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Catherwood v. Nationwide Property & Casualty Insurance Co.

November 26, 2007

CYNDI CATHERWOOD, PLAINTIFF / COUNTER-DEFENDANT,
v.
NATIONWIDE PROPERTY & CASUALTY INSURANCE COMPANY, DEFENDANT / COUNTER-PLAINTIFF.



The opinion of the court was delivered by: Susan K. Lee United States Magistrate Judge

Lee

MEMORANDUM AND ORDER

I. Introduction

Before the Court is the motion of defendant and counter-plaintiff, Nationwide Property & Casualty Insurance Company ("Nationwide"), for a partial summary judgment pursuant to Fed. R. Civ. P. 56 [Doc. No. 24]. Plaintiff and counter-defendant, Cyndi Catherwood ("Catherwood"), has filed a response in opposition to Nationwide's motion for partial summary judgment [Doc. No. 27]. Nationwide has filed a reply to Catherwood's response [Doc. No. 28].

Nationwide's motion for partial summary judgment is now ripe for review. For the reasons which follow, Nationwide's motion for partial summary judgment on Catherwood's claim for a bad faith penalty under Tenn. Code Ann. § 56-7-105 [Doc. No. 24] will be GRANTED and that claim will be DISMISSED WITH PREJUDICE.

II. Procedural and Factual Background

A. Procedural History

Catherwood commenced this action against Nationwide on July 7, 2006, in the Circuit Court of Hamilton County, Tennessee, seeking damages as the result of an insurance coverage dispute regarding a fire which destroyed Catherwood's residence on September 14, 2005 [Doc. No. 1-2]. In her complaint, Catherwood alleges Nationwide issued a policy of insurance, policy no. 2611142 (the "policy"), which insured her residence against loss or injury by fire [Doc. No. 1-2 at 1, ¶ 2]. Catherwood alleges the policy was in effect on September 14, 2005 [id.]. Catherwood alleges her residence was wholly destroyed by fire on September 14, 2005, and that Nationwide had notice of such fire/destruction [id. at ¶ 3]. Catherwood also alleges she has performed all conditions precedent to her right of recovery under the policy, but Nationwide refused to make payment under the policy to her [id. at ¶ 4]. Catherwood further alleges Nationwide's failure to pay is without justification and in bad faith and, therefore, she is entitled to recover an additional amount equal to 25% of the face amount of the policy pursuant to Tenn. Code Ann. § 56-7-105 [id. at 1-2, ¶ 4]. In addition to the bad faith penalty, Catherwood seeks damages, interest and costs [id.].

Nationwide timely removed the action to this Court pursuant to 28 U.S.C. § 1441 and filed an answer and counterclaim [Doc. Nos. 1 & 2]. Nationwide asserts the fire was of incendiary origin and was caused by Catherwood for the express purpose of fraudulently obtaining funds from Nationwide [id. at 4]. Nationwide asserts that in furtherance of her plan to defraud it, Catherwood filed a sworn statement in proof of loss ("sworn statement") and made a demand upon Nationwide for payment and that when Nationwide refused payment, Catherwood filed suit in furtherance of her plan [id.]. Nationwide asserts that as the result of Catherwood's plan to defraud, it has had to incur expenses in investigating and defending against Catherwood's claim and Nationwide seeks a penalty of 25% of the face amount of the policy as reimbursement for the costs it incurred in investigating and defending against Catherwood's claim under Tenn. Code Ann. § 56-7-106 [id.]. Nationwide asserts a counterclaim against Catherwood for payments made to her and her mortgage holder [id.].

B. Facts

Attached to Nationwide's motion is a statement of undisputed facts which states:

1. Plaintiff, Cyndi Catherwood, submitted an application for insurance with Nationwide on August 11, 2005. . . .

2. The defendant, Nationwide, issued a homeowners' policy to Cyndi Catherwood on August 15, 2005 with an effective date of August 11, 2005.

3. On September 14, 2005, 34 days after the Nationwide policy was in effect, Ms. Catherwood's residence was destroyed by fire.

4. On October 31, 2005, Cyndi Catherwood submitted a proof of loss to defendant, Nationwide. . . .

5. On April 26, 2006, Nationwide denied Ms. Catherwood's claim . . . based on the fact that plaintiff concealed or misrepresented material facts in obtaining the policy of insurance.

6. That at no time prior to the commencement of the present action did the plaintiff, her public adjuster and/or attorney make the requisite demand pursuant to Tenn Code Ann. 56-7-105 so as to permit her to seek the bad faith penalty. [Doc. No. 24-3 at 2-3].

Also attached to Nationwide's motion is the affidavit of Phil Vaughn ("Vaughn"), an employee of Nationwide, who is the primary claims representative handling Catherwood's claim since the fire occurred [Doc. No. 24-4 at 1, ¶¶ 1-3]. Vaughn's affidavit states:

4. After the fire occurred, the plaintiff submitted a claim under her homeowner's policy for the value of her home and the personal property located within, which prompted Nationwide to begin an investigation into both the cause of the fire and the value of the property destroyed.

5. In the months after the fire, I sent several letters to the plaintiff requesting information and asking that she complete an inventory sheet and proof of loss form.

6. In December 2005, Professional Claims Solutions informed Nationwide that they had been employed by the plaintiff to handle her claim. Nationwide and its representative were in contact with Professional Claims Solutions regarding various items needed for Nationwide to complete its investigation. 7 After completing ...


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