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Holman v. State Farm Fire and Casualty Co.

United States District Court, N.D. Alabama, Northeastern Division

September 9, 2014

KENNY L. HOLMAN and SANDRA K. HOLMAN, Plaintiffs,
v.
STATE FARM FIRE AND CASUALTY COMPANY, Defendant.

MEMORANDUM OPINION

JOHN E. OTT, Magistrate Judge.

This case concerns cracks in the foundation walls and exterior brick veneer of the plaintiffs' house. The plaintiffs contend that the cracks were caused by the torsional stress placed on their house during a tornado and that the damage is covered under their homeowners insurance policy. Defendant State Farm Fire and Casualty Company ("State Farm") contends that the cracks were caused by hydrostatic pressure and the movement of the underlying soils and that the damage is not covered under the homeowners policy. Consequently, State Farm has refused to pay the plaintiffs' claim for damage to their house, and the plaintiffs have sued State Farm for breach of contract and for bad faith refusal to pay their claim.

The case is now before the court on State Farm's motion for summary judgment on both of the plaintiffs' claims. (Doc. 21).[1] Because there is a genuine dispute as to the cause of the cracks in the walls and brick veneer of the plaintiffs' house, the court finds that the motion is due to be denied as to the plaintiffs' breach of contract claim and granted as to their bad faith claim.

I. Facts[2]

Plaintiffs Kenny and Sandra Holman (the "Holmans") reside at 1053 County Road 316 in Jackson County, Alabama. In 2010, State Farm issued a homeowners insurance policy (the "Policy") insuring the Holmans' home and its contents against loss.

On the morning of April 27, 2011, a series of tornados occurred in various places throughout Alabama. Mrs. Holman testified that three storms passed through the area where the Holmans live. (S. Holman Depo., Doc. 21-1 at 7-11). Mrs. Holman and her two children were at home when the first storm hit. ( Id. at 7). According to Mrs. Holman, there was "quite a bit of hail" and "heavy winds" but "[v]ery little rain." (S. Holman Depo., Doc. 22-1 at 8-9). She testified that she went into the basement with her children and that they heard "cracking and popping" and "a loud roaring sound." ( Id. at 9). She further testified that "we actually felt the wall vibrate." ( Id. ) The storm knocked out the power to their home.[3] ( Id. at 8).

On May 6, 2011, Mrs. Holman went back into the basement of her home and observed a vertical crack in the front wall of the basement. (Doc. 21 at ¶ 18). The Holmans then inspected the entire house for damage. ( Id. at ¶ 20). They found other cracks in the basement walls and in the brick veneer at the four corners of the house. ( Id. )

Mrs. Holman contacted her State Farm agent and reported the damage to their home. ( Id. at ¶ 19). On May 28, 2011, Philip Germany, a State Farm representative, inspected the home. ( Id. at ¶¶ 21-22). After completing his inspection, Germany reviewed his observations with Dwayne Gipe, a State Farm Catastrophe Team Manager. ( Id. at ¶ 29; Gipe Aff., Doc. 22-19 at ¶ 2). Gipe determined that an engineer needed to be consulted to independently determine what caused the cracks and recommend a repair process. (Doc. 21 at ¶ 29).

State Farm retained PT&C Forensic Consulting Services, PA ("PT&C") from Atlanta, Georgia, to inspect the Holmans' home. ( Id. at ¶¶ 30-31). Grant Renne, a PT&C consultant, performed the inspection on June 8, 2011. ( Id. at ¶¶ 32-33). In his inspection report, Renne concluded as follows:

No structural elements were damaged as a result of the high winds associated with the tornado on April 27, 2011. The south basement wall has fractured and sections of the CMUs have become dislodged due to historical damage from expansive clays, exacerbated by improper site drainage condition which allowed storm water runoff associated with the tornado on April 27, 2011 to accumulate against the basement wall. The accumulated runoff applied hydrostatic pressure to the historically damaged basement wall resulting in failure.

(Doc. 23-11 at 24).

By letter dated July 19, 2011, State Farm advised the Holmans that it was denying their claim, stating: "From the results of our discussions, site inspection (which includes the engineer's inspection), and investigation, it was found that the damage to your basement walls and brick veneer was not caused by the tornados of April 27, 2011. The damage was determined to have been caused by historical damage from expansive clays and hydrostatic pressure, which caused the collapsing of the basement wall." (Doc. 23-11 at 9-10).

After State Farm denied their claim, the Holmans hired engineer Stephen Hendrix to inspect their house. (Doc. 21 at ¶ 44). Hendrix inspected the house on August 5, 2011, and noted in his report that "[t]he most severe cracking was at the front porch where the foundation wall returns 90 degrees toward the front of the house" and that the cracking appeared to be "newer cracks" and did not appear to be "related to horizontal pressure or to cracks related to settlement of the foundation." (Doc. 22-15 at 33). He also observed "cracking of the brick veneer at the corners of the house... which would indicate torsional stress as a result of the lateral loads imposed on the house from the severe winds and multi-directional winds of the tornado." ( Id. at 34). The Holmans provided a copy of Hendrix's report to State Farm, but State Farm again denied their claim. (Doc. 23-11 at 85-88).

Although State Farm again denied the claim, State Farm forwarded a copy of Hendrix's report to PT&C. ( Id. at 130). After reviewing the report and conducting a second inspection of the Holmans' house on February 14, 2012, PT&C reported that it stood by its original opinion with no changes or updates. ( Id. at 130-31). State Farm ...


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