Henley v. Safeco Insurance Company of America

Background

Safeco issued Eva Jo Henley a homeowners-insurance policy. After a reported water loss, Safeco paid some amounts and approved some additional work but disputed other requested coverage. Safeco also paid $4,420 per month under the policy’s loss-of-use coverage because it believed Eva Jo had moved into assisted living after the damage. Safeco later found an assisted-living newsletter indicating that she had been living there before the leak, stopped a pending payment, investigated, and deducted previously paid loss-of-use amounts that it believed had been improperly paid.

Eva Jo filed the lawsuit in state court, and Safeco removed it to federal court. After Eva Jo’s death, Joe Henley was substituted as the plaintiff in his capacity as representative of her estate. The operative complaint asserted claims for declaratory relief, breach of the implied covenant of good faith and fair dealing, breach of the contractual duty to pay a covered insurance claim, and financial elder abuse. The estate also sought punitive and treble damages.

Summary-judgment standard

Summary judgment is a procedure for deciding claims without a trial when there is no genuine dispute about a material fact and the moving party is entitled to judgment under the law. The party opposing the motion must provide evidence of facts that could affect the outcome.

Additional living expenses

The policy’s loss-of-use provision covered necessary increases in living expenses when a covered loss made the insured residence uninhabitable. Safeco presented evidence that Eva Jo moved into Carlton Senior Living in November 2019, before the reported water loss, and later moved in with her daughter. The court found that Henley’s statement that his mother wanted to return home did not refute the evidence that she was not living in the insured home when the damage occurred. The court therefore granted summary judgment to Safeco on whether the estate was owed or could recover additional living expenses. This ruling concerned portions of the declaratory-relief and contractual-duty claims.

Implied covenant of good faith and fair dealing

Under California law, an insurance bad-faith claim requires proof that policy benefits were improperly withheld and that the withholding was unreasonable or lacked proper cause. A genuine dispute about coverage or the amount owed generally means the withholding was not unreasonable.

Henley argued that Safeco acted improperly by failing to disclose that it had authorized $172,167.95 for the claim. The court found that this figure was not the amount Safeco determined was owed. It included costs Safeco later found were not covered, including $75,140 in additional living expenses, and $36,573.92 in mitigation work already paid directly to a contractor. The court concluded that the authorization amount did not show unreasonableness or bad faith and granted Safeco summary judgment on the entire implied-covenant claim.

Financial elder abuse

California’s financial-elder-abuse statute requires proof that a person took or retained an elder’s property for wrongful use, with intent to defraud, or through undue influence, and knew or should have known the conduct was likely to harm the elder. In an insurance dispute, the court stated that an incorrect denial of policy benefits alone is not enough.

The court found that Henley had not provided evidence showing more than an incorrect denial of policy benefits. It therefore granted Safeco summary judgment on the financial elder-abuse claim.

Punitive and treble damages

The court stated that the requests for punitive and treble damages depended on the implied-covenant and financial-elder-abuse claims. Because it granted summary judgment to Safeco on both underlying claims, and Henley offered no argument that these damages were available without them, the court also granted summary judgment to Safeco on the availability of punitive and treble damages.

Disposition

The court granted Safeco’s motion for partial summary judgment. It granted summary judgment to Safeco on the bad-faith claim, the financial elder-abuse claim, additional living expenses, and the availability of punitive and treble damages.