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Choharis v. Statefarmfire and Casualty Co.

December 18, 2008


Appeal from the Superior Court of the District of Columbia. (CA-2973-04) (Hon. Anna Blackburne-Rigsby, Trial Judge). (Hon. Russell F. Canan, Trial Judge).

The opinion of the court was delivered by: Steadman, Senior Judge

Argued November 15, 2007

Before REID, Associate Judge, and FERREN and STEADMAN, Senior Judges.

In the spring of 2001, the home of appellant Peter Choharis ("Choharis") sustained significant water damage from a malfunctioning upstairs radiator. Choharis filed several claims under his homeowner's policy with appellee State Farm Fire and Casualty Company ("State Farm"). A series of disputes arose over the handling of the claims, which eventually resulted in the present litigation. Choharis presents three major issues for resolution in this appeal: first, whether this jurisdiction will recognize a tort of bad faith in the handling of insurance claims and, as a related issue, whether summary judgment was proper on his alleged torts of fraud and negligent misrepresentation; second, whether he may recover punitive damages on his contract cause of action; and third, whether he should have had the right to amend his complaint. The trial court ruled in State Farm's favor on all these issues. We affirm.

I. Background

A. Facts*fn1

In the spring of 2000, Choharis purchased a three-bedroom house in the Woodley Park neighborhood of Washington, D.C. At the same time, Choharis purchased homeowner's insurance coverage with appellee State Farm. The policy covered losses from "[s]udden and accidental discharge or overflow of water . . . from within . . . plumbing, heating, [or] air conditioning." The policy did not cover losses "caused by or resulting from continuous or repeated seepage or leakage of water . . . which occurs over a period of time and results in deterioration . . . mold, [etc]." The policy also provided that "[w]hen a Loss Insured causes the residence premises to become uninhabitable, [the policy covers] the necessary increase in cost [an insured incurs] to maintain [the insured's] standard of living for up to 24 months . . . [P]ayment is limited to incurred costs for the shortest of: a) the time required to repair or replace the premises, b) the time required for your household to settle elsewhere, or c) 24 months. When a Loss Insured causes that part of the residence premises rented to others or held for rental by you to become uninhabitable, we will cover its fair rental value."

On April 17, 2001, Choharis returned home to find hundreds of gallons of water gushing from an upstairs radiator that flooded the top two floors and basement apartment of his house. Choharis sought recovery under the policy for several elements of damage, including the cost of repairs, temporary housing costs, lost rental income, and personal property losses. Extensive and increasingly heated disputes arose between Choharis and State Farm over a period of many months on a number of issues relating to these claims.*fn2 While objecting to a number of aspects of State Farm's handling of his claims, Choharis focuses in particular on State Farm's treatment of his housing and living expenses and of a mold condition relating to the flooding.*fn3


Choharis asserts that under the policy, State Farm should have promptly provided him with at least a three-bedroom house while his home was uninhabitable and that such housing was readily available in the neighborhood. On April 19, 2001, Choharis asked State Farm Claim Representative Damian Ruesink how soon he could move into short-term housing and Ruesink informed him that short-term housing was difficult to find and that State Farm did not want to pay for a lease that exceeded the repair time. Choharis maintains that Ruesink made this false representation knowing that State Farm had employed the CRS Temporary Housing agency to find short-term housing in Washington, D.C. for other clients in the past. Relying on Ruesink's representation that short-term housing was difficult to obtain, Choharis moved into a room at the Omni Shoreham hotel for almost a year, incurring considerable expenses.It was not until December 13, 2001, eight months later, that Ruesink informed Choharis that State Farm was trying to secure short-term housing for him through its agency.Short-term housing was eventually finalized in March 2002, after almost one year in a hotel, when Choharis located a one-bedroom apartment through his own efforts. Choharis argues that this delay was deliberate as evidenced by the fact that a representative from CRS Temporary Housing complained to him on February 25, 2002, that State Farm was not willing to work with them because State Farm was asking CRS Temporary Housing to search for properties that were far less expensive than those actually available in the market.

Reimbursement of Living Expenses

On June 18, 2001, Ruesink wrote to Choharis asking him to submit a "schedule of normal, pre-loss expenses" including "a dollar amount for meals eaten outside of the residence premises, phone and utility expenditures, and other related housing expenses" in order to process his additional living expenses. On November 15, 2001, Ruesink informed Choharis that a review of his receipts was ongoing and that the information he submitted was insufficient to accurately calculate his Additional Living Expense ("ALE") reimbursement. Ruesink asked Choharis to complete an ALE form at his "earliest possible convenience" because it was "necessary to calculate any reimbursement." On November 20, 2001, Choharis submitted an ALE worksheet with the necessary information for reimbursement. Choharis maintains that this was the first time that he was made aware of such a form. Choharis argues that State Farm gave a series of pretexts over the course of a year for withholding payments owed to him. State Farm objected to his valet laundry costs as "neither reasonable nor necessary" and refused to pay for his laundry and long distance calls because they were not a part of his living expenses before the loss. Choharis argues State Farm never indicated that it would not permit these kinds of expenses which Choharis contends were entirely foreseeable.


On June 21, 2001, Choharis in a letter alerted State Farm that mold was growing in his home. On that day, Rick Scotton, Ruesink's supervisor, wrote in a State Farm activity log that "[m]old is a consideration [in Mr. Choharis' home] if the plywood got wet and circulation is limited as to not allow the water to dry." Although State Farm knew that mold was a health hazard, it did not notify Choharis of this fact and did nothing for a number of months. On November 27, 2001, Choharis requested environmental testing for mold and mildew. The next day, denying that it had been aware of a mold problem, State Farm informed Choharis that the claims office would need to inspect the house before agreeing to incur any expense related to an environmental hygienist. On February 1, 2002, Ruesink informed Choharis that after an examination of the property, Ruesink found that there was a "substantial lack of surface ...

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