J&C Enterprises v. Mid-Cont.

Utah State Courts - Opinions - J&C Enterprises v. Mid-Cont.

IN THE UTAH COURT OF APPEALS

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J & C Enterprises, Inc., a Utah corporation,

Plaintiff and Appellant,

v.

Mid-Continent Casualty Company, an Oklahoma corporation,

Defendant and Appellee.

MEMORANDUM DECISION
(Not For Official Publication)

Case No. 20020421-CA

F I L E D
(September 5, 2003)

2003 UT App 304

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Eighth District, Vernal Department

The Honorable A. Lynn Payne

Attorneys: Daniel S. Sam, Vernal, for Appellant

Roger R. Fairbanks, South Jordan, for Appellee

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Before Judges Davis, Greenwood, and Thorne.

GREENWOOD, Judge:

J & C Enterprises, Inc. (J & C) appeals, claiming error in the trial court's grant of summary judgment to J & C's insurer, Mid-Continent Casualty Company (Mid-Continent). J & C asserts the trial court erred in granting summary judgment on its claims for bad faith, punitive damages, attorney fees, and recovery of storage expenses.

I. Storage Expenses

J & C argues the trial court erred in determining J & C was not entitled to payment under the insurance contract for storage expenses. Mid-Continent does not argue that the contract does not cover storage expenses, only that J & C incurred none.

After the accident, J & C took the damaged truck and crane to property (the Trust Property) owned by the Julie Ann Lewis Trust (the Trust). Junior Lewis, an officer of J & C and trustee of the Trust, testified in his deposition that an agreement existed between the Trust and J & C whereby J & C paid the yearly property taxes for the Trust Property in exchange for permitting J & C to store equipment on the Trust Property. This arrangement was not made specifically for the storage of the damaged truck and crane, nor did it limit what equipment could be stored on the Trust Property. Because of this agreement, J & C was never charged by the Trust for storage of the truck or crane, nor was it likely to, given the arrangement. J & C suffered no expense or detriment of any kind for storage of the truck and crane. Therefore, the trial court properly granted summary judgment to Mid-Continent on this issue. See Johannessen v. Canyon Rd. Towers Owners Ass'n, 2002 UT App 332,¶11, 57 P.3d 1119 ("'Summary judgment should be granted only if there has been a showing that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.'" (quoting Harris v. Albrecht, 2002 UT App 98,¶8, 46 P.3d 241)).

II. Bad Faith, Punitive Damages, and Attorney Fees

J & C also appeals the trial court's grant of Mid-Continent's Motion for Summary Judgment on J & C's claim of bad faith, seeking punitive damages and attorney fees. At the summary judgment hearing, Mid-Continent argued that J & C did not suffer any storage expenses or cleanup expenses, as cleanup and debris removal had been done by J & C "in-house." The trial court disallowed the storage expenses, as previously noted, and set for trial the issue of recovery for cleanup and debris removal.(1) The trial court granted Mid-Continent's Motion for Summary Judgment on the bad faith claim, determining that the issues of recovery for storage fees and cleanup costs were "fairly debatable." Because the court determined that the refused claims were fairly debatable, the trial court granted Mid-Continent's Motion for Summary Judgment as to punitive damages and attorney fees.(2)

"Under Utah law, if an insurer denies an insured's claim [that] is fairly debatable, [then] the insurer is entitled to debate it and cannot be held to have breached the implied covenant [of good faith] if it chooses to do so." Prince v. Bear River Mut. Ins. Co., 2002 UT 68,¶28, 56 P.3d 524 (quotations and citations omitted) (first and second alteration in original). A matter is fairly debatable "'[i]f the evidence presented creates a factual issue as to the claim's validity.'" Id. at ¶34 (alteration in original) (quoting Callioux v. Progressive Ins. Co., 745 P.2d 838, 842 (Utah Ct. App. 1987)); see also 14 Lee R. Russ & Thomas F. Segalla, Couch on Insurance 3d § 204:28 (1999) ("A 'debatable reason,' for purposes of determining whether a first-party insurer may be subjected to bad-faith liability, means an arguable reason, a reason that is open to dispute or question."). "[T]rial courts have 'some discretion' in concluding that an insurance claim is fairly debatable 'because of the complexity and variety of the facts upon which the fairly debatable determination depends,' and [this court] will therefore 'grant the trial court's conclusion some deference.'" Id. at ¶33 (quoting Billings v. Union Bankers Ins. Co., 918 P.2d 461, 464 (Utah 1996)).

Given that J & C's claim for storage fees was properly denied and that the issue of recoverable costs for cleanup and debris removal was set for trial, the trial court properly concluded that the denied claims were fairly debatable.(3) See, e.g., S.W. Energy Corp. v. Continental Ins. Co., 1999 UT 23,¶20, 974 P.2d 1239 (holding "claims for bad faith . . . and punitive damages were appropriately dismissed" where denied insurance claim was fairly debatable); Larsen v. Allstate Ins. Co., 857 P.2d 263, 266 (Utah Ct. App. 1993) (determining insurer did not act in bad faith in denying insured's claim because the issue was fairly debatable given that (1) the insurer had sought legal counsel, (2) cases from other jurisdictions supported the insurer's position, (3) policy considerations weighed in the insurer's favor, and (4) the trial court agreed with the insurer's position when granting summary judgment).(4) Because the trial court properly deemed the denied claims fairly debatable the trial court properly granted Mid-Continent's Motion for Summary Judgment on J & C's claims of bad faith, punitive damages, and attorney fees. See Prince, 2002 UT 68 at ¶28.

Affirmed.

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Pamela T. Greenwood, Judge

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WE CONCUR:

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James Z. Davis, Judge

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William A. Thorne, Jr., Judge

1. In denying summary judgment as to the recovery of cleanup and debris removal costs, the trial court determined that J & C suffered a loss for the use of its equipment and employees when conducting the activities in-house. We agree, and distinguish the recovery of cleanup costs from the recovery of storage costs because the agreement between the Trust and J & C precluded J & C from suffering any loss for storage expenses.

2. Attorney fees are permitted for recovery "as consequential damages for a breach of the covenant of good faith implicit in an [insurance contract.]" Pugh v. North Am. Warranty Servs., Inc., 2000 UT App 121,¶20, 1 P.3d 570.

3. At the summary judgment motion hearing, Mid-Continent argued that it denied J & C's claims for cleanup and debris removal because J & C conducted the activities in-house. On appeal,

J & C argues that because the trial court tried this issue, the trial court erred in determining the matter was fairly debatable. However, J & C's argument must fail as it would impose strict liability on an insurance company that denies a claim that is later allowed by the trial court. It has previously been noted that such an interpretation is not the intent of the "fairly debatable" defense to an insurance company's denial of claims. Billings v. Union Bankers Ins. Co., 918 P.2d 461, 465 n.2 (Utah 1996).

4. J & C argues that Pugh v. North American Warranty Services, Inc., 2000 UT App 121, 1 P.3d 570, supports its position that the trial court erred in granting Mid-Continent's Motion for Summary Judgment as to bad faith. However, in Pugh there was significant evidence of the insurer's bad faith that is not present in this case. For example, in Pugh, the plaintiff's vehicle was stranded in another city for "an entire year due to [the insurer's] refusal to pay for necessary repairs." Id. at ¶21. Further, the court found that there was "substantial evidence" that repairs needed to be made "from first inspection by [the insurer's] agent," the insurer "delayed unreasonably in both investigating the loss and authorizing" payment, the insurer "refused to follow the payment procedure required by the contract," and that once the insurer "proffered payment (almost eleven months after the loss), it deducted sums without justification and in direct contravention of the [agreement.]" Id. at ¶23.