Allstate Indemnity Company v. Guy

Filing 37

OPINION. Signed by Honorable Judge Myron H. Thompson on 7/5/2012. (cc, )

IN THE DISTRICT COURT OF THE UNITED STATES FOR THE
MIDDLE DISTRICT OF ALABAMA, NORTHERN DIVISION

ALLSTATE INDEMNITY
COMPANY,

)
)
)
)
)
)
)
)
)
)

Plaintiff,
v.
DOROTHY GUY,
Defendant.

CIVIL ACTION NO.
2:11cv432-MHT
(WO)

OPINION
Plaintiff

Allstate

Indemnity

Company

seeks

a

declaratory judgment against defendant Dorothy Guy
that its insurance policy is void.
counterclaim

alleging

that

Guy has filed a

Allstate

breached

the

policy by refusing to pay a $ 217,019 claim related to
a fire at Guy’s property. This court has jurisdiction
under 28 U.S.C. § 1332 (diversity of citizenship).
Allstate

moves

for

summary

judgment

on

its

declaratory-judgment claim and Guy’s counterclaim.1
For the reasons that follow, the motion is granted.

I.

SUMMARY-JUDGMENT STANDARD

Summary judgment is appropriate “if the movant
shows that there is no genuine dispute as to any
material fact and the movant is entitled to judgment
as a matter of law.”

Fed. R. Civ. P. 56(a).

court

evidence

must

favorable
reasonable

view
to

the

the

non-moving

inferences

in

in

the

party

favor

of

light

and

draw

that

The
most
all

party.

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475
U.S. 574, 587 (1986).

1.
Guy also brought a bad-faith counterclaim.
Guy has conceded that summary judgment is appropriate
on her bad-faith counterclaim. Guy Opposition Brief
(Doc. No. 32) at 1.
2

II.

BACKGROUND

This case arises from a home fire in Andalusia,
Alabama.

In

2007,

Guy’s

brother,

purchased two adjoining homes.

Terry

Craig,

Craig subsequently

gave one of the homes to his stepson, Jeff Bullard.
In December 2008, Bullard sold that home to Guy for
$ 122,000.

At the time, Guy resided in Pensacola,

Florida. Guy claims that she purchased the property
because she had a lot of family in the Andalusia area.
Because of her absence, she asked Craig to take care
of the property; Guy provided Craig with significant
funds to pay for the home’s mortgage, insurance,
utilities, and other expenses.
On January 20, 2008, Guy and Allstate executed an
insurance

policy

on

the

property.

The

policy

indicates that Guy is the home’s sole adult occupant
and that the residence was not regularly unoccupied
during the day or evening.
30-6) at 1.

Allstate Policy (Doc. No.

Guy, however, rarely stayed at the
3

property.
times.

In 2009, she visited approximately five

And in 2010, she stayed at the home once or

twice a month.2
On December 9, 2010, Guy, Craig, and several other
family members took a vacation to Orlando, Florida.
Early

in

the

morning

on

December

11,

2010,

the

Andalusia Fire Department received a call about a fire
at the property.

Despite the fire company’s best

effots, the home was destroyed. After learning of the
fire, Guy and her family continued their vacation and
visited the Holy Lands Amusement Park. Guy arrived in
Andalusia early in the morning on December 12, 2010.
Guy promptly notified Allstate about the fire and
submitted a $ 217,019 claim.
Allstate and local authorities quickly became
suspicious about the fire’s origins. The Chief of the
Andalusia

Fire

Department–-who

had

served

for

26

2. Craig’s son sometimes stayed at the home, but
he did not reside there.
4

years–-reported that Guy’s family had experienced
similar home fires five or six times while allegedly
vacationing in Florida.

The Fire Chief was also

concerned about potential arson because Craig was an
electrician by trade.

A subsequent investigation

revealed that: (1) the fire originated in a hallway;
(2) the odor of gasoline was present; and (3) ignition
resulted from an open flame.
Suspecting arson, Allstate requested, pursuant to
a provision in the life-insurance policy, that Guy
attend an examination under oath. During the two-hour
examination, Guy became distraught and terminated the
questioning.

She also refused to bring requested

documents. This declaratory-judgment action followed.

III.

DISCUSSION

Allstate brings a declaratory judgment seeking to
void the life-insurance policy on two grounds. First,
Allstate believes that the contract is void because
5

Guy

lied

about

her

residency.

Second,

Allstate

contends that Guy’s refusal to sit for an interview is
a failure to perform under the contract.

Because

Allstate prevails on its first argument, the court
will grant the declaratory judgment and declines to
address the second issue.
Allstate contends that if it had known Guy did not
reside at the property, it would not have issued the
insurance
conditions.

policy

under

the

current

terms

and

Libby Affidavit (Doc. No. 30-18) at 2-3.

Whether a home is occupied is relevant to the insurer
for the simple “reason that [the owner] has less
incentive to care for the [unoccupied] property.”
Lexington Insurance Co. v. Wolfe, 2008 WL 5262774, *3
(S.D. Ala. Dec. 16, 2008) (Steele, J.).
As such, Allstate submits that it may void the
contract under § 27-14-7(a) of the 1975 Ala. Code,
which provides that:

6

“All statements and descriptions in
any application for an insurance
policy or annuity contract, or in
negotiations therefor, by, or in
behalf of, the insured or annuitant
shall
be
deemed
to
be
representations and not warranties.
Misrepresentations,
omissions,
concealment of facts and incorrect
statements shall not prevent a
recovery
under
the
policy
or
contract unless either:
(1) Fraudulent;
(2)
Material
either
to
the
acceptance of the risk or to the
hazard assumed by the insurer; or
(3) The insurer in good faith would
either not have issued the policy or
contract, or would not have issued a
policy or contract at the premium
rate as applied for, or would not
have issued a policy or contract in
as large an amount or would not have
provided coverage with respect to
the hazard resulting in the loss if
the true facts had been made known
to the insurer as required either by
the application for the policy or
contract or otherwise.”
It is undisputed that Guy lived in Pensacola and
she

only

visited

her

Andalusia
7

home

sporadically

throughout the year.

The simmering dispute between

the parties concerns whether the materiality of Guy’s
misrepresentation is a question that can be resolved
at summary judgment.
Guy

believes

that

summary

judgment

is

inappropriate because materiality is a jury question.
To be sure, “[u]nder Alabama law, the materiality of
a misrepresentation on an application for an insurance
policy is generally a jury question.”

Nationwide

Mutual Fire Insurance Co. v. Pabon, 903 So.2d 759
(Ala. 2004) (emphasis added).
held

that

some

“However, it has been

misrepresentations,

whether

made

intentionally or innocently, increase the risk of loss
as a matter of law and are therefore material to the
issuance of the policy.”

Id.

One of these instances

is when “it is represented that the owner occupies the
premises but in fact another, unknown to the insurer,
does so.”

Wolfe, 2008 WL 5262774, at *3.

See also

Camden Fire Insurance Ass’n v. Landrum, 156 So. 832,
8

834 (Ala. 1934) (holding that a “representation that
the dwelling is occupied by a tenant, when in fact it
is occupied by another claiming in his or her own
possessory right, hostile to any possessory right
claimed by the insured, is material, and affects the
risk of loss by an insured”).3
Guy denies that she ever stated she was the sole
occupant of the Andalusia residence.

Rather, she

asserts that either the Allstate representative failed
to

ask

this

incorrectly

question

or

recorded.

that

her
But

answer

was

“[a]bsent

misrepresentations, fraud, or other deceit by the
agent, a person able to read and write is bound by an
insurance application signed by him or her, whether or
Pabon, 903 So.2d at 767.

not he or she reads it.”

3.
The court also notes that, “[e]ven if a
misstatement is not material, the insurer may rescind
if it in good faith would not have issued the policy
or would have required a greater premium had the true
fact been known.”
Wolfe, 2008 WL 5262774, at *3
(citing 1975 Ala. Code § 27-14-8(a)(3)).
9

Guy has not alleged any misrepresentation by Allstate–nor

has

she

submitted

any

evidence

of

improper

behavior.

Because the insurance agreement clearly

states-–in

numerous

occupant

and

that

places–-that
the

property

she
is

is
not

the

sole

regularly

unoccupied during the day or night, Guy is bound by
her signature.
As such, the court holds as a matter of law that
Guy’s

misrepresentation

is

material

and

that

the

in

favor

of

insurance policy is void.4
*
An

appropriate

*

summary

*
judgment

Allstate and against Guy will be entered.
DONE, this the 5th day of July, 2012.
/s/ Myron H. Thompson
UNITED STATES DISTRICT JUDGE

4. Given the ruling on Allstate’s declaratoryjudgment claim, summary judgment is due to be granted
in Allstate’s favor on Guy’s breach-of-contract
counterclaim.