CLARY Et Al. v. ALLSTATE FIRE AND CASUALTY INSURANCE COMPANY , 340 Ga. App. 351 ( 2017 )

FOURTH DIVISION
ELLINGTON, P. J.,
BRANCH and MERCIER, JJ.
NOTICE: Motions for reconsideration must be
physically received in our clerk’s office within ten
days of the date of decision to be deemed timely filed.
http://www.gaappeals.us/rules
February 2, 2017
In the Court of Appeals of Georgia
A16A2186. CLARY et al. v. ALLSTATE FIRE AND CASUALTY JE-081
INSURANCE COMPANY.
ELLINGTON, Presiding Judge.
John and Cathy Clary filed this action in the Superior Court of Putnam County
against their homeowners’ insurance carrier, Allstate Fire and Casualty Insurance
Company,1 asserting multiple claims in tort and contract based on circumstances
surrounding Allstate’s handling of their claim against their homeowners’ insurance
policy. Allstate defended the action, inter alia, on the basis that it had satisfied its
obligations under the policy by tendering the amount determined to be due by
appraisers selected pursuant to the policy. Allstate filed a motion for entry of
judgment on the appraisal award and motions for partial summary judgment as to the
1
The Clarys also asserted claims against other defendants, which are not at
issue in this appeal.
Clarys’ claims for inceptive fraud, breach of implied contract, negligence, emotional
distress, and attorney fees. The Clarys filed a cross motion for partial summary
judgment on its claim for a declaratory judgment that the appraisal award was not
final. After a hearing, the trial court granted Allstate’s motion for judgment on the
appraisal award and its motions for partial summary judgment; the trial court denied
the Clarys’ cross motion. The Clarys appeal, and, for the reasons explained below, we
affirm.
Summary judgment is proper “if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show that
there is no genuine issue as to any material fact and that the moving party is entitled
to judgment as a matter of law[.]” OCGA § 9-11-56 (c).
Summary judgments enjoy no presumption of correctness on appeal, and
an appellate court must satisfy itself de novo that the requirements of
OCGA § 9-11-56 (c) have been met. In our de novo review of the grant
[or denial] of a motion for summary judgment, we must view the
evidence, and all reasonable inferences drawn therefrom, in the light
most favorable to the nonmovant.
2
(Citations and punctuation omitted.) Cowart v. Widener, 287 Ga. 622, 624 (1) (a)
(697 SE2d 779) (2010). The relevant facts that follow are undisputed unless
otherwise noted.
The Clarys obtained a homeowners’ insurance policy with Allstate in October
2009 for their lakeside residence in Eatonton. Section 1.4 of the policy provides:
Our Settlement Options. In the event of a covered loss, we have the
option to:
a) repair, rebuild, or replace all or any part of the damaged, destroyed or
stolen property with property of like kind quality within a reasonable
time; or
b) pay for all or any part of the damaged, destroyed or stolen property
as described in Condition 5 “How We Pay For a Loss.” Within 30 days
after we receive your signed, sworn proof of loss we will notify you of
the option or options we intend to exercise.[2]
Section 1.7 provides:
Appraisal. If you and we fail to agree on the amount of loss, either party
may make written demand for an appraisal. Upon such demand, each
2
See OCGA § 33-32-3 (explaining that the “privilege of rebuilding or
reinstating property sustaining loss or damage shall not exist unless it is reserved in
the policy.”).
3
party must select a competent and impartial appraiser and notify the
other of the appraiser’s identity within 20 days after the demand is
received. . . .
The appraisers shall then determine the amount of loss, stating
separately the actual cash value and the amount of loss to each item. If
the appraisers submit a written report of an agreement to you and to us
the amount agreed upon shall be the amount of the loss.
On August 3, 2010, lightning struck the Clary residence, resulting in a fire,
which was extinguished by firefighters. The fire and ensuing water penetration caused
severe damage to the residence and the personal property it contained. The Clarys
reported the fire to their Allstate insurance agent, Chris Jackson, on August 3, 2010.
Jackson called Paul Davis of Restoration of Athens to the home to begin water
mitigation. On August 5, 2010, Matt Hunter, an Allstate adjuster, met with the Clarys
to view the damage to their home. The parties agree that the lightning fire that
partially destroyed the premises was a covered occurrence under the policy. Hunter
advised the Clarys that “if it were my property I would let Allstate handle it all.”
According to the Clarys, Hunter terminated Paul Davis from the mitigation work,
hired Elite Response, Inc., to perform that work, hired Icon Restoration, Inc. to
perform the repairs, and supervised the repair and rebuilding of the residence until a
4
dispute arose regarding the measures necessary to remediate mold that had formed as
a result of the fire and water damage.3
When the Clarys reported to Allstate that they thought mold was present at the
property, Allstate hired Marge Philbin, an industrial hygienist, to inspect the property.
Although there was no dispute the mold was covered under the policy, the parties
could not agree on how to remediate the problem. On December 30, 2010, Allstate
made a written demand for an appraisal. Allstate selected Larry Masters, and the
Clarys selected Chris Dawkins. The appraisers obtained a repair estimate prepared by
Icon and used that estimate in determining the amount to allow for structural repairs.
The final structural repair estimate by Icon was $329,664.75. The appraisers obtained
a protocol for mold remediation from Elizabeth Witten, a certified microbial
consultant, agreed to by Allstate and the Clarys. In determining the amount to allow
for mold remediation, the appraisers relied on an estimate from Luke Smith of
ServiceMaster who advised the appraisers he would complete the remaining mold
3
Allstate contends that Hunter only recommended that the Clarys hire Elite
Response and that John Clary actually hired Elite Response, as the general contractor,
as well as Icon Restoration, and signed the contract guaranteeing payment. Allstate
contends that John Clary personally supervised the work.
5
remediation for $95,000. The appraisers set the total mold remediation loss at
$114,546.44, which reflected remediation work already performed.
On January 20, 2012, the appraisers reached a final agreement and issued an
Appraisal Agreement in the following amounts:
Section I, Mitigation Loss
$ 42,572.33
Section II, Mold Remediation Loss
$114,546.44
Section III, Structural Loss
$329,764.75
Total
$486,883.52
Once the appraisers issued the award, Allstate issued checks to the Clarys in the
amount of the award. The Clarys returned the checks to Allstate and demanded that
Allstate complete the restoration. Allstate refused, and the Clarys ultimately deposited
the checks after advising Allstate that they would use the proceeds to mitigate the
damages they would suffer from Allstate’s abandonment of the restoration.
1. The Clarys contend that the trial court erred in granting Allstate’s motion for
judgment on the appraisal award and in denying their cross motion for partial
summary judgment regarding the finality of the appraisal award. They contend that
when the privilege to rebuild or repair property is reserved in a policy, and the insurer
6
asserts that privilege and begins repair and restoration, the insurer cannot later
abandon the restoration and change its election to paying for the loss. In addition,
they contend that a condition precedent to Allstate’s right to demand an appraisal,
specifically that there was a dispute as to the amount of the loss, was not present,
arguing that the amount of loss was no longer an issue once Allstate elected to repair
and restore the property. They argue that the appraisal award cannot be considered
final because the scope of the appraisal was not determined prior to the
commencement of the appraisal process and because the real issue was coverage vel
non, which is not the proper subject for an appraisal.
(a) In arguing that, once an insurer begins a restoration, it cannot later change
its election to paying for the loss, the Clarys cite Mason v. Tennessee Farmers Mut.
Ins. Co., 640 SW2d 561 (Tenn. Ct. App. 1982). In that case, the Court of Appeals of
Tennessee stated that, under Tennessee law,
[w]here an insurer properly exercises its option [in a motor vehicle
policy] to repair damaged property, it tacitly represents that it will
substantially restore the vehicle as to function, appearance and value.
Under these circumstances, the insured has no choice but to acquiesce
and [the] insurer is bound to repair the property and restore it to its
former condition.
7
640 SW2d at 567 (II). From this the Clarys would have us extrapolate that, under
Georgia law, once an insurer exercises its option to repair damaged property, it loses
the right to exercise the alternative option under the policy of paying for the insured’s
loss. This misstates the holding. The Tennessee court held that the insurer did not
satisfy its obligation under the replacement contract when it elected to repair the
insured’s water-damaged truck, where the evidence showed that the repairs the
insurer proposed to undertake could not restore the truck to its former condition. Id.The Tennessee court emphasized that, where an insured’s property cannot be
substantially restored to its fair market value immediately prior to the loss, “the
[insurer’s] sole method of complying with the insurance contract is to pay to the
insured the loss of value.” (Citation omitted.) Id. at 566 (II).
The holding in Mason v. Tennessee Farmers Mut. Ins. Co. is generally
consistent with Georgia law regarding homeowners’ insurance. If an insurer elects to
repair a damaged home, it satisfies its obligations under the contract only if it restores
the property to its former, pre-loss condition. See Carter v. Allstate Ins. Co., 197 Ga.
App. 738, 741-742 (2) (399 SE2d 500) (1990) (The insurer that chooses the option
to repair the property “assumes a duty to restore the home to a habitable condition”
and is contractually obligated “to perform those repairs (or to see to it that they were
8
performed) in a skillful and workmanlike manner.”) (citations omitted). Furthermore,
even when an insurer restores damaged real property to its pre-loss condition, it may
also be liable to pay for any post-repair diminution in value. Royal Capital Dev. LLC
v. Maryland Cas. Co., 291 Ga. 262, 265 (1) (728 SE2d 234) (2012). This flows from
the principle that Georgia law favors full recovery, that is, that an injured party be
placed, “as nearly as possible, in the same position it would have been if the injury
had never occurred.” (Citations omitted.) Id. at 264 (1).
Based on the foregoing, we conclude that Georgia law does not support the
Clarys’ argument that, having elected to repair the property, Allstate breached the
contract by abandoning the restoration and instead electing to pay the Clarys the
amount of the loss. Carter v. Allstate Ins. Co., 197 Ga. App. at 742 (“Allstate was
entitled under the terms of the policy either to pay the [homeowners] for the fire
damage or to repair the damage itself[.]”). In the same vein, we conclude that the
Clarys’ argument that, once Allstate elected to repair the property, the amount of loss
was no longer an issue is not supported by Georgia law.
(b) In addition, the Clarys’ argument that the real issue determined by appraisal
was coverage vel non, which is not the proper subject for an appraisal, is not
supported by the record. The record is undisputed that Allstate never denied coverage
9
on the basis that the fire and water damage was not a covered event, nor on the basis
that the policy did not cover mold remediation.4 The record is undisputed that the
appraisers undertook to determine the cost of all repairs necessary to restore the
property to its pre-loss value, including mold remediation.
2. The Clarys contend that the trial court erred in granting Allstate’s motion for
judgment on their claim that Allstate negligently performed, supervised, and managed
the restoration of their home. They contend that, by virtue of Allstate’s election to
rebuild, it had a duty of care, apart from its contractual duties, to perform the repair
and rebuild work in a skillful and workmanlike manner.
In order to have a viable negligence action, a plaintiff must satisfy the
elements of the tort, namely, the existence of a duty on the part of the
defendant, a breach of that duty, causation of the alleged injury, and
damages resulting from the alleged breach of the duty. The legal duty is
the obligation to conform to a standard of conduct under the law for the
protection of others against unreasonable risks of harm. This legal
obligation to the complaining party must be found, the observance of
4
Furthermore, the Clarys’ argument that the scope of the appraisal was not
determined prior to the commencement of the appraisal process is not supported by
the record. Dawkins, the Clarys’ chosen appraiser, understood the appraisers’ task to
be “to identify and put a dollar amount on any and all damage to the property” and
to determine the amount of the loss. Masters, Allstate’s chosen appraiser, testified
that their task was to arrive at a total loss amount.
10
which would have averted or avoided the injury or damage; the
innocence of the plaintiff is immaterial to the existence of the legal duty
on the part of the defendant in that the plaintiff will not be entitled to
recover unless the defendant did something that it should not have done,
i.e., an action, or failed to do something that it should have done, i.e., an
omission, pursuant to the duty owed the plaintiff under the law.
(Citations and punctuation omitted.) Rasnick v. Krishna Hospital, Inc., 289 Ga. 565,
566 (713 SE2d 835) (2011). Thus, it is not enough for a plaintiff to show that the
defendant owed the plaintiff a duty of care, the plaintiff must specify the conduct that
constituted a breach of that duty, that is, what the defendant did that it should not
have done.
In their complaint, in responding to Allstate’s motion for summary judgment,
and now on appeal, the Clarys assert in a conclusory manner that Allstate negligently
performed, supervised, and managed the restoration of their home. The Clarys have
not identified any restoration work performed by Allstate’s agents that was not
performed in a skillful and workmanlike manner. To the extent the Clarys base their
negligence claim on Allstate’s exercising its option to pay the value of the loss, rather
than to undertake to repair and rebuild, such conduct does not constitute the breach
of any duty. Tate v. Aetna Cas. & Sur. Co., 149 Ga. App. 123, 124-125 (253 SE2d
11
775) (1979) (Georgia does not recognize a claim for negligent handling of an
insurance claim.).
3. The Clarys contend that the trial court erred in granting Allstate’s motion for
judgment on their claim for breach of an implied contract. The Clarys argue that,
when Allstate initially opted to repair the damage to their home, a new agreement
arose between them under which Allstate assumed a duty to restore the home to a
habitable condition. They contend that Allstate breached that implied agreement when
it abandoned its efforts to repair the home and instead insisted on the appraisal
process.
Under Georgia law, “[t]here cannot be an express and implied contract for the
same thing existing at the same time between the same parties.” (Punctuation and
footnote omitted.) Georgia Real Estate Properties, Inc. v. Lindwall, 303 Ga. App. 12,
15 (3) (692 SE2d 690) (2010). Therefore, where there exists an express agreement
covering the same subject matter, the courts will not imply a contract. Id. As noted
in Division 1, supra, if an insurer repairs damaged property, in lieu of paying for the
loss, it is obligated under the insurance contract to perform those repairs in a
competent manner. Carter v. Allstate Ins. Co., 197 Ga. App. 738, 741-742 (2) (399
12
SE2d 500) (1990). Because an express agreement covered the same subject matter,
the Clarys cannot recover on any implied contract.
4. The Clarys contend that the trial court erred in granting Allstate’s motion for
judgment on their claim for inceptive fraud. “To establish a claim for fraud in the
inducement, or inceptive fraud to enter into a contract, a plaintiff must prove both that
the defendant failed to perform a promised act and that the defendant had no intention
of performing when the promise was made.” (Citation omitted.) Nash v. Roberts
Ridge Funding, LLC, 305 Ga. App. 113, 116 (1) (699 SE2d 100) (2010). See also
Higginbottom v. Thiele Kaolin Co., 251 Ga. 148, 152 (2) (304 SE2d 365) (1983) (“An
action for fraudulent inducement can be made out . . . [by] show[ing] that the
defendant . . . made promises as to future events with the present intention not to
perform or with the knowledge that the future event would not occur.”) (citations
omitted).
Fraudulent intent at the time of contracting can . . . be inferred based on
subsequent conduct of the defendant that is unusual, suspicious, or
inconsistent with what would be expected from a contracting party who
had been acting in good faith. Actionable fraud, however, does not result
from a mere failure to perform promises made. Otherwise any breach of
a contract would amount to fraud.
13
(Citations and punctuation omitted.) Gibson Technical Svcs., Inc. v. JPay, Inc., 327
Ga. App. 82, 84 (755 SE2d 377) (2014).
Like their claim for breach of an implied contract, the Clarys’ claim for
inceptive fraud is premised on their position that a new agreement arose between
them and Allstate under which Allstate assumed a duty to restore the home to a
habitable condition. See Division 3, supra. The Clarys contend that there is evidence
that, after the fire, Allstate promised to repair their home while intending not to fulfill
that promise.5 The Clarys’ do not specify, however, what Allstate’s allegedly
fraudulent promise to repair induced them to do. Not only was Allstate’s duty after
the fire to restore the Clarys’ home competently (or to pay for the loss) established
by the insurance contract, but the Clarys’ own duties following the loss arose from
the policy. Because the Clarys do not allege that they agreed to perform any act
5
The Clarys contend that Allstate’s Matt Hunter testified that he did not intend
to repair and rebuild the Clary home, which at the very least creates a fact issue as to
whether Allstate intended to fulfill its promise to rebuild when the promise was made.
Hunter Deposition, [Appellate Record] Vol. 4, pp. 449-450 (showing that Mr. Hunter
never intended to repair and rebuild the home despite his actions in hiring the
contractors and directing the restoration process).
We have reviewed the referenced portion of the transcript and find that it does not
support the Clarys’ characterization.
14
because of Allstate’s allegedly fraudulent promise, they failed to make a claim for
fraudulent inducement. Id. at 85.
5. The Clarys contend that the trial court erred in granting Allstate’s motion for
judgment on their claim for emotional distress.
Georgia has long recognized a cause of action for intentional infliction
of emotional distress. However, the burden which the plaintiff must
meet in order to prevail in this cause of action is a stringent one. To
prevail, a plaintiff must demonstrate that: (1) the conduct giving rise to
the claim was intentional or reckless; (2) the conduct was extreme and
outrageous; (3) the conduct caused emotional distress; and (4) the
emotional distress was severe. The defendant’s conduct must be so
extreme in degree, as to go beyond all possible bounds of decency, and
to be regarded as atrocious, and utterly intolerable in a civilized
community. Whether a claim rises to the requisite level of
outrageousness and egregiousness to sustain a claim for intentional
infliction of emotional distress is a question of law.
(Citation and punctuation omitted.) Thompson-El v. Bank of America, 327 Ga. App.
309, 312-313 (3) (759 SE2d 49) (2014).
As evidence of outrageous conduct, the Clarys identify Hunter’s alleged
“refus[al] to make accommodations for [John] Clary’s susceptibility to mold
conditions,” Allstate’s alleged “misrepresentations of the Clarys’ rights under the
15
policies,” and Allstate’s allegedly improper invocation of the appraisal process. But
a “mere breach of a valid contract amounting to no more than a failure to perform in
accordance with its terms does not constitute a tort or authorize the aggrieved party”
to pursue a tort action, even if the alleged breach caused great hardship.” (Citation
and punctuation omitted.) Tate v. Aetna Cas. & Sur. Co., 149 Ga. App. 123, 124-125
(253 SE2d 775) (1979) (Where the plaintiff’s claim arose solely from the defendant’s
alleged breach of a contractual duty to cover his insurance claim, the plaintiff could
not recover damages for emotional distress.). We conclude that the trial court did not
err in granting Allstate’s motion for summary judgment because the Clarys failed to
allege any acts by the defendants that were extreme and outrageous or that any
emotional distress on their part was so severe that no reasonable person could be
expected to endure it. Thompson-El v. Bank of America, 327 Ga. App. at 312-313 (3)
(A lender’s conduct in foreclosure proceedings against defaulting borrower did not
amount to extreme and outrageous acts tending to cause emotional distress so severe
that no reasonable person could be expected to endure it.); Massih v. Mulling, 271
Ga. App. 685, 687-688 (2) (610 SE2d 657) (2005) (An employer’s alleged breach of
an oral contract to transfer an ownership interest in the company to an employee
would not support the employee’s claim for intentional infliction of emotional
16
distress.); Frank v. Fleet Finance, 238 Ga. App. 316, 318 (518 SE2d 717) (1999) (A
lender’s conduct in failing to close on a contract for the sale of a residence to its
current tenant and then evicting him did not support the tenant-buyer’s claim for
intentional infliction of emotional distress.); Lincoln Nat. Life Ins. Co. v. Davenport,
201 Ga. App. 175, 176 (5) (410 SE2d 370) (1991) (“An insurer’s failure to pay
benefits under an insurance policy does not, as a matter of law, rise to the level of
such outrageousness requisite to a cause of action for intentional infliction of
emotional distress.”) (citations omitted).6
6. The Clarys contend that the trial court erred in granting Allstate’s motion for
judgment on their claim for attorney fees pursuant to OCGA § 13-6-11. Specifically,
they contend that their claims are not based exclusively on an alleged bad faith refusal
6
Cf. Yarbray v. S. Bell Tel. & Tel. Co., 261 Ga. 703, 706 (2) (409 SE2d 835)
(1991) (Evidence that an employer deliberately set out to retaliate against its
employee for testifying against the employer, which retaliation included subjecting
her to abuse by her supervisor and causing her severe emotional pain could meet the
threshold which reasonable persons would consider outrageous and extreme conduct
sufficient to subject the company to damage for intentional infliction of emotional
distress.); Turnage v. Kasper, 307 Ga. App. 172, 183-184 (1) (c) (704 SE2d 842)
(2010) (Where the defendants repeatedly photographed and publicly humiliated a
neighbor with whom they had a dispute, and schemed to have the neighbor arrested
for aggravated stalking and incarceration without bail, knowing that she walked by
their property merely to pick up her children from their designated bus stop, such
conduct could be considered by a jury to be extreme and outrageous.).
17
to pay their insurance claim, but are also based on Allstate’s failure to repair their
home after electing to do so, and therefore they are not limited to seeking fees under
OCGA § 33-4-6.7
An award of attorney fees and other expenses of litigation is authorized
pursuant to OCGA § 13-6-11, where (1) the plaintiff specially pleads and prays for
such an award, and (2) the finder of fact finds that the defendant acted in bad faith in
the underlying transaction or that, after the transaction on which the cause of action
is predicated, the defendant was stubbornly litigious or caused the plaintiff
unnecessary trouble and expense. But expenses of litigation are not recoverable
pursuant to OCGA § 13-6-11 unless other elements of damages are recoverable.
7
“In the event of a loss which is covered by a policy of insurance and the
refusal of the insurer to pay the same within 60 days after a demand has been made
by the holder of the policy and a finding has been made that such refusal was in bad
faith, the insurer shall be liable to pay such holder, in addition to the loss, not more
than 50 percent of the liability of the insurer for the loss or $5,000.00, whichever is
greater, and all reasonable attorney’s fees for the prosecution of the action against the
insurer.” OCGA § 33-4-6 (a). Because the General Assembly has provided in OCGA
§ 33-4-6 a specific procedure and a limited penalty for bad faith failure to pay
insurance claims, such limited penalty and procedure were intended by the legislature
to be the exclusive procedure and penalty, and recovery under general penalty
provisions such as OCGA § 13-6-11 is not allowed for bad faith failure to pay
insurance claims. Balboa Life & Cas. v. Home Builders Fin., Inc., 304 Ga. App. 478,
483 (3) (697 SE2d 240) (2010); United Svcs. Auto. Assn. v. Carroll, 226 Ga. App.
144, 149 (5) (486 SE2d 613) (1997); Howell v. Southern Heritage Ins. Co., 214 Ga.
App. 536, 537 (2) (448 SE2d 275) (1994).
18
Lincoln Nat. Life Ins. Co. v. Davenport, 201 Ga. App. 175, 176 (410 SE2d 370)
(1991); Connell v. Houser, 189 Ga. App. 158, 160 (5) (375 SE2d 136) (1988); Basic
Four Corp. v. Parker, 158 Ga. App. 117, 121 (279 SE2d 241) (1981). Because
Allstate has prevailed on each of the substantive counts of the Clarys’ complaint, it
necessarily follows that it is also entitled to summary judgment on the claim for
attorney fees. Connell v. Houser, 189 Ga. App. at 160 (5).
Judgment affirmed. Branch and Mercier, JJ., concur.
19