Scottsdale Insurance Company, a corporation v. Prayer Tabernacle Early Church of Jesus Christ Number 1
MEMORANDUM OPINION & ORDER granting Plf's 25 Motion for Summary Judgment as set out. Signed by Judge Callie V. S. Granade on 8/2/2011. (tot)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
PRAYER TABERNACLE EARLY
CHURCH OF JESUS CHRIST
CIVIL ACTION NO. 10-0346-CG-N
MEMORANDUM OPINION AND ORDER
This matter is before the court on plaintiff’s motion for summary judgment
(Doc. 25), defendant’s response in opposition (Doc. 29), and plaintiff’s reply (Doc.
30). The court finds that Scottsdale is entitled to a declaratory judgment stating
that the policy issued by Scottsdale to defendant is void and that no coverage exists
for the supplemental Hurricane Ivan or Katrina claims submitted by defendant due
to the intentional material misrepresentations made by defendant. Therefore,
plaintiff’s motion for summary judgment is due to be granted.
This is a declaratory judgment action filed by Scottsdale Insurance Company
(“Scottsdale”) concerning a policy issued to defendant Prayer Tabernacle Early
Church of Jesus Christ Number 1, and a supplemental claim submitted by the
defendant in 2009 for losses that were incurred to commercial property as a result
of Hurricane Ivan and/or Hurricane Katrina. Plaintiff’s complaint seeks a
declaration that the policy issued to defendant is void or that no coverage exists for
any supplemental Hurricane Ivan or Katrina claims due to the defendant’s
intentional material representations. (Doc. 1). Defendant filed a counterclaim for
appointment of an umpire and continuation of the appraisal proceedings under the
insurance contract and for bad faith refusal to pay. (Doc. 10). Scottsdale moves for
summary judgment as to its claims as well as defendant’s counterclaims.
Defendant was insured by Scottsdale under consecutive policies of insurance
that provided coverage from 7/22/2003 through 7/22/2006. (Doc. 1-1). Defendant
submitted a claim for damage as a result of Hurricane Ivan on September 16, 2004,
and Scottsdale paid defendant $6,753.23 on November 6, 2004. (Doc. 25-2). On
August 29, 2005, defendant submitted a claim for damage resulting from Hurricane
Katrina and Scottsdale paid defendant $33,036.77. A separate check was issued to
defendant in the amount of $6,000 for damage to business personal property – an
organ. (Doc. 25-4). Defendant states that the funds were applied to some repairs of
the church, but defendant does not recall in which bank account the funds have
been deposited and has not provided any record, accounting, or other evidence
showing what happened to the money or what it was used for. (Doc. 25-3, pp. 2-4).
Scottsdale received a letter dated August 6, 2009, from an attorney
representing the defendant. (Doc. 25-7). The letter refers to an insurance claim and
enclosed an estimate of damages that were incurred from Hurricane Ivan. (Doc. 257, p. 2). The letter demanded “that their claim be submitted to the appraisal
provision of the insurance policy that was issued to them by Scottsdale” and
requested that Scottsdale appoint its appraiser and contact the appraiser chosen by
the defendant. (Doc. 25-7, pp. 2-3). The letter and the estimate of damages both list
the date of the loss as September 24, 2004. (Doc. 25-7, pp. 2, 4). Defendant’s
representative later testified that the date was an error and that the date should
have been September 16, 2004 – the date of Hurricane Ivan. (Doc. 25-6, pp. 10-12).
The list of damages totaled $257,404.91. (Doc. 25-7, p. 12). The estimate itself has
the date February 24, 2009. (Doc. 25-7, pp. 4-12).
Scottsdale responded with a letter dated August 13, 2009, acknowledging
receipt of the August 6 letter and stating that the letter was the first notice it
received of defendant’s claim which reportedly occurred on September 24, 2009.
(Doc. 25-8). The letter stated that appraisal was premature and that it was
necessary for the insured “to comply with their post loss obligations” and allow
Scottsdale “to complete a full investigation of the claim” before the amount of the
loss would be addressed. (Doc. 25-8, p. 2). Scottsdale’s letter went on to state that
Scottsdale reserved its rights to assert policy provisions, exclusions and conditions
during the investigation of the claim, but that the letter was not a denial of the
claim. (Doc. 25-8, pp. 2-3).
Defendant’s representative testified to the authenticity of certain receipts
that defendant submitted to support its claim, but has not provided any record of
payment. Defendant’s representative testified that it paid an invoice from Servpro
for $4,619.42. (Doc. 25-6, pp. 6, 15, 17; Doc 25-9). However, Servpro states that the
receipt is not one of its business records and that it appears to be cut from their
yellow pages ad and pasted onto another form. (Doc. 25-10, p. 2). The format is not
like what Servpro uses. (doc. 25-10, p. 2). Servpro has no record of ever doing work
for or receiving payment from defendant. (Doc. 25-10, p. 2). Defendant also
submitted an invoice for services performed by Fiberglass Unlimited for repair to
the church’s steeple. (Doc. 25-11). Fiberglass Unlimited has no record of doing any
work for defendant. (Doc. 25-12). The exemplary copies of Fiberglass Unlimited’s
invoices do not match the invoice submitted by defendant. (Doc. 25-13). The
heading and portions of one of Fiberglass Unlimited’s ads appears to match the
heading on the invoice submitted by defendant. (Doc. 25-13, p. 5).
The policy includes the following provisions:
E. Loss Conditions
The following conditions apply in addition to the Common Policy
Conditions and the Commercial Property Conditions.
If we and you disagree on the value of the property or the amount of
loss, either may make written demand for an appraisal of the loss. In
this event, each party will select a competent and impartial appraiser.
The two appraisers will select an umpire. If they cannot agree, either
may request that selection be made by a judge of a court having
jurisdiction. The appraisers will state separately the value of the
property and amount of loss. If they fail to agree, they will submit their
differences to the umpire. A decision agreed to by any two will be
binding. Each party will
a. Pay its chosen appraiser; and
b. Bear the other expenses of the appraisal and umpire equally
If there is an appraisal, we will still retain our right to deny the claim.
3. Duties In The Event of Loss Or Damage
a. You must see that the following are done in the event of loss or
damage to Covered Property:
(1) Notify the police if a law may have been broken.
(2) Give us prompt notice of the loss or damage to Covered Property.
(3) As soon as possible, give us a description of how, when and where
the loss or damage occurred.
(4) Take all reasonable steps to protect the Covered Property from
further damage, and keep a record of your expenses necessary to
protect the Covered Property, for consideration in the settlement of the
claim. This will not increase the Limit of Insurance. However, we will
not pay for any subsequent loss or damage resulting from a cause of
loss that is not a Covered Cause of Loss. Also, if feasible, set the
damaged property aside and in the best possible order for examination.
(5) At our request, give us complete inventories of the damaged and
undamaged property. Include quantities, costs, values and amount of
(6) As often as may be reasonably required, permit us to inspect the
property proving the loss or damage and examine your books and
records. Also permit us to take samples of damaged and undamaged
property for inspection, testing and analysis, and permit us to make
copies from your books and records.
(7) Send us a signed, sworn proof of loss containing the information we
request to investigate the claim. You must do this within 60 days after
our request. We will supply you with the necessary forms.
(8) Cooperate with us in the investigation or settlement of the claim.
b. We may examine any insured under oath while not in the presence
of any other insured and at such times as may be reasonably required,
about any matter relating to this insurance or the claim, including an
insured’s books and records. In the event of an examination, an
insured’s answers must be signed.
COMMERCIAL PROPERTY CONDITIONS
This Coverage Part is subject to the following conditions, the
Common Policy conditions and applicable Loss Conditions and
Additional Conditions in Commercial Property coverage Forms.
A. CONCEALMENT, MISREPRESENTATION OR FRAUD
This Coverage Part is void in any case of fraud by you as it relates to
this Coverage Part at any time. It is also void if you or any other
insured, at any time, intentionally conceal or misrepresent a material
1. This Coverage Part;
2. The Covered Property;
3. Your interest in the Covered Property; or
4. A claim under this Coverage Part.
(Doc. 1-1, pp. 32-33, 38).
A. Summary Judgment Standard
Federal Rule of Civil Procedure 56(c) provides that summary judgment shall
be granted: Aif 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 that the moving party is entitled to judgment as a
matter of law.@ The trial court=s function is not Ato weigh the evidence and
determine the truth of the matter but to determine whether there is a genuine issue
for trial.@ Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). AThe mere
existence of some evidence to support the non-moving party is not sufficient for
denial of summary judgment; there must be >sufficient evidence favoring the
nonmoving party for a jury to return a verdict for that party.=" Bailey v. Allgas, Inc.,
284 F.3d 1237, 1243 (11th Cir. 2002) (quoting Anderson, 477 U.S. at 249). "If the
evidence is merely colorable, or is not significantly probative, summary judgment
may be granted." Anderson, at 249-250. (internal citations omitted).
The basic issue before the court on a motion for summary judgment is
Awhether 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.@
See Anderson, 477 U.S. at 251-252. The moving party bears the burden of proving
that no genuine issue of material fact exists. O'Ferrell v. United States, 253 F.3d
1257, 1265 (11th Cir. 2001). In evaluating the argument of the moving party, the
court must view all evidence in the light most favorable to the non-moving party,
and resolve all reasonable doubts about the facts in its favor. Burton v. City of Belle
Glade, 178 F.3d 1175, 1187 (11th Cir. 1999). AIf reasonable minds could differ on
the inferences arising from undisputed facts, then a court should deny summary
judgment.@ Miranda v. B&B Cash Grocery Store, Inc., 975 F.2d 1518, 1534 (11th
Cir. 1992) (citing Mercantile Bank & Trust v. Fidelity & Deposit Co., 750 F.2d 838,
841 (11th Cir. 1985)).
Once the movant satisfies his initial burden under Rule 56(c), the non-moving
party "must make a sufficient showing to establish the existence of each essential
element to that party's case, and on which that party will bear the burden of proof at
trial." Howard v. BP Oil Company, 32 F.3d 520, 524 (11th Cir. 1994)(citing Celotex
Corp. v. Catrett, 477 U.S. 317, 324 (1986)). Otherwise stated, the non-movant must
Ademonstrate that there is indeed a material issue of fact that precludes summary
judgment.@ See Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir. 1991). The
non-moving party Amay not rest on the mere allegations or denials of the [non-moving]
party=s pleading, but .... must set forth specific facts showing that there is a genuine
issue for trial.@ Fed. R. Civ. P. 56(e) AA mere >scintilla= of evidence supporting the
[non-moving] party=s position will not suffice; there must be enough of a showing that
the jury could reasonably find for that party.@ Walker v. Darby, 911 F.2d 1573, 1577
(11th Cir. 1990) (citation omitted). A[T]he nonmoving party may avail itself of all facts
and justifiable inferences in the record taken as a whole.@ Tipton v. Bergrohr GMBH8
Siegen, 965 F.2d 994, 998 (11th Cir. 1992). AWhere the record taken as a whole could
not lead a rational trier of fact to find for the non-moving party, there is no genuine
issue for trial.@ Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574
at 587 (1986) (internal quotation and citation omitted).
B. Plaintiff’s Claims
Plaintiff’s complaint seeks a declaration that the policy issued to defendant is
void or that no coverage exists for any supplemental Hurricane Ivan or Katrina claims
due to the defendant’s intentional material representations. Scottsdale has offered
evidence that indicates that defendant has misrepresented some of its claimed losses.
Defendant submitted to Scottsdale copies of invoices for repairs it alleges it paid, but
has been unable to produce any record of having actually paid the invoices or showing
that the work was done. Although defendant’s representative testified to the
authenticity of the invoices, Servpro and Fiberglass Unlimited show no record of doing
any work for defendant. Additionally, the invoices do not look like the invoices these
two companies use. In fact, a comparison of the yellow page ads for both these
companies appear to match exactly the heading portion of the invoices submitted as if
they were cut out and pasted onto an invoice form and copied. The evidence clearly
indicates that these invoices were made up or altered and although defendant denied
such allegations in its answer, it has offered no evidence or even argument to dispute
these allegations. “In opposing a motion for summary judgment, a ‘party may not rely
on his pleadings to avoid judgment against him.’” Resolution Trust Corp. v. Dunmar
Corp., 43 F.3d 587, 592 (11th Cir. 1995), cert. denied sub nom., Jones v. Resolution
Trust Corp., 516 U.S. 817 (1995)(citing Ryan v. Int’l Union of Operating Eng’rs., Local
675, 794 F.2d 641, 643 (11th Cir. 1986)). Moreover, “[t]here is no burden upon the
district court to distill every potential argument that could be made based upon the
materials before it on summary judgment. Rather, the onus is upon the parties to
formulate arguments; grounds alleged in the complaint but not relied upon in
summary judgment are deemed abandoned.” Id. at 599 (citations omitted).
The policy clearly states that commercial property coverage is void if defendant
intentionally conceals or misrepresents a material fact concerning a claim. Whether
defendant incurred the losses it claims in the amounts claimed are clearly material
facts concerning the claim. Accordingly, the court finds that the commercial property
coverage is void.
Defendant argues that Scottsdale breached the contractual obligations by
failing to name its appraiser in response to defendant’s demand for appraisal. As
such, defendant argues that Scottsdale can no longer seek relief or assert the terms of
the policy as a defense. However, under the circumstances, Scottsdale was clearly
within its rights to investigate the claim before proceeding with the appraisal process.
Under Alabama law, “the insured… bears the burden of establishing coverage by
demonstrating that a claim falls within the insurance policy.” Assurance Co. of Am. v.
Admiral Ins. Co., 2011 WL 1897589, at *3 (S.D. Ala. May 18, 2011). Defendant seems
to believe that because Scottsdale found that defendant had coverage in 2004 and
2005 for the original claims submitted it cannot deny coverage for any additional
claims submitted four years later. Scottsdale still has the right under the policy to
require defendants to comply with their post loss duties for each claim, including
prompt notice of the loss; providing a description of how, when, and where the loss
occurred; and permitting Scottsdale to examine defendant’s books and records.
Defendant did not comply with all of its duties and defendant has not pointed to
anything in the policy that would require Scottsdale to name an appraiser before it
completes its investigation of the claim. Scottsdale’s actions or inactions did not
breach the contract of insurance. Accordingly, the court finds that Scottsdale is
entitled to a declaratory judgment stating that the policy issued by Scottsdale
Insurance Company to defendant is void and that no coverage exists for the
supplemental Hurricane Ivan or Katrina claims submitted by defendant due to the
intentional material misrepresentations made by defendant.
C. Defendant’s Counterclaims
Defendant filed a counterclaim for appointment of an umpire and continuation
of the appraisal proceedings under the insurance contract and for bad faith refusal to
pay. As discussed above with regard to defendant’s claims, defendant has failed to
establish that Scottsdale was required to begin the appraisal proceedings under the
contract and has failed to show that its supplemental claim is covered under the
circumstances. Accordingly, defendant’s counterclaims also fail. See Mitchell v. State
Farm Fire & Cas. Co., 642 So.2d 462, 466-67 (Ala. 1994)(noting that absent
contractual liability, an insured’s bad faith claim fails as a matter of law); State Farm
Fire & Cas. Co. v. Slade, 747 So.2d 293, 317 (Ala. 1999)(recognizing that liability for
bad faith is limited “to those instances in which the insured’s losses [are] covered
under the policy”).
For the reasons stated above, plaintiff’s motion for summary judgment (Doc. 25)
is hereby GRANTED.
DONE and ORDERED this 2nd day of August, 2011.
/s/ Callie V. S. Granade
UNITED STATES DISTRICT JUDGE
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