Lane-Jacobson v. Mercury

NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

ATHENA FINNEY LANE-JACOBSON, Plaintiff/Appellant/Cross-Appellee,

v.

MERCURY CASUALTY COMPANY, Defendant/Appellee/Cross-Appellant.

No. 1 CA-CV 19-0246
FILED 6-2-2020

Appeal from the Superior Court in Maricopa County
No. CV2016-010863
The Honorable Roger E. Brodman, Judge

AFFIRMED

COUNSEL

Athena Finney Lane-Jacobson, Phoenix
Plaintiff/Appellant/Cross-Appellee

Gordon Rees Scully Mansukhani, LLP, Phoenix
By Matthew G. Kleiner, Annelise M. Dominguez
Counsel for Defendant/Appellee/Cross-Appellant
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MEMORANDUM DECISION

Judge Jennifer M. Perkins delivered the decision of the Court, in which
Presiding Judge David D. Weinzweig and Judge James B. Morse Jr. joined.

P E R K I N S, Judge:

¶1 Athena Finney Lane-Jacobson appeals the superior court’s
award of summary judgment to Mercury Casualty Company for breach of
contract and breach of good faith and fair dealing. Mercury Casualty cross-
appeals the denial of attorneys’ fees. We affirm.

FACTUAL AND PROCEDURAL HISTORY

¶2 In July 2014, a storm caused water damage to the home of
James Jacobson and Ms. Lane-Jacobson (collectively, “the Jacobsons”). The
Jacobsons made a claim for water damage under their homeowner’s
insurance policy with Mercury Casualty.

¶3 Mercury Casualty retained Sams & Associates (“Sams”), an
independent adjustment company, to inspect the property and estimate
damages. On August 9, 2014, an adjustor from Sams inspected the home.
According to the Jacobsons, the Sams adjuster refused to inspect the interior
of the home for damage and limited his investigation to the home’s exterior.
The adjuster concluded that the property sustained exterior damage. On
August 14, 2014, Mercury Casualty made a payment to the Jacobsons
consistent with the adjuster’s report and closed the claim.

¶4 The Jacobsons contacted Mercury Casualty again in
September 2014 to address the claim for interior water damage. Mercury
Casualty reopened the claim. Another adjustor from Sams inspected the
home and found interior water damage. ServPro, a remediation company,
began interior remediation efforts. Claim records suggest that, as part of the
remediation efforts, ServPro advised that demolition or wall cavity air
testing in each affected room could be conducted to verify any presence of
mold, but that the Jacobsons were “not too big on a lot of demo[lition] . . .
.” ServPro also conducted interior mold sampling. The subsequent mold
sampling report showed elevated or abnormal levels of mold in the interior
of the home. ServPro then provided mold remediation.

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¶5 In October 2014, post-remediation air testing results showed
“acceptable post-remediation air sampling results.” Mercury Casualty paid
the Jacobsons that month for the additional damage to the property.

¶6 In December 2014, the Jacobsons contacted Mercury Casualty
and ServPro and reported “mold poisoning,” claiming “ServPro didn’t do
their job.” The Jacobsons wanted to “open[] a claim for mold poisoning.” In
April 2015, Mercury Casualty spoke to Mr. Jacobson about his mold
concerns and the claim file shows that he agreed to send Mercury Casualty
documents related to “doctors information, hospital visits, etc.” in support
of his mold poisoning concerns. The claim file reflects more conversations
with Mr. Jacobson, but no additional documentation from the Jacobsons
related to their mold poisoning claim. Mercury Casualty closed the
Jacobsons’ claim in June 2015.

¶7 In March 2016, Ms. Lane-Jacobson conducted her own mold
sampling and sent the samples to a laboratory for testing. According to Ms.
Lane-Jacobson, the laboratory found that one of her four samples was
“unsafe,” but she did not inform Mercury Casualty of the results.

¶8 In July 2016, the Jacobsons retained Environmental Analytics
to perform an indoor environmental quality assessment. Environmental
Analytics could not determine whether any alleged mold growth was
related to the July 2014 storm. The Jacobsons did not inform Mercury
Casualty of these results.

¶9 In the summer of 2016, the Jacobsons contacted ServPro to
inspect the property again. ServPro hired Syntech Environmental
Management, LLC to conduct mold sampling. While this sampling
revealed no abnormal levels of mold in the home’s interior in August 2016,
ServPro provided further mold remediation at the Jacobson’s request. Air
clearance testing revealed acceptable results in September 2016.

¶10 The Jacobsons sued Mercury Casualty, alleging breach of
contract and the duty of good faith as well as negligence, the latter of which
the court dismissed. The Jacobsons claimed personal injury damages due
to mold poisoning from the failure to properly inspect the home’s interior
and the failure to timely and acceptably remediate mold and water damage.

¶11 Mercury Casualty served an offer of judgment for $25,000 on
the Jacobsons and moved for summary judgment, which the court granted.
The court awarded Mercury Casualty taxable costs and sanctions for the
Jacobsons’ failure to accept Mercury Casualty’s offer of judgment; the total
award was approximately $25,000. The court denied Mercury Casualty’s

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request for attorneys’ fees above $120,000, in part finding that such an
award would be an extreme financial hardship to the Jacobsons and that
such an award could deter future litigants.

¶12 We have jurisdiction over Ms. Lane-Jacobson’s appeal and
Mercury Casualty’s cross-appeal under A.R.S. section 12-2101(A)(1).

DISCUSSION

I. Substantive Claims

¶13 We review the trial court’s grant of summary judgment de
novo, viewing the facts “in the light most favorable” to Ms. Lane-Jacobson.
Andrews v. Blake, 205 Ariz. 236, 240, ¶ 12 (2003). We will affirm summary
judgment when no genuine issue of material fact exists and the moving
party is entitled to judgment as a matter of law. Ariz. R. Civ. P. 56(a);
Thompson v. Pima Cty., 226 Ariz. 42, 44, ¶ 5 (App. 2010).

A. Breach of Contract

¶14 The Jacobsons had the burden to prove Mercury Casualty
breached its contract and the breach caused damages. Chartone, Inc. v.
Bernini, 207 Ariz. 162, 170, ¶ 30 (App. 2004); Thunderbird Metallurgical, Inc.
v. Arizona Testing Labs., 5 Ariz. App. 48, 50 (App. 1967).

¶15 The Jacobsons claimed Mercury Casualty breached its policy
when the adjustor made an insufficient initial inspection by not examining
the home’s interior and allowed unremediated damage to fester, causing
mold poisoning. The superior court ruled that the Jacobsons failed to
demonstrate what portion of the contract Mercury Casualty breached or
how the unspecified breach damaged them. In support of its ruling, the
superior court found that even if the initial inspection in August 2014 was
inadequate, Mercury Casualty cured any breach when it conducted a
subsequent inspection and remediation of the property in October 2014. On
appeal, Ms. Lane-Jacobson argues the superior court improperly granted
summary judgment because the court ignored that ServPro again
remediated the property for mold in 2016 and further argues that
subsequent remediations establish a factual issue as to the adequacy of the
initial investigation.

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¶16 Even if an alleged failure to timely investigate and remediate
a mold claim breached a contract provision, Ms. Lane-Jacobson must still
prove causation. Chartone, 207 Ariz. at 170, ¶ 30; Thunderbird, 5 Ariz. App.
at 50. In response to the summary judgment motion, the Jacobsons
presented no evidence that any delay in inspecting or remediating the
property caused any alleged mold poisoning. Without causation evidence,
the superior court properly granted summary judgment to Mercury
Casualty. Cullison v. City of Peoria, 120 Ariz. 165, 168 (1978) (party opposing
summary judgment has the burden to show competent evidence justifying
a triable issue of fact); Burrington v. Gila County, 159 Ariz. 320, 325 (App.
1988) (conclusory allegations insufficient to defeat summary judgment).

B. Breach of the Duty of Good Faith and Fair Dealing

¶17 A party to a contract has a duty to act fairly and in good faith.
Rawlings v. Apodaca, 151 Ariz. 149, 153 (1986). To prove that Mercury
Casualty breached the duty of good faith and fair dealing, the Jacobsons
had to prove that Mercury Casualty failed to pay their claim or delayed
payment of their claim without a reasonable basis for such action. See Noble
v. Nat’l Am. Life Ins. Co., 128 Ariz. 188, 190 (1981). Further, the Jacobsons had
to prove that Mercury Casualty knew that it acted without a reasonable
basis or Mercury Casualty failed to perform an investigation or evaluation
adequate to determine whether a reasonable basis supported its action.
Rawlings, 151 Ariz. at 156; Noble, 128 Ariz. at 190.

¶18 The Jacobsons argued that Mercury Casualty ignored their
claims as to interior damage. Even if Mercury Casualty explicitly instructed
the Sams adjuster to only inspect the home’s exterior, Mercury Casualty
ultimately reopened the claim, inspected the home’s interior, remediated
the home, and made payment for interior damage. Moreover, the Jacobsons
failed to present any evidence that Mercury Casualty knew it lacked a
reasonable basis for delaying payment.

¶19 The Jacobsons also argue that summary judgment was
inappropriate on their bad faith claim because whether Mercury Casualty
did “not open[] a timely mold investigation” in 2014 was a fact question.
But the Jacobsons’ mere notice of mold poisoning to Mercury Casualty in
December 2014 does not raise a factual question on the bad faith claim. The
bad faith claim was dismissed because the Jacobsons offered no evidence
that Mercury Casualty knowingly failed to address their mold concerns
without a reasonable basis. In fact, the record shows that Mercury Casualty
and the Jacobsons discussed the mold poisoning concerns and the
Jacobsons agreed to submit supporting documentation, but failed to do so.

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¶20 The Jacobsons also contend there was a fact question because
ServPro’s agents told the Jacobsons that Mercury Casualty did not want to
pay for destruction and that mere testing on the wall cavity was sufficient.
Again, the Jacobsons presented no admissible evidence that ServPro’s
agents told the Jacobsons that Mercury Casualty would not pay for
destructive testing. With no admissible evidence to support the bad faith
claim, the court properly granted summary judgment. Cullison, 120 Ariz. at
168; Burrington, 159 Ariz. at 325.

II. Procedural Challenges

¶21 Ms. Lane-Jacobson challenges Mercury Casualty’s objections
to statements the Jacobsons made in response to the motion for summary
judgment. She argues Mercury Casualty violated Arizona Rule of Civil
Procedure 7.1(f)(3) because it filed a separate objection, rather than
objecting in its reply. Rule 7.1(f)(3) cross-references Rule 56(c)(4), which
permits a party to include objections in a response to the opposing party’s
separate statement of facts or in a responsive memorandum. Here, because
Ms. Lane-Jacobson only responded to Mercury Casualty’s separate
statement of facts, rather than filing her own separate statement of facts, we
find no error.

¶22 Ms. Lane-Jacobson also argues the superior court erred by
considering an affidavit filed by Mercury Casualty’s attorney in support of
its motion for summary judgment. But that affidavit merely attested that
true copies of exhibits were attached; it did not constitute evidence.
Construing Ms. Lane-Jacobson’s argument as best we can, she seems to be
challenging the superior court’s consideration, if any, of Mercury
Casualty’s redacted claim notes, which Mercury Casualty attached in
support of its motion for summary judgment. Ms. Lane-Jacobson
challenged the redacted claim notes in her motion to strike the motion for
summary judgment. In doing so, she violated Rule 7.1(f)(3)’s proscription
against objecting to the admissibility of evidence in a motion to strike.
Because Ms. Lane-Jacobson also relied on those same claim notes in support
of her appeal, we find no error.

¶23 Ms. Lane-Jacobson finally argues the superior court erred in
failing to consider an untimely, supplemental affidavit Mr. Jacobson filed
in opposition to summary judgment. Although the court ruled that it would
disregard Mr. Jacobson’s affidavit, it actually considered and addressed the
supplemental affidavit, noting that it “fails to establish a triable issue on the
breach of contract count.” We agree and find no error.

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III. Denial of Attorneys’ Fees

¶24 Mercury Casualty cross-appeals the superior court’s denial of
its request for attorneys’ fees under A.R.S. § 12-341.01(A). Mercury Casualty
argues the superior court erred in denying attorneys’ fees because the
record does not support the court’s finding that a fee award would be an
extreme hardship on Ms. Lane-Jacobson. Mercury Casualty also argues that
all factors favor an award to Mercury Casualty and the court abused its
discretion in finding that an attorneys’ fee award would discourage other
parties with tenable claims or defenses from litigating them.

¶25 We review the court’s ruling denying attorneys’ fees under
A.R.S. § 12-341.01(A) for abuse of discretion. Assoc. Indem. Corp. v. Warner, 143 Ariz. 567, 570–71 (1985). We view the record in the light most favorable
to upholding the court’s denial and will affirm if the record reflects “any
reasonable basis” for the decision. Tucson Estates Prop. Owners Ass’n, Inc. v.
McGovern, 239 Ariz. 52, 56, ¶ 12 (App. 2016); Merkens v. Fed. Ins. Co., 237
Ariz. 274, 279, ¶ 22 (App. 2015). Under A.R.S. § 12-341.01(A), the superior
court need not award attorneys’ fees to the successful party. Warner, 143
Ariz. at 570. Although the superior court must consider various factors in
deciding whether to award attorneys’ fees, one factor can outweigh other
factors in the court’s consideration to award fees. Merkens, 237 Ariz. at 279,
¶ 25. The parties’ financial condition is one of several factors to consider in
determining a fee award. Warner, 143 Ariz. at 570.

¶26 Here, the superior court found that Ms. Lane-Jacobson was ill,
and there was no evidence she is currently employed. Further, the court
found that the Jacobsons will owe nearly $25,000 in mandatory costs and
sanctions. Mercury Casualty’s affidavit in support of its motion for
attorneys’ fees supports these findings and provides a reasonable basis for
the court’s ruling. Because there is a reasonable basis for the court’s ruling,
we find no abuse of discretion.

CONCLUSION

¶27 We affirm the superior court’s ruling. In our discretion, we
decline to award attorneys’ fees on appeal. We award costs to Mercury

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Casualty upon compliance with ARCAP 21.

AMY M. WOOD • Clerk of the Court
FILED: AA

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