Cecil Payton v. Agents Mutual Insurance Company

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April 14, 2004


[NO. CIV-2001-3061]




Josephine Linker Hart, Judge

Cecil Payton appeals from a Crawford County Circuit Court order granting summary judgment to Agents Mutual Insurance Company (hereinafter Agents Mutual). On appeal, Payton argues that the trial court erred in granting summary judgment in this case because a genuine issue of material fact existed as to causation, liability and damages. We affirm in part, reverse in part, and remand to the trial court for further proceedings.

At all times relevant to this appeal, Payton had in force with Agents Mutual a policy of homeowners' insurance. That policy provided coverage for losses occasioned by named perils, that, in pertinent part, included windstorm or hail, but not ice. On December 30, 2000, in accordance with the requirements of the policy, Payton submitted to Agents Mutual a notice of claim and sworn proof of loss for a barn that was located on his property. In his claim, Payton alleged that three days earlier, a windstorm caused the barn to collapse, resulting in the loss of the structure and much of the contents. The economic value of the loss was set at $7,000. Agents Mutual subsequently investigated the claim and denied coverage, opining that accumulation of ice during an ice storm, which was not a covered peril, was responsible for the loss.

Payton filed suit. In his pleadings, which were simply styled "Complaint," Payton claimed that he had performed all of the obligations required of him under the policy, that his barn was destroyed by a windstorm, which was a named peril, that he had properly submitted a proof of loss, that he had engaged in month-long negotiations concerning payment of his claim with Agents Mutual claims representative Toni Cummings, and that Agents Mutual had denied his claim because it ascribed the loss to ice, which was not a named peril. He also alleged that issuing the policy of homeowners' insurance "created a contractual relationship" between himself and the insurer. Payton further asserted that because of this contractual relationship, Agents Mutual was "subject to the implied-in-law duty to act fairly and in good faith in order not to deprive [him] of the benefits of the policy," and that Agents Mutual had "no legitimate or arguable reason for refusing to pay," which constituted a "breach" of the implied-in-law duty of good faith and fair dealing and operated to "unreasonably deny [him] of the benefits of the policy." Payton charged that Agents Mutual's conduct in "intentionally" refusing to pay his claim was "malicious, fraudulent, oppressive, and . . . a conscious disregard of [his] rights." He claimed that the denial of the claim was the proximate cause of emotional distress. Regarding damages, Payton asserted that he was entitled to attorney's fees and costs as a result of Agents Mutual's "breach of its duty under the policy hereto." He also asserted a claim for "consequential damages" in the amount of $7,000 for "economic loss" and $50,000 for emotional distress suffered as the "proximate result" of Agents Mutual's "bad faith" refusal to pay his "valid" claim, and $50,000 in punitive damages for Agents Mutual's "malicious, fraudulent, and oppressive conduct."

Agents Mutual timely responded to Payton's complaint. It stated, among other things, that it denied the claim for "legitimate reasons" and denied that the damages claimed would flow from "the alleged breach of contract, and, therefore, are not recoverable in an action of this type since there is no ground for a bad faith claim and the policy does not cover consequential damages."

Agents Mutual subsequently moved for summary judgment. In its motion, it asserted that "[s]ince there was simply a denial of the claim there is no basis for a claim for personal injuries from the alleged breach of contract under the circumstances." Attached to its motion was an affidavit from Kathy Vincent, claims manager for Agents Mutual. This affidavit asserted that their investigation caused them to conclude that the claim was caused by ice, and therefore, the loss was not covered under the terms of the policy. She denied any misconduct on the part of Agents Mutual. Vincent also asserted that Agents Mutual was "entitled to a determination by the trial court that there is no coverage under the insurance policy for the circumstances involved in the alleged loss."

Payton countered with his own affidavit in which he asserted that it was "obvious from the location of the debris and the location in which the barn fell" that the barn's collapse was caused by wind and not ice, and that he had viewed the barn "repeatedly in the days prior to its collapse" and that there was no build-up of ice that would have caused its collapse. Payton's deposition was also apparently submitted to the court. In it, he conceded that he was not certain as to exactly when the barn collapsed, that there was an ice storm that hit the area in December of 2000, that he did not see whether ice accumulated on the barn during that storm, and that there were no eyewitnesses that could testify about what the wind was like on the day that the barn fell. He did, however, confirm that he observed sheets of metal that had blown off the barn and that the structure "didn't come straight down like it would from weight" but was actually blown over ten feet from its original location.

By order filed for record on June 10, 2003, the trial court granted summary judgment and dismissed the case with prejudice. In the order, it asserted that Payton's deposition and affidavit "only contained conjecture and speculation and no relevant evidence that a judge or jury could use to determine a judgment."

Describing this case as a "contract and tort action," Payton argues that the trial court erred in granting summary judgment because, viewed in the light most favorable to him, the pleadings, depositions, and affidavits establish a material issue of genuine fact as to whether the loss was caused due to ice or windstorm. He points to the portions of his affidavit in which he described his personal observations concerning the debris pattern of the collapsed barn, which suggested to him that the collapse was caused by a windstorm that hit the area on December 27, 2000. Further, he points to the fact that he repeatedly viewed the barn in the days prior to the collapse and observed no build-up of ice. Payton argues that his proof is equivalent to Agents Mutual's "self-serving" assertion, purportedly based on its investigation, that the collapse was caused by ice.

Agents Mutual argues that summary judgment was properly granted since there was no genuine issue of material fact as to bad faith. It asserts that there is no evidence of any "ill will" and that its denial of a claim based on a reasonable belief that the damages reported are not covered under the policy does not amount to the tort of bad faith. Further, it cites inconsistencies between Payton's affidavit and deposition and relies on Caplener v. Bluebonnet Milling Co., 322 Ark. 751, 911 S.W.2d 586 (1995) for the proposition that inconsistencies between Payton's affidavit and deposition testimony rendered the former incapable of establishing a question of fact to ward off the granting of a summary judgment motion. Agents Mutual also asserts that because Payton did not present evidence that a windstorm actually occurred in the area at the time in question, he was relying only on his interpretation of the debris pattern to prove why the barn fell, which was only "suspicion or conjecture," which is not a substitute for proof. Finally, and most importantly, Agents Mutual argues that even if the evidence of the barn's collapse "is as Payton would have it" it would not prove a claim of bad faith since there is no evidence of malicious or oppressive actions on its part. It claims that, at worst, there was evidence that it did not adequately investigate Payton's claim, which the supreme court in Reynolds v. Shelter Mut. Ins. Co., 313 Ark. 145, 852 S.W.2d 799 (1993), rejected as a basis of sustaining an action for bad faith.

We find merit in both Payton's and Agents Mutual's arguments, as far as they go. Summary judgment is no longer considered a "drastic remedy," but rather "one of the tools in a trial court's efficiency arsenal." Thomas v. Stewart, 347 Ark. 33, 60 S.W.3d 415 (2001). However, summary judgment should be granted only when it is clear that there are no genuine issues of material fact to be litigated, and the moving party is entitled to judgment as a matter of law. Laird v. Shelnut, 348 Ark. 632, 74 S.W.3d 206 (2002). The purpose of summary judgment is not to try the issues, but to determine whether there are any issues to be tried. Id. Once the moving party has established a prima facie entitlement to summary judgment, the opposing party must meet proof with proof and demonstrate the existence of a material issue of fact. Id. On appellate review, this court determines if summary judgment was appropriate based on whether the evidentiary items presented by the moving party in support of the motion leave a material fact unanswered. Id. This court views the evidence in a light most favorable to the party against whom the motion was filed, resolving all doubts and inferences against the moving party. Id. Our review focuses not only on the pleadings, but also on the affidavits and other documents filed by the parties. Id.

As a preliminary matter, we note that while Payton's complaint is not a model of clarity on this issue, it nonetheless asserts a cause of action that sounds both in tort and in contract. We are directed to this conclusion by Rule 8(f) of the Arkansas Rules of Civil Procedure, which provides: "All pleadings shall be liberally construed so as to do substantial justice," and by our supreme court's mandated reliance on the rule of liberal construction in looking beyond the form of a pleading and concentrating on its actual substance. See, e.g., Dodge v. Lee, 352 Ark. 235, 100 S.W.3d 707 (2003); Cornett v. Prather, 293 Ark. 108, 737 S.W.2d 159 (1987). Accordingly, dismissal of this case in its entirety through the granting of summary judgment would only be proper if there was no issue of material fact in regard to both the tort and the contract theories.

With regard to the tort of bad faith, we agree with Agents Mutual that Payton failed to resist its motion with proof sufficient to prove the existence of bad faith. In First Marine Ins. Co. v. Booth, 317 Ark. 91, 876 S.W.2d 255 (1994), the supreme court stated that to be liable for bad faith the insurer must engage in affirmative misconduct, without a good faith defense, in a malicious, dishonest, or oppressive attempt to avoid liability. Malice here is defined as that state of mind characterized by hatred, ill will, or a spirit of revenge, which may be inferred from the conduct and surrounding circumstances. Id. A controversy over the existence of a first party insured's claim does not constitute bad faith even if it results from negligence or gross negligence on the part of the insurer. Id. Here, Payton simply does not assert the existence of any recognizable malice on the part of Agents Mutual. Moreover, by acknowledging that an ice storm blanketed the state around the time of the barn's collapse, and by admitting that neither he nor any other witness that he was aware of could testify that ice was not responsible for the barn's collapse, Payton proved by his own words that Agents Mutual had a good-faith reason for denying coverage. Accordingly, we hold that the trial court properly granted summary judgment as to the tort of bad faith.

We, however, come to the opposite conclusion as to whether summary judgment was appropriate as to the breach-of-contract claim. In the first place, we do not believe that Agents Mutual established a prima facie entitlement to summary judgment. Its summary judgment motion was directed almost exclusively at Payton's tort claim. As noted above, it prevailed in no small part because of Payton's failure to even allege the requisite malice element in his pleadings. As to the proof that Agents Mutual marshaled in support of its summary judgment motion, while it is true that it led us to the inevitable conclusion that it had a good-faith basis for denying Payton's claim, that proof was by no means sufficient to convince us that its theory of causation is conclusive. Therefore, the fundamental issue in this case, i.e., what caused the barn to collapse, is yet to be decided by a trier of fact in the context of Payton's breach of contract claim. See Findley v. Time Ins. Co., 264 Ark. 647, 573 S.W.2d 908 (1978). Secondly, while there may be some merit to Agents Mutual's contention that Payton's affidavit is undercut by his deposition, we do not believe that it approaches the situation in Caplener v. Bluebonnet Milling Co., supra, where the supreme court upheld a trial court's decision to exclude an affidavit from an expert that directly contradicted his deposition testimony, and we decline to stretch that authority to cover the situation here. Accordingly, it does not annul our duty to view the evidence in the light most favorable to Payton, and resolve all doubts and inferences against Agents Mutual. Applying this standard, we hold that whether it was ice or wind that actually caused the barn to collapse constitutes a genuine issue of material fact. We therefore reverse the grant of summary judgment as to the contract claim arising in this case and remand to the trial court for further proceedings not inconsistent with this opinion.

Affirmed in part, reversed in part, and remanded.

Griffen, J., agrees;

Gladwin, J., concurs