Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-06-02935/USCOURTS-ca8-06-02935-0/pdf.json

Parties Involved:
Kathy Klocke
Not Party
Steven Klocke
Not Party
Pekin Insurance Company
Appellee
Sherri Jo Reid
Appellant

Document Text:

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 06-2935

___________

Sherri Jo Reid, dba Colonial * 

Square Tax & Accounting, * 

* 

Plaintiff - Appellant, * 

* 

v. * 

* 

Pekin Insurance Company, * 

* 

Defendant - Appellee, * 

____________________ * Appeal from the United States 

* District Court for the 

Pekin Insurance Company, * Northern District of Iowa.

* 

Third-Party Plaintiff, * [UNPUBLISHED]

* 

v. * 

* 

Kathy Klocke; Steven Klocke, dba * 

Klocke Excavating and Trucking, * 

* 

Third-Party Defendants. *

___________

Submitted: June 14, 2007

Filed: August 28, 2007

___________

Before MELLOY, SMITH, and GRUENDER, Circuit Judges.

___________

PER CURIAM.

Appellate Case: 06-2935 Page: 1 Date Filed: 08/28/2007 Entry ID: 3345801
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The Honorable Linda R. Reade, Chief Judge, United States District Court for

the Northern District of Iowa.

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Sherri Jo Reid, doing business as Colonial Square Tax and Accounting, brought

this diversity action against Pekin Insurance Company ("Pekin"), alleging breach of

contract and bad faith. The district court1

 granted summary judgment on the bad faith

claim, and a jury returned a verdict in favor of Pekin on the breach of contract claim.

The district court denied Reid's motion for a judgment as a matter of law. Reid appeals

the grant of summary judgment and the denial of her motion for judgment as a matter

of law. We affirm. 

I. Background

Reid owns a commercial building that is insured by Pekin. The insurance policy

explicitly excludes damage to the building caused by wear and tear; rust, corrosion,

fungus, decay, deterioration, hidden or latent defect or any quality in the property that

causes it to damage or destroy itself; and settling, cracking, shrinking or expansion.

On October 25, 2002, Steve Klocke began to excavate a foundation wall on a property

approximately four feet east of Reid's building. During the excavation, Klocke

repeatedly smashed the excavation equipment against the foundation wall with such

force that it sent vibrations to several nearby structures, including Reid's building.

Reid suspected that these vibrations caused structural damage to her building's

foundation, roof, outside concrete blocks, and various other places. 

Several months later, Reid hired an engineering expert to determine whether the

vibrations caused the structural damage to her building. This expert, however,

concluded that the structural damage pre-dated the excavation. At most, this expert

concluded, that the vibrations caused very minor damage to Reid's building, not the

extensive structural damage alleged by Reid. Despite her own expert's conclusion,

Reid filed a claim with Klocke's insurer, Westbend Mutual Insurance Company

(Westbend), seeking compensation for the structural damage. Westbend, after sending

Appellate Case: 06-2935 Page: 2 Date Filed: 08/28/2007 Entry ID: 3345801
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Pekin offered to compensate Reid for cost of repair to the interior drywall and

finishes, electrical wiring, and ducts. Pekin asked Reid to submit an estimate for these

costs. But, Reid never submitted these estimates. The parties do not dispute that the

estimated costs of these minor repairs was substantially less than $400,000. 

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their own engineering expert, also concluded that the building's structural damage predated Klocke's excavation and denied her claim. Reid then filed a $400,000 claim with

Pekin, her own insurer. Over the course of the next three years, nine different

engineering experts visited the building. Three of these experts—hired by Reid—

concluded that the vibrations caused the alleged damage to the building. Five of the

experts—hired by Pekin—concluded that the vibrations did not cause the alleged

damage to the building. The ninth expert, a second Westbend engineering expert, also

concluded that the damage was not caused by the vibrations. Based upon the

conclusions of its experts, Pekin denied most of Reid's claim.2

Reid brought suit against Pekin who, in turn, filed a third-party complaint

against Klocke, seeking indemnification. Reid alleged that Pekin breached their

insurance contract by refusing to cover all damages and, in doing so, acted in bad

faith. The district court granted Pekin's motion for summary judgment on the bad faith

claim. The breach of contract claim went to trial, and the jury found for Pekin. The

district court denied Reid's motion for judgment as a matter of law. Reid appeals both

rulings.

II. Discussion

"We review de novo a grant of summary judgment, considering the facts in the

light most favorable to the nonmoving party. Summary judgment is proper when no

genuine issues of material fact exist and the moving party is entitled to judgment as

a matter of law." Neb. Beef, Ltd. v. Wells Fargo Bus. Credit, Inc., 470 F.3d 1249,1252

(8th Cir. 2006) (internal quotations omitted); Arnold v. Nursing and Rehab. Ctr. at

Good Shepherd, LLC, 471 F.3d 843, 846 (8th Cir. 2006). We also review the district

court's denial of a motion for judgment as a matter of law de novo; where we will

Appellate Case: 06-2935 Page: 3 Date Filed: 08/28/2007 Entry ID: 3345801
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affirm if sufficient evidence supports the jury verdict. Morse v. S. Union Co., 174 F.3d

917, 922 (8th Cir. 1999). "State law controls the construction of insurance policies

when a federal court is exercising diversity jurisdiction." Bell v. Allstate Life Ins. Co.,

160 F.3d 452, 455 (8th Cir. 1998). 

A. Bad Faith

Under Iowa law, a prima facie claim of bad faith requires the plaintiff to prove,

inter alia, that the defendant had no reasonable basis for denying the plaintiff's claim.

Bellville v. Farm Bureau Mut. Ins. Co., 702 N.W.2d 468, 473 (Iowa 2005). Whether

the defendant had a reasonable basis for denying a claim is an objective inquiry, and

a court may grant a motion for judgment as a matter of law, if a claim is "fairly

debatable." Id. "If reasonable minds can differ on the coverage-determining facts or

law, then the claim is fairly debatable." Id. The district court, citing the conflicting

conclusions of the parties' engineering experts, determined that reasonable minds

could differ on the cause of the damage to Reid's building. 

Reid argues that the experts hired by Pekin are biased and, therefore, their

opinions cannot constitute an objective, reasonable basis to deny her claim. We

disagree. But assuming, arguendo, that we were to accept Reid's argument, three other

experts, including the first expert hired by Reid, also concluded that Klocke's

excavation was not the cause of the building's structural damage. The district court

observed that Reid's first inspector "estimated that the repairs to the damage caused

to the Building due to Klocke's [] demolition activities would range in the hundreds

of dollars, rather than thousands of dollars [alleged by Reid]." We conclude, based

upon the conflicting conclusions of Reid's own experts, that Pekin had a reasonable

basis to deny Reid's claim and that the district court did not err by granting Pekin's

motion for summary judgment. 

Appellate Case: 06-2935 Page: 4 Date Filed: 08/28/2007 Entry ID: 3345801
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B. Judgment as a Matter of Law

Reid also avers that the district court erred in denying her motion for judgment

as a matter of law. We disagree. We give great deference to a jury verdict and will

only reverse if we conclude that no reasonable juror could have returned a verdict for

the non-moving party. Morse, 174 F.3d at 922. In conducting our review, we: (1)

consider the evidence in the light most favorable to the verdict; (2) assume all

conflicts in the evidence were resolved in favor of the verdict; (3) assume the

prevailing party proved all facts that his evidence tended to prove; and (4) give the

prevailing party's evidence the benefit of all favorable inferences that reasonably may

be drawn from the proven facts. Id.

The trial of this matter was largely a battle of the experts. Both the plaintiff and

the defendants produced witnesses who testified consistent with their legal theories.

Defense engineering experts testified that Klocke's excavation was not the cause of

the damage to Reid's building. On appeal, Reid attacks these experts' credibility, the

thoroughness of their work, and the methodology that they employed to reach their

conclusions. Reid also avers that she presented stronger, more objective expert

evidence than did the defendants. These arguments have already been made before the

jury and is the jury's exclusive province to find the facts. The denial of a new trial

motion based on the argument that the jury verdict was against the weight of the

evidence is virtually unassailable on appeal. Matrix Group Ltd., Inc. v. Rawlings

Sporting Goods Co., 477 F.3d 583, 593 (8th Cir. 2007) (citing Grogg v. Mo. Pac. R.R.

Co., 841 F.2d 210, 214 (8th Cir. 1988)). We discern no reason to make an exception

to this rule here. Accordingly, when viewing the evidence in a light most favorable to

the verdict, we cannot say that the district court erred when it denied Reid's motion for

judgment as a matter of law.

III. Conclusion

After a careful review of the record, we affirm the judgments of the district

court.

______________________________

Appellate Case: 06-2935 Page: 5 Date Filed: 08/28/2007 Entry ID: 3345801