Morrow v. State Farm Fire & Cas. Co.
| Decision Date | 22 March 2022 |
| Docket Number | 1:21-CV-00133-DCLC-CHS |
| Parties | Norma MORROW, Plaintiff, v. STATE FARM FIRE & CASUALTY CO., Defendant. |
| Court | U.S. District Court — Eastern District of Tennessee |
Emily S. Alcorn, J. Brandon McWherter, Jonathan L. Bobbitt, Gilbert McWherter Scott Bobbitt PLC, Franklin, TN, for Plaintiff.
Nina Musinovic Eiler, Kay, Griffin, Enkema & Colbert, PLLC, Nashville, TN, Adam R. Duggan, Breeding Olinzock Carter Crippen, P.C., Daniel C. Headrick, Matthew J. Evans, Kay Griffin PLLC, Knoxville, TN, for Defendant.
This matter is before the Court on Plaintiff Norma Morrow's Motion to Compel Appraisal [Doc. 29]. Defendant State Farm Fire and Casualty Company ("State Farm") responded [Doc. 31], and Morrow replied [Doc. 32]. This matter is now ripe for resolution.
On May 3, 2020, a severe storm with strong winds and tornadic activity damaged Morrow's home in Manchester, Tennessee . Morrow insured her home with State Farm and had an active policy ("the Policy") at the time of the storm [Id. , pg. 2]. The Policy covered direct physical loss to Morrow's home, other structures on her property, and her personal property [Id. ]. After the May 2020 storm, Morrow promptly reported the damage to her home to State Farm [Id. , pg. 3]. State Farm acknowledged that the damage to Morrow's home was covered under the Policy and made a payment, following its own estimate of the damage, for her loss [Id. ]. Morrow, however, alleged that State Farm failed to determine the actual cost of the damage her home suffered [Id. ]. She informed State Farm that its payment was insufficient to cover all of the damage and restore her home to its condition before the May 2020 storm [Id. ].
On June 17, 2020, Morrow informed State Farm, in writing, that she was invoking the Policy's appraisal clause because of their dispute about the proper amount of loss State Farm was required to pay [Id. ].1 The appraisal clause states that:
If you [Morrow] and we [State Farm] fail to agree on the amount of the loss, either one can demand that the amount of the loss be set by appraisal. If either makes a written demand for appraisal, each shall select a competent, disinterested appraiser. Each shall notify the other of the appraiser's identity within 20 days of receipt of the written demand. The two appraisers shall then select a competent, impartial umpire. If the two appraisers are unable to agree upon an umpire within 15 days, you or we can ask a judge of a court of record in the state where the residence premises is located to select an empire. The appraisers shall then set the amount of the loss. If the appraisers fail to agree within a reasonable time, they shall submit their differences to the umpire. Written agreement signed by any two of these three shall set the amount of the loss. Each appraiser shall be paid by the party selecting that appraiser. Other expenses of the appraisal and the compensation of the umpire shall be paid equally by you and us.
[Docs. 27, pg. 4; 27-1, pg. 20] (emphasis added). Morrow selected an appraiser, but State Farm denied her demand for appraisal on July 7, 2020 [Doc. 27, pg. 4]. State Farm told Morrow that her estimate of the damage to her home represented a dispute in coverage rather than a dispute in the amount of loss, which could not be settled under the appraisal clause in the Policy [Id. ].
Morrow files the instant suit to recover the insurance proceeds she believes she is entitled [Id. , pg. 5]. In her Second Amended Complaint, Morrow asserts two causes of action . First, Morrow asserts a breach of contract claim for State Farm's alleged material breach of the Policy by failing to pay her the amount she believes necessary and failing to engage in the appraisal process . Second, Morrow contends that State Farm engaged in bad faith refusal to pay under Tennessee law .
Morrow now moves to compel State Farm to engage in the appraisal process contemplated by the Policy [Doc. 29]. She explains that, after she reported the damage from the May 2020 storm to State Farm, State Farm acknowledged coverage and determined that it would cost approximately $5,000 to fix her home [Doc. 30, pg. 4]. Morrow then hired her own contractor, who estimated that it would cost more than $90,000 to fix her home to its condition before the storm . She argues that appraisal is mandatory under the Policy and that she has satisfied the requirements to invoke the appraisal clause because there is a disagreement about the amount of loss, and she made a written demand for appraisal [Id. , pg. 5]. According to Morrow, the only dispute between her and State Farm is about the pricing and methods of the necessary work to repair her home [Id. , pg. 8].
State Farm responds that there is a coverage dispute between it and Morrow, not a disagreement about the amount of loss [Doc. 31, pg. 1]. It admits that it acknowledged coverage over Morrow's claim and paid her for its estimate of the damage to her home [Id. , pg. 2]. State Farm explains that its own contractor concluded that there was no other storm damage to her home beyond what it initially acknowledged [Id. ]. Moreover, State Farm informed Morrow that the Policy "does not provide coverage for the damages to [her] property" identified by her contractor [Id. ]. It contends that its initial estimate and payment were the only amounts due to Morrow under the Policy [Id. , pg. 3]. State Farm characterizes its dispute with Morrow as one about coverage rather than amount of loss or the scope of work for a covered loss [Id. ]. Lastly, State Farm contends that the Court should deny Morrow's motion because it was not brought under a Federal Rule of Civil Procedure [Id. , pg. 7]. Morrow replies, reiterating her arguments from her initial motion [Doc. 32].
"A federal court sitting in diversity applies the substantive law of the state in which it sits." Hayes v. Equitable Energy Res. Co. , 266 F.3d 560, 566 (6th Cir. 2001) (citing Klaxon Co. v. Stentor Elec. Mfg. Co. , 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941) ). Tennessee law presumes a contract is governed by the "law of the jurisdiction in which it was executed absent a contrary intent." Carbon Processing & Reclamation, LLC v. Valero Mktg. & Supply Co. , 823 F. Supp. 2d 786, 801 (W.D. Tenn. 2011) (citing Se. Tex. Inns Inc. v. Prime Hosp. Corp. , 462 F.3d 666, 672 (6th Cir. 2006) (applying Tennessee law) ); Ohio Cas. Ins. Co. v. Travelers Indem. Co. , 493 S.W.2d 465, 467 (Tenn. 1973). Here, the Court will apply Tennessee substantive law because the contract was executed in Tennessee, and there is no evidence of a contrary intent in the contract.
The Court's analysis begins with the Policy's language. "In general, courts should construe insurance contracts in the same manner as any other contract." Am. Just. Ins. Reciprocal v. Hutchison , 15 S.W.3d 811, 814 (Tenn. 2000). "The language of the policy must be taken and understood in its plain, ordinary, and popular sense." Id. (citing Bob Pearsall Motors, Inc. v. Regal Chrysler-Plymouth, Inc. , 521 S.W.2d 578, 580 (Tenn. 1975) ). In Tennessee, the guiding principle of contract interpretation "is to ascertain and give effect to the intent of the parties." Clark v. Sputniks, LLC , 368 S.W.3d 431, 441 (Tenn. 2012).
Here, the Policy explicitly provides for appraisal, and the provision is mandatory if invoked by one of the parties. The Policy states: [Docs. 27, pg. 4; 27-1, pg. 20] (emphasis added). Morrow invoked the appraisal provision on June 17, 2020. [Doc. 27, pg. 3]. The provision is mandatory if invoked, as evidenced by the language "each shall select a competent, disinterested appraiser." [Docs. 27, pg. 4; 27-1, pg. 20] (emphasis added).
This type of appraisal provision is valid in Tennessee. Harowitz v. Concordia Fire Ins. Co. , 129 Tenn. 691, 168 S.W. 163, 165 (1914). Courts "regularly compel appraisal pursuant to such provisions," even though these motions are not brought under any particular Federal Rule of Civil Procedure. J. Wise Smith & Assocs., Inc. v. Nationwide Mut. Ins. Co. , 925 F. Supp. 528, 530 (W.D. Tenn. 1995) (collecting cases); see also Bard's Apparel Mfg., Inc. v. Bituminous Fire & Marine Ins. Co. , 849 F.2d 245, 249 (6th Cir. 1988) (applying Tennessee law) ; Glob. Aerospace, Inc. v. Phillips & Jordan, Inc. , No. 3:15-CV-105-PLR-CCS, 2015 WL 5514627 (E.D. Tenn. Sept. 17, 2015) ; Kush Enters., LLC v. Mass. Bay Ins. Co. , No. 3:18-CV-00492, 2019 WL 13117568, at *1 (E.D. Tenn. Nov. 7, 2019) (). Consequently, if there is a disputed amount of loss, State Farm must move forward with the Policy's appraisal process.
State Farm seeks to avoid enforcement of the appraisal provision by claiming there is a dispute as to coverage, rather than loss. . It is true that "the object of appraisal in cases of casualty insurance is to quantify the monetary value of a property loss," rather than to decide issues of coverage or causation. Merrimack Mut. Fire Ins. Co. v. Batts , 59 S.W.3d 142, 149 (Tenn. Ct. App. 2001). But the parties do not dispute that Morrow's damage is covered as a general matter; they instead argue over the extent and the amount of the loss. [Docs. 27, pg. 3; 31, pg. 2]. Indeed, both parties concede that the Policy covers some damage, and State Farm has made a payment for the damage. Morrow...
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