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Zewdie v. Safeco Insurance Company of America

United States District Court, W.D. Oklahoma

January 19, 2018




         Plaintiff Wudeneh Zewdie sued his insurer, Safeco Insurance Company of America (“Safeco), in state court seeking to recover benefits under the provisions of a homeowners' insurance policy. He asserted breach of contract and bad faith claims. Safeco removed the action on the basis of diversity jurisdiction and moved for summary judgment, contending both claims are barred by the applicable statute of limitations.[1]

         Summary judgment is appropriate only “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). “A genuine dispute as to a material fact ‘exists when the evidence, construed in the light most favorable to the non-moving party, is such that a reasonable jury could return a verdict for the non-moving party.'” Carter v. Pathfinder Energy Servs., Inc., 662 F.3d 1134, 1141 (10th Cir. 2011) (quoting Zwygart v. Bd. of Cnty. Comm'rs, 483 F.3d 1086, 1090 (10th Cir.2007)). Having considered the submissions of the parties in light of this standard, the court concludes Safeco's motion should be granted.


         Plaintiff's Edmond, Oklahoma residence was insured under a homeowners' insurance policy issued by Safeco. On November 10, 2011, plaintiff discovered water entering his residence during a rainstorm and, two days later, he submitted a claim to Safeco for the water damage. What happens next is not completely clear. In their briefs the parties skip to July of 2012. However, it appears from the allegations in the petition[3]that Safeco came out soon after the damage was sustained, prepared an estimate for repairs (for less than $2000) but never issued payment, and took the position that the damage was largely caused by faulty construction not covered by the policy. See Doc. #1-2; see also Doc. Nos. 24-3; 24-4; 26-15; 27-2. Plaintiff apparently paid for the repairs himself and then sought reimbursement/damages from his builder through arbitration. See id. He alleges in the petition that Safeco sent him a letter on December 5, 2011, informing him that his claim had been transferred to its subrogation department. See also Doc. # 24-4. Neither party submitted that letter or any letter from Safeco explicitly pertaining to coverage under the policy prior to a letter Safeco sent plaintiff on December 30, 2013, which is discussed subsequently.

         On July 30, 2012, approximately eight months after the storm and water damage, plaintiff's then-counsel, Janna Gau, sent Safeco a letter stating she had been retained to represent the Zewdies, its insureds, [4] in connection with three referenced claims. She wrote that while the insureds had attempted to work with Safeco to resolve the claims “there ha[d] been no response from your company” and in the interim the insureds had “incurred extraordinary out-of-pocket expenses for covered occurrences under their Homeowners' Policy.” Doc. #24-3, p. 1. Ms. Gau then asked for the adjuster's name and contact information in order to “attempt to facilitate a resolution to these claims.” Id. Rodney McAtee, a property loss specialist with Safeco, responded on August 7, 2012. He provided his contact information and stated that, once he received a “packet of documentation” Ms. Gau had prepared, he would review it and get back in touch with her. Doc. #26-1.

         Over the next few months the parties exchanged emails and, on October 4, 2012, Mr. McAtee asked for additional information “so we can re-assess the damages to the home.” Doc. 26-3. He stated that once he received the items requested they could “make arrangements for the re-inspection that we discussed.” Id. Ms. Gau sent Safeco the requested information and on November 1, 2012, she sent him pleadings related to the arbitration proceeding plaintiff had filed against MAC Builders, LLC. She informed him the parties were going to participate in a mediation on December 5, 2012 and also wrote:

It is my understanding that SafeCo has notified Mid-Continent Insurance of a subrogation claim relating to the above referenced claim number. As you are aware, SafeCo Insurance HAS NOT PAID OUT any monies relating to the above claim number, or any claims relating to the water damage sustained by the Insured. SafeCo Insurance also sent the Insured a notice of subrogation for any recovery in the arbitration. This is egregious. The Insured is out of pocket a significant amount of money to repair damage caused by the intrusion of water into his home. The Insured has also incurred attorney fees and costs associated with its attempt to recover from MAC Builders, LLC and obtain payment from SafeCo for its covered claims.
As you are aware, any monies that SafeCo Insurance pays out to the Insured will be the subject of subrogation in any recovery obtained from MAC Builders, LLC. Safeco Insurance would also be responsible for payment of the Zewdies' attorney fees and costs associated with such recovery. Because SafeCo Insurance has refused to act in good faith in the resolution of the Insured's claim and has refused to pay any monies on the Insured's behalf, SafeCo is not in a position to assert a subrogation claim in this matter.
If Safeco Insurance desires to participate in the above referenced mediation, please let me know. However, for Safeco to participate in the mediation at this juncture would be disingenuous based on the fact that it has not made any payments to the Insured for his covered claims. Further, it should be clear that the invitation to Safeco to participate in the mediation does not waive any of the Insured's legal rights to recover for claims against SafeCo Insurance based upon their refusal to act in good faith and deal fairly with the Insured.

Doc. #24-4.

         In a letter sent to Mr. McAtee a couple of weeks later, dated November 16, 2012, Ms. Gau confirmed the December 5, 2012, mediation. She stated that if Safeco elected to attend the mediation it “should send a representative with full authority to settle all of the lnsured's claims against Safeco, i.e., the Insured's claim for the extensive water damage to the Insured's home, as well as the Insured's claim against Safeco for its failure to deal fairly and in good faith with the Insured.” Doc. #24-6.

         On November 29, 2012, Michael Woodson introduced himself by letter to Ms. Gau as counsel retained by Safeco “to assist in bringing Mr. and Mrs. Zewdie's homeowners insurance claims to an agreeable resolution.” Doc. #26-8. He references a meeting scheduled for November 30, 2012, at which “we can discuss the claims that have been made, the damages incurred, and the status of any repairs or reconstruction.” Doc. #26-8. Mr. Woodson also confirmed that he would be attending the mediation scheduled for December 5, 2012, and stated that he hoped they could “utilize the mediation to work toward the resolution of some, if not all, of the outstanding issues.” Id.

         On December 7, 2012, two days after the mediation, Mr. Woodson sent Ms. Gau a letter stating that “[a]s indicated at the mediation, Safeco is tendering an additional payment regarding the Zewdie's flooring in the amount of $25, 334.30.” Doc. #26-9. And he said he “would also like the opportunity to visit with you about a convenient time to schedule an additional inspection of the home to address the current condition of the interior and any additional covered damages.” Id. Safeco issued the check to plaintiff on December 17, 2012, and conducted an additional inspection of plaintiff's home in early January 2013. Doc. Nos. 26-10; 26-11.

         On January 16, 2013, Ms. Gau sent Mr. Woodson documents pertaining to the costs the Zewdies incurred to repair and reconstruct the front and rear balconies of their home due to water damage. Mr. Woodson then sent her a supplemental estimate which had been prepared after a January supplement inspection and informed Ms. Gau that Safeco would “issue payment for the amount reflected in the estimate (which is at RCV with no depreciation).” Doc. #26-13. On February 6, 2013, Mr. Woodson sent Ms. Gau an additional check in the amount of $6, 319.69, “representing the amount referenced in SafeCo's recent estimate generated following the supplemental inspection.” Doc. #26-14.

         A couple of weeks later, in a letter dated February 27, 2013, Ms. Gau wrote Mr. Woodson, noting his plan to “participate in the mediation of the matter Zewdie v. MAC Builders, LLC, ” and Safeco's intent to “have a representative available by telephone if necessary to discuss settlement of certain outstanding coverage claims by the insureds.” Doc. #27-2, p. 1. Ms. Gau informed Mr. Woodson that the Zewdies were “out of pocket approximately $150, 000.00 due to SafeCo's failure to process and handle their claims, ” and that it was their position, “based upon the negligent and/or willful failure of SafeCo to deal fairly and in good faith with the Zewdies, that SafeCo has waived any right to seek subrogation for any future payments of covered losses.” Id. at p. 2.

         Safeco participated in the mediation the next day and on March 12, 2013, it issued an additional payment of $10, 000 to plaintiff. In the letter he sent Ms. Gau explaining the payment, Mr. Woodson stated he had “received Safeco's response to [her] request to waive subrogation as to any payments made under the Zewdie's homeowners policy.” Doc. #26- 16. He said Safeco not only had “agreed to waive its contractual right of subrogation as to the payments it ha[d] made to date under the Zewdie's homeowners policy, ” but it would also “issue an additional payment of the $10, 000.00 limit under the additional coverage endorsement for mold, decay and rot” and would “waiv[e] subrogation as to this additional payment as well.” Id. He further explained that it was Safeco's position that plaintiff was “free to resolve claims with MAC Builders and its subcontractors without regard to any Safeco's right of subrogation.” Id.

         The next communication between the parties occurred on June 17, 2013. Ms. Gau sent Mr. Woodson an email on that date letting him know that the insured had reached an agreement with MAC Builders, LLC and several subcontractors. She states: “[a]fter the Global Settlement Agreement is executed by all the parties, we can discuss concluding the outstanding claims the Zewdies have with Safeco.” Doc. #27-1. The agreement she referenced -- a “Final Settlement Agreement and Release in Full of All Claims” - was signed by the Zewdies, MAC Builders, LLC, Safeco and other construction companies and insurers on October 18, 2013. Doc. #26-18. While it provides for the payment of monies by other entities and the Zewdies release their claims against those entities, it does not include similar provisions pertaining to Safeco. Only two provisions of the agreement affect Safeco. In one, Safeco waives its right of subrogation against the other contractors/insurers “arising out of any damages allegedly sustained to the Home.” Id. at p. 13. The other provides: “It is Further Agreed that this Settlement Agreement shall not foreclose the Zewdies from claims for certain damages sought under their homeowners' insurance policy with SafeCo Insurance Company.” Id. at p. 14.

         The next interaction between plaintiff and defendant consists of a “FOR SETTLEMENT PURPOSES ONLY letter dated December 12, 2013, which Ms. Gau sent Mr. Woodson. Doc. #26-19, p. 1. She states the letter is to “serve to follow up on the outstanding coverage claims relating to the Zewdies' Homeowners Policy.” Ms. Gau asserts that the water damage to the Zewdie's front and rear balcony structures fell within the coverage of the policy. She then makes a settlement offer which includes an amount for remaining claims related to water damage, the amount the Zewdies expended in attorney's fees and arbitration and mediation costs to recover their damages from MAC Builders and Safeco, and an amount for Safeco's claimed failure to deal fairly and in good faith with the Zewdies.

         Mr. Woodson rejected the settlement demand by letter dated December 30, 2013. He explained that plaintiff's loss was denied because Safeco believed the damage was caused by faulty construction. While the policy did provide limited coverage for certain damages resulting from faulty construction, Mr. Woodson stated that Safeco had already paid the $10, 000.00 policy limit under its additional coverage for damages caused by wet rot. He stated that Safeco was not responsible for plaintiff's arbitration fees or its legal expenses and, as Safeco had been reasonable in adjusting plaintiff's claims, it had not ...

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