State Farm Fire & Cas. Co. v. Harper
| Decision Date | 31 March 2022 |
| Docket Number | 3:20-cv-00856 |
| Citation | 596 F.Supp.3d 1032 |
| Parties | STATE FARM FIRE & CASUALTY COMPANY, Plaintiff/Counter-Defendant, v. Jason HARPER and Michelle Harper, Defendants/Counter-Plaintiffs. |
| Court | U.S. District Court — Middle District of Tennessee |
Daniel C. Headrick, Matthew J. Evans, Nina M. Eiler, Kay Griffin, PLLC, Knoxville, TN, for Plaintiff/Counter-Defendant.
Jonathan L. Bobbitt, Nancy R. Steer, J. Brandon McWherter, McWherter Scott & Bobbitt PLC, Franklin, TN, for Defendants/Counter-Plaintiffs.
Pending before the Court is a Motion for Review of Nondispositive Order of Magistrate Judge filed by Plaintiff/Counter-Defendant State Farm Fire and Casualty Company ("State Farm" or "Plaintiff"). (Doc. No. 36). Through the Motion, State Farm seeks review of the Magistrate Judge's August 13, 2021 Order (Doc. No. 35), which granted the Motion to Compel Appraisal (Doc. No. 16) filed by Defendants/Counter-Plaintiffs Jason and Michelle Harper ("the Harpers" or "Defendants"). The Harpers filed a response in opposition to the Motion for Review (Doc. No. 49), State Farm filed a Reply (Doc. No. 50), and the Harpers filed a Sur-Reply (Doc. No. 53). The Harpers also filed two notices of supplemental authority. (Doc. Nos. 54, 59).
This case involves an insurance dispute regarding the amount owed to the Harpers as a result of damage to their home from a tornado in the Nashville area on March 3, 2020. (Compl., Doc. No. 1, ¶ 10). The Harpers insured the home through a home insurance policy with State Farm. (Id. , ¶ 7). After the tornado, the Harpers filed an insurance claim with State Farm. (Id. , ¶ 11). State Farm retained a company called NV5 to conduct an inspection of the property. (Id. , ¶ 13). Based on the inspection, State Farm estimated the cost to repair the property to be $135,054.54. (Id. , ¶ 16). The Harpers retained engineer Eduard C. Badiu ("Dr. Badiu") to perform a structural assessment of the property. (Id. , ¶ 17). Dr. Badiu opined that the home was a total loss and recommended the home be demolished and rebuilt. (Id. , ¶ 18, Ex. C). On May 21, 2020, the Harper's public adjuster, Jordan Murray, sent a letter to State Farm stating that the estimate to rebuild a new structure is $303,357.22. (Id. , ¶ 19, Ex. D).
Mr. Murray also forward an email to State Farm from Mark Kirk with the City of Mt. Juliet Building Department. (Doc. No. 1-5). Mr. Kirk stated that "City Code 8-52" provides that "if the cost to repair the property is in access [sic] of 50% of the property value, it would have to be demolished." Mr. Kirk stated that "the total market appraisal [of the property], according to Wilson County, is $95,500.00." (Id. ). He concluded, (Id. ).
On June 5, 2020, the Harpers formally requested an appraisal pursuant to the appraisal provision of the Policy. The appraisal 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 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 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 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.
State Farm denied the appraisal request three times. (See Doc. No. 17-4, 17-7, 17-9). In the last denial on August 17, 2020, State Farm wrote, (Doc. No. 17-9).
On October 2, 2020, State Farm filed the instant lawsuit, seeking declaratory judgment that (1) the appraisal provision of the policy does not apply in this instance, where there is a difference in opinion regarding the scope of work to be performed, (2) the Harpers are only entitled to recovery provided for in the scope of work as defined by NV5; and (3) that the City of Mt. Juliet's valuation using the tax assessed value is incorrect. (Doc. No. 1, ¶ 36).
The Harpers filed a counterclaim bringing claims for breach of contract (including for failure to submit to the appraisal process) and statutory bad faith. (Doc. No. 10 at 10-23). The Harpers seek compensatory damages, punitive damages, a statutory bad faith penalty, costs, pre and post judgment interest, and an order compelling State Farm to proceed with an appraisal of the amount of the loss. (Id. at 22-23).
The Harpers filed a Motion to Compel Appraisal, seeking "specific performance of the appraisal clause." (Doc. No. 16). The Magistrate Judge granted the Motion. (Doc. No. 35). State Farm filed a motion for review of the Magistrate Judge's Order. (Doc. No. 36).
As an initial matter, State Farm argues that the Magistrate Judge's Order is dispositive of the Parties’ claims for declaratory judgment on the applicability of the appraisal provision in the Policy and is, therefore, subject to de novo review. (Doc. No. 37 at 5). The Harpers do not dispute that the motion to compel appraisal is dispositive of certain claims, but argue that State Farm has waived the argument that the motion to compel is a dispositive motion because it failed to raise that issue before the Magistrate Judge. (Doc. No. 49 at 17).
The standard of review is an issue of law to be resolved by the Court. The standard of review depends on the procedural posture of the case and the nature of the issue to be reviewed. Vogel v. United States Office Prods. Co. , 258 F.3d 509, 514-15 (6th Cir. 2001). The Harpers characterize their motion to compel appraisal as requesting "specific performance of the appraisal clause." (Doc. No. 17 at 5-6). This is the same relief the Harpers specifically request in their Counterclaim. (See Doc. No. 10 at 23). Moreover, determination of whether the Harpers are entitled to specific performance of the appraisal clause requires interpretation of the Policy language that is the subject their claim for breach of contract based on State Farm's "refusing to submit to the appraisal process that was properly invoked by the Harpers to resolve the parties’ dispute concerning the amount of the Loss." (Doc. No. 10, ¶ 84). State Farm also requests declaratory judgment on this same issue – "that the appraisal demand does not apply." (Doc. No. 1 at 6).
The Court finds the Motion to Compel Appraisal, which will resolve dispositive claims in this case, is a dispositive motion. See Vogel , 258 F.3d at 514-15 ().
The Court reviews a Magistrate Judge's rulings on dispositive motions de novo. See 28 U.S.C. § 636(b)(1)(B) ; United States v. Curtis , 237 F.3d 598, 603 (6th Cir. 2001) (). Arguments not raised before the Magistrate Judge are not properly raised before the district court in a motion for review. Swain v. Comm'r of Soc. Sec. , 379 F. Appx 512, 517-18 (6th Cir. 2010) (citing Ward v. United States , 208 F.3d 216 (table) (6th Cir. 2000) ).
State Farm has waived any argument that a motion to compel is not the proper procedural mechanism to seek specific performance of the appraisal clause. State Farm did not raise this argument before the Magistrate Judge, and the Court will not consider it upon review.1
As discussed above, the Parties dispute whether the appraisal clause in the Policy, which provides that if the Parties "fail to agree on the amount of loss," either party can demand that the amount of loss be set by appraisal, applies to their dispute over the scope of work required to return the property to its pre-loss condition and the cost of that work.
In a diversity action, the substantive law of the forum state controls under the forum's choice of law principles. See In re Air Crash Disaster , 86 F.3d 498, 540-41 (6th Cir. 1996) (citing Klaxon Co. v. Stentor Elec. Mfg. Co. , 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941) ). "In Tennessee, absent a valid choice of law provision, the rights and obligations under an insurance policy are governed by the law of the state where the insurance policy was ‘made and delivered.’ " Charles Hampton's A-1 Signs, Inc. v. Am. States Ins. Co. , 225 S.W.3d 482, 485 n.1 (Tenn. Ct. App. 2006). Because the Policy was issued and delivered in Tennessee, the Court will apply Tennessee substantive law to the interpretation and effect of the Policy.
Under Tennessee law, "an insurance policy is a contract, and as such, [the court's] analysis must be grounded in principles of contract law." Christenberry v. Tipton , 160 S.W.3d 487, 492 (Tenn. 2005). Thus, the terms of an insurance contract "should be given...
To continue reading
Request your trial