Norman v. State Farm Fire & Cas. Co.

• Docket Number: 2:22-cv-367-SMD
• Decision Date: 07 August 2023
• Parties: TODD NORMAN and GINGER NORMAN, Plaintiffs, v. STATE FARM FIRE AND CASUALTY COMPANY, Defendant.
• Court: U.S. District Court — Middle District of Alabama

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TODD NORMAN and GINGER NORMAN, Plaintiffs, v. STATE FARM FIRE AND CASUALTY COMPANY, Defendant.

No. 2:22-cv-367-SMD

United States District Court, M.D. Alabama, Northern Division

August 7, 2023

OPINION & ORDER

STEPHEN M. DOYLE CHIEF U.S. MAGISTRATE JUDGE

Plaintiffs Todd and Ginger Norman (“the Normans”) claim that Defendant State Farm Fire and Casualty Company (“State Farm”) breached their insurance contract in bad faith by failing to pay a claim for damage to their home. Before the Court is State Farm's Motion for Summary Judgment. Mot. (Doc. 24). For the following reasons, State Farm's motion is granted on the “normal” bad faith claim and denied on all other grounds.

I. JURISDICTION

Federal courts are courts of limited jurisdiction. Kokkonen v. Guardian Life Ins. Co.of Am., 511 U.S. 375, 377 (1994). Pursuant to 28 U.S.C. § 1332, a federal district court may hear a civil action between citizens of different states where the amount in controversy exceeds $75,000. See Wachovia Bank v. Schmidt, 546 U.S. 303, 306 (2006).

“Except as otherwise provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant[.]” 28 U.S.C. § 1441(a). When a defendant removes a case based on diversity jurisdiction, the defendant must show, by a preponderance of the evidence, that the amount in controversy is met. McGee v. Sentinel Offender Servs., LLC, 719 F.3d 1226, 1241 (11th Cir. 2013). “In some cases, this burden requires the removing defendant to provide additional evidence demonstrating that removal is proper.” Roe v.Michelin N. Am., Inc., 613 F.3d 1058, 1061 (11th Cir. 2013). “In other cases, however, it may be facially apparent from the pleading itself that the amount in controversy exceeds the jurisdictional minimum, even when the complaint does not claim a specific amount of damages.” Id. (citing Pretka v. Kolter City Plaza II, Inc., 608 F.3d 744, 754 (11th Cir. 2010)).

If a defendant alleges that removability is apparent from the face of the complaint, the district court must evaluate whether the complaint itself satisfies the defendant's jurisdictional burden. In making this determination, district courts may make “reasonable deductions, reasonable inferences, or other reasonable extrapolations” from the pleadings. Id. at 1061-62 (quoting Pretka, 608 F.3d at 754). “Put simply, a district court need not suspend reality or shelve common sense in determining whether the face of a complaint establishes the jurisdictional amount.” Id. (internal quotations omitted). “Instead, courts may use their judicial experience and common sense in determining whether the case stated in a complaint meets federal jurisdictional requirements.” Id.

Here, the Court is satisfied that, based on the Normans' request for punitive damages, State Farm has proved the requisite amount in controversy by a preponderance of the evidence for this Court to exercise diversity jurisdiction over the complaint. Alabama law provides that “no award of punitive damages shall exceed three times the compensatory damages of the party claiming punitive damages or five hundred thousand dollars ($500,000), whichever is greater.” ALA. CODE § 6-11-21 (a) (emphasis added). Importantly, the Eleventh Circuit has held that when a removing defendant alleges that a plaintiff's claim for punitive damages satisfies the amount in controversy, the defendant “need only prove the jurisdictional facts necessary to establish that punitive damages in an amount necessary to reach the jurisdictional minimum are at issue-that is, that such damages could be awarded.” McDaniel v. Fifth Third Bank, 568 Fed.Appx. 729, 731 (11th Cir. 2014) (emphasis original) (holding that the jurisdictional amount was satisfied by looking to the maximum possible recovery of punitive damages permitted by statute). Under Alabama law, then, the Normans could be awarded $500,000 or more in punitive damages, which is obviously greater than $75,000.

Further, the Normans make no disclaimer that they seek less than $75,000 for their claims. The absence of a disclaimer for overall damages is persuasive evidence that the Normans seek more than $75,000. See Townsend v. Win-Holt Equip. Corp., 2018 WL 4608476, at *2 (M.D. Ala. Sept. 25, 2018) (“Although a plaintiff's refusal to stipulate that damages do not exceed $75,000 does not alone establish the amount in controversy, . . . the court may consider such refusal as evidence that the amount in controversy is met.”).

Finally, a punitive damages award against a company as large as State Farm would need to be substantial to punish and deter similar future conduct. Roe, 637 F.Supp.2d at 998, aff'd, 613 F.3d 1058 (11th Cir. 2013) (noting that “any award that is soundly and honestly calculated to punish and deter [a large company's] wanton behavior . . . would have to be substantial”). Thus, the Court is persuaded that the amount in controversy likely exceeds $75,000.

In sum, because (1) the Normans could be awarded $500,000 or more in punitive damages; (2) the Normans have not disclaimed that they seek less than $75,000 for their claims; and (3) a punitive damages award would need to be substantial to deter conduct from a large company like State Farm, the Court finds that State Farm has shown, by a preponderance of the evidence, that the Normans' claims exceed the amount-in-controversy requirement. See Pullum v. Ford Motor Co., 2019 WL 2578948, at *3 (M.D. Ala. June 21, 2019) (finding that the plaintiff's claims for punitive damages exceeded $75,000 where the damages were capped by state law at $500,000; the damages were sought against a large company; and the plaintiff did not expressly disclaim that the damages were less than the amount in controversy); Stubbs v. State Farm Fire & Cas. Co., 2013 WL 980313, at *5 (N.D. Ala. Mar. 8, 2013) (finding that, based on the court's judicial experience and common sense, the plaintiffs' bad faith claim-which was based on allegations that the defendant “misrepresented the facts and the content of the Policy in a bad faith effort to refuse full payment”-exceeded the $75,000 amount in controversy requirement). Therefore, this Court has jurisdiction over the Normans' complaint pursuant to 28 U.S.C. § 1441(a).

II. UNDISPUTED MATERIAL FACTS

In 2000, the Normans purchased a home in Greenville, Alabama. Mr. Norman Depo. (Doc. 24-1) pp. 4-5. In late 2016/early 2017, the sheetrock in the home began to crack. Id. at 8; Ms. Norman Depo. (Doc. 24-2) p. 4. The Normans hired Alabama Foundation Solutions (“AFS”) to repair the damage. Mr. Norman Depo. (Doc. 34-17) pp. 7-10. AFS installed helical piers on the southern end of the home, and the Normans did not observe any further cracking for several years. Id. at 9.

In March 2017, the Normans purchased a home insurance policy with State Farm that contained supplemental sinkhole collapse coverage. Mr. Norman Depo. (Doc. 24-1) pp. 11-13; Policy (Doc. 1-1) pp. 6-57. The sinkhole collapse endorsement provided that State Farm would “pay for accidental direct physical loss to [the Normans' home] . . . caused by sinkhole collapse, meaning sudden settlement or collapse of the earth resulting from subterranean voids created by the action of water on limestone or similar rock formations.” Policy (Doc. 1-1) p. 56. A little over two years after purchasing the policy, Mr. Norman heard a loud, popping noise, which he described as sounding “like a .22 going off.” Mr. Norman Depo. (Doc. 24-1) p. 13. Thereafter, the Normans once again noticed visible signs of cracking in the sheetrock. Id.

The Normans filed a claim with State Farm in October 2019. Claim Denial (Doc. 34-12) p. 1; Handley Depo. (Doc. 24-5) p. 7. State Farm's adjustor, Jason Handley (“Handley”), inspected the Normans' home and surrounding property. Handley Depo. (Doc. 24-5) pp. 9-11. Finding no visible signs of what he considered to be a sinkhole,^[1]Handley hired a soil geologist, Ron Maggard (“Maggard”), to assess whether the damage to the Normans' home was caused by sinkhole collapse. Id. at 11-15. On October 24, 2019, Maggard took soil samples up to seven feet deep and concluded that the cracking was due to a clay issue that was not properly repaired by AFS, not a sinkhole. Maggard Depo. (Doc. 24-6) pp. 12-22, 36; Maggard Report (Doc. 36-1) pp. 8-9. Based on Maggard's report, State Farm denied coverage of the Normans' claim on November 20, 2019. Claim Denial (Doc. 34-12) p. 1.

After the initial denial of their claim, the Normans hired Gordon Davis (“Davis'), an engineer with knowledge of sinkholes, to inspect their home. Mr. Norman Depo. (Doc. 24-1) p. 25. On November 27, 2019, Davis submitted a report to the Normans that concluded that the cracking was caused by movement in the foundation resulting from the consolidation of loose or weakly compacted soils beneath the foundation. Davis Report (Doc. 34-2) pp. 1-8. Davis reached this conclusion by visually inspecting the property and by reviewing old topography maps, which suggested that the Normans' house was likely built on fill dirt. Id.; Davis Depo. (Doc. 24-4) pp. 8-9, 12-16; 25-28. He also opined that the helical piers installed by AFS caused movement in the foundation. Davis Depo. (Doc. 24-4) pp. 28-31, 38; Davis Report (Doc. 34-2) p. 7. He did not opine that sinkhole collapse caused the damage but stated that he observed at least one sinkhole on the Normans' property. Davis Depo. (Doc. 24-4) pp. 45-46. The Normans submitted Davis's report to State Farm and State Farm denied the claim for a second time in December 2019. Ms. Norman Depo. (Doc. 24-2) pp. 8-9.

Subsequently in response to street damage occurring in the Normans' neighborhood, the City of Greenville (“the City”)...