Clark v. AMCO Insurance Company

Background

Kathryn and Jered Clark asserted breach-of-contract and breach-of-the-duty-of-good-faith-and-fair-dealing claims concerning an insurer’s denial of a supplemental claim for damage to their home and personal property after the Kincaid Fire. The opinion’s factual discussion identifies the insurer as Nationwide Mutual Insurance Company, while the case caption identifies AMCO Insurance Company as a defendant.

The Clarks’ property suffered smoke damage in October 2019. The insurer made claim payments totaling $176,832.28. Later inspections produced conflicting conclusions about the level of remaining soot, ash, char, and fire residue. The Clarks submitted a supplemental claim for $695,763.27. After reviewing expert reports, the insurer sent a November 3, 2023 denial letter stating that there was no evidence of remaining wildfire damage. The letter also referenced Exclusion 14, titled “Undetectable Wildfire or Brushfire Particles.”

Motion and Dispute

The Clarks moved for partial summary judgment, asking the court to declare that Exclusion 14 was invalid and unenforceable and that the insurer could not lawfully rely on it to deny their claim. Summary judgment is appropriate only when there is no genuine dispute about a material fact and the moving party is entitled to judgment under the law.

The Clarks relied on references to Exclusion 14 in the insurer’s April 26, 2021 and November 3, 2023 communications. They argued that those references supported an inference that the insurer relied, at least in part, on the exclusion. The insurer argued that mentioning the exclusion did not establish reliance and pointed to reports from its experts concluding that no additional damage remained. The insurer also stated in a May 8, 2024 claim update that it had never used Exclusion 14 to guide its investigation or decline payment.

Ruling

Judge William H. Orrick held that a genuine dispute of material fact existed about whether the insurer relied on Exclusion 14 when denying the Clarks’ supplemental claim. Because resolving that dispute was a predicate to deciding whether reliance on the exclusion would be lawful, the court concluded that a ruling on the exclusion’s validity or enforceability would be premature and could amount to an advisory opinion.

The court denied the Clarks’ motion for partial summary judgment. It did not decide whether Exclusion 14 was valid or enforceable, or whether the insurer was entitled to rely on it.