Hsu v. State Farm - Insurance Contract Dispute

IN THE SUPERIO R COUR T OF THE ST A TE OF DELA W ARE LEE L IFENG HSU and JANE YUCHEN HSU, Plaintif fs, v. ST A TE F ARM FIRE AND CASUAL TY COMP ANY, Defendant.)))))) C.A. No. N24C-09- 020 CLS)))))) Date Submitte d: November 25, 2025 Date Decided: Febr uary 27, 2026 Upon Conside ration of the Plaintiffs’ Moti on for Partial Summary Judgment. DENIED. Upon Conside ration of the Plaintiffs’ Moti on to V acate the Modified T rial Scheduling O r d er. DENIED. Upon Conside ration of De fendant’ s Moti on for Summ ary Judgment. GRANTED in part, DENIED in pa rt. MEMORAN DUM OPINION Lee Lifeng Hsu & J ane Y uchen Hsu, Pr o Se Plaintiffs. Donald M. Ransom, Esquire fo r C ASARINO C HRISTMAN S H ALK R A NSOM & D OSS, P.A., Attorney for Defen dant. SCOTT, J.

This matter stem s from an alleged breach of an insurance c ontract. Lee Lifeng Hsu a nd Jane Y uchen H su (col lectively, “Plaint iff s”) f iled a pro se Motion for Part ial Summary Judgment on their claims for breach of contract, b ad faith breach of contract and frau d, and a Mo tion to V acate the M odified T ria l Scheduling Or der. The defendant, State Farm Fire and Casualty Compa ny (“S tate Farm”) filed a Motion for Summary Judgme nt on a ll claims aga inst it. For the following reasons, Plainti ffs’ Motion for Partial Summary Judgment is DENIED; Plaintiffs’ Motion to V acate is DENIED; Defendant’ s Motion for Summary Ju dgment is GRAN TED in part, DENIED in part. F ACTUAL BACKGR OUND AN D PROCEDURA L HISTO R Y 1 In August 2023, Plaintiff s entered into a contract with State Farm for Homeowners’ Insura nce (the “Policy”). 2 On October 30, 2023, Plaintif fs’ home flooded with sewage water. 3 Plaintif fs allege that water started l eaking fro m t he toilet on the second f loor of Plain tif fs’ h ome, causing the kitc hen ceilin g to colla pse, which then caused sewage water to flood to the basement. 4 Plaintiffs then filed a claim with Sta te Farm for cov erage on the dama ges that re sulted. 5 1 The facts are drawn from the Complaint and all documents the parties incorporated by reference. The Court accepts these facts solely for the purpose of ruling on the Motion. 2 Def.’s Mot. for Summ. J. and Resp. to Pls.’ Mot. for Partial Summ. J., Ex. 5, D.I. 50 (“Def.’s Mot. for Summ. J.”). 3 Complaint, ¶ 1, D.I. 1 (“Compl.”). 4 Id. ¶ 8. 5 Id. ¶ 7.

Following assessme nts from State Farm agents and an estimate fro m Gibellino Constructi on, State Farm p aid around $61,0 00 in coverage under the Policy. 6 State Farm denied coverage for additional claim s made by Plaintif fs for ceramic tiles, the kitchen f loor ceiling, underlayment plywood, and thousands of personal p roperty items. 7 Plaintiffs allege that the damage to their home was more than $61,000 because the water intrusion was a “Category 3” leak. 8 Although unclear from the record, it seem s that not all of the damages claimed by Plaintif f s “appear[ed] loss[-]r elated” in State Farm ’ s view. 9 The Court’ s understandi ng from the parties’ briefing and the record is t hat “category” refers to the severity o f the contamination from the leak: Category 1 is “generally clear;” Category 2 is “gen erally murky;” and Category 3 is “dark, hig hly contaminate d water.” 10 According to Plaintiff s, State Farm wrongful ly denied the coverage by faili ng to classify the leak’ s severity as Category 3, which requires coverage on the entirety of Plaintif fs’ claim under the Po licy. On September 10, 2 024, Plaintif fs filed a Complaint against State Farm for breach of contract, bad faith breach of contract, fraud, unfair claims settlement practices under 18 Del. C. § 2304(16), and insurance fraud under 18 Del. C. § 6 Def.’s Mot. for Summ. J., Ex. 2 at 71; Compl. ¶¶ 12, 14, 17, 19. 7 Compl. ¶¶ 19, 33; Def.’s Mot. for Summ. J., Ex. 2 at 25–26, 34, 41. 8 Compl. ¶ 7. 9 Def.’s Mot. for Summ. J., Ex. 2 at 71. 10 Def.’s Mot. for Summ. J. ¶ 2.

2407(c)(2). 11 Plaintif fs seek declarator y judgment, damages for dwelling and personal property losses, “opportunity costs,” emotional distress and associated health is sues, punitive damages, a court recommendation for a Department of Insurance inve stigation, intere st, and attor ney’ s fees an d costs. 12 Plaintif fs filed a Motion for Partial Summa ry Judgment on January 27, 2025, arg uing that t here is no genuine dispute of material fact relating to their claims for State’ s Farm violation of 18 Del. C. § 2304(16)(c), breach of contract and bad faith breach of contract, and fraud. 13 State Farm filed a Mo tion for Su mmary Judgment and Response t o Plaintif fs’ Motion for Partial Summary Judgment on October 31, 2025. 14 On November 2 5, 2025, Plaintiff s filed a Motion t o V acate the Court’ s January 9, 2025 Order modifying the t rial scheduling o rder, Reply to State Farm’ s Response, and Response to State Farm’ s Motion for Summary Judgment. 15 The matter is now ripe f or decision. ST ANDARD OF REVIEW The burden of proof on a motion f or s ummary judgment under Su perior Court Civil Rule 56 falls on the moving party to demonstra te that “there is no genuine issue 11 See generally Compl. 12 Compl. ¶ 40. 13 See gen erally Pls.’ Mot. for Partial Summ. J. and Mot. to Compel, D.I. 15 (“Pls.’ Mot. for Partial Summ. J.”). 14 See generally Def.’s Mot. for Summ. J. 15 See generally Pls.’ Mot. to Vacate Prior Scheduling Order Modification, Reply to Def.’s Resp. to Pls.’ Mot. for Partial Summ. J., and Resp. to Def.’s Mot. for Summ. J., D.I. 52 (“Pls.’ Reply Br”).

as to any material fact and that the moving party i s entitled to judgment as a matter of law.” 16 If the movin g p arty satisfies its initia l burden, th e non-moving p arty mus t suf ficiently establish t he “existence of one or more genuine issues of m aterial fact.” 17 Summary j udgment will not be granted if there is a material fact in dispute or if “it seems desirable to inquire thoroughly into [the facts] i n o rder to clarify the application of the law to the circu mstances. ” 18 “All facts and reasonab le inference s must be consider ed in a light m ost favorabl e to the non-moving party.” 19 DISCUSSION I. The br each of contract claim survives summary judgment, but personal pr ope rty damages ar e l imited to actual c ash value. T o show the contractual liability of an insurer, the i nsured must establish: “(1) the existence of a contract, whether express or i mplied, (2) breach of one or more of the contract’ s obligations, and (3) damages resultin g from the breach.” 20 The only eleme nt in dispute here i s whether Sta te Farm breach ed the P olicy. 16 Super. Ct. Civ. R. 56(c). 17 Qualit y Elec. Co., Inc. v. E. States Const. Serv., Inc., 663 A.2d 488, 1995 WL 379125, at *3– 4 (Del. June 19, 1995) (TABLE); see also Moore v. Sizemore, 405 A.2d 679, 681 (Del. 1979). 18 Ebersole v. Lowengrub, 180 A.2d 467, 469–70 (Del. 1962); see also CNH Indus. Am. L LC v. Am. Cas. Co. of Reading, 2015 WL 3863225, at *1 (Del. Super. June 8, 2015). 19 Nutt v. A.C. & S. C o., Inc., 517 A.2d 690, 692 (Del. Super. 1986) (citing Mechell v. Plamer, 343 A.2d 620, 621 (Del. 1975); Allstate Auto Leasing Co. v. Caldwell, 394 A.2d 748, 752 (D el. Super. 1978)). 20 Geico Gen. Ins. Co. v. Green, 308 A.3d 132, 140 (Del. 2022).

A. Summary judgment is no t app ropriate o n Plaintif fs’ cla im for breach of contract. The Court concludes that neither State Farm nor Plaintif fs are entitled to summary judgment on the breach of contract c laim. While it is undisputed that Stat e Farm has paid Plaintif fs just over $61,000 to cover the loss from the event, a material issue o f fact exists as to the severity of the loss and what coverage was required under the Policy. 21 Despite the p arties’ clear dispute, State Farm cl aims that it is nevertheless entitled to summary judgment because Plaintif fs fail to provide an expert opinion “to address the proper categorizatio n of [th e] water loss [,] which in turn aff ects the neces sary... remediation to support their c laims for any addi tional” dwelling and personal property c overage “beyond wha t i t h as alrea dy pa id.” 22 Plaintif fs counter that J ason Scarpato is the “only qualified expert opinion in the record.” 23 The Cou rt agrees wit h State Farm that the nature of the loss r equires an expert opinion as it is a matter outside the common knowledge of the factfinder. 24 However, there is a dispute as to whether Plaintiffs have a q ualified expert. In the Complaint, Plaintif f s allege t hat their exper t, Jason Scarpat o, a certified spec ialist in 21 Def.’s Mot. for Summ. J. ¶¶ 2, 5; Pls.’ Reply Br. ¶ 15. 22 Def.’s Mot. for Summ. J. ¶ 3. 23 Pls.’ Reply Br. ¶ 16. 24 See Campbell v. DiSabatino, 947 A.2d 1116, 1118 (Del. 2008) (quoting Davis v. Maute, 770 A.2d 36, 40 n.3 (Del. 2001)) (explaining that “[i]t is settled Delaware law t hat, if a claim requires proof of facts that ‘are not within the common knowledge of laymen,’ those fa cts must be presented through expert testimony”).

water damage restoration, assessed the damages and opined that t he home suffered a “Category 3” loss. 25 The Court notes that Plaintif fs have not d isclosed an exper t report on Mr. Scarpato and a ruling on whethe r Mr. Scarpato is qualified as an exper t is not suited for summary judgment. But t he fact that Plaintif fs claim to have an expert raises a genuine issue of material fact as to whether State Farm breached the Policy. Acc ordingly, th e Court will not grant summary judgment on the breach of contract cla im. B. State Farm is entitled to summary judgment on r eplacemen t cost value for pers onal property dam ages. Alternatively, State Farm argues that Plaintif f s’ remedy for personal property should be limited to the actual cash val ue because Plaintif fs failed to meet a condition precedent to receiving th e replacement value under Section I Loss Settlement, Coverage B – Personal Property, B1 – Limited Replacement Cost Loss Settlement of the Policy. 26 Plaintif fs’ only res ponse is that it is entitled to the replacement cost valu e because the defendant breached the contra ct in bad faith even though Plaintif fs “acted in good faith and were willing to accept Actual Cash V alue (ACV) as the set tlement co st.” 25 Compl. ¶ 9. 26 Def.’s Mot. for Summ. J. ¶ 8, Ex. 5 at 19.

“Absent waiver or estoppel, an insurer may assert substantial non- performance o f any cond ition as a defense to any p roceeding a gainst it on a policy.” 27 Section I Loss Settleme nt, Coverage B – Personal Property, B1 – Limited Replacement C ost Loss Settle ment provide s: COVERAGE B – PERSONAL P ROPER TY 1. B1 – Limited Repl acement Cost L oss Settlement a. We will pay the cost to repair or replace property covered under SECTION I – PRO PER TY COVERAGES, COVERAGE B – PERSONAL PROPER TY, except for property listed in item b below, subject to the follow ing: (1) until repair or replacement is co mpleted, we will pay only the actua l cash value of the da maged propert y; (2) after repair o r replacement is completed, we will pay the diff erence b etween the actual cash value and the cost you h ave actually and necessarily spent to repair or replace the property; an d (3) if proper ty is not repaired or replace d within two years after the d ate of loss, we will pay only the actual cash value. 28 Delaware laws instr ucts that unless the language is clear, courts sho uld construe insurance contracts strongly in favor of the insured where an ambiguity exists. 29 T he langua ge of this provision is unamb iguous and only susceptible of one 27 Casson, 455 A.2d 361, 365 (Del. Super. 1982) (citing Bacon v. American Ins. Co., 330 A.2d 576 (N.J. Super. 1978), aff’d, 351 A.2d 771 (N.J. 1974)). 28 Def.’s Mot. for Summ. J., Ex. 5 at 19. 29 Casson, 455 A.2d a t 366 (citing Nove llino v. Life I ns. Co. of North America, 216 A.2d 420 (Del. 1966); Lamberton v. Travelers Indem. Co., 325 A.2d 104 (Del. Super. 19 74)).

meaning: State Farm would pay the replacemen t cost value of personal property if Plaintif fs furnished State Farm with proof that the items claimed were repaired or replaced. Consequently, Plaintif fs and Stat e Farm are bound by the t erms above for payment of t he replac ement cost value versus actua l cash value of personal p roperty covered under t he Policy. Here, there is no dispute tha t Plaintif fs did not provide State Farm with pro of that the personal prop erty items being claim ed have been repaired or replaced. Thus, any potential recover y on Plaintif fs’ claims for personal property damage under the Policy is lim ited to the act ual cash val ue of those i tems. II. State Farm is enti tled to s ummary judgment on Plaintiffs’ ba d fai th brea ch of contract claim. Plaintif fs allege that State Farm’ s “intentional delays and unnecessary bureaucratic procedures to frustrate and hinder the claim process” constitute bad faith breach o f contract. 30 State Farm arg ues that it had a reasonable basis fo r denying Plain tif fs’ claim. 31 T he Court agree s with State Farm. Under Delaware law, for a claimant to prevail on a bad faith breach of contrac t claim, the insured must prove that the insurer breached the insurance contr act, and that the breach was “clearly without any reasonable justification.” 32 The “q uestio n 30 Compl. ¶ 39(a); Pls.’ Mot. for Partial Summ. J. ¶¶ 14–17. 31 Def.’s Mot. for Summ. J. ¶ 12. 32 Green, 308 A.3d at 144 (Del. 2022) (quoting Casson, 455 A.2d at 369).

relevant to whether the insurer ’ s denial was reasonable becomes ‘whether at the time the insurer denied liability, there existed a s et of facts or circum stances known to the insurer which created a bona fide dispute and therefore a meritoriou s defense to t he insurer ’ s liability.’” 33 Although there is a d isputed breach of contract claim, Plaintif fs otherwise cannot show that State Farm’ s denial of additional coverage was clearly without reasonable justificatio n. Nothing in the rec ord supports the a ssertion that State Farm was engaging in intentional delays at the time it denied the entirety of the coverage that Plaintif fs seek or even that t he supposed de lays genera te a breach of the Policy. Further, there is a bona fide dispute as to the severity of the leak and whether the Policy covered Pl aintif fs’ entire insurance claim. The Policy does not cover collapse, sewage leaks over time, or cont amina tion from sewage leaks unless covered by the losse s insured —i.e., direct, accidental physical loss of the dwelling. 34 While unclear, it l ooks li ke Sta te Farm d id not provide covera ge on Plaintif f s’ entire claim because some of the damages did not s eem related to the loss o r covered by the Policy. St ill, State Farm p aid Plaintif fs around $61,000 for th e loss based on numerous assessments. Given the circumstances at the time, it denied some of the liability claimed b y Plaintif fs, State Farm disputed the coverage required under the 33 Id. 34 Def.’s Mot. for Summ. J., Ex. 5 at 5, 12, 14–15.

Policy in good faith. Hence, summary judgment in favor of S tate Farm is appropriate on Plaintif fs’ claim f or bad faith breach of contract. III. State Farm is entitled to summary judg ment on Plaintiffs’ claims under 18 Del. C. § 2 304(16). There is n o private right of action un der 18 Del. C. § 2304. 35 It is u ndispute d that this case is a private action, a nd Plaintif fs ad mit that they are no t asserting a statutory claim under Section 2304(16) but rather using it as “a concise benchmark for evaluatin g insurer conduct.” 36 Therefore, summary judgme nt i n favor of State Farm is appro priate on this i ssue. IV. State Farm is entitled to summary judgment on Plaintiffs’ clai m for fraud as the a llegations lack specificity. The Complaint avers th at State Farm’ s actions sho w “a fraudulent pattern of conduct” because its “syst emic approach [is] rooted in a corporate culture that promotes unethical behavior.” 37 Plaintiffs ar gue t hat t hey are entitled to summary judgment for t his claim on two grounds: (1) State Farm’ s failure to disclose the replacement cost basis for personal property violates 18 Del. C. § 2407(c)(2) and constitutes fraud under the common law; and (2) State Farm fraudule ntly tol d them that the personal property claims were being investigated when t hey were not, and 35 Green, 308 A.3d at 142 (internal citations omitted). 36 Pls.’ Reply Br. ¶ 18. 37 Compl. ¶ 39(c).

Plaintif fs were unaware due to the complicate d software used for filing claims with State Farm. 38 State Farm, on the other h and, ar gues that summary judgment is appropriate because the Complaint “fails to allege fraud with specificity and [P]laintif fs have produced no fac tual evide nce to sup port any claim of fraud.” 39 T o state a claim for frau d, the claimant mu st show that: (1) the defendant falsely r epresente d or o mitted facts that t he def endant had a duty to disclose; (2) the d efendant knew or believed that the representation was false or made the representation with a reckless indif ference to the truth; (3) the defendant intended to induce the plaintif f to act or refrain from acting; (4) the p laintif f ac te d in justifiab le reliance o n the representation; and (5) the p laintif f was injured b y its reliance. 40 Rule 9(b) also requires that the claim asserts: “(1) the time, place, and contents of the false representation; (2) the identity of the person making the represe ntation; and (3) what the person intended to gain by making the representation.” 41 The particularity require ment is s atisfie d if the allegat ions are mad e with “ detail suf ficient to ap prise the defe ndant of the b asis for the c laim.” 42 38 Pls.’ Mot. for Partial Summ. J. ¶¶ 18–22. 39 Def.’s Mot. for Summ. J. ¶ 10. 40 Perfect Game, Inc. v. Ri se 2 Greatn ess Found., 2 025 WL 1555003, at *5 (Del. Super. June 2, 2025) (quoting Everphone, Inc. v. Go Tech. Mg mt., LLC, 2023 WL 79965 60, at *4 (Del. Super. Nov. 17, 2023)) (internal quotation marks omitted). 41 Medlink Health Sols., LLC v. JL Kaya, Inc., 2023 WL 1859785, at * 2 (Del. Super. Feb. 9, 2023) (quoting Abry Partners V, L.P. v. F & W Acq. LLC, 891 A.2d 1032, 1050 (Del. Ch. 2006)) (internal quotation marks omitted). 42 Id.

Primarily, there is nothing o n this r ecord t hat State Farm m ade statements tha t they were investigat ing Plaintif fs’ claims when they were not, and that Plaintif fs relied o n those statements in acting o r refraining from acting. Moreover, th e replacement cost valu e condition precedent is di sclosed in the P olicy and t he record does not s how that State Farm h ad an obliga tion to direc tly discl ose specific provisions of the Policy to Plaintif fs. Acc ordingly, summary j udgment in favor of State Farm is also a ppropriate on P laintif fs’ clai m for frau d. V. The r emedies a vailable ar e limited to P laintiff s’ expectation dama ges. Given tha t Plain tiffs’ claim f or breach of contract is al l that survives summar y judgment, the remedi es that Plaintif fs can assert are lim ited to declaratory judgment, and dwelling and personal property damages —i.e., Plaintif fs’ “expectation interest.” 43 While the Delaware Supreme Court h as held that punitive damage s may be available i n insurance contract disputes when the insurer act s in bad faith, the Co urt has found that State Farm did not refuse to pay in bad faith. 44 Plaintif fs assert no other justifiable grounds for recovering punitive damages on a breach of contract claim. In addition, emotional distres s damages or “associ ated heal th issues” are not 43 E.I. DuPont de Nemours and Co. v. Pressman, 679 A.2d 436, 445 (Del. 1996). 44 Id. at 445–49.

proper reme dies where th ere i s n o evidence of physical injury or claim for intentional infliction of em otional d istress. 45 The Court also finds that there is no a uthority supporti ng Plaintiff s’ contention that “oppor tunity costs” are available for interfer ence wit h Mr. Hsu’ s achie vement of his ultim ate life goal or that the Court may rec ommend a Department of Ins urance investigation. 46 VI. Motion to V acate Januar y 9, 2024, T rial Scheduling Order Finally, for the reasons discussed in this Court’ s Order on Plaintiff s’ Motion in Limine, Plai ntiff s’ Motion to V acate is DENIED. 47 CONCLUSION In sum, the only claim that survives summary judgment is Plaintiffs’ claim for breach of contract and any expectation damages associated with that claim. Thus, for the f oregoing reasons, Plaintiffs’ Motion for Partial Summary J udgment is DENIED; Plaintiffs’ Motion t o Vacate i s DENIED; and Defendant’s Motion for Summary Jud gment is GRANTED in part, DENIED in part. IT IS SO ORDER ED. /s/ Calvin Sc ott Judge Calvin L. Scott, Jr. 45 Id. at 445–46 (internal citations omitted). 46 Compl. ¶ 40. 47 See Hsu v. State Farm Fire & Casualty Co., 2026 WL 165493, a t *1 (Del. Super. Ja n. 20, 2026).