Kuehn Amended Complaint

IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF MISSISSIPPI SOUTHERN DIVISION

HENRY KUEHN AND JUNE P. KUEHN

PLAINTIFFS

VERSUS

CIVIL ACTION NO. 1:08CV577-LTS-RHW

STATE FARM FIRE AND CASUALTY COMPANY AND JOHN DOES 1 THROUGH 10

DEFENDANTS

AMENDED COMPLAINT JURY TRIAL DEMANDED COME NOW the Plaintiffs, HENRY KUEHN AND JUNE P. KUEHN, by and through their attorneys of record, DENHAM LAW FIRM, and would file their Amended Complaint against Defendants, State Farm Fire and Casualty Company (“State Farm Fire”) and John Does 1-10 (“John Does”), and allege as follows: I. PARTIES 1.

Plaintiffs, HENRY KUEHN and JUNE P. KUEHN, are adult resident citizens of

the State of Mississippi, residing at 3208 North 3rd Street, Ocean Springs, Jackson County, Mississippi. 2.

Defendant, State Farm Fire, is a corporation organized and existing under the laws

of the State of Illinois, with its principal office and place of business located at One State Farm Plaza, Bloomington, Illinois 71701-0001. This defendant may be served with process by service on its agent for service of process, William Penna, at 1080 River Oakes Drive, Suite B-100, Flowood, Mississippi 39232-7644, or on the Mississippi Insurance Commissioner at Post Office

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Box 79, Jackson, Mississippi, 39205-0079, pursuant to Mississippi Code Annotated Section 8321-1. 3.

At the time of the loss there was a line of credit with Keesler Federal Credit

Union secured by the Plaintiffs’ home, but it has since been paid off so that the home is free and clear of liens that might require notice of this action. 4.

Defendants John Does 1-10 are entities affiliated with Defendant and/or have

acted in concert with Defendant, and whose identities are currently unknown. All allegations and claims asserted herein against the Defendant are incorporated herein by reference against John Does 1-10. Said John Does, when their identities are known, will be identified by name and joined in this action, if necessary, pursuant to the Federal Rules of Civil Procedure. II. SUBJECT MATTER AND PERSONAL JURISDICTION 5.

This Court has jurisdiction over the subject matter and the Defendant in this case

pursuant to 28 U.S.C. § 1332 because there is complete diversity of citizenship between Plaintiffs and Defendants and the amount in controversy exceeds $75,000.00. III. VENUE 6.

Venue in this case is proper in this Court pursuant to 28 U.S.C. § 1391, because

this suit concerns real property located exclusively in Jackson County, Mississippi, and the conduct, acts and/or omissions upon which this cause of action is based occurred in Jackson County, Mississippi, which is completely within the United States District Court for the Southern District of Mississippi, Southern Division.

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IV. FACTS AND GENERAL ALLEGATIONS 7.

Plaintiffs have been loyal insureds of State Farm Fire and its predecessors, and

they have dutifully paid premiums to State Farm Fire for insurance coverage. 8.

Plaintiffs purchased from State Farm Fire a standard Homeowners Policy, Policy

Number 24-BN-1533-4, (“subject policy”), naming HENRY KUEHN and JUNE P. KUEHN as the insureds. The subject policy insured the building located at 1305 Cove Place, Ocean Springs, Mississippi, (“insured building”). A certified copy of the subject Homeowners policy is attached hereto and incorporated herein as Exhibit “A”. 9.

Based on the representations of hurricane coverage made by State Farm Fire and

its agent, and the express and implicit policy coverage, the Kuehns reasonably relied on said representations and purchased the subject policy with the reasonable expectation that the subject policy would provide full and comprehensive coverage for damage to the insured residence caused by wind, rain, and wind-propelled objects. 10.

The subject policy, through its “Covered Causes of Loss” provision, also

purported to provide full and comprehensive coverage for all loss to insured property proximately and efficiently caused by wind, rain, and wind-propelled objects, and in addition the clear language of the policy contained language guaranteeing appraisal as an inexpensive, alternative means of dispute resolution as opposed to litigation. 11.

Based on representations of hurricane coverage made by State Farm Fire and its

agents, and the express and implicit policy coverage, Plaintiffs reasonably relied on said representations and purchased the subject policy with the reasonable expectation that the subject

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policy would provide full and comprehensive coverage for damage to the insured building caused by windstorm. 12.

On August 29, 2005, within the subject policy period, most of the insured

residence and the personal contents therein were proximately and/or efficiently damaged or destroyed by the winds, rain, and wind-propelled objects of Hurricane Katrina. It is undisputed that the storm surge reached the subject property; however, by the time the surge arrived, the insured residence had already been rendered uninhabitable and the contents therein were damaged or destroyed. 13.

Almost immediately thereafter, and in accordance with the subject policy

provisions, Plaintiffs notified State Farm Fire of the covered loss. An adjuster by the last name of Wildsmith visited their property to make a determination. 14.

On or about November 16, 2005, State Farm Fire wrote to the Plaintiffs and

advised, contrary to the subject policy coverage provisions and despite the fact that the insured property was damaged by wind, rain and/or wind-propelled objects, that the “damage to your property was a result of storm surge, wave wash and flood. Unfortunately, that damage to your property is not covered under the policy.”

See attached Exhibit “B,” Letter from State Farm

Fire dated November 16, 2005. 15.

Subsequently in a letter to Plaintiffs dated January 4, 2006, State Farm Fire,

contrary to the subject policy coverage provisions and despite the fact that the insured property was damaged by wind, rain and/or wind-propelled objects, informed Plaintiffs that it would not cover the loss beyond what was already paid, which was $10,765.48. See attached Exhibit “C,” Letter from State Farm Fire dated January 4, 2006.

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16.

Plaintiffs were completely unsatisfied with the inadequate payment, but they

continued their negotiations with State Farm Fire in an effort to settle their claim. The Kuehns demanded appraisal under the terms of their policy, as was their right under the terms of the contract. The policy states as follows: Appraisal. If you and we fail to agree on the amount of loss, either one can demand that the amount of the loss be set by appraisal. If either makes a written demand for appraisal, each shall select a competent, disinterested appraiser. Each shall notify the other of the appraiser’s identity within 20 days of receipt of the written demand. The two appraisers shall then select a competent, impartial umpire. If the two appraisers are unable to agree upon an umpire within 15 days, you or we can ask a judge of a court of record in the state where the residence premises is located to select an umpire. The appraisers shall then set the amount of loss. If the appraisers submit a written report of an agreement to us, the amount agreed upon shall be the amount of the loss. If the appraisers fail to agree within a reasonable amount of time, they shall submit their differences to the umpire. Written agreement signed by any two of these three people for any item shall set the amount of loss. Each appraiser shall be paid by the party selecting that appraiser. Other expenses of the appraisal and the compensation of the umpire shall by paid equally by you and us. (Emphasis added) .... Loss Payment. We will adjust all losses with you. We will pay you unless some other person is named in the policy or is legally entitled to receive payment. Loss will be payable 60 days after . . . there is a filing of an appraisal award with us. See Exhibit “A,” Certified policy. There was no response from State Farm Fire to Mr. Kuehn’s request. 17.

On April 1, 2006, Mr. Kuehn wrote to State Farm Fire to follow up on his prior

requests to participate in the appraisal process. See attached Exhibit “D,” Letter from Mr. Kuehn to State Farm insurance agent Rex Foster, dated April 1, 2006.

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18.

On April 17, 2006, Mr. Kuehn had a telephone conversation with a State Farm

representative named Tina, from Team 10. During this conversation, Tina informed Mr. Kuehn that “The State of Mississippi has overrode [sic] our appraisal options.” Mr. Kuehn asked her “You can’t get appraisal now, is that more or less what you’re saying,” to which she replied, “Exactly.” She went on to say, “That’s what our management is saying, we’re not offering appraisal at all because mediation overrides it.” 19.

On June 21, 2006, Plaintiffs filed their Complaint in the Chancery Court of

Jackson County, Mississippi, asking for injunctive relief by the Chancellor; i.e., to compel State Farm Fire to comply with the terms of its contract and go through with the appraisal process. On July 28, 2006, State Farm Fire filed the Notice of Removal to the United State District Court and also filed its Answer to the Complaint contesting the requested appraisal. 20.

Plaintiffs filed their Motion to Remand on August 17, 2006. On August 24, 2006,

the U. S. Magistrate Judge entered an Order Staying Case pending a ruling on Plaintiffs’ Motion to Remand. 21.

One year after Hurricane Katrina on August 29, 2006, State Farm Fire filed its

Motion to Conduct Remand Related Discovery and for Additional Time to Respond to Plaintiffs' Motion to Remand, which the Federal Court granted, allowing limited discovery on the appraisal issue. 22.

After the parties conducted discovery on the appraisal issue, United States District

Judge Senter entered an Order of Remand on January 19, 2007, granting Plaintiffs' Motion to Remand and remanded the case to the Chancery Court of Jackson County, Mississippi. 23.

After the remand, the Chancery Court of Jackson County entered an Order on

April 24, 2007, finding the request for appraisal to be appropriate, and ordered each party to

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designate an appraiser within 30 days. See Exhibit “E,” Order of Chancery Court of Jackson County filed August 24, 2007. Plaintiffs filed their Designation of Appraiser on May 29, 2007, and State Farm Fire filed its Designation of Appraiser on or about June 14, 2007. The parties actually went through with the appraisal process under the State Farm policy, and the appraisers appointed by both parties determined the value of the loss. 24.

On February 28, 2008, the appraisal process concluded, and the umpire and the

parties’ appraisers signed an Award setting forth the appraisal amount of $174,811.80. A copy of the Award is attached hereto and incorporated herein as Exhibit “F”. Yet after the Award was produced, counsel for State Farm Fire told the appraisers and the umpire that the Award did not specify which part was for wind. However, the appraisers and umpire confirmed that entire amount was for wind damage, i.e., that they had determined the amount of “loss” as they were supposed to do under the policy.

A copy of the amended Award is attached hereto and

incorporated herein as Exhibit “G”. As of the date of filing the Complaint, State Farm Fire has contemptuously failed and refused to pay Plaintiffs any portion of the appraisal Award, contrary to the clear terms of its own insurance contract and breaching its duty to the Plaintiffs. It has done so maliciously, with gross negligence, and in recklessly indifferent regard to Plaintiffs’ rights. 25.

Three years after the hurricane and despite their best efforts to settle their claim

with State Farm Fire, Plaintiffs still have not been fully compensated for their losses and State Farm Fire still has not complied with the terms of the policy it drafted and sold to Plaintiffs. The only other payment State Farm Fire has made was for $4,771.55, which was made on August 20, 2008. 26.

State Farm Fire’s position in this directly contradicts Mississippi insurance law, in

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existence for the last forty years, which mandates full insurance coverage if the hurricane winds were the efficient proximate cause of the loss. It is uncontroverted that loss caused by hurricane and/or tornadic wind is covered under the subject policy. It is also uncontroverted that Plaintiffs had a right to appraisal under the subject policy. 27.

Additionally, as the policy at issue is an “all risk” policy, all risks of accidental

direct physical loss are covered by the subject policy unless specifically excluded by the terms of the subject policy. In such policies, insureds such as the Plaintiffs only have the burden of showing the existence of a covered loss, at which point the burden of proof shifts to the insurer, State Farm Fire, to establish the applicability of a named exclusion under the facts of the case and the terms of the policy. 28.

In this case, there is no question that the Plaintiffs have established a loss covered

by the subject policy. State Farm Fire has the burden to prove that the loss was attributable to an excluded peril such as “flood,” and not to a covered peril, such as wind. State Farm Fire has not met this burden of proof and cannot meet it. There is no question that an appraisal award was entered. There is no question that State Farm Fire did not make a loss payment to Plaintiffs within 60 days of the entry of the appraisal award. 29.

An insurance contract is a contract of adhesion, and should be construed in the

light most favorable to the insured. 30.

Inherent in any insurance contract, and in the policy at issue, is that payment must

be made promptly so that the insured may be put back into the position he or she was in prior to the loss, and as quickly as possible. 31.

A special relationship exists between an insurer and its insured; such relationship

is best characterized as one of the utmost good faith and fair dealing.

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32.

Plaintiffs have complied with all conditions precedent to obtaining payment of

benefits under the subject policy, and State Farm Fire has waived and/or is estopped from raising such conditions precedent. 33.

State Farm Fire is merely attempting to dodge its coverage obligations to the

Plaintiffs under the subject policy by wrongfully characterizing their damage as being from flood, surface water, waves and/or tidal water. 34.

State Farm Fire’s investigation, adjustment, and denial of Plaintiffs’ claim were

negligent, grossly negligent, and in reckless disregard for Plaintiffs’ rights. State Farm Fire’s denial of and eventual underpayment of Plaintiffs’ loss breached the subject contract of insurance. Such conduct constitutes bad faith and tortious breach of contract and breach of duty of good faith and fair dealing. State Farm Fire unjustly, in bad faith, denied Plaintiffs the appraisal demanded under the subject policy. State Farm Fire fraudulently and/or negligently, with gross negligence, reckless disregard for Plaintiffs’ rights and actual malice, misrepresented to Plaintiffs through its policy of insurance that they could utilize the appraisal process provided by the policy. Plaintiffs relied on these representations to their detriment. State Farm Fire’s conduct has forced its customers to resort to litigation in order to receive benefits that should have been paid under the policy, and to compel State Farm Fire and Casualty Company to comply with its own policy terms. 35.

Plaintiffs are therefore entitled to full coverage under the subject policy for the

damage to their property, injunctive relief, specific performance of the contract, indemnity, unjust enrichment, other such equitable relief, and extra-contractual, compensatory and punitive damages.

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V. COUNT ONE: DECLARATORY JUDGMENT AND INJUNCTION AS TO APPRAISAL 36.

Plaintiffs hereby incorporate and adopt by reference each and every allegation set

forth in each Paragraph of the Amended Complaint. 37.

This count is an action for declaratory judgment pursuant to Federal Rule of Civil

Procedure 57, and an action for an Injunction pursuant to Federal Rule of Civil Procedure 65. 38.

The Defendant introduced and inserted a procedure into their policy, appraisal,

which was intended to afford policy holders and the insurance company a reasonable and affordable alternative to litigation. From their actions, it is evident that the Defendant never intended to use this procedure and instead wrote said procedure into its policies merely to entice policy holders to pay premiums for coverage and dispute resolution that in reality it would not offer, and where implementation would be resisted at any cost by the Defendant to the point that appraisal could never resolve anything. 39.

Because of the Defendant’s actions in misrepresenting and in dodging the

appraisal process, the Plaintiffs were forced to litigate the very issue of the existence of appraisal, which within itself was supposedly designed to limit and/or remove the necessity and expense of litigation. As a result of the Defendant’s behavior, the Plaintiffs had to seek and hire counsel to assert their right to the appraisal “offered” by the Defendant, incurring attorney’s fees in an amount exceeding $10,000.00. The Plaintiffs did hire counsel who filed suit in Chancery Court to assert their right to appraisal, and the Defendant improperly removed said suit to Federal Court. The removal was entirely done to further deny the Plaintiffs their right to

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appraisal and was done with the intent to damage the Plaintiffs and cost them further attorney’s fees. The Federal Court realized this improper removal and issued an Order of Remand. 40.

After remand, the Chancery Court of Jackson County entered an Order on April

24, 2007, granting Plaintiffs’ request for an appraisal and ordered each party to designate an appraiser within 30 days. Plaintiffs filed their Designation of Appraiser on May 29, 2007, and State Farm Fire filed its Designation of Appraiser on or about June 14, 2007. 41.

On February 28, 2008, the appraisal process concluded, and the umpire and the

parties’ appraisers signed an Award setting forth the appraisal amount of $174,811.80. Copies of the Award and the amended Award are attached hereto and incorporated herein as Exhibits “F” and “G”. However, as of the date of filing the Complaint, State Farm Fire has failed and refused to pay Plaintiffs any portion of the appraisal Award. 42.

The Plaintiffs’ policy provides: Appraisal. If you and we fail to agree on the amount of loss, either one can demand that the amount of the loss be set by appraisal. If either makes a written demand for appraisal, each shall select a competent, disinterested appraiser. Each shall notify the other of the appraiser’s identity within 20 days of receipt of the written demand. The two appraisers shall then select a competent, impartial umpire. If the two appraisers are unable to agree upon an umpire within 15 days, you or we can ask a judge of a court of record in the state where the residence premises is located to select an umpire. The appraisers shall then set the amount of loss. If the appraisers submit a written report of an agreement to us, the amount agreed upon shall be the amount of the loss. If the appraisers fail to agree within a reasonable amount of time, they shall submit their differences to the umpire. Written agreement signed by any two of these three people for any item shall set the amount of loss. Each appraiser shall be paid by the party selecting that appraiser. Other expenses of the appraisal and the compensation of the umpire shall by paid equally by you and us. (Emphasis added)

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43.

State Farm Fire’s policy further states that “Loss will be payable 60 days after we

receive your proof of loss and . . . there is a filing of an appraisal award with us.” (Emphasis added). The requirement for the filing of a proof of loss was waived in the wake of Hurricane Katrina. An appraisal award was, however, ultimately filed. State Farm Fire did not pay the loss/award amount of $174,811.80 within sixty days of the appraisal award as its own policy demanded. 44.

Plaintiffs would hereby request that the Court enter a declaratory judgment to

state that appraisal was done, to enforce the appraisal Award as a binding amount to be paid, and to cause State Farm Fire to pay unto Plaintiffs the sum of $174,811.80 as per the appraisal Award, as well as to order the Defendant to reimburse the Plaintiffs for their costs in the appraisal process, due to State Farm Fire’s unreasonable delay tactics. 45.

Plaintiffs would hereby request that an injunction issue to direct Defendant, State

Farm Fire, to pay unto Plaintiffs the sum of $174,811.80 as per the appraisal Award. 46.

The Plaintiffs ask that the Court award declaratory relief and/or that the Court

award injunctive relief in ordering State Farm Fire and Casualty Company to pay what was awarded in the appraisal process, and that the Court order the Defendant to pay punitive and/or exemplary damages for their malicious behavior, attorney’s fees, extra-contractual damages including damages for pain and suffering, costs of the appraisal and any other damages found proper by this Court. VI. COUNT TWO: DECLARATORY JUDGMENT AS TO THE POLICY 47.

Plaintiffs hereby incorporate and adopt by reference each and every allegation set

forth in each Paragraph of the Amended Complaint.

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48.

This count is an action for declaratory judgment pursuant to Federal Rule of Civil

Procedure 57. 49.

On the occasion of Hurricane Katrina, Plaintiffs’ insured property was

proximately and/or efficiently devastated by wind, rain and wind-propelled objects. However, State Farm Fire has maintained and continues to maintain the position that the majority of the Plaintiffs’ claim was caused by water or water-borne material, relying on the exclusions in the subject policy. 50.

As a result of State Farm Fire’s partial payment of Plaintiffs’ claim, it has

admitted that wind damage to Plaintiffs’ property occurred, which is a covered peril. See Exhibit “C”, Letter from State Farm Fire, dated January 4, 2006, with summary of loss. 51.

In order to deny coverage for the Plaintiffs’ loss resulting from Hurricane

Katrina, State Farm Fire has the burden to prove that the loss was attributable to an excluded peril, such as “flood,” rather than a covered peril, such as wind. 52.

State Farm Fire has not met and cannot meet its burden of proof. The damage to

Plaintiffs’ property is thus covered under the subject policy. State Farm Fire should have tendered policy limits to Plaintiffs as soon as it became apparent that it could not meet said burden of proof. 53.

Wherefore, Plaintiffs respectfully seek a declaration from this Court that: (a) State Farm Fire breached its policy obligations to its insureds and

owes coverage for the damage sustained to Plaintiffs’ insured property due to Hurricane Katrina;

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(b) In order to deny coverage for Plaintiffs’ claim under the subject policy, State Farm Fire has the burden to prove that the loss was attributable to an excluded peril and not to a covered peril; (c) State Farm Fire has not met and cannot meet its burden of proof, and the loss and damage is thus covered under the subject policy; and (d) Plaintiffs are entitled to an award of damages for the full value of all coverage available to them under the policy, and such other extra-contractual damages or relief as this Court may deem fit to make them whole; Plaintiffs are entitled to receive a trial by jury on all issues triable. VII. COUNT THREE: NEGLIGENCE/GROSS NEGLIGENCE/ RECKLESS DISREGARD FOR THE RIGHTS OF PLAINTIFFS 54.

Plaintiffs hereby incorporate and adopt by reference each and every allegation set

forth in each Paragraph of the Amended Complaint. 55.

State Farm Fire had a duty under Mississippi law to fully, promptly, fairly,

adequately and correctly investigate and adjust Plaintiffs’ claim for damages caused by Hurricane Katrina. 56.

State Farm Fire breached its duty to conduct such an investigation, and to base its

decision on the facts. State Farm Fire knew or should have known that it could not meet its burden of proving its policy exclusions, but it denied the claim based upon said exclusion anyway. 57.

State Farm Fire negligently and grossly negligently, in reckless disregard of

Plaintiffs’ rights, underpaid the claim, refused to comply with the appraisal process set forth in

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the policy, and then failed and refused to pay monies to Plaintiffs in accordance with the policy or the appraisal Award. State Farm Fire has repeatedly demonstrated its reckless disregard for Plaintiffs’ rights. State Farm Fire has unreasonably delayed the claims process and it has refused to fully and adequately compensate Plaintiffs and delayed making even the inadequate payment that it eventually did. 58.

State Farm Fire breached its duty by failing to adequately investigate and adjust

Plaintiffs’ claim. State Farm Fire breached its duty by denying Plaintiffs’ claim without meeting its affirmative duty of proving at the time of the denial that Plaintiffs’ loss was proximately and efficiently caused by “flood/tidal surge”, a peril excluded by the policy. 59.

State Farm Fire breached its duty by denying Plaintiffs’ claim without meeting its

affirmative duty of establishing at the time of the denial, which amount of Plaintiffs’ loss was caused by water and which amount was caused by wind. 60.

Similarly, State Farm Fire breached its duty by failing to pay and/or by

subsequently underpaying Plaintiffs for the damage State Farm Fire could not prove was caused by “flood/tidal surge”. 61.

State Farm Fire breached its duty by shifting to the Plaintiffs the burden of

proving that the loss was not excluded by the policy. 62.

State Farm Fire breached its duty by dispatching an adjuster that did not have the

qualifications or training to investigate, adjust and then deny Plaintiffs’ losses. 63.

State Farm Fire breached its duty by failing to properly train its adjuster as to how

to investigate and adjust Plaintiffs’ losses. 64.

State Farm Fire breached its duty by basing its denial of Plaintiffs’ claims for

hurricane damage on the investigation and adjustment of an unqualified adjuster.

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65.

State Farm Fire breached its duty by failing to adequately inspect, investigate or

adjust the insured property prior to denying the claim, and by its subsequent underpayment of the claim. 66.

State Farm Fire breached its duty by failing to credit the statements from

eyewitnesses in investigating and adjusting Plaintiffs’ claim. 67.

State Farm Fire breached its duty by failing to utilize an objective meteorologist

or structural engineer to determine the cause of Plaintiffs’ loss prior to denying the claim. 68.

State Farm Fire breached its duty by failing to pay Plaintiffs for their losses.

69.

State Farm Fire intentionally interpreted its exclusions in the broadest possible

manner as a means of underpaying and/or denying valid claims such as the Plaintiffs’. The law does not support State Farm Fire’s interpretation of said exclusions, but State Farm Fire nevertheless attempted to use said broad interpretations to deny claims and thus increase its profits. 70.

Such conduct as alleged above constitutes negligence, gross negligence, and/or

reckless disregard for Plaintiffs’ rights as State Farm Fire insureds. 71.

State Farm Fire’s negligent, grossly negligent, and/or reckless adjustment

proximately caused Plaintiffs to suffer economic and other damages. VIII. COUNT FOUR: SPECIFIC PERFORMANCE OF INSURANCE CONTRACT 72.

Plaintiffs hereby incorporate and adopt by reference each and every allegation set

forth in each Paragraph of the Amended Complaint. 73.

State Farm Fire entered into the subject contract of insurance with the Plaintiffs

wherein it clearly and expressly agreed to provide insurance coverage for physical loss to

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property and loss of use proximately and efficiently caused by windstorm or hail. Plaintiffs, in turn, have paid State Farm Fire substantial premiums. 74.

Plaintiffs suffered substantial damage and/or destruction of their insured building

and property as a proximate and direct result of covered losses, and have consequently been denied use of their property. 75.

Plaintiffs have performed their end of the bargain and are accordingly now

entitled to Specific Performance of the subject insurance contract. The Court should therefore require State Farm Fire to specifically perform such agreement. IX. COUNT FIVE: WAIVER AND ESTOPPEL 76.

Plaintiffs hereby incorporate and adopt by reference each and every allegation set

forth in each Paragraph of the Amended Complaint. 77.

State Farm Fire had the obligation to establish, prior to denying the claim, what

part, if any, of the loss fell under the terms of its exclusion. By declaring its burden of proof irrelevant and intentionally abandoning its obligation to establish what, if any, part of the loss was excluded, Defendant waived its right to attempt to put on “after-the-fact” evidence to exclude any part of the claim. 78.

State Farm Fire intentionally interpreted its exclusions in the broadest possible

manner as a means of underpaying and/or denying valid claims such as the Plaintiffs’. The law does not support State Farm Fire’s interpretation of said exclusions, but State Farm Fire nevertheless attempted to use said broad interpretations to deny claims and thus increase its profits.

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79.

State Farm Fire induced the Plaintiffs to rely on its representations that it was

handling the claim in good faith, while at the time, it had actually already adopted claims handling procedures through which coverage under the subject policy would be denied in Plaintiffs’ situation. Defendant should be estopped from denying that it owes full coverage under the Homeowner’s policy to the Plaintiffs and all similarly situated insureds of the Defendant. 80.

State Farm Fire, by failing to conduct a prompt, reasonable and thorough

investigation prior to denying and/or underpaying the subject claim, has waived its right to conduct a new investigation to justify its denial, and hence should be estopped from utilizing information that it did not have at the time it denied or underpaid the subject claim as its “arguable basis” for said denial. X. COUNT SIX: INDEMNITY 81.

Plaintiffs hereby incorporate and adopt by reference each and every allegation set

forth in each Paragraph of the Amended Complaint. 82.

State Farm Fire is obligated under the subject policy and by its representations to

provide full insurance coverage to Plaintiffs for all damage to the insured building and property caused by windstorm or hail. 83.

However, State Farm Fire has denied Plaintiffs their insurance coverage and has

refused to pay them for their covered losses. 84.

As a direct and proximate result of State Farm Fire’s denial and subsequent

underpayment, Plaintiffs have been and/or will be forced to pay significant amounts of money to

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rebuild and/or replace their severely damaged or destroyed property, and to pursue litigation in order to recover amounts properly due under the subject policy. 85.

The expenses Plaintiffs have incurred and continue to incur as a result of State

Farm Fire’s refusal to completely pay what they are owed are expenses that State Farm Fire, in all fairness and equity, should pay under the subject policy or otherwise. Plaintiffs are therefore entitled to indemnity from State Farm Fire and Casualty Company for all sums they have expended and will be required to expend, as well as debt they will be required to incur, in order to repair, refurbish, and/or replace the insured building and property, as well as any sums expended or debts incurred as a result of being forced to hire engineers, attorneys and other experts in order to recover sums under their insurance contract. XI. COUNT SEVEN: UNJUST ENRICHMENT/CONSTRUCTIVE TRUST 86.

Plaintiffs hereby incorporate and adopt by reference each and every allegation set

forth in each Paragraph of the Amended Complaint. 87.

In marketing, selling and issuing the subject policy to Plaintiffs, State Farm Fire

represented and agreed to obtain and provide Plaintiffs with full coverage for property damage and loss of use, as well as for damage proximately caused by windstorm or hail as a result of hurricane winds and rain. These representations and contractual obligations are also evidenced by the subject policy’s coverage provisions. 88.

Plaintiffs have paid State Farm Fire substantial monetary premiums for such

coverage. 89.

Despite realizing substantial premiums from Plaintiffs, State Farm Fire has

withheld the insurance proceeds owed to Plaintiffs for the damage to their insured property.

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90.

By purposefully mischaracterizing the damage to Plaintiffs’ building and property

as being caused by “flood/tidal surge” despite a complete lack of evidence or diligent investigation, and despite the fact that State Farm Fire knew or should have known it could not prove that Plaintiffs’ property was damaged solely by excluded perils, State Farm Fire has wrongfully realized insurance premiums and withheld insurance proceeds to which the Plaintiffs are entitled, and have gained interest on such sums. 91.

State Farm Fire has therefore been unjustly enriched at Plaintiffs’ expense.

92.

Plaintiffs have suffered injury as a proximate result of State Farm Fire’s unjust

enrichment. Plaintiffs have been and will continue to be forced to pay for costs that should, in equity and good conscience, be borne by State Farm Fire under the subject policy. 93.

As a proximate result of State Farm Fire’s false representations and refusal to

provide full insurance coverage under the subject policy for the damage to Plaintiffs’ insured home and property, State Farm Fire is in possession of premiums, insurance proceeds and other monies that it should not, in equity and good conscience, be entitled to retain. 94.

Plaintiffs are therefore entitled to damages resulting from State Farm Fire’s unjust

enrichment, including, but not limited to, the imposition of a Constructive Trust on all premiums Plaintiffs paid to State Farm Fire and on the insurance proceeds wrongfully held by State Farm Fire under the subject policy. XII. COUNT EIGHT: BAD FAITH 95.

Plaintiffs hereby incorporate and adopt by reference each and every allegation set

forth in each Paragraph of the Amended Complaint.

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96.

State Farm Fire had a duty to undertake a prompt and reasonable investigation

into the Plaintiffs’ claim and to base its decision on the evidence. 97.

State Farm Fire knew or should have known that it was incumbent upon it, in

denying Plaintiffs’ claim, to meet the factual burden of proving the damage to Plaintiffs’ property was due solely to an excluded peril such as “flood/tidal surge”, but nevertheless it failed to do so and initially denied Plaintiffs’ claim. 98.

In bad faith, State Farm Fire refused to comply with the appraisal clause in its

policy and the accompanying settlement of loss language. State Farm Fire intentionally denied Plaintiffs this right, in reckless disregard of their clear rights under the policy, and forced Plaintiffs to file suit in Chancery Court to get State Farm Fire to comply with its own policy. Once the ordered appraisal was concluded and an award was rendered, State Farm Fire refused to comply with its own policy and compensate the Plaintiffs. 99.

After intentionally interpreting its exclusions in the broadest possible manner,

State Farm Fire denied valid claims such as that of the Plaintiffs. State Farm Fire’s interpretation of its exclusions is not supported by the law, but it relied upon those expansive interpretations to deny claims and thus increase its profits. 100.

Because of State Farm Fire’s conduct in handling and denying Plaintiffs’ claim,

Plaintiffs have suffered depression, emotional distress, mental anxiety, and mental anguish. State Farm Fire knew that Plaintiffs’ home was severely damaged/destroyed and no longer habitable, but nevertheless unreasonably denied Plaintiffs’ claim.

Further, State Farm Fire

exercised unreasonable delay in its paltry investigation of said claim, further causing mental anguish to Plaintiffs. Such depression, emotional distress, mental anxiety, and mental anguish were clearly foreseeable results to State Farm Fire when it unreasonably denied Plaintiffs’ claim.

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XIII. COUNT NINE: FRAUDULENT CLAIMS PRACTICES 101.

Plaintiffs hereby incorporate and adopt by reference each and every allegation set

forth in each Paragraph of the Amended Complaint. 102.

The massive number of properties destroyed by Hurricane Katrina left State Farm

Fire facing the prospect of large payouts to its insureds after Hurricane Katrina.

Upon

information and belief, State Farm Fire made an initial assessment of the magnitude of the losses, and then it conceived and instituted a fraudulent course of claims practices to be applied to Katrina cases such as Plaintiffs’ claim. 103.

The claim of Plaintiffs and other insureds of State Farm Fire whose homes and

businesses were destroyed or substantially damaged by Hurricane Katrina were wrongfully denied pursuant to Defendant’s Katrina-specific corporate “top-down” scheme of fraudulent and deceptive claims practices. 104.

State Farm Fire in effect rewrote its contract and its claims procedures for cases

where properties were destroyed or substantially damaged by wind and water and embarked on an intentional course of pre-litigation and post-litigation conduct, fraudulently concealed from the Plaintiffs and other insureds, deliberately designed to deny legitimate claims covered under the Defendant’s contract, the insurance policy, and Mississippi law. 105.

State Farm Fire’s intentional broad interpretation of the exclusions in its policy

were undertaken as a means of denying and/or underpaying valid claims of State Farm Fire’s insureds. Although State Farm Fire’s interpretation of its exclusions is not supported by the law, it continued to use them as a means to deny or reduce its obligations to its insureds in order to protect its profits.

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106.

State Farm Fire also sold Plaintiffs a policy containing an appraisal clause and

other policy language, representing to Plaintiffs that said clause was available to Plaintiffs, and representing that State Farm Fire would comply with the terms of its policy.

It did so

fraudulently, as Plaintiffs found out when they were denied appraisal in the wake of Hurricane Katrina. Plaintiffs relied on this to their detriment, and were ultimately forced to file suit to get State Farm Fire to comply with the terms of its own policy. Plaintiffs were damaged thereby, including incurring attorneys’ fees, extra-contractual damages, mental anguish, mental anxiety, emotional distress, and other damages clearly foreseeable to State Farm Fire as a result of its conduct. 107.

The actions of State Farm Fire constituted a deliberate course of company-wide

fraudulent post-Katrina claims handling practices by which it intentionally undertook to defraud the Plaintiffs and others whose properties were insured by State Farm Fire. 108.

The scheme included post-Katrina modification of its coverage provisions, as well

as improper engineering procedures, all of which were concealed from Plaintiffs and others who were expecting and relying on good faith handling of their claims by the Defendant. 109.

State Farm Fire’s actions constitute fraud, fraudulent concealment and fraudulent

inducement, as well as bad faith claims handling on an institutional basis in State Farm Fire’s handling of claims resulting from Hurricane Katrina. State Farm Fire’s actions were intended to, and did, result in the intentional and fraudulent denial and/or underpayment of claims of the Plaintiffs and others. 110.

State Farm Fire’s actions warrant the imposition of compensatory, extra-

contractual and punitive damages under Mississippi law.

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XIV. REMEDIES 111.

Plaintiffs hereby incorporate and adopt by reference each and every allegation set

forth in each Paragraph of the Amended Complaint. 112.

Plaintiffs are entitled to declaratory relief as to the rights and obligations of the

parties under the subject policy. 113.

Plaintiffs are entitled to declaratory and injunctive relief as to the payment by

State Farm Fire of $174,811.80, as was awarded in the appraisal process provided by the policy. 114.

Plaintiffs are entitled to full insurance coverage under the subject policy for

damage to the insured building and property, as well as other monies they should have been paid under the subject policy, and other such equitable relief set forth in the Complaint, including, but not limited to, specific performance, indemnity and/or a constructive trust. 115.

Plaintiffs are entitled to recover consequential and incidental damages caused by

State Farm Fire’s refusal to honor its obligations under the subject policy and otherwise. 116.

Plaintiffs are entitled to recover punitive and/or exemplary damages for State

Farm Fire’s bad faith denial of coverage. 117.

Plaintiffs are entitled to recover damages for pain and suffering, emotional

distress, mental anguish, loss of enjoyment of life and such other extra-contractual damages as may be appropriate. 118.

Plaintiffs are entitled to recover attorneys’ fees, litigation expenses, funds

expended on experts, pre-judgment interest and post-judgment interest; such expenses were clearly foreseeable to State Farm Fire and Casualty Company as a result of its conduct.

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WHEREFORE, PREMISES CONSIDERED, your Plaintiffs demand judgment against the Defendants, and in particular Defendant, State Farm Fire and Casualty Company, of actual damages in the amount of the appraisal Award, or in the alternative, in the amount of limits of liability of their insurance policy, and other sums they should have been paid under the insurance policy, extra-contractual damages and punitive damages in an amount sufficient to make Plaintiffs whole and deter future wrongful conduct of the Defendants, and in particular Defendant, State Farm Fire and Casualty Company, together with all costs, attorneys’ fees and pre- and post-judgment interest. Plaintiffs request any further relief that may be appropriate.

Respectfully submitted, HENRY KUEHN AND JUNE P. KUEHN BY: DENHAM LAW FIRM

BY: __s/Earl L. Denham___ EARL L. DENHAM MS Bar No. 6047

CERTIFICATE I, EARL L. DENHAM, do hereby certify that I electronically filed the above and foregoing Amended Complaint with the Clerk of the Court utilizing the ECF system, which provides notification of said filing to the following: H. Scot Spragins [email protected] Hickman, Goza & Spragins, PLLC Post Office Box 668 Oxford, MS 38655-0068 John A. Banahan [email protected] H. Benjamin Mullen [email protected]; [email protected] Bryan, Nelson, Schroeder, Castigliola & Banahan

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P.O. Drawer 1529 Pascagoula, MS 39568-1529 SO CERTIFIED on this the 1st day of May, 2009.

___s/Earl L. Denham_ EARL L. DENHAM

EARL L. DENHAM, MS Bar No. 6047 KRISTOPHER W. CARTER, MS Bar No. 101963 DENHAM LAW FIRM 424 Washington Avenue (39564) Post Office Drawer 580 Ocean Springs, MS 39566-0580 228.875.1234 Telephone 228.875.4553 Facsimile

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