Naff v. State Farm General Insurance Co.

          ORDER DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT

          JENNIFER L. THURSTON UNITED STATES MAGISTRATE JUDGE

         Halonda and Jarvis Naff contend Defendant State Farm General Insurance Company wrongfully cancelled their insurance policy and denied their claim following a house fire that caused the loss of personal property. State Farm argues its actions were proper and seeks a declaration of rights in its counterclaim, and seeks summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. (Doc. 31) For the following reasons, Defendant’s motion for summary judgment is DENIED.

         I. Undisputed Facts^[1]

         On December 26, 2012, the home owned by Jarvis and Halonda Naff at 331 Donna Avenue in Bakersfield, California, caught fire and burned. (JSF 9) The contents of the home were totally lost. (PSF 17) The Naffs had in place a homeowner’s policy issued by State Farm. (JSF 8; Doc. 6-1 at 2-51)^[2] The policy provided coverage in the amount of $154, 300 for the dwelling, $15, 430 for the dwelling extension and $115, 725 for personal property. (Id.; PSF 6) The policy included the following condition:

         2. Concealment or Fraud.

This policy is void as to you and any other insured, if you or any other insured under this policy has intentionally concealed or misrepresented any material fact or circumstance relating to this insurance, whether before or after a loss.

(JSF 8; Doc. 6-1 at 43, emphasis in original)

         After the fire, Plaintiffs hired David Coston to do repair work on the home. (PSF 14) Mr. Avery “asked David Coston to have an inventory prepared identifying the contents of the house.” (PSF 15; Coston Depo. 24:8-24) “Pursuant to Mr. Avery’s direction . . . Coston asked Sharon Endlsey to go through everything and to document every item that [she] saw which had been destroyed in the fire.” (PSF 18) Ms. Endley went to the home and listed every item that she could recognize, prepared an inventory and gave it to Mr. Avery. (PSF 20, 25) Thomas Collier, who worked for State Farm’s Special Investigations Unit, “determined the [total] value of the property on the Endsley list … was approximately $147, 815.18.” (PSF 43)

         On May 29, 2013, Plaintiffs gave State Farm “an inventory of personal property they claim was damaged and destroyed . . . and requested financial compensation for the damaged personal property.” (JSF 10) Mrs. Naff completed an inventory form that requested information for each item claimed, such as where it was purchased, the age, and “today’s repair cost/replacement cost/amount of loss (without tax).” (PSF 27) The Naffs claim that each item on Mrs. Naff’s inventory was in the home at the time of the fire. (JSF 11) They deny that they knowingly misrepresented the age or value of any item on the inventory. (JSF 12; JSF 13) The reported total value of items on Mrs. Naff’s inventory form that they owned at the time of the bankruptcy petition was approximately $26, 000. (See JSF 14-40)

         In June 2013, Mrs. Naff gave a recorded statement to Mr. Collier. (PSF 34) Mrs. Naff “indicated she had felt overwhelmed by the entire process… and been confused in regard to how to complete certain columns including the columns for where purchased, age, and ‘today’s repair cost/replacement cost/amount of loss.” (Id.) Mr. Avery and Mr. Collier directed Mrs. Naff to provide a new inventory form. (PSF 35)

         On August 13, 2013, “Plaintiffs submitted a revised loss inventory to State Farm.” (JSF 41) Mrs. Naff reported she was advised “to be more accurate on how long she had the items” prior to submitting the second inventory. (JSF 43) Mrs. Naff asserts she “remove[ed] some items that had been found in storage, combin[ed] items, and correct[ed] certain information that she was confused by.” (PSF 36) Plaintiffs maintain “each item on the August 13, 2013 inventory was in the home at the time of the fire.” (JSF 44) Plaintiffs deny they “knowingly misrepresented the age of even one item, ” and “deny that they knowingly overvalued even one item” on the August inventory. (JSF 45-46) The reported total value of items that Mrs. Naff indicated were aged three years or more on the August inventory was approximately $18, 000. (See JSF 47-54, 60-66, 68-76, 78-84; DSF 55-58, 67, 77, 85-86)

         During the investigation, State Farm learned that the Naffs had filed Chapter 7 Bankruptcy.^[3](DSF 1; Doc. 32-4 at 3) On the voluntary petition, the Naffs “declare[d] under penalty of perjury that the information provided in this petition is true and correct.” (DSF 2; Doc. 31-4 at 6) On the “Schedule B” form, the Naffs were directed to “list all property of the debtor of whatever kind.” (Id. at 14) Plaintiffs indicated they had $300.00 in a bank account; $3, 000 in “[h]ousehold furnishings including electronics and appliances; $500.00 in “[c]lothing and wearing apparel;” $500.00 in jewelry; and $2, 000.00 in “[f]irearms and sporting equipment including photographic equipment.” (Id.)

         On December 4, 2015, Mr. Collier telephoned Mrs. Naff and told her State Farm had completed its investigation and was denying the claim for the personal property losses. (Doc. 31-6 at 99) The information was further detailed in a letter dated December 5, 2015:

         Our investigation revealed you intentionally concealed and/or misrepresented material facts when presenting your claim to State Farm. As a result, we must regretfully, void your Homeowners Policy as of the date of the loss, December 26, 2012, and deny your claim. Below, we provide examples of some of the information you intentionally misrepresented and/or concealed when making your claim.

• On June 18, 2013, you contacted Claim Representative Michael Avery and inquired about a payment for your patio cover. Information in your claim file, as well as images available on-line, did not reveal you had a patio cover at your home when the fire occurred on December 26, 2012.

You met with Claim Representative Avery at your home later that day and described a patio cover of approximately 20 feet by 20 feet. You claimed the patio cover was badly damaged as a result of the fire.

In your subsequent recorded statements with Claim Representative Tom Collier, you and Mr. Naff indicated you did not make a claim for a patio cover, and explained a patio cover was not damaged at your home as a result of the fire.

You made false representations about a patio cover to Claim Representative Avery in an effort to obtain payment from your Homeowners Policy for a loss you did not sustain.

• On May 30, 2013, you presented an inventory of personal property damaged by the December 26, 2012 fire at your home. In his recorded statement, Mr. Naff indicated some mistakes may have been made, and the loss inventory you submitted for your claim should be revised.

You submitted a revised loss inventory to State Farm on August 15, 2013. The replacement cost of the personal property claimed on the new loss inventory was approximately one half of what you claimed in the May 30, 2013 loss inventory.

At the time of your examination under oath, you explained the inventory of damaged personal property you submitted on May 30, 2013 was the accurate assessment of your personal property loss. Despite Mr. Naffs acknowledgement some mistakes may have been made in the May 30, 2013 inventory, and your subsequent submission of a significantly revised loss inventory, you testified your initial loss inventory was accurate.

As you know, your general contractor, Image Builders, made an inventory of the personal property at your residence premises after the fire. State Farm compared the inventory of damaged personal property you submitted for your claim on May 30, 2013 with the inventory prepared on site by your contractor. Your inventory of damaged personal property included numerous items not found at your home by your contractor. The replacement cost you claimed to State Farm for items your contractor did not observe at your home following the fire was nearly $112, 000.00.

State Farm must, regretfully, conclude you intentionally concealed and misrepresented material information when making your personal property claim based on the differences in the inventory you originally submitted, your revised loss inventory, and the inventory prepared by Image Builders.

(Doc. 31-6 at 99-100) State Farm indicated in the letter that the above list was “not meant to be an exhaustive description of each and every concealment and/or misrepresentation you made.” (Id. at 100) State Farm indicated the claim was also denied because Mrs. Naff “did not comply with [the] duties after a loss as described in the Homeowners Policy”-which included providing documentation in support of the claim. (Id.) Finally, State Farm indicated it did “not intend, by this letter, to waive any policy defenses in addition to those stated…and reserve[d] its right to assert additional policy defenses at any time.” (Id. at 101)

         Plaintiffs filed a claim with the Department of Insurance, and received a “right to sue” on December 15, 2014. (Doc. 1-2 at 8) Accordingly, Plaintiffs initiated this action by filing a complaint in Kern County Superior Court on February 19, 2015, alleging State Farm is liable for: (1) a breach of the duty of good faith and fair dealing, (2) breach of contract, (3) intentional infliction of emotional distress, and (4) negligent ...