Chaney v. Allstate Vehicle and Property Insurance Company

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ALABAMA

NORTHWESTERN DIVISION

JONATHAN CHANEY, )

)

Plaintiff, )

)

v. ) Case No. 3:20-cv-00675-NAD

)

ALLSTATE VEHICLE AND )

PROPERTY INSURANCE )

COMPANY, )

)

Defendant. )

MEMORANDUM OPINION AND ORDER GRANTING

DEFENDANT’S MOTION FOR PARTIAL SUMMARY JUDGMENT

For the reasons stated below and on the record in the December 15, 2021

motion hearing, Defendant Allstate Vehicle and Property Insurance Company’s

motion for partial summary judgment (Doc. 14) is GRANTED, and Plaintiff

Jonathan Chaney’s bad faith claim is DISMISSED.

BACKGROUND

Plaintiff Chaney filed a complaint against Defendant Allstate in state court,

alleging two claims for relief: a claim for breach of contract, and a claim for bad

faith refusal to pay an insurance claim. Doc. 1-1. Allstate removed the case to this

court (Doc. 1), and later moved for partial summary judgment on Chaney’s bad faith

claim (Doc. 14).

A. Factual background

Plaintiff Chaney owns residential property located in Rogersville, Alabama.

Doc. 1 at 3; Doc. 1-1 at 4. On or about April 10, 2017, Chaney sustained water

damage to his property, caused by a leaking pipe inside the property. Doc. 15 at 1;

Doc. 18 at 1. Chaney sought insurance coverage for that water damage under a

“House & Home” insurance policy issued by Defendant Allstate. Doc. 15 at 1–2;

Doc. 18 at 1–2. After Chaney timely filed his insurance claim, Allstate assigned

adjusters to that claim. Doc. 15 at 1–2; Doc. 18 at 2.

Allstate designated Greg Mims as the structural adjuster responsible for

Chaney’s insurance claim. Doc. 15 at 2; Doc. 18 at 2. On April 12, 2017 (two

days after Chaney had reported the damage to his property), Mims inspected

Chaney’s home, and prepared an estimate of the damage. Doc. 15 at 2; Doc. 18 at

2. Mims’ notes from the inspection stated that “[Mims] went over the estimate with

[Chaney] and he agreed with the scope. [Chaney] is to provide the estimate to his

contractor of choice and have him get back to [Mims] with any questions or

concerns.” Doc. 16-3 at 2.

On April 15, 2017, Mims updated his estimate to $16,076.75; that estimate

covered additional damage that Chaney had reported. Doc. 15 at 2; Doc. 18 at 2.

On May 23, 2017, Chaney provided to Allstate a different estimate of the

property damage. Doc. 15 at 3; Doc. 18 at 2; Doc. 16-5 at 13. That estimate totaled

$24,702.53. Doc. 16-6 at 5.

On May 24, 2017 (the next day), Steve Dunn—a claims consultant for

Allstate—emailed Chaney to ask about the difference between Allstate’s April 15

estimate and Chaney’s May 23 estimate. Doc. 15 at 3; Doc. 16-7 at 5–6. Dunn

wrote that “[t]here is clearly something missing from the contractor’s bid to explain

the $7000 pricing difference.” Doc. 15 at 3; Doc. 16-7 at 6.

On May 26, 2017, Chaney replied to Dunn’s email, stating that he “was not

going to be able to find someone to make repairs at 17k,” and that he “need[ed] this

done asap.” Doc. 15 at 4; Doc. 18 at 2; Doc. 16-7 at 5.

That same day, Dunn replied, stating that Allstate was not telling Chaney that

he could not use the contractor who had provided the estimate, but that Allstate

needed the contractor to show “how he came up with the $7000 difference,” given

that Allstate and the contractor both “[were] using the same pricing software.” Doc.

16-7 at 5.

On June 5, 2017, Chaney emailed Dunn again, stating that he had another

estimate, and that he would provide that estimate to Dunn when it was complete.

Doc. 16-7 at 4–5. In that email, Chaney asked, “What do I need to do to get some

money, so I can get started.” Doc. 16-7 at 5.

On June 6, 2017 (the next day), Dunn replied to Chaney’s email: “You can

send the new estimate whenever you receive it. I have issued payment based on

[Greg Sims’] estimate.” Doc. 16-7 at 4. And, on the same day, Allstate issued to

Chaney a check for $16,076.75—i.e., the amount of Sims’ April 15 estimate. Doc.

15 at 4; Doc. 18 at 3; Doc. 16-7 at 4. In addition to that amount (for repairs), Allstate

also paid to Chaney $6,591 for living expenses. Doc. 16-5 at 36.

Chaney never did provide another estimate to Allstate, but he did later submit

receipts to Allstate for work totaling $33,477.90. Doc. 15 at 5; Doc.18 at 3; Doc.

16-5 at 36.

In his verified interrogatory responses, Chaney averred that he had spent more

than $50,000 repairing the water damage. Doc. 15 at 5; Doc. 18 at 3; Doc. 16-8 at

2.1

In his deposition, Chaney testified that he had spent approximately $60,000

on the repairs. Doc. 15 at 5; Doc. 18 at 3; Doc. 16-5 at 19–20. Consistent with his

interrogatory responses, Chaney also testified that he had taken out loans to cover

the costs of the repairs, and that he had completed those repairs himself (with help

from his father). Doc. 18 at 3; Doc. 16-5 at 19.

1 Chaney’s full interrogatory response reads as follows: “Cost of repair totals over

$50,000.00. I have previously given receipts to defendant for as many materials as

I could find. My father helped me with the labor, and I would give him gas money

and buy food for him daily. I took out a 401k loan for the amount of $34,000.00 on

February 20, 2018. This money was used to buy supplies and pay bills since I

missed many days from work to be able to work on my house. I also took out a

$10,000.00 loan from TVA Community Credit Union on May 25, 2018, to pay for a

portion of the repairs at my home.” Doc. 16-8 at 2.

B. Legal background

1. Removal (diversity jurisdiction), and applicable substantive

law

Defendant Allstate removed this case from the Circuit Court for Lauderdale

County, Alabama, based on diversity jurisdiction. Doc. 1; see 28 U.S.C. § 1332.

With respect to the necessary amount in controversy, a defendant’s “allegation

should be accepted when not contested by the plaintiff or questioned by the court.”

Dart Cherokee Basin Op. Co. v. Owens, 135 S. Ct. 547, 553 (2014). In its notice

of removal, Defendant Allstate alleged that Plaintiff Chaney has “asserted

$65,000.00 to $70,000.00 in specifically itemized damages plus pain and suffering,

mental anguish, emotional distress, consequential and incidental damages, punitive,

exemplary and aggravated damages.” Doc. 1 at 5–7. Here, the amount in

controversy requirement is satisfied because Chaney’s complaint seeks the contract

damages discussed above, and punitive damages for Allstate’s alleged wrongful

conduct and “bad faith,”2 among other things.

When a federal district court has diversity jurisdiction over state law claims,

the court must apply the substantive law of the forum state. McMahan v. Toto, 256

2 In determining the amount in controversy, the court can consider the value of a bad

faith claim for punitive damages and applicable state law standards. See Bell v.

Preferred Life Assur. Soc. of Montgomery, Ala., 320 U.S. 238, 240–43 (1943);

Broughton v. Florida Int’l Underwriters, Inc., 139 F.3d 861, 863–64 (11th Cir.

1998) (statutory cap on damages).

F.3d 1120, 1132 (11th Cir. 2001) (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78

(1938)). Consequently, this court applies the substantive law of Alabama.

2. Alabama law on bad faith refusal to pay an insurance claim

Alabama recognizes two forms of bad faith refusal to pay an insurance claim:

“normal” bad faith, and “abnormal” bad faith. White v. State Farm Fire & Cas.,

Co., 953 So. 2d 340, 347–48 (Ala. 2006).3

a. A “normal” bad faith claim

On a “normal” bad faith claim, a plaintiff must show the following: “(1) the

existence of an insurance contract; (2) an intentional refusal to pay the claim; and

(3) the absence of any lawful basis for the refusal and the insurer’s knowledge of

that fact or the insurer’s intentional failure to determine whether there is any lawful

basis for its refusal.” Acceptance Ins. Co. v. Brown, 832 So. 2d 1, 16 (Ala. 2001).

In this regard, a plaintiff alleging normal bad faith “bears a heavy burden.” Id.;

LeFevre v. Westberry, 590 So. 2d 154, 159 (Ala. 1991) (citation omitted).

Indeed, to avoid summary judgment on a normal bad faith claim, the

3 “Alabama law recognizes two forms of bad faith: ‘normal’ and ‘abnormal.’

These are not two torts but a single tort ‘with different options for proof.’” Coleman

v. Unum Group Corp., 207 F. Supp. 3d 1281, 1284 (S.D. Ala. 2016) (quoting State

Farm Fire & Cas. Co. v. Brechbill, 144 So. 3d 248, 257–58 (Ala. 2013)); see Mutual

Serv. Cas. Ins. Co. v. Henderson, 368 F.3d 1309, 1314 (11th Cir. 2004) (“Under

Alabama law, there are two methods by which a party can establish a bad faith

refusal to pay an insurance claim. An insurance company may be liable for either

‘normal’ bad faith or ‘abnormal’ bad faith.” (citations omitted)).

plaintiff’s “underlying contract claim must be so strong that the plaintiff would be

entitled to a preverdict judgment as a matter of law.” Jones v. Alfa Mut. Ins. Co., 1

So. 3d 23, 32 (Ala. 2008) (quoting Shelter Mut. Ins. Co. v. Barton, 822 So. 2d 1149,

1155 (Ala. 2001)).

b. An “abnormal” bad faith claim

Among other things, “abnormal” bad faith can include a failure to investigate

an insurance claim. See Singleton v. State Farm Fire & Cas. Co., 928 So. 2d 280,

283 (Ala. 2005). On an “abnormal” bad faith claim that is based on an alleged

failure to investigate, a plaintiff must show the following: “(1) that the insurer

failed to properly investigate the claim or subject the results of the investigation to a

cognitive review and (2) that the insurer breached the contract for insurance

coverage when it refused to pay the insured’s claim.” Simmons v. Congress Life

Ins. Co., 791 So. 2d 371, 379 (Ala. 2000) (quoting State Farm Fire & Casualty Co.

v. Slade, 747 So. 2d 293, 318 (Ala. 1999)).

On an abnormal bad faith claim premised on an alleged failure to investigate,

the “material question” is whether the insurer “recklessly or intentionally failed to

properly investigate” the insured’s “claim or to subject the results of an investigation

to a cognitive evaluation.” Simmons, 791 So. 2d at 381 (citations omitted).

In addition, an abnormal bad faith claim requires “sufficient evidence of

dishonest purpose or breach of known duty . . . through some motive of self-interest

or ill will.” Singleton, 928 So. 2d at 283 (quoting Slade, 747 So. 2d at 303–04).

C. Procedural background

On March 5, 2020, Plaintiff Chaney initiated this action in state court (Doc.

1-1), and on May 13, 2020, Defendant Allstate filed its notice of removal (Doc. 1).

After Allstate removed this case, the parties consented to magistrate judge

jurisdiction pursuant to 28 U.S.C. § 636(c). Doc. 9. And, on June 14, 2021 (after

the close of discovery), Allstate filed this partial summary judgment motion on

Chaney’s bad faith claim. Doc. 14.

This case was reassigned to the undersigned on August 31, 2021. Doc. 21.

After a status conference, the parties submitted supplemental briefing on Allstate’s

partial summary judgment motion. Doc. 22 (order); Doc. 23 (order). The parties

now have fully briefed this motion (Doc. 15; Doc. 18; Doc. 20), including that round

of supplemental briefing (Doc. 24; Doc. 25). And the court held a motion hearing

on December 15, 2021 (see Minute Entry, Entered: 12/15/2021).

In his complaint (Count 2), Chaney alleged Allstate’s “bad faith failure to pay

the claim and/or the bad faith failure of [Allstate] to properly investigate, adjust and

pay the claim.” Doc. 1-1 at 6. In his supplemental brief, Chaney confirmed that

he is asserting that Allstate “committed both ‘normal’ bad faith and ‘abnormal’ bad

faith.” Doc. 24 at 1.

LEGAL STANDARD

Summary judgment is appropriate when the movant establishes “that there is

no genuine dispute as to any material fact,” and that the movant “is entitled to

judgment as a matter of law.” Fed. R. Civ. P. 56(a); see Celotex Corp. v. Catrett,

477 U.S. 317, 323 (1986). A material fact is one that might affect the outcome of

the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). And a

dispute about a material fact is “genuine,” if “the evidence is such that a reasonable

jury could return a verdict for the nonmoving party.” Id.

To avoid summary judgment, the nonmovant must go beyond the allegations

to offer specific facts creating a genuine dispute for trial. Celotex, 477 U.S. at 324–

25. The court’s job is not to “weigh the evidence and determine the truth of the

matter but to determine whether there is a genuine issue for trial.” Anderson, 477

U.S. at 248. The court must view all evidence and draw all reasonable inferences

in the light most favorable to the nonmovant. Centurion Air Cargo, Inc. v. UPS

Co., 420 F.3d 1146, 1149 (11th Cir. 2005).

Where there is no genuine dispute of material fact for trial, the movant is

entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a), (c).

DISCUSSION

There is no triable issue on Plaintiff Chaney’s normal bad faith claim, or his

abnormal bad faith claim.

I. There is no triable issue on Plaintiff Chaney’s normal bad faith claim.

On Plaintiff Chaney’s normal bad faith claim, there is no triable issue of fact.

As explained above, a normal bad faith claim requires that the plaintiff’s “underlying

contract claim must be so strong that the plaintiff would be entitled to a preverdict

judgment as a matter of law.” Jones, 1 So. 3d at 32. But Chaney has not filed a

summary judgment motion on his breach of contract claim, and the record would not

support judgment as a matter of law on that claim; rather, the breach of contract

claim will be for the jury. If anything, the record shows that the parties dispute the

cost of the repairs that Chaney has claimed under his insurance policy.

As a preliminary matter, Allstate did pay to Chaney more than $16,000 to

cover the cost of repairs, and more than $6,000 for living expenses. Doc. 15 at 4;

Doc. 18 at 3; Doc. 16-7 at 4; Doc. 16-5 at 36. In fact, the record demonstrates that

Allstate has not actually issued a refusal or denial of Chaney’s insurance claim, given

that he still is seeking additional payment to cover the cost of repairs.

Relying on Hand v. Allstate Insurance Co., No. 6:19-CV-00453-LSC, 2021

WL 2867034 (N.D. Ala. July 8, 2021), Chaney argues in his supplemental brief that

Allstate “constructively” has denied his insurance claim, even though “there is no

‘express’ (‘actual’) denial.” Doc. 24 at 2. But in Hand it was undisputed that

Allstate owed the insured a supplemental payment of approximately $25,000, and

that Allstate had delayed paying that undisputed amount for more than 2 years.

2021 WL 2867034, at *4. According to the district court, “Allstate hadn’t paid

nearly $25,000 in undisputed claims,” and the “two-year delay in payment likely

would have amounted to a constructive denial.” Id. (emphasis added) (citing

Congress Life Ins. Co. v. Barstow, 799 So. 2d 931, 938 (Ala. 2001)). The facts in

this case are distinguishable from those in Hand. Here, without any delay, Allstate

issued Chaney a check in the amount of $16,076.75. While Chaney maintains that

he is entitled to additional payment, the parties dispute the cost of the repairs. So,

unlike Hand, Allstate has not delayed payment of any undisputed amount, and there

is no triable issue on a theory of constructive denial.

Moreover, based on the record evidence, a jury could not reasonably find the

“absence of any reasonably legitimate or arguable reason” for Allstate’s refusal to

make an additional payment. See Singleton, 928 So. 2d at 283; Doc. 15 at 3, 11–

12; Doc. 16-7 at 4–6. When Chaney submitted his own estimate for the cost to

repair the water damage, Allstate asked for more information about the difference

between Chaney’s estimate ($24,702.53) and Allstate’s estimate ($16,076.75).

Allstate’s claim adjuster (Sims) had inspected Chaney’s property, and used software

to calculate Allstate’s estimate. Doc. 15 at 2; Doc. 16-4; Doc. 18 at 2. Chaney’s

estimate appeared to have been calculated using the same software, and the record

appears to show that Chaney’s estimate covered the same scope of work as Allstate’s

estimate. Doc. 15 at 3; Doc. 16-7 at 5; Doc. 18 at 3; Doc. 16-5 at 14.

Chaney told Allstate that he “was not going to be able to find someone to

make repairs at 17k”—approximately, the amount of Allstate’s estimate—and said

that he would submit another estimate. Doc. 15 at 4; Doc. 18 at 2; Doc. 16-7 at 5.

Allstate asked Chaney “how” his contractor had “c[o]me up with the $7000

difference,” given that Allstate and Chaney’s contractor both had “us[ed] the same

pricing software.” Doc. 16-7 at 5. But Chaney never submitted any additional

information to support that estimate, and never submitted the additional estimate that

he said he would have completed; instead, Chaney later submitted to Allstate

receipts for $33,477.90 in repairs.4 Doc. 15 at 5; Doc. 16 at 5; Doc. 18 at 3; Doc.

16-5 at 36.

At a minimum, Allstate had a “debatable” reason not to make the additional

payment that Chaney had requested, and “[w]hen a claim is debatable, an insurance

company is entitled to debate it.” See Insurance Co. of N. Am. v. Citizensbank of

Thomasville, 491 So. 2d 880, 884 (Ala. 1986) (“There was a genuine dispute about

the validity of the claims, and that dispute provided a debatable reason for denying

coverage.”). Allstate asked Chaney to explain the difference between his estimate

and Allstate’s estimate. Chaney never did so. Allstate still paid to Chaney the

amount of its estimate (more than $16,000).

4 Then, in this litigation, Chaney said that the cost of repairs was more than $50,000,

or approximately $60,000. Doc. 15 at 5; Doc. 18 at 3; Doc. 16-8 at 2; Doc. 16-5 at

19–20.

To be sure, Chaney ultimately may prevail on his breach of contract claim,

and prove that Allstate owed more than $16,076.75 under his insurance policy. But,

on these facts, Allstate’s (partial) refusal to pay a “debatable” insurance claim cannot

be normal bad faith. See Insurance Co., 491 So. 2d at 884.

II. There is no triable issue on Plaintiff Chaney’s abnormal bad faith claim.

On Plaintiff Chaney’s abnormal bad faith claim, there is no triable issue of

fact. In this regard, Chaney argues that Defendant Allstate “engaged in ‘abnormal’

bad faith by failing to adequately investigate [his] claim.” Doc. 24 at 4–5; see Doc.

18 at 10. Specifically, Chaney argues that, “[r]ather than properly investigating and

adjusting this claim, Defendant placed upon Plaintiff a burden of obtaining a

contractor” who would repair the damage at Allstate’s estimated cost, and that

Allstate had an “obligation” to “send its adjuster back to the property to review the

damages.” Doc. 18 at 9.

But Chaney has not identified any legal authority that would impose such

duties on an insurance provider, or that would support his assertions that such

evidence is sufficient to get an abnormal bad faith claim to the jury; the court also

has been unable to locate any such authority. See Doc. 23 at 2 (quoting Doc. 18 at

6, 9).

In any event (as explained above), an abnormal bad faith claim requires the

plaintiff to show the defendant’s “dishonest purpose” or “some motive of self-

interest or ill will.” Singleton, 928 So. 2d at 283. But there is no such evidence

here.

Under Alabama law, “more than bad judgment or negligence is required in a

bad-faith action.” Singleton, 928 So. 2d at 286–87. In this case, Allstate’s adjuster

has inspected the damage, Allstate has paid Chaney’s insurance claim (at least in

part), and the parties dispute the cost of the claimed repairs. Even if Chaney would

characterize Allstate’s conduct as “bad judgment” or “negligence,” there is no

evidence of anything “more.” Id.

In particular, there is no evidence that Allstate “recklessly or intentionally

failed to properly investigate” Chaney’s insurance claim. Simmons, 791 So. 2d at

381 (emphasis added). Again, on Chaney’s breach of contract claim, the record

shows a bona fide dispute between the parties about the amount that Allstate owed

Chaney under his insurance policy. But there is no evidentiary basis from which a

jury reasonably could infer any “recklessly or intentionally” wrongful conduct. Id.

So the record cannot create a jury question on an abnormal bad faith claim based on

Allstate’s alleged failure to investigate.

CONCLUSION

For the reasons stated above, the court GRANTS Defendant Allstate’s partial

summary judgment motion (Doc. 14), and DISMISSES Plaintiff Chaney’s bad faith

claim. By separate order, the court will set a status conference.

DONE and ORDERED this January 26, 2022.

AG A. DANELLA

UNITED STATES MAGISTRATE JUDGE

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