Water, Water Everywhere: Bad Faith Litigation and Motions for Summary Judgement in Arizona

Author: Jenny Silverstein

January 7, 2019 9:00am

Most of us, hopefully, have some form of insurance for our home, whether it be a single family home we own or an apartment we rent. We pay monthly premiums in the hope that, heaven forbid, an earthquake, flood, tornado, fire, or other catastrophic event occurs, the insurance company to whom we have been sending our monthly checks will make us whole again. It may be a long road, but it is our hope that we will be paid fairly for the property lost or damaged, we will have a place to stay temporarily, and there will be a friendly ear on the other side when the road seems too long and daunting.

However, what happens when your property is damaged, you fill out the form for your loss, and the dollar amount you believe is fair for your property is significantly different than what the insurance company values it? Do you have any rights to contest the insurance company’s method for the value of your property? Alternatively, do you have to seek remedy from the courts and sue for bad faith and breach of contract?

What is a Motion for Summary Judgment?

A Motion for Summary Judgment is a judgment entered by a court for one party and against another party without a full trial. The party moving (applying) for summary judgment is attempting to avoid the time and expense of a trial when, in the moving party’s view, the outcome is obvious. Typically, the argument is when all the evidence likely to be put forward is such that no reasonable factfinder could disagree with the moving party, summary judgment is appropriate. Sometimes this will occur when there is no real dispute as to what happened, but it also frequently occurs when there is a nominal dispute but the non-moving party cannot produce enough evidence to support its position.

A party may also move for summary judgment in other to eliminate the risk of losing at trial by demonstrating to the judge, via sworn statements and documentary evidence, that there are no material factual issues remaining to be tried. If there is nothing for the factfinder to decide, then the moving party asks rhetorically, why have a trial? The moving party will also attempt to persuade the court that the undisputed material facts require judgment to be entered in its favor. In many jurisdictions, a party moving for summary judgment takes the risk that, although the judge may agree there are no material issues of fact remaining for trial, the judge may also find that it is the non-moving party that is entitled to judgment as a matter of law.

When Does an Insurance Claim Become a “Bad Faith” Claim?  

Insurance “Bad Faith” is a legal term, which describes a claim that an insured person may have against an insurance company for its “bad acts.” Generally, insurance companies owe a duty of “good faith and fair dealing” to the people they insure. This duty is often referred to as the “implied covenant of good faith and fair dealing” which automatically exists by operation of law in every insurance contract.

If an insurance company violates that covenant, the policyholder may sue the company for a “bad faith” claim in addition to a standard breach of contract claim. The distinction between “bad faith” and a breach of contract is significant because as a matter of public policy, punitive damages are not available for contract claims, but are available for bad faith claims. The result is a plaintiff in an insurance bad faith case may be able to recover an amount larger than the original face value of the policy, if the insurance company’s conduct was particularly egregious.

Charles Nyakondo v. Still Water Insurance Company (2018 WL 6575468)

On December 13, 2018, the United States District Court in Arizona ruled on the Charles Nyakondo v. Still Water insurance Company matter. Plaintiffs Charles and Elizabeth Nyakondo suffered water damage to their home on April 24, 2017. Plaintiffs contacted their home insurance company, defendant Still Water Insurance Company, and reported the loss the same day. The following day, Still Water sent a property claims examiner and an inspector to the home. Still Water also secured temporary lodging for plaintiffs through a temporary housing placement company, which began on April 25, 2017 (the day after the loss was reported).

On April 26, 2017, Pelican Power, LLC inventoried plaintiffs’ personal property items which were damaged in the incident and took some of the damaged items to storage. Pelican valued the totality of plaintiffs’ damaged personal items at $17,931.47. Plaintiffs sent a copy of this list of damaged items and Pelican’s valuation to Still Water’s claims examiner on June 9, 2017. Following Still Water’s inspection process, Still Water reimbursed plaintiffs $6,369.44 for the damaged personal property on or around July 27, 2018. Plaintiffs disputed the sufficiency of this compensation and requested that Pelican not dispose of any items stored by Pelican. Nevertheless, Pelican disposed of plaintiffs’ items without their consent.

To make matters worse, on May 30, 2017, the temporary housing placement company notified plaintiffs they would have to vacate their temporary lodging on June 28, 2017. The remodeling company working on plaintiffs’ home, however, did not certify that remodeling work was complete until July 12, 2017.

With the ongoing dispute over the valuation of plaintiffs’ property and the temporary housing placement ending before the remodeling work at plaintiffs’ home was complete, plaintiffs filed a complaint in federal court against Still Water alleging bad faith and breach of contract. Still Water Insurance Company filed a Motion for Summary Judgment alleging that there was no triable issue of fact to support plaintiffs’ claims that Still Water had committed any bad faith or breached its contract with plaintiffs.


The District Court noted plaintiffs’ argument for bad faith stems from their claim that Still Water failed to pay the full estimated value of their damaged personal property items stored by Pelican and for poor communication throughout the handling of the claim. In addition, there is a discrepancy of over $10,000 in valuation placed on the damaged property. Defendant’s explanation for the difference in value is that, “reasonable minds may have differed in terms of evaluation of personal property items.” No further explanation or documentation was submitted by Still Water in support of their Motion for Summary Judgment. Without any further explanation or documentation, the Court found that the unresolved discrepancy in Pelican’s valuation and that of Still Water created a genuine dispute of fact regarding the reasonableness of Still Water’s handling of plaintiffs’ claim. Also, Still Water’s alleged delays with communication throughout the claims handling process is also grounds that there is a triable issue of fact pertaining to bad faith.

The District Court also discussed plaintiffs’ breach of contract claim. Under Arizona law, the elements of a breach of contract claim are 1) the existence of a contract, 2) breach and 3) resulting damages. (First Am. Title Ins. Co. v. Johnson Bank (2016) 372 P.3d 292, 297). Still Water argues that it did not breach the contract because it paid all benefits due to plaintiffs in a timely manner. However, plaintiffs’ argued Still Water failed to fully cover plaintiffs’ loss and specifically failed to pay for temporary lodging on the night of the incident and near the completion of remodeling. To the Court’s surprise, neither party provided a copy of the applicable insurance policy. Therefore, the Court could not determine the extent, if any, of Still Water’s obligations to provide temporary lodging, other than recognize that Still Water had some obligation. Also, there was evidence to dispute Still Water failed to fully cover plaintiffs’ claim for damaged personal property based not only on plaintiffs’ affidavit, but also the discrepancy between Pelican’s valuation of plaintiffs’ personal property and the amount paid by Still Water.

Given the fact Still Water could not provide an explanation for the discrepancy in the valuation of plaintiffs’ property or its obligations pertaining to providing lodging to plaintiffs, the District Court denied defendant Still Water Insurance’s Motion for Summary Judgment.


While Still Water did provide lodging and paid plaintiffs what it felt was fair value for their property, it became a “bad faith” claim because of poor communication, failing to explain how it arrived at the decisions it arrived at, and for failing to assist their insureds find a stop-gap measure for housing until their repairs were completed. Furthermore, when filing a Motion for Summary Judgment, it needs to be precise and with the necessary documentation to make a strong case before the judge so that there can be no question that a plaintiff’s claim is devoid of any triable issues of fact.  Therefore, it is important to retain an attorney who is up to date on current case law pertaining to bad faith litigation, who understands the complexities of bad faith lawsuits and the required elements to assert proper defenses, including those to assert when filing a Motion for Summary Judgment.


About the Author: Jenny A. Silverstein is an associate in the San Francisco office of Tyson & Mendes. She specializes in insurance defense. Contact Jenny at 628-253-5070 or jsilverstein@tysonmendes.com

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