1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA
9 ACS International Products LP, No. CV-19-00549-TUC-DCB
10 Plaintiff, ORDER
11 v.
12 State Automobile Mutual Insurance Company, 13 Defendant. 14 15 The Court denies summary judgment and directs the parties to file a Joint Proposed 16 Pretrial Order. 17 A. Background 18 Plaintiff, ACS International Products, LP (ACS International), manufactures fillers 19 for the countertop and flooring industry. Dorfner Holding (Dorfner), a German company, 20 purchased Arizona Cultured Stone, then owned by Jim and Greg Novak, (ACS Novak) in 21 August 2017. As part of the purchase agreement, Guy Mattern, V.P. of Operations and 22 Norman Franzen, Controller, stayed on with ACS International. Brian O’Neil was ACS’s 23 insurance agent before and after the acquisition, at the time of the alleged loss, and when 24 the claim was filed. Prior to the acquisition in August of 2017, Defendant State Auto and 25 Dorfner conducted several inspections of the property, and Dorfner required ACS Novak 26 to install a new roof vent in July 2017. “After ACS received new ownership and new name, 27 it became insured with State Auto in 2017.” (MSJ (Doc 84) at 3 (citing DSOF ¶ 11). 28 1 The Plaintiff alleges that on September 2, 2018, a hailstorm hit the company’s 2 property causing roof damage. The Plaintiff filed a claim with Defendant, which was 3 denied. The Plaintiff alleges breach of the insurance contract and bad faith and seeks 4 punitive damages. The effective policy coverage period for the alleged date of loss, 5 September 2, 2018, was August 9, 2018, to August 9, 2019. 6 State Auto seeks summary judgment because “ACS [] cannot link the alleged hail 7 damage to the September 2018 storm—the only storm that occurred within the policy’s 8 coverage—because several hailstorms previously impacted ACS’s property and four 9 engineering firms were unable to agree which hail damage was caused by which storm.” 10 (MSJ (Doc. 84) at 1.) According to State Auto, an “initial roof inspection revealed old hail 11 damage, [therefore] State Auto retained Donan Engineering to date the damage. The report 12 provided by Donan Engineering, however, was inconclusive and inconsistent,” id. 13 warranting a second inspection and that “second engineering firm concluded that no 14 damage was caused during the policy coverage.” Id. at 2. 15 Defendant asserts that “[b]ecause the cause of ACS’s property damage is fairly 16 debatable based on State Auto’s entire investigation, State Auto had a reasonable basis to 17 deny ACS’s claim,” thus “State Auto should be granted summary judgment on both ACS’s 18 causes of action.” As there is no evidence even of bad faith, “ACS’s demand for punitive 19 damages should also be denied.” Id. 2. 20 B. Summary Judgment Standard 21 Summary Judgment is appropriate only where there is no genuine issue as to any 22 material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. 23 P.56(c). The movant bears the initial responsibility of presenting the basis for its motion 24 and identifying those portions of the record, together with affidavits, if any, that it believes 25 demonstrate the absence of a genuine issue of material fact. Celotex, Celotex Corp. v. 26 Catrett, 477 U.S. 317, 323 (1986). If the movant fails to carry its initial burden of 27 production, the nonmovant need not produce anything. Nissan Fire & Marine Ins. Co., 28 Ltd. v. Fritz Co., Inc., 210 F.3d 1099, 1102-03 (9th Cir. 2000). When the movant meets its 1 initial responsibility, the burden shifts to the nonmovant to demonstrate the existence of a 2 factual dispute and that the fact in contention is material; a fact is material if it might affect 3 the outcome of the suit under the governing law, and that the dispute is genuine. In other 4 words, the evidence is such that a reasonable jury could return a verdict for the nonmovant. 5 Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 250 (1986); Triton Energy Corp. v. 6 Square D. Co., 68 F.3d 1216, 1221 (9th Cir. 1995). 7 The nonmovant does not need to establish a material issue of fact conclusively in 8 its favor. First Nat’l Bank of Ariz. v. Cities Serv. Co., 391 U.S. 253, 288-89 (1968). It need 9 only “come forward with specific facts showing that there is a genuine issue for trial.” 10 Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (internal 11 citation omitted); Fed. R. Civ. P. 56(c)(1). 12 At summary judgment, it is not for the judge to determine the truth of a matter 13 asserted, to weigh the evidence, or to determine credibility, but only to determine whether 14 there is a genuine issue for trial. Anderson, 477 U.S. 248-49. In its analysis, the court must 15 believe the nonmovant’s evidence and draw all inferences in the nonmovant’s favor. Id. at 16 255. The court need consider only the cited materials, but it may consider any other 17 materials in the record. Fed. R. Civ. P. 56(c)(3). The movant carries the burden of showing 18 that there is no genuine issue of material fact, all reasonable doubt as to the existence of a 19 genuine issue of fact should be resolved against the moving party. Hector v. Wiens, 533 20 F.2d 429, 432 (9th Cir. 1976). Where different inferences can be drawn, summary 21 judgment is inappropriate. Sankovich v. Life Ins. Co. of North Am., 638 F.2d 136, 140 (9th 22 Cir. 1981). 23 C. Material Issues of Fact: Breach of Contract and Bad Faith Claims 24 1. The hailstorm claims. 25 Sometime around June 2018, Plaintiff allegedly noticed that a “new” roof vent, 26 installed in 2017 when ACS International purchased the business, was dented due to hail 27 damage. In July 2018, the Plaintiff filed a hail-damage claim with a loss date of June 16, 28 2018. By email, July 11, 2018, Defendant’s claim adjuster, Matthew Romero, sent a 1 CoreLogic hail-storm report to the Insurance Broker, Brian O’Neil, which reflected no hail 2 falling at the property on June 16, 2018. According to Mr. O’Neil, the only significant hail 3 event shown there was on August 22, 2015, when one-inch hail fell at the property. Mr. 4 O’Neil communicated this information to ACS International. (MSJ, SOF, Ex. O’Neil 5 Depo. at 44 (Doc. 85-2) at 10-11.)1 According to Mr. Romero, the Plaintiff failed to pursue 6 this claim; he was unable to coordinate a site-inspection. Mr. Romero considered it a non- 7 pursuit claim and closed it. (MSJ, SOF, Ex. H: Romero Depo. (85-2) at 160; Depo. at 119.) 8 It is undisputed that the 2015 hailstorm was prior to ACS International’s acquisition 9 of ACS Novak, and that at that time ACS Novak was insured by EMC Insurance Wahad, 10 not State Auto. (MSJ, SOF, Ex. O’Neil Depo. at 41, 43 (Doc. 85-2) at 10-11.) 11 Plaintiff filed the claim at issue in this case on March 12, 2019, alleging a loss date 12 of September 2, 2018, under the policy effective August 9, 2018, to August 9, 2019. 13 This time, Mr. Romero conducted a site inspection. He met with John Morris, a 14 claim adjuster hired by Plaintiff, and Josh Mattern,2 a roofing contractor. (MSJ, SOF, Ex. 15 H: Romero Depo. at 92 (Doc. 85-2) at 146.) He observed hail damage but believed it to be 16 old hail damage. Id. at 99; 149. He was told about the vent cover replaced in 2017. Id. at 17 100; 150. There was hail damage on soft metal vents. Id. Based on weather data, he 18 confirmed that there was a hail event that matched what he was seeing on the roof: “Like 19 larger hail,” i.e., “over one inch.” Id. at 102; 152. According to Mr. Romero this event 20 occurred in 2015. The weather data reflected an event within a mile radius of the property 21 on the date of loss but not at one inch or larger. Id. at 103-104; 153-154. He considered the 22 benchmark report id. at 103; 153, which reflected a hail event on September 2, 2018, at the 23 property with an estimated 50% probability of hail size at .75. (MSJ, SOF, Ex. D (Doc. 85- 24 1) at 91, 93.)3
25 1 Deposition citations include parallel CM/ECF page citations. 2 Josh Mattern is related to Guy Mattern. 26 3 The Court’s review of the various weather reports relied on by the parties has found them to all similarly reflect that they “attempt” to be as accurate as possible in reporting 27 significant hail events at specific property locations and progressing outward at one-mile and three-miles away, with the importance being one-inch or more hail events because 28 “significant damage to real property such as roofing materials does not occur until hail stones reach at least 1” in diameter.” (MSJ, SOF, Ex. N: Springer Report (Doc. 85-4) at 1 Plaintiff’s adjuster, Mr. Morris, provided his hail report data to substantiate the 2 claim that hail over one inch hit the property on 9/2/18, Romero Depo. at 103; 153, with 3 hail sized at 1.25,” and hail hit the property on August 22, 2015, size 1.50. (Resp, SOF, Ex. 4 10 NEXRAD Interactive Hail Maps (Doc. 90-7) at 13.) Initially, Mr. Romero was going to 5 schedule a second appointment to walk the roof with a roofing contractor. Id. at 96; 148. 6 Mr. Romero, however, had some concerns about the claim because of the prior claim 7 Plaintiff filed but did not pursue. Id. at 119; 160. After Mr. Romero discussed the case with 8 his manager, Defendant decided an engineer should inspect the roof rather a roofing 9 company. Id. at 120; 161. 10 2. Donan Engineering Investigation and Report 11 Subsequently, State Auto sent out its preferred vendor, Donan Engineering, 12 Engineer Marcor Platt, S.E., P.E., to conduct a site study and prepare a report. “The purpose 13 of the study was to determine whether the roof surfaces, metal surfaces, and/or painted 14 surfaces were damaged due to hail impact, and whether the hail impact occurred after 15 August 1, 2017.” (MSJ, SOF, Ex. E: Donan Report at 1 (Doc. 85-2) at 3.) Like Mr. Romero, 16 Mr. Platt inspected the property accompanied by John Morris and Josh Mattern, who were 17 joined by Guy Mattern and Louis Larrasco from ACS International. He interviewed ACS 18 International employees, including Mattern who reported that hail 1 ¼ inches hit the 19 property on September 2, 2018, and he noticed twice as many roof leaks throughout the 20 building following the hailstorm and that there was damage to the office rollup doors, 21 heating, ventilating, and air conditioning (HVAC) units, and soft metal vents. Id. at 4. Mr. 22 Larrasco, who lived less than ½ mile from the property, reported golf-ball-sized hail at his 23 property on that day, it was the largest hail he had seen in four years and prior hail was 24 pea-sized. Id. at 5. Josh Mattern reported a vent was installed on the north side of the 25 manufacturing building over the curing oven in 2017 after the building was purchased and 26 provided documentation of the installed vent. Id. 27 28 18.) 1 Mr. Platt reported dents up to one inch and over on various surfaces, some clean and 2 some not, which indicates whether a hit is new or old. He distinguished the dents by size 3 and age. Importantly, he reported dents up to 1 inch wide on rooftop metal vent caps, 4 “including in the vent installed in 2017 (photos 50 and 53).” Id. at 6. 5 Mr. Platt consulted historical weather data for the property from 2015-2018, using 6 the National Oceanic and Atmospheric Administration’s (NOAA) Storm Event Database 7 (SED), which reports significant weather phenomena having sufficient intensity to cause 8 loss of life, injuries, significant property damage, and/or disruption to commerce. The 9 NOAA data reflected hail up to 7/8 inch on August 1, 2015, approximately 500 feet north 10 of the property; hail up to one inch on August 22, 2018, less than ½ mile west of property, 11 and one inch hail on September 2, 2018, approximately 15 miles northwest of property. Id. 12 at 8. 13 Based on historical weather data and collateral indicators of hail impact, Mr. Platt 14 concluded some damage occurred prior to 2017 and some after. According to Mr. Platt, 15 “[b]ased on the collateral indicators, weather data, and firsthand accounts, hail up to 1 inch 16 in diameter impacted the property September 2, 2018.” Id. at 17. 17 In his report, he very specifically identified the damage and whether it occurred 18 before or after August 1, 2017, and if it could be attributed to the September hailstorm. For 19 example, he found that dents in the roll-up doors, south rolling door canopy south-facing 20 metal flashing, first and third south elevation downspouts, HVAC condenser fins was due 21 to hail impact after August 1, 2017. Damage to exhaust vent flaps, parking garage roof, 22 trellis paint, swamp cooler metal duct, and gutters was due to hail impact, but it could not 23 be determined whether the impact occurred before or after August 1, 2017. He found no 24 hail damage to the office BUR roof covering. As for the manufacturing building, he 25 concluded 1-inch-diameter bruises on the northeast portion and elsewhere were from the 26 September 2, 2018, hailstorm, but bruises less than one inch at the southwest portion and 27 elsewhere were from hailstorms occurring prior to August 1, 2017. He also noted that the 28 1 “roof surface is sloped less than the IBC minimum and is inadequate for effective 2 drainage.” (MSJ, SOF, Ex. E: Donan Report (Doc. 85-2) at 17-18.) 3 On April 26, 2019, Defendant’s claim adjuster, Specialist Mr. Wakefield, sent an 4 email to Plaintiff’s private adjuster, saying: “I have completed review of our claim file. 5 Hail damage was concluded in our engineer’s report. I am now proceeding with scheduling 6 our hired consultant to inspect the roof and complete a damage scope.” (Resp. SOF, Ex. 7 16: email (Doc. 90-8) t 71); see also Claim File note 4/26/2019 (Wakefield)(proceeding to 8 hire Tines Group to determine roof damages scope and bid out job; “communicated plan 9 of action to insured PA”). This was done, and State Auto’s contractor, the Tines Group, 10 estimated hailstorm roof damage for September 2, 2018, at $353,181. (Resp., SOF, Ex. 18: 11 Tines Group Estimate (Doc. 90-8) at 97.) 12 3. Defendant denies claim: Donan Report and Plaintiff’s suspicious claim 13 behavior. 14 The Defendant did not, however, move forward to formally approve and pay the 15 claim. Instead, it hired Augspurger Komm Engineering, Inc. to conduct another site review 16 on June 11, 2019, and prepare a report, the Springer Report, on July 18, 2019. State Auto 17 denied the claim on July 26, 2019. (Resp., SOF, Ex. P: D Expert, DiCiancio Report (Doc. 18 85-4) at 74, 77.) State Auto, accidentally attached the Donan Report instead of the Springer 19 Report to the denial letter. (Resp., SSOF ¶ 125.) 20 In the Motion for Summary Judgment, the Defendant refers the Court to “ACS’s 21 own standard of care expert witness McNeil, [who] testified that the Donan Engineering 22 report was inconclusive and that there was a dispute about when hail damage occurred.” 23 (MSJ (Doc. 84) at 6 (citing DSOF ¶ 53; SOF, Ex. J: McNeil depo at 52:1-7, 80:23-81:20, 24 83:13-25, 84:5-18, 86:9-15, 87:3-15)). There is no support found in these cited portions of 25 Mr. McNeil’s deposition to support the assertion that the Donan Engineering report failed 26 to identify when hail damage occurred. Mr. McNeil’s deposition review of the Donan 27 Report reflects the record similar to that referenced by the Court above. The Donan Report 28 parsed damage to the property between two hailstorms occurring before, August or after 1 August 2017: August 1, 2015 and September 2, 2018. He specifically identified damage 2 that he concluded was unrelated to either hailstorm. 3 According to Defendant, “ACS’s vice president Guy Mattern confirmed that Platt’s 4 report did not inform him as to “when” the damage may have occurred.” Id. (citing DSOF 5 ¶ 55). This deposition reference includes Mattern’s admission that he skimmed the Donan 6 Report; his lay opinion is that it found hailstorm damage; and he, Mattern, did not know 7 when the damage occurred. 8 For the first time in the Reply, State Auto references, without citation, a weather 9 report that shows a July 2017 storm to support its assertion that “engineers involved 10 disagree about when damage occurred.” (Reply (Doc. 91) at 5.) Here, “is at least one 11 significant storm before the inception of ACS’s Policy with State Auto and damage caused 12 in July 2017 would not be covered by the Policy.” Id. This was not a date considered in the 13 Donan Report or the Springer Report. It appears to come from a NEXRAD, Historical 14 Storm Activity report provided by the Plaintiff which reflects a July 28, 2017 hailstorm 15 with one-inch hail within one mile of the property; the hail size at the property was .50 16 inches. (Resp., SOF, Ex. 10: Historical Storm Activity (Doc. 90-7) at 13.) Because the July 17 2017 storm is raised in the Reply, the Court does not consider it to assess the merits of 18 State Auto’s summary judgment motion, but notes that this weather data report, like all the 19 others included in this record, make it clear that hail data is not reported to a certainty. For 20 example, “Interactive Hail Maps (IHM) uses NEXRAD weather radar data and proprietary 21 hail detection algorithms to generate the “Hail Impact” and “Historical Storm Activity” 22 information included in this report. And while IHM attempts to be as accurate as possible., 23 IHM makes no representations or warranties of any kind, including express or implied 24 warranties, that the information in this report is accurate, complete and/or free of defect.” 25 Id. 26 To be clear, weather data reports are not magic bullets for determining hailstorm 27 damage claims. They help answer the question of whether a significant hail event occurred 28 at a specific location during a period of time. It is undisputed that the property was covered 1 by State Auto beginning August 2017. The Donan Report speaks for itself, including Mr. 2 Platt’s date of loss findings. In the Donan Report, the only hailstorm damage that could not 3 be dated as occurring before or after August 2017, was “to exhaust vent flaps, parking 4 garage roof, trellis paint, swamp cooler metal duct, and gutters.” Supra. above. To this 5 limited extent, the Donan Report was arguably inconclusive. 6 Concerns regarding roof-slope inadequacy for effective drainage is a red herring 7 because it is not relevant to the question of whether there was hailstorm damage to parts of 8 Plaintiff’s buildings and when any such damage occurred either before or after August 9 2017. Defective slope is relevant to repair and replacement determinations once coverage 10 is established; "[f]or reroofing applications, the IBC requires reroofing materials and 11 installation methods meet the same requirements as new construction.” (MSJ, SOR, Ex. E: 12 Donan Report (Doc. 85-2) at 15.) In other words, building standards must be met for the 13 repair and replacement work if coverage exists, even if the damaged roof was defective. 14 Therefore, as Plaintiff’s expert McNeil agreed, the alleged defective roof slope may have 15 warranted further investigation, (MDJ) (Doc. 84) at 6 n.5), but this needed additional 16 investigation was not due to the Donan Report being inconclusive as to the date of loss. 17 It is undisputed that the Donan Report was inconsistent with Defendant’s claim 18 adjuster, Mr. Romero’s opinion that all the hailstorm damage on Plaintiff’s property 19 occurred prior to 2017; the Donan Report was ordered specifically to address this concern 20 expressed by Mr. Romero. 21 The Defendant wrongly asserts that the Donan Report is internally inconsistent 22 because it reflects “‘damage to BUR roofs occurs with hail 2 inches or greater’ and then 23 concluded that there was damage to BUR roof while weather reports do not show any storm 24 of size even close to 2 inches.” (Reply (Doc. 91) at 4 (quoting and citing (MSJ, SOF, Ex: 25 E: Donan Report (Doc. 85-2) at 14, 16)) (emphasis in original). The Donan Report 26 expressly concludes: “No hail damage is on the office BUR roof covering. Surface 27 abrasions are due to age-related deterioration.” Id. at 16), see also Summary of Conclusions 28 at 18 (same). 1 It is undisputed that the Donan Report and the Springer Report prepared by 2 Augspurger Komm Engineering, Inc. are inconsistent. Mr. Springer found the hailstorm 3 history for the property reflected several occasions of minor/inconsequential events, 4 including the September 2, 2018, storm. “The largest hail experienced by the property 5 occurred in August 2015 and was on the order of 5/8 of an inch in diameter. No hail stone 6 impact damage is present on either roofing system.” (MSJ, SOF, Ex: N: Springer Report 7 (Doc. 85-4) at 11, 14, 15.) State Auto secured the second Springer Report after obtaining 8 the Donan Report; the Springer Report did not identify any alleged inconsistencies in the 9 Donan Report findings or address the tests and pictures compiled by Mr. Platt in the Donan 10 Report. 11 The Donan Report alone suffices to raise a material issue of fact regarding the 12 breach of contract claim. A jury might conclude that it reflects a hailstorm on September 13 2, 2018, caused damage to Plaintiff’s property in part, and at that time the property was 14 covered by the August 9, 2018, through August 9, 2019 policy. The alleged inconsistencies 15 or inconclusiveness of the Donan Report remain arguments going to the question of bad 16 faith. The parties argue contrary to each other: Defendant justifying its further investigation 17 of the claim, and Plaintiff asserting the bogus investigation shows bad faith. 18 Similarly, both sides argue different conclusions should be drawn from State Auto’s 19 investigation into the allegedly inconsistent and inconclusive Donan Report. State Auto 20 argues the merits of hiring another engineering loss report, the Springer Report, because 21 when it contacted Donan engineering to ask questions, it discovered that Mr. Platt was no 22 longer employed there. According to Mr. Wakefield, he was, therefore, unable to obtain 23 clarification regarding the Donan Report. The Plaintiff disputes the sincerity of this 24 explanation for preparing the second engineering investigation and Springer Report. The 25 Defendant made one telephone call to Donan Engineering to resolve the alleged 26 inconsistencies and inaccuracies in Mr. Platt’s report. (Resp. SOF, Ex. 11: Claim File note 27 4/15/2019 (Wakefield) (85-3) at 122 (called engineer, Marcor Platt, Donan Engineering, 28 today and left a voice message)). Admittedly, he mistakenly failed to record the Donan 1 communication in the claim file record and could not remember more than the fact that he 2 had called and was told Mr. Platt was not employed there. Mr. Wakefield admitted he made 3 no other attempts beyond the single telephone call to contact or secure contact information 4 for Mr. Platt. (Resp, SOF, Ex. 17: Wakefield Depo. at 45-47 (Doc. 90-8) at 78-80.) 5 According to State Auto, “[o]n August 22, 2015, the Benchmark Hail History 6 Report informed State Auto of a 65% chance that hail of 1-inch in diameter fell on ACS’s 7 Property then.” (MSJ (Doc. 84) at 2 (citing (DSOF ¶ 7). “State Auto’s investigation 8 uncovered that soon thereafter, ACS’s representative attempted to file a hail-damage claim 9 with ACS’s insurance agent O’Neil from Koty-Leavitt agency.” Id. at 2-3 (citing DSOF ¶ 10 8). In other words, State Auto argues that its claim investigation revealed that ACS’s 11 representative attempted to file a hail-damage claim for a loss date in 2015 shortly after 12 State Auto gave ACS the Benchmark Hail History Report that reflected the only major 13 hailstorm event to hit the property occurred on August 22, 2015, which was a time period 14 when it did not even own the property and State Auto was not the insurance carrier. 15 Agent O’Neil’s deposition expressly disavows any assertion that there was ever any 16 attempt to file a hail claim in 2015. (MSJ, SOF, Ex.F: O’Neil Depo. at 42 (Doc. 85-2) at 17 76.) It is undisputed that there is no State Auto claim file with an alleged loss date of August 18 22, 2015. The claim file note from May 22, 2019, reflects: Mr. O’Neil was the agent on the 19 account since 2001 through the time of the sale and currently; contact information for 20 Norman Franzen was obtained, and that he “attempted to file a roof/exterior hail claim with 21 the agent on August 22, 2015. He attempted to file a claim even though his company did 22 not yet own the company. Agent Brian informed him they had no financial interest in 23 company and could not pursue claim. I asked why the current owner in 2015 did not file 24 and pursue the claim. They had no answers in the file. On July 11, 2018, they attempted to 25 file another hail claim with us regarding 6/16/2018 date of loss, []. However, our adjuster 26 investigated and informed them there was no hail on this date. They then filed the current 27 claim for the loss date, 9/2/2018.” (Resp, SOF, Ex. 11: Claim File note 5/22/2019 28 (Wakefield) (Doc. 90-7) at 58.) 1 The only evidence for this claim comes from the string of emails beginning around 2 June 25, 2018, with Norm Franzen asking Mr. O’Neil for a copy of the ACS International 3 policy because he had been told there was some hail damage in “the last storm.” 23-24; 71 4 Guy Mattern emailed Mr. O’Neil that he would be the point of contact. Id. at 24. This string 5 of emails reflects the claim filed in July 2018 for a hail loss date of June 16, 2018. As noted 6 above, Defendant’s adjuster, Mr. Romero, sent the CoreLogic hailstorm report to Mr. 7 O’Neil by email, July 11, 2018, which reflected no hail falling at the property on June 16, 8 and this claim was ultimately closed due to Plaintiff’s failure to pursue it. 9 Defendant relies on an email towards the end of the string, sent September 18, 2018, 10 by Mr. Mattern to Mr. O’Neil, which reads: “The adjuster that was sent out here, but never 11 actually came out, sent a CoreLogic report to my contractor that is missing numerous hail 12 storms that came through this area; namely, the June 2018 storm that caused visible damage 13 to a new vent we just installed in August 2017, and the June 2015 storm, one of the biggest 14 to hit Tucson in decades. Please file a wind/hail claim on our previous policy and please 15 let me know when an adjuster has been named to this claim.” (MSJ, SOF, Ex.F: O’Neil 16 Depo. at 49-50 (Doc. 85-2) at 78) (emphasis added). Defendant argues that this email 17 shows Guy Mattern attempting “to file a coverage claim but did not reference the 18 September 2018 storm at all and referenced only the June 2018 and the 2015 storms, 19 requesting that O’Neil file the claim under an old policy with inapplicable policy dates.” 20 (MSJ (Doc. 84) at 3 (quoting SOF ¶21) (citing Ex. F: O’Neil depo.)). “State Auto’s 21 investigation uncovered that . . . ACS’s representative attempted to file a hail-damage claim 22 with ACS’s insurance agent O’Brian from Koty-Leavitt agency.” Id. at 2-3. See also (Reply 23 (Doc. 91) at 5-6 (quoting O’Neil Depo.)) 24 When Mr. O’Neil was deposed, he was asked about the September 18, 2018, email, 25 wherein Mr. Mattern wrote: “Since we are having issues with dates of loss on this current 26 claim, which would be involving the 6/16/18 claim, . . . “[w]e would like you to file the 27 claim under our old policy.” (MSJ, SOF, Ex.F: O’Neil Depo. at 48 (Doc. 85-2) at 77.) Mr. 28 1 O’Brien was asked: “The old policy would have been the EMC policy?” He answered: The 2 old policy, I believe in his reference here was the prior owner’s policy[,] State Auto.” Id. 3 The Defendant’s position that State Auto’s investigation lead to a reasonable 4 suspicion that the Plaintiff was trying to commit insurance fraud is arguably disingenuous. 5 For Plaintiff, the facts surrounding the Defendant’s handling of the claim due to an 6 allegedly improper filing of a 2015 hailstorm claim shows the Defendant acted in bad faith. 7 The Plaintiff notes that Mr. Wakefield admitted during his deposition that he never 8 attempted to confirm with Mr. Franzen whether he had ever attempted to file a roof hail 9 damage claim for a loss in 2015 or for the loss date of August 22, 2015. Mr. Wakefield 10 testified that he relied solely on the information he received from the agency because:
11 The agency had been with Franzen, I believe, for 15, 16 years. The agent's assistant spoke from their claim -- from their agency files, I believe with the 12 agent and agent assistant, had information they had provided to me. In fact, they had informed me that – that the claim -- they had -- Franzen had 13 attempted to file a claim prior to owning the company and -- and that no follow-up of -- with the insurance companies at that time was conducted. So 14 what I believed was what the agent had informed me, and there was no purpose to follow up with ACS. 15 (MSJ, SOF, Ex: Wakefield Depo. at 66 (Doc. 85-3) at 111.) The Plaintiff is critical of Mr. 16 Wakefield’s lax investigation into the substance of a fact State Auto relied on to further 17 investigate and delay payment of the claim, and to ultimately deny the claim. 18 D. Conclusion 19 Some of Defendant’s motion for summary judgment simply asserts facts that are 20 not in dispute but are facts that the parties are disputing as to what they show. The 21 appropriate place for the Defendant to make such arguments is at trial. On summary 22 judgment, this Court will not weigh the persuasiveness of evidence to establish various 23 material questions of fact which must be resolved to prove the breach of contract and bad 24 faith claims. State Auto carries the burden of showing that there is no genuine issue of 25 material fact, therefore, the Court resolves all reasonable doubt as to the existence of a 26 genuine issue of fact against State Auto and construes all inferences in favor of ACS 27 International. 28 1 The law is undisputed. “The tort of bad faith in a first-party claim arises when an 2 insurance company: (1) intentionally denies, fails to process or pay, or delays payment of, 3 a claim without a reasonable basis; and (2) knows that it acted without a reasonable basis, 4 or fails to perform an investigation or evaluation adequate to determine whether its action 5 was supported by a reasonable bases.” (MSJ (Doc. 84) at 8 (citing Noble v. Nat’l Am Life 6 Ins. Co., 624 P.2d 866, 868 (Ariz. 1981); see also Miel v. State Farm Mut. Automobile Ins. 7 Co., 912 P.2d 1333, 1339 (Ariz. App. 1995)). “Insurance contracts include an implied 8 covenant of good faith and fair dealing that requires the parties to refrain from any conduct 9 that would impair the benefits or rights expected from the contractual relationship.” (Resp. 10 (Doc. 89) at 11 (citing Rawlings v. Apodaca, 726 P.2d 565, 570 (1986)). Parties must 11 “refrain from any conduct that would impair the benefits or rights expected from the 12 contractual relationship,” id., and obligates the insurer to “immediately conduct an 13 investigation, act reasonably in evaluating the claim, and act promptly in paying a 14 legitimate claim.” Zilisch v. State Farm Mut. Ins. Co., 995 P.2d 276, 280 (2000). 15 Both parties agree that the appropriate inquiry on summary judgment is “whether 16 there is sufficient evidence from which reasonable jurors could conclude that in the 17 investigation, evaluation, and processing of the claim, the insurer acted unreasonably and 18 either knew or was conscious of the fact that its conduct was unreasonable.” (MSJ (Doc. 19 84) at 8) (quoting Bjornstad v. Senior Am. Life Ins. Co., 599 F.Supp 2d 1165, 1174 (Ariz. 20 2009)); (Resp. (Doc. 89) at 12 (quoting Zilisch v. State Farm Mutul Ins. Co., 995 P.2d 276, 21 279 (Ariz. 2000)). The Plaintiff has rebutted the Defendant’s assertion on summary 22 judgment that there is no such evidence. There are material questions of fact in dispute 23 regarding the reasonableness of State Auto’s handling of Plaintiff’s claim. At trial, the 24 Defendant may present the facts it argues here show suspicious behavior by the Plaintiff, 25 such as: ACS not inspecting its roof until November 2018 despite alleged flooding in 26 September and taking six months to file a claim from the September 2018 storm. The 27 Plaintiff’s bad faith arguments may or may not rely on the same facts relied on by the 28 Defendant or include other facts, such as: State Auto’s conduct in securing the second 1 engineering referral from attorney Dicaro at a time when State Auto was supposed to be 2 conducting an independent unbiased investigation; Mr. Springer’s orientation biased his 3 report, and Mr. Springer contradicted Mr. Platt’s findings without addressing the 4 foundational test results and pictures contained in the Donan Report. 5 In short, summary judgment is not appropriate in this case because there are material 6 issues of fact that must be resolved by a jury. The question of whether punitive damages 7 are appropriate is better answered by the jury after a full hearing of the facts at the time of 8 trial. An insured may recover punitive damages on a bad faith claim; the insured must prove 9 that the insurer's wrongful conduct was guided by an “evil mind.” Walter v. Simmons, 818 10 P.2d 214, 225–26 (Ariz. App.1991). This requires evidence showing that the insurer either: 11 “(1) intended to injure the [insured], (2) was motivated by spite or ill will, or (3) acted to 12 serve [its] own interest, having reason to know and consciously disregarding a substantial 13 risk that [its] conduct might significantly harm [insured].” Id. (Resp. (Doc. 89) at 14-15.) 14 Summary judgment is not appropriate to decide the question of punitive damages if 15 “a reasonable jury could find the requisite evil mind by clear and convincing evidence.” 16 Thompson v. Better–Bilt Aluminum Prods. Co., 832 P.2d 203, 211 (1992). The Court agrees 17 with the Plaintiff that the evidence supporting Plaintiff’s claim of bad faith is sufficient to 18 overcome summary judgment on punitive damages because a reasonable juror might find 19 that State Auto was “consciously aware of the evil of [its] actions, of the spitefulness of 20 [its] motives or that [its] conduct is so outrageous, or intolerable in that it creates a 21 substantial risk of tremendous harm to others.” (Resp. (Doc. 89) at 14-15 (citing Thompson, 22 832 P.2d 203). 23 Accordingly, 24 IT IS ORDERED that the Motion for Summary Judgment (Doc. 84) is DENIED. 25 IT IS FURTHER ORDERED that this case is ready for trial, and the parties have 26 30 days from the filing date of this Order to file the Proposed Joint Pretrial Order. 27 28 1 IT IS FURTHER ORDERED that the parties shall contact the Court in the event 2|| they want to attempt to settle the case and would like the case referred to a Magistrate || Judge to serve as a settlement judge. 4 Dated this 4th day of May, 2022. 5 6 Y= ° Honorabje David C. But 7 United States District Judge 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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