Lafrance v. State Farm Fire and Casualty Co.

STATE OF MAINE SUPERIOR COURT

YORK, ss. CIVIL ACTION

DOCKET NO. CV-14-39

RICKY LAFRANCE, )

)

Plaintiff, )

)

V. ) ORDER

STATE FARM FIRE AND CASUALTY )

COMPANY, )

)

Defendant. )

Pending before the Court is Defendant State Farm Fire and Casualty Company's Motion

for Judgment Notwithstanding the Verdict.

I. Background

This case arises from Plaintiff Ricky LaFrance's claim that Defendant State Farm

breached the parties' homeowner's insurance contract by denying his claim to recover damages

that resulted from a pipe bursting in his home.

Trial in this matter was held on May 21, 23, and 24, 2018. The Court denied Defendant's

motion for judgment as a matter of law at the close of all evidence. The jury returned a verdict

in favor of Plaintiff in the amount of$150,000 in direct damages and $50,000 in consequential

damages.

Defendant now moves the Court to enter judgment notwithstanding the verdict on the

question of consequential damages and to reduce the damages award to $150,000.

II. Discussion

A. Standard & State Farm's Argument

While State Farm's motion is styled as a motion for judgment notwithstanding the

verdict, it brings the motion under Maine Rule of Civil Procedure SO(b), which governs post-trial

1

motions for judgment as a matter oflaw. Defendant's motion is procedurally proper because

State Farm moved for judgment as a matter of law at the close of all evidence. See M.R. Civ. P.

50(b).

"The party seeking a judgment after an adverse verdict has the burden of showing that the

jury verdict was "'clearly and manifestly wrong."' Harvey, 3 Maine Civil Practice§ 50:4, at

124 (3d ed. 2011) (quoting Youngv. Libby, 1999 ME 139, 17, 737 A.2d 1071. Judgment as a

matter of law is appropriate "if the court determines that, viewing the evidence and all reasonable

inferences therefrom in the light most favorable to the party opposing the motion, a jury could

not reasonably find for that party on an issue that under the substantive law is an essential

element of the claim." M.R. Civ. P. 50(a).

State Farm argues it is entitled to judgment as a matter of law on the question of

consequential damages because (i) consequential damages are not covered by the parties'

insurance contract, (ii) Lafrance failed to prove the requisite element of bad faith to be entitled

to consequential damages, and (iii) Lafrance failed to present sufficient evidence at trial to

wanant an instruction on consequential damages.

B. Recoverability of Consequential Damages for Breach of Contract

State Farm first contends the language of the insurance policy should govern the

recoverability of consequential damages here. Lafrance does not dispute that consequential

damages were not covered under the policy, but argues that consequential damages for breach of

the policy are recoverable in addition to the moneys owed under the policy.

State Farm argues Maine Farm Venison, Inc. v. Peerless Ins. Co., 2004 ME 80, 853 A.2d

767 is controlling, where the Law Court stated:

Because we find that Maine Farms failed to establish any cause of action other than

breach of contract, and because Peerless is not required to pay pursuant to the insurance

2

contract until Maine Farms demonstrated that it was entitled to recover for a loss covered

by the insurance contract, Dolliver v. Granite State Fire Ins. Co., 111 Me. 275, 282-83,

89 A. 8, 12 (1913), damages must be limited to the contract damages set out in the policy

of recovery of$ 250 for each of the 154 deer that the jury found to have been killed by

lightning, or$ 38,500. Accordingly, we vacate the damages award and remand for

judgment in favor of Maine Farms in the amount of$ 38,500.

Id. 120. Thus, according to State Farm, the only recoverable damages in a cause of action for

breach of an insurance contract is the amount owed under the policy.

Maine Farms does not stand for the proposition for which State Farm advocates. There

was no indication that the plaintiff requested consequential damages, or that any amount of the

jury's award represented damages resulting as a consequence of the breach. Rather, the Maine

Farms court simply ordered the reduction of damages to the amount owed under the parties'

insurance contract when the plaintiff did not seek to recover consequential damages.

The weight of authority contravenes State Farms's assertion that consequential damages

are not recoverable in a breach of contract action. "The principle that in case of breach of

contract such consequential damages may be recovered as may fairly be presumed to have been

in the contemplation of the parties at the time of making the contract, has been affirmed in this

State." Keeling-Easter Co. v. R.B. Dunning & Co., 113 Me. 34, 40, 92 A. 929 (Me. 1915). 1

Consequential damages are recoverable in an action for breach of contract to the extent they

1 The rule derives from the seminal English case Hadley v. Baxendale, 9 Exch. 341, 156 Eng. Rep. 145 (1854). See

id. The rule has been adopted by the ALI in the Restatement (Second) of Contracts:

(I) Damages are not recoverable for loss that the party in breach did not have reason to foresee as a

probable result of the breach when the contract was made.

(2) Loss may be foreseeable as a probable result of a breach because it follows from the breach

(a) in the ordinary course of events, or

(b) as a result of special circumstances, beyond the ordinary course of events, that the party in

breach had reason to know.

(3) A court may limit damages for foreseeable loss by excluding recovery for loss of profits, by allowing

recovery only for loss incurred in reliance, or otherwise ifit concludes that in the circumstances justice so

requires in order to avoid disproportionate compensation.

Restatement (Second) of Contracts§ 351 (1981).

3

were foreseeable to the parties at the time of contracting and were not avoidable. See

Marchesseault v. Jackson, 611 A.2d 95, 98 (Me. 1992) ("[s]ubject to the limitations of

avoidability and unforeseeability, an injured party is entitled to recover for all loss actually

suffered as a result of the breach.") (citing Restatement (Second) of Contracts§ 347 comment c

(1981)).

No Maine cases have addressed whether consequential damages from the breach of an

insurance contract may exceed the limits of the policy. Lafrance notes that authorities from

other jurisdictions have held that consequential damages for breach of an insurance contract, and

apart from the amounts owed under the policy for which the non-payment was deemed to

constitute a breach. 2 Moreover, Defendant advances no principled reason why a breach of an

insurance contract should be treated differently form the breach of any other type of contract.

In short, nothing in Maine law, the law of other jurisdictions, or the Restatement limits

recovery of consequential damages for breach of an insurance contract to those covered by the

policy.

C. Bad Faith

State Farm argues "bad faith" is an essential element to the recovery of compensatory

damages for a breach of an insurance contract under Marquis v. Farm Family Mutual Insurance

2 See Swanny ofHugo, Inc. v. Integrity Mui. Ins. Co. 2013 Minn. Dist. LEXIS 109, * 15-*23 (denying insurer's

motion for sununary judgment with respect to plaintiff-restaurant owner's claim for consequential damages from

lost profits and reduced value of business and holding that "[p ]laintiffs will be allowed to seek those damages at trial

provided they can prove to the jury that those damages resulted from the breach and were foreseeable at the time the

policy was entered into.") (citing Hadley v. Baxendale); Ricci v. Proprietors Ins. Co., 1981 Wisc. App. LEXIS 4118,

at *2 ("[c]ontracts for insurance are to be judged by the same legal principles as any other contract. A cause of

action for breach of contract arises when an insurer refuses to make payment under an insurance policy.

Consequential damages may be recovered if such damages were proximately caused by or flowed naturally from the

breach.") (citing Hadley v. Baxendale); see also Rizka v. State Farm Fire & Cas. Co., 2014 U.S. Dist. LEXIS 92210,

*26 (E.D. Ml 2014) ("[a] plaintiff in a breach of contract action may recover those damages that arise naturally from

the breach or are foreseeable and can reasonably be said to have been in contemplation of the parties at the time the

contract was made.") (citations and quotation marks omitted) (emphasis in original).

4

Company, 628 A.2d 644 (Me. 1993). There, the Law Court held that there was sufficient

evidence to support the jury's finding that the defendant-insurer breached its implied duty of

good faith and fair dealing through its conduct that eventually resulted in its denial of the

insured's claim. Id at 648. In a separate part of the opinion, the Court held that there was

sufficient evidence to support the jury's award of consequential damages. Id at 650-51.

Contrary to State Farm's contention, the Marquis court did not hold that a showing of bad

faith was a prerequisite to the recovery of consequential damages. Rather, it stands for the

proposition that when a plaintiff proves that an insurer breached its insurance contract-whether

the implied duty of good faith or otherwise-consequential damages are recoverable according

to the general rule: "Subject to the limitations of avoidability and unforeseeability, an injured

party is entitled to recover for all loss actually suffered as a result of the breach." Marchesseault,

611 A.2d at 98.

Lafrance cites an authority from another jurisdiction that addressed the same question

and concluded bad faith need not be proven for consequential damages to be recoverable under

an insurance contract. See Ricci v. Proprietors Ins. Co., 1981 Wisc. App. LEXIS 4118, at *4

("[a] showing of bad faith is not required in Wisconsin to recover consequential damages for the

breach of an insurance contract.") Absent any controlling authority to the contrary, the Court is

persuaded that "bad faith" is not a prerequisite to the recovery of consequential damages for

breach of an insurance contract.

D. Sufficiency of Evidence

State Farm's final argument is that there was not sufficient evidence to warrant a jury

instruction on the question of consequential damages.

1. Lost Earnings

5

"To recover for lost earnings ... , the plaintiff must establish that the plaintiff would

have earned the wages ... but for the injury." Hmton & McGehee, Maine Civil Remedies§ 4­

(c)(3) (citing Decesere v. Thayer, 468 A.2d 597, 599 (Me. 1983); Lindsey v. Mitchell, 544 A.2d

1298, 1301-02 (Me. 1988)).

LaFrance testified that after State Farm denied his claim, he could not afford to hire

contractors to do the necessary work to get his home into a habitable condition. Plaintiff saw his

income drop to approximately $5,000 in 2013, when he performed the repairs, from an average

of approximately $48,000 per year over the previous three years. A number of other local

contractors testified that they would have subcontracted work to Mr. Lafrance had he been

working during that time.

This testimony, to which Defendant did not object, establishes a basis upon which the

jury could have found that but for State Farm's failure to pay Mr. LaFrance's claim, he would

have been able to work full-time and earn an additional $43,000 in 2013. Furthermore, the jmy

could have found that the necessity of foregoing work to get one's home in a habitable condition

is a reasonably foreseeable consequence of breaching the policy.

2. Additional Consequential Damages

Mr. Lafrance testified that State Farm denied his claim in late January, 2013, the same

time he had been planning to move into the house. State Farm informed the remediation team

doing the "dry out" work in the home of the denial, causing the team to cease operations and

leaving Lafrance to do the work himself.

His home being left uninhabitable, Lafrance entered into two short-term leases over the

next six months costing $11,300 in total. After those six months, Lafrance purchased a camper

to live in on his property ($2,500), and paid to have electricity hooked up to the camper ($2,450)

6

and a temporary bathroom constructed in the home ($4,768.86). Over the two years following

the denial of his claim, LaFrance estimates he spent an additional $23,000 in additional expenses

for food preparation and laundry.

While some or all of these living expenses may have been covered under the policy, the

jmy could just as easily have found they were a foreseeable consequence of the denial of the

claim.

3. Validity of Award

"An award of damages will be disturbed only when it is plain that there is no rational

basis upon which the amount of the award may be supported. . . . A rational basis for a finding

exists if there is any competent evidence in the record to support it." Smith v. Kennard, 472 A.2d

434,435 (Me. 1984) (citing Harmon v. Emerson, 425 A.2d 978 (Me. 1981); Jamshidi v. Bowden,

366 A.2d 522 (Me. 1976)) (emphasis in original). "The assessment of damages is the sole

province of the jury, and the amount fixed must not be disturbed by the trial court unless it is

apparent that the jury acted under some bias, prejudice or improper influence, or made some

mistake of law or fact." C.N Brown Co. v. Gillen, 569 A.2d 1206, 1209 (Me. 1990) (citing

Paulette v. Herbert C. Haynes, Inc., 347 A.2d 596,599 (Me. 1975)).

The competent evidence of record forms a sufficient evidentiary basis upon which the

jury could rationally have found Lafrance incurred at least $50,000 in damages as a result of

State Farm's denial of his claim, and that those costs were reasonably foreseeable to the parties

at the time of contracting. There is no basis upon which the Court could conclude the jury acted

out of some improper motive or misapplication of fact or law in calculating this amount.

III. Conclusion

7

State Farm has not sustained its burden of proving how the jury's verdict with respect to

consequential damages "was clearly and manifestly wrong" as a matter of law based on the

evidence presented at trial.

In light of the foregoing, the shall make the following entry on the docket by reference

under Maine Rule of Civil Procedure 79(a):

Defendant's motion for judgment as a matter of law on the question of consequential

damages is DENIED.

SO ORDERED.

,,,,.

Dated: October (':>, 2018

John~

Justice, Superior Court

ENTERED ON THE DOCKET ON: / tf/ ;5 llf

8

STATE OF MAINE SUPERIOR COURT

YORK, SS. CIVIL ACTION

DOCKET NO. CV-14-39

RICKY LAFRANCE,

Plaintiff,

V. ORI>ER

STATE FARM FIRE AND

CASUAL TY COMP ANY,

Defendant.

Plaintiff Ricky Lafrance brought this action against Defendant State Farm Fire

and Casualty Company alleging breach of contract (Count n and violation of the Unfair

Claims Settlement Practices Act ("UCSPA"), 24-A M.R.S. § 2436-A (Count ID for a loss

caused by a frozen pipe that burst in his home. State Farm denied coverage for failure to

maintain adequate heat in the home. State Farm moved for summary judgment on the

UCSP A count, which the court granted. Plaintiff has moved the court to reconsider the

order granting summary judgment.

"Motions for reconsideration of an order shall not be filed unless required to bring

to the court's attention an error, omission or new material that could not previously have

been presented." M.R. Civ. P. 7(b)(5). The rule "is intended to deter disappointed

litigants from 5eeking 'to reargue points that were or could have been presented to the

court on the underlying motion."' Shaw v. Shaw, 2003 ME 153, ~ 8, 839 A.2d 714. The

court has discretion to deny such a motion without a hearing. M.R. Civ. P. 7(b )(5).

In moving for reconsideration, LaFrance largely makes the same arguments that

were in his opposition to summary judgment. Lafrance expounds further on his theory

that once he co:Tected his admitted initial "lie" that he did not add oil to the tank used to

heat the home, State Farm had no legitimate basis to deny coverage, and thus the denial

created liability under the UCSP A. The court carefully considered and ultimately rejected

Lafrance's argument relying on several First Circuit cases that have held that "any

legitimate doubt" about coverage creates a safe harbor under the UCSP A. To the extent

Lafrance disag:~ees with this court's decision, his remedy is an appeal to the Law Court.

The motion to reconsider is denied.

The entry shall be:

Plaintiff's motion for reconsideration is DENIED.

SO ORDERED.

DATE: October 3 2015

John O'Neil, Jr.

Justice, Superior Court

2

ATTORNEYS FOR PLAINTIFF

DONALD FURMAN

ER.IC I COLLTI~S

FURMAN GREGORY LLC

215 MAIN ST SUITE 101

BIDDEFORD ME 04005

VISITING ATI~ORNEY FOR PLAINITIFF:

JUSTIN LEVINE

1731 BEACOJ\ ST-315

BROOKLINE JvlA 02445

ATTORNEYS FOR DEFENDANT:

KENNETH PIERCE

MATTHEW K LIBBY

MONAGHANLEAHYLLP

POBOX7046

PORTLAND :NlE 04112-7046

STATE OF MAINE SUPERIOR COURT

YORK, SS. CIVIL ACTION

DOCKET NO. CV-14-39

RICKY LAFRANCE,

Plaintiff,

V. ORDER

STATE FARM FIRE AND

CASUALTY COMP ANY,

Defendant.

Plaintiff Ricky LaFrance brings this action against Defendant State Farm Fire and

Casualty Company alleging counts for breach of contract and violation of the Unfair

Claims Settlement Practices Act ("UCSPA"), 24-A M.R.S. § 2436-A. LaFrance sought

coverage for water damage caused when a pipe burst during the winter and flooded the

home. State Farm denied coverage. State Farm has moved for summary judgment on the

UCSP A claim.

"Summary judgment is appropriate if the record reflects that there is no genuine

issue of material fact and the movant is entitled to judgment as a matter oflaw." Dussault

v. RRE Coach Lantern Holdings, UC, 2014 ME 8, ,i 12, 86 A.3d 52 (citation omitted).

"A material fact is one that can affect the outcome." Mcllroy v. Gibson's Apple Orchard,

2012 ME 59, ,i 7, 43 A.3d 948 (citation omitted).

l

LaFrance alleges that State Farm violated Section 2436-A(l)(E) of UCSPA,

which imposes civil liability on insurers that "[w]ithout just cause, failing to effectuate

prompt, fair and equitable settlement of claims submitted in which liability has become

reasonably clear." "Without just cause" is defined as "refus[ing] to settle claims without a

reasonable basis to contest liability, the amount of any damages or the extent of any

injuries claimed." 24-A M.R.S. § 2436-A(2). "[A]ny legitimate doubt is a safe harbor

under UCSPA." Rankin v. Allstate Ins. Co., 336 F.3d 8, 16 (1st Cir. 2003).

Andrea Smith, an employee of State Farm, denied LaFrance's claim because he

failed to use "reasonable means to maintain adequate heat on the property"-an exclusion

under the policy. (Def.'s S.M.F. ,r,r 2, 25.) Smith based her decision on the following (1)

thermostats in the home were set to the low 40' s with one completely off, (2) the furnace

and oil tank were in need of repair and service, (3) plaster had been removed from some

of the walls in the home, and (4) LaFrance represented that he had not purchased oil and

other circumstantial evidence 1 indicated little or no oil had been consumed from

November to January, when the loss occurred. (Def. 's S.M.F. ,r 26.)

In response, LaFrance emphasizes a number of measures he took to maintain

adequate heat and highlights facts that Smith "ignored and failed to investigate." (Pl.'s

Opp. Summ. J. 6-10.) The question here is not whether State Farm in fact properly denied

coverage; that issue will be resolved with LaFrance' s breach of contract claim. See Sch.

'

Union No. 37v. UnitedNat'llns. Co., 617 F.3d 554 (1st Cir. 2010) (affirming dismissal

of UCSPA claim, but vacating and remanding dismissal of claim for coverage). Rather,

1

As of November, the oil tank had a little more than half a tank of oil, and at the time of the

loss in January, there was a little less than half a tank. Smith asked LaFrance during a recorded

interview whether he had "purchased" any oil smce November, to which he replied "nope." (Pl. 's

Opp. SUlllill. J. 3.) After Smith denied coverage, Lafrance revealed that he had m fact added oil

to the tank, 1!pparently from another property.

2

the court must consider whether, based on the facts known at the time of the decision to

deny coverage, State Farm acted "without just cause ... to contest liability."

Lafrance concedes that he initially told Smith he had not purchased oil and at that

time, he failed to inform her that he added any oil to the tank. (PL' s Opp. Summ. J. 3.)

Lafrance attempts to create a factual dispute regarding the oil tank and other measures to

evade summary judgment, but that fact is not a "material" one. Even accepting

Lafrance' s version and assuming he did put oil in the tank, this does not mean State

Farm lacked "any legitimate or reasonable basis " to deny coverage. State Farm had a

legitimate and reasonable basis to deny coverage based on the undisputed facts regarding

the conditions in the home and Lafrance's initial representations. This created a

"legitimate doubt" as to coverage, which protects State Farm under the UCSPA's safe

harbor provision. Summary judgment as to the UCSP A is therefore appropriate.

The entry shall be:

Defendant's motion for summary judgment as to Count II is GRANTED.

SO ORDERED.

DATE: ~ __, 2015

u~r John O'Neil, Jr.

Justice, Superior Court

3

CV-14-39

ATTORNEYS FOR PLAINTIFF:

DONALD FURMAN ESQ

ERIC I COLLINS ESQ

FURMAN GREGORY DEPTULA

215 MAIN STREET

BIDDEFORD ME 04005

JUSTIN M LEVINE ESQ - VISITING ATTORNEY

LEVINE LAW GROUP LLC

1731 BEACON STREET #315

BROOKLINE MA 02445

ATTORNEYS FOR DEFENDANT:

KENNETH D PIERCE ESQ

MATTHEW K LIBBY ESQ

MONAGHANLEAHYLLP

POBOX7046

PORTLAND ME 04112