Lakeland True Value Hardware, LLC v. Hartford Fire Ins. Co.

• Decision Date: 14 November 2012
• Docket Number: No. 37987.,37987.
• Citation: 291 P.3d 399,153 Idaho 716
• Court: Idaho Supreme Court
• Parties: LAKELAND TRUE VALUE HARDWARE, LLC, Plaintiff–Appellant, v. The HARTFORD FIRE INSURANCE COMPANY, a Connecticut corporation, Defendant–Appellant.

153 Idaho 716

291 P.3d 399

LAKELAND TRUE VALUE HARDWARE, LLC, Plaintiff–Appellant,

v.The HARTFORD FIRE INSURANCE COMPANY, a Connecticut corporation, Defendant–Appellant.

No. 37987.

Supreme Court of Idaho, Coeur d'Alene, April 2012 Term.

Nov. 14, 2012.

Rehearing Denied Jan. 9, 2013.

Bistline Law, PLLC, Coeur d'Alene, for appellants. Arthur M. Bistline argued.

Duke Scanlan & Hall, PLLC, Boise, for respondent. Keely E. Duke argued.

HORTON, Justice.

After the roof collapsed on Lakeland True Value Hardware, LLC's (Lakeland) store, Lakeland sought payment for business personal property and business income losses from its insurer, The Hartford Fire Insurance Co. (Hartford). Lakeland filed suit, asserting bad faith and breach of contract. The district court granted summary judgment dismissing the bad faith claim for lack of evidence that Lakeland's claim was not fairly debatable. The breach of contract claim proceeded to trial, and the jury returned a verdict in favor of Hartford. On appeal, Lakeland challenges the order granting summary judgment. Lakeland also asserts: (1) the jury was confused as to the period of coverage and the district court's evidentiary rulings and jury instructions relevant to that issue were erroneous; (2) the jury verdict is not supported by substantial and competent evidence; and (3) that the district court erred by awarding discretionary costs to Hartford. We affirm.

I. FACTUAL AND PROCEDURAL BACKGROUND

The Lakeland True Value Hardware store located in Rathdrum, Idaho, is owned by Lakeland, which is in turn owned by Mike and Kathy Fritz. Hartford insured Lakeland against business personal property and business income losses. On January 28, 2008, heavy snowfall caused the store's roof to collapse. Shortly after Lakeland notified Hartford of the collapse, Hartford hired independent insurance adjuster Steve Bonanno to assess the claim. Bonanno met with Mike Fritz on February 4, 2008, and determined that approximately two-thirds of Lakeland's inventory and some of Lakeland's fixtures had been damaged or destroyed.

That day, Fritz and Bonanno also met with a salvage company estimator. There is conflicting evidence as to the salvage plan the three of them reached. According to Bonanno, the salvage company was instructed to create three separate lists as it removed materials from the store: (1) undamaged materials removed and stored; (2) partially damaged but salvageable materials removed and separately stored; and (3) materials disposed of because they were destroyed. According to the salvage company representative, the salvage company was simply instructed to remove undamaged property from the areas unaffected by the roof collapse and store those materials, while discarding all materials buried by the collapse. Hartford contends that it was Lakeland's obligation to separate the undamaged and salvageable goods in order to enable a valuation of the business personal property claim. Lakeland responds that it was not informed that this was Hartford's position and that it would have objected that it was unable to pay for such a process.

On the same day, Hartford advanced $50,000 toward Lakeland's business personal property claim. Ultimately, the materials buried beneath the collapsed roof were discarded, and salvaged goods were placed into several storage trailers without any distinction made between those that were undamaged and those that were damaged but had limited retail value. These goods remained in storage for several months.

Meanwhile, Hartford hired MD & D, a forensic accounting firm, to evaluate Lakeland's business income claim. On several occasions, MD & D asked Lakeland to provide documentation regarding Lakeland's business income loss, often reiterating previous requests that had gone unfulfilled. Hartford also repeatedly instructed Lakeland to provide that documentation. Lakeland contends on appeal that it provided sufficient documentation to support its business income claim.

On March 18, 2008, Hartford advanced Lakeland $50,000 toward its business income claim. According to Hartford's claim notes, MD & D noted the business income loss schedule it had created in support of the advance payment was incomplete because MD & D lacked several items of requested documentation and MD & D was uncertain "about 1–the expense for the insds rental space during repairs 2–whether insd is paying his entire payroll." Hartford made additional business income payments on May 23, 2008 ($73,951) and July 17, 2008 ($30,144).

Ultimately, Hartford claims adjuster Melanie Copley determined that under the insurance policy, the Period of Restoration (the period during which Lakeland was entitled to payment for lost business income loss) ended on October 31, 2008. She reached this conclusion by taking into account the fact that Lakeland regained access to its retail space on September 1, 2008, then adding sufficient time for Lakeland to stock that space. Although she had been told that four to six weeks was sufficient to stock the store, Copley allowed eight weeks for Lakeland to restock. She thus determined that the Period of Restoration ended on October 31, 2008. Lakeland's financial ability to reopen did not play into Copley's assessment of the Period of Restoration.

On September 4, 2008, Lakeland filed suit against Hartford, asserting bad faith and breach of contract claims. Hartford continued to request documentation after the suit was filed, and also made several payments to Lakeland. Hartford ultimately paid the policy limits of $370,000 for Lakeland's business personal property loss and $266,407 for Lakeland's business income loss.

On November 14, 2009, the district court ruled from the bench and granted summary judgment dismissing Lakeland's bad faith claim on the grounds that Lakeland had failed to provide evidence that its claim was not fairly debatable. Lakeland then filed a memorandum and affidavit of counsel in support of a motion to reconsider. The district court denied the motion, explaining:

The dispute in the value of Plaintiff's claim, that whole dispute was caused by the Plaintiff's inconsistent amounts that they claimed was due. There were different figures at different times. And it was caused—that dispute in the value of the Plaintiff's claim was also caused by the Plaintiffs not providing all the information the Defendant felt it needed, specifically, the inventory. And that is what led to the delay.

On February 14, 2010, Lakeland filed a second motion for reconsideration, supported by the affidavit of a certified public accountant, Dan Harper. The district court received argument on the motion on February 22, 2010, and again ruled from the bench, denying the motion for reconsideration for lack of proof that the claim was not fairly debatable. On March 9, 2010, Lakeland filed another motion for reconsideration of the grant of summary judgment dismissing its bad faith claims, which was denied on March 13, 2010, evidently due to the district court's scheduling order. On April 6, 2010, Lakeland filed its final motion for reconsideration of the grant of summary judgment as to its bad faith claims and a supporting memorandum. After a hearing, the district court took the motion under advisement and on May 17, 2010, the district court issued a memorandum opinion and order denying the motion.

The district court's opinion focused on the first two elements of a bad faith claim as articulated in this Court's decision in Robinson v. State Farm Mut. Auto. Ins. Co., 137 Idaho 173, 45 P.3d 829 (2002) :

In an insurance claim, the ball starts rolling with the insured making a claim upon the insurer, putting the insurer on notice of the claim. Then the insurer must evaluate that claim and act in good faith. But to prove bad faith, the insured must prove that: 1) the insurer denied a claim in which coverage was not fairly debatable, and 2) that the insured had proven coverage to the point that based on the evidence the insurer had before it, the insurer intentionally and unreasonably withheld the insured's benefits. Robinson v. State Farm Mut. Auto. Ins. Co., 137 Idaho 173, 178, 45 P.3d 829, 834 (2002).... At summary judgment on Lakeland's bad faith claim, fault upon Lakeland is wholly irrelevant. However, proving the claim was not fairly debatable and proving coverage to the point that based on the evidence before the insurer, the insurer then intentionally and unreasonably withheld benefits is not only relevant, it is dispositive, and, most importantly, it is Lakeland's burden to prove at summary judgment. Because Lakeland made unsupported, inconsistent and changing claim demands upon Hartford, at summary judgment Lakeland could not prove its own claim was not fairly debatable, and Lakeland could not prove coverage to the point[,] based on the evidence Lakeland had given to Hartford[,] that Hartford then intentionally and unreasonably withheld benefits.

(Emphasis original).

After the jury began its deliberations, in response to a question from the jury, the parties agreed that the district court should submit a substitute special verdict form. The jury returned a verdict in Hartford's favor, finding that Hartford had complied with the Period of Restoration term of the insurance policy. Over Lakeland's objection, the district court subsequently awarded Hartford some of its requested discretionary costs.

Lakeland appeals and challenges the district court's grant of summary judgment, as well as the sufficiency of the evidence supporting the jury verdict. Lakeland also challenges several evidentiary rulings made by the district court, the propriety of certain jury instructions, and the district court's order awarding discretionary costs. Lakeland requests attorney fees on appeal.

II. ANALYSIS

A. The district court's grant of summary judgment dismissing Lakeland's bad faith claim is affirmed.

Lakeland asserts that the district court improperly acted as factfinder at the summary judgment phase. Specifically, Lakeland contends...