Rankin v. Allstate Ins. Co.

• Decision Date: 14 July 2003
• Docket Number: No. 02-2572.,02-2572.
• Citation: 336 F.3d 8
• Parties: Ronald J. RANKIN; Liz Rankin, Plaintiffs, Appellants, v. ALLSTATE INSURANCE CO.; Concord General Mutual Insurance Co.; Si Trucking, Inc., Defendants, Appellees. Right-On-Time Moving & Storage, Inc., Defendant.
• Court: U.S. Court of Appeals — First Circuit

Page 8

336 F.3d 8

Ronald J. RANKIN; Liz Rankin, Plaintiffs, Appellants, v. ALLSTATE INSURANCE CO.; Concord General Mutual Insurance Co.; Si Trucking, Inc., Defendants, Appellees Right-On-Time Moving & Storage, Inc., Defendant.

No. 02-2572.

United States Court of Appeals, First Circuit.

Heard April 11, 2003.

Decided July 14, 2003.

Arthur J. Greif with whom Julie D. Farr and Gilbert & Greif, P.A. were on brief for appellants.

James E. Fortin with whom Martica S. Douglas and Douglas, Denham, Buccina & Ernst, P.A. were on brief for appellee Allstate Insurance Co.

Before BOUDIN, Chief Judge, TORRUELLA and LIPEZ, Circuit Judges.

BOUDIN, Chief Judge.

This appeal concerns claims, complicated both factually and legally, arising from an ill-starred household move. On June 16, 2000, Ronald and Liz Rankin contracted with Right-On-Time Moving & Storage, Inc. ("ROTMS") to transport their possessions from California to Maine. ROTMS subcontracted with SI Trucking, Inc. ("SI") to handle most of the move. The Rankins had homeowners insurance policies in force with Allstate Insurance Company ("Allstate") and Concord General Mutual Insurance Company ("Concord"), one covering the origin residence and one the destination.

ROTMS employees picked up the Rankins' possessions in California in June 2000 and brought them to a warehouse. SI employees then transferred them to an SI truck for transportation and delivery. When SI arrived at the Rankins' new home in Maine on July 24, 2000, the Rankins discovered that some of their possessions had been damaged and that many others were missing. Upon delivery, the SI movers could not account for the damaged or missing items and became abusive and threatening toward the Rankins.

Shortly thereafter, the Rankins notified their insurer, Allstate, which hired an adjuster to determine what goods were damaged and their value. In August 2000, the Rankins provided Allstate with a detailed list of lost or damaged items, supplemented with more information in September. The task of appraisal was substantial as the list comprised a large array of objects, including household goods, electronics, artwork, and furniture. In September, their attorney sent Allstate a demand letter.

The Allstate policy covered theft and damage to property in transit but, on Allstate's reading, did not cover items that were merely misplaced by the carrier. Allstate maintained in an October 2000 letter that the Rankins' missing goods were not covered by the policy because it was unclear whether they were stolen or merely misplaced in a carrier or warehouse. On December 19, 2000, the Rankins filed a police report about the missing goods, convinced by now that their property had in fact been stolen.

On January 23, 2001, Allstate sent a worksheet to the Rankins giving its appraisal of the damaged items, but making no mention of the larger number of stolen items. In the Rankins' view at the time, the damage to the items that were delivered amounted to about $24,000 — of which Allstate's share was half.¹ On February 12, 2001, Allstate agreed to pay $6,000 to satisfy what it claimed was its share of the losses stemming from the damaged goods. The next day the Rankins gave Allstate an itemized account of their losses, calculating the total loss (damaged goods and stolen goods) at $97,583 (a figure the Rankins later raised to $106,000).

On March 2, 2001, the Rankins brought suit against ROTMS and Allstate in federal district court in Maine. The original complaint alleged inter alia that ROTMS had violated the Carmack Amendment to the Interstate Commerce Act, 49 U.S.C. § 14706 (2000), which imposes something close to strict liability upon originating and delivering carriers, and that Allstate had breached its contract with the Rankins by failing to provide the benefits due them under the insurance policy.

In June 2001, the Rankins added SI as a defendant, claiming against it under the Carmack Amendment and separately for intentional infliction of emotional distress based on the behavior of the employees who delivered the load and abused the Rankins. The same amendment added a claim against Allstate under Maine's Unfair Claims Settlement Practices Act ("UCSPA"), 24-A M.R.S.A. § 2436-A(1)(E) (2000), which imposes attorneys' fees and interest for an insurer's unreasonable failure to make timely settlement of insurance claims.

The magistrate judge empowered by consent to act as the district court, 28 U.S.C. § 636(c) (2000), permitted the addition of the new claims and defendants but deferred then-existing discovery deadlines. The Rankins and Allstate made obligatory disclosures and conducted some discovery. When SI failed to answer the amended complaint, the Rankins in September 2001 sought and received entry of default against it. Fed.R.Civ.P. 55(a). On September 14, 2001, the court set a new discovery deadline of December 14, 2001.

In October 2001, all parties had an informal settlement conference. Allstate thereafter requested a copy of the police report filed by the Rankins in December 2000, which the Rankins then provided. Allstate did not depose the Rankins — it had their recorded statements — but Concord did take their deposition in December 2001. Allstate did depose ROTMS and also asked that its adjuster be allowed to contact the Rankins directly.

Shortly after the discovery deadline and not long before the scheduled trial date of February 11, 2002, Allstate, on December 19, 2001, sent a letter invoking an arbitration provision in the policy for resolving disputes as to the amount of loss or damage.² The Rankins rejected this demand as coming too late. Allstate then, on December 26, 2001, sent the Rankins a check for $38,500, as purported full payment for the theft claims — which the Rankins had estimated as approximately $82,000.

Allstate then sought summary judgment on the claims against it. The court granted the motion on March 25, 2002, as to certain claims not pressed on this appeal but denied the motion as to the Rankins' contract and UCSPA claims with which we are now concerned. Trial was rescheduled for August 2002, and the parties were ordered to confer and provide further information to each other. In consequence, Allstate paid the Rankins two further sums (totaling a little over $25,000) on account of the theft claim in May and July 2002. This brought the total payments for theft to about $63,500 — still about $19,000 short of the Rankins' final estimate.

On July 11, 2002, the court reconsidered sua sponte its denials of summary judgment, invited a new motion by Allstate, and deferred the trial again. On September 16, 2002, the court granted the motion for summary judgment, resolving both the contract claim and the UCSPA claim in favor of Allstate. Thereafter the court held a hearing on November 6, 2002, to determine SI's liability on the default and heard evidence from the Rankins as to the amount of their property losses and as to their emotional distress claims. The next day it awarded $150,000 on the latter but — on grounds described below — denied recovery on the former.

In the course of the litigation, the Rankins settled their disputes with ROTMS and Concord out of court. The Rankins have now appealed from the district court's dismissal of their contract and UCSPA claims against Allstate and the refusal of the district court to award damages on their property loss claim against SI. We consider the issues on appeal in the same order. On the grant of summary judgment, our review is de novo. Roche v. John Hancock Mut. Life Ins. Co., 81 F.3d 249, 253 (1st Cir.1996). As to the ruling on the default judgment determination, the standard of review depends upon the basis for the ruling.

Contract Claims. In a nutshell, the Rankins say that Allstate breached its insurance contract by failing to make timely payment for all covered losses; that Allstate's share of the losses is still not completely paid — a further breach of contract; and, finally, that Allstate cannot rely on the arbitration provision for two reasons: that Allstate itself breached the contract and that it failed to invoke the arbitration provision in a timely manner.

The magistrate judge concluded that the delays in payment were explainable in light of the changing nature of the Rankins' claims and various litigation-related events and that no reasonable jury could find otherwise. As to the remaining gap between what Allstate paid and the Rankins' larger estimate of losses, the magistrate judge stated that "Allstate is entitled to invoke the contract provision requiring arbitration of any remaining disputes regarding the value of items stolen or damaged."

Whether Allstate unreasonably delayed payment of what was due, whether it stills owes money, and whether it lost its right to invoke the arbitration provision are three different questions, albeit set against the same background facts and intertwined with each other (and with the Rankins' separate statutory claim based on unreasonable delay).

We start with the question whether Allstate unreasonably delayed making payment of what was (or still is) due to the Rankins. More precisely, the question is whether summary judgment should have been granted by the magistrate judge on that issue. Our conclusion is that the undue delay question presents a jury issue, assuming arguendo that there is a contractual obligation to act diligently. The reasons why the delay question could not be decided on summary judgment are more appropriately set forth in our later discussion of the statutory claim, where the answer clearly matters.

Quite likely the answer does not matter in the case of the contract claim. Whatever may still be due under the policy for direct losses (that is, for direct damage to or loss of insured goods) is due regardless of whether there has been delay. The Rankins have suggested only two reasons why delay itself may be pertinent to their contract claim: first, as a basis for...