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Progressive Specialty Insurance Co. v. Smith

United States District Court, S.D. Alabama, Southern Division

November 21, 2014

PROGRESSIVE SPECIALTY INSURANCE COMPANY, Petitioner,
v.
BOBBY SMITH and SHELIA SMITH, Respondents.

REPORT AND RECOMMENDATION

WILLIAM E. CASSADY, Magistrate Judge.

This cause is before the Magistrate Judge for issuance of a report and recommendation, pursuant to 28 U.S.C. § 636(b), on the complaint for declaratory judgment (Doc. 1), the respondents' answer and counterclaim (Doc. 14), Progressive Specialty Insurance Company's (hereinafter, "Progressive") motion to dismiss counterclaim (Doc. 18), the Smiths' response in opposition (Doc. 22), and the moving party's reply (Doc. 24). Upon consideration of the foregoing pleadings, the Magistrate Judge recommends that the Court DENY petitioner's motion to dismiss the respondents' counterclaim (Doc. 18).

FINDINGS OF FACT

As previously observed by the Court, "[t]he Smiths insured their RV with Progressive." (Doc. 29, at 1.) Indeed, Shelia Smith contacted Progressive on April 30, 2014, and reinstated the policy of insurance on the RV, bearing policy number 32817137-8, at 9:59 a.m., that lapsed on April 4, 2014. ( Compare Doc. 14, at 4-5 with Doc. 1, ¶ 6.) And, "[w]hile parked at a campground in Baldwin County, Alabama, rising river waters flooded the RV." (Doc. 29, at 1.) For its part, petitioner contends that torrential rains fell in Baldwin County on April 29-30, 2014, with no rain occurring on May 1, 2014 (Doc. 1, at ¶ 7), and it is Progressive's belief that "there was flooding in the area where the insured RV was located prior to" May 1, 2014 ( id. ). The Smiths contend that the damage sustained by their RV due to rising-river waters occurred on May 1, 2014 (Doc. 14, at 5) and that same day they made a claim under their Progressive policy for the total loss of their RV ( compare Doc. 29, at 1 with Doc. 1, at ¶ 7).

On May 13, 2014, Progressive notified Bobby Smith by letter that it had completed a "thorough investigation of th[e] claim" and though it attempted "to provide coverage[, ]" it "regret[ted] to inform [the insureds] that [their] claim [could not] be covered by Progressive Insurance." (Doc. 22, Exhibit 1, at 1; see also id. ("Our investigation determined that the loss occurred before the policy reinstated on April 30, 2014 at 9:59 am Eastern Time. This decision is based on, but not limited to, information provided by you, inspection of the property and the insuring agreements, per your policy contract, listed below.").) While an explicit denial of coverage appears clear from this language, on the next page of the letter the claims agent does not do a total about-face but does tergiversate by informing the Smiths that it was necessary for Progressive Insurance to "conditionally deny the claim[.]" ( Id. at 2; see also id. ("If you can provide us with any additional information or documentation that may alter our decision in any way, please do not hesitate to contact us at the telephone number provided below.").)

On June 3, 2014, Phil E. Miley, Esquire, penned a letter to the above-referenced claims agent, Jake Degroot, and therein requested that Progressive "immediately undertake to properly adjust the[] loss [suffered by his clients] and pay to [the Smiths] the agreed upon value of the motorhome as provided in the policy [of insurance]." (Doc. 24, Exhibit 1, at 1.) Progressive was informed that if proper payment was not made within thirty (30) days, the Smiths would file suit seeking the "proceeds of the policy of insurance along with penalties, attorney fees, court costs, and additional appropriate damages." ( Id. at 2.) One day prior to the expiration of that 30-day period, that is, on July 2, 2014, Shelia Pourciau Smith and Bobby H. Smith, Sr. sat for their examinations under oath ( see Doc. 24, Exhibits 2 & 3), as allowed by their policy of insurance ( see Doc. 24, Exhibit 3, Examination Under Oath of Shelia Pourciau Smith, at 5). Shelia Smith maintained that she and her husband received their first notification of rising floodwaters in Riverside RV Park during the morning of May 1, 2014 ( see id. at 30) and later that day learned their RV had flooded ( see id. at 45). In addition, Mrs. Smith testified that she and her husband received information that there was flooding in Baldwin County on March 30, 2014, but that the RVs in the park, including their RV, were not in peril of the floodwaters. ( Id. at 49-50; see also id. at 57 (no one told she or her husband that their motorhome was underwater on April 30, 2014).)

Q Has anybody told you at all that the people were evacuated from the park as early as April 29th?
A No.
Q You don't have any knowledge of that?
A No, sir.
Q Okay. Do you have any knowledge that people were evacuated from the park on April 30th?
A No, sir.
Q Nobody has told you ...

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