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Shreve v. State Farm Fire and Casualty Co.

Court of Appeals of Louisiana, Second Circuit

May 23, 2018

TOBY SHREVE AND SHERRI SHREVE Plaintiff-Appellants Cross-Appellees
STATE FARM FIRE AND CASUALTY COMPANY, ET AL. Defendant-Appellee Cross-Appellant

          Appealed from the Fourth Judicial District Court for the Parish of Ouachita, Louisiana Trial Court No. 13-0237 Honorable Daniel Joseph Ellender, Judge

          ANTHONY J. BRUSCATO JOHN F. BRUSCATO Counsel for Appellant Cross-Appellee Toby Shreve and Sherri Shreve.

          DAVENPORT, FILES & KELLY By: Martin Shane Craighead Counsel for Appellee Cross-Appellant State Farm Fire and Casualty Company.

          WILLIAM HENRY HALLACK, JR. DENNIS WOODFORD HALLACK Counsel for Appellee Smith Builders, LLC

          Before STONE, STEPHENS, and McCALLUM, JJ.

          McCALLUM, J.

         This lawsuit results from a significant crack located in the foundation of a house in Downsville, Louisiana, owned by Toby and Sherri Shreve ("Shreves"). A jury found the crack was caused by a tree falling on the house, which was covered by their homeowner's insurance policy with State Farm. The jury also found that State Farm, which had denied the Shreves' claim on the basis that the crack was caused by differential settlement, had been unreasonable, arbitrary, and capricious in handling the claim. State Farm filed a motion for a JNOV on the issue of State Farm's bad faith, and the trial court granted the motion. The Shreves have appealed the granting of the JNOV. We affirm.


         Sherri Shreve has lived in the house since 1994, and Toby Shreve began living there after their marriage in 2000. On October 9, 2009, a large oak tree fell across the right front of the house causing extensive damages. At the time, State Farm insured the Shreves' home.

         The Shreves selected Smith Builders, a contractor in State Farm's Premier Service Program, to repair the damage. While the house was being repaired, the Shreves lived in a motel and then in a house they rented before returning to their own house in January of 2010. In February of 2010, one of Smith's workers came to the house to repair kitchen cabinets which had pulled away from the wall.

         In late December of 2011, the Shreves heard what they described as a loud "gunshot" sound in the house. They were unable to determine the origin of the sound. In April of 2012, the heel of Sherri's shoe went through the linoleum floor in the master bathroom. A large crack running the entire width of the rear of the house was eventually discovered. The Shreves did not see the crack when the flooring in the entire house was replaced in 2000, or when the flooring in the hallway, dining room, and kitchen was replaced after the tree fell on the house.

         On August 10, 2012, Sherri notified her State Farm agent of the claim regarding the crack. Later that month, State Farm wrote to the Shreves that there was a question as to whether State Farm was obligated under the policy for the crack, and that the cause of the crack was being investigated. The policy excluded coverage for losses caused by "settling, cracking, shrinking, bulging, or expansion of pavements, patios, foundation, walls, floors, roofs or ceilings[.]"

         State Farm contacted Donan Engineering to evaluate the cause of the crack in the slab and to provide an indication of the scope of the repair job. Timothy Hassenboehler, a forensic engineer for Donan, visited the house on August 22, 2012. The Shreves were present during his visit and pointed out areas of concern. Sherri recalled that by that time the crack had grown, the floor had become uneven and doors would not shut.

         Hassenboehler prepared a report on August 27, 2012. Hassenboehler noted in his report that the crack in the bathroom was one inch wide and three inches deep, without any reinforcing steel in it. The crack, which spanned the entire width of the south-facing house, was one to two feet from the north wall of the house. The crack could be felt under the flooring in the kitchen, master bedroom, and adjacent bedroom.

         Hassenboehler also noted in his report that drywall at numerous locations in the house was cracked or delaminated, many closet and cabinet doors were out of plumb, there was a large hump in the living room floor, the hallway floor was not level, and soft spots could be felt under the floor in the living room and kitchen.

         Hassenboehler observed a large diagonal crack in the brick veneer on the west side of the house, with the crack widening as it went up. There were numerous additional cracks on this wall. Hassenboehler also observed that the concrete slab had many cracks, with the west side having the most amount of cracking. It was obvious that repairs involving application of a sealant had been attempted in the horizontal cracks on the west side of the house, while numerous vertical cracks on that side showed no signs of repair. Hassenboehler, who saw a void that was one inch deep under the grade beam on the north side of the house, also found the subsurface soils at this wall to be moist.

         Hassenboehler attached to his report a statewide drought monitor map of Louisiana from the USDA dated August 21, 2012. This map showed Ouachita Parish as being under a severe drought. Hassenboehler found that the slab had been significantly damaged throughout the house, with damage to the interior portion of the slab as well as to the exterior grade beam. He concluded that: (1) North Louisiana had been undergoing a severe to extreme drought; (2) the drought caused differential settlement; (3) long-term differential settlement had dislodged the plumbing under the house; (4) the influx of additional water from leaking plumbing caused erosion of the soils under the slab; (5) the erosion caused the exterior grade beams of the slab to settle; (6) the settlement caused the concrete slab to crack; and (7) the erosion will continue and the crack will grow larger until the plumbing is repaired. He further concluded that the cracked concrete was not a result of damage from the fallen tree.

         On September 4, 2012, Brian Griffin, a State Farm associate, wrote to the Shreves that State Farm had determined that the damage to their house's concrete slab was caused by ground movement and, therefore, not covered by their policy.

         The Shreves filed suit against State Farm, Smith Builders, and Sonnier & Fisher Public Adjusters, LLC, on January 24, 2013. State Farm answered and, by amended answer filed on January 22, 2014, urged the affirmative defense that the suit was untimely under a provision of the insurance contract which required any suit against State Farm to be filed within one year from the date of loss or damage. The policy further provided that to conform with state law, when a policy provision was in conflict with the applicable law of the state in which the policy was issued, the law of the state will apply.

         On May 2, 2014, State Farm filed a motion for summary judgment in which it argued, in part, that there was no genuine issue of material fact that the Shreves failed to comply with the policy provision requiring when suit was to be filed. In their opposition, the Shreves argued in part that the suit was not untimely because of prescription or the terms of the insurance contract: La. R.S. 22:868(C) prohibited policy provisions that purported to reduce an insured's time to file suit under a policy to a period of less than two years. At the hearing on the motion for summary judgment, State Farm's attorney argued that nonetheless the claim was not brought within 24 months. On October 23, 2014, the trial court denied the motion for summary judgment.

         In 2014, the Shreves hired Foy Gadberry, a Ouachita Parish civil engineer who performs code inspections for several parishes, to evaluate their claim. He first visited their house in June or July of 2014. Gadberry believed that the crack in the foundation was caused by the tree falling on the house. His theory was that when the tree fell, its weight lowered the front of the slab and pushed the rear of the slab up.

         The deposition of Hassenboehler was taken on January 15, 2015. On March 30, 2015, the Shreves filed a second supplemental and amended petition, asserting that Hassenboehler's report was insufficient to conclude that the tree did not cause the cracks. They asserted that the denial of coverage was without just cause, and they were entitled to damages, penalties and attorney fees for State Farm's breach of its duties of good faith and fair dealing as well as its affirmative duty to adjust their claims.

         On June 1, 2015, the court granted the Shreves' motion to dismiss their claims against the defendants associated with Sonnier & Fisher.

         When State Farm learned that Gadberry had an opinion contrary to Hassenboehler, it retained Dr. Jerry Householder, a consulting engineer and retired engineering professor from LSU.

         Gadberry and Dr. Householder visited the house on March 13, 2015. Householder and Gadberry each took a soil sample from a depth of 18 inches at the same location. Gadberry took an additional soil sample from another location.

         Dr. Householder and Gadberry had sieve tests run on the samples to determine how much clay and silt was in the soil. Soil analysis showed it was 17% sand and the remainder was a combination of clay and silt. Clay soil is very susceptible to shrinking and swelling because it is volatile regarding moisture content. Gadberry also had an Atterberg limits test performed to determine the plasticity index and liquid limits of the soil. The test revealed that it was a fat clay with sand.

         Dr. Householder wrote to State Farm's counsel on May 31, 2015, regarding his conclusions. Dr. Householder had reviewed the petitions, Hassenboehler's report, photos, Hassenboehler's deposition, and Gadberry's affidavit and deposition. He stated that it was his understanding that Gadberry believed the tree falling on the house caused the crack in the slab in December of 2010. He agreed that if the front of the house was forced down, then the soil beneath the slab could cause some indeterminate amount of flexural stress in the slab.

         Dr. Householder further noted that Gadberry opined that over time, the tension gradually weakened the slab to the point that it finally cracked at its weakest point. Dr. Householder countered that there was no engineering principle to support that theory. First, concrete does not weaken with age, but actually strengthens with age. Second, concrete does not weaken because it is under stress. Third, if the slab was being forced upward into a bow, the soil beneath the slab would have to be pushing up on the slab with a force greater than it did before the tree fell. It is well settled that clay soil such as at the site will consolidate under load. The consolidation would relieve the force and flexure in the slab.

         Dr. Householder also noted that he had reviewed rainfall records for Calhoun, Louisiana, from October 2009 through December 2010. These records showed rainfall of 42.22 inches, or a 23.45-inch deficit for that period. A deficit that great would cause the water table to lower. Dr. Householder found that the cracks in the brick masonry were consistent with differential settlement, and that cracks in concrete slabs often accompany differential movement. He acknowledged that it can sound like a gunshot when concrete cracks.

         Dr. Householder opined that any flexural stress in the slab due to the tree pushing the front of the foundation into the ground would have been greatest immediately after the impact and that to the extent it might have existed, the flexural stress decreased over time due to the consolidation of the clay, assuming that the clay was under stress from the slab. He concluded that there was no engineering or scientific evidence that the crack in the slab was caused by or influenced in any way by the tree falling on the front of the house. He added that drought conditions can cause differential settlement, and that differential settlement can cause slab cracks.

         Ouachita Parish received 22 inches of rain in March of 2016. Gadberry went to the house once a week for four weeks during that month and took elevation readings of the slab to see if it was moving up or down. He found no appreciable difference, and he concluded that the soil was not highly volatile or highly susceptible to shrinking or swelling.

         This matter proceeded to trial. A jury trial was conducted over a week in February of 2017.

         Gadberry testified at trial as an expert in the field of civil engineering. He believed that the "gunshot" heard in December of 2011 was probably the sound of a rafter in the attic breaking, although it would have been associated with the slab breaking. He estimated that the foundation cracked in November or December of 2011.

         Gadberry also testified that while concrete is strong in compression, it is weak in tension, and the tree caused tension in the top of the concrete. The lowering of the front of the slab caused the middle to buckle, which then put pressure on the back of the slab. The crack occurred when the foundation could no longer take the tensile stress. He acknowledged that houses typically have a thicker slab known as a grade beam along the perimeter. The grade beam is normally 12 inches wide and 20-24 inches deep, while the rest of the slab is typically only four inches thick. The concrete's compression capacity is the same throughout a house slab, but the load carrying capacity differs depending on the slab's thickness.

         Gadberry recognized that when the load capacity of a concrete structure is exceeded to the point it fails, it usually fails immediately. The tree caused an impact load, which meant it caused a greater load than if it had been placed there. The load was removed when the tree was removed. If an impact load is applied with enough force to cause a failure, the higher probability is that the failure will occur when the impact load occurs.

         Gadberry did not think the soil had a high enough clay content to shrink and swell to an extent that it would have caused the crack. In his opinion, the soil samples were not taken from a reliable depth because a core of 18 inches does not tell what the soil is like for the next five to six feet. He also maintained that the samples did not show what the soil was actually like under the foundation.

         Utilizing rainfall data for Ouachita Parish from 1999 to 2012 that had been compiled by the University of Louisiana-Monroe, Gadberry determined that there had not been a drought from 2010 to 2012. The university is located about 18 miles from the house. Gadberry believed that if the foundation was going to crack from a ...

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