Kuehn Amended Complaint
Transcript of Kuehn Amended Complaint
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IN THE UNITED STATES DISTRICT COURTFOR THE SOUTHERN DISTRICT OF MISSISSIPPI
SOUTHERN DIVISION
HENRY KUEHNAND JUNE P. KUEHN PLAINTIFFS
VERSUS CIVIL ACTION NO. 1:08CV577-LTS-RHW
STATE FARM FIRE AND CASUALTY COMPANYAND JOHN DOES 1 THROUGH 10 DEFENDANTS
AMENDED COMPLAINT
JURY TRIAL DEMANDED
COME NOW the Plaintiffs, HENRY KUEHN AND JUNE P. KUEHN, by and through
their attorneys of record, DENHAM LAW FIRM, and would file their Amended Complaint
against Defendants, State Farm Fire and Casualty Company (“State Farm Fire”) and John Does
1-10 (“John Does”), and allege as follows:
I.
PARTIES
1. Plaintiffs, HENRY KUEHN and JUNE P. KUEHN, are adult resident citizens of
the State of Mississippi, residing at 3208 North 3rd Street, Ocean Springs, Jackson County,
Mississippi.
2. Defendant, State Farm Fire, is a corporation organized and existing under the laws
of the State of Illinois, with its principal office and place of business located at One State Farm
Plaza, Bloomington, Illinois 71701-0001. This defendant may be served with process by service
on its agent for service of process, William Penna, at 1080 River Oakes Drive, Suite B-100,
Flowood, Mississippi 39232-7644, or on the Mississippi Insurance Commissioner at Post Office
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Box 79, Jackson, Mississippi, 39205-0079, pursuant to Mississippi Code Annotated Section 83-
21-1.
3. At the time of the loss there was a line of credit with Keesler Federal Credit
Union secured by the Plaintiffs’ home, but it has since been paid off so that the home is free and
clear of liens that might require notice of this action.
4. Defendants John Does 1-10 are entities affiliated with Defendant and/or have
acted in concert with Defendant, and whose identities are currently unknown. All allegations
and claims asserted herein against the Defendant are incorporated herein by reference against
John Does 1-10. Said John Does, when their identities are known, will be identified by name
and joined in this action, if necessary, pursuant to the Federal Rules of Civil Procedure.
II.
SUBJECT MATTER AND PERSONAL JURISDICTION
5. This Court has jurisdiction over the subject matter and the Defendant in this case
pursuant to 28 U.S.C. § 1332 because there is complete diversity of citizenship between
Plaintiffs and Defendants and the amount in controversy exceeds $75,000.00.
III.
VENUE
6. Venue in this case is proper in this Court pursuant to 28 U.S.C. § 1391, because
this suit concerns real property located exclusively in Jackson County, Mississippi, and the
conduct, acts and/or omissions upon which this cause of action is based occurred in Jackson
County, Mississippi, which is completely within the United States District Court for the Southern
District of Mississippi, Southern Division.
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policy would provide full and comprehensive coverage for damage to the insured building
caused by windstorm.
12. On August 29, 2005, within the subject policy period, most of the insured
residence and the personal contents therein were proximately and/or efficiently damaged or
destroyed by the winds, rain, and wind-propelled objects of Hurricane Katrina. It is undisputed
that the storm surge reached the subject property; however, by the time the surge arrived, the
insured residence had already been rendered uninhabitable and the contents therein were
damaged or destroyed.
13.
Almost immediately thereafter, and in accordance with the subject policy
provisions, Plaintiffs notified State Farm Fire of the covered loss. An adjuster by the last name
of Wildsmith visited their property to make a determination.
14. On or about November 16, 2005, State Farm Fire wrote to the Plaintiffs and
advised, contrary to the subject policy coverage provisions and despite the fact that the insured
property was damaged by wind, rain and/or wind-propelled objects, that the “damage to your
property was a result of storm surge, wave wash and flood. Unfortunately, that damage to your
property is not covered under the policy.” See attached Exhibit “B,” Letter from State Farm
Fire dated November 16, 2005.
15. Subsequently in a letter to Plaintiffs dated January 4, 2006, State Farm Fire,
contrary to the subject policy coverage provisions and despite the fact that the insured property
was damaged by wind, rain and/or wind-propelled objects, informed Plaintiffs that it would not
cover the loss beyond what was already paid, which was $10,765.48. See attached Exhibit “C,”
Letter from State Farm Fire dated January 4, 2006.
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16. Plaintiffs were completely unsatisfied with the inadequate payment, but they
continued their negotiations with State Farm Fire in an effort to settle their claim. The Kuehns
demanded appraisal under the terms of their policy, as was their right under the terms of the
contract. The policy states as follows:
Appraisal. If you and we fail to agree on the amount of loss,either one can demand that the amount of the loss be set byappraisal. If either makes a written demand for appraisal, eachshall select a competent, disinterested appraiser. Each shall notifythe other of the appraiser’s identity within 20 days of receipt of thewritten demand. The two appraisers shall then select a competent,impartial umpire. If the two appraisers are unable to agree upon anumpire within 15 days, you or we can ask a judge of a court of
record in the state where the residence premises is located to selectan umpire. The appraisers shall then set the amount of loss. If theappraisers submit a written report of an agreement to us, theamount agreed upon shall be the amount of the loss. If theappraisers fail to agree within a reasonable amount of time, theyshall submit their differences to the umpire. Written agreement
signed by any two of these three people for any item shall set
the amount of loss. Each appraiser shall be paid by the partyselecting that appraiser. Other expenses of the appraisal and thecompensation of the umpire shall by paid equally by you and us.(Emphasis added)
. . . .
Loss Payment. We will adjust all losses with you. We will payyou unless some other person is named in the policy or is legallyentitled to receive payment. Loss will be payable 60 days after .. . there is a filing of an appraisal award with us.
See Exhibit “A,” Certified policy. There was no response from State Farm Fire to Mr. Kuehn’s
request.
17. On April 1, 2006, Mr. Kuehn wrote to State Farm Fire to follow up on his prior
requests to participate in the appraisal process. See attached Exhibit “D,” Letter from Mr. Kuehn
to State Farm insurance agent Rex Foster, dated April 1, 2006.
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18. On April 17, 2006, Mr. Kuehn had a telephone conversation with a State Farm
representative named Tina, from Team 10. During this conversation, Tina informed Mr. Kuehn
that “The State of Mississippi has overrode [sic] our appraisal options.” Mr. Kuehn asked her
“You can’t get appraisal now, is that more or less what you’re saying,” to which she replied,
“Exactly.” She went on to say, “That’s what our management is saying, we’re not offering
appraisal at all because mediation overrides it.”
19. On June 21, 2006, Plaintiffs filed their Complaint in the Chancery Court of
Jackson County, Mississippi, asking for injunctive relief by the Chancellor; i.e., to compel State
Farm Fire to comply with the terms of its contract and go through with the appraisal process. On
July 28, 2006, State Farm Fire filed the Notice of Removal to the United State District Court and
also filed its Answer to the Complaint contesting the requested appraisal.
20. Plaintiffs filed their Motion to Remand on August 17, 2006. On August 24, 2006,
the U. S. Magistrate Judge entered an Order Staying Case pending a ruling on Plaintiffs’ Motion
to Remand.
21. One year after Hurricane Katrina on August 29, 2006, State Farm Fire filed its
Motion to Conduct Remand Related Discovery and for Additional Time to Respond to Plaintiffs'
Motion to Remand, which the Federal Court granted, allowing limited discovery on the appraisal
issue.
22. After the parties conducted discovery on the appraisal issue, United States District
Judge Senter entered an Order of Remand on January 19, 2007, granting Plaintiffs' Motion to
Remand and remanded the case to the Chancery Court of Jackson County, Mississippi.
23. After the remand, the Chancery Court of Jackson County entered an Order on
April 24, 2007, finding the request for appraisal to be appropriate, and ordered each party to
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designate an appraiser within 30 days. See Exhibit “E,” Order of Chancery Court of Jackson
County filed August 24, 2007. Plaintiffs filed their Designation of Appraiser on May 29, 2007,
and State Farm Fire filed its Designation of Appraiser on or about June 14, 2007. The parties
actually went through with the appraisal process under the State Farm policy, and the appraisers
appointed by both parties determined the value of the loss.
24. On February 28, 2008, the appraisal process concluded, and the umpire and the
parties’ appraisers signed an Award setting forth the appraisal amount of $174,811.80. A copy of
the Award is attached hereto and incorporated herein as Exhibit “F”. Yet after the Award was
produced, counsel for State Farm Fire told the appraisers and the umpire that the Award did not
specify which part was for wind. However, the appraisers and umpire confirmed that entire
amount was for wind damage, i.e., that they had determined the amount of “loss” as they were
supposed to do under the policy. A copy of the amended Award is attached hereto and
incorporated herein as Exhibit “G”. As of the date of filing the Complaint, State Farm Fire has
contemptuously failed and refused to pay Plaintiffs any portion of the appraisal Award, contrary
to the clear terms of its own insurance contract and breaching its duty to the Plaintiffs. It has
done so maliciously, with gross negligence, and in recklessly indifferent regard to Plaintiffs’
rights.
25. Three years after the hurricane and despite their best efforts to settle their claim
with State Farm Fire, Plaintiffs still have not been fully compensated for their losses and State
Farm Fire still has not complied with the terms of the policy it drafted and sold to Plaintiffs. The
only other payment State Farm Fire has made was for $4,771.55, which was made on August 20,
2008.
26. State Farm Fire’s position in this directly contradicts Mississippi insurance law, in
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existence for the last forty years, which mandates full insurance coverage if the hurricane winds
were the efficient proximate cause of the loss. It is uncontroverted that loss caused by hurricane
and/or tornadic wind is covered under the subject policy. It is also uncontroverted that Plaintiffs
had a right to appraisal under the subject policy.
27. Additionally, as the policy at issue is an “all risk” policy, all risks of accidental
direct physical loss are covered by the subject policy unless specifically excluded by the terms of
the subject policy. In such policies, insureds such as the Plaintiffs only have the burden of
showing the existence of a covered loss, at which point the burden of proof shifts to the insurer,
State Farm Fire, to establish the applicability of a named exclusion under the facts of the case
and the terms of the policy.
28. In this case, there is no question that the Plaintiffs have established a loss covered
by the subject policy. State Farm Fire has the burden to prove that the loss was attributable to an
excluded peril such as “flood,” and not to a covered peril, such as wind. State Farm Fire has not
met this burden of proof and cannot meet it . There is no question that an appraisal award was
entered. There is no question that State Farm Fire did not make a loss payment to Plaintiffs
within 60 days of the entry of the appraisal award.
29. An insurance contract is a contract of adhesion, and should be construed in the
light most favorable to the insured.
30. Inherent in any insurance contract, and in the policy at issue, is that payment must
be made promptly so that the insured may be put back into the position he or she was in prior to
the loss, and as quickly as possible.
31. A special relationship exists between an insurer and its insured; such relationship
is best characterized as one of the utmost good faith and fair dealing.
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32. Plaintiffs have complied with all conditions precedent to obtaining payment of
benefits under the subject policy, and State Farm Fire has waived and/or is estopped from raising
such conditions precedent.
33. State Farm Fire is merely attempting to dodge its coverage obligations to the
Plaintiffs under the subject policy by wrongfully characterizing their damage as being from
flood, surface water, waves and/or tidal water.
34. State Farm Fire’s investigation, adjustment, and denial of Plaintiffs’ claim were
negligent, grossly negligent, and in reckless disregard for Plaintiffs’ rights. State Farm Fire’s
denial of and eventual underpayment of Plaintiffs’ loss breached the subject contract of
insurance. Such conduct constitutes bad faith and tortious breach of contract and breach of duty
of good faith and fair dealing. State Farm Fire unjustly, in bad faith, denied Plaintiffs the
appraisal demanded under the subject policy. State Farm Fire fraudulently and/or negligently,
with gross negligence, reckless disregard for Plaintiffs’ rights and actual malice, misrepresented
to Plaintiffs through its policy of insurance that they could utilize the appraisal process provided
by the policy. Plaintiffs relied on these representations to their detriment. State Farm Fire’s
conduct has forced its customers to resort to litigation in order to receive benefits that should
have been paid under the policy, and to compel State Farm Fire and Casualty Company to
comply with its own policy terms.
35. Plaintiffs are therefore entitled to full coverage under the subject policy for the
damage to their property, injunctive relief, specific performance of the contract, indemnity,
unjust enrichment, other such equitable relief, and extra-contractual, compensatory and punitive
damages.
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V.
COUNT ONE:
DECLARATORY JUDGMENT
AND INJUNCTION AS TO APPRAISAL
36. Plaintiffs hereby incorporate and adopt by reference each and every allegation set
forth in each Paragraph of the Amended Complaint.
37. This count is an action for declaratory judgment pursuant to Federal Rule of Civil
Procedure 57, and an action for an Injunction pursuant to Federal Rule of Civil Procedure 65.
38. The Defendant introduced and inserted a procedure into their policy, appraisal,
which was intended to afford policy holders and the insurance company a reasonable and
affordable alternative to litigation. From their actions, it is evident that the Defendant never
intended to use this procedure and instead wrote said procedure into its policies merely to entice
policy holders to pay premiums for coverage and dispute resolution that in reality it would not
offer, and where implementation would be resisted at any cost by the Defendant to the point that
appraisal could never resolve anything.
39. Because of the Defendant’s actions in misrepresenting and in dodging the
appraisal process, the Plaintiffs were forced to litigate the very issue of the existence of
appraisal, which within itself was supposedly designed to limit and/or remove the necessity and
expense of litigation. As a result of the Defendant’s behavior, the Plaintiffs had to seek and hire
counsel to assert their right to the appraisal “offered” by the Defendant, incurring attorney’s fees
in an amount exceeding $10,000.00. The Plaintiffs did hire counsel who filed suit in Chancery
Court to assert their right to appraisal, and the Defendant improperly removed said suit to
Federal Court. The removal was entirely done to further deny the Plaintiffs their right to
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appraisal and was done with the intent to damage the Plaintiffs and cost them further attorney’s
fees. The Federal Court realized this improper removal and issued an Order of Remand.
40. After remand, the Chancery Court of Jackson County entered an Order on April
24, 2007, granting Plaintiffs’ request for an appraisal and ordered each party to designate an
appraiser within 30 days. Plaintiffs filed their Designation of Appraiser on May 29, 2007, and
State Farm Fire filed its Designation of Appraiser on or about June 14, 2007.
41. On February 28, 2008, the appraisal process concluded, and the umpire and the
parties’ appraisers signed an Award setting forth the appraisal amount of $174,811.80. Copies of
the Award and the amended Award are attached hereto and incorporated herein as Exhibits “F”
and “G”. However, as of the date of filing the Complaint, State Farm Fire has failed and refused
to pay Plaintiffs any portion of the appraisal Award.
42. The Plaintiffs’ policy provides:
Appraisal. If you and we fail to agree on the amount of loss,either one can demand that the amount of the loss be set byappraisal. If either makes a written demand for appraisal, eachshall select a competent, disinterested appraiser. Each shall notifythe other of the appraiser’s identity within 20 days of receipt of thewritten demand. The two appraisers shall then select a competent,impartial umpire. If the two appraisers are unable to agree upon anumpire within 15 days, you or we can ask a judge of a court of record in the state where the residence premises is located to selectan umpire. The appraisers shall then set the amount of loss. If theappraisers submit a written report of an agreement to us, theamount agreed upon shall be the amount of the loss. If theappraisers fail to agree within a reasonable amount of time, theyshall submit their differences to the umpire. Written agreement
signed by any two of these three people for any item shall set the
amount of loss. Each appraiser shall be paid by the party selectingthat appraiser. Other expenses of the appraisal and thecompensation of the umpire shall by paid equally by you and us.(Emphasis added)
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43. State Farm Fire’s policy further states that “Loss will be payable 60 days after we
receive your proof of loss and . . . there is a filing of an appraisal award with us.” (Emphasis
added). The requirement for the filing of a proof of loss was waived in the wake of Hurricane
Katrina. An appraisal award was, however, ultimately filed. State Farm Fire did not pay the
loss/award amount of $174,811.80 within sixty days of the appraisal award as its own policy
demanded.
44. Plaintiffs would hereby request that the Court enter a declaratory judgment to
state that appraisal was done, to enforce the appraisal Award as a binding amount to be paid, and
to cause State Farm Fire to pay unto Plaintiffs the sum of $174,811.80 as per the appraisal
Award, as well as to order the Defendant to reimburse the Plaintiffs for their costs in the
appraisal process, due to State Farm Fire’s unreasonable delay tactics.
45. Plaintiffs would hereby request that an injunction issue to direct Defendant, State
Farm Fire, to pay unto Plaintiffs the sum of $174,811.80 as per the appraisal Award.
46. The Plaintiffs ask that the Court award declaratory relief and/or that the Court
award injunctive relief in ordering State Farm Fire and Casualty Company to pay what was
awarded in the appraisal process, and that the Court order the Defendant to pay punitive and/or
exemplary damages for their malicious behavior, attorney’s fees, extra-contractual damages
including damages for pain and suffering, costs of the appraisal and any other damages found
proper by this Court.
VI.
COUNT TWO:
DECLARATORY JUDGMENT AS TO THE POLICY
47. Plaintiffs hereby incorporate and adopt by reference each and every allegation set
forth in each Paragraph of the Amended Complaint.
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48. This count is an action for declaratory judgment pursuant to Federal Rule of Civil
Procedure 57.
49. On the occasion of Hurricane Katrina, Plaintiffs’ insured property was
proximately and/or efficiently devastated by wind, rain and wind-propelled objects. However,
State Farm Fire has maintained and continues to maintain the position that the majority of the
Plaintiffs’ claim was caused by water or water-borne material, relying on the exclusions in the
subject policy.
50. As a result of State Farm Fire’s partial payment of Plaintiffs’ claim, it has
admitted that wind damage to Plaintiffs’ property occurred, which is a covered peril. See Exhibit
“C”, Letter from State Farm Fire, dated January 4, 2006, with summary of loss.
51. In order to deny coverage for the Plaintiffs’ loss resulting from Hurricane
Katrina, State Farm Fire has the burden to prove that the loss was attributable to an excluded
peril, such as “flood,” rather than a covered peril, such as wind.
52. State Farm Fire has not met and cannot meet its burden of proof. The damage to
Plaintiffs’ property is thus covered under the subject policy. State Farm Fire should have
tendered policy limits to Plaintiffs as soon as it became apparent that it could not meet said
burden of proof.
53. Wherefore, Plaintiffs respectfully seek a declaration from this Court that:
(a) State Farm Fire breached its policy obligations to its insureds and
owes coverage for the damage sustained to Plaintiffs’ insured property due to
Hurricane Katrina;
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(b) In order to deny coverage for Plaintiffs’ claim under the subject
policy, State Farm Fire has the burden to prove that the loss was attributable to an
excluded peril and not to a covered peril;
(c) State Farm Fire has not met and cannot meet its burden of proof, and
the loss and damage is thus covered under the subject policy; and
(d) Plaintiffs are entitled to an award of damages for the full value of all
coverage available to them under the policy, and such other extra-contractual
damages or relief as this Court may deem fit to make them whole; Plaintiffs are
entitled to receive a trial by jury on all issues triable.
VII.
COUNT THREE:
NEGLIGENCE/GROSS NEGLIGENCE/
RECKLESS DISREGARD FOR THE RIGHTS OF PLAINTIFFS
54. Plaintiffs hereby incorporate and adopt by reference each and every allegation set
forth in each Paragraph of the Amended Complaint.
55. State Farm Fire had a duty under Mississippi law to fully, promptly, fairly,
adequately and correctly investigate and adjust Plaintiffs’ claim for damages caused by
Hurricane Katrina.
56. State Farm Fire breached its duty to conduct such an investigation, and to base its
decision on the facts. State Farm Fire knew or should have known that it could not meet its
burden of proving its policy exclusions, but it denied the claim based upon said exclusion
anyway.
57. State Farm Fire negligently and grossly negligently, in reckless disregard of
Plaintiffs’ rights, underpaid the claim, refused to comply with the appraisal process set forth in
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the policy, and then failed and refused to pay monies to Plaintiffs in accordance with the policy
or the appraisal Award. State Farm Fire has repeatedly demonstrated its reckless disregard for
Plaintiffs’ rights. State Farm Fire has unreasonably delayed the claims process and it has refused
to fully and adequately compensate Plaintiffs and delayed making even the inadequate payment
that it eventually did.
58. State Farm Fire breached its duty by failing to adequately investigate and adjust
Plaintiffs’ claim. State Farm Fire breached its duty by denying Plaintiffs’ claim without meeting
its affirmative duty of proving at the time of the denial that Plaintiffs’ loss was proximately and
efficiently caused by “flood/tidal surge”, a peril excluded by the policy.
59. State Farm Fire breached its duty by denying Plaintiffs’ claim without meeting its
affirmative duty of establishing at the time of the denial, which amount of Plaintiffs’ loss was
caused by water and which amount was caused by wind.
60. Similarly, State Farm Fire breached its duty by failing to pay and/or by
subsequently underpaying Plaintiffs for the damage State Farm Fire could not prove was caused
by “flood/tidal surge”.
61. State Farm Fire breached its duty by shifting to the Plaintiffs the burden of
proving that the loss was not excluded by the policy.
62. State Farm Fire breached its duty by dispatching an adjuster that did not have the
qualifications or training to investigate, adjust and then deny Plaintiffs’ losses.
63. State Farm Fire breached its duty by failing to properly train its adjuster as to how
to investigate and adjust Plaintiffs’ losses.
64. State Farm Fire breached its duty by basing its denial of Plaintiffs’ claims for
hurricane damage on the investigation and adjustment of an unqualified adjuster.
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65. State Farm Fire breached its duty by failing to adequately inspect, investigate or
adjust the insured property prior to denying the claim, and by its subsequent underpayment of the
claim.
66. State Farm Fire breached its duty by failing to credit the statements from
eyewitnesses in investigating and adjusting Plaintiffs’ claim.
67. State Farm Fire breached its duty by failing to utilize an objective meteorologist
or structural engineer to determine the cause of Plaintiffs’ loss prior to denying the claim.
68. State Farm Fire breached its duty by failing to pay Plaintiffs for their losses.
69.
State Farm Fire intentionally interpreted its exclusions in the broadest possible
manner as a means of underpaying and/or denying valid claims such as the Plaintiffs’. The law
does not support State Farm Fire’s interpretation of said exclusions, but State Farm Fire
nevertheless attempted to use said broad interpretations to deny claims and thus increase its
profits.
70. Such conduct as alleged above constitutes negligence, gross negligence, and/or
reckless disregard for Plaintiffs’ rights as State Farm Fire insureds.
71. State Farm Fire’s negligent, grossly negligent, and/or reckless adjustment
proximately caused Plaintiffs to suffer economic and other damages.
VIII.
COUNT FOUR:
SPECIFIC PERFORMANCE OF INSURANCE CONTRACT
72. Plaintiffs hereby incorporate and adopt by reference each and every allegation set
forth in each Paragraph of the Amended Complaint.
73. State Farm Fire entered into the subject contract of insurance with the Plaintiffs
wherein it clearly and expressly agreed to provide insurance coverage for physical loss to
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property and loss of use proximately and efficiently caused by windstorm or hail. Plaintiffs, in
turn, have paid State Farm Fire substantial premiums.
74. Plaintiffs suffered substantial damage and/or destruction of their insured building
and property as a proximate and direct result of covered losses, and have consequently been
denied use of their property.
75. Plaintiffs have performed their end of the bargain and are accordingly now
entitled to Specific Performance of the subject insurance contract. The Court should therefore
require State Farm Fire to specifically perform such agreement.
IX.
COUNT FIVE:
WAIVER AND ESTOPPEL
76. Plaintiffs hereby incorporate and adopt by reference each and every allegation set
forth in each Paragraph of the Amended Complaint.
77. State Farm Fire had the obligation to establish, prior to denying the claim, what
part, if any, of the loss fell under the terms of its exclusion. By declaring its burden of proof
irrelevant and intentionally abandoning its obligation to establish what, if any, part of the loss
was excluded, Defendant waived its right to attempt to put on “after-the-fact” evidence to
exclude any part of the claim.
78. State Farm Fire intentionally interpreted its exclusions in the broadest possible
manner as a means of underpaying and/or denying valid claims such as the Plaintiffs’. The law
does not support State Farm Fire’s interpretation of said exclusions, but State Farm Fire
nevertheless attempted to use said broad interpretations to deny claims and thus increase its
profits.
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79. State Farm Fire induced the Plaintiffs to rely on its representations that it was
handling the claim in good faith, while at the time, it had actually already adopted claims
handling procedures through which coverage under the subject policy would be denied in
Plaintiffs’ situation. Defendant should be estopped from denying that it owes full coverage
under the Homeowner’s policy to the Plaintiffs and all similarly situated insureds of the
Defendant.
80. State Farm Fire, by failing to conduct a prompt, reasonable and thorough
investigation prior to denying and/or underpaying the subject claim, has waived its right to
conduct a new investigation to justify its denial, and hence should be estopped from utilizing
information that it did not have at the time it denied or underpaid the subject claim as its
“arguable basis” for said denial.
X.
COUNT SIX:
INDEMNITY
81. Plaintiffs hereby incorporate and adopt by reference each and every allegation set
forth in each Paragraph of the Amended Complaint.
82. State Farm Fire is obligated under the subject policy and by its representations to
provide full insurance coverage to Plaintiffs for all damage to the insured building and property
caused by windstorm or hail.
83. However, State Farm Fire has denied Plaintiffs their insurance coverage and has
refused to pay them for their covered losses.
84. As a direct and proximate result of State Farm Fire’s denial and subsequent
underpayment, Plaintiffs have been and/or will be forced to pay significant amounts of money to
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rebuild and/or replace their severely damaged or destroyed property, and to pursue litigation in
order to recover amounts properly due under the subject policy.
85. The expenses Plaintiffs have incurred and continue to incur as a result of State
Farm Fire’s refusal to completely pay what they are owed are expenses that State Farm Fire, in
all fairness and equity, should pay under the subject policy or otherwise. Plaintiffs are therefore
entitled to indemnity from State Farm Fire and Casualty Company for all sums they have
expended and will be required to expend, as well as debt they will be required to incur, in order
to repair, refurbish, and/or replace the insured building and property, as well as any sums
expended or debts incurred as a result of being forced to hire engineers, attorneys and other
experts in order to recover sums under their insurance contract.
XI.
COUNT SEVEN:
UNJUST ENRICHMENT/CONSTRUCTIVE TRUST
86. Plaintiffs hereby incorporate and adopt by reference each and every allegation set
forth in each Paragraph of the Amended Complaint.
87. In marketing, selling and issuing the subject policy to Plaintiffs, State Farm Fire
represented and agreed to obtain and provide Plaintiffs with full coverage for property damage
and loss of use, as well as for damage proximately caused by windstorm or hail as a result of
hurricane winds and rain. These representations and contractual obligations are also evidenced
by the subject policy’s coverage provisions.
88. Plaintiffs have paid State Farm Fire substantial monetary premiums for such
coverage.
89. Despite realizing substantial premiums from Plaintiffs, State Farm Fire has
withheld the insurance proceeds owed to Plaintiffs for the damage to their insured property.
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90. By purposefully mischaracterizing the damage to Plaintiffs’ building and property
as being caused by “flood/tidal surge” despite a complete lack of evidence or diligent
investigation, and despite the fact that State Farm Fire knew or should have known it could not
prove that Plaintiffs’ property was damaged solely by excluded perils, State Farm Fire has
wrongfully realized insurance premiums and withheld insurance proceeds to which the Plaintiffs
are entitled, and have gained interest on such sums.
91. State Farm Fire has therefore been unjustly enriched at Plaintiffs’ expense.
92. Plaintiffs have suffered injury as a proximate result of State Farm Fire’s unjust
enrichment. Plaintiffs have been and will continue to be forced to pay for costs that should, in
equity and good conscience, be borne by State Farm Fire under the subject policy.
93. As a proximate result of State Farm Fire’s false representations and refusal to
provide full insurance coverage under the subject policy for the damage to Plaintiffs’ insured
home and property, State Farm Fire is in possession of premiums, insurance proceeds and other
monies that it should not, in equity and good conscience, be entitled to retain.
94. Plaintiffs are therefore entitled to damages resulting from State Farm Fire’s unjust
enrichment, including, but not limited to, the imposition of a Constructive Trust on all premiums
Plaintiffs paid to State Farm Fire and on the insurance proceeds wrongfully held by State Farm
Fire under the subject policy.
XII.
COUNT EIGHT:
BAD FAITH
95. Plaintiffs hereby incorporate and adopt by reference each and every allegation set
forth in each Paragraph of the Amended Complaint.
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96. State Farm Fire had a duty to undertake a prompt and reasonable investigation
into the Plaintiffs’ claim and to base its decision on the evidence.
97. State Farm Fire knew or should have known that it was incumbent upon it, in
denying Plaintiffs’ claim, to meet the factual burden of proving the damage to Plaintiffs’
property was due solely to an excluded peril such as “flood/tidal surge”, but nevertheless it failed
to do so and initially denied Plaintiffs’ claim.
98. In bad faith, State Farm Fire refused to comply with the appraisal clause in its
policy and the accompanying settlement of loss language. State Farm Fire intentionally denied
Plaintiffs this right, in reckless disregard of their clear rights under the policy, and forced
Plaintiffs to file suit in Chancery Court to get State Farm Fire to comply with its own policy.
Once the ordered appraisal was concluded and an award was rendered, State Farm Fire refused to
comply with its own policy and compensate the Plaintiffs.
99. After intentionally interpreting its exclusions in the broadest possible manner,
State Farm Fire denied valid claims such as that of the Plaintiffs. State Farm Fire’s interpretation
of its exclusions is not supported by the law, but it relied upon those expansive interpretations to
deny claims and thus increase its profits.
100. Because of State Farm Fire’s conduct in handling and denying Plaintiffs’ claim,
Plaintiffs have suffered depression, emotional distress, mental anxiety, and mental anguish.
State Farm Fire knew that Plaintiffs’ home was severely damaged/destroyed and no longer
habitable, but nevertheless unreasonably denied Plaintiffs’ claim. Further, State Farm Fire
exercised unreasonable delay in its paltry investigation of said claim, further causing mental
anguish to Plaintiffs. Such depression, emotional distress, mental anxiety, and mental anguish
were clearly foreseeable results to State Farm Fire when it unreasonably denied Plaintiffs’ claim.
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XIII.
COUNT NINE:
FRAUDULENT CLAIMS PRACTICES
101.
Plaintiffs hereby incorporate and adopt by reference each and every allegation set
forth in each Paragraph of the Amended Complaint.
102. The massive number of properties destroyed by Hurricane Katrina left State Farm
Fire facing the prospect of large payouts to its insureds after Hurricane Katrina. Upon
information and belief, State Farm Fire made an initial assessment of the magnitude of the
losses, and then it conceived and instituted a fraudulent course of claims practices to be applied
to Katrina cases such as Plaintiffs’ claim.
103. The claim of Plaintiffs and other insureds of State Farm Fire whose homes and
businesses were destroyed or substantially damaged by Hurricane Katrina were wrongfully
denied pursuant to Defendant’s Katrina-specific corporate “top-down” scheme of fraudulent and
deceptive claims practices.
104. State Farm Fire in effect rewrote its contract and its claims procedures for cases
where properties were destroyed or substantially damaged by wind and water and embarked on
an intentional course of pre-litigation and post-litigation conduct, fraudulently concealed from
the Plaintiffs and other insureds, deliberately designed to deny legitimate claims covered under
the Defendant’s contract, the insurance policy, and Mississippi law.
105. State Farm Fire’s intentional broad interpretation of the exclusions in its policy
were undertaken as a means of denying and/or underpaying valid claims of State Farm Fire’s
insureds. Although State Farm Fire’s interpretation of its exclusions is not supported by the law,
it continued to use them as a means to deny or reduce its obligations to its insureds in order to
protect its profits.
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106. State Farm Fire also sold Plaintiffs a policy containing an appraisal clause and
other policy language, representing to Plaintiffs that said clause was available to Plaintiffs, and
representing that State Farm Fire would comply with the terms of its policy. It did so
fraudulently, as Plaintiffs found out when they were denied appraisal in the wake of Hurricane
Katrina. Plaintiffs relied on this to their detriment, and were ultimately forced to file suit to get
State Farm Fire to comply with the terms of its own policy. Plaintiffs were damaged thereby,
including incurring attorneys’ fees, extra-contractual damages, mental anguish, mental anxiety,
emotional distress, and other damages clearly foreseeable to State Farm Fire as a result of its
conduct.
107. The actions of State Farm Fire constituted a deliberate course of company-wide
fraudulent post-Katrina claims handling practices by which it intentionally undertook to defraud
the Plaintiffs and others whose properties were insured by State Farm Fire.
108. The scheme included post-Katrina modification of its coverage provisions, as well
as improper engineering procedures, all of which were concealed from Plaintiffs and others who
were expecting and relying on good faith handling of their claims by the Defendant.
109. State Farm Fire’s actions constitute fraud, fraudulent concealment and fraudulent
inducement, as well as bad faith claims handling on an institutional basis in State Farm Fire’s
handling of claims resulting from Hurricane Katrina. State Farm Fire’s actions were intended to,
and did, result in the intentional and fraudulent denial and/or underpayment of claims of the
Plaintiffs and others.
110. State Farm Fire’s actions warrant the imposition of compensatory, extra-
contractual and punitive damages under Mississippi law.
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XIV.
REMEDIES
111. Plaintiffs hereby incorporate and adopt by reference each and every allegation set
forth in each Paragraph of the Amended Complaint.
112. Plaintiffs are entitled to declaratory relief as to the rights and obligations of the
parties under the subject policy.
113. Plaintiffs are entitled to declaratory and injunctive relief as to the payment by
State Farm Fire of $174,811.80, as was awarded in the appraisal process provided by the policy.
114.
Plaintiffs are entitled to full insurance coverage under the subject policy for
damage to the insured building and property, as well as other monies they should have been paid
under the subject policy, and other such equitable relief set forth in the Complaint, including, but
not limited to, specific performance, indemnity and/or a constructive trust.
115. Plaintiffs are entitled to recover consequential and incidental damages caused by
State Farm Fire’s refusal to honor its obligations under the subject policy and otherwise.
116. Plaintiffs are entitled to recover punitive and/or exemplary damages for State
Farm Fire’s bad faith denial of coverage.
117. Plaintiffs are entitled to recover damages for pain and suffering, emotional
distress, mental anguish, loss of enjoyment of life and such other extra-contractual damages as
may be appropriate.
118. Plaintiffs are entitled to recover attorneys’ fees, litigation expenses, funds
expended on experts, pre-judgment interest and post-judgment interest; such expenses were
clearly foreseeable to State Farm Fire and Casualty Company as a result of its conduct.
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WHEREFORE, PREMISES CONSIDERED, your Plaintiffs demand judgment against
the Defendants, and in particular Defendant, State Farm Fire and Casualty Company, of actual
damages in the amount of the appraisal Award, or in the alternative, in the amount of limits of
liability of their insurance policy, and other sums they should have been paid under the insurance
policy, extra-contractual damages and punitive damages in an amount sufficient to make
Plaintiffs whole and deter future wrongful conduct of the Defendants, and in particular
Defendant, State Farm Fire and Casualty Company, together with all costs, attorneys’ fees and
pre- and post-judgment interest. Plaintiffs request any further relief that may be appropriate.
Respectfully submitted,HENRY KUEHNAND JUNE P. KUEHN
BY: DENHAM LAW FIRM
BY: __s/Earl L. Denham___EARL L. DENHAMMS Bar No. 6047
CERTIFICATE
I, EARL L. DENHAM, do hereby certify that I electronically filed the above andforegoing Amended Complaint with the Clerk of the Court utilizing the ECF system, whichprovides notification of said filing to the following:
H. Scot [email protected] Hickman, Goza & Spragins, PLLC
Post Office Box 668Oxford, MS 38655-0068
John A. Banahan [email protected] H. Benjamin [email protected]; [email protected] Bryan, Nelson, Schroeder, Castigliola & Banahan
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P.O. Drawer 1529Pascagoula, MS 39568-1529
SO CERTIFIED on this the 1st day of May, 2009.
___s/Earl L. Denham_EARL L. DENHAM
EARL L. DENHAM, MS Bar No. 6047KRISTOPHER W. CARTER, MS Bar No. 101963DENHAM LAW FIRM424 Washington Avenue (39564)Post Office Drawer 580Ocean Springs, MS 39566-0580
228.875.1234 Telephone228.875.4553 Facsimile