United States District Court, N.D. California
ORDER GRANTING MOTION FOR SUMMARY JUDGMENT RE: DKT.
William H. Orrick United States District Judge.
Floyd Castro submitted a homeowner's insurance claim to
State Farm following the burglary of his home in April 2014,
claiming that a significant amount of cash, a number of
expensive tools and expensive musical equipment were stolen.
State Farm denied the claim and voided Castro's policy
under its Concealment and Fraud provision because of
Castro's multiple material misrepresentations about the
value and source of the stolen tools and
equipment. It now moves for summary judgment, or
partial summary judgment, because its conduct was justified.
Castro opposes because any misrepresentations are explained
by plaintiff's memory problems, of which State Farm was
fully aware. Indeed, he argues that State Farm's
investigation was conducted in bad faith because, having
knowledge of Castro's memory problems, it should have
sent him for an Independent Medical Exam prior to denying his
claim for misrepresentations. Castro's misrepresentations
were numerous and material, and he introduced no evidence of
memory issues that a reasonable jury would find as an excuse
for his obviously false and inconsistent submissions. I GRANT
State Farm's motion.
April 20, 2014, Castro's home was burglarized.
Declaration of Floyd Castro [Dkt. No. 33-1] ¶ 5. He
reported the burglary to the police. He made at least two
online reports to the police department about items that were
stolen from his home. Castro Decl. ¶ 5.
had a homeowner's insurance policy with State Farm (the
“Policy”), and opened a claim on April 21, 2014.
On April 23, 2014, Castro gave a recorded statement to State
Farm indicating that tools were stolen from his garage, $6500
in cash was taken, and at least one piece of musical
equipment (a PA system) was stolen. April Statement, Ex. A.
to the Declaration of John T. Bell [Dkt. No. 33-2] at 7:6-10;
Declaration of Maria Okino [Dkt. No. 27] at 22:5-8. In early
May 2014, he submitted a “Personal Property Inventory -
Customer Worksheet” listing the following items (as
relevant to this motion) as stolen: (1) Husqvarna chain saw,
purchased at Sears and valued at $600; (2) Tascam recorder,
purchased online and valued at $500; (3) socket set,
purchased in Portland and valued at $6, 000; (4) Martin
hunting bow, purchased in Portland and valued at $1, 000; (5)
a Mackie PA system, purchased at Guitar Center and valued at
$1, 100; and (6) a fender acoustic guitar, given as a gift
and valued at $3, 250. Okino Decl., Ex. 5.
this general time frame, State Farm had a number of contacts
with Castro, asking for receipts and other proofs of payment
for the stolen items. See, e.g., Okino Decl., Exs.
12-13. State Farm attempted to get more information about
some of the musical equipment that was lost, to figure out
the exact versions, purchase dates, and purchase prices.
See, e.g., Ex. 13. On June 26, 2014, Castro
reaffirmed his belief that the stolen guitar was a fender,
that it retailed for $3, 000, and that it was gifted to him
by “Jimmy Johnson” who was working in Alaska. Ex.
13. Shortly thereafter, he changed his claim, asserting that
the stolen guitar was a Martin guitar in a Fender case (which
is why he thought it was a Fender), and was valued at $47,
999. Okino Decl., Exs. 15-16. On June 28, 2014, he sent State
Farm an email “as to” the Tascam recorder
identifying the model he believed it was and stating that it
sells for $1600. Okino Decl., Ex. 12.
30, 2014, State Farm paid Castro $4, 789.75 for repairs
Castro had to make to doors damaged during the burglary.
Okino Decl., Ex. 14. It also informed him that more
information was needed as to the Tascam recorder, the socket
set, and other items. Id. On July 1, 2014, Castro
submitted a supplemental report to the police department
listing additional stolen items and provided a copy to State
Farm. Okino Decl., Ex. 15. That list included three Marshal
amps and cabinets with speakers and the Martin guitar.
Id. On July 15, 2014, Castro provided State Farm
with an unsigned and undated typed note addressed “to
State Farm” allegedly from “Doug
Fretus” stating that Freitas gave Castro a Martin
D45 Authentic 1942 Dreadnaught Acoustic guitar. Okino Decl.
Ex. 16. The note also included a phone number for Freitas and
Castro's claim number. Id. On the same day,
Castro forwarded to State Farm an unsigned typed note
“to State Farm” allegedly from Brian
“Tillseth, ” indicating that Tilseth sold Castro
a Snap On socket set on May 12, 2011 for $6, 000.
Id. The note included Tilseth's phone
number and Castro's claim number. Id. State Farm
was concerned about the authenticity of these notes because
they looked to have been drafted by the “same
person/printer.” Okino Decl., Ex. 23.
18, 2014, State Farm informed Castro that it needed a copy of
his revised police report and more documentation regarding
the Tascam recorder, the socket set, amplifiers, and the
“Fender Acoustic guitar.” Okino Decl., Ex. 17. On
July 22, 2014, State Farm performed an online search and
found that Castro had made a prior homeowners insurance
policy claim for stolen items in November 2013 and had made
numerous claims over the past years, some of which had been
referred for further investigation because of suspected
fraud. Okino Decl., Ex. 18.
Farm took a second recorded call statement from Castro on
August 1, 2014. August Statement, Ex. B. to Bell Declaration;
Ex. 20 to the Okino Decl. In that call, Castro confirmed that
he lost at least three Marshall amps and three cabinets, as
well as the Mackie PA system. August Statement at 8:6-9:20,
18:13. Castro stated that although he had filed a bankruptcy
petition in 2012, he did not list any of the items he claimed
were stolen in April 2014 on his personal property schedules
filed with his bankruptcy petition because he did not know he
was supposed to. Id. at 18:7 - 19:3. The State Farm
agent explained that Castro might want to reopen his
bankruptcy petition to disclose those items, because if they
were not included on Castro's petition then State Farm
would not be able to include those items in this claim.
Id. 19:20 - 20:13. In closing, the State Farm agent
indicated he would continue to investigate the claim and
would “check on the bankruptcy, um, issue as well. Just
again check whether or not they need anything updated on the
bankruptcy or not. . . . I hope to get back in touch with
you, ah, next week with, you know, the information with
regard to the bankruptcy . . . .” August Statement at
24:21 - 25:3. Castro took that as an indication that unless
he heard back from the agent, he did not need to do anything
with respect to his bankruptcy petition. Castro Decl. ¶
8. However, in an August 18, 2014 letter, Castro was informed
that he should contact the bankruptcy trustee and his
bankruptcy attorney because the property for which he was
claiming a loss was not disclosed on his bankruptcy
schedules. Okino Decl., Ex. 25.
August 5, 2014, a State Farm agent contacted Doug Freitas.
Freitas admitted giving Castro a Martin guitar, but said that
he was too busy to talk and asked the agent to call back.
Okino Decl., Ex. 21. The agent was never able to reach
Freitas again. Okino Decl., Ex. 40 at 313.
the inconsistencies in Castro's testimony and the failure
to secure accurate responses regarding the source and value
of a number of the items, and because it appeared that he was
seeking recovery for property (including a Marshal amp) for
which he had sought coverage in his prior State Farm claim
(from the November 2013 robbery), State Farm initiated a
review for potential fraud. Okino Decl., Ex. 23. In an August
18, 2014 letter to Castro, State Farm explained that it was
concerned because there was (i) insufficient clarity on which
amps were stolen in 2014 and which receipts submitted to
State Farm covered the items for which he was currently
seeking coverage and (ii) inadequate proof of the $6000
payment to Tilseth for the socket set. Id.
August 27, 2014, State Farm recorded a call with Brian
Tilseth. Okino Decl., Ex. 26. Tilseth said he did not know
where Castro had gotten his tools. Id. at
10:13-11:2. According to the agent's notes, Tilseth told
the agent that he had never sold Castro any tools and never
gave Castro a written statement of what he sold or gave to
Castro. Okino Decl., Ex. 27 at 194. Following the calls to
Tilseth and Freitas, Castro called the State Farm agent to
question why State Farm was “riding” his friends
about the claim. Id. at 193. When questioned about
the tools, Castro indicated that Tilseth “wrote the
[typed] note” about the sale of the socket set for $6,
000 (although Tilseth's name was misspelled).
Id. State Farm told Castro that Tilseth had informed
them that he had not sold Castro any tools and had not
provided any written statement, creating inconsistencies and
implicating the Concealment and Fraud provision of the
Policy. Id. State Farm also asked Castro whether
Castro also wrote the computer note from Doug Freitas
regarding the Martin guitar, noting that Freitas' name
was spelled incorrectly on the note. Id. State Farm
informed Castro that it intended to notice an Examination
Under Oath (“EUO”).
August 29, 2014, Castro called State Farm and informed them
that Tilseth was confused and that Tilseth had in fact sold
Castro the tools for $6, 000 worth of marijuana, which could
be confirmed by Tilseth. Okino Decl., Ex. 28. The agent
called Tilseth, who “recanted” some of his prior
statements, admitted selling Castro the tools for two pounds
of marijuana, stated that he typed up a receipt for the trade
for Castro when the sale was made two years ago, and denied
writing up “the statement.”
September 8, 2014, State Farm informed Castro in writing of
the inconsistencies in his claim, including the source and
cost of the socket tools and whether a legitimate receipt
existed for the purchase from Tilseth to Castro, and the
quality, brands and the source of amps that were lost as a
result of the April 2014 burglary (as opposed to the prior
burglary and prior claim processed from November 2013), and
stated that those concerns raised questions whether the
Concealment or Fraud provision of the Policy applied. Okino
Decl., Ex. 29. An EUO was scheduled for Tuesday September
30, 2017, and Castro was asked to bring documentation
regarding his losses. Okino Decl., Ex. 30.
EUO, Castro provided additional testimony regarding the
origin of a number of items. As to the Martin guitar, Castro
testified that although he played the guitar once or twice a
week, he did not realize that the Martin guitar was stolen
because it was kept in a Fender case. Okino Decl., Ex. 31
(“EUO Tr.”) at 88:14 - 89:16; 93:9 - 94:22.
Castro also testified that Freitas prepared the typewritten
statement at Castro's house on Castro's computer.
Id. at 107:20 - 108:3. Castro was not asked about
the misspelling of Freitas's name on the receipt. As to
the socket set, Castro first affirmed that the set was
purchased at a Portland swap meet, as he listed on the
original State Farm inventory of stolen items. Id.
81:7-17. He later testified that in fact he had given Tilseth
$6, 000 of marijuana for the set and that Tilseth typed up
the receipt presented to State Farm by Castro on the computer
at Castro's house. Id. 106:3- 107:16; 108:4-6.
the amplifiers, Castro clarified that although at some points
he had claimed three Marshall amps and cabinets were stolen,
he was now claiming only one Marshall amp and cabinet was
stolen as well as one Ampeg amp and cabinet, and one Fender
amp. Id. 97:10 - 98:17. As to the Husqvarna
chainsaw, Castro testified that the receipt for it was stolen
in the prior November 2013 burglary. Id. at 78:5-19.
As to the Tascam recorder, he agreed with his initial
inventory that it was worth $500 and purchased online, but
did not mention his prior email to State Farm claiming it was
valued at $1, 600. Id. at 78:23 - 79:12; see
also Okino Decl., Ex. 12.
October 20, 2014, Castro submitted for the first time a
handwritten “Bill of Sale” dated January 2012
stating that he and Brian Tilseth traded a socket set for
marijuana worth around $6, 000. Okino Decl., Ex. 32.
early 2015, State Farm concluded its investigation and
decided to deny the claim and void the Policy under the
Concealment and Fraud provision because of Castro's
shifting explanations regarding the source and value of a
number of items, as well as the inconsistencies in the
documents he provided (e.g., the various different
receipts with misspelled names). Okino Decl., Ex. 40. State
Farm also relied on Castro's failure to include the items
for which he sought coverage as assets in his bankruptcy
schedules, at least not until the State Farm agent pointed it
out as a problem. By letters dated February 13, 2015 and
March 3, 2015, State Farm denied the claim, refunded
Castro's premium payments, and voided the Policy. Okino
Decl., Exs. 42, 43.
filed suit against State Farm for breach of contract and
breach of the duty of good faith and fair dealing in state
court on May 22, 2015. Dkt. No. 1. After State Farm was
served in November 2015, it removed the case to this Court on
December 14, 2105. Id. After the inception of this
litigation, State Farm subpoenaed the production of claims
files from Farmers Insurance Company, Inc. Okino Decl., Ex.
45. These records showed that Castro submitted a claim to
Farmer's in 2015 for the same April 2014 burglary
(“Farmer's Claim”) as was the subject of the
State Farm claim. Id. at 351 - 369. In the
Farmer's Claim, Castro sought coverage for some of the
same items of property at issue here, but valued them
differently. For example, in the Farmer's Claim Castro
valued the socket set at $400 (not $6, 000), the chainsaw at
$200 (not $600), a “gifted” Martin guitar for
$200, later revised to $5, 300 (not $47, 999), the Tascam
recorder at $460 (not $500 and later $1, 600), and the Martin
hunting bow for $200 (not $1, 000). Id. at 354, 360,
362, 363. Castro also claimed that the socket set and
chainsaw were purchased from Gino Herrera, not from Tilseth
and the Portland swap meet as asserted here. Id.
states that he suffers from traumatic brain injury and had
two brain operations as a result of a motorcycle accident in
1981. Castro Decl. ¶ 2. He also suffered a head injury
during an assault in 2013, which exacerbated his ability to
recall and recollect things. Id. ¶
3. He informed the State Farm claims
adjuster in his April and August statements of his two brain
surgeries. April Statement at 16:7-8; August Statement at
22:19. During his August 1 statement, Castro attributed some
of his difficulty in remembering to his brain surgeries.
August Statement at 22:23-25, 23:1-2. At the October 8, 2014
EUO, he informed State Farm's attorney that he was having
problems recollecting due to his severe head trauma,
including the more recent 2013 attack. Ex. C to Bell Decl.
& Ex. 31 to Okino Decl., EUO Tr. at 30:15-19, 31:7-10.
However, he also testified that he has not been diagnosed by
any doctor or medical professional with any memory disorder,
had not sought treatment in the last 12 months for memory
issues, had not lost any job positions because of inability
to conduct work in the last two years, and that the 2013
injury affected his ...