Chapman et al v. State Farm Fire and Casualty Company, No. 2:2017cv00225 - Document 73 (E.D. Wash. 2019)
Court Description: ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT 24 AND DENYING PLAINTIFFS' MOTIONS TO AMEND COMPLAINT AND TO STRIKE DECLARATION 29 45 . Signed by Judge Rosanna Malouf Peterson. (VR, Courtroom Deputy)
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Chapman et al v. State Farm Fire and Casualty Company Doc. 73 1 2 FI LED I N THE U.S. DI STRI CT COURT EASTERN DI STRI CT OF WASHI NGTON 3 Apr 15, 2019 SEAN F. MCAVOY, CLERK 4 UNITED STATES DISTRICT COURT 5 EASTERN DISTRICT OF WASHINGTON 6 7 BARRY CHAPMAN, husband; and JESSIE NORRIS, wife, NO: 2:17-CV-225-RMP 8 Plaintiffs, 9 v. 10 11 STATE FARM FIRE AND CASUALTY COMPANY, a foreign company, ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTIONS TO AMEND COMPLAINT AND TO STRIKE DECLARATION 12 Defendant. 13 14 BEFORE THE COURT is a motion for summary judgment by Defendant 15 State Farm Fire and Casualty Company (“State Farm”), ECF No. 24; a motion to 16 amend or correct the complaint by Plaintiffs Barry Chapman and Jessie Norris 17 (“Chapman”), ECF No. 29; and a motion to strike, also by Chapman, ECF No. 45. 18 Having reviewed the parties’ submissions, the remaining docket, and the relevant 19 law, the Court is fully informed. 20 21 ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTIONS TO AMEND COMPLAINT AND TO STRIKE DECLARATION ~ 1 Dockets.Justia.com 1 BACKGROUND 2 Procedural History 3 Before filing this lawsuit, Chapman filed and served a claim and complaint on 4 State Farm on October 11, 2016, pursuant to the Insurance Fair Conduct Act 5 (“IFCA”), in chapter 48.30 of the Revised Code of Washington (“RCW”). Chapman 6 asserts that the 20-day IFCA notice “set forth the basis for the reasons for the 7 [IFCA] claim including violations of WAC 284-30-330, RCW 48.30.015 and finally 8 for any other violations is [sic] formal discovery in the underlying action otherwise 9 disclosed.” ECF No. 29 at 3. 10 On October 25, 2016, Chapman filed his complaint in Pierce County Superior 11 Court, stating only claims for breach of insurance contract and breach of the duty of 12 good faith and fair dealing. ECF No. 1-1. The complaint sought “compensatory and 13 exemplary damages for any injury, harm, economic and non-economic damages or 14 losses,” as well as Chapman’s attorneys’ fees and costs and “such other and further 15 relief as the Court deems just and equitable.” ECF No. 1-1 at 5. In explaining why 16 Chapman filed the complaint fewer than twenty days after providing the IFCA 17 notice, Chapman recounts: “Because the State Farm policy had a shorter limitation 18 time for filing a breach of contract action, the lawsuit was required to be filed before 19 the IFCA notice time had run.” ECF No. 29 at 3; see also ECF No. 25-2 at 8 (citing 20 a portion of the insurance contract that provided that “[n]o action shall be brought 21 ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTIONS TO AMEND COMPLAINT AND TO STRIKE DECLARATION ~ 2 1 unless there has been compliance with the policy provisions and the action is started 2 within one year after the date of loss or damage.”). 3 State Farm removed the action to this Court on June 19, 2017. ECF No. 1. 4 The Court scheduled a bench trial scheduling conference for November 9, 2017, 5 ECF No. 8, and the parties submitted a joint status certificate in preparation for the 6 conference, ECF No. 9. The certificate indicated: “Plaintiffs . . . anticipate filing a 7 motion to amend the complaint to add counts alleging violations of the Washington 8 Insurance Fair Claims Act and the Washington Consumer Protection Act.” ECF No. 9 9 at 2. 10 After discussion with the parties at the scheduling conference, the Court 11 issued a bench trial scheduling order that, among other deadlines and hearings 12 scheduled, set a December 21, 2017 deadline for moving to amend the pleadings. 13 ECF No. 11 at 3. 14 There is no dispute that despite subsequent stipulated motions to amend 15 pretrial deadlines and continue the trial date by the parties, the December 21, 2017 16 deadline to move to amend pleadings remained intact. See ECF Nos. 17, 19, 21, and 17 22. The discovery cutoff in this matter passed on December 19, 2018. ECF No. 22. 18 The dispositive motion deadline passed on January 10, 2019. Id. A bench trial is 19 scheduled for May 13, 2019. ECF No. 19 at 9. 20 21 ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTIONS TO AMEND COMPLAINT AND TO STRIKE DECLARATION ~ 3 1 Underlying Facts 2 The following facts are undisputed, unless otherwise noted. 3 Chapman owns a rental property in Spokane, Washington, that was built in 4 1909. ECF Nos. 1-1 at 3; 25-9 at 3. On approximately October 26, 2015, a fire next 5 door to the property damaged Chapman’s rental property, to the point that the 6 property was uninhabitable. ECF Nos. 1-1 at 3; 36-1 at 1. The home was 7 unoccupied at the time, while Chapman undertook a limited remodeling project. 8 ECF No. 25-5 at 9. Thus, Chapman was not holding the property out for rent at the 9 time of the fire. ECF No. 25-10 at 3. 10 During the relevant time period, Chapman held a rental dwelling insurance 11 policy through State Farm that insured the “residence premises” for “property 12 damage,” including “physical damage to or destruction of tangible property, 13 including loss of use of [the] property.” ECF Nos. 25-1 at 8; 36-1 at 1. The policy 14 covered damage to the dwelling (Coverage A) up to $136,900, with 20% extra 15 replacement cost coverage up to $13,690, available under circumstances explained 16 below; damage to personal property (Coverage B) up to $6,845; and loss of rent 17 (Coverage C) up to the amount of the actual loss. ECF No. 25-1 at 3. The parties 18 dispute Coverage A at this stage in the lawsuit. 19 20 With respect to Coverage A, for damage to the dwelling, an “Extra Replacement Cost Coverage Endorsement” was in place that provided: 21 ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTIONS TO AMEND COMPLAINT AND TO STRIKE DECLARATION ~ 4 1 2 3 We will settle covered losses for the amount you actually and necessarily spend to repair or replace the dwelling under Coverage A . . . up to the applicable limit of liability shown in the Declarations. If the amount spent for covered damage exceeds the applicable limit of liability stated in the Declarations, an additional 20% of the stated limit is available to cover the cost of repair or replacement. 4 Id. at 31. 5 In addition, Coverage A was subject to the following parameter: 6 7 8 9 10 [State Farm] will pay the cost of repair or replacement, without deduction for depreciation, but not exceeding the smaller of the following amounts: (a) The replacement cost of that part of the building damaged for equivalent construction and use on the same premises; (b) The amount actually and necessarily spent to repair or replace the damaged building; or (c) The limit stated in the Extra Replacement Cost Coverage provision. 11 Id. at 14 (emphasis added). 12 The insurance policy defined “replacement cost” as “the cost, at the time of 13 loss, to repair or replace the damaged property with new materials of like kind and 14 quality, without deduction for depreciation.” ECF No. 25-1 at 21 (emphasis added). 15 The policy did not define “equivalent construction and use” or “like kind and 16 quality.” 17 The following terms were also in place regarding payment of actual cash 18 value (“ACV”) versus replacement cost value (“RCV”): 19 20 [State Farm] will pay the actual cash value of the damage to the buildings, up to the policy limit, until actual repair or replacement is completed. 21 ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTIONS TO AMEND COMPLAINT AND TO STRIKE DECLARATION ~ 5 1 2 3 [The insured] may disregard the replacement cost loss settlement provisions and make claim under this policy for loss or damage to buildings on an actual cash value basis and then make claim within 180 days after loss for any additional liability on a replacement cost basis. ... 4 5 6 Until actual repair or replacement is completed, [State Farm] will pay only the actual cash value at the time of the loss of the damaged part of the building, up to the applicable limit of liability shown in the Declarations, not to exceed the cost to repair or replace the damaged part of the building; 7 8 9 When the repair or replacement is actually completed, [State Farm] will pay the covered additional amount [the insured] actually and necessarily spend[s] to repair or replace the damaged part of the building, or an amount up to the applicable limit of liability shown in the Declarations, whichever is less; and 10 11 12 13 14 15 16 To receive any additional payments on a replacement cost basis, [the insured] must complete the actual repair or replacement of the damaged part of the building within two years after the date of loss, and notify [State Farm] within 30 days after the work has been completed. Id. at 34. After the fire, Chapman immediately reported the loss to State Farm, and State Farm accepted coverage of the claim. ECF No. 25 at 3. Between December 2015 and August 2016, Chapman and State Farm 17 exchanged estimates and proposals regarding the scope of work and the method and 18 cost of repair. State Farm, through claims adjuster Dan Teel, provided its initial loss 19 and repair estimate in November 2015, followed by a revised estimate in December 20 2015. Chapman requested that State Farm send its revised estimate to a contractor 21 ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTIONS TO AMEND COMPLAINT AND TO STRIKE DECLARATION ~ 6 1 who Chapman was considering hiring to repair the property, Pat Cummings of 2 Capstone Construction. ECF No. 25-2 at 6. In February 2016, Cummings had 3 reviewed the estimate, inspected the property, and agreed that the estimate covered 4 the damage, with the possibility that there could be “a supplement for something” 5 once work commenced. ECF Nos. 25-2 at 6; 25-5 at 22. Cummings indicated that 6 his company could start the repair work by mid-February 2016 and could complete 7 the project within six months. ECF No. 25-2 at 6. 8 9 By the end of February 2016, Chapman hired public adjuster Roger Maib to develop his own loss and repair estimate, which he provided at the end of March 10 2016. In April 2016, State Farm engaged a consulting contractor, Covington 11 Construction, to develop a new repair estimate. Covington Construction provided its 12 initial loss and repair estimate in May 2016 and subsequently revised the estimate in 13 July 2016. Chapman obtained an additional estimate from Belfor Property 14 Restoration (“Belfor”) to try to reconcile what he viewed as “wildly disparate 15 amounts” among the various estimates received up until July 2016. ECF No. 25-5 at 16 35. Belfor prepared an estimate by the beginning of August 2016, which Covington 17 Construction then reviewed. Covington Construction declined to revise its own 18 estimate based on the Belfor information. See ECF No. 25-2 at 3. 19 20 The progression of loss estimates from State Farm during this time period is summarized, with approximate dates, here: 21 ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTIONS TO AMEND COMPLAINT AND TO STRIKE DECLARATION ~ 7 1 look at and consider.” ECF No. 25-6 at 5. Chapman himself did not understand the 2 payments he received to be final payment of the claim. ECF No. 25-5 at 17. 3 The parties dispute the adequacy of State Farm’s final repair estimate and 4 proposed repair methodology, specifically regarding whether replacement of the 5 entire fir tongue-and-groove flooring (“fir floors”) located underneath other later- 6 installed forms of finished flooring was necessary. See ECF No. 33 at 2. Chapman 7 characterizes the fir floors as running “continuously” throughout the home. Id. State 8 Farm submitted a declaration by Brian Daniels, a general contractor and construction 9 consultant that posits that Chapman’s use of the term “continuous” is “undefined and 10 ambiguous.” ECF No. 41 at 2. Moreover, Daniels declared that, “[t]o the extent 11 plaintiffs contend that ‘continuous’ means the tongue-and-groove flooring ran in 12 uninterrupted planks across the entire east to west span of the home, my review of 13 the available evidence does not support plaintiffs’ position.” Id. 14 It is undisputed that the wall framing of the house was built on top of the fir 15 floors, which was the construction method at the time the house was built in 1909. 16 See ECF No. 25-3 at 8. Contemporary construction methods entail building vertical 17 stud walls on a subfloor, and installing finished floors up to the edge of, but not 18 under, the stud walls. See ECF No. 33 at 2. It is further undisputed that at the time 19 of the fire, the fir floors were covered with a variety of finished flooring materials, 20 including oak hardwood, vinyl, tile, and carpet. ECF No. 25-5 at 10. 21 ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTIONS TO AMEND COMPLAINT AND TO STRIKE DECLARATION ~ 9 1 The Covington Construction estimate of July 8, 2016 (“Covington Estimate”) 2 involved cutting out and removing the final and fir flooring from around undamaged 3 interior walls with a Sawzall, a type of reciprocating saw. See ECF Nos. 36-4 at 3; 4 39 at 4. By contrast, Maib contended that all walls and all flooring needed to be 5 removed and rebuilt using the same construction technique that was used in 1909, 6 which entails building new walls on top of replacement fir floors, rather than merely 7 on top of a patched subfloor, to restore the property to the pre-fire condition. See 8 ECF Nos. 25-8 at 4; 36-4 at 7−10. 9 The parties dispute whether the Covington Estimate accounts for removal and 10 replacement of all damaged areas of the property. For instance, Chapman maintains 11 that State Farm’s estimate and method “disregard the damaged floor under the stud 12 walls.” ECF No. 33 at 9. By contrast, Covington attests that his estimate left only 13 undamaged walls and undamaged portions of the fir floors in place. ECF No. 40 at 14 2. Covington further declared, “If I had been hired by plaintiffs to perform the repair 15 work, I would have notified both plaintiffs and State Farm if I discovered hidden 16 damage that was covered by a wall or otherwise obstructed from view during the 17 estimation process.” Id. at 3. 18 In addition, the parties dispute whether the end product of the Covington 19 proposal would be the aesthetic equivalent of how Chapman’s rental property looked 20 and functioned prior to the fire. Maib contended that the Sawzall method suggested 21 ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTIONS TO AMEND COMPLAINT AND TO STRIKE DECLARATION ~ 10 1 in the Covington Estimate would impact any future remodel involving removal of an 2 interior wall of the house. ECF No. 36-4 at 5−6. Maib states that Chapman “can’t 3 just now pull that wall out . . . and then have a beautiful continuous fir floor.” Id. 4 However, Covington asserts that the method of cutting out damaged portions of the 5 flooring and lacing in new pieces of wood, both for the fir floors and the areas of the 6 house finished with oak flooring, would produce a result without any “aesthetic or 7 functional difference between the old and new wood.” ECF No. 40 at 3. 8 JURISDICTION 9 This matter is before the Court on diversity jurisdiction, pursuant to 28 U.S.C. 10 § 1332, with responses from Chapman to interrogatories and requests for production 11 claiming in excess of $75,000 in damages. 1 ECF No. 3, 3-1. 12 DISCUSSION 13 Motion to Amend 14 Legal Standard 15 Chapman relies in his motion on Fed. R. Civ. P. Rule 15(a)(2) and the 16 accompanying “strong policy permitting amendment.” ECF No. 29 at 2 (quoting 17 Unigard Sec. Ins. Co. v. Lakewood Eng’g & Mfg. Corp., 982 F.2d 363, 371 (9th Cir. 18 1992)). However, Fed. R. Civ. P. Rule 16(b), rather than Rule 15(a), controls in this 19 20 1 Plaintiffs’ complaint does not specify the amount in controversy. See ECF No. 11. 21 ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTIONS TO AMEND COMPLAINT AND TO STRIKE DECLARATION ~ 11 1 situation because the Court entered a bench trial scheduling order on November 14, 2 2017, that provided that “any motion to amend pleadings . . . shall be filed and 3 served on or before December 21, 2017, or meet the standard of Fed. R. Civ. P. 4 16(b)(4).” ECF No. 11 at 3. 5 To amend a complaint after a deadline in a scheduling order has passed, the 6 party must show “good cause” for the amendment and obtain the judge’s consent. 7 Fed. R. Civ. P. 16(b)(4). Once a scheduling order is filed, a plaintiff must meet the 8 good cause standard of Rule 16 rather than the liberal pleading standard of Rule 15. 9 Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 608 (9th Cir. 1992). A party 10 must move to amend the scheduling order and then, if leave is granted, move to 11 amend the complaint. Id. “Unlike Rule 15(a)’s liberal amendment policy which 12 focuses on the bad faith of the party seeking to interpose an amendment and the 13 prejudice to the opposing party, Rule 16(b)’s ‘good cause’ standard primarily 14 considers the diligence of the party seeking the amendment.” Id. at 609. 15 16 Discussion The operative complaint in this action states claims for breach of insurance 17 contract and breach of duty of good faith and fair dealing. ECF No. 1-1. Chapman 18 seeks to amend his complaint to add claims for: (1) declaratory judgment; (2) 19 negligent claims handling; (3) unfair and deceptive practices under the Washington 20 Consumer Protection Act; (4) constructive fraud; (5) injunctive relief; and (6) 21 ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTIONS TO AMEND COMPLAINT AND TO STRIKE DECLARATION ~ 12 1 unreasonably denying claims for coverage or payment under the Washington 2 Insurance Fair Conduct Act. ECF No. 29-1. However, in his reply brief, Chapman 3 withdraws his request to amend the complaint to add a constructive fraud claim and 4 argues that “all of the claims absent the constructive fraud claim have already been 5 aired, discovered, and opined upon by the parties’ experts.” ECF No. 43 at 2. 6 Chapman maintains that he was diligent in seeking amendment of his 7 complaint, despite missing the deadline to amend by thirteen months, because 8 Chapman’s counsel allegedly thought that he had timely filed the amended 9 complaint and did not realize that the complaint had not been amended until 10 reviewing State Farm’s instant motion for summary judgment in mid- to late- 11 January 2019. ECF No. 29 at 6−7. Chapman characterizes the blunder as a “clerical 12 error” and asserts that Chapman’s counsel saw a .pdf file version of the amended 13 complaint in his law office’s electronic file for this case and assumed that it had 14 been filed in Pierce County Superior Court prior to removal. ECF Nos. 43 at 1−2; 15 29 at 7. 16 Chapman further argues that the case proceeded “as though IFCA and the rest 17 of the claims contained [sic] ECF No. 29-1 were in play: both experts addressed 18 such claims in their reports.” ECF No. 43 at 3. 19 20 However, State Farm argues that Chapman’s reasons for failing to file the amended complaint by the established deadline or to seek leave to amend the 21 ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTIONS TO AMEND COMPLAINT AND TO STRIKE DECLARATION ~ 13 1 complaint at an earlier time do not amount to good cause. See ECF No. 37. State 2 Farm asserts that it will be prejudiced if Chapman is allowed to amend his complaint 3 within such close proximity to the scheduled bench trial and after the discovery 4 cutoff has passed because of additional expense, inconvenience, and delay. Id. at 9. 5 Chapman acknowledged a need to file an amended complaint at the 6 scheduling conference in November 2017, nine months after Chapman claims that 7 his clerical error occurred. The Court discussed the December 21, 2017 amendment 8 deadline with the parties at the scheduling conference. See ECF No. 10. However, 9 Chapman did not move to amend until January 2019, after State Farm filed its 10 motion for summary judgment. Chapman did not demonstrate diligence in 11 complying with the amendment deadline set by the Court or in seeking an extended 12 opportunity to amend. See Zivkovic v. S. Cal. Edison Co., 302 F.3d 1080, 1087 (9th 13 Cir. 2002) (“If the party seeking the modification ‘was not diligent, the inquiry 14 should end’ and the motion to modify should not be granted.”) (quoting Johnson, 15 975 F.2d at 609). In addition, regardless of whether Chapman thinks that he would 16 have proceeded the same way throughout discovery had the amended complaint 17 been operative, his postulation that State Farm would not have navigated the case 18 differently cannot be verified. Coleman v. Quaker Oats Co., 232 F.3d 1271, 1294 19 (9th Cir. 2000) (“Prejudice to the nonmoving party, while not required under Rule 20 16(b)’s good cause assessment, can serve as an additional reason to deny a 21 ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTIONS TO AMEND COMPLAINT AND TO STRIKE DECLARATION ~ 14 1 motion[.]”). Therefore, the Court does not find that Chapman has shown good cause 2 to allow the untimely amended complaint. 3 Motion to Strike 4 Chapman moves to strike the declaration of Bob Covington, ECF No. 40, as 5 “new evidence” that State Farm submitted with its reply. ECF No. 45 at 3. 6 Chapman argues that Covington is an “undisclosed witness, who may also be an 7 expert, presenting his professional opinion about the extent of the repairs necessary 8 to restore Chapman’s property using like kind and quality construction as required 9 by the policy of insurance . . . .” Id. 10 State Farm responds that the Covington declaration was justified in that it 11 addressed Chapman’s primary argument in response to the summary judgment 12 motion, that State Farm’s proposed repair method did not provide Chapman with 13 “like kind and quality[.]” See ECF No. 49 at 5. State Farm further argues that 14 Chapman was aware since May and July 2016 of Covington Construction’s 15 involvement in the case when State Farm provided Covington’s repair estimates. Id. 16 at 5−6. In addition, State Farm argues that Chapman could have deposed Covington 17 or another corporate designee during discovery. Id. State Farm suggests that the 18 appropriate remedy in the event that the Court determines the Covington declaration 19 to be new evidence would be for Chapman to have an opportunity to file a sur-reply 20 prior to disposition of the summary judgment motion. Id. at 5. However, Chapman 21 ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTIONS TO AMEND COMPLAINT AND TO STRIKE DECLARATION ~ 15 1 did not file a reply regarding the motion to strike requesting an opportunity to file a 2 sur-reply, and the Court will not grant that opportunity sua sponte. 3 The Court finds that Covington’s declaration is proffered to rebut Chapman’s 4 arguments in his response and is from a source known to Chapman before the 5 declaration was filed. Therefore, Covington’s declaration is warranted by the 6 content of Chapman’s response. In addition, Chapman did not file a reply seeking 7 an opportunity to respond with further submissions of his own, such as through a 8 sur-reply to the summary judgment motion. Consequently, Chapman’s motion to 9 strike is denied. Nevertheless, the Court will evaluate whether the same conclusion 10 regarding summary judgment is appropriate with or without Covington’s declaration 11 in the record. 12 Motion for Summary Judgment 13 State Farm moves for summary judgment dismissal of both claims raised by 14 Chapman’s operative complaint: breach of contract and breach of the implied 15 covenant of good faith and fair dealing. 16 Legal Standard 17 Summary judgment is appropriate when “the movant shows that there is no 18 genuine dispute as to any material fact and the movant is entitled to judgment as a 19 matter of law.” Fed. R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 20 317, 322 (1986). A genuine dispute exists where “the evidence is such that a 21 ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTIONS TO AMEND COMPLAINT AND TO STRIKE DECLARATION ~ 16 1 reasonable jury could return a verdict for the nonmoving party.” Anderson v. 2 Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A fact is material if it “might affect 3 the outcome of the suit under the governing law.” Id. “Factual disputes that are 4 irrelevant or unnecessary will not be counted.” Id. 5 The moving party bears the initial burden of demonstrating the absence of a 6 genuine issue of material fact. See Celotex, 477 U.S. at 323. If the moving party 7 meets this challenge, the burden shifts to the nonmoving party to “set out specific 8 facts showing a genuine issue for trial.” Id. at 324 (internal quotations omitted). “A 9 non-movant’s bald assertions or a mere scintilla of evidence in his favor are both 10 insufficient to withstand summary judgment.” F.T.C. v. Stefanchik, 559 F.3d 924, 11 929 (9th Cir. 2009). In deciding a motion for summary judgment, the court must 12 construe the evidence and draw all reasonable inferences in the light most favorable 13 to the nonmoving party. T.W. Elec. Serv., Inc. v. Pacific Electric Contractors Ass’n, 14 809 F.2d 626, 631–32 (9th Cir. 1987). 15 16 Breach of Contract A plaintiff claiming breach of contract “must prove that a valid agreement 17 existed between the parties, the agreement was breached, and the plaintiff was 18 damaged.” Univ. of Wash. v. Gov’t Emps. Ins. Co., 200 Wn. App. 455, 467 (Wash. 19 Div. 1 2017) (citing Lehrer v. Dep’t of Soc. & Health Servs., 101 Wn. App. 509, 516 20 (Wash. 2000)). Under Washington law, interpretation of an insurance policy is a 21 ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTIONS TO AMEND COMPLAINT AND TO STRIKE DECLARATION ~ 17 1 question of law, and the court must construe the policy as a whole and give each 2 clause force and effect. Overton v. Consolidated Ins. Co., 145 Wn.2d 417 (Wash. 3 2002). 4 As a preliminary matter, the Court notes that Chapman did not dispute at 5 summary judgment the reasonableness of the lost rent benefits paid to Chapman 6 during the claim settlement process. As such, Chapman’s assertion prior to removal 7 that he was owed “at least five additional months loss of rents” is deemed waived. 8 ECF No. 3-1 at 17. 9 Chapman’s argument in opposition to summary judgment is distilled as: “If 10 the Insureds had a continuous wood (fir) floor before the Fire, they are entitled to a 11 continuous wood floor after the Fire; they are certainly not required to accept a 12 ‘patchwork’ wood floor so that State Farm can minimize the cost of the Claim.” 13 ECF No. 33 at 9. Chapman maintains that failing to remove all of the interior walls 14 and replacing the entirety of the “continuous wood floor,” violates State Farm’s 15 contractual duty to provide for “equivalent construction.” ECF No. 33 at 9. Upon 16 review of the record and without relying on Covington’s declaration, the Court finds 17 no genuine dispute of fact to validate that a reasonable factfinder could agree with 18 Chapman. 19 20 First, Chapman contends that the entire fir floor was damaged, including underneath the walls, but does not cite to any evidence in the record to support that 21 ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTIONS TO AMEND COMPLAINT AND TO STRIKE DECLARATION ~ 18 1 contention. Compare ECF No. 34 at 3 (Chapman’s statement of facts stating that the 2 Sawzall method would “leave the damaged wood floor under each wall”) with ECF 3 No. 36-4 at 3 (document cited by Chapman’s statement of facts, but in which Maib 4 merely states that he would not recommend using the Sawzall method of cutting out 5 flooring because the rental house did not have flooring that was cut out by a Sawzall 6 before the fire); see also ECF No. 33 at 9 (portion of Chapman’s response brief 7 characterizing State Farm’s position as claiming an entitlement to save money by 8 replacing only some of the fir floor and disregarding “damaged floor under the stud 9 walls.”). The Court does not find evidence to support that State Farm’s replacement 10 cost estimate was premised on leaving walls intact over flooring that was known to 11 be damaged. 12 Second, Maib, the public adjuster who provided the repair estimate on which 13 Chapman relies to argue that he was entitled to a higher settlement amount, offered a 14 different basis for the conclusion that the Sawzall approach violated the “equivalent 15 construction” and “new materials of like kind and quality” obligations. Maib 16 asserted that prior to the fire Chapman could have removed a wall during a 17 renovation and revealed “continuous fir flooring.” ECF No. 36-4 at 5. By contrast, 18 Maib testified at deposition, “[N]ow they pull out this wall, because of this improper 19 repair or one that doesn’t make them like they were before the fire, that wall is now 20 21 ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTIONS TO AMEND COMPLAINT AND TO STRIKE DECLARATION ~ 19 1 gone and they have got Sawzalled interruption. They don’t have a continuous 2 floor.” Id. 3 State Farm submitted a declaration by construction consultant Daniels that 4 refutes whether the floors ever were continuous in the sense that they were 5 composed of uninterrupted planks that ran the length of the house. ECF No. 41. 6 However, Chapman does not offer competent evidence to support that contention, 7 only Maib’s speculative claim that the floors would not be able to be remodeled to 8 the same aesthetic standard if Chapman chose to remove or move interior walls in 9 the future. 10 Moreover, neither of Chapman’s theories of breach is availing in light of the 11 plain language of the insurance contract. The policy obligated State Farm to pay 12 Chapman the lesser of: 13 14 15 (d) The replacement cost of that part of the building damaged for equivalent construction and use on the same premises; (e) The amount actually and necessarily spent to repair or replace the damaged building; or (f) The limit stated in the Extra Replacement Cost Coverage provision. 16 ECF No. 25-1 at 14 (emphasis added). The insurance policy further defined 17 “replacement cost” as “the cost, at the time of loss, to repair or replace the damaged 18 property with new materials of like kind and quality, without deduction for 19 depreciation.” ECF No. 25-1 at 21. 20 21 ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTIONS TO AMEND COMPLAINT AND TO STRIKE DECLARATION ~ 20 1 Chapman’s rental house before the fire had fir floor that was covered with 2 various other flooring materials. The undisputed factual record supports that State 3 Farm’s estimate accounted for the cost to replace the damaged floors and walls with 4 “new materials of like kind and quality.” See ECF No. 25-1 at 21. In contrast, 5 Chapman provides no evidence for his assertion that the only way to satisfy the 6 contractual language was to remove and rebuild everything rather than cutting out 7 damaged materials and replacing them with new materials. 8 Chapman’s claims-handling expert Williams testified at deposition that water 9 that is applied to a fire by emergency responders sometimes contains chemical 10 additives that can permeate and damage walls. ECF No. 42-1 at 3−4.2 Beyond 11 Williams’ assertion of what generally can happen with water used to extinguish a 12 fire, the Court does not find support in the record for Chapman’s position that the 13 walls that were not slated for removal in the Covington Estimate were damaged or 14 were standing on damaged floor. Notably, the general manager from Belfor, who 15 was retained by Chapman, testified at his deposition that it would be possible to 16 repair the damaged floors without also having to replace undamaged wall framing 17 2 18 19 20 The Court notes that State Farm moves in a footnote of its reply brief to strike Williams’ statements regarding the techniques and substances utilized by firefighters in extinguishing a fire as outside of his area of expertise. ECF No. 39 at 2 n. 1. Defendant did not file a formal motion to strike nor set its request to strike for hearing. Accordingly, the Court declines to treat and resolve this request as a motion because Chapman had no opportunity to respond. 21 ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTIONS TO AMEND COMPLAINT AND TO STRIKE DECLARATION ~ 21 1 that is sitting on top of the floors, although he considered cutting out portions of fir 2 floor impractical because of the time involved to employ the Sawzall. ECF No. 25-3 3 at 8. The Belfor general manager’s deposition testimony did not support, nor did 4 anything else in the record cited by Chapman, that the state of the property following 5 the Sawzall repair would amount to less than “equivalent construction” or that 6 repairs with a Sawzall would result in a lesser kind and quality than existed prior to 7 the fire. 8 9 Finally, the Covington declaration submitted by State Farm provides further, though unessential, support that the method of replacing only what was damaged 10 would have resulted in repairs to the floor with “no aesthetic or functional difference 11 between the old and new wood.” ECF No. 40 at 3. 12 13 Breach of Duty of Good Faith and Fair Dealing Inherent in every contract under Washington law is “an implied duty of good 14 faith and fair dealing that obligates the parties to cooperate with each other so that 15 each may obtain the full benefit of performance.” Rekhter v. State, Dep’t of Soc. & 16 Health Servs., 180 Wn.2d 102, 112 (Wash. 2014). For insurance contracts, an 17 insurer is required to exercise discretion reasonably in light of all the facts and 18 circumstances of the case. Smith v. Safeco Ins. Co., 150 Wn.2d 478, 486 (2003). 19 The Washington Supreme Court has delineated the legal inquiry as follows: 20 If the insured claims that the insurer denied coverage unreasonably in bad faith, then the insured must come forward with evidence that the 21 ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTIONS TO AMEND COMPLAINT AND TO STRIKE DECLARATION ~ 22 1 insurer acted unreasonably. The policyholder has the burden of proof. The insurer is entitled to summary judgment if reasonable minds could not differ that its denial of coverage was based upon reasonable grounds. If, however, reasonable minds could differ that the insurer’s conduct was reasonable, or if there are material issues of fact with respect to the reasonableness of the insurer’s action, then summary judgment is not appropriate. If the insurer can point to a reasonable basis for its action, this reasonable basis is significant evidence that it did not act in bad faith and may even establish that reasonable minds could not differ that its denial of coverage was justified. However, the existence of some theoretical reasonable basis for the insurer’s conduct does not end the inquiry. The insured may present evidence that the insurer’s alleged reasonable basis was not the actual basis for its action, or that other factors outweighed the alleged reasonable basis. 2 3 4 5 6 7 8 9 10 Id. Chapman has not come forward with evidence in this matter that State Farm 11 acted unreasonably. Rather, the record reflects that State Farm based its decision 12 regarding both the ACV and RCV amounts that applied to Chapman’s insurance 13 claim on ample information in the record and did not overemphasize State Farm’s 14 own interests. In addition, the record supports that State Farm was poised to 15 increase the RCV up to the policy limit to account for damage that was discovered 16 during the repair work. ECF Nos. 25-2 at 7−8; 25-6 at 5; and 40 at 3. Finally, 17 Chapman has not proffered evidence that State Farm’s alleged reasonable basis was 18 pretextual. 19 20 21 ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTIONS TO AMEND COMPLAINT AND TO STRIKE DECLARATION ~ 23 1 Therefore, the Court finds that summary judgment for State Farm on the 2 breach of contract and breach of duty of good faith and fair dealing claims is 3 appropriate. 4 Accordingly, IT IS HEREBY ORDERED: 5 1. Plaintiffs’ Motion to Amend the Complaint, ECF No. 29, is DENIED. 6 2. Plaintiffs’ Motion to Strike, ECF No. 45, is DENIED. 7 3. Defendant’s Motion for Summary Judgment, ECF No. 24, is GRANTED. 8 4. Judgment shall be entered for Defendant. 9 5. Any pending motions are DENIED AS MOOT, and upcoming deadlines 10 11 12 13 and hearings are STRICKEN. IT IS SO ORDERED. The District Court Clerk is directed to enter this Order, provide copies to counsel, and close the case. DATED April 15, 2019. 14 15 s/ Rosanna Malouf Peterson ROSANNA MALOUF PETERSON United States District Judge 16 17 18 19 20 21 ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTIONS TO AMEND COMPLAINT AND TO STRIKE DECLARATION ~ 24
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