest. In addition, the building provided her with residential rental income from the leased upstairs apartment. Her mortgage on the building required her to purchase insurance, and Ms. Huffman purchased a business insurance policy from defendant American Family Mutual Insurance Company (American Family) through defendant Linda L. Reiling, who was an independent broker and an agent of American Family.

On July 12, 2000, the building caught fire. It was not destroyed, but it suffered smoke damage that ruined interior and exterior finishes, telecommunications equipment, carpets, and furnishings. The fire also damaged the rental residence upstairs.

Plaintiffs turned in a claim to American Family. American Family immediately hired Chavez Cleaning and Restoration (Chavez), which was an American Family approved contractor, to begin performing fire remediation work on the building. Ms. Huffman had repeatedly expressed concerns about the quality of contractors the insurance company was going to hire for the work, and defendant William Klecan, American Family's claims adjuster, assured Ms. Huffman that Chavez was an "excellent" fire damage remediation contractor. Chavez set up ozone treatment machines and began working immediately and over the weekend to repair the damage to the building. The work required the building to be closed and it was unavailable to conduct Home Quest's business.

The following week, Mr. Klecan fired Chavez without consulting Ms. Huffman. Mr. Klecan explained that Chavez was "too expensive." The lack of office space negatively impacted Home Quest. The fire had occurred in mid-summer, during a peak time in the residential mortgage business; Ms. Huffman was trying to get Home Quest established in the Oskaloosa market; the lack of telecommunications equipment and functioning office space was giving clients a negative impression of Home Quest; and the situation was causing considerable stress to valuable employees. Ms. Huffman repeatedly asked Mr. Klecan to provide a temporary office facility as was provided for in the insurance contract. Mr. Klecan responded, "You little ladies can't be making that much money-it will be cheaper for us to pay your loss than to set you up." Mr. Klecan also repeatedly deceived Ms. Huffman by assuring her that "it would be just a few days and they'd be back." He also deceived Ms. Huffman by telling her that the delay was due to the insurance company's need to obtain competitive bids.

Meanwhile, unbeknownst to Ms. Huffman, American Family, Mr. Klecan, and defendant Mike Elliot, who was American Family's regional claims supervisor, were trying to persuade the fire marshal that Ms. Huffman had started the fire in the building. Messrs. Elliot and Klecan were trying to turn the investigation from the upstairs tenant, who had been in the process of being evicted for non-payment of rent at the time of the fire, to Ms. Huffman. American Family employees visited people in the community, including merchants, and Mr. Klecan called businesses and Ms. Huffman's staff asking if they thought she had started the fire. They asked interviewees to verify that Ms. Huffman was "emotionally unstable" and had "financial problems," and attempted to elicit answers that negatively characterized Ms. Huffman's marital relationship. This made day-to-day operations between Ms. Huffman and her staff difficult, and eventually led to the loss of a valuable and difficult-to-replace experienced mortgage loan broker.

Eventually, American Family selected defendant Joe Little General Contractor, Inc. (Joe Little) to repair the building. Mr. Klecan assured Ms. Huffman that Joe Little was an American Family guaranteed contractor, and that all of Joe Little's work would be guaranteed and warranted by American Family. Home Quest was able to reoccupy the building after three weeks of cleaning and remediation. At that time, Ms. Huffman discovered that Joe Little had removed the contents of the basement without allowing her or her company to have a representative present. Mr. Elliot and the adjuster stated that Joe Little had kept a list of everything that had been thrown away, but when defendant Robert Joe Little was questioned about this he falsely stated that "nothing had been thrown away" by his company. In fact, numerous items were missing. Among these items was a top-of-the-line furnace with many years of operation left. Chavez had determined that this furnace had survived the smoke damage and was still fully functional despite the fire. Chavez had turned off the furnace to prevent it from being ruined by operation during Chavez's remediation work. Joe Little, however, had turned on the furnace and ruined it with continued use, then replaced it with an inferior unit that was not installed correctly. In addition, Joe Little had removed two truckloads which had included an irreplaceable door to the safe, and other antique valuables were also missing.

Joe Little had not performed many of the operations that it charged for and some of Joe Little's remediation work was inadequate. It was revealed during a walk-through of the building that Joe Little's statement of charges were largely for work that had not been performed. Joe Little had not utilized materials that it had purchased and said that it had used on the job, and these materials were left at the site. Also, Joe Little stole Home Quest's paint stocks. Maria Cosper with Advisor Financial witnessed a walk-through in which Robert Joe Little admitted nothing had been done in the south room, which was contrary to what Joe Little's bill stated. After examining another room, Robert Joe Little got aggressive and halted the walk-through. Robert Joe Little and Joe Little had bid on the contract with American Family without having had any experience or skills in specialized fire and smoke remediation work. Robert Joe Little and Joe Little refused to do the upstairs part of the building. None of the telecommunications equipment worked properly after the smoke damage, and fax transmissions were illegible. Staff and clients experienced problems from the smell of smoke that permeated the building for the next two years. The ventilation systems were not cleaned, and Ms. Huffman had to argue with American Family's rejection of responsibility to clean the ventilation systems.

Also, despite the fact that American Family had hired and later fired Chavez without Ms. Huffman's consent, American Family refused to pay Chavez. Ms. Huffman first learned that American Family was not paying Chavez when a collection agency contacted her. Ms. Huffman pursued American Family and Mr. Elliot on a weekly basis for six months to try to get American Family to pay the bill, but American Family refused to pay. Chavez ultimately turned Ms. Huffman over to collections, which caused two credit risks to be placed on her personal credit file. This prevented her from having access to the most competitive and preferred interest rates from some capital sources, resulting in decreased profitability and opportunity losses, endangering her licensing as a mortgage broker, and threatening her and Home Quest's annual certification by the Department of Housing and Urban Development (HUD).

Ms. Reiling, who was Ms. Huffman's insurance agent, refused to return to the building and view any of the problems associated with the unremediated smoke damage. Mr. Elliot likewise refused to come to the building and view the unremediated smoke damage. He insisted that Ms. Huffman release American Family's payments to Joe Little, even though the bills were fraudulent, because they were "men" and therefore deserved payment.

American Family also refused to reimburse Ms. Huffman for lost income during the time her office was closed to repair the fire damage because her income, which conformed to the financial information on her insurance application, "was too great for a woman owned business." American Family refused to accept any proof of lost income from Ms. Huffman.1

Based on these facts, plaintiffs asserts nine claims: (1) violations of the FHA, specifically 42 U.S.C. §§ 3604, 3605; (2) conspiracy to violate plaintiffs' civil rights under 42 U.S.C. § 1985; (3) negligence and breach of implied warranty against American Family and Messrs. Elliot and Klecan; (4) negligence and breach of implied warranty against Joe Little and Robert Joe Little; (5) breach...

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