# First Protective Insurance Company v. Brown

> District Court, E.D. North Carolina · June 17, 2021

URL: https://www.frixlaw.com/law-library/cases/10251604

## Case

- **Court:** District Court, E.D. North Carolina
- **Decided:** June 17, 2021
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10251604

## How later opinions describe it (automated extraction)

- finding that, in North Carolina, an original offer has been rejected and ceases to exist when a party makes a counteroffer
- finding that such conduct “constitutes an unfair trade practice”

## Opinion text

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
EASTERN DIVISION
No. 4:20-CV-239-BO
FIRST PROTECTIVE INSURANCE )
COMPANY, )
Plaintiff,
V. ORDER
JEFFREY BROWN AND CATHERINE
BROWN, )
Defendants.

This cause comes before the Court on plaintiff's motion to enforce settlement agreement
and defendants’ motion for judgment on the pleadings. For the following reasons, both motions
are denied.
BACKGROUND
Plaintiff issued a homeowners policy to defendants Mr. Jeffrey and Ms. Catherine
Brown, the owners of a vacation home located at 2311 Emerald Dr., Emerald Isle, North
Carolina 28594. The policy had effective dates of August 30, 2018 to August 30, 2019 and
provided for certain coverages, including Coverage A (Dwelling) and Coverage C (Personal
Property). On September 18, 2018, defendants notified plaintiff of damage incurred at the
property from Hurricane Florence on September 14, 2018. Plaintiff hired an independent field
adjuster to inspect the property on September 26, 2018, and plaintiff issued an initial payment of
$74,550.18 to defendants on November 5, 2018. Plaintiff subsequently ordered a second
inspection of the property, and after defendant submitted additional invoices, issued
supplemental payments on November 7, 2018, in the amount of $15,154.10; on November 14,

2018, in the amount of $16,091.53; and on December 1, 2019, in the amounts of $19,373.07 and
$1,989.16. In total, plaintiff made $127,158.04 in payments under Coverage A and C of the
policy to defendants.
Unsatisfied by the amount they received from plaintiff for their property damage claim,
defendants hired StormPro Consultants, LLC on September 26, 2019 to assist them in handling
their insurance claim. According to defendants, StormPro provided an estimate in October 2019
of $305,620.97 for the total cost to mitigate and repair the property under Coverage A of the
policy. Plaintiff sent a letter and supplemental estimate dated December 17, 2019 to defendants
indicating that plaintiff would make a payment of $56,841.56 and that its investigation of the
loss was complete. On January 31, 3030, defendants notified plaintiff that they intended to
invoke their right to appraisal as set out in the policy if they did not receive a response regarding
a subsequent submission on or before February 13, 2020. On February 7, 2020, plaintiff
contacted defendants through StormPro and indicated that plaintiff's management determined
that it paid appropriately on defendants’ claim. StormPro, on behalf of defendants, requested that
plaintiff release depreciation. On February 10, 2020, plaintiff sent a reservation of rights letters
to defendants indicating that there was a dispute as to the amount of loss.
On May 7, 2020, Mr. Ron Hicks of StormPro contacted plaintiff “one last time as a
courtesy,” asking for $25,000 in new money as an “amount to settle” the dispute. On May 8,
2020, Mr. Dave Fasking, an employee of plaintiff, sent a proposed release for defendants. On
May 19, 2020, in response to plaintiff's attempts to follow up on the status of the release, Mr.
Hicks stated that he would have to check with defendants about the release. On May 21, 2020,
further communication took place during which, according to defendants, defendants formally
rejected the proposed release or, according to plaintiff, defendants attempted to unilaterally

terminate the settlement agreement between the parties. In the following months, the parties
considered to discuss the status of the claim.
On July 6, 2020, plaintiff advised defendants that they were obligated to sit for an
examination under oath pursuant to the terms of the policy. On July 7, 2020 defendants sent an
appraisal demand form to plaintiff invoking the appraisal policy, and plaintiff agreed to
participate in the appraisal process on July 27, 2020. Appraiser Scott Mauldin and Appraiser
Lavonzel Williams performed a re-inspection of the property on October 23, 2020 and produced
an estimate of the loss. Along with the umpire, Mr. Wesley Barber, they came to an agreement
on November 1! 1, 2020 as to the amount of loss for defendants’ entire claim and submitted a
three-signature appraisal award to plaintiff on November 12, 2020. Defendants notified plaintiff
of their intention to enforce the award. Plaintiff then filed the instant lawsuit on December 29,
2020 seeking a declaratory judgment as to plaintiff's rights and obligations under the policy and
seeking enforcement of the contract and/or settlement between the parties. Defendants filed
counterclaims for breach of contract, breach of the covenant of good faith and fair dealing, and
unfair claim settlement practices against plaintiff on January 19, 2021.
DISCUSSION
Motion to Enforce Settlement Agreement
Plaintiff filed the instant motion to enforce settlement agreement, and the Court had a
hearing on the motion on March 17, 2021, at Elizabeth City. A district court has “inherent
authority” to enforce a settlement agreement if the court finds that the parties reached a complete
settlement and the court can determine the agreement’s terms and conditions. Hensley v. Alcon
Labs., 277 F.3d 535, 540-41 (4th Cir. 2002) (citation omitted). A motion to enforce settlement
agreement “draws on standard contract principles.” /d. at 540. Under contract law, a valid and

enforceable contract exists when there is a meeting of the minds of the contracting parties upon all
essential terms and conditions of the contract. Apple Tree Ridge Neighborhood Ass'n v.
Grandfather Mountain Heights Prop. Owners Corp., 206 N.C. App. 278, 282 (2010).
Absent an agreement, “a party may demand and receive full judicial process, including a trial,”
and the district court must deny enforcement. Hensley, 277 F.3d at 540-41.
The issue here is whether there was a meeting of the minds on all essential terms of the
settlement between the parties. The Court finds there was not. Plaintiff argues that StormPro was
acting with actual and apparent authority for defendants in negotiating a settlement agreement. In
North Carolina, an agent may bind his principal to the terms of a contract: “(1) When the agent
acts within the scope of his actual authority; (2) When the contract, although unauthorized, has
been ratified; (3) When the agent acts within the scope of his apparent authority, unless the third
person has notice that the agent is exceeding his actual authority.” Morpul Researcbh Corp. v.
Westover Hardware, Inc., 263 N.C. 718, 721 (1965).
Plaintiff alleges that StormPro had both actual and apparent authority to negotiate and agree
to terms of a settlement agreement on behalf of defendants. The Court agrees. StormPro did have
authority to enter into a settlement agreement for defendants. However, this does not lead to the
conclusion that StormPro did, in fact, enter into a settlement agreement with plaintiff. Instead, the
Court finds that Plaintiff never accepted the terms of Mr. Hicks’s request for $25,000 in new
money. Even assuming, as plaintiff argues, that Mr. Hicks’s email was an offer to settle, plaintiff
made a counteroffer when it sent a release in response. This counteroffer terminated Mr. Hicks’s
original offer. See Cole v. Champion Enters., 496 F. Supp. 2d 613, 628 (M.D.N.C. 2007) (finding
that, in North Carolina, an original offer has been rejected and ceases to exist when a party makes
a counteroffer) (citing Normile v. Miller, 312 N.C. 98, 106 (1985)). The five-page release included

a variety of provisions never referenced in the May 2020 email exchange and not included in
defendant’s offer, such as provisions for assignment of benefits, indemnity, severability,
confidentiality, and liability. After receiving the proposed release and reviewing these terms,
defendants unequivocally rejected the release on May 21, 2020 through StormPro.
Motion for Judgment on the Pleadings
Rule 12(c) of the Federal Rules of Civil Procedure provides that “[a]fter the pleadings are
closed—but early enough not to delay trial—a party may move for judgment on the pleadings.”
Fed. R. Civ. P. 12(c). In considering a Rule 12(c) motion, “[c]ourts apply the same standard that
is applied to Rule 12(b)(6) motions,” but “a court may consider all pleadings, including answers
and attached exhibits, instead of reviewing only the complaint.” Great Am. Ins. Co. v. GRM Mgemt.,
LLC, No. 4:14CV295, 2014 U.S. Dist. LEXIS 164147, at *5 (E.D. Va. 2014) (citing Edwards v.
City of Goldsboro, 178 F.3d 231, 243-44 (4th Cir. 1999)). Judgment on the pleadings is properly
granted if “the moving party has clearly established that no material issue of fact remains to be
resolved and the party is entitled to judgment as a matter of law.” Park Univ. Enters. v. Am. Cas.
Co. of Reading, 442 F.3d 1239, 1244 (10th Cir. 2006) (cited favorably in Fireman’s Ins. Co. v.
Glen-Tree Invs., LLC, No. 7:11-CV-59-D, 2012 U.S. Dist. LEXIS 134064, *10 (E.D.N.C. 2012)).
The court “must accept the truthfulness of all factual allegations in a complaint,” but it “need not
assume the veracity of bare legal conclusions.” Wall & Assocs. v. Better Bus. Bureau of Cent.
Virginia, Inc., 685 F. App’x 277, 277-78 (4th Cir. 2017) (internal quotations omitted).
I. Declaratory Judgment Action
Plaintiff seeks a declaratory judgment invalidating the appraisal award by asserting that
defendants did not comply with a necessary condition precedent to appraisal and that the award 1s
invalid due to impeaching circumstances. Defendants, however, have filed for judgment on the

pleadings, arguing that the undisputed facts within the pleadings reveal that none of the allegations
made by plaintiff support invalidating the award. The Court finds that there are still issues of
material fact to be resolved and that defendant is not entitled to judgment on the pleadings.
Defendants argue that they should be awarded judgment on the pleadings as to plaintiff's
declaratory judgment action because they did not fail to satisfy any conditions precedent to the
appraisal process. Defendants argue further that, even if their completion of examinations under
oath was a condition precedent to the invocation of appraisal, plaintiff waived its right to rely on
that condition by proceeding with the appraisal. Under North Carolina law, when an insurer
requests compliance of post-loss duty provisions in an insurance policy, the compliance is a pre-
requisite to the insured invoking an appraisal provision. Hailey v. Auto-Owners Ins. Co., 181 N.C.
App. 677, 687 (2007). The parties must engage in some meaningful exchange of information prior
to the insured invoking an appraisal provision, id. at 684, since the objective of provisions laying
out an insured’s duties after loss is “to enable the insurance company to obtain information to
determine the extent of its obligation and to protect itself from false claims,” Chavis v. State Farm
Fire & Cas. Co.,79 N.C. App. 213, 215 (1986), rev'd on other grounds, 317 N.C. 683 (1986).
However, insurer may be found to have waived a provision or condition in an insurance policy
which is for its own benefit.” Brandon v. Nationwide Mut. Fire Ins. Co., 301 N.C. 366, 370 (1980).
An insurer waives a policy provision when there is (1) “knowledge on the part of the insurer of the
pertinent facts” and (2) “conduct thereafter inconsistent with an intention to enforce the contract.”
Cullen v. Valley Forge Life Ins. Co., 161 N.C. App. 570, 575 (2003) (internal citations omitted).
Defendants* final argument that they are entitled to judgment on this issue is that the
undisputed facts do not contain a single factual allegation suggesting that the appraisal award is
invalid based on fraud, duress, or other impeaching circumstances. However, plaintiff argues that

defendants’ alleged repeated refusal to sit for examinations under oath prior to appraisal is an
impeaching circumstance. In North Carolina, an appraisal award is binding where the relevant
appraisal provisions have been followed and there is no evidence of fraud, duress, or impeaching
circumstances. Enzor v. N. Carolina Farm Bureau Mut. Ins. Co., 123 N.C. App. 544, 545-46
(1996). An impeaching circumstance is a mean, bad, or dishonest act on the part of a party to the
appraisal that, at a minimum, has “a bearing on the accuracy or authenticity of the appraisal.”
Elledge v. Austin, No. COA04-1003, 2005 N.C. App. LEXIS 2222, at *13 (2005).
Resolution of the declaratory judgment dispute requires this Court to consider factual
disputes. For example, the conflicting allegations by the parties surrounding defendants’ failure to
complete examinations under oath when scheduled are sufficient to create a factual dispute as to
whether defendants’ conduct created an impeaching circumstance. Here, plaintiff alleges that
defendants unilaterally rescheduled their examinations under oath on two separate occasions,
thereby shirking their obligations under the policy, while simultaneously advancing the appraisal
process despite plaintiffs express objections. Plaintiff also alleges that defendants failed to provide
pertinent documentation prior to the appraisal, as requested in letters from counsel. Defendants
deny these allegations and instead assert a multitude of other explanations for rescheduling. Tlhe
factual dispute over whether bad faith was the reason for rescheduling the examination under oath,
in addition to other factual disputes, prevents the Court from granting defendants motion on the
pleadings as to the declaratory judgment action.
IJ. Breach of Contract Counterclaim
In order to prove a breach of contract claim in North Carolina, a plaintif? mus: establish
the existence of a valid contract and breach of the terms of that contract. McLamb vy. T.P. Inc., 173
N.C. App. 586, 588 (2005). A valid contract requires offer, acceptance, consideration, and a

meeting of the minds. Turner v. Ellis, 179 N.C. App. 357, 362 (2006). A breach of contract occurs
where there is a “non-performance unless the person charged shows some valid reason which may
excuse the non-performance; and the burden of doing so rests upon him.” First Protective Ins. Co.
v. Rike, No. 4:20-CV-124-D, 2021 U.S. Dist. LEXIS 16153,at *26 (E.D.N.C. Jan. 28, 2021)
(citations and quotations omitted).
The parties agree that the insurance policy is a contract, and defendants contend that
plaintiff breached the terms of the contract by failing to agree that the appraisal award was binding
upon the parties and by failing to pay the full amount of loss in the appraisal award. It is undisputed
that plaintiff is required to fulfill these obligations under the insurance policy, but there is a dispute
as to whether and to what extent these obligations were breached by non-performance. Plaintiff
contends that it fulfilled its obligations under the policy to the extent that it was able, and that
plaintiff participated in the appraisal in compliance with the policy while simultaneously
reiterating its desire to conduct examinations of the defendants before the appraisal award. Plaintiff
alleges that the appraisal award is invalid because defendants had not previously submitted to
examinations under oath, and that this is a valid reason to excuse its nonperformance.
Defendants’ breach of contract arguments and plaintiffs asserted breach of contract
defense rely on many of the same arguments as the impeaching circumstance for the appraisal
process. Since the Court has already determined that there are factual disputes over whether there
was bad faith in the rescheduling of the examinations under oath, the Court also finds that there
are factual disputes that prevent the Court from determining at this time whether plaintiff breached
the contract between the parties. Therefore, because there are material facts in dispute, defendants’
motion for judgment on the pleadings with respect to their breach of contract counterclaim fails.

III. Breach of Implied Covenant of Good Faith and Fair Dealing Counterclaim
“Under North Carolina law, every contract contains an implied covenant of good faith and
fair dealing that neither party will do anything which injures the right of the other to receive the
benefits of the agreement.” Cordaro v. Harrington Bank, FSB, 260 N.C. App. 26, 38 (2018)
(internal quotations omitted). To state a claim for breach of good faith and fair dealing, “a plaintiff
must plead that the party charged took action which injured the right of the other to receive the
benefits of the agreement, thus depriving the other of the fruits of the bargain.”” McDonald v. Bank
of New York Mellon Trust Co., 259 N.C. App. 582, 597 (2018) (internal quotations omitted). The
North Carolina Court of Appeals has held that “{a] defendant cannot breach a covenant of good
faith and fair dealing when a claimant fails to establish the defendant breached the underlying
contract.” /d. (citation omitted).
Because there can be no breach of the implied covenant of good faith and fair dealing when
there has not been a breach of contract, the Court must first decide whether there has been a breach
of contract. As previously states, the Court cannot decide at the judgment on the pleadings stage
whether there has been a breach of contract because of factual disputes, and these factual disputes
likewise prevent the Court from now determining whether there has been a breach of the implied
covenant of good faith and fair dealing. Defendants’ motion for judgment on the pleadings fails
with respect to this counterclaim.
IV. Untair Claims Settlement Practices Counterclaim
To establish an unfair and deceptive trade practices claim, a plaintiff must show: “(1) an
unfair or deceptive act or practice, (2) in or affecting commerce, and (3) which proximately caused
injury to plaintiffs.” Gray v. N. Carolina Ins. Underwriting Ass’n, 352 N.C. 61, 68 (2000). “A
[vjiolation of any form of conduct listed in N.C. Gen. Stat. § 58-63-15(11) operates as a per se

instance of unfair and deceptive trade practice under N.C. Gen. Stat. § 75-1.1. Lyon v. Serv. Team
of Prof'ls (E. Carolina), LLC, No. COA18-627, 2019 N.C. App. LEXIS 359, at *13 (2019)
(citation omitted). Conduct that violates N.C. Gen. Stat. § 58-63-15(11) is an unfair and deceptive
act or practice because “such conduct is inherently unfair, unscrupulous, immoral, and injurious
to consumers.” Gray, 352 N.C. at 71. “Not attempting in good faith to effectuate prompt, fair and
equitable settlements of claims in which liability has become reasonably clear” is conduct listed
under the statute. N.C. Gen. Stat. § 58-63-15(11)(f).
Defendants base their unfair and deceptive trade practice claim on allegations that plaintiff
“engage[d] in conduct manifesting an inequitable assertion of power or position,” Murray v.
Nationwide Mut. Ins. Co., 123 N.C. App. 1, 9 (1996) (finding that such conduct “constitutes an
unfair trade practice”), and violated N.C. Gen. Stat. § 58-63-15(11), including N.C. Gen. Stat. §
58-63-15(11)(f), when it failed to pay the full appraisal award amount within sixty days of the
award’s entry and for refusing to treat the appraisal award as a final determination of value that
would bind both parties. Again, these assertions rely on facts that are in dispute. For example,
defendants contend that plaintiff participated in the entire appraisal process without once
contending that the appraisal could not properly determine the value of defendants’ loss. On the
other hand, plaintiff contends that it repeatedly reiterated its request to conduct examinations under
oath of defendants as a condition precedent to the appraisal. Based on these disputes, the Court
denies defendants’ motion for judgment on the pleadings as to this claim.
CONCLUSION
For the foregoing reasons, plaintiff's motion to enforce settlement agreement [DE 11]
defendants’ motion for judgment on the pleadings [DE 16] are DENIED.

10

SO ORDERED, this j Giay of June, 2021.

VLA W. BOYLE
UNITED STATES DISTRICT’JUDGE

1]

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10251604. Public record. Not legal advice.