Nationwide Property and Casualty Company v. Hunt et al
MEMORANDUM OPINION. Signed by Magistrate Judge John E Ott on 6/13/2014. (PSM)
2014 Jun-13 AM 08:30
U.S. DISTRICT COURT
N.D. OF ALABAMA
IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ALABAMA
NATIONWIDE PROPERTY and CASUALTY )
PHILLIP HUNT and COMMUNITY,
& SOUTHERN BANK, INC. f/k/a
FIRST NATIONAL BANK OF
CASE NO.: 1:11-cv-02591-JEO
In this declaratory judgment action, Plaintiff Nationwide Property and Casualty Company
(“Nationwide”) seeks a declaratory judgment that a homeowners insurance policy it issued to
Defendant Phillip Hunt (“Hunt”) is void and provides no coverage for a fire loss suffered by
Hunt. Hunt, in turn, has filed a counterclaim against Nationwide for breach of the insurance
Before the court is Nationwide’s motion for summary judgment on both its request for
declaratory relief and Hunt’s counterclaim. (Doc. 19).1 The motion has been fully briefed and is
properly under submission before the court.2 (Docs. 19, 20, 25, 26). For the reasons stated
below, the court finds that the motion is due to be denied.
Citations to “Doc(s). __” are to the document numbers assigned by the clerk to the pleadings,
motions, and other materials in the court file, as reflected on the docket sheet.
The parties have consented to the exercise of plenary jurisdiction by a magistrate judge pursuant
to 28 U.S.C. § 636(c). (Doc. 23).
Factual Background3 and Procedural History
In 2001, Hunt purchased a homeowners insurance policy from Nationwide (the “Policy”).
(Doc. 20-1 at 3). The Policy insured the residence located at 783 County Road 50 in Fruithurst,
Alabama (the “Property”), and provided coverage for the dwelling, detached structures, and
personal property. (Doc. 19-10 at 3). As part of the Policy application process, Hunt confirmed
that he was the owner of the Property and that it was owner occupied. (Doc. 19-10 at 3). On
July 31, 2001, Hunt transferred title to the Property to his daughter via a warranty deed. (Doc. 194 at 2). He did not notify Nationwide of the transfer of title. (Doc. 20-1 at 2). Hunt continued to
live in the residence and continued to pay the insurance premiums and taxes on the Property.
(Doc. 20-1 at 2-3).
In May 2007, Hunt obtained a $170,000.00 loan from First National Bank of Georgia
(“First National”) to make improvements to the Property. (Doc. 20-1 at 3). As security for the
loan, Hunt’s daughter granted First National a mortgage on the Property. (Doc. 19-5 at 2-6).
On October 1, 2009, Hunt filed a Chapter 13 Voluntary Petition in the United States
Bankruptcy Court for the Northern District of Alabama, Case No. 1:09-bk-42917. Hunt
represented in the bankruptcy petition that he held no interest in real property and that he leased
the Property. (Doc. 19-2 at 19, 31).
On October 24, 2010, the Property and its contents were destroyed by fire. (Doc. 20-1 at
3). Hunt gave notice of the loss to Nationwide that same day. (Id.) Ten days later, on November
3, 2010, the bankruptcy trustee filed a motion to dismiss Hunt’s bankruptcy case for failure to
The facts stated in this background are for summary judgment purposes only. They may not be
the actual facts.
make the required payments under the bankruptcy plan. (Doc. 19-8). The bankruptcy court
dismissed the case on December 8, 2010. (Doc. 19-9). Hunt never amended his bankruptcy
petition to include a potential claim against Nationwide as an asset of his estate.
Hunt submitted a Proof of Loss to Nationwide on May 14, 2011. (Doc. 19-3).
Nationwide initiated this action two months later, seeking a declaration that it owed no coverage
to Hunt for the fire loss.4 (Doc. 1). Hunt answered the complaint and asserted a counterclaim
against Nationwide, alleging that Nationwide had breached the Policy by failing to reimburse
him for the fire loss. (Doc. 6). Nationwide has now moved for summary judgment in its favor,
arguing that Hunt’s counterclaim is barred by judicial estoppel and that the Policy is void.
Summary Judgment Standard
Summary judgment is appropriate when there is no genuine dispute as to any material fact
and the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(a). The party
seeking summary judgment must first identify grounds that show the absence of a genuine issue
(dispute) of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The burden then
shifts to the non-movant, who must go beyond the pleadings and present affirmative evidence
that a genuine issue (dispute) of material fact does exist. Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 257 (1986). In ruling on a motion for summary judgment, the court must draw all
reasonable inferences in the light most favorable to the non-moving party. Sims v. MVM, Inc.,
704 F.3d 1327, 1330 n.2 (11th Cir. 2013); Hill v. Wal-Mart, 510 F. App’x 810, 813 (11th Cir.
2013). The court may consider materials including depositions, documents, electronically stored
Nationwide also sued Community & Southern Bank, Inc. f/k/a First National Bank of Georgia,
seeking a declaration of its responsibilities (if any) to the bank. (Doc. 1). Following a settlement, the
bank was dismissed from this action. (Doc. 18).
information, affidavits, and declarations. FED. R. CIV. P. 56(c)(1)(A).
Is Hunt’s counterclaim barred by judicial estoppel?
The doctrine of judicial estoppel operates “ ‘to protect the integrity of the judicial
process’ by ‘prohibiting parties from deliberately changing positions according to the exigencies
of the moment.’ ” New Hampshire v. Maine, 532 U.S. 742 , 749-50 (2001) (quoting Edwards v.
Aetna Life Ins. Co., 690 F. 2d 595, 598 (6th Cir. 1982), and United States v. McCaskey, 9 F.3d
368, 378 (5th Cir. 1993)); see also Middleton v. Caterpillar Indus., Inc., 979 So. 2d 53, 59 (Ala.
2007) (quoting New Hampshire). Here, Nationwide asserts that Hunt’s counterclaim is barred by
judicial estoppel because he never identified a fire loss claim against Nationwide in his
bankruptcy filings. Nationwide argues that Hunt’s fire loss claim was an asset of his bankruptcy
estate and that his failure to disclose the claim to the bankruptcy court is “inconsistent” with the
assertion of his counterclaim here. (See Doc. 19 at 12-13).
Because this is a diversity case, “the application of the doctrine of judicial estoppel is
governed by [Alabama] state law.” Original Appalachian Artworks, Inc. v. S. Diamond Assoc.,
Inc., 44 F.3d 925, 930 (11th Cir. 1995); see also Carribean I Owners’ Assoc., Inc. v. Great Amer.
Ins. Co. of New York., 619 F. Supp. 2d 1178, 1183 (S.D. Ala. 2008) (“Because federal subject
matter jurisdiction in this case is predicated solely on diversity jurisdiction, the Court looks to
Alabama’s law of judicial estoppel.”); Sunbelt Cranes Const. and Hauling, Inc. v. Gulf Coast
Erectors, Inc., 189 F. Supp. 2d 1341, 1345 (M.D. Fla. 2002); Lane v. Wal-Mart, Inc., 172 F.3d
879 (10th Cir. 1999). The Supreme Court of Alabama has embraced the factors set forth in New
Hampshire for determining whether judicial estoppel applies:
[F]or judicial estoppel to apply (1) “a party’s later position must be ‘clearly
inconsistent’ with its earlier position”; (2) the party must have been successful in the
prior proceeding so that “judicial acceptance of an inconsistent position in a later
proceeding would create ‘the perception that either the first or second court was
misled’” (quoting Edwards v. Aetna life Ins. Co., 690 F.2d 595, 599 (6th Cir. 1982));
and (3) the party seeking to assert an inconsistent position must “derive an unfair
advantage or impose an unfair detriment on the opposing party if not estopped.”
Ex Parte First Alabama Bank, 883 So. 2d 1236, 1244-45 (Ala. 2003) (quoting New Hampshire, 532
U.S. at 750-51).5
Here, at least two of the three judicial estoppel factors are absent. First, Hunt was not
“successful” in his bankruptcy case. The court recognizes that, as a general rule, “[t]he doctrine
of judicial estoppel applies, where a debtor in bankruptcy proceedings fails to disclose any claim
that may be presented in a nonbankruptcy contest, to estop the debtor from presenting the claim.”
Luna v. Dominion Bank of Middle Tennessee, Inc., 631 So. 2d 917, 919 (Ala. 1993). Here,
however, Hunt’s fire loss claim arose on October 24, 2010, more than a year after he filed his
bankruptcy petition and just ten days before the bankruptcy trustee moved to dismiss his
The undersigned recognizes that the district courts in this circuit have not consistently followed
the rule set forth in Original Appalachian and have sometimes analyzed judicial estoppel under federal
law in diversity cases. See, e.g., Ballenger v. Sikorsky Aircraft Corp., 2011 WL 5245209, *3 (M.D. Ala.
2011) (citing federal law and declining to invoke judicial estoppel); State Farm Fire & Casualty Co. v.
Billingsley, 2010 WL 1511560, *8 (S.D. Ala. 2010) (citing federal law and finding that judicial estoppel
did not apply). For the most part, these cases do not address whether federal or state law should be
applied, but simply cite federal law. In any event, none of these cases constitute binding precedent on this
court, which will follow Original Appalachian. See Fishman & Tobin, Inc. v. Tropical Shipping & Const.
Co., Ltd., 240 F.3d 956, 965 (11th Cir. 2001) (“while the decisions of fellow judges are persuasive, they
are not binding authority”). Furthermore, because Alabama has adopted the factors set forth in New
Hampshire, the outcome in this case would be the same even if judicial estoppel were analyzed under
federal law. See Caribbean I, 619 F. Supp. 2d at 1183-84 (applying Alabama law but noting that “the
outcome in this case would be identical irrespective of whether federal or Alabama law of judicial
estoppel applied”); see also American Casualty Co. of Reading, Pennsylvania v. Skilstaf, Inc., 695 F.
Supp. 2d 1256, 1261 (M.D. Ala. 2010) (finding that judicial estoppel was inappropriate and citing both
New Hampshire and Alabama state law). Indeed, both parties have acknowledged that the outcome
should be the same regardless of whether state or federal law is applied here. (See Doc. 25 at 6; Doc. 26
bankruptcy case for failure to make his payments under his Chapter 13 plan. Hunt testified in his
affidavit in opposition to Nationwide’s motion for summary judgment that “[a]fter the motion to
dismiss [the bankruptcy case] was filed I knew the case was being dismissed so I did not ask my
attorney to amend the petition adding the potential claim against Nationwide.” (Doc. 20-1 at 4).
The trustee’s motion to dismiss was granted and the bankruptcy case was dismissed on
December 8, 2010, without a discharge of Hunt’s debts. In other words, notwithstanding Hunt’s
failure to disclose his fire loss claim, he was not “successful” in the bankruptcy because he never
received a discharge of his debts. See Martin v. Cash Express, Inc., 60 So. 2d 236, 248 (Ala.
2010) (holding that the plaintiffs were judicially estopped from pursuing a claim they had not
included in their Chapter 13 bankruptcy petition and noting that the plaintiffs had been
“successful in having the plan confirmed and their debts discharged”); Hamm v. Norfolk
Southern Railway Co., 52 So. 2d 484, 494 (Ala. 2010) (holding that the plaintiff’s claim was
barred by judicial estoppel where he had failed to identify the claim as a potential asset in his
bankruptcy proceeding and had been “successful” in receiving a no-assets discharge in the
bankruptcy); Luna, 631 So. 2d at 918 (applying judicial estoppel to bar the plaintiff’s claim
where he had been discharged from his debts in a bankruptcy proceeding without disclosing the
claim as a potential asset).
Second, because Hunt’s debts were not discharged in bankruptcy, he derived no unfair
advantage over Nationwide or any of his creditors by not disclosing his fire loss claim. Indeed, if
the court were to apply judicial estoppel to bar Hunt’s counterclaim under these circumstances,
Nationwide would be “the undeserving recipient of an unwarranted windfall, i.e., the dismissal of
[Hunt’s] potentially meritorious claim.” Middleton, 979 So. 2d at 64. “Such a result would
thwart the goals of our justice system.” Id.
For these reasons, the court finds that the doctrine of judicial estoppel is not applicable
here and that Hunt’s counterclaim against Nationwide is not barred by judicial estoppel.
Does the Policy cover Hunt’s fire loss claim?
Nationwide also argues that the Policy is void and provides no coverage for the fire loss
on the Property. Nationwide argues that the Policy is void because (1) Hunt misrepresented his
ownership of the Property, which triggered the “Concealment or Fraud” provision of the Policy,
and (2) Hunt lost any insurable interest in the Property when he transferred title to his daughter.
(Doc. 19 at 15-16). The court will address each argument in turn.
Misrepresentation/Concealment regarding Hunt’s ownership of the
The Policy contains a “Concealment or Fraud” provision that voids the policy under
certain circumstances. The “Concealment or Fraud “ provision provides:
CONCEALMENT OR FRAUD
This policy is void as to all insureds if you or any other
insured has intentionally misrepresented any material fact or
circumstance which would have caused us not to issue or
renew this policy.
This policy does not provide coverage for all insureds if you
or any other insured, either before or after a loss, has:
intentionally concealed or misrepresented any
material fact or circumstance; or
committed any fraud or made false statements relating
to such loss.
(Doc. 19-1 at 44). Nationwide argues that the provision applies here and that the Policy is void
because Hunt “intentionally misrepresented a fact, his ownership of the house, which would have
caused Nationwide to not renew the Policy had it known the truth.” (Doc. 19 at 15).
Nationwide, however, has offered no evidence that Hunt ever made such a misrepresentation,
much less that he did so intentionally.
In support of its motion for summary judgment, Nationwide submitted the affidavit of
Kirsten Clayvon, a Nationwide Personal Lines Senior Underwriter. (Doc. 19-10). In her
affidavit, Clayvon states that “[d]uring the policy application process, the insured is asked to
confirm that the insured residence is owner occupied” and that “Mr. Hunt made such a
confirmation at the time of his policy purchase in 2001.” (Doc. 19-10 at 3). The evidence is
undisputed that Hunt did, in fact, own (and reside at) the Property at that time. Significantly,
Clayvon does not state in her affidavit that Hunt ever confirmed his ownership of the Property at
any time other than when he first purchased the Policy or that Hunt was ever asked to do so
again. Consistent with Clayvon’s affidavit, Hunt does not recall “anyone from Nationwide
asking for any updates regarding the occupancy or ownership of the house” even though the
Policy was renewed several times. (Doc. 20-1 at 3). In sum, there is no evidence in the record
that Hunt made any misrepresentation to Nationwide regarding his ownership of the Property.6
Although Nationwide has framed its fraud argument in terms of misrepresentation, it
appears to the court that the issue is better framed in terms of concealment. Did Hunt’s failure to
notify Nationwide that he no longer owned the Property constitute an intentional concealment of
material fact so as to trigger the “Concealment or Fraud” provision of the Policy?
Because there is no evidence that Hunt ever misrepresented his ownership of the Property, the
court need not address whether such a misrepresentation would have been “material.”
In Alabama, the elements of fraud based on the suppression or concealment of material
facts are: “(1) a duty on the part of the defendant to disclose facts; (2) concealment or nondisclosure of material facts by the defendant; (3) defendant’s knowledge of the facts and their
materiality; (4) action by the plaintiff in reliance on the suppression; and (5) damages resulting
from the reliance action.” Sherrin v. Northwestern National Life Ins. Co., 2 F.3d 373, 378 (11th
Cir. 1993) (citing Wolff v. Allstate Life Ins. Co., 985 F.2d 1524 (11th Cir. 1993) (citing Hardy v.
Blue Cross and Blue Shield of Ala., 585 So. 2d 29, 32 (Ala. 1991)). Here, Nationwide has not
presented any documentation or other evidence suggesting that Hunt was under a duty to disclose
that he had transferred ownership of the Property to his daughter. Although Nationwide contends
that ownership of the Property was “a required condition for eligibility for the homeowners
policy” (doc. 19 at 15), that alleged condition is not stated anywhere in the Policy. In this regard,
the court would note that Hunt was the named “insured” under the Policy. (See Doc. 19-10 at
10). The Policy defines the term “insured” to mean “you,” which in turn is defined to mean “the
named insured shown in this policy who resides at the residence premises.” (Id. at 14). Hunt
satisfied this definition, which defines insured status based on residency at the premises, not
Moreover, even assuming that Hunt was under a duty to disclose that he no longer owned
the Property, there is, at a minimum, a genuine dispute as to whether that fact was material and
whether Hunt was aware of its materiality. Again, there is no provision in the Policy requiring
the insured (Hunt) to own the Property in order to remain insured, and no evidence that
Nationwide ever asked Hunt to confirm his ownership of the Property once the Policy was
issued. A trier of fact could certainly find that Hunt was not on notice of the alleged materiality
of his transfer of title to the Property to his daughter.
There also is a genuine dispute as to whether Nationwide suffered any damage as a result
of its alleged reliance on Hunt’s ownership of the Property. According to Kirsten Clayvon, if
Nationwide had been advised of the change in ownership of the Property, “immediate action
would have been taken to move this property to the correct policy form.” (Doc. 19-10 at 5).
Regardless of whether the Property had been moved to “the correct policy form” or not,
Nationwide would have been faced with a fire loss claim when the Property was destroyed by
fire. The end result for Nationwide would not have changed.
Finally, the “Concealment or Fraud” provision of the Policy requires that any
concealment of material fact be “intentional” in order for coverage to be voided. Nationwide has
offered no evidence that Hunt “intentionally” failed to disclose that he had transferred ownership
of the Property, and Hunt has affirmatively stated that he “never intended to mislead Nationwide
regarding the legal title.” (Doc. 20-1 at 3).
For all of these reasons, Nationwide has failed to meet its burden of showing the absence
of a genuine issue of material fact with respect to the application of the “Concealment or Fraud”
provision of the Policy.
Lack of Insurable Interest in the Property
Without offering any legal or other support, Nationwide asserts that the Policy is void
because Hunt lost any insurable interest in the Property when he transferred ownership to his
daughter. (Doc. 19 at 16). Alabama law supports a contrary finding.
In Alabama, “[n]o contract of insurance of property or of any interest in property ... shall
be enforceable as to the insurance except for the benefit of persons having an insurable interest as
at the time of the loss.” ALA. CODE § 27-14-4. An insurable interest is defined as “any actual,
lawful and substantial economic interest in the safety or preservation of the subject of the
insurance free from loss, destruction or pecuniary damage or impairment.” Id. As a result, “ ‘a
fee title is clearly not required of the insured, nor even a direct property interest, the test of
exposure to financial loss being all important. ... And a person who had made himself
responsible for property may insure it against loss.’ ” Hunter v. State Farm Fire & Cas. Co., 543
So. 2d 679, 681 (Ala. 1989) (quoting 4 Appleman, Insurance Law and Practice § 2123 (1969)).
Here, although Hunt transferred title to the Property to his daughter, he continued to
reside at the Property, performed all of the maintenance on the Property, and paid all of the
insurance premiums and taxes on the Property. (Doc. 20-1 at 3). He also took out a $170,000.00
loan to make improvements to the Property and was solely responsible for repaying the loan.
(Id.) When the Property and its contents were destroyed in the fire, Hunt lost “almost all of [his]
belongings.” (Id.) Under these circumstances, the evidence is sufficient to establish that Hunt
had a “substantial economic interest in the safety [and] preservation” of the Property and that he
did not lose an insurable interest in the Property when he transferred ownership to his daughter.7
Based on the foregoing, Nationwide’s motion for summary judgment (doc. 19) is due to
be DENIED. An appropriate order will be entered.
In its motion for summary judgment, Nationwide has also expressed a desire to cancel the Policy
based on the Policy’s “Cancellation During Policy Period” provision, which provides in part that
Nationwide may cancel the Policy if “the property or other interest has been transferred to another
person, unless the transfer is permissible under the terms of this policy.” (Doc. 19 at 8-9, 15-16).
Because the court has determined that summary judgment is due to be denied, the court will not address
Nationwide’s desire to cancel the Policy at this time and will defer consideration of that issue until trial.
DONE this 13th day of June, 2014.
JOHN E. OTT
Chief United States Magistrate Judge
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