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Walsh v. State Farm Fire and Casualty Co.

United States District Court, M.D. Tennessee, Nashville Division

July 17, 2017



          ALETA A. TRAUGER United States District Judge.

         Pending before the court is a Motion for Summary Judgment (Docket No. 15) filed by the defendant, State Farm Fire and Casualty Company (“State Farm”), to which the plaintiffs, James and Belinda Walsh (the “Homeowners”), have filed a Response in opposition (Docket No. 30), and State Farm has filed a Reply (Docket No. 34). For the reasons stated herein, the motion will be granted.


         This insurance dispute arises from allegations that State Farm, a provider of property insurance coverage to the Homeowners, denied the Homeowners' insurance claim for damage to their property that was caused by sinkhole activity, despite the fact that the Homeowners had met all conditions of the policy and the policy covered sinkhole damage. (Docket No. 1-2.) It is undisputed that the Homeowners' residential property (the “Property”) was insured by State Farm, that their policy includes sinkhole damage (but not other types of damage to the land rather than the dwelling), and that the Homeowners' insurance claim submitted on September 15, 2014 for damages to their dwelling and surrounding land (the “Claim”) was denied by State Farm on the grounds that the damage was not caused by sinkhole activity or any other covered calamity. The dispute in this action focuses solely on whether State Farm was justified in its denial of the Claim.

         It is further undisputed that, upon receiving the Claim, State Farm sent representative Jeremy Moran to visit the Property and to observe the damage on September 19, 2014. On September 23, 2014, State Farm retained Conestoga-Rovers & Associates (“CRA”) to investigate the damage to the Property and determine the cause. It is undisputed that CRA is a preferred vendor for State Farm and that it has regularly conducted investigations related to sinkhole claims and provided expert testimony in lawsuits over denied sinkhole claims on behalf of State Farm. Further, it is undisputed that State Farm did not provide to the Homeowners its contractual agreement with CRA for the investigation done on the Claim, nor did it disclose to the Homeowners the rate at which CRA was compensated for its investigation.

         On October 1, 2014, CRA inspected the Property. On November 4, 2014, CRA issued a report of its findings, certified by Tennessee licensed geologists Bernd T. Rindermann and Norman R. Meeks, Tennessee licensed geotechnical engineer Steven A. Janosik, and licensed structural engineer Charles N. Stewart.[1] (Docket No. 17-3 (the “CRA Report”).) The CRA Report includes the following:

▪ Statement that the CRA Report is based on a visual assessment of the Property and geotechnical evaluation of the soil conditions.
▪ Statement that: “[I]t is CRA's opinion that the cause of the [Claim] is not sinkhole activity. In our opinion, the analysis conducted by CRA, as documented in this report, was of sufficient scope to eliminate sinkhole activity as the cause of the damage to the home within a reasonable professional probability.” (Docket No. 17-3, p.2.)
▪ Identification of the following causes of damage to the Property, based on evaluation of the Property and the surrounding subsurface conditions:
• Differential slab/foundation movement (settlement) in response to saturation and frost penetration as well as compression/consolidation of poorly compacted underlying fill soil deposits and cyclical slope creep;
• Shrinkage of cementitious materials based on properties of the materials themselves that are likely to cause cracks that can then be exacerbated by soil conditions;
• Cyclical expansion and contraction of various building materials in response to changes in temperature and humidity levels;
• Drywall “nail pop” caused by improper installation and/or withdrawal of fasteners due to shrinkage and swelling of the wood caused by changes in humidity;
• Excess moisture entering the ceiling near the family room fireplace due to inadequately sealed joints, roof penetrations, utility pipes or other mechanisms unrelated to foundation settlement; and
• Separation of the rear porch slab from the main structure due to a lack of structural continuity between the slab and the home, exacerbated by soil conditions and cyclical slope creep.

          Listing of the following work that was performed by CRA:

• Site visit to document the condition of the Homeowners' residence and Property and to interview the Homeowners and their representative;
• Review of the Sumner County Assessor of Property website for information about the Property and other local geologic, topographic, and soil information;
• Geophysical testing, including an electrical resistivity imaging (“ERI”) survey;
• Relative elevation floor survey;
• Excavation of a test pit to expose the geometric features of the perimeter wall and foundation of the dwelling;
• Performance of two hand auger borings and three Standard Penetration Test borings to explore both shallow and deeper soil conditions, up to 19 feet;
• Review and classification of recovered soil samples; and
• Assessment of soil conditions revealed in the borings and evaluation of the relationship between the soil and the ...

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