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Harmon v. State Farm Mutual Automobile Insurance Co.

Supreme Court of Idaho

May 11, 2017

JOEL W. HARMON and KATHLEEN F. HARMON, husband and wife, Plaintiffs-Appellants,

         2017 Opinion No. 43

         Appeal from the District Court of the First Judicial District of the State of Idaho, Kootenai County. Hon. Cynthia K.C. Meyer, District Judge.

         The order of the district court is reversed in part, and the case is remanded.

          Bistline Law, PLLC, Coeur d'Alene, for appellants. Arthur M. Bistline argued.

          Elam & Burke, P.A. Boise, for respondent. Jeffrey A. Thomson argued.

          BRODY, Justice.

         Plaintiffs Joel W. Harmon and Kathleen F. Harmon filed a claim with their insurance company, State Farm Mutual Automobile Insurance Co., after their motorhome was broken into and damaged. The Harmons subsequently brought suit against State Farm in district court, claiming that State Farm breached the insurance agreement by failing to pay the amount required to actually repair the vehicle or pay the cash value. The Harmons also brought a claim for bad faith. State Farm moved for summary judgment on both claims, which the district court granted. The Harmons timely appealed.


         The Harmons owned a 2008 National Pacifica motorhome. They lived in the motorhome in Alaska. The Harmons spent the fall of 2013 in the lower 48 states. In December 2013, they placed the motorhome in storage at a facility in Spokane, Washington, and planned to keep it there until spring.

         On December 19, 2013, the motorhome was burglarized. The dashboard was severely damaged when the intruders removed electrical components. The Harmons immediately filed a claim with State Farm. State Farm acknowledged receipt of the claim on December 22, 2013, and assigned a Claim Associate to handle the claim. The insurance policy at issue provided comprehensive coverage for the motorhome subject to a $500 deductible.

         Following the loss, the Harmons obtained a written repair estimate from the facility where the motorhome had been stored. The repair estimate which was dated January 21, 2014, contained two separate estimates. The first estimate totaled over $184, 000 and included $155, 000 for the custom molding of a new dash because the old dash could not be repaired and a replacement could not be found. The second estimate was titled "Estimate with Figures Available." This estimate totaled $18, 491.36 and included $2, 000 for replacement of the dash, even though a replacement unit could not be located.

         In January 2014, the Harmons were in touch with a State Farm claim representative via telephone. Mr. Harmon stated in his affidavit in opposition to summary judgment that "[the claim representative] informed us that State Farm would be totaling the coach because the dash could not be repaired, that no existing replacement was available, and that the dash could only be re-manufactured for a cost of approximately $155, 000.00." State Farm did not dispute these statements.

         Sometime in April or May 2014, Mr. Harmon spoke again with the State Farm claim representative via telephone. Mr. Harmon stated in his affidavit that the Claim Representative informed him at that time that State Farm did not consider the motorhome a total loss and that State Farm would pay the repair cost based on an estimate of the cost if a dash were actually available. On May 29, 2014, the claim representative sent Mr. Harmon a letter confirming their conversation and offering to pay $18, 491.36 for the damage to the motorhome. The letter stated in part:

The issue has been to get a replacement dash, to be able to complete the repairs to your motorhome. After much research by RV Northwest, it appears there is not a replacement dash available, new or used. I have spoke [sic] with several RV repair facilities myself. If a dash was available I was told the price would be in the $2, 000.00 range. I have taken the parts prices, labor prices, etc from the RV Northwest estimate and added $2, 000.00 for a dash. These figures total up to, [sic] $18, 491.36. I can write you a check for this amount. If there is any additional parts needed, additional labor, or parts increases, we will review them and handle it as a supplement.
Your motorhome is not a total loss because of an obsolete part, or because a company goes out of business and parts are no longer available. I am obligated to pay for what the part would cost if it was available. In this case the estimate for a replacement dash was $2, 000.00.
If you have any additional information, or any questions, please give me a call. I am willing to look at any prospects with the idea of getting your motorhome back to the way it was prior to this incident. Thanks for your cooperation.

(Emphasis added).

         Approximately three weeks after receiving this letter, the Harmons filed suit against State Farm alleging breach of contract and bad faith. On July 21, 2014, State Farm filed an answer and moved to stay the proceedings and compel an appraisal process that is required when there is a disagreement between the parties as to the cost of the repair or the actual cash value. It is undisputed that State Farm again offered to pay the Harmons what it estimated to be the actual cash value of the motorhome while the motion to stay proceedings was pending. The Harmons rejected the offer. On August 22, 2014, the parties stipulated to entry of the stay and to participate in the appraisal process. Thereafter, the parties traded letters concerning what would be determined by the appraisers. The Harmons demanded that the appraisers determine the actual cash value of the vehicle. State Farm, on the other hand, demanded the appraisal of both the cost of repair and the actual cash value.

         On October 27, 2014, the claim representative sent the Harmons a letter advising them of new repair options. A used replacement dash from the previous model year had been located. The used dash would fit the space in the Harmon's motorhome, but was not an exact match. State Farm also advised the Harmons that another repair specialist had determined that their existing dash could be repaired. The claim representative enclosed two estimates, one for replacing the dash for $18, 994.22 and the other for repairing the dash for $18, 252.89, both of which would be subject to the $500 deductible. State Farm requested that the Harmons choose between either replacing the damaged dash or repairing it. The Harmons advised State Farm a few days later that they wanted to discuss the feasibility of repairs with their expert.

         On November 10, 2014, the Harmons advised State Farm that they chose to have the dash repaired. On November 21, 2014, State Farm paid the Harmons $17, 752.89-the amount of the repair estimate less the $500 deductible. On January 30, 2015, the umpire involved in the appraisal process, issued a decision finding that the cost of repair was $18, 252.89-the amount State Farm had tendered previously less the $500 deductible.

         After State Farm tendered payment, the parties again traded letters regarding the repairs. In February 2015, the Harmons advised State Farm that they would have the repairs made subject to their right to reject if the repairs were not satisfactory. The Harmons also asked for a determination of the actual cash value of the vehicle from the umpire so that it could be used in the event the repairs were not successful. In May 2015, State Farm filed a motion to lift the stay of proceedings, arguing that the cash value of the motorhome was moot and, alternatively, that the Harmons refused to complete the appraisal process. The Harmons stipulated to lift the stay. The litigation then proceeded.

         State Farm filed a motion for a summary judgment in June 2015. The Harmons responded to the motion. In August of 2015, the district court granted State Farm's motion for summary judgment, finding no breach of contract or bad faith. The district court dismissed the Harmons' claims and final judgment was entered. In September 2015, the Harmons timely filed a Motion to Alter or Amend the Judgment pursuant to Idaho Rule of Civil Procedure 59. The Order Denying Plaintiff's Motion to Alter or Amend the Judgment was filed in October 2015. The Harmons timely filed their Notice of Appeal in November 2015.


         1. Whether the district court erred when it determined that State Farm had not breached the insurance contract.

         2. Whether the district court erred when it dismissed the Harmons' bad faith claim. 3. Whether the Harmons are entitled to an award of reasonable attorney's fees and costs on appeal.


         Idaho appellate standards of review apply even when a contract's choice of law provision requires the application of the law of another state. See Carroll v. MBNA Am. Bank, 148 Idaho 261, 264, 220 P.3d 1080, 1083 (2009) (applying the Idaho standard of review when a Delaware choice of law was at issue). In reviewing a grant of summary judgment, this Court's standard of review is the same as the district court's standard in ruling upon a motion. Thomson v. Lewiston, 137 Idaho 473, 475-76, 58 P.3d 488, 490-91 (2002). "The [district] court must grant summary judgment 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." I.R.C.P. 56(a). Courts will consider "pleadings, depositions, and admissions on file, together with the affidavits, if any." Kiebert v. Goss, 144 Idaho 225, 227, 159 P.3d 862, 864 (2007) (internal citations omitted). In making that determination, all facts are construed in the light most favorable to the non-moving party and all reasonable inferences that can be drawn from the record are to be drawn in favor of the non-moving party. Parks v. Safeco Ins. Co. of Illinois, 160 Idaho 556, 561, 376 P.3d 760, 765 (2016). If there is no genuine issue of material fact, only a question of law remains, over which this Court exercises free review. Kiebert, 144 Idaho at 227, 159 P.3d at 864.

         IV. ANALYSIS

         A. Alaska law governs the parties' dispute.

         State Farm insured the motorhome under Alaska Policy Form 9802A. There is a choice of law provision in the policy which states: "Without regard to choice of law rules, the law of the state of: Alaska will control . . . in the event of any disagreement as to the interpretation and application of any provision in this policy." This Court has previously ruled that the law of the state chosen by the parties to govern their contractual rights and duties will be applied. See Ward v. Puregro Co., 128 Idaho 366, 369, 913 P.2d ...

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