Darmer v. Jenkins-Jones

Background

A fire damaged Steven Darmer’s residence on November 15, 2016. Darmer submitted insurance claims to State Farm Fire and Casualty Company. His claims included breach of contract, insurance bad faith under Minnesota Statutes section 604.18, discrimination under the Minnesota Human Rights Act, negligent supervision, and requests for declaratory judgment. He also sought an appraisal to determine the amount of his loss.

The policy provided that State Farm would pay the applicable dwelling limits for a total loss. For a loss that was not total, the policy provided for payment of the actual cash value first and the remaining repair or replacement amount after the repair or replacement was completed. The policy also required Darmer to provide information and documents, cooperate with State Farm’s investigation, and submit to an examination under oath. State Farm raised concerns about Darmer’s proof of loss, claimed personal-property values, additional living expenses, cooperation, and a repair contract that was later amended to show a substantially lower repair amount.

The Parties’ Motions

State Farm moved for partial summary judgment on Darmer’s bad-faith, Minnesota Human Rights Act, and negligent-supervision claims. Darmer moved for partial summary judgment on breach of contract, statutory interest, and his request for an appraisal. Summary judgment is appropriate when there is no genuine dispute over a fact that could affect the result and the moving party is entitled to judgment under the law.

November 2016 Legal Total Loss

Darmer argued that the City of St. Paul’s emergency abatement order made the property a total loss as a matter of law and required State Farm to pay the policy limits by November 21, 2016. The court rejected that argument. The City razed the garage and workshop but determined that the primary structure could be saved, did not raze the house, and allowed Darmer to repair it. The court concluded that there was no legal or practical prohibition on rebuilding and that Darmer had not shown a total loss.

The court denied summary judgment for Darmer and granted summary judgment for State Farm on this theory. It dismissed with prejudice the contract and declaratory-judgment claims to the extent they were based on a November 2016 legal total loss, including the related statutory-interest claim.

December 2016 Constructive Total Loss

Darmer argued that State Farm’s December 2016 repair estimate of $517,614.44 exceeded the Coverage A limit of $461,824 and therefore established a constructive total loss. The court considered the policy’s additional dwelling coverage, which raised the total dwelling coverage to $545,792. Because the December estimate did not exceed that total limit, the court held that Darmer had not suffered a constructive total loss in December 2016.

The court denied summary judgment for Darmer and granted summary judgment for State Farm on this theory. It dismissed with prejudice the contract and declaratory-judgment claims to the extent they were based on a December 2016 constructive total loss, including the related statutory-interest claim.

May 2017 Constructive Total Loss

Darmer relied on State Farm’s May 2017 repair estimate of $605,455.13, which exceeded the total dwelling coverage of $545,792. The court held that Darmer had shown that State Farm’s estimate exceeded the policy limits. State Farm, however, asserted defenses based on alleged fraud, concealment, and failure to cooperate. The court found that material factual disputes remained, particularly concerning Darmer’s state of mind and credibility. It therefore denied summary judgment for Darmer on the May 2017 constructive-total-loss and statutory-interest claims.

Appraisal

Darmer’s policy allowed either party to demand an appraisal if the parties could not agree on the amount of the loss. The court had previously denied Darmer’s first appraisal motion because factual disputes existed about whether he had complied with his contractual duties after the loss. Darmer argued that his later examination under oath resolved those concerns.

The court disagreed. It held that the examination under oath was only one of Darmer’s contractual duties and that disputes remained about his provision of information, cooperation, and possible fraud or concealment. Because those disputes could also affect whether the policy remained valid, the court denied summary judgment for Darmer on his appraisal request.

Insurance Bad Faith

Darmer claimed that State Farm acted in bad faith by failing to pay policy limits, refusing to appoint an appraiser, and mishandling his dwelling, personal-property, and additional-living-expense claims. Minnesota’s bad-faith statute requires proof that the insurer lacked a reasonable basis for denying benefits and knew of, or recklessly disregarded, that lack of a reasonable basis.

The court granted summary judgment for State Farm. Regarding the dwelling claim, the court found that State Farm’s decision to await a repair contract was at least debatable and was not objectively or subjectively unreasonable, particularly given changing repair estimates and State Farm’s concerns about Darmer’s submissions. Regarding personal property, the court found State Farm’s requests for additional information and its fraud investigation objectively reasonable. Regarding additional living expenses, the court found reasonable State Farm’s concerns about the amount claimed and the delay in receiving a repair contract. The court dismissed Darmer’s statutory bad-faith claims with prejudice without deciding whether State Farm’s underlying claim adjustments were ultimately correct.

Minnesota Human Rights Act

Darmer alleged that State Farm discriminated against him because of his post-traumatic stress disorder, depression, and anxiety. The court assumed for purposes of the motion that he had shown a disability, State Farm knew about it, and State Farm had taken an adverse action. But the court held that he had not shown that State Farm acted because of his disability.

The court emphasized that the adjuster’s “cuckoo” statement occurred before State Farm or the adjuster knew about Darmer’s alleged disability. The court also found that Darmer presented no fact showing that State Farm’s requests for information or its other claims-adjustment actions were motivated by disability discrimination. It granted summary judgment for State Farm and dismissed the Minnesota Human Rights Act claim with prejudice.

Negligent Supervision

Darmer alleged that State Farm failed to supervise Jenkins-Jones, whose conduct he said worsened his post-traumatic stress disorder and caused emotional distress. The court held that Minnesota law requires a physical injury, or threat of physical injury, for this negligent-supervision claim. Because Darmer alleged emotional and psychological harm but did not present evidence of physical injury or threat of physical injury, the court granted summary judgment for State Farm and dismissed the negligent-supervision claim with prejudice.

Disposition

The court granted State Farm’s motion for summary judgment and dismissed with prejudice Darmer’s claims under Minnesota’s bad-faith statute, the Minnesota Human Rights Act, and negligent supervision. Darmer’s motion was denied in part and granted in part to State Farm as described in the opinion. The court dismissed with prejudice his contract and declaratory-judgment claims based on the November 2016 legal-total-loss and December 2016 constructive-total-loss theories. The court denied summary judgment on the appraisal request and the May 2017 constructive-total-loss claim.