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Uzelac v. Fire Insurance Exchange

Court of Appeals of Utah

April 5, 2018

Michael Uzelac and Holly Uzelac, Appellants,
Fire Insurance Exchange, Appellee.

          Third District Court, Salt Lake Department The Honorable Denise P. Lindberg No. 110903573

          L. Rich Humpherys and J.D. Lauritzen, Attorneys for Appellants

          Andrew M. Morse, Kenneth L. Reich, and Brian A. Mills, Attorneys for Appellee.

          Judge Gregory K. Orme authored this Opinion, in which Judges Michele M. Christiansen and Kate A. Toomey concurred. [1]

          ORME, JUDGE.

         ¶1 Only days before Appellants Michael and Holly Uzelac were scheduled to close on a permanent mortgage for their new, custom-built vacation home, they learned that vandals had broken into the home and caused extensive damage. The Uzelacs submitted several claims to their insurer, Appellee Fire Insurance Exchange (FIE), and FIE made payments to cover most of the necessary repairs. Nevertheless, believing they were entitled to more, the Uzelacs filed suit against FIE to obtain additional compensation. The parties proceeded to litigate, and ultimately the district court entered summary judgment in favor of FIE. The Uzelacs now appeal. For the reasons discussed below, we affirm the district court's decision in part and reverse it in part, and we remand the case for further proceedings.


         ¶2 In February 2008, having received word that the construction and interior decoration of their new vacation home had finally been concluded, the Uzelacs set out to view the completed home for the first time. The home, set in the mountains above Fruitland, was large and luxurious, with lavish, custom-designed furnishings. Upon arriving, they were horrified to find that their expensive new home was in shambles.

         ¶3 Vandals had forced their way into the home; torn apart the walls and ceiling; smashed exterior windows; and ripped the plumbing from the framework, flooding the structure with hot water. Combined with the frigid winter temperatures, the water continued to wreak havoc upon the home even after the vandals departed. Hardly a square foot of the home was left undamaged.

         ¶4 The Uzelacs immediately filed a homeowner's insurance claim with FIE, claiming extensive damage to the home and its contents. Soon after, an FIE representative visited the scene to inspect the home and inventory the damaged personal property. FIE arranged for a third party, ServiceMaster, to conduct mitigation and remediation services, the bulk of which consisted of drying out the home and its contents and boxing up and storing the Uzelacs' furniture and belongings.[3] FIE never took the position that the Uzelacs' policy was not in effect when the vandalism occurred or that vandalism did not fall within the scope of the policy's coverage.

         ¶5 FIE received and processed numerous claims from the Uzelacs in connection with the vandalism. Nearly all of the claims were approved, some on the same day they were received. Indeed, altogether, FIE disbursed over $900, 000 to cover repairs to the home and over $100, 000 to cover damage to the Uzelacs' personal property. But FIE did reject some of the Uzelacs' claims.

         ¶6 In particular, the Uzelacs assert they made three requests that FIE wrongfully rejected.[4] The first request involved an attempt to recoup certain unanticipated financing expenses that arose as a consequence of the vandalism. Although the Uzelacs had found a lender willing to provide permanent mortgage financing for their new home before construction was completed, closing was contingent on the Uzelacs' first obtaining a certificate of occupancy for the home. As a result of the extensive vandalism, the Uzelacs were unable to obtain the certificate, and they therefore had no choice but to secure a "bridge loan" during the interim reconstruction period. In response to the Uzelacs' inquiry, FIE informed them that the additional expenses flowing from the bridge loan's higher interest rate were not recoverable under the policy.

         ¶7 The second request involved the question of whether and on what terms the Uzelacs' policy would cover the expense of substitute accommodations. In a declaration attached to the Uzelacs' opposition to FIE's motion for summary judgment, Mr. Uzelac averred that shortly after the vandalism occurred, he contacted FIE to inquire whether his policy would cover the expense of renting a substitute vacation home while theirs was being rebuilt. According to him, an FIE representative informed him that it would not. For its part, FIE has conceded that the policy would have covered the expense of renting a second home, but only if the Uzelacs had actually incurred that expense. In turn, Mr. Uzelac stated in his declaration that the only reason he and his wife did not rent a second home is that FIE led them to believe the expense would not be covered.

         ¶8 Finally, the third request involved the malfeasance of ServiceMaster. In November 2009, as the repairs to the home neared completion, ServiceMaster retrieved the Uzelacs' salvaged personal property from storage and delivered the items back to the home. To the Uzelacs' dismay, many of the items were returned in a ruined condition. For example, mattresses were rotten and mildewed, and the pages of books and photograph albums were stuck together in brittle clumps. The property apparently had not been properly dried out before being placed in storage, and as a result much of it was beyond repair. The Uzelacs submitted a claim for this damage, but FIE denied it, explaining that the Uzelacs would need to pursue their claim against ServiceMaster directly.

         ¶9 Early in 2011, the Uzelacs filed suit against FIE and ServiceMaster, asserting breaches of contract and the implied covenant of good faith and fair dealing. In support, they alleged that FIE had "failed and refused . . . to pay [the Uzelacs] the moneys owing to them, despite demand therefor, " and that FIE had "engaged . . . in a course of conduct to further its own economic interest . . . in violation of its obligations to [the Uzelacs]." Yet the complaint contained few specifics, and the Uzelacs' initial disclosures did not clarify matters much. In their disclosures, under the heading "Computation of Damages, " the Uzelacs claimed they were seeking "[t]he amounts that would be owing under the policy as set forth in the complaint" in addition to "[g]eneral and consequential damages, " "[e]xemplary and punitive damages, " and costs and attorney fees. The Uzelacs' "computation" did not make direct reference to any itemized list of expenses or specific dollar figures.

         ¶10 Somewhat perplexed by the Uzelacs' reluctance to state their damages with specificity, FIE asked Mr. Uzelac at his deposition just what it was that he wanted FIE to cover that had not already been paid:

Q. Okay. Before we get into this I want to make sure I understand a couple of things. First, this list of damaged items [of personal property that you provided to us, which I have marked Exhibit 6], is this the extent of your damages in this case? I understand that there's on page 4 of Exhibit 1 also a list of some items . . . . So the list that you made in Exhibit 6 and the final page of Exhibit 1, is that the sum total of everything . . . that you think [FIE] ought to cover?
A. No.
Q. Okay. What else are we talking about?
. . . .
A. . . . [T]he bridge loan that we had to get.

         The two deposition exhibits to which FIE's counsel directed Mr. Uzelac's attention each contained a list of expenses that the Uzelacs had submitted to FIE for reimbursement. The first, Exhibit 6, identified certain items of personal property that had been damaged during the vandalism, and the second, Exhibit 1, itemized reconstruction services, including snow-removal services, the costs for which exceeded $50, 000. Notably, during his deposition Mr. Uzelac did not indicate that he and his wife intended to pursue a claim relating to the costs of substitute vacation accommodations.

         ¶11 Shortly after the Uzelacs settled their claims against ServiceMaster, resulting in its dismissal from this action, FIE moved for summary judgment. In its supporting memorandum, FIE explained that Mr. Uzelac had "identified in his deposition only two issues as the basis for his litigation against FIE. First, [the Uzelacs] believed that FIE did not compensate [them] for certain personal property items that were damaged during the vandalism of their cabin." FIE explained that the items in question were the items listed in Exhibit 6 and other items that were allegedly mishandled by ServiceMaster. "Next, [the Uzelacs] believed FIE should have to pay for the interest on a 'bridge loan' [they] obtained." FIE then devoted the bulk of its motion to arguing that it was entitled to judgment as a matter of law on these two issues, without mentioning the reconstruction expenses identified in Exhibit 1.

         ¶12 In their opposition, the Uzelacs began by defending the validity of the claims Mr. Uzelac raised in his deposition and then identified a number of additional factual issues they believed should preclude summary judgment. Chief among these was their claim that FIE made misrepresentations regarding the scope of their policy coverage, thereby leading them to believe, incorrectly, that the expense of renting a substitute vacation home would not be covered. In connection with that claim, the Uzelacs asserted-for the first time during the proceedings before the district court-that they would be seeking the reasonable value of the expenses they would have incurred in renting a comparable vacation home if they had been properly informed about the policy's coverage for this expense. In addition, the Uzelacs maintained that summary judgment was inappropriate because a factual issue remained as to whether FIE should be held vicariously liable for the property damage caused by ServiceMaster-to the extent, presumably, that these losses remained unpaid after the Uzelacs' settlement with ServiceMaster.

         ¶13 After hearing oral arguments on FIE's motion, the district court orally entered its ruling, granting the motion in part and denying it in part. With respect to the Uzelacs' claim for the damaged items of personal property, the court concluded that judgment should be rendered in FIE's favor because there was no genuine dispute that the Uzelacs had been adequately reimbursed for those expenses, albeit in a somewhat smaller amount than they had hoped for. The court further concluded that FIE was entitled to judgment as a matter of law on the Uzelacs' claims for the additional bridge loan expenses and the substitute accommodations expenses, as the former expense category was not recoverable under the terms of their policy and the latter was recoverable only if the expenses had actually been incurred. The court did, however, determine that a genuine issue of fact remained as to whether a principal-agent relationship existed between FIE and ServiceMaster, such that FIE might be ...

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