Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-alnd-7_13-cv-00027/USCOURTS-alnd-7_13-cv-00027-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Insurance Contract

---

UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ALABAMA

WESTERN DIVISION

STANLEY R. CHRISTIAN, et al., )

)

Plaintiffs, )

)

vs. ) 7:13-CV-0027-LSC

)

COUNTRY MUTUAL )

INSURANCE COMPANY, et al., )

)

Defendants. )

MEMORANDUM OF OPINION

Stanley R. Christian and his wife Nancy K. Jones-Christian (collectively,

“Plaintiffs”) brought this action against their insurance company and a group of

engineers and adjusters after their home was damaged by a tornado on April 27, 2011.

The only Defendant that remainsin the action is Country Mutual Insurance Company

(“CMIC”),the successor in interest toPlaintiffs’ originalhome insurer,Cotton States

Mutual Insurance Company (“Cotton States”). Before the Court is CMIC’s motion

for partial summary judgment. (Doc. 36.) For the reasonsstated below, the motion is

due to be granted in part and denied in part.

I. Factual Background

Plaintiffs own a home in Cottondale, Alabama, which they insured through

Page 1 of 14

FILED

 2014 May-29 PM 03:52

U.S. DISTRICT COURT

N.D. OF ALABAMA

Case 7:13-cv-00027-LSC Document 47 Filed 05/29/14 Page 1 of 14
CMIC. A tornado struck the area on April 27, 2011, damaging the home and causing 1

a tree to fall on the carport. Plaintiffssubmitted a claim toCMIC for the damage to the

home. 

After the house was damaged, Plaintiffs lived in it for about two weeks. They

used a generator during this time, and were told not to have their power turned back

on because the wires in the house had been stretched. It became unbearable to live in

the house without air conditioning. Since moving out of the house at issue, Plaintiffs

have lived in a camp house in Moundville, Alabama.

The first adjuster to examine Plaintiffs’ home was Michael Long (“Long”) of

Crawford and Company on May 2, 2011. He told Stanley Christian that the amount

of damage was greater than he was authorized to adjust. Long also told Plaintiffsthat

they needed to have an engineer look at the house. Plaintiffsthen retained Al Cabaniss

(“Cabaniss”), an engineer who performed an inspection on May 10, 2011. Stanley

Christian and Jeff Englebert (“Englebert”), the builder of Plaintiffs’ house, were

present for this inspection. On May 18, 2011, Brian Brady (“Brady”), a CMIC claims

representative who had been assigned to Plaintiffs’ claim, brought an engineer named

Robert Edmondson (“Edmondson”) to inspect the home. Stanley Christian testified

The parties use CMIC to refer to both the current defendant and its predecessor in

1

interest, Cotton States, and the Court will do the same.

Page 2 of 14

Case 7:13-cv-00027-LSC Document 47 Filed 05/29/14 Page 2 of 14
that Edmondson did a “pretty good job” of inspecting the house in a thorough,

professional manner. (Doc. 37-1 at 82.)

On May 20, 2011, before either Cabaniss or Edmondson issued the reports of

their inspections, Brady submitted a “Request for Authority” in the amount of

$50,000. The parties dispute the meaning of this request. Plaintiffs point out that

CMIC’s30(b)(6)representative,Bradley McLaughlin,characterizedthe request asthe

maximum amount that would be needed to cover Plaintiffs’ claims, regardless of the

details of the engineering report. CMIC notes, however, that McLaughlin also stated

that the request could have been resubmitted if the engineer had found that all of the

damage came from the tornado.

On May 21, 2011, Brady offered Plaintiffs the cash value of the damage to the

carport, a retaining wall, and a portion ofthe roof framing. Stanley Christian askedhim

to delay payment until the submission of the engineering reports. Cabaniss and

Edmondson came to very different conclusionsin their reports. Cabaniss believed that

the upper level house had shifted approximately two inches on the frame, and that

most of the brick and framing needed to be replaced. He concluded that it would be

more economically efficient to rebuild the house on the basement slab. Edmondson,

on the other hand, determined that much of the damage outside the carport area was

caused not by the tornado, but by settlement of the house.

Page 3 of 14

Case 7:13-cv-00027-LSC Document 47 Filed 05/29/14 Page 3 of 14
Using Edmondson’s report as a guide, CMIC issued Plaintiffs a check for

$32,302.89 on June 22, 2011. Five days later, Christian requested a reinspection.

Although CMIC sent out a new adjuster, the reinspection of the premises did not

occur until December 18, 2011. During the intervening period, Cabaniss prepared a

report that reiterated his conclusions, and Plaintiffsalso hiredRon Martin (“Martin”)

to prepare a third engineer’s opinion. Martin concluded that all of the damage at issue

was caused by the tornado. 

After reinspecting the house,Edmondson wrote a new report that addressed the

issues raised by Martin and Cabaniss, concluding again that the damage outside the

carport area was caused by settlement rather than wind. CMIC relied on this report

in denying coverage for this damage. Both Martin and Edmondson later issued further

reports in line with their first conclusions. The parties agree that settlement damage

is not covered by the policy. 

Although some contents coverage and Alternative Living Expenses (“ALE”)

payments have been paid, the parties dispute whether further payments are due.

Plaintiffs claim additional ALE benefits incurred while living at their camp house.

CMIC contends that ALE expenses incurred after February 29, 2012 are not

reimbursable. It also argues that Plaintiffs’ failed to mitigate their damages with

respect to contents claims for items in the basement of the home. Plaintiffs have not

Page 4 of 14

Case 7:13-cv-00027-LSC Document 47 Filed 05/29/14 Page 4 of 14
repaired their home or moved back into it. Finally, Plaintiffs also seek damages for

mental anguish and distress caused by the damage to their home. Plaintiffs filed suit

in the Circuit Court of Tuscaloosa County on December 6, 2012, and Defendants

properly removed the case to this Court.

II. Standard of Review

Summary judgment is proper “if the movant shows that there is no genuine

dispute as to any material fact and the movant is entitled to judgment as a matter of

law.” Fed. R. Civ. P. 56(a). The party moving for summary judgment “always bears

the initial responsibility of informing the district court of the basis for its motion, and

identifying those portions of[the evidence]which it believes demonstrate the absence

of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

The movant can meet this burden by presenting evidence showing that there is no

genuine dispute of material fact, or by showing that the nonmoving party hasfailed to

present evidence in support ofsome element of its case on which it bearsthe ultimate

burden of proof. Celotex, 477 U.S. at 322-23. In evaluating the arguments of the

movant, the court must view the evidence in the light most favorable to the nonmoving

party. Mize v. Jefferson City Bd. of Educ., 93 F.3d 739, 742 (11th Cir. 1996).

Once the moving party hasmet his burden,Rule 56(e)“requiresthe nonmoving

party to go beyond the pleadings and by her own affidavits, or by the ‘depositions,

Page 5 of 14

Case 7:13-cv-00027-LSC Document 47 Filed 05/29/14 Page 5 of 14
answersto interrogatories, and admissions on file,’ designate ‘specific facts showing

that there is a genuine issue for trial.’” Celotex, 477 U.S. at 324 (quoting Fed. R. Civ.

P. 56(e)). “Afactual dispute is genuine only if a ‘reasonable jury could return a verdict

for the nonmoving party.’” Info. Sys. & Networks Corp. v. City of Atlanta, 281 F.3d

1220, 1224 (11th Cir. 2002) (quoting United States v. Four Parcels of Real Property, 941

F.2d 1428, 1437 (11th Cir. 1991)).

III. Discussion

CMIC movesfor summary judgment on Plaintiffs’ bad faith claim. In addition,

CMIC seekssummary judgment on the portion of Plaintiffs’ breach of contract claim

predicated on contents coverage and ALE benefits. Finally, CMIC also seeks to

preclude damages for mental anguish on the breach of contract claim.

A. Bad Faith

To survive summary judgment on a bad faith claim under Alabama law, a

Plaintiff must show substantial evidence of five elements: “(a) an insurance contract

between the parties and a breach thereof by the defendant; (b) an intentional refusal

to pay the insured’s claim; (c) the absence of any reasonably legitimate or arguable

reason for that refusal (the absence of a debatable reason); (d) the insurer’s actual

knowledge of the absence of any legitimate or arguable reason; (e) if the intentional

failure to determine the existence of a lawful basis is relied upon, the plaintiff must

Page 6 of 14

Case 7:13-cv-00027-LSC Document 47 Filed 05/29/14 Page 6 of 14
prove the insurer’s intentional failure to determine whether there is a legitimate or

arguable reason to refuse to pay the claim.” State Farm Fire and Cas. Co. v. Brechbill,

2013 WL 5394444 at *8 (Ala. Sept. 27, 2013). 

The Brechbill Court made it clear that bad faith exists as a single tort, and that

there are two potential methods to prove such a claim. Id. at *8-*9. The “normal”

method of proving the claim requires not only that the plaintiff prove the first four

elements, but also that the underlying breach of contract claim be so strong that the

plaintiff is entitled to a preverdict judgment as a matter of law. Shelter Mut. Ins. Co. v.

Barton, 822 So. 2d 1149, 1155 (Ala. 2001). Here, Plaintiffs do not contend that they are

entitled to judgment as a matter of law on the breach of contract claim. Therefore,

they seek to prove the tort of bad faith through the “abnormal” method, which does

not require such a preverdict judgment. White v. State Farm Fire & Cas. Co., 953 So.

2d 340, 348 (Ala. 2006). 

In order to prove the abnormal case,the plaintiff must show that the insurer (1)

intentionally or recklessly failed to investigate the plaintiff’s claim; (2) intentionally

or recklessly failed to properly subject the plaintiff’s claim to a cognitive evaluation or

review; (3) created its own debatable reason for denying the plaintiff’s claim; or (4)

relied on an ambiguous portion of the policy as a lawful basis to deny the plaintiff’s

claim.” State Farm Fire & Cas. Co. v. Slade, 747 So. 2d 293, 306-07. In addition to

Page 7 of 14

Case 7:13-cv-00027-LSC Document 47 Filed 05/29/14 Page 7 of 14
proving one of these four elements, however, the plaintiff must also demonstrate that

the insurer lacked a debatable reason to deny the claim. Brechbill, 2013 WL 5394444

at *9. Failure to prove this element is fatal to the claim, because “[o]f course, if a

lawful basis for denial actually exists, the insurer, as a matter of law, cannot be held

liable in an action based upon the tort of bad faith.” Gulf Atl. Life Ins. Co. v. Barnes,

405 So. 2d 916, 924 (Ala. 1981).

Here, the Edmondson engineering reports gave State Farm a debatable reason

to deny the claim. See National Sec. Fire &Cas. Co. v. Bowen, 417 So. 2d 179, 185 (Ala.

1982)(finding that investigative report gave insurer “ample debatable reason” to deny

claim). State Farm requested three separate reports from its engineer, and these

reports found that significant portions of the damage to the house were not caused by

the tornado. In addition, State Farm’s engineer considered reports made by

independent engineers retained by Plaintiffs and even reinspected the house in light

of their findings. Although Plaintiffs dispute Edmondson’s conclusions, Stanley

Christian conceded in deposition that the engineer did a thorough inspection, and

Plaintiffsdo not contend that hemanufactured or planted evidence to defeat the claim.

See Adams v.Auto-Owners Ins. Co., 655 So. 2d 969, 971-72 (Ala. 1995). Nor do Plaintiffs

claim that the damage should have been covered if it was not caused by wind; both

parties agree that State Farm had no obligation to pay for damage caused by settling,

Page 8 of 14

Case 7:13-cv-00027-LSC Document 47 Filed 05/29/14 Page 8 of 14
normal wear and tear, or defective workmanship. Thus, once it had obtained the

Edmondson reports, State Farm had a debatable reason for its partial denial of

Plaintiffs’ claim.

Plaintiffs, however, argue that CMIC committed bad faith by denying the claim

before it received Edmondson’s first engineering report. An insurance company’s

decision to deny a claim must be based on the information before it at the time. Aetna

Life Ins. Co. v. Lavoie, 505 So. 2d 1050, 1053 (Ala. 1987). Before Edmondson’sreport

wasissued, CMIC adjuster Brian Brady filed a Request for Authority for $50,000 on

May 18, 2011. Although it was possible for Brady to ask for more money if the

engineering report had concluded that the whole house suffered tornado damage,this

request would not cover the total reconstruction of Plaintiffs’ home recommended by

Al Cabaniss. On May 21, 2011, Brady offered Plaintiffs the actual cash value of the

undisputed repairs to the carport and roof framing (“the carport damage”). Stanley

Christian then asked CMIC to wait until it received the engineering reports to issue

payment. Plaintiffs’ expert Gary Augustine opines that the request for authority and

offer to repair the carport damage together mean that CMIC’s denial of the

Christians’ claim for total loss of the home occurred on May 20 or 21, 2011. 

2

CMIC has filed a motion to disqualify Mr. Augustine. (Doc. 43). The Court does not rule

2

on this motion herein, but examines Mr. Augustine’s testimony in light of the fact that only

evidence that can be reduced to admissible form may be considered on summary judgment. Kidd

Page 9 of 14

Case 7:13-cv-00027-LSC Document 47 Filed 05/29/14 Page 9 of 14
It is not fully clear whether Plaintiffs argue that these actions constituted an

express denial or a constructive denial. However,they provide no argument asto how

the Request for Authority,which was not communicated to Plaintiffs, and the offer to

pay for a portion of the damage can constitute an express denial of the claim for the

rest of the house. Augustine characterized the actions as a constructive denial in his

deposition. He did not, however, opine concerning the legal standard of what

constitutes a constructive denial in Alabama. Alabama law specifically provides two

ways for a Plaintiff to demonstrate a constructive denial: “(1) by showing that the

passage of time is so great that the delay alone creates a denial; or (2) by showing

sufficient delay in payment coupled with some wrongful intent by the insurance

company.” Congress Life Ins. Co. v. Barstow, 799 So. 2d 931, 938 (Ala. 2001).

Either of these methods requires a showing of delay, which Plaintiffs cannot

meet in this case. Plaintiffs’ home was damaged on April 27, 2011, and the supposed

constructive denial came less than a month later, within three days of the first

engineering inspection of the home. Plaintiffs make no argument that this brief delay

was unreasonable. In Barstow, the Alabama Supreme Court held that a six week

“passage of time, by itself, is not so great that it amountsto a denial.” Id.; see also Ins.

v. Mando American Corp., 731 F.3d 1196, 1207 (11th Cir. 2013).

Page 10 of 14

Case 7:13-cv-00027-LSC Document 47 Filed 05/29/14 Page 10 of 14
Co. Of N.Amer. v.Citizensbank of Thomasville, 491 So. 2d880, 883 (Ala. 1986)(finding

constructive denial at the end of 24-month period). The delay between the storm

damage on April 27, 2011, and the receipt of Edmondson’sreport on June 7, 2011, is

simply insufficient to constitute a constructive denial under Alabama law. No

reasonable jury could find that CMIC denied Plaintiffs’ claim without a debatable

reason to do so, making summary judgment on the bad faith claim proper.

B. ALE and Contents Claims

Plaintiffs bring breach of contract claims regarding the policy’s contents and

Additional Living Expenses coverages. A breach of contract claim demands proof of

the following elements: (1) a valid contract binding the parties; (2) Plaintiffs’

performance under the contract; (3) Defendant’s nonperformance; and (4) damages.

Barstow, 799 So. 2d at 937. The second and third element appear to be at issue in this

case. CMIC paid some ALE and contents benefits, but additional claims remain

disputed. 

Plaintiffssent three letterstoCMIC in April of 2012 regarding additional living

expenses and contents damage. The lettersincluded specific calculations and receipts

for certain living expenses, and generally described “everything in the basement ofthe

home” as being ruined by mildew. CMIC moves for summary judgment on these

claims. CMIC statesthat it has paid all the ALE claims covered by the policy but does

Page 11 of 14

Case 7:13-cv-00027-LSC Document 47 Filed 05/29/14 Page 11 of 14
not explain why any of the receipts submitted with these letters should not be paid.

3

Thus, CMIC has failed to meet its burden of showing the Court that it is entitled to

judgment as a matter of law on this issue. Summary judgment on the ALE claim is due

to be denied.

CMIC also argues that it paid all of Plaintiffs’ contents claims. In deposition,

Stanley Christian acknowledged that he submitted some claimstoCMIC and that they

were paid. He does not state that all his claims were paid. Plaintiffs now claim that

mold and mildew ruined objectsthat were not damaged in the original tornado event.

CMIC, while denying these claims, does not appear to argue that these items are not

covered by the policy. Rather they claim that a storage shed would have beenprovided

for these items if Plaintiffs had asked for one. A genuine factual dispute exists as to

whether Plaintiffs could and should have mitigated their damages to the basement

content. Therefore, summary judgment on the contents claim is due to be denied.

C. Mental Anguish Damages

Alabama law allows a plaintiffto recover for mental anguish damagesin a breach

of contract action when “the contractual duties imposed by this contract are so

coupled with matters of mental solicitude . . . that a breach of that duty will necessarily

 In its reply brief, CMIC states that the ALE claim is due to be limited to the receipts 3

submitted in the April 24 letter, but makes no argument as to why this is the case. (Doc. 44 at 17).

Page 12 of 14

Case 7:13-cv-00027-LSC Document 47 Filed 05/29/14 Page 12 of 14
or reasonably result in mental anguish.” Ind. Fire Ins. Co. v. Lunsford, 621 So. 2d 977,

979 (Ala. 1993). A contract to build or insure a home can meet this standard. Id.; B &

M Homes Inc. v.Hogan, 376 So. 2d 667, 671 (Ala. 1979). To recover damagesfor mental

anguish, the Plaintiff must demonstrate that the breach of the contract could

“reasonably be seen to affect the solicitude and well-being” of the contracting party.

Orkin Exterminating Co., Inc. v. Donavan, 519 So. 2d 1330, 1333 (Ala. 1988). 

The Alabama Supreme Court has never required that the breach render the

house uninhabitable, though it did note that a contract for termite protection “affects

the habitability of a house.” Id. A contract for home insurance can also affect

habitability, and a factual dispute exists over whether the damage in this case affected

the home’s habitability. Furthermore, in Lunsford, the plaintiffs recovered mental

anguish damages after a windstorm destroyed an awning, with no indication that this

damage rendered the home uninhabitable. 621 So. 2d at 979. In this case, a reasonable

jury could find a breach of contract by CMIC that affected Plaintiffs’ “solicitude and

well being.” Donavan, 519 So. 2d at 1333. Therefore, summary judgment is

inappropriate and due to be denied.

IV. Conclusion

Because Plaintiffs cannot demonstrate the absence of a debatable reason for

CMIC to deny their claim, summary judgment is due to be granted on their bad faith

Page 13 of 14

Case 7:13-cv-00027-LSC Document 47 Filed 05/29/14 Page 13 of 14
claim. Summary judgment is due to be denied on Plaintiffs’ claims for ALE and

contents coverage, aswell astheir claim for mental anguish damages. Aseparate order

will be entered.

Done this 29 day of May 2014. th

 

L. SCOTT COOGLER

UNITED STATES DISTRICT JUDGE

174310

Page 14 of 14

Case 7:13-cv-00027-LSC Document 47 Filed 05/29/14 Page 14 of 14