Harris v. Universal Property and Casualty Insurance Company

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ALABAMA

NORTHEASTERN DIVISION

WADE HARRIS, et al., )

)

Plaintiffs, )

)

v. ) Case No. 5:21-cv-00344-NAD

)

UNIVERSAL PROPERTY AND )

CASUALTY INSURANCE )

COMPANY, et al., )

)

Defendants. )

MEMORANDUM OPINION AND ORDER GRANTING

DEFENDANTS’ MOTION FOR PARTIAL SUMMARY JUDGMENT

For the reasons stated below and on the record in the January 18, 2023 motion

hearing, the motion for partial summary judgment filed by Defendants Universal

Property and Casualty Insurance Company and Alder Adjusting Corporation (Doc.

33) is GRANTED. The claim for bad faith failure to pay and investigate alleged

by Plaintiffs Wade and Nicole Harris is DISMISSED WITH PREJUDICE. See

Doc. 1 at 17–18 (Count 6 in the Plaintiff Harrises’ complaint).

BACKGROUND

Roughly a year and a half after a pipe burst and flooding damaged the Plaintiff

Harrises’ residential property, the Harrises filed a complaint in state court against

Defendants Universal and Alder Adjusting (collectively, “Universal”),1 alleging 6

claims for relief: misrepresentation (Count 1), suppression (Count 2),

negligent/wanton failure to procure (Count 3), negligent/wanton training and

supervision (Count 4), breach of contract (Count 5), and bad faith failure to pay and

investigate (Count 6). Doc. 1 at 7–18; Doc. 39 at 2. After removing the case to

this court (Doc. 1), Universal moved for summary judgment on all of the Harrises’

claims except the claim for breach of contract (Count 5). Doc. 33.

In their opposition to Universal’s partial summary judgment motion, the

Harrises withdrew the claims that they had alleged in Counts 1, 2, 3, and 4 of the

complaint (Doc. 39 at 2), each of which then was dismissed with prejudice (Doc.

43).

As a result, only the Harrises’ bad faith claim (Count 6) is at issue on this

partial summary judgment motion.

A. Factual background

Generally speaking, the material facts are undisputed. The court here

summarizes the relevant timeline:

The Harrises own a residential property located in Decatur, Alabama. Doc.

35-1 at 2. The property was covered by a homeowners insurance policy that

1 Defendant Alder Adjusting is a subsidiary of Defendant Universal. Doc. 35-2 at

4.

Universal issued in 2018. Doc. 35-1. The Harrises properly and timely paid their

premiums for the policy such that the policy did not lapse. Doc. 35-2 at 8.

The policy includes “duties after loss” provisions, stating that Universal has

no duty to provide coverage if the Harrises do not comply with specified duties,

including a duty to provide Universal with requested records and documents. Doc.

35-1 at 20. Specifically, the provision states in relevant part: “In case of a loss to

covered property, we have no duty to provide coverage under this policy if the failure

to comply with the following duties is prejudicial to us. These duties must be

performed either by you, an ‘insured’ seeking coverage, or a representative of

either.” Doc. 35-1 at 20. The specified duties include the following: “Cooperate

with us in the investigation of a claim”; “As often as we reasonably require[,] . . .

[p]rovide us with records and documents we request and permit us to make copies”;

and, “Send to us, within 60 days after our request, your signed, sworn proof of loss

which sets forth, to the best of your knowledge and belief: . . . [s]pecifications of

damaged buildings and detailed repair estimates.” Doc. 35-1 at 20.

On or about May 4, 2019 (and as noted above), the Harrises’ property

sustained damage from flooding after a pipe burst. Doc. 35-3 at 2. On May 6,

2019, the Harrises contacted Universal about the damage. Doc. 35-3.

The next day (May 7, 2019), Universal contacted Servpro, a damage

restoration company, and Servpro came out to the property. Doc. 35-4 at 2.

On May 8, 2019, both Shane St. John—an adjuster for Universal—and

professionals from Servpro came to the property. Doc. 35-4 at 2. Servpro began

restoration work, and St. John submitted an estimate for the claim. Doc. 35-4 at 2.

On May 9, 2019, Universal issued a check to the Harrises for $13,424.89,

based on St. John’s itemized estimate. Doc. 35-2 at 10; Doc. 36-1; Doc. 36-2; Doc.

36-3. Universal also sent a letter to the Harrises explaining that they potentially

could recover additional funds by submitting itemized invoices and other

documentation related to repairs. Doc. 36-4.

On May 15, 2019, Servpro completed its initial restoration work. Doc. 35-4

at 5. In June 2019, Universal paid Servpro $2,898.62 for the restoration work.

Doc. 35-2 at 10.

Also in June 2019, Mr. Harris contacted Universal, requesting documents and

seeking coverage for additional damage and repairs. Doc. 36-6; Doc. 36-7. A

representative from Universal told Mr. Harris that he needed to submit itemized

invoices to receive coverage for the additional damage and repairs. Doc. 36-7.

On June 17, 2019, Universal sent the Harrises a letter stating that their claim

for supplemental damage coverage was being denied because of their failure to

submit line-item cost estimates, including estimated costs for materials and labor.

Doc. 35-2 at 16–17; Doc. 36-8.

On July 24, 2019, Mr. Harris called Universal to say that he had not received

the initial insurance check, and that he had not received adequate compensation for

the damage to the property. Doc. 36-10. Universal mailed the Harrises a new

check, and Mr. Harris was told that he needed to send an itemized invoice for

redetermination of the value of the damage to the property. Doc. 36-10.

In September 2019, Ms. Harris sent an email to Universal, stating that the

Harrises had not received adequate compensation, and that the property had

developed mold. Doc. 36-12.

On September 18, 2019, Jenny Fernandez—a claims examiner for

Universal—attempted to call the Harrises; their voicemail was full, so she sent them

an email. Doc. 36-12; Doc. 35-2 at 14. After Fernandez held a conference call

with the Harrises and a contractor (Bobby Young), Universal issued another check

to the Harrises for $12,160.98 based on Young’s estimates. Doc. 37-1; Doc. 36-14;

Doc. 36-15; Doc. 35-2 at 10. The following day, the Harrises were emailed a

property inventory form to fill out and a routing number so that they could track

delivery of the insurance checks (both the initial payment, which still had not been

received, and the supplemental payment). Doc. 36-14; Doc. 37-2.

On September 27, 2019, Ms. Harris requested that Universal provide

documents to the Harrises’ mortgage company. Doc. 37-4. The same day, Mr.

Harris confirmed that the documents had been received, and told Universal that he

still was working on obtaining an estimate for repairs to the kitchen. Doc. 37-6.

On September 30, 2019, Ms. Harris asked Fernandez if she had received a

repair estimate (apparently from a contractor named Michael Grantland); Fernandez

replied that she had not. Doc. 37-7. On October 1, 2019, Ms. Harris sent an email

about a partial estimate for painting, but Fernandez noted that the email did not have

an attachment. Doc. 37-8; Doc. 37-9.

On October 10, 2019, Ms. Harris emailed Fernandez photographs of the

kitchen. Doc. 37-10. Fernandez tried to contact the Harrises but could not reach

them. Doc. 37-13; Doc. 37-14.

On October 29, 2019, Fernandez spoke to the Harrises and retained James

Hindman of Belfor Property to provide a cost estimate for any remaining repairs to

the property. Doc. 37-15; Doc. 37-16. On November 27, 2019, Hindman

informed Fernandez that he had not been able to get in touch with the Harrises.

Doc. 37-17; Doc. 37-19.

But on December 3, 2019, Hindman confirmed an inspection date for the

Harrises’ home of December 5, 2019. Doc. 37-18; Doc. 37-20. Hindman

performed the inspection on that date. Doc. 38-1; Doc. 39-3 at 9.

On January 13, 2020, Fernandez asked Hindman when to expect a report, and

Hindman said he would submit the report in a few days. Doc. 38-3.

On January 20, 2020, no report had been received, and the Harrises contacted

Fernandez, threatening to hire a lawyer to sue for bad faith. Doc. 38-1; Doc. 38-2.

On February 3, 2020, Hindman told Universal that he would be finished with

the report in two days; however, no report from Hindman ever was received. Doc.

38-3; Doc. 35-2 at 11.

On February 13, 2020, Fernandez tried to contact the Harrises but could not

reach them, and could not leave them a voicemail; Fernandez then contacted the

Harrises’ independent insurance agent to confirm that she had their correct contact

information. Doc. 38-4; Doc. 38-5. On February 14, 2020, Fernandez and Mr.

Harris exchanged emails. Doc. 38-7.

On February 18, 2020, the Harrises returned a call from Fernandez.

Fernandez explained that, in light of the lack of any report from Hindman, Universal

had “decided to reach a settlement agreement”—if the Harrises could obtain an

estimate from a general contractor covering the specific repairs necessary to fix the

damage to the property. Fernandez also explained the additional living expenses

(ALE) coverage available to the Harrises. Doc. 38-8. Mr. Harris agreed to try to

send information to Fernandez about the damage and the recovery the Harrises were

seeking, but stated that he was having trouble because no contractor wanted to take

the job. Doc. 38-8. The same day, Ms. Harris requested a copy of the insurance

policy. Doc. 38-10. Records indicate that Universal emailed Ms. Harris a copy of

the policy on February 22, 2020, but the Harrises dispute receiving the policy. Doc.

38-10; Doc. 38-9; Doc. 38-15. Based on the record in this case, the Harrises never

submitted a claim or documentation to seek ALE coverage related to this insurance

claim. Doc. 35-2 at 8–9; Doc. 39-3 at 12.

Then, on April 16, 2020, Fernandez composed a reservation of rights letter,

requesting additional information from the Harrises, and threatening to close the

claim file in 10 days if the information was not received. Doc. 38-12. The letter

was postmarked on May 1, 2020 (that is, more than 10 days after it was dated on

April 16). Doc. 38-13. But Universal did not close the file.

On May 19, 2020, Universal received a letter of representation from an

attorney (Phillip Mitchell), stating that he was representing the Harrises with respect

to their insurance claim. Doc. 38-14. On May 26, 2020, Fernandez requested that

a copy of the insurance policy be both mailed and emailed to Mitchell. Doc. 38-11.

On June 30 and July 16, 2020, another contractor (Danny Dumas) performed

two estimates related to the damage to the Harrises’ property. Doc. 38-16; Doc. 39-

3 at 7; Doc. 39-5.

On August 27, 2020, Universal received from Mitchell an estimate by Danny

Dumas, stating that the cost of repairs would total $93,516.63. Doc. 38-16. The

estimate did not include itemized costs.2 Doc. 38-16; Doc. 35-2 at 12.

Then, on January 27, 2021, the Harrises filed this lawsuit. Doc. 1.

2 In contrast, estimates performed for Universal by both St. John and Jason Artusio

(see infra) included itemized costs. See Doc. 36-3; Doc. 38-17.

On June 14, 2021, Universal had Jason Artusio—a consultant expert from

Envista Forensics—inspect the Harrises’ home. Doc. 38-17; Doc. 35-2 at 7.

Artusio estimated that the damage would cost $51,723.18 to repair, and provided an

itemized estimate. Doc. 38-17.

In May 2022, the Harrises submitted an appraisal report by a designated

expert, Chris Pettey, related to the pending litigation. Doc. 39-4. Pettey’s estimate

relied on a non-itemized estimate that Dumas provided in May 2022. Doc. 39-4 at

70–78.

In addition, Universal’s corporate representative testified in her deposition

that Universal has not yet denied the Harrises’ insurance claim because there is “still

a dispute as far as” what the Harrises “believe to be as damaged and what Universal

believes to be as damaged.” Doc. 35-2 at 6–7. Universal’s representative testified

that it was her understanding that “additional money is going to be paid” on the

Harrises’ claims.3 Doc. 35-2 at 7.

Based on Artusio’s estimate, the corporate representative testified that at least

$26,237.31 remained to be paid, but she also noted that the number was fluid—the

$26,237.31 number did not account for recoverable depreciation or the deductible,

as repairs had not yet been performed. Doc. 35-2 at 7. The representative was

3 Since the Harrises initiated this lawsuit, they also have filed two additional

insurance claims with Universal. Doc. 35-2 at 6; see Doc. 39-3 at 10–11.

asked if she was saying that “your company is not arguing that coverage does not

exist,” and instead that Universal was “in a[n] argument over how much coverage

exists on the claims.” Doc. 35-2 at 10. She replied, “I would say so, yeah,” and

stated that “we’re not disputing that the[] [Harrises] have suffered a loss, . . . [we’re]

just disputing as to the amount owed.” Doc. 35-2 at 10.

B. Legal background

1. Removal (diversity jurisdiction), and applicable substantive

law

Universal removed this case from the Circuit Court for Morgan County,

Alabama, based on diversity jurisdiction. Doc. 1; see 28 U.S.C. § 1332. 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 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 related to insurance claims

Alabama law 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). “Alabama courts often refer to

refusal-to-pay claims as ‘normal’ bad-faith claims and to failure-to-investigate

claims as ‘abnormal’ bad-faith claims.” Walker v. Life Ins. Co. of N. Am., No. 21-

12493, 2023 U.S. App. LEXIS 3070, at *17 (11th Cir. Feb. 8, 2023) (published)

(citing State Farm Fire & Cas. Co. v. Brechbill, 144 So. 3d 248, 256–58 (Ala.

2013)).4

To establish a “normal” bad faith claim, a plaintiff must show four elements:

(1) “an insurance contract between the parties and a breach thereof by the

defendant”; (2) “an intentional refusal to pay the insured’s claim”; (3) “the absence

of any reasonably legitimate or arguable reason for that refusal (the absence of a

debatable reason)”; and (4) “the insurer’s actual knowledge of the absence of any

legitimate or arguable reason.” Brechbill, 144 So. 3d at 257 (quoting National Sec.

Fire & Cas. Co. v. Bowen, 417 So. 2d 179, 183 (Ala. 1982)).

To prevail on a normal bad faith claim, “the plaintiff bears a heavy burden.”

Acceptance Ins. Co. v. Brown, 832 So. 2d 1, 16 (Ala. 2001); LeFevre v. Westberry,

590 So. 2d 154, 159 (Ala. 1991) (citation omitted). Indeed, to avoid summary

judgment on a normal bad faith claim, 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 v. Alfa Mut. Ins. Co., 1 So. 3d 23, 32 (Ala. 2008) (quoting Shelter

4 “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

Brechbill, 144 So. 3d at 257–58); 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)).

Mut. Ins. Co. v. Barton, 822 So. 2d 1149, 1155 (Ala. 2001)).

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

plaintiff must show “(1) that the insurer failed to properly investigate the claim or to

subject the results of the investigation to a cognitive evaluation and review and (2)

that the insurer breached the contract for insurance coverage with the insured 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 & Cas. Co. v. Slade, 747 So. 2d

293, 318 (Ala. 1999)). “[I]f the intentional failure to determine the existence of a

lawful basis is relied upon, the plaintiff must prove the insurer’s intentional failure

to determine whether there is a legitimate or arguable reason to refuse to pay the

claim.” Brechbill, 144 So. 3d at 257.

Thus, on an abnormal bad faith claim, 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 379.

“Regardless of whether the claim is a bad-faith refusal to pay or a bad-faith

refusal to investigate, the tort of bad faith requires proof of the third element, absence

of legitimate reason for denial.” Brechbill, 144 So. 3d at 258. A plaintiff “must

go beyond a mere showing of nonpayment and prove a bad faith nonpayment, a

nonpayment without any reasonable ground for dispute.” Bowen, 417 So. 2d at 183

(emphasis in original). In other words, “the plaintiff must show that the insurance

company had no legal or factual defense to the insurance claim.” Id.

In addition, any bad faith claim requires “sufficient evidence of ‘dishonest

purpose’ or ‘breach of known duty’ . . . through some motive of self-interest or ill

will.” Singleton v. State Farm Fire & Cas. Co., 928 So. 2d 280, 283 (Ala. 2005)

(quoting Slade, 747 So. 2d at 318).

C. Procedural background

As noted above, the Harrises initiated this action in state court on January 27,

2021. Doc. 1 at 7. The Harrises alleged 6 claims for relief in their complaint.

Doc. 1 at 14–18. On March 5, 2021, Universal filed the notice of removal. Doc.

1. The parties consented to magistrate judge jurisdiction. Doc. 9; see Doc. 13.

On October 11, 2022 (after the close of discovery), Universal filed the pending

partial summary judgment motion. Doc. 33.5 As noted above, 4 claims already

have been withdrawn and dismissed with prejudice (Counts 1, 2, 3, and 4). Doc. 39

at 2; Doc. 43.

The parties have fully briefed this partial summary judgment motion on the

Harrises’ bad faith claim (Count 6). Doc. 34; Doc. 39; Doc. 41. And, in their

opposition to Universal’s partial summary judgment motion, the Harrises

incorporated a motion to strike Artusio as an expert witness (Doc. 39 at 13–15). See

5 The Harrises’ claim for breach of contract (Count 5) will be for a jury.

Doc. 44 (order denying motion to strike). On January 18, 2023, the court held a

motion hearing on the bad faith claim. See Minute Entry (Entered: 01/18/2023).

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 nonmovant’s favor. 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

The court has conducted an exhaustive review of the record to determine

whether there is a triable issue. But, based on the controlling law and the record

evidence, there is no triable issue of fact for a jury on the Harrises’ bad faith claim.

I. There is no triable issue of fact on the Harrises’ normal bad faith claim.

On the Harrises’ normal bad faith claim, there is no triable issue of fact for a

jury. 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 the Harrises

have not filed a summary judgment motion on their breach of contract claim, and

the record would not support judgment as a matter of law on that claim anyway.

Instead (as noted above), the breach of contract claim will be for the jury.

Practically speaking, the record demonstrates that the parties dispute the cost of the

repairs to which the Harrises are entitled under their insurance policy, and dispute

whether the Harrises complied with their relevant contractual obligations under the

policy.

As a preliminary matter (and as explained above), on a normal bad faith claim,

the plaintiff must show “an intentional refusal to pay the insured’s claim.” See

Brechbill, 144 So. 3d at 257. But no jury reasonably could find that Universal has

refused to pay the Harrises’ insurance claim. Instead, Universal did make two

separate payments to the Harrises, totaling approximately $25,000, based on

estimates for repairs. Doc. 35-2 at 10; Doc. 36-1; Doc. 36-2; Doc. 36-3; Doc. 37-

1; Doc. 36-14; Doc. 36-15. And the record shows that Universal has not actually

issued a refusal or denial of the Harrises’ insurance claim. Universal’s corporate

representative testified in her deposition that the Harrises’ claim has not been denied

and still is open. Doc. 35-2 at 6–7.

In this regard, the Harrises are correct that an insurer’s partial payment does

not necessarily preclude trial on a bad faith claim. Doc. 39 at 8, 12–13. As the

Alabama Supreme Court has held, “it does not per se preclude a jury’s consideration

of an insured’s bad-faith claim simply because the insurer has paid a portion of the

insured’s claim.” Ex parte Alfa Mut. Ins. Co., 799 So. 2d 957, 964 (Ala. 2001); see

also Nationwide Mut. Ins. Co. v. Clay, 525 So. 2d 1339, 1343 (Ala. 1987) (a partial

payment alone cannot “avert liability altogether” because a “partial payment could

be used simply as a guise to conceal an otherwise intentional denial of the claim”).

But, without more, a plaintiff alleging bad faith cannot create a triable jury

question on evidence of partial payment alone.6 See, e.g., Clay, 525 So. 2d at 1343–

6 The Harrises cannot create a triable issue based on the undisputed facts that

Fernandez’s April 16, 2020 reservation of rights letter, which included the threat to

close the claim file in 10 days if the Harrises did not reply, was postmarked on May

1, 2020 (i.e., more than 10 days after it was dated). Doc. 39 at 5; see Doc. 38-12;

Doc. 38-13. As discussed above in text, it also is undisputed that Universal did not

close the claim file, despite not having received a response in the 10-day timeframe

stated in the letter.

44 (“The cases cited by [the defendant insurer] in support of its argument that partial

payment exempted it from liability for bad faith are all distinguishable from the

present case in one respect: in each of those decisions, the Court found no evidence

of bad faith in the refusal to pay a claim.”).

Next, the Harrises assert that a jury could find an intentional refusal to “fully”

pay the claim based on Universal’s delay in making what the Harrises would

consider to be “full[]” payment—or at least additional payment(s) over and above

the approximately $25,000 already paid. Doc. 39 at 12–13.7

But (again), the parties dispute the cost of the repairs and the amount of what

would be a hypothetical “full” payment or additional partial payment. As explained

above, the relevant insurance policy includes duties after loss provisions, pursuant

to which Universal was not required to provide coverage if the Harrises did not

provide Universal with requested records and documents. Doc. 35-1 at 20. And

the undisputed record evidence shows that Universal repeatedly requested itemized

estimates and invoices for repairs, but the Harrises never provided the requested

documents. Doc. 36-4; Doc. 36-7; Doc. 35-2 at 16–17; Doc. 36-8; Doc. 36-10.

While Universal’s corporate representative testified in her deposition that

7 Under certain circumstances, a plaintiff alleging bad faith can prove a constructive

denial of a claim “by showing that the passage of time is so great that the delay alone

creates a denial.” Congress Life Ins. Co. v. Barstow, 799 So. 2d 931, 938 (Ala.

2001).

“additional money is going to be paid” to the Harrises (Doc. 35-2 at 7), the parties

still dispute that amount. Even Universal’s estimate (from Artusio) that at least

$26,237.31 remains to be paid to the Harrises for repairs still does not provide a

definitive amount, even for a partial payment; Artusio’s estimated amount did not

(and cannot) account for “recoverable depreciation and the insureds’ deductible”

because repairs had not yet been performed. Doc. 35-2 at 7.8 Thus, even

construing the evidence and reasonable inferences in the Harrises’ favor, their

insurance claim remains open because the parties dispute the amount of additional

payment owed; so, no reasonable jury could find that there has been a final denial of

payment, constructive or otherwise.

Moreover, there can be no jury question based on any delay in Universal’s

“fully” making payment in this case,9 because there is no indication in the record

that any delay in payment to the Harrises was because of anything other than an

ongoing dispute about the value of their insurance claim. Construing the evidence

8 In their opposition brief, the Harrises note their own disagreement with Artusio’s

estimate. See Doc. 39 at 8 (“[Universal] ha[s] paid nothing since [the second

payment], even in light of their own estimator’s [Artusio’s] report,” which they note

contains “(an amount the Plaintiffs do not agree with).”).

9 The Harrises argue that a jury could find bad faith based on “examples of

[Universal’s] intentional failure to investigate and fully pay Plaintiffs’ claims.”

Doc. 39 at 12 (emphasis added). But (as discussed above in text), the amount of

any hypothetical “full[]” payment is disputed, and will be for a jury on the Harrises’

breach of contract claim.

in the Harrises’ favor, there are no record facts from which a jury reasonably could

find or infer that Universal’s delay in “fully pay[ing]” the claim (or even making any

additional payment) was because of a bad faith “dishonest purpose,” “self-interest,”

or “ill-will.” See, e.g., Brechbill, 134 So. 3d at 259–60 (“Bad faith, then, is not

simply bad judgment or negligence. It imports a dishonest purpose and means a

breach of known duty, i.e., good faith and fair dealing, through some motive of self-

interest or ill will.” (quoting Gulf Atl. Life Ins. Co. v. Barnes, 405 So. 2d 916, 924

(Ala. 1981))).

The district court decision in Hand v. Allstate Insurance Co. is illustrative.

See No. 6:19-CV-00453-LSC, 2021 WL 2867034 (N.D. Ala. July 8, 2021) (denying

in relevant part the defendant insurer’s summary judgment motion on the plaintiffs’

normal bad faith claim). In Hand, it was undisputed that the insurer owed the

insured a supplemental payment of approximately $25,000, and that the insurer had

delayed paying that undisputed amount for more than 2 years. 2021 WL 2867034,

at *4. According to the district court, the insurer “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)).

Here, unlike in Hand, Universal has made partial payments, and has not

delayed payment of any undisputed amount. While the Harrises maintain that they

are entitled to some amount of additional payment (and Universal’s corporate

representative concedes as much), the parties still dispute the cost of the repairs and

the amount of insurance coverage. See, e.g., Doc. 39 at 8. So, no reasonable jury

could find that Universal has delayed payment of any undisputed amount. And,

neither the Harrises nor this court has been able to identify any authority suggesting

that, without more, a jury could find bad faith based on an insurer’s failure to make

piecemeal payments (after initial partial payments) while the cost of repairs and the

amount of insurance coverage still are disputed.

In addition (and as explained above), a plaintiff alleging a normal bad faith

claim must show both “the absence of any reasonably legitimate or arguable reason”

for the refusal to pay an insurance claim (i.e., “the absence of a debatable reason”),

and “the insurer’s actual knowledge of the absence of any legitimate or arguable

reason.” See Brechbill, 144 So. 3d at 257. But, here, no reasonable jury could find

or infer the absence of a debatable reason or that Universal had actual knowledge of

any such absence.

As explained above, the relevant insurance policy includes duties after loss

provisions, based on which Universal was not required to provide coverage if the

Harrises did not comply with the specified duties, including the duty to provide

Universal with requested records and documents. Doc. 35-1 at 20. The Alabama

Supreme Court has recognized the validity of such duties after loss provisions in

insurance contracts as conditions precedent to insurer liability. See Nationwide Ins.

Co. v. Nilsen, 745 So. 2d 264, 267 (Ala. 1998); Hillery v. Allstate Indem. Co., 705

F. Supp. 2d 1343, 1362 (S.D. Ala. 2010) (“Courts have routinely upheld the validity

of such ‘duties after loss’ provisions obliging an insured to furnish information and

documents to the insurer.”). For instance, an insurer’s “obligation to pay or to

evaluate the validity of the claim does not arise until the insured has complied with

the terms of the contract with respect to submitting claims,” including terms

requiring written proof of loss. United Ins. Co. of Am. v. Cope, 630 So. 2d 407, 411

(Ala. 1993).

In this case, it is undisputed that—consistent with the duties after loss

provisions in the relevant insurance policy—Universal repeatedly informed the

Harrises that the Harrises would need to submit itemized estimates related to the

expenses arising from the damage to their home before Universal would provide

additional payment. Doc. 36-4; Doc. 36-7; Doc. 35-2 at 16–17; Doc. 36-8; Doc.

36-10. Likewise, it is undisputed that the Harrises did not provide the requested

estimates with itemized costs for additional payment. Doc. 35-2 at 12, 16–17; Doc.

36-8; Doc. 38-16.10

In sum, a jury may find that Universal breached its contract with the Harrises,

10 Based on the record evidence, the Harrises also did not make a claim for ALE

coverage. Doc. 35-2 at 8–9; Doc. 39-3 at 12.

and it is not yet clear what damages the Harrises may claim at trial for any property

damage that has arisen as the home has “deteriorate[d] more and more” since the

flooding in May 2019. See Doc. 39 at 6.

But, even construing the evidence and reasonable inferences in favor of the

Harrises, the parties’ disagreement about the amount owed, along with the

undisputed fact that the Harrises did not submit itemized estimates for additional

payment, means that no reasonable jury could find the “absence of a debatable

reason” or that Universal had “actual knowledge” of the absence of a debatable

reason. See Brechbill, 144 So. 3d at 257. As the Alabama Supreme Court has

instructed, “[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.”). Thus, the record

shows a “reasonable ground for dispute” behind Universal’s lack of additional

payment, and the evidence cannot create a jury question on the Harrises’ normal bad

faith claim. Bowen, 417 So. 2d at 183; Brechbill, 144 So. 3d at 258; Insurance Co.

of N. Am., 491 So. 2d at 884.

II. There is no triable issue of fact on the Harrises’ abnormal bad faith claim.

On the Harrises’ abnormal bad faith claim, there is no triable issue of fact for

a jury. As an initial matter, there can be no jury question on the Harrises’ abnormal

bad faith claim because—as discussed above, see supra Part I—there is no genuine

dispute of material fact about whether Universal “refused to pay the [Harrises’]

claim” (Simmons, 791 So. 2d at 379), or about whether there was an “absence of

legitimate reason for denial” (Brechbill, 144 So. 3d at 258).

Regardless (and as explained above), a plaintiff alleging an abnormal bad faith

claim must show that “the insurer failed to properly investigate the claim or subject

the results of the investigation to a cognitive review.” Simmons, 791 So. 2d at 379.

Construing the evidence in the Harrises’ favor, no reasonable jury could find

or infer bad faith based on Universal’s alleged failure to properly investigate the

claim. As discussed above, Universal’s adjuster (St. John) visited the relevant

property less than a week after the reported damage, and submitted an itemized

estimate for the Harrises’ claim (Doc. 35-4 at 2); based on St. John’s estimate,

Universal made a payment to the Harrises (Doc. 35-2 at 10; Doc. 36-1; Doc. 36-2;

Doc. 36-3). Universal also made a second payment based on the estimates from the

Harrises’ contractor (Young). Doc. 37-1; Doc. 36-14; Doc. 36-15; Doc. 35-2 at 10.

The undisputed record evidence shows that Universal then repeatedly

requested that the Harrises submit itemized estimates and invoices with respect to

the property damage, but the Harrises did not submit itemized requests for additional

payment. Doc. 36-4; Doc. 36-7; Doc. 35-2 at 16–17; Doc. 36-8; Doc. 36-10.

Universal also notified the Harrises that Universal had “decided to reach a settlement

agreement,” if the Harrises could submit a specific estimate from a general

contractor for repairing the damage to the property. Doc. 38-8. And, after the

Harrises had filed this lawsuit, Universal had another consultant expert (Artusio)

inspect the damage and provide an itemized estimate for repairs. Doc. 38-17.

Thus, in light of the record evidence, no jury reasonably could find or infer that

Universal “recklessly or intentionally failed to properly investigate” the Harrises’

insurance claim. Simmons, 791 So. 2d at 381 (emphasis added).

In this respect, the Harrises assert that Universal acted in bad faith by not

having one or more adjusters assess the property more frequently and/or sooner—

i.e., after St. John had inspected the property and before Artusio did so. Doc. 39 at

6–13. But (as also 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.

According to the Alabama Supreme Court, “more than bad judgment or

negligence is required in a bad-faith action.” Singleton, 928 So. 2d at 286–87. The

undisputed record shows that in October 2019—5 months after St. John’s estimate—

Universal retained Hindman to provide a cost estimate, that in February 2020

Hindman said the report would be completed in 2 days, but that Universal never

obtained any report from Hindman. Doc. 37-15; Doc. 37-16; Doc. 38-3; Doc. 35-2

at 11. And, it was shortly thereafter (in February 2020), that Universal

communicated to the Harrises the intention “to reach a settlement agreement.” Doc.

38-8.

While those undisputed facts appear strange, there is no evidence suggesting

the necessary “dishonest purpose,” “self-interest,” or “ill will” (Singleton, 928 So.

2d at 283), and any finding in that regard would be speculative. See Cordoba v.

Dillard’s, Inc., 419 F.3d 1169, 1181 (11th Cir. 2005) (“unsupported speculation does

not meet a party’s burden of producing some defense to a summary judgment

motion,” as “speculation does not create a genuine issue of fact” (emphasis in

original; quotation marks omitted)). At most, the record facts related to Hindman’s

having “ghosted” Universal might show “bad judgment” or “negligence,” but

nothing “more”—as is required to get an abnormal bad faith claim to a jury.

Singleton, 928 So. 2d at 286–87.

As explained above, the undisputed record demonstrates both a disagreement

between the parties about the amount that Universal owes the Harrises under the

relevant insurance policy, and that the Harrises did not submit documents that

Universal had requested. Doc. 35-2 at 12; see Doc. 38-16. Given the record

evidence, this court has not identified any legal authority supporting the proposition

that, without more, a jury could find or infer bad faith based on Universal’s failure

to send a hypothetical additional inspector/adjuster to investigate the cost of repairs.

Nor have the Harrises identified any such legal authority. As a result, the record

facts cannot create a jury question on the Harrises’ abnormal bad faith claim.

CONCLUSION

For the reasons stated above, the court GRANTS the partial summary

judgment motion (Doc. 33), and DISMISSES WITH PREJUDICE the Plaintiff

Harrises’ claim for bad faith failure to pay and investigate (Count 6).

The court SETS this case for a telephone status conference on Friday, March

24, 2023, at 1:00 PM. Ahead of that status conference, counsel are ORDERED to

meet and confer regarding potential case resolution and trial scheduling.

DONE and ORDERED this March 10, 2023.

AG A. DANELLA

UNITED STATES MAGISTRATE JUDGE

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