Rogers v. State Farm Fire and Cas. Co.

Decision Date12 October 2007
Docket Number1051458.
Citation984 So.2d 382
PartiesCharles B. ROGERS and Lori Heath Rogers v. STATE FARM FIRE AND CASUALTY COMPANY.
CourtAlabama Supreme Court

J. Michael Campbell, Birmingham, for appellants.

V. Edward Freeman II of Stone, Patton, Kierce & Freeman, Bessemer, for appellee.

COBB, Chief Justice.1

Charles B. Rogers and Lori Heath Rogers appeal from a judgment of the Jefferson Circuit Court assessing damages against State Farm Fire and Casualty Company (hereinafter referred to as "State Farm") for storm damage to the Rogerses' residence. We reverse and remand.

I. Facts and Procedural Background

The Rogerses' residence was damaged as a result of a powerful tornado that swept through western Jefferson County on April 8, 1998. State Farm insured the Rogerses' residence, and the Rogerses made a claim against their State Farm homeowner's policy for the damage sustained as a result of the tornado; the Rogerses' claim asserted that the house was a total loss. State Farm disputed the Rogerses' claim that their house was a total loss and employed Joel D. Wehrman, a subcontractor engineer with Jade Engineering and Inspection, Inc., to assess the damage to the Rogerses' house. Wehrman concluded that the damage to the brick veneer and the foundation was the result of settlement and not the storm; therefore that damage was not covered by the Rogerses' homeowner's policy with State Farm. The Rogerses hired their own engineer, Homer Montague, who concluded that the damage to the brick veneer and foundation was a result of stress placed on the house by the storm.

On June 3, 1998, State Farm sent the Rogerses a letter directing their attention to the appraisal-condition provision in the homeowner's policy. According to the letter, that provision states:

"Appraisal. If you and we fail to agree on the amount of 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 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 umpire. The appraisers shall then set the amount of the loss. If the appraisers submit a written report of an agreement to us, the amount agreed upon shall be the amount of the loss. If the appraisers fail to agree within a reasonable time, they shall submit their differences to an 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 compensation of the umpire shall be paid equally by you and us."

(Emphasis added.) The Rogerses did not respond to this letter, and on June 28, 1998, State Farm sent another letter, noting the Rogerses' failure to respond, accompanied by a check to cover living expenses and the property damage State Farm agreed had been caused by the storm. The Rogerses did not negotiate the check; their attorney instead sent a letter dated July 2, 1998, informing State Farm that the Rogerses declined to initiate the appraisal proceedings and stating that they claimed the limits of their policy, $60,911 with interest, to cover the total loss to their house. In a letter sent on July 21, 1998, State Farm again contested the Rogerses' claim that their house was a total loss and again suggested that the Rogerses seek a "non-binding" appraisal from a third party.

On January 26, 1999, the Rogerses sued State Farm in the Jefferson Circuit Court, alleging claims of breach of contract and bad-faith refusal to pay. On April 4, 2000, over a year and two months after the action was filed, State Farm sent the Rogerses a letter "requesting that the dispute be resolved in accordance with the terms of the contract." On June 22, 2000, State Farm filed with the trial court a motion for a partial summary judgment as to the Rogerses' bad-faith claim.2 On July 13, 2000, State Farm filed a motion for the appointment of an appraiser and/or an umpire. On July 21, 2000, the trial court denied the motion on the ground that State Farm had waived the right to invoke the appraisal process under the homeowner's policy.

State Farm filed a motion to set aside the order denying its motion for the appointment of an appraiser and requested a hearing on the matter. The trial court held a hearing on March 7, 2002, to determine whether an appraisal should be ordered at which point State Farm conceded that if the appraisal resulted in a finding that the damage to the brick veneer and the foundation were the result of the tornado, then State Farm would declare the house a total loss under the policy. The trial court, on May 7, 2002, set aside its July 21, 2000, order sua sponte and held that State Farm had not waived its right to invoke the appraisal process.

The Rogerses appealed that order to the Court of Civil Appeals, and the Court of Civil Appeals transferred the appeal to this Court. We dismissed the appeal, and the trial court began the appraisal process. The Rogerses amended their complaint on January 16, 2004, maintaining their initial claims of breach of contract and bad faith as set forth in the original complaint and adding new claims of breach of contract and bad faith in the context of State Farm's refusal to invoke the appraisal clause in a timely manner. The two appraisers were unable to agree on an umpire; consequently, the trial court appointed an umpire. The trial court then entered an order on May 26, 2006, in favor of the Rogerses and against State Farm, based on the umpire's findings that the Rogerses were due $16,595.38 from State Farm. The court deducted from that amount $1,642.50, representing one-half the cost of the umpire's charges, making the total award of damages to the Rogerses $14,952.88.

On July 5, 2006, the trial court entered a final order on the case-action summary. That order stated: "This Court's Order of the 26th day of May 2006 adjudicates all of the issues and is therefore a final order." On July 11, 2006, in response to a motion by State Farm requesting that the final order be set aside, the trial court entered an order on the case-action-summary sheet that stated: "The order of [July 5, 2006,] applies only to the finality of the right to demand ... the appraisal process and the findings of that process." The Rogerses appealed to this Court.

On December 20, 2006, we remanded this case for the trial court to make its order of July 5, 2006, a final judgment pursuant to Rule 54(b), Ala. R. Civ. P.; to adjudicate the remaining claims, thus making the interlocutory order final; or to take no action, in which event the appeal would be dismissed. On remand, the trial court entered an order on the case-action-summary sheet on January 2, 2007, certifying the judgment in favor of the Rogerses as final, pursuant to Rule 54(b). That order states: "The Court in accordance with the Supreme Court finds that the order of July 5, 2006, is a final judgment pursuant to the provisions of Rule 54(b) and as such the interlocutory order of July 5th 2006 is final." This Court has held that when the trial court specifically cites Rule 54(b) as the ground upon which it makes a summary judgment final, the trial court implicitly incorporates the language of Rule 54(b) into its order. Schneider Nat'l Carriers, Inc. v. Tinney, 776 So.2d 753, 755 (Ala.2000). Because the trial court certified its judgment as final in response to our remand order, we now consider the Rogerses' arguments on the merits.

II. Standard of Review

As this Court stated in Rogers Foundation Repair, Inc. v. Powell, 748 So.2d 869, 871 (Ala.1999):

"When a trial judge's ruling is not based substantially on testimony presented live to the trial judge, review of factual issues is de novo. Eubanks v. Hale, 752 So.2d 1113, 1122 (Ala.1999). `[W]here the trial court's ruling rests upon a construction of facts indisputably established, this Court indulges no presumption of correctness in favor of the lower court's ruling.' Alabama Farm Bureau Mut. Cas. Ins. Co. v. Dyer, 454 So.2d 921, 923-24 (Ala.1984). See also, Beavers v. Walker County, 645 So.2d 1365, 1372 (Ala.1994) (`[W]here the facts are not disputed the ore tenus standard does not apply.'). `"[W]hen a trial court sits in judgment on facts that are undisputed, an appellate court will determine whether the trial court misapplied the law to those undisputed facts."' Harris v. McKenzie, 703 So.2d 309, 313 (Ala. 1997) (quoting Craig Constr. Co., Inc. v. Hendrix, 568 So.2d 752, 756 (Ala.1990)). The ore tenus `standard's presumption of correctness has no application to a trial court's conclusion on questions of law.' Beavers, 645 So.2d at 1372. `[O]n appeal, the ruling on a question of law carries no presumption of correctness, and this Court's review is de novo.' Ex parte Graham, 702 So.2d 1215, 1221 (Ala.1997)."

The trial court did not base its ruling allowing State Farm to invoke the appraisal clause on live testimony; rather, the court relied on pleadings, depositions, interrogatories, and exhibits, and the facts regarding the invocation of the appraisal clause are undisputed. Therefore, we review the trial court's application of law to the undisputed facts de novo.

III. Analysis
A. Waiver of the Right to Invoke the Appraisal Clause

The Rogerses argue that State Farm waived its right to invoke the appraisal process by waiting until over 14 months after litigation had commenced, and almost 2 years after the tornado occurred, to demand invocation of the appraisal clause. Although this Court has never ruled on what standard should be applied to determine whether there has been a waiver of the right to invoke an appraisal clause in...

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