Darren Sleister v. State Farm Fire and Casualty Company ( 2019 )

IN THE COURT OF APPEALS OF IOWA
No. 18-2022
Filed August 7, 2019
DARREN SLEISTER,
Plaintiff-Appellant,
vs.
STATE FARM FIRE AND CASUALTY COMPANY,
Defendant-Appellee.
________________________________________________________________
Appeal from the Iowa District Court for Polk County, David May, Judge.
Darren Sleister appeals from the district court’s orders granting the
defendant’s motion for judgment notwithstanding the verdict on his breach-of-
contract claim and dismissing his bad-faith claim. AFFIRMED.
Kenneth R. Munro of Munro Law Office, P.C., Des Moines, for appellant.
Guy Cook and Adam Zenor of Grefe & Sidney, P.L.C., Des Moines, for
appellee.
Considered by Potterfield, P.J., and Bower and Greer, JJ. May, J., takes
no part.
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GREER, Judge.
In 2016, Darren Sleister entered into a “house flipping” venture with
Georgios Symeonidis after seeing Symeonidis’s property listing. Under their
agreement, Symeonidis would own the property and act as general contractor
during the rehab, Sleister would pay for labor and materials, and Sleister would
retain the net proceeds from the sale of the fully-remodeled property. On July 19,
Symeonidis purchased homeowner’s insurance for the property with $100,800 in
dwelling coverage from State Farm Fire and Casualty Company (State Farm).
Symeonidis was the named insured as the property owner, and Sleister was
named as an additional insured.1 A State Farm underwriting representative took
photographs of the property on July 29, showing the condition of the home to be
extremely poor. A municipal sign posted on the door declared the property a public
nuisance unsafe or unfit for human occupancy.
Symeonidis hired a subcontractor to work on the roof, and Sleister expected
the subcontractor would only remove and replace the shingles and sheathing. On
August 10, the subcontractor removed the entire roof, including the trusses,
leaving the exposed home without a tarp or other protection from the elements. A
rainstorm began later that day, dumping water into the now-roofless structure and
destroying the interior of the home.
On August 11, State Farm was notified of the property damage. A claims
specialist did not inspect the property until August 25. By that time, most of the
internal walls and flooring of the home had been removed. The claims specialist
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Neither Sleister nor Symeonidis ever lived in the home. At the time of trial, it was
unknown where Symeonidis lived.
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took photographs of the property, but he was unable to confirm what damage was
attributable to the rainstorm. Sleister maintains that because State Farm waited
weeks from the date of the damage to inspect the property, the walls and floors of
the home deteriorated to the extent that they had to be removed before the
inspection; however, the materials remained piled around the property or in the
dumpster on site.
On September 13, State Farm sent Symeonidis a letter denying coverage
under the policy, stating, “We are denying coverage for this claim based [on] your
failure to comply with the conditions of the policy. You have a duty under the policy
to allow us to inspect the damage prior to the demolition or commencement of
repairs.”
The policy requires the following duties of the insured after a loss:
a. give immediate notice to us or our agent. . . . ; Also notify the
police if the loss is caused by theft. Also notify the credit card
company or bank if the loss involves a credit card or bank fund
transfer card;
b. protect the property from further damage or loss, make
reasonable and necessary temporary repairs required to
protect the property, keep an accurate record of repair
expenditures;
c. prepare an inventory of damaged or stolen personal property.
Show in detail the quantity, description, age, replacement cost
and amount of loss. Attach to the inventory all bills, receipts
and related documents that substantiate the figures in the
inventory;
d. as often as we reasonably require:
(1) exhibit the damaged property;
(2) provide us with records and documents we request and
permit us to make copies;
(3) submit to and subscribe, while not in the presence of any
other insured:
(a) statements; and
(b) examinations under oath; and
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(4) produce employees, members of the insured’s household
or others for examination under oath to the extent it is within
the insured’s power to do so; and
e. submit to us, within 60 days after the loss, your signed, sworn
proof of loss which sets forth, to the best of your knowledge
and belief:
(1) the time and cause of loss;
(2) interest of the insured and all others in the property involved
and all encumbrances on the property;
(3) other insurance which may cover the loss;
(4) changes in title or occupancy of the property during the term
of this policy;
(5) specifications of any damaged building and detailed
estimates for repair of the damage;
(6) an inventory of damaged or stolen personal property
described in 2.c;
(7) receipts for additional living expenses incurred and records
supporting the fair rental value loss; and
(8) evidence or affidavit supporting a claim under the Credit
Card, Bank Fund Transfer Card, Forgery and Counterfeit
Money coverage, stating the amount and cause of loss.
Sleister sued State Farm for breach of contract, negligence, breach of
fiduciary duty, and bad faith. The district court granted summary judgment on the
counts relating to negligence, breach of fiduciary duty, and bad faith. The case
was tried to a jury on the breach-of-contract claim.
At the trial, Sleister submitted documentation that he spent $95,000 on the
remodeling project before he abandoned it when this dispute could not be
resolved. He believed the property was worth more than $95,000 on the day
before the storm. State Farm calculated the actual cash value of the property was
$9553.65 prior to the loss. The assessed value of the structure pre-remodel was
$4100.
Kim Brown, a claims team manager with State Farm, testified that the initial
reason for the denial of the claim was the insureds’ failure to “exhibit” the damage.
She defined “exhibiting the property” as allowing State Farm “to inspect the
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damage.” The policy language requires the insureds to “exhibit the damaged
property” to State Farm “as often as we reasonably require.” Brown also
addressed other conditions precedent the insureds did not meet, including (1) not
protecting the structure from further damage or loss; (2) failing to provide an
inventory of damaged personal property; and (3) failing to submit a sworn proof of
loss within sixty days of the loss.
On August 29, 2018, the jury found State Farm had breached the contract
and awarded Sleister $85,800 in damages. State Farm then filed post-trial motions
and specifically requested judgment notwithstanding the verdict (JNOV). The
district court granted State Farm’s motion for JNOV, entered judgment for State
Farm, and dismissed the case. On appeal, Sleister asserts the evidence is
sufficient to prove he was entitled to coverage and the damages awarded. He also
appeals the ruling granting summary judgment on his bad-faith claim.
“We review the [district] court’s grant of a motion for directed verdict for
correction of errors of law.” Tomka v. Hoechst Celanese Corp., 528 N.W.2d 103,
106 (Iowa 1995). Our review “is limited to those grounds raised in the directed
verdict motion.” Lala v. Peoples Bank & Tr. Co., 420 N.W.2d 804, 806 (Iowa 1988).
We will “view the evidence in the light most favorable to the nonmoving party” to
“decide whether the trial court correctly determined that there was insufficient
evidence to submit the case to the jury.” Id. We will also “tak[e] into consideration
every legitimate inference that may fairly and reasonably be made.” Wiesler v.
Sisters of Mercy Health Corp., 540 N.W.2d 445, 448–49 (Iowa 1995). “A motion
for judgment notwithstanding the verdict should be denied if there is substantial
evidence to support each element of the plaintiff[’s] claim[].” Id. at 449.
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Under Iowa law, a party claiming entitlement to coverage under an
insurance policy must prove compliance with the policy’s terms. Am. Guar. & Liab.
Ins. Co. v. Chandler Mfg. Co., 467 N.W.2d 226, 228 (Iowa 1991); Bruns v. Hartford
Accident & Indem. Co., 407 N.W.2d 576, 579 (Iowa 1987); Henschel v. Hawkeye-
Sec. Ins. Co., 178 N.W.2d 409, 415 (Iowa 1970); Henderson v. Hawkeye-Sec. Ins.
Co., 106 N.W.2d 86, 91 (Iowa 1960). The insured may meet this burden of proof
by showing either: (1) substantial compliance with the condition precedent; (2) the
failure to comply was excused or waived; or (3) the failure to comply was not
prejudicial to the insurer. Am. Guar., 467 N.W.2d at 228; Henderson, 106 N.W.2d
at 92. When conditions are not met, prejudice to the insurer is presumed unless
the insured can show substantial compliance. Am. Guar., 467 N.W.2d at 228.
Upon review, we agree with the district court’s detailed and well-reasoned
opinion that Sleister failed to comply with the requirements of the insurance policy.
Accordingly, we affirm the order granting JNOV to State Farm and dismissing the
action under Iowa Court Rule 21.26(1)(d) (“The record of the proceeding includes
an opinion of the court or agency whose decision is being reviewed, the opinion
identifies and considers all the issues presented, and the appellate court approves
of the reasons and conclusions in the opinion.”).
Sleister also argues that the district court erred when it dismissed his bad-
faith claim. In Iowa, a plaintiff may bring a common law bad-faith action when an
insurer “intentionally denies or fails to process a claim without a reasonable basis
for such action.” Reuter v. State Farm Mut. Auto. Ins. Co., 469 N.W.2d 250, 253
(Iowa 1991). Based on our conclusion that Sleister and Symeonidis did not
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substantially comply with the conditions precedent to coverage, we also affirm the
grant of summary judgment on Sleister’s bad-faith claim.
AFFIRMED.