Medley v. State Farm Fire and Casualty Company

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA

CHARLESTON DIVISION

GARY LEE MEDLEY and

TERESA MEDLEY,

Plaintiffs,

v. CIVIL ACTION NO. 2:23-cv-00736

STATE FARM FIRE AND CASUALTY

COMPANY, and CHRISTOPHER GAUNT,

Defendants.

MEMORANDUM OPINION AND ORDER

The Court has reviewed the Plaintiffs’ Motion for Partial Summary Judgment on Insurance

Coverage Issue (Document 43), the Plaintiffs’ Memorandum in Support of Motion for Partial

Summary Judgment on Insurance Coverage Issue (Document 44), the Defendants’ Response to

Plaintiffs’ Motion for Partial Summary Judgment on Insurance Coverage Issue (Document 47),

the Plaintiffs’ Reply to Defendants’ Response to Plaintiffs’ Motion for Partial Summary Judgment

on Insurance Coverage Issue (Document 49), and all attached exhibits. For the reasons stated

herein, the Court finds the motion should be denied.

FACTUAL ALLEGATIONS1

The Plaintiffs are Gary Lee Medley and Teresa Medley, a married couple, who seek to

recover under their homeowners insurance policy issued by State Farm Fire and Casualty

1 All facts are drawn from the parties’ submissions and are recounted in the light most favorable to the Defendants

as the non-moving parties.

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Company (“State Farm”), a Defendant in this matter. The Plaintiffs live at 576 Thomas Hollow

Road in Tornado, West Virginia, known as Honeysuckle Farm, which consists of a home, two

barns, and riding trails. On April 1, 2023, a windstorm collapsed one of the Medleys’ barns onto

their Zetor 4341 farm tractor. The cost to repair the tractor is estimated at $40,079. At the time

of the storm, the Plaintiffs’ homeowners insurance policy held through State Farm (State Farm

Policy No. 48-BS-D178-6) was in effect.

After the windstorm, the Plaintiffs submitted a claim to State Farm to recover insurance

proceeds for the tractor. This claim was assigned to Christopher Gaunt, a State Farm claim

specialist and a Defendant in this case. On May 23, 2023, Mrs. Medley emailed State Farm

requesting information about the pending claim for the damages to the tractor. In the email, Mrs.

Medley testified that “[w]e have had no income from our business as we operated out of our barn”

and requested loss of income payment, as well as costs for transporting and storing their harvested

hay in a rental facility. (Document 47-2.) Mr. Gaunt testified in his deposition that he

interpreted the email as confirmation that the Medleys were running a business out of their barn

and had suffered a loss due to its collapse.

In her deposition, Mrs. Medley testified that Honeysuckle Farm is a sole proprietorship

owned solely by Mr. Medley. For over thirty years, the Medleys offered horse boarding, training,

and riding lessons on the farm. The horse boarding, training, and riding lessons ended in October

2022. However, the Medleys still keep a horse outside at Honeysuckle Farm for a friend, who

pays $350 a month for the horse’s hay and grain. Mrs. Medley does not describe the arrangement

with the friend as horse boarding. Additionally, the Medleys also purchased two horses from a

nurse, who previously boarded the horses in Honeysuckle Farm’s barn. While Mrs. Medley stated

that this purchase occurred in June 2023, Mr. Medley testified it occurred in 2022.

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Additionally, a Facebook page for Honeysuckle Farm was still available as of April 1,

2023, and the Honeysuckle Farm’s business license was active until April 30, 2023. The Medleys

also continue to use the business checking account from 2022 and advertise their farm with signs

at the end of Thomas Hollow Road. In September 2022, Mrs. Medley advertised horse boarding,

riding lessons, and trail rides, although Mr. Medley clarified that the Medleys received no income

from these activities in 2023.

The Medleys also sell chicken eggs on their property and are certified to do so through the

Department of Agriculture. The Medleys’ foster children sold the eggs from the end of Thomas

Hollow Road. Mrs. Medley stated that the chickens and egg sales were intended to give the

children something to focus on and something from which to earn money. The egg sale proceeds

were split between chicken feed, egg cartons, the children, and the Medleys. After the barn

collapsed, many of the chickens scattered. The remaining chickens were sold, and the Medleys

did not sell eggs after the windstorm. Mrs. Medley stated that selling the eggs earned $1,200 in

2021, $2,500 in 2022, and $600 in the first three months of 2023.

The Medleys used the now damaged tractor to cut hay, mow the pasture field, and clean

ditch lines. The hay cut by the tractor fed the Medleys’ horses, cattle, and goats. Additional

bales of hay were purchased to feed the boarded horses. The hay baled by the tractor and the

purchased hay were not kept separate and were fed, without regard to its source, to boarded and

personal horses alike. Mr. Medley testified in his deposition that there is “[n]o need at all” for

the tractor to be used in caring for the chickens or collecting their eggs. (Document 44.)

For personal property used or intended for use in a business, recovery under the State Farm

Policy is limited to $1,500. The policy defines a business as “any full-time or part-time activity.

. . of an economic nature. It does not matter whether it is continuous or regular, is a secondary or

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supplemental source of income, or is an insured’s principal means of livelihood. Profit and profit

motive are irrelevant.” (Document 44.) Excepted from the definition of business are “incidental

and infrequent personal economic activity such as a hobby, garage or yard sale, or traditional farm

activities when the farm products are intended only for the personal use of the insured” and “any

occasional or part-time self-employed activity by a person under 19 years of age that involves no

employees or subcontracted independent contractors and is a type of activity normally performed

by persons under 19 years of age, including but not limited to, child care, lawn mowing, or paper

delivery.”2 (Id.)

After Mrs. Medley’s May 2023 email, the Plaintiffs obtained counsel who contacted State

Farm on August 22, 2023, about the tractor claim. Mr. Gaunt asked the Plaintiffs’ attorney, Mr.

Berthold, whether the tractor was used for personal or business purposes. Mr. Berthold was

unsure and needed to consult with the Plaintiffs. After talking to his clients, Mr. Berthold stated

that the tractor is used for “home, business[,] and everything” on the Plaintiffs’ other properties

and on Honeysuckle Farm, which he described as “more or less an unincorporated business.”

(Document 47.)

As a result of Mr. Gaunt’s conversation with the Plaintiffs’ attorney, he accepted that the

tractor was being used for business purposes. This acceptance was confirmed by Danny Ruth,

Mr. Gaunt’s team manager, who testified in a deposition that knowledge about the exact type of

business being run is not necessarily required to consider whether a business is operating on a

property. Particularly when considering the size and price of the Plaintiffs’ tractor, he testified

2 The State Farm Policy does not cover personal property vehicles designed to travel on public roads and require

vehicle registration. If a vehicle does not travel on public roads or require registration, it will be protected by the

State Farm Policy if it is either “used primarily to service the insured location” or “designed for assisting persons with

disabilities.” (Document 44.) The Medleys’ tractor does not travel on public roads or require vehicle registration.

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that it is “reasonable” to question whether such a tractor is being used for a business. (Document

47.) Therefore, Mr. Gaunt notified the Plaintiffs that only $1,500 of the tractor’s damages would

be covered by State Farm because that is the policy limit for personal property used or intended

for use in a business. Payment in that amount was issued to the Plaintiffs for the tractor claim.

After the Medleys were unsuccessful in recovering additional insurance payout for the

damages to the tractor, they filed this suit on October 5, 2023, in the Circuit Court of Kanawha

County, West Virginia, against State Farm and Christopher Gaunt. The action was removed to

this Court on November 13, 2023. The Plaintiffs assert claims for breach of contract, common-

law bad faith, and unfair trade practices.

STANDARD OF REVIEW

A. Summary Judgment

The well-established standard in consideration of a motion for summary judgment is that

“[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as

to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.

56(a)–(c); see also Hunt v. Cromartie, 526 U.S. 541, 549 (1999); Celotex Corp. v. Catrett, 477

U.S. 317, 322 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986); Hoschar v.

Appalachian Power Co., 739 F.3d 163, 169 (4th Cir. 2014). A “material fact” is a fact that could

affect the outcome of the case. Anderson, 477 U.S. at 248; News & Observer Publ’g Co. v.

Raleigh-Durham Airport Auth., 597 F.3d 570, 576 (4th Cir. 2010). A “genuine issue” concerning

a material fact exists when the evidence is sufficient to allow a reasonable jury to return a verdict

in the nonmoving party’s favor. FDIC v. Cashion, 720 F.3d 169, 180 (4th Cir. 2013); News &

Observer, 597 F.3d at 576.

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The moving party bears the burden of showing that there is no genuine issue of material

fact, and that it is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a); Celotex Corp.,

477 U.S. at 322–23. When determining whether summary judgment is appropriate, a court must

view all the factual evidence, and any reasonable inferences to be drawn therefrom, in the light

most favorable to the nonmoving party. Hoschar, 739 F.3d at 169. However, the nonmoving

party must offer some “concrete evidence from which a reasonable juror could return a verdict in

his favor.” Anderson, 477 U.S. at 256. “At the summary judgment stage, the nonmoving party

must come forward with more than ‘mere speculation or the building of one inference upon

another’ to resist dismissal of the action.” Perry v. Kappos, No. 11-1476, 2012 WL 2130908, at

*3 (4th Cir. June 13, 2012) (unpublished decision) (quoting Beale v. Hardy, 769 F.2d 213, 214

(4th Cir. 1985)).

In considering a motion for summary judgment, the court will not “weigh the evidence and

determine the truth of the matter,” Anderson, 477 U.S. at 249, nor will it make determinations of

credibility. N. Am. Precast, Inc. v. Gen. Cas. Co. of Wis., 2008 WL 906334, *3 (S.D. W. Va. Mar.

31, 2008) (Copenhaver, J.) (citing Sosebee v. Murphy, 797 F.2d 179, 182 (4th Cir. 1986)). If

disputes over a material fact exist that “can be resolved only by a finder of fact because they may

reasonably be resolved in favor of either party,” summary judgment is inappropriate. Anderson,

477 U.S. at 250. If, however, the nonmoving party “fails to make a showing sufficient to establish

the existence of an element essential to that party’s case,” then summary judgment should be

granted because “a complete failure of proof concerning an essential element . . . necessarily

renders all other facts immaterial.” Celotex, 477 U.S. at 322–23.

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B. Determination of Insurance Policy Coverage

The Supreme Court of Appeals of West Virginia has instructed that the “[d]etermination

of the proper coverage of an insurance contract when the facts are not in dispute is a question of

law.” Syl. Pt. 1, Tennant v. Smallwood, 568 S.E.2d 10 (W. Va. 2002) (citation and quotation

omitted). “[W]here the provisions of an insurance policy contract are clear and unambiguous they

are not subject to judicial construction or interpretation, but full effect will be given to the plain

meaning intended.” Keffer v. Prudential Ins. Co., 172 S.E.2d 714, 715 (W. Va. 1970) (citations

omitted).

On the other hand, if a policy’s provisions are ambiguous, they will be liberally construed

in favor of the insured. Aetna Cas. & Sur. Co. v. Pitrolo, 342 S.E.2d 156, 160 (W. Va. 1986)

(citations omitted) (“since insurance policies are prepared solely by insurers, any ambiguities in

the language of insurance policies must be construed liberally in favor of the insured.”) However,

“such construction should not be unreasonably applied to contravene the object and plain intent of

the parties.” Syl. Pt. 6, Hamric v. Doe, 499 S.E.2d 619 (W. Va. 1997) (quoting Syl. Pt. 2, Marson

Coal Co. v. Ins. Co. of State of Pennsylvania, 210 S.E.2d 747 (W. Va. 1974)). A policy provision

is ambiguous if it is “reasonably susceptible of two different meanings or . . . of such doubtful

meaning that reasonable minds might be uncertain or disagree as to its meaning.” Glen Falls

Inc. Co. v. Smith, 617 S.E.2d 760, 768 (W. Va. 2005) (quoting Syl. Pt. 5, Hamric, 499 S.E.2d 619

(emphasis in original)).

If coverage is not intended to apply, the policy should clearly indicate that insurance is not

available. “An insurer wishing to avoid liability on a policy purporting to give general or

comprehensive coverage must make exclusionary clauses conspicuous, plain, and clear, placing

them in such a fashion as to make obvious their relationship to other policy terms, and must bring

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such provisions to the attention of the insured.” Satterfield v. Erie Ins. Property and Cas., 618

S.E.2d 483, 487 (W. Va. 2005) (quoting Syl pt. 10, Nat’l Mut. Ins. Co. v. McMahon & Sons, Inc.,

177 W. Va. 734, 356 S.E.2d 488 (1987), overruled on other grounds by Parsons v. Halliburton

Energy Services, Inc., 237 W. Va. 138, 785 S.E.2d 844 (2016)).

DISCUSSION

The primary issue in this case is the extent to which the damage to the Plaintiffs’ tractor is

covered under the State Farm Policy. This question hinges on whether the tractor was used for

business purposes as defined in the State Farm Policy. The scope of “property used or intended

for use in a business” is relevant to this question to determine whether summary judgment is

appropriate here.

The Plaintiffs state that availability of insurance coverage is decided as a matter of law if

the material facts are not in dispute. They contend that State Farm has the burden of proving an

insurance policy exclusion when seeking to avoid liability through that exclusion. Thus, the

Plaintiffs conclude that State Farm must establish the facts necessary to prove an operation of the

exclusion. Specifically, State Farm must prove that the tractor was used or intended for use in a

business at the time of the storm, which the Plaintiffs argue State Farm has failed to do.

Regarding whether property is used in a business in the insurance damage context, the

Plaintiffs point to authority by the Supreme Court of Appeals of West Virginia, which requires

consideration of how the property is used, whether compensation was received, and the insured’s

intent. (Document 44) (citing W. Va. Ins. Co. v. Jackson, 200 W. Va. 588, 490 S.E.2d 675 (W.

Va. 1997)). The Plaintiffs also refer to a Northern District of Indiana decision that quoted cases

from Indiana state courts and found that the “proper focus for determining ‘use’ is at the time of

the accident,” and that a potential business motive is insufficient to convert personal property to

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business property. (Id.) (quoting Bachman v. AMCO Ins. Co., 897 F. Supp. 2d 780, 789 (N.D.

Ind. 2012) (citing Am. Family Mut. Ins. Co. v. Ginther, 803 N.E.2d 224 (Ind. Ct. App. 2004);

Singer v. Nat’l Fire Ins. Co. of Hartford, 264 A.2d 270 (N.J. Super. Ct. Law Dev. 1970)).

The Plaintiffs also argue that the State Farm Policy is ambiguous because it does not clarify

whether property once used for business purposes can become personal property. Accordingly,

they argue the policy should be strictly construed against State Farm. Lastly, the Plaintiffs point

to an Ohio appeals court insurance coverage case, which held that “[a]ctivities related to a business

that may result in a de minimis increase in risk and did not cause the loss or damage should not

preclude coverage under an insurance contract.” (Id.) (quoting Byers v. Motorists Ins. Cos., 863

N.E.2d 196, 203) (Ohio App. 4th Dist. 2006)). They argue that this decision is instructive because

their chicken business profit was de minimis, and the tractor was not involved in that business.

In response, the Defendants state that in the absence of ambiguity, a court is to give effect

to the plain meaning of an insurance policy. Here, the Defendants argue that the plain meaning

of “property used or intended for use in a business” from the State Farm Policy applies to property

that has been, is currently, or is intended to be used for business. To support this, the Defendants

cite cases from the Oklahoma Supreme Court and the Pennsylvania Superior court with similar

limiting policy language: “used at any time or in any manner for any [business or business

purpose].” (Document 47) (quoting Shadoan v. Liberty Mut. Fire Ins. Co., 894 P.2d 1140 (Okla.

1994), overruled on other grounds by Hamilton v. Northfield Ins. Co., 473 P.3d 22 (Okla. 2020));

Zawierucha v. Phila. Contributionship Ins. Co., 740 A.2d 738 (Pa. Super. 1999)). Those courts

found that the key issue was not whether the property at issue was currently used for business, but

whether it had ever been used for business purposes.

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The Defendants also point to a recent case by the Intermediate Court of Appeals of West

Virginia, which held that the phrase “used in whole or in part for business purposes” in an

insurance policy exclusion is unambiguous and should be given its plain meaning. (Id.) (quoting

Scafella v. Eire Ins. Co., 894 S.E.2d 556 (W. Va. App. 2023)). Finally, the Defendants argue that

there is a genuine issue of material fact regarding when the Plaintiffs ceased operation of their

businesses and whether the tractor was used for these businesses. Thus, they argue that the

conflicting statements and evidence can only be resolved by a jury and not on summary judgment.

In their reply, the Plaintiffs clarify that the business discussed in Mrs. Medley’s initial

email is the chicken business, not the horse boarding business. They state there is no factual

dispute about the tractor’s use in the chicken business, as Mr. Medley’s deposition provides that

the tractor is not needed for it. The Plaintiffs further assert that Mr. Gaunt’s claim notes do not

indicate that he discussed the meaning of “business” as used in the State Farm Policy with Mr.

Berthold. They contend Mr. Gaunt’s omission was improper since West Virginia regulations

require insurers denying a claim to specify the policy language relied upon. The Plaintiffs also

argue that the Honeysuckle Farm Facebook page, business license, and checking account do not

establish how the tractor was used at the time of the storm. Finally, the Plaintiffs point out that

the State Farm Policy does not contain the phrase “used at any time,” unlike the policies cited by

the Defendants to support the relevance of the tractor’s prior business use.

The Court finds that the phrase “property used or intended for use in a business” in the

State Farm Policy applies only to the property’s use at the time of the qualifying peril and its

intended future use. While the Defendants cite Shadoan and Zawierucha to argue that the State

Farm Policy encompasses past use, this Court disagrees. In those cases, the insurance policies

limited coverage to property “used at any time or in any manner for any business.” Shadoan, 894

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P.2d at 1142; Zawierucha, 740 A.2d at 739 (emphasis added). However, the State Farm Policy

does not contain such an expansive phrase. It does not limit recovery for damages to property

used at any time for any business, it only limits recovery for damages to property “used or intended

for use in a business.” Additionally, Scafella addresses the definition of “structure” in the policy

at issue there, not the scope of the analogous phrase “used in whole or in part for business

purposes,” which would be comparable to the State Farm Policy. 894 S.E.2d at 559.

In Pepper v. Allstate Ins. Co., the court found that “the average person could interpret the

phrase [property used or intended for use in a business] as only referring to items currently used

for business purposes.” 20 A.D.3d 633, 636 (N.Y. App. Div. 2005) (the plaintiffs’ property,

which has been previously used in a landscaping business, did not fall within a policy exclusion

nearly identical to the one in the State Farm Policy). Had State Farm intended to include property

that had previous or past business use, it could have used more expansive language like that in

Shadoan and Zawierucha, particularly where it did add language for “intended use” which would

affect future business use. Because insurance policies must be strictly construed against the

insurer, the Court finds that it would be inappropriate to deny the Plaintiffs recovery based on the

tractor’s prior use in their horse business, assuming there is evidence to prove the horse business

had ceased operation prior to the windstorm.

The Court also finds a factual dispute exists regarding whether the Medleys used their

tractor for a business purpose, as defined in the State Farm Policy. A jury drawing all reasonable

inferences from the evidence in favor of the Defendants could determine that the Medleys were

using the tractor for their horse business at the time of the windstorm that destroyed the barn,

limiting the tractor’s damages to $1,500. This factual dispute precludes summary judgment.

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When an insurance company invokes a policy exclusion to avoid liability, it must prove

that the exclusion applies to the facts of the case. Murray v. State Farm Fire & Cas. Co., 509

S.E.2d 1,8 (W. Va. 1998) (citing Syl. Pt. 7, Nat’l Mut. Ins. Co. v. McMahon & Sons, Inc., 356

S.E.2d 488 (W. Va. 1987)). The Defendants point to several relevant facts, including: (1) Mrs.

Medley’s email about their lack of income from their business and hay storage concerns; (2) Mr.

Berthold’s statement that the tractor was used for business, based on information from the

Medleys; (3) testimony from Danny Ruth about Mr. Gaunt’s conversation with Mr. Berthold; (4)

conflicting statements, as compared before and after litigation commenced, from the Plaintiffs

about when the horse business ended; (5) Mr. Medley’s testimony that hay cut by the tractor and

purchased hay were fed to personal and boarded horses without certainty of its source; (6) Mrs.

Medley’s testimony that a friend pays $350 per month to keep her horse outside at Honeysuckle

Farm and for hay (7) conflicting statements about the purchase date of two boarded horses from a

nurse; (8) and evidence about Honeysuckle Farm’s Facebook page, business license, checking

account, signage, and advertisements for new business in community groups.

It is undisputed that the tractor was used to mow hay, that the Medleys at one point received

compensation for boarding horses, that they purchased hay to support the boarded horses, and that

Mr. Medley cannot determine what hay (purchased or tractor-mowed) went to which horses

(boarded or personal). What is in dispute is when the operation of the horse business ceased.

Construing all inferences in favor of the Defendants, the business may have continued as late as

June 2023—after the windstorm—when the two boarded horses may have been purchased from

the nurse. This factual dispute is material because whether the horse business and the tractor’s

use in it ceased before or after the windstorm will be determinative of the outcome of the case.

Accordingly, the Plaintiffs’ motion must be denied.

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CONCLUSION

WHEREFORE, after thorough review and careful consideration, and for the reasons stated

herein, the Court ORDERS that the Plaintiffs’ Motion for Partial Summary Judgment on

Insurance Coverage Issue (Document 43) be DENIED. The Court DIRECTS the Clerk to send

a copy of this Order to counsel of record and to any unrepresented party.

ENTER: November 14, 2024

IRENE C. □ G

UNITED STATES DISTRICT JUDGE

SOUTHERN DISTRICT OF WEST VIRGINIA

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