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

PLAINTIFFS’ RESPONSE IN OPPOSITION TO

[63] STATE FARM’S MOTION FOR SUMMARY JUDGMENT
RE: APPRAISAL AND STATE FARM’S [64] SUPPORTING MEMORANDUM

(ORAL ARGUMENT REQUESTED)

COME NOW the Plaintiffs, HENRY KUEHN AND JUNE P. KUEHN, by and through

their attorneys of record, DENHAM LAW FIRM, and would file their Response in Opposition to

[63] State Farm’s Motion for Summary Judgment Re: Appraisal and [64] State Farm’s

Memorandum in Support of its Motion for Summary Judgment Re: Appraisal, and would show as

follows:

1. Plaintiffs respectfully submit that Defendant, State Farm Fire and Casualty

Company, is not entitled to summary judgment as to the claims for declaratory and injunctive

relief as set forth in Count One of Plaintiffs’ Complaint. As an initial matter, Plaintiffs are

currently composing a Motion to Compel 30(b)(6) Deposition, to Compel 30(b)(5) Production

and for Sanctions with regard to the 30(b)(6) deposition taken in this matter at the end of March.

The 30(b)(6) deponent was not prepared whatsoever to respond to the issues in Plaintiffs’ Notice

of 30(b)(6) deposition, brought virtually nothing with him, and was constantly instructed not to

answer questions by State Farm’s attorney. Plaintiffs sought a hearing from Judge Walker while

1
at the deposition, which took place on March 27, 2009, in Colorado, but Judge Walker’s

chambers informed staff for Plaintiffs’ counsel that Judge Walker was “not inclined” to have a

telephonic hearing on the issue, and that Plaintiffs should just “file a motion.” Plaintiffs received

the deposition transcript of Rick Moore (the 30(b)(6) deponent) recently, and are preparing a

Motion. Accordingly, Plaintiffs would request a stay of the ruling on Summary Judgment as to

the appraisal issue until such time as they have been allowed to conduct a full and meaningful

deposition of the 30(b)(6) representative, unobstructed by Defense counsel. Plaintiffs would also

request that they be allowed to supplement their response to Defendant’s Motion for Summary

Judgment.

I. INTRODUCTION

2. Plaintiffs, Henry and June Kuehn, entered into a contract, a homeowners all perils

policy ("subject policy"), with State Farm Fire and Casualty Company (hereinafter referred to as

“State Farm”), wherein State Farm agreed to provide insurance as described in the policy. Henry

and June Kuehn are the named insureds on the policy. The State Farm Homeowners Policy

insured a dwelling located at 1305 Cove Place, Ocean Springs, Mississippi, and also contained

coverage, inter alia, for other structures, personal property, and loss of use, for which the Kuehns

paid State Farm. Exhibit “1,” Certified copy of State Farm Homeowners Policy and

declarations.

3. On August 29, 2005, within the subject policy period, the insured real property

and personal property were heavily damaged by Hurricane Katrina. State Farm initially paid

some wind damage, but it denied the remainder of Plaintiffs’ homeowners claims.

2
 4. It is undisputed the storm surge reached the subject property; however, by the

time the surge arrived, the insured residence had already been rendered uninhabitable and its

contents were damaged in excess of the limits of the subject policy.

5. Plaintiffs are seeking compensation for damages caused by wind from Hurricane

Katrina, specifically wind damage that occurred above the level of the storm surge. In the

deposition of Rick Moore, State Farm’s corporate representative, State Farm agreed that damage

above the waterline from Hurricane Katrina was due to wind.

6. As a result of State Farm’s failure to compensate Plaintiffs for their losses under

the subject policy and in accordance with the terms of the Homeowners Policy, Plaintiffs

requested appraisal as a means to avoid litigation.

7. State Farm claims the appraisal in which State Farm participated and to which it

agreed, did not comply with the terms of the insurance policy or governing law, and therefore

Plaintiffs should not be granted the relief they seek in Count One of the Complaint. See State

Farm’s [64] Memorandum, Preliminary Statement, and [1] Complaint, ¶¶ 35-45, 110. However,

State Farm is not entitled to summary judgment on this issue for a number of reasons:

a. State Farm is estopped from denying that appraisal was appropriate for Plaintiff’s

loss;

b. State Farm is estopped from denying the validity of the appraisal award;

c. The appraisal clause in State Farm’s policy is ambiguous, and must be construed

against State Farm;

d. State Farm, in violation of its own company guidelines as to appraisal,

intentionally failed to instruct its appraiser, and admitted fault as to same;

3
 e. State Farm had a pattern and practice of conducting appraisals in the same fashion

as the Kuehn appraisal post Hurricane Katrina, and has apparently conducted as

many as one hundred other appraisals in the same fashion;

f. The appraisal panel only appraised undisputed wind damage, and made no

attempt to break out wind and water damage below the flood line.

8. Plaintiffs respectfully request that this Court DENY State Farm’s [63] Motion for

Summary Judgment Re: Appraisal.

II. BACKGROUND FACTS

9. Plaintiffs’ home was destroyed by Hurricane Katrina on August 29, 2005. When

the Kuehns returned to the insured property after the hurricane, their home and personal property

were damaged to such an extent that the house was uninhabitable. Mr. Kuehn promptly notified

State Farm of the loss a few days after the hurricane.

10. Plaintiffs’ State Farm Fire and Casualty Company Homeowners Policy number

24-BN-1533-4 provides “face value” coverage of $ 196,900 (Dwelling); $ 51,700 (Dwelling

Extension); $ 147,675 (Personal Property); and Loss of Use of actual loss sustained. See Exhibit

“1,” Certified State Farm Homeowners policy, “Kuehn-61”. The policy also includes A1

Replacement Cost coverage for the dwelling; Option ID increased coverage of $39,380 for the

dwelling; coverage for building ordinance or law of $19,690 under Option OL; B1 Limited

Replacement Cost for personal property; and Option HC additional coverage for computers of

$10,000; jewelry and furs coverage of $1500/$2500 under Option JF; and inflation protection.

The policy insured Plaintiffs’ dwelling, other structures and personal property against damage

caused by certain perils, one of which is windstorm, which includes damage by wind, rain and

wind propelled debris and rain. (Exhibit 1”.)

4
 11. On January 4, 2006, John Wildsmith, Claim Representative for State Farm Fire

and Casualty Company wrote to the Kuehns enclosing a Statement of Loss and check for only

$10,765.48 for damage to the roof and walls. Exhibit “2,”State Farm (Wildsmith) letter dated

1/4/2006, statement loss, check (Kuehn 24-40). In response, Mr. Kuehn wrote to Mr. Wildsmith

stating “I feel that a lot of the damages not approved for wind, were in fact wind damages” and

requesting appraisal, which was provided for in his insurance policy and which appeared to be a

means of avoiding litigation. Exhibit “3,” Mr. Kuehn's letter to Wildsmith dated 1/16/2006

(Kuehn 44).

12. On January 21, 2006, Mr. Wildsmith responded that, “Appraisal as explained in

Section 1 – Conditions , paragraph 4, is applicable when the amount of damage is in dispute and

is not appropriate to your claim.” Exhibit “4,” State Farm (Wildsmith) letter appraisal dated

1/21/2006 (Kuehn 49).

13. On January 26, 2006, Mr. Kuehn wrote to Mr. Wildsmith reiterating his request

for appraisal on the “amount of loss” and appointing Lewis O’Leary as his appraiser. Exhibit

“5,” Kuehn letter to Wildsmith dated 1/26/2006 (Kuehn-50).

14. On January 26, 2006, Mr. Wildsmith wrote in reply to Mr. Kuehn, “As I

previously stated, the appraisal process is not appropriate for your claim.” Exhibit “6,” State

Farm (Wildsmith) letter dated 1/26/2006 (Kuehn 53).

15. Subsequently in a letter to Rex Foster dated April 1, 2006, Mr. Kuehn wrote:

It has been over Sixty days since I asked State Farm to participate in
the appraisal process. Feeling as though I am being deprived of this process,
I felt I had no other choice but to seek legal advice. I have determined that
when State [F]arm makes an offer acknowledging coverage for wind
damage and I dispute the amount being offered, the policy affords me the
contractual right to demand appraisal, and that this refusal to enter into
appraisal is a breach of contract.

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 I have no desire to be having this conversation with State Farm,
which is exactly why I wanted 3rd party professionals to work this out for us.
Please, please allow me the use of the policy benefit. With all this being said,
and in the spirit of cooperation, I am hereby affording State Farm another
two weeks from receipt of this letter, to name their choice of appraisers. If
State Farm is not willing to agree to join in and name their choice of
appraisers by then, I will take it as a refusal to grant me this policy benefit,
forcing me to commission an attorney. I am begging you to do all that you
can to prevent me from being forced to do this. I have been a loyal customer
for over 30 years and do not want to turn to an attorney to force State Farm
into appraisal. Please do all that you can to help me to get State Farm to
name your choice of appraisers.

Exhibit “7,” Kuehn letter to Rex Foster appraisal dated 4/1/2006 (Kuehn-54).

16. In response to Mr. Kuehn’s letter, State Farm Claim Representative Lynn Fern

told Mr. Kuehn, by telephone and letter, that “appraisal is not appropriate for your claim

dispute.” Exhibit “8” State Farm (Fern) letter appraisal dated April 11, 2006 (Kuehn 56-58).

17. On April 17, 2006, Mr. Kuehn called State Farm to discuss the situation with

regard to appraisal. The telephone conversation, which Mr. Kuehn recorded, went, in relevant

part, as follows:

STATE FARM: Good afternoon, State Farm, this is Tina.

MR. KUEHN: Uh, Tina, this is Henry Kuehn, I’m looking to talk to Lynn Fern.

STATE FARM: She is away from her desk. I’m on her team, do you have a
claim number?

....

MR. KUEHN: Lynn had sent me a letter that State Farm, uh, thinks appraisal is
not appropriate for my claim dispute, and she suggested mediation.

STATE FARM: Yes.

MR. KUEHN: -- and I kind of -- from people I’m talking to and from what
research I did, I think appraisal is appropriate in my case, and --

STATE FARM: Basically, it’s the same, only mediation, you don’t pay
anything. State Farm pays it all.

6
MR. KUEHN: You uh -- yeah, I understand that, well, someone’s got to pay,
and I mean, no one works for free.

STATE FARM: Right, well, uh, that’s the only thing is, um, in appraisal, you
have to pay your own expert, and in mediation, you just bring in an expert, or
bring his findings, and we pay for the whole process.

MR. KUEHN: Right, but we--

STATE FARM: We’re not really offering mediation [sic] in Mississippi at this
point, because Mississippi government has overrode that and said that mediation
is how we’re going to do it, to keep the cost out of your hands.

MR. KUEHN: You mean you’re not offering appraisal, just mediation?

STATE FARM: Yeah, because the state of Mississippi has overrode our
appraisal --

MR. KUEHN: Oh --

STATE FARM: -- options.

MR. KUEHN: ‘Cause in any policy, there’s nothing about mediation, but
appraisal is mentioned as a, uh, as a [sic] alternative, you know, for dispute
settlement --

STATE FARM: Yeah, because there is typically not a state mediation program,
but after this loss, because there were so many people who suffered such huge
losses --

MR. KUEHN: Yeah.

STATE FARM: -- Mississippi stepped up and said the insurance company is

going to have to pay for this process, we’re going to call it mediation, and the
State of Mississippi is going to, uh --

MR. KUEHN: Well, did this law --

STATE FARM: -- to oversee it, so --

MR. KUEHN: override the appraisal --

STATE FARM: Appraisal.

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MR. KUEHN: -- so you can’t get appraisal from them, is that more or less what
you’re saying?

STATE FARM: Exactly.

MR. KUEHN: In other words, that’s the law passed and we can’t have appraisal
in Mississippi.

STATE FARM: Correct.

MR. KUEHN: We have to go to – that’s correct?

STATE FARM: Yes. From what I’m understanding, that’s what our
management is saying, we’re not offering appraisal at all, because mediation
overrides it.

MR. KUEHN: Mediation overrides it. That’s news to me. I don’t know. Well
anyway, uh, I did get the information on mediation, and I thought for sure we
could still go through the appraisal process.

STATE FARM: No, I’m sorry.

MR. KUEHN: No, huh?

STATE FARM: Nope.

MR. KUEHN: Okay, uh, well let me talk with some of the folks here who think
it is appropriate, and, uh, I don’t think they realize it’s not allowed anymore.

STATE FARM: Yeah, it’s not -- it's not available at this point.

MR. KUEHN: Yeah. Okay, and who am I, who am I speaking to, I know you’re
not Lynn, who are you again?

STATE FARM: I’m Tina, and I actually sit right next to Lynn, we’re on the
same team.

MR. KUEHN: Oh, okay, Tina.

STATE FARM: On Team 10.

MR. KUEHN: Team 10.

STATE FARM: Actually, the flood team should be handling your claim. Team
13 should be.

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 MR. KUEHN: Yeah.

STATE FARM: But, um, looks like your call got bounced over to Lynn.

MR. KUEHN: Oh, okay.

STATE FARM: But if you call again, go ahead and punch in Team 13, and they
can handle your – your questions.

MR. KUEHN: Oh. Okay. Well, thank you, Tina, I’ll be getting back to you.

STATE FARM: Okay.

MR. KUEHN: Bye, now.

18. State Farm has since tried to argue that she was simply “mistaken” and that this

was not management’s position in Mississippi following Katrina, but that is merely a self-serving

fabrication. During the deposition management personnel for State Farm, State Farm

Catastrophe Team Manager, Steve Burke, on November 28, 2007, in Delchamps v. State Farm

Fire and Casualty Company et al., Civil Action no. 1:06cv1194-LTS-RHW, Mr. Burke testified

that he had been informed in a management meeting on September 23, 2005, that appraisal

would not be offered in Mississippi; he testified as follows, when being questioned about his

notes from said management meeting:

Q. (Kris Carter) Is there anything about the next bullet, says “appraisal”?

A. (Steve Burke) Appraisal.

Q. Is there anything about appraisal in the policy?

A. Yes.

Q. And were you not offering that either with State Farm – when I say “you,” I
mean State Farm. Was State Farm offering appraisal?

A. No.

Q. Why not?

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 A. Not at that time, they weren’t.

Q. Even though it was in the policy, they weren’t offering it?

A. That’s correct.

Exhibit “9,” Burke deposition excerpt, pp. 5, 145-146. Feeling they had no other recourse, the

Kuehns filed a Complaint for Injunctive and Declaratory Relief on June 21, 2006, in the

Chancery Court of Jackson County, Mississippi. The first Kuehn action sought no other relief.

State Farm removed the case to Federal Court on July 28, 2006.1 The Plaintiffs filed a [6]

Motion to Remand on August 17, 2006, which was subsequently granted by the Court by Order

of Remand entered on January 19, 2007. Rather than attempting to litigate the matter further, or

to argue that appraisal was not appropriate in the Kuehns’ case, State Farm agreed that the

Kuehns had a right to appraisal of their claim, and entered into an Agreed Order in the Chancery

Court of Jackson County stating same, which was signed and entered by the Honorable Randy

Pierce.2 See Exhibit “10,” Agreed Chancery Order dated April 24, 2007.

19. On March 23, 2007, counsel for State Farm Fire and Casualty Company wrote to

Plaintiffs’ counsel and advised as follows: “Pursuant to recent conversations I have had with

State Farm in regard to this matter, a second look was given to the value of your clients’ loss. In

light of current conditions in the relevant market, inflated labor costs, etc., State Farm is willing

to confess that the total replacement cost for the Kuehn dwelling is in excess of the policy limits

available under Homeowners’ Coverage A ($201,232). Please advise whether this admission is

sufficient to satisfy the present controversy. If not, please advise in writing why appraisal would

be required in light of the same.” Exhibit “11,” Tucker letter dated 3/23/2007 (Kuehn 110).

1
“Henry Kuehn and June P. Kuehn versus State Farm Fire and Casualty Company, Civil Action Number 1:06-cv-
00723-LTS-RHW”, which the Defendant refers to in its Motion for Summary Judgment as “Kuehn I.”
2
Judge Pierce is no longer a chancellor in Jackson County, but rather has been elected to be a Justice of the
Mississippi Supreme Court. His docket has since been turned over to Honorable G. Charles Bordis.

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 20. Subsequently on May 29, 2007, Plaintiffs’ filed their Designation of Appraiser in

which they designated Lewis O’Leary. State Farm formally designated its appraiser, John

Minor, on June 14, 2007.

21. On December 21, 2007, State Farm notified the Kuehns that their Homeowners

Policy would not be renewed because of the “lack of underwriting information indicating the

home is complete and owner occupied.” Exhibit “12,” State Farm letter cancelling policy dated

12/21/2007 (Kuehn 111).

22. The appraisal was held before Umpire John Voelpel and Mr. Voelpel and both

appraisers signed off on the appraisal award dated February 28, 2008. Exhibit “13,” 2-28-08

Kuehn appraisal Award dated 2/27/2008 (Kuehn 134.).

23. On April 26, 2008, Mr. Kuehn wrote to Rex Foster to inquire if State Farm would

be paying the appraisal award. Exhibit “14,”Mr. Kuehn's letter to Rex Foster dated 4/26/2008

(Kuehn 136.)

24. On August 26, 2008, counsel for State Farm wrote to Plaintiffs’ counsel and

enclosed a check from State Farm Fire and Casualty Company “in the amount of $4,771.55,

representing the current Statement of Loss form plus 8% interest.” Exhibit “15,” Spragins letter

dated 8/26/2008, with check. In response to Plaintiffs’ counsel’s inquiry about the check,

counsel for State Farm replied that “State Farm determined that additional items were needed for

the repairs and/or associated with those repairs. You will find enclosed the revised Statement of

Loss.” Exhibit “16,” Letter from Spragins to Denham dated 9/19/2008 with Statement of Loss

dated January 23, 2008. (Kuehn 112-130).

25. On August 29, 2008, Plaintiffs filed their [1] Complaint in the instant cause of

action.

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 26. Prior to the filing of Plaintiffs’ Complaint (and then Amended Complaint)3, State

Farm never filed any motion with the Chancery Court concerning any complaints about the

appraisal process itself, nor did it ever raise the issue whatsoever prior to Plaintiffs filing suit for

bad faith. Plaintiffs relied on this fact in filing their Complaint in this Court. There was no

apparent disagreement with the process by State Farm. See Exhibit “17,” E-mail chain between

Earl Denham and Lawrence “Lucky” Tucker, beginning May 30, 2008, and ending June 9, 2008

(in which Tucker admits that appraisal process properly went forward in accordance with policy

language). Not until Plaintiffs filed suit for the bad faith nonpayment of the appraisal

award did State Farm complain about the process itself. State Farm only changed its strategy

and decided to attack the process in response to the bad faith litigation. In fact, even as of May

30, 2008, State Farm’s position was that the appraisal properly went forward, in accordance

with the policy language and the terms of the Chancery Court Order. Lucky Tucker states on

May 20, 2008, that “the Kuehns’ loss has been appraised.” Again, on May 30, 2008, Mr. Tucker

states, “I have reviewed the attached Chancery Court Order commanding appraisal. It has

been complied with in full.” See Exhibit “17,” E-mail chain between Tucker and Denham

(emphasis added.) It should be noted that the Chancery Order referred to commands that the

parties comply with appraisal under the terms of State Farm’s policy, and further states that if

any disputes arose in the process, they were to have been taken up with the Chancery Court.

This certainly constitutes an admission by State Farm. Mr. Tucker then goes on to state,

An appraisal in accord with that language [in the policy] has already
occurred – we selected an appraiser, you selected an appraiser, the

3
Plaintiffs filed a Motion to Amend Complaint on January 9, 2009. The proposed Amended Complaint was
attached as an exhibit to that Motion. Judge Walker granted Plaintiffs’ Motion to Amend Complaint on February 3,
2009. However, Plaintiffs discovered that the Amended Complaint did not appear on the Court’s docket, and filed
the Amended Complaint on May 1, 2009. The Counts in the Amended Complaint remained the same, but some
language changes were made in a few areas.

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 appraisers selected an umpire, and together they determined the total
amount of [covered]4 loss sustained by the Kuehns.

(emphasis added.) Mr. Tucker, once again, states, “The appraisal process is now complete.

The total amount of the [covered] loss sustained by the Kuehns as a result of Hurricane

Katrina has been determined and no determination as to wind/water has been made.”

27. State Farm agreed to allow the Chancery Court to retain jurisdiction over any

disputes that arose as to the appraisal process. Accordingly, if State Farm disagrees with the

actual conduct of the process, as it has now begun to do, it has waived its right to proceed in

federal court on that issue, and any complaints about the actual conduct of the appraisal process

itself should be remanded to the Chancery Court of Jackson County.

III. STANDARD OF REVIEW

28. Summary judgment is appropriate only when the movant can demonstrate that

there is no genuine issue of material fact and is entitled to judgment as a matter of law.

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S. Ct. 2505, 2509-10, 91 L.Ed.2d

202 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 106 S. Ct. 2548, 91 L.Ed.2d 265 (1986);

Fed.R.Civ.P. 56(c); Miss.R.Civ.P. 56(c). Essentially, the inquiry is "whether the evidence

presents a sufficient disagreement to require submission to a jury or whether it is so one-sided

that one party must prevail as a matter of law." Anderson, 477 U.S. at 251-52, 106 S. Ct. at

2512. An issue of fact is "genuine" if the evidence is significantly probative or more than merely

colorable such that a jury could reasonably return a verdict for the nonmoving party. Id. at 248,

4
As previously pointed out to the Court, State Farm admitted in its sworn answers to the Requests for Admission
propounded by Plaintiffs that “loss” in its appraisal clause and policy refer to “covered” loss. See Exhibit “18,”
State Farm’s Responses to First set of Requests for Admission propounded to State Farm; Exhibit “19,” Second set
of Requests for Admission propounded to State Farm. Accordingly, State Farm unquestionably admitted that the
loss as determined by the appraisers was a “covered” loss. It is estopped from contending otherwise. Any
ambiguity as to the definition in the policy is construed against State Farm.

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106 S. Ct. at 2510. An issue of fact is "material" if proof thereof might affect the outcome of the

lawsuit as assessed from the controlling substantive law. Id. at 249, 106 S. Ct. at 2510.

29. The purpose of summary judgment is to isolate, and then terminate, claims and

defenses that are factually unsupported, and summary judgment is proper after an adequate

period for discovery "if the pleadings, depositions, answers to interrogatories, and admissions on

file, together with the affidavits, if any, show that there is no genuine issue as to any material fact

and the moving party is entitled to a judgment as a matter of law." Celotex Corp. v. Catrett, 477

U.S. 317, 323-24, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986). A genuine issue exists

where the evidence before the court is of such a nature that a jury could reasonably find in favor

of the non-moving party, and whether a fact is material hinges on the substantive law at issue.

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-54, 106 S.Ct. 2505, 2510, 2510-13, 91

L.Ed.2d 202 (1986).

30. If the moving party is able to show "an absence of evidence to support the

non-moving party's case" Celotex, 477 U.S. at 325, 106 S.Ct. at 2554, the burden then shifts to

the non-moving party "to make a showing sufficient to establish the existence of an element

essential to that party's case, and on which that party will bear the burden of proof at trial." Id. at

322, 106 S.Ct. at 2552. The opposing party may not rest upon mere allegations or denials in the

pleadings but must set forth specific facts that show a genuine issue for trial remains. Anderson,

477 U.S. at 250, 106 S.Ct. at 2511. The nonmoving party's response must be supported by the

kinds of evidentiary materials listed in Rule 56(c). Celotex, 477 U.S. at 324, 106 S.Ct. at 2553;

Farnsworth v. Town of Pinedale , Wyoming , 968 F.2d 1054, 1056 (10th Cir.1992). Rule 56 does

not require "the moving party to support its motion with affidavits or other similar materials

negating the opponent's claim." Celotex, 477 U.S. at 323, 106 S.Ct. at 2553.

14
 31. The nonmoving party is entitled to the benefit of any and all doubts regarding the

facts, and all evidence (and all inferences therefrom) must be viewed in the light most favorable

to the nonmoving party and against the movant. Matagorda County v. Russell Law, 19 F.3d 215,

217 (C.A. 5 1994).

32. The trial court has the freedom to allow a case to continue when it has any doubt

as to the wisdom of terminating an action prior to a full trial. Donald v. Reeves Transport Co. of

Calhoun, Georgia, 538 So.2d 1191 (Miss. 1989).

IV. PLAINTIFFS ARE ENTITLED TO

DECLARATORY AND INJUNCTIVE RELIEF.

A. State Farm is estopped from denying the validity of the appraisal award.

33. State Farm is estopped from denying that the Kuehns were entitled to appraisal on

their Hurricane Katrina claim, as this issue was already addressed in the Chancery proceedings.

State Farm entered into an Agreed Order stipulating as to Plaintiffs’ rights to the appraisal. This

issue was necessarily and properly addressed in the Chancery action, and, indeed, was the only

subject at issue in the Chancery action. Accordingly, State Farm is now collaterally estopped

from attempting to re-litigate the issue of whether Plaintiffs were entitled to an appraisal on their

claim.5 Further, the Chancery Court retained jurisdiction (again, in an Agreed Order) to resolve

any allegations of impropriety or dispute as to the process itself. State Farm has never attempted

to raise any allegations of impropriety or dispute of the appraisal process with the Chancery

Court. It never sought to allege malfeasance, fraud or any other exceptional circumstances

5
See, e.g., Hollis v. Hollis, 650 So. 2d 1371, 1377 (Miss. 1995).

15
warranting a setting aside6 of the award. The 60 day period following the appraisal award, in

which State Farm’s policy obligates it to pay the amount of the loss as determined by appraisal,

passed without comment or complaint from State Farm (and without payment as well). Not until

Plaintiffs filed a bad faith lawsuit did State Farm attempt to allege flaws in the appraisal process.

“[A] party who voluntarily submits to appraisal to determine the amount due under [an]

insurance policy is bound by the appraisal award, absent exceptional circumstances,” such as

fraud, misfeasance, collusion or manifest injustice. FDL, Inc. v. Cincinnati Ins. Co., 135 F.3d

503, 505 (7th Cir. 1998) (holding District Court was precluded from interfering with

contractually agreed upon appraisal award absent exceptional circumstances).

34. State Farm is equitably estopped from now attempting to allege impropriety of

the appraisal process and award. “In order to establish equitable estoppel, a party must show a

change in position in reliance upon the conduct of another and detriment caused thereby.”

Thomas v. Bailey, 375 So. 2d 1049, 1052 (Miss. 1979)(citing Birmingham v. Conger, 222 So. 2d

388 (Miss. 1969)). Clearly, State Farm took the position that Plaintiffs were entitled to appraisal,

and entered into an agreed Judgment in Chancery Court stating same. Plaintiffs, reasonably

relying on the fact that State Farm would comply properly with its policy and engage in the

appraisal process in good faith, then ceased to pursue the matter with their attorneys. The

appraisal went forward as planned, and an award was entered. State Farm unquestionably took

the position for many months that the appraisal process was proper under the terms of State

Farm’s policy. It unequivocally stated so on numerous occasions. See Exhibit “17,” E-mail

Chain between Tucker and Denham. State Farm’s own policy mandates payment of the covered

loss within 60 days of the entry of an appraisal award. Sixty days and more passed from the date

6
Cf. Louis Gardens of Encino Homeowners Ass’n v. Truck Ins. Exchange, 82 Cal. App. 4th 648, 654-655, 659 (Cal.
Ct. App. 2000)(holding that failure of Association to move to vacate appraisal award within designated 100-day
time period precluded Association from challenging award.)

16
of the appraisal award with no action whatsoever from State Farm. Mr. Kuehn attempted, in

April of 2008, to get State Farm to pay what it owed without having to resort further to attorneys

or litigation. Again, State Farm simply ignored him. During the months after the appraisal

award was entered in February 2008, State Farm never once complained or petitioned the

Chancery Court to address any alleged problems in the appraisal process. In fact, it did quite the

opposite, suggesting to Plaintiffs that the process occurred properly, was complete, and that the

Chancery matter should be dismissed. Only after Plaintiffs had to bring their attorneys back into

the matter, and after said attorneys began engaging in communication with State Farm as to why

the award had not been paid, did State Farm attempt to disagree with the process or introduce

ambiguity. State Farm did not actually complain or allege any impropriety in the process until

Plaintiffs were forced to file a lawsuit in federal court for the bad faith nonpayment of their

claim. Plaintiffs relied upon State Farm’s position and on its contract for months while suffering

without adequate payment from State Farm on their homeowners policy, and indeed, had to

again resort to attorneys to attempt to resolve the matter. Plaintiffs forbore litigation for many

months, further delaying the resolution of their claim, based on the reasonable position that State

Farm would act in accordance with the terms of its own policy and representations. State Farm

did not do so, and here we are. Further, had State Farm timely alleged impropriety of the process

itself, Plaintiffs would have addressed it with the Chancery Court, which retained jurisdiction

over such matters pursuant to the Agreed Order. State Farm did not do so, and in fact, took the

position even as of late May and early June of 2008 that the appraisal process had gone

forward properly and in accordance with State Farm’s policy language.

35. State Farm is, of course, judicially estopped from taking any position inconsistent

with its position in this litigation or the previous Chancery litigation, including the positions it

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took in its aforementioned remand-related discovery responses. See, e.g., Edwards v. Aetna Life

Insurance Company, 690 F.2d 595, 598 (6th Cir. 1982). State Farm took the position that “loss”

in its policy refers to “covered” loss. It further took the position, through its counsel, that the

appraisal went forward properly and in accordance with its policy language. It simply refused to

pay the award.

B. The appraisal panel appraised only undisputed wind damage.

36. All agree that only undisputed wind damage was appraised, and the panel only

appraised from the water line and up. See Exhibit “20,” Deposition of John Voelpel, pp. 85, 89-

90; Exhibit “21,” Second Deposition of John Minor, pp. 81, 82. Even State Farm’s 30(b)(6)

representative, Rick Moore, testified that State Farm does not dispute that the damage above the

waterline was attributable to wind. See Exhibit “22,” Deposition of Rick Moore, p. 101. He

also contended that there was no issue as to what damage was caused by wind and what was

caused by water in this case. Exhibit “22,” Deposition of Rick Moore, p. 71. While State

Farm wildly emphasizes that the appraisers and umpires all admit to having appraised losses

from “wind damage only,” that certainly is not fatal to the appraisal process or award, as State

Farm’s policy only provides for appraisal of the “covered” (i.e., wind) loss. Thus, the appraisers

did exactly what they were supposed to do. State Farm’s appraiser, as well as the umpire, both

testified that they did not engage in any coverage determinations, but appraised wind only. See

Exhibit “20,” Deposition of Voelpel, pp. 23-24, 46; Exhibit “21,” Second Deposition of Minor,

pp. 49, 120-121. Further, State Farm’s hands are unclean as to this issue, as it issued no written

instructions whatsoever to its appraiser or to the panel as a whole as to how the appraisal

should be conducted. See Exhibit “22,” Deposition of Rick Moore, p.102,104,105; Exhibit “20,”

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Deposition of John Voelpel, pp. 13, 20-21; see also p. 18. Minor testified that he handled this

appraisal in the exact same fashion he handled twenty to thirty others for State Farm, pursuant to

State Farm’s instructions (and which, upon information and belief, were paid). See Exhibit “23,”

First Deposition of Minor, p. 28; 102-104, 107-108, 110, 114. Volepel testified that he handled

the appraisal in the same fashion as possibly 60 other appraisals he had done for State Farm. See

Exhibit “20,” Deposition of John Voelpel, p. 97. In fact, the only instructions Minor could

remember bring given in this case, which were given by Lucky Tucker, were squarely in

opposition to the terms of the policy. Tucker asked Minor to appraise the entire loss, both

covered and non-covered damages. See Exhibit “23,” Excerpts from First Deposition of John

Minor, p. 18. This contradicts the appraisal clause, which State Farm admits provides for an

appraisal of covered loss only. Both appraisers and the umpire testified that had State Farm

asked them to do the appraisal any differently, they would have (and could have) done so. See

Exhibit “20,” Deposition of John Voelpel, pp. 81-82, ; Exhibit “21,” Second Deposition of John

Minor, pp. 98-99; Exhibit “24,” Deposition of Lewis O’Leary, pp. 60-61, 71-72; 75-76.

37. Furthermore, State Farm did not follow its own guidelines, and submit to the

appraisers a written letter concerning the appraisal. See Exhibit “22,” Deposition of Rick Moore,

p. 104.

C. Any alleged impropriety in the appraisal process is attributable to State Farm.

38. If the Court finds that it should address any alleged improprieties in the appraisal

process, Plaintiffs would point out to the Court that State Farm admits that if the appraisal

process went forward improperly, State Farm is responsible. State Farm admittedly failed to

follow its own guidelines, and gave no instructions of merit to the appraisal panel whatsoever. In

a letter from Scot Spragins to John Minor, State Farm’s appraiser, Spragins unequivocally states,

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“we take the blame in not being able to properly articulate your task.” See Exhibit “21,”

Second Deposition of John Minor, p. 162 (quoting letter from Spragins to Minor). State Farm

failed to properly instruct its own appraiser. The entire panel agrees they could have done the

appraisal differently had State Farm only instructed them to do so. See Exhibit “20,” Deposition

of John Voelpel, pp. 81-82, ; Exhibit “21,” Second Deposition of John Minor, pp. 98-99; Exhibit

“24,” Deposition of Lewis O’Leary, pp. 60-61, 71-72; 75-76.

D. O’Leary is “disinterested” for the purposes of the appraisal clause.

39. State Farm argues that Plaintiffs’ appraiser, Lewis O’Leary, was not

“disinterested” which allegedly tainted the appraisal award.

40. It is noteworthy that State Farm did not participate in the appraisal with clean

hands and, in fact, failed to comply with the appraisal provision of the Homeowners Policy.

Plaintiffs entered into the appraisal process in good faith, and they have done everything they can

to comply with the various rules, requirements and procedures that were made known to them by

State Farm for the appraisal process.

41. State Farm alleges that Mr. O’Leary was not a “disinterested” appraiser and

therefore the appraisal process was tainted. The relevant appraisal provision in the State Farm

Homeowners Policy reads as follows:

SECTION I--CONDITIONS

4. 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 the 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

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 agree within a reasonable time, they shall submit their differences to the umpire.
Written agreement signed by any two of these three shall set the amount of the
loss. Each appraiser shall be paid by the party selecting that appraiser. Other
expenses of the appraisal and the compensation of the umpire shall be paid
equally by you and us. [Bold and italicized emphasis added.]

Ex. 1, Policy, at “Kuehn-78,” and “Kuehn v. SF HO CP 100019.” Notably “disinterested” is not

defined in the policy. Further, it is common practice for an appraiser to zealously advocate their

client’s position, and appraisers are not subject to the same “impartiality” standard as arbitrators.

See Exhibits “25” and “26,” Excerpts from Couch on Insurance. O’Leary’s “puffing” for his

client as indicated by State Farm certainly does not render the appraisal void. Further, State

Farm never questioned his appointment, nor complained about him during the process.

42. Plaintiffs would show that their appraiser, Lewis O’Leary, had no pecuniary

stake in the outcome of the appraisal, and thus was not “interested” as applies to appraisal. His

fees were the same regardless of the result. He merely diligently and zealously represented

Plaintiffs’ interests in the appraisal process, which is entirely permissible. Diligent or even

zealous representation does not mean that the appraiser does not meet the requirements of the

policy for a “disinterested” appraiser. State Farm does not appear to be questioning Mr.

O’Leary’s competency, merely whether or not he was sufficiently “disinterested” to meet State

Farm’s definition of this term. Minor was as much an advocate for State Farm as O’Leary was

for the Kuehns, though he may not have engaged in as much “puffery” as O’Leary. See Exhibit

“21,” Second Deposition of Minor, p. 87; Exhibit “20,” Deposition of Voelpel, pp. 65-66, 82-84,

86-87. Voelpel, who has does nothing but appraisals for a living, and has done perhaps as many

as 100 for State Farm, testified that this was common, and not improper at all.

43. State Farm evinces concern that Mr. O’Leary may have departed from the “lack

of partisanship and bias” required by the “policy and the law.” See [64] State Farm’s

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Memorandum, p. 9. However, Mr. O’Leary’s passionate efforts on Kuehn’s behalf during the

appraisal should not be used as a means to deprive the Kuehns of the appraisal in which both

parties agreed to participate and the appraisal award that was agreed upon by both parties’

appraisers, John Minor for State Farm and Lewis O’Leary for the Plaintiffs, as well as the

umpire, John Voelpel.

E. The appraisal clause is ambiguous.

44. This should be an obvious point at this juncture. While “appraisal” has been

litigated in Mississippi on more than one occasion, there seems to be no case on point

challenging an appraisal provision as to ambiguity. State Farm’s appraisal clause and policy

simply do not outline or define the procedure for appraisal. This creates an enormous ambiguity

as to the meaning of the terms therein, as well as to how the process should be conducted. It

appears from the record that even State Farm’s lawyers did not know what the clause meant.

After all, Lucky Tucker at one point asked Minor to appraise the entire loss (wind and water

damages), though State Farm’s policy purportedly only allows for appraisal of “covered” loss.

“Loss” is not defined in the policy whatsoever, and Plaintiffs had to resort to requests for

admission to even determine State Farm’s position on the definition of that term. Further, it

makes no sense that appraisal is purportedly intended to avoid litigation, but, as State Farm

urges, one must first litigate the coverage issues before it can be invoked. It is a farce to expect

people like the Plaintiffs, though they are very intelligent people, to be able to comprehend what

exactly an appraisal is, what the process entails without having any definitions or details as to the

procedure present in the policy. Even with a law degree, it’s not easy. In fact, the record makes

clear that even the umpire and appraisers in this case, though they are all professionals with

ample experience in appraisal, could not determine exactly what State Farm wanted them to do

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in this case. Accordingly, any ambiguity in the policy must be construed against the drafting

party: State Farm. See United States Fidelity and Guaranty Co. of Miss. v. Martin, 998 So. 2d

956, 963 (¶13) (Miss. 2008).

45. “The courts have generally held that it is the duty of both parties to an insurance

contract which provides for a submission to appraisal, in case of loss, of the question of the

amount of loss or damages suffered, to act in good faith and to make a fair effort to carry out

such agreement and accomplish its object.” Hartford Fire Insurance Co. v. Conner, 223 Miss.

799, 79 So.2d 236, 239 (1955).

46. A court may set aside an appraisal only "where the award is so grossly inadequate

as to amount to a fraud in effect, although fraud is not charged, or where the appraisers were

without authority, or where there is a mistake of fact or to prevent injustice." Munn v. Nat'l Fire

Ins. Co., 115 So.2d 54, 58 (Miss.1959).

47. In Mississippi, the Munn case stands for the proposition that appraisal is a valid

method of establishing the amount of damage that has occurred. Munn v. National Fire

Insurance Co. of Hartford, 115 So.2d 54 (Miss.1959). However, each case certainly must be

viewed on its own facts, and on its own merits, as must each insurance policy. Beyond mere

mention of the clause itself in Munn, there is no mention of any other definitions within the

policy, whether it provided any specific process for appraisal, and so forth. We have that

information here, however, and in the context of State Farm’s policy, there is unquestionable

ambiguity. Further, it appears from Munn that the appraisers were to determine both the covered

and noncovered loss (e.g., the appraisers were to appraise the leaning wall, regardless of the

cause of its leaning). State Farm’s policy is different. It indisputably allows for appraisal of

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covered loss only. Accordingly, Munn is not on point. Certainly, the parties are entitled to

contract as they see fit, so long as the contract is not illegal or in contravention to public policy.

V. CONCLUSION

48. As noted above, there are serious questions of fact about whether State Farm had

a legitimate and arguable basis for refusing to pay the appraisal award in this case. As first

mentioned in this pleading, Plaintiffs contend that they should be entitled to take an unobstructed

30(b)(6) deposition prior to the Court ruling on this Motion. In any event, there are material

questions of fact about (a) whether State Farm conducted a proper appraisal; (b) whether State

Farm provided adequate instruction to its appraiser and the panel sufficient to allow them to

conduct an appraisal that met State Farm’s internal rules on appraisal (which were not part of the

insurance policy); (c) whether State Farm or its counsel, through their acts or omissions,

interfered with the appraisal; (d) whether State Farm is estopped from contesting the validity of

the appraisal process and award; and (e) whether the appraisal (and ultimate refusal to tender

payment) of Plaintiffs’ claim was performed with negligence, gross negligence, and reckless

disregard of Plaintiffs’ rights and/or malicious intent.7 Further, it is Plaintiffs’ contention that the

appraisal clause is ambiguous, and must be construed in their favor.

49. There are genuine issues of material fact which entitle Plaintiffs to have their

claims presented to a jury.

50. The facts and evidence in this case demonstrate that summary judgment is not

appropriate. Plaintiffs have demonstrated that there is sufficient evidence from which a jury

could find that the appraisal was proper.

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Again, as to Plaintiffs’ breach of contract, bad faith and fraud claims, it is not dispositive whether the appraisal
award was proper or not. The series of actions by State Farm and its representatives in this matter make those
claims virtually unassailable. At the end, this is still a standard Hurricane Katrina case, but the Plaintiffs in this case
made the unfortunate decision to try and “avoid litigation” by invoking the appraisal clause in their contract with
State Farm.

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 51. There are genuine issues of material fact in dispute which prohibit the Court from

granting Summary Judgment in favor of State Farm Fire and Casualty Company. Further, State

Farm Fire and Casualty Company is not entitled to judgment as a matter of law.

52. State Farm Fire and Casualty Company’s [63] Motion for Summary Judgment Re:

Appraisal fails to meet the requirements for entry of summary judgment. This entire case

involves credible substantial material issues of genuine facts. State Farm Fire and Casualty

Company’s [63] Motion for Summary Judgment Re: Appraisal should be denied as it is not

entitled to a judgment as a matter of law.

53. Based upon the foregoing and the following exhibits, the Defendant, State Farm

Fire and Casualty Company, is not entitled to summary judgment as a matter of law.

a. Exhibit “1” – Certified copy of State Farm Homeowners Policy and Declarations;

b. Exhibit “2” – State Farm (Wildsmith) letter dated 1/4/2006;

c. Exhibit “3” – Kuehn letter to Wildsmith dated 1/16/2006;

d. Exhibit “4” – State Farm (Wildsmith) letter dated 1/21/2006;

e. Exhibit “5” – Kuehn letter to Wildsmith dated 1/26/2006;

f. Exhibit “6” – State Farm (Wildsmith) letter dated 1/26/2006;

g. Exhibit “7” – Kuehn letter to Rex Foster dated 4/1/2006;

h. Exhibit “8” – State Farm (Fern) letter dated 4/11/2006;

i. Exhibit “9” – Excerpt from Steve Burke deposition;

j. Exhibit “10” – Chancery Court Order dated 4/24/2007;

k. Exhibit “11” – Tucker letter dated 3/23/2007;

l. Exhibit “12” – State Farm letter cancelling policy dated 12/21/2007;

m. Exhibit “13” – Appraisal Award dated 2/27/2008;

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 n. Exhibit “14” – Kuehn letter to Foster dated 4/26/2008;

o. Exhibit “15” – Spragins letter dated 8/26/2008;

p. Exhibit “16” – Spragins letter dated 9/19/2008 with Statement of Loss dated
1/23/2008;

q. Exhibit “17” – E-mail chain between Denham and Tucker from 5/30/2008 to
6/9/2008;

r. Exhibit “18” – State Farm’s Responses to First Set of Requests for Admission
(Kuehn I);

s. Exhibit “19” – State Farm’s Responses to Second Set of Requests for Admission
(Kuehn I);

t. Exhibit “20” – Deposition of John Voelpel;

u. Exhibit “21” – second Deposition of John Minor dated 3/10/2009;

v. Exhibit “22” – Deposition of Rick Moore (State Farm Corporate Representative);

w. Exhibit “23” – first Deposition of John Minor dated 2/5/2009;

x. Exhibit “24” – Deposition of Lewis O’Leary;

y. Exhibit “25” – Excerpt from Couch on Insurance; and

z. Exhibit “26” – Excerpt from Couch on Insurance.

54. Therefore, Plaintiffs request that State Farm Fire and Casualty Company’s [63]

Motion for Summary Judgment Re: Appraisal should be denied in its entirety. Any issue in State

Farm Fire and Casualty Company’s [63] Motion for Summary Judgment Re: Appraisal or

accompanying [64] Memorandum not specifically addressed herein is, out of an abundance of

caution, denied.

55. Plaintiffs respectfully request that the Court waive the requirement of filing a

separate memorandum brief in support of their Response, and that the Court consider this to be

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Plaintiffs’ Response to [63] State Farm’s Motion for Summary Judgment Re: Appraisal with

supporting Memorandum Brief.

WHEREFORE, PREMISES CONSIDERED, the Plaintiffs respectfully request that the

Court DENY the Defendant, State Farm Fire and Casualty Company’s, Motion for Summary

Judgment Re: Appraisal.

Respectfully submitted,
HENRY KUEHN AND JUNE P. KUEHN

BY: DENHAM LAW FIRM

BY: ___s/Kristopher W. Carter_

KRISTOPHER W. CARTER
MS Bar No. 101963

CERTIFICATE

I, KRISTOPHER W. CARTER, do hereby certify that I electronically filed the above and
foregoing Plaintiffs’ Response to [63] State Farm’s Motion for Summary Judgment Re:
Appraisal and State Farm’s [64] Supporting Memorandum with the Clerk of the Court utilizing
the ECF system, which provides notification of said filing to the following:

H. Scot Spragins
sspragins@hickmanlaw.com
Hickman, Goza & Spragins, PLLC
Post Office Box 668
Oxford, MS 38655-0068

John A. Banahan
john@bnscb.com
H. Benjamin Mullen
ben@bnscb.com; lawshark66@i-55.com
Bryan, Nelson, Schroeder, Castigliola & Banahan
P.O. Drawer 1529
Pascagoula, MS 39568-1529

SO CERTIFIED on this the 1st day of May, 2009.

_ s/Kristopher W. Carter_
KRISTOPHER W. CARTER

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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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