Republic Franklin Ins Co v. Quiroz
Filing
74
ORDER denying 53 plaintiff's Motion for Summary Judgment and denying 55 defendant's Motion for Summary Judgment. Please see attached Ruling & Order for details. Signed by Judge Robert N. Chatigny on 9/30/17. (Jones, P.)
UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
Republic Franklin Ins. Co.,
Plaintiff,
v.
Rafael Quiroz,
New Penn Financial, LLC
d/b/a Shellpoint Mortgage
Servicing,
Defendants.
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Case No. 3:15-cv-1102 (RNC)
RULING AND ORDER
Plaintiff Republic Franklin Insurance Company (“Republic
Franklin”) brings this diversity case seeking a declaration that
it owes no coverage to defendants Raphael Quiroz and his
mortgagee, New Penn Financial, LLC, d/b/a Shellpoint Mortgage
Servicing (“Shellpoint”), under a homeowner’s policy covering
residential property owned by Mr. Quiroz in East Hartford (“the
property”), which has been damaged by fire.
Republic Franklin
contends that the policy has been properly rescinded based on a
material misrepresentation in the policy application attributable
to either Mr. Quiros or his agent, and that language in an
endorsement to the policy is properly construed as an open
mortgage clause such that Shellpoint has no greater right to
coverage than the insured.
In response to the complaint, Mr.
Quiroz has filed counterclaims for breach of contract,
reformation and negligence.
Plaintiff and Shellpoint have moved
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for summary judgment (ECF Nos. 53, 55).
After considering the
parties’ submissions, I conclude that genuine issues of material
fact are presented with regard to whether the misrepresentation
in the policy application was knowingly made.
I also conclude
that Shellpoint has failed to demonstrate that it is entitled to
judgment as a matter of law.
Accordingly, both motions are
denied.
I.
The materials submitted by the parties establish the
following facts for purposes of deciding the motions for summary
judgment.
2010.
Mr. Quiroz bought the property some time prior to
At various times prior to 2014, he obtained homeowner’s
insurance policies for the property using Antonio Jimenez as his
insurance agent.
Mr. Jiminez used other agents who had binding
authority with insurance companies to assist him in placing
coverage for his customers.
In October 2014, Mr. Quiroz approached Mr. Jimenez about
applying for a policy for the property.
Mr. Jimenez contacted
Angel Rivera, who had an agency relationship with the plaintiff.
Mr. Jimenez prepared an application for Mr. Quiroz to obtain
coverage for the property through the plaintiff and forwarded it
to Mr. Rivera.
The application was not signed.
The insurance policy application was uploaded to the
plaintiff’s server, which checks information in an application to
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determine whether a risk meets underwriting guidelines.
The
application submitted by Mr. Jiminez on behalf of Mr. Quiroz
stated that the property was owner occupied.
In fact, Mr. Quiroz
did not reside at the property and rented the property to a
tenant.
The application made it appear that the property qualified
for homeowner’s insurance coverage as an owner-occupied residence
and plaintiff issued the policy on that basis.
Plaintiff was
unaware that the property was not owner occupied.
it would not have issued the policy.
Had it known,
After the fire loss
occurred at the property, Mr. Jiminez prevailed upon Mr. Quiroz
to sign the policy application.
Following an investigation,
plaintiff rescinded the policy based on the misrepresentation in
the application regarding owner occupancy.
II.
In Connecticut, to rescind an insurance policy on the basis
of a misrepresentation, an insurer must prove: “(1) a
misrepresentation (or untrue statement) by the plaintiff which
was (2) knowingly made and (3) material to defendant's decision
whether to insure.” Pinette v. Assurance Co. of Am., 52 F.3d 407,
409 (2d Cir. 1995) (citing State Bank & Trust Co. v. Connecticut
Gen. Life Ins. Co., 145 A. 565, 567 (Conn. 1929)).1
1
Here, all
These principles were articulated by appellate courts in life
insurance cases, see Pinette, 52 F.3d at 409, and automobile
insurance cases, see Middlesex Mut. Assur. Co. v. Walsh, 590 A.2d
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three elements are contested by Quiroz and Shellpoint.
I think
only the second is subject to a genuine dispute.
Shellpoint argues that Republic Franklin’s failure to obtain
the insured’s signature on the application before issuing
coverage precludes it from rescinding on the basis of the alleged
misrepresentation.
In the absence of a signature, Shellpoint
argues, there was no misrepresentation.
That Quiroz did not sign
the application before coverage issued might bar Republic
Franklin from claiming reliance on the form.
See 6 Couch on Ins.
§ 85:60 (“False answers stated without the insured's knowledge or
consent, in an unsigned application filled out by the insurer's
agent, do not bind the insured unless he or she is charged with
knowledge thereof.”).
In Bristol v. Comm. Union Life Ins. Co. of
America, the Connecticut Supreme Court held that an insurer could
not rescind a policy based on a misrepresentation in an
application form that was filled out by the insurer’s agent,
where the insured “never independently ratified or adopted” the
statements in the form. 560 A.2d 460, 464 (Conn. 1989).
Here, unlike in Bristol, Mr. Quiroz can be said to have made a
misrepresentation because his agent submitted the application.
957, 963 (Conn. 1991). Lower courts have applied the same
principles in cases involving other types of insurance, including
fire insurance. See Quincy Mutual Fire Ins. Co. v. Nurkovic,
2009 WL 1607735, 47 Conn. L. Rptr. 830 (Sup. Ct. Conn. 2009)
(fire insurance); Danbury Ins. Co. v. Ginnetti, No.
302CV2097(RNC), 2004 WL 2009281 (D. Conn. Aug. 5, 2004)
(homeowner’s insurance).
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It is undisputed that Mr. Quiroz was “using the services” of
Mr. Jimenez to “procure insurance” for the insured property.
Quiroz’s R. 56(a)(2) Statement ¶ A3, ECF No. 58.
Jimenez
contacted Rivera, who “had an agency relationship with” Republic
Franklin.
agent.
Id. at ¶ A10.
Under these facts, Jimenez was Quiroz’s
In Georgia Cas. & Sur. Co. v. Valley Wood, Inc., a
Georgia appellate court held that when an agent is “authorized to
procure insurance on behalf” of the insured, the insured can be
bound by misrepresentations contained in an unsigned application
form. 783 S.E.2d 441, 443 (Ga. Ct. App. 2016), reconsideration
denied (Apr. 14, 2016), cert. denied (Oct. 31, 2016).
consistent with Connecticut law.
This is
Cf. New York Life Ins. Co. v.
Rigas, 168 A. 22, 23 (Conn. 1933) (holding that, under New York
law, insured was estopped from claiming he never signed insurance
application when he accepted policy, paid premiums and
application was “attached to and made a part of the policy”).
Quiroz’s agent submitted an application on his behalf, Republic
Franklin accepted the application and Quiroz (presumably) began
paying premiums.
See Quiroz’s R. 56(a)(2) Statement ¶¶ A11, A14,
A15, ECF No. 58. Under these facts, Quiroz “independently
ratified or adopted” the application form through his agent.
III.
Because Quiroz can be said to have “made” a
misrepresentation, Republic Franklin can validly rescind on that
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basis but only if the misrepresentation was “known by the assured
[or his agent] to be untrue when made.”
Co., 52 F.3d at 691.
Middlesex Mut. Assurance
In Connecticut, “‘[i]nnocent’
misrepresentations - those made because of ignorance, mistake, or
negligence - are not sufficient grounds for rescission.” Pinette,
52 F.3d at 408 (citing Middlesex Mut. Assurance Co., 590 A.2d at
963).
An individual’s misrepresentation can be “innocent” when
he “does not know that the information he is providing is false”
or he is “justifiably unaware of the answer's falsity and had no
actual or implied knowledge of its existence.” Cont'l Cas. Co. v.
Morris I. Olmer, LLC, No. 3:08-CV-805 CFD, 2010 WL 3257673, at *4
(D. Conn. Aug. 10, 2010) (citations omitted).
Knowledge is imputed when an insured signs the application
form.
See Pinette, 52 F.3d at 410 (“[A] person may not claim
that a misrepresentation is ‘innocent’ solely because the person
failed to read the application before signing it.”).
But in this
case, the application form was not signed.
Republic Franklin’s
Rule 56(a)(2) Statement ¶ A18, ECF No. 62.
Republic Franklin
must therefore show that either Quiroz or his agent, Jimenez,
actually was aware that the information provided in the
application was untrue.2
2
The signature on an application performs two functions: (1)
affirming that the application was in fact submitted by the
applicant, and (2) affirming that the statements in the
application are accurate. Quiroz’s agency relationship with
Jimenez might satisfy (1), but (2) is not satisfied if neither of
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The parties dispute who knew what when.
Republic Franklin
contends that “Mr. Jimenez explained to Mr. Quiroz the importance
of owner occupancy on the type of insurance he could purchase”;
“Mr. Quiroz told Mr. Jimenez that [the property] was his
residence”; and “Mr. Jimenez discussed the Republic-Franklin
application with Mr. Quiroz, including that the property . . .
was owner-occupied.”
Republic Franklin’s R. 56(a)(1) Statement
¶¶ 4, 5, 12, ECF No. 53.
Quiroz contends that he told Jimenez he
did not occupy the property, he did not see the application
before the policy was issued, and he was never told or became
aware that the policy required him to reside at the property.
Quiroz’s R. 56(a)(2) Statement ¶¶ B1, B3, B5, ECF No. 58.
The
parties do not dispute whether “Jimenez forgot to have Quiroz
sign [the application] when he faxed it to Rivera” or that “[a]t
no time did Jimenez read the Homeowner Application to Quiroz
before he signed it.” Republic Franklin’s Rule 56(a)(2) Statement
¶¶ 18, 28, ECF No. 62.
Under the disputed and undisputed facts, a reasonable jury
could decide Quiroz did not make a knowing misrepresentation,
either directly or constructively through his agent.
If a jury
were to credit Jimenez, it would have to find that Quiroz
concealed the occupancy status and almost certainly did so
them knew the application included a false statement about owner
occupancy.
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knowingly.
See Jimenez Deposition 23-25, ECF No. 53-2 (stating
that he explained how “owner occupied property is quoted
differently . . . [s]everal times” over the years and discussed
what type of coverage he needed at the property before submitting
the application to Republic Franklin).
But if a jury were to
credit Quiroz and discredit Jimenez, it could conclude that
Jimenez not only “forgot” to have Quiroz sign the application but
also “forgot” certain facts related to him by Quiroz.
See Cont’l
Cas. Co., 2010 WL 3257673, at *1 (denying summary judgment when
lawyer testified he failed to disclose pending lawsuits to
malpractice insurer because he ”didn't remember them or ...
didn't think about them, not because [he] attempted to mislead”).
Jimenez stated in his deposition that Quiroz told him about his
other property, where Quiroz did reside, which Jimenez
“eventually quoted as well as a rental.”
ECF No. 53-2.
Jimenez Deposition 23,
It is possible Jimenez simply mixed-up these two
properties when he submitted the application.
Indeed, Jimenez’s
testimony regarding the apparent mix-up tends to negate any
nefarious motive on Quiroz’s part because even if he paid a
reduced rate on the property at issue here, he apparently paid a
higher rate on the other property, which is owner occupied.
Alternatively, a jury could discredit both Quiroz and Jimenez and
find that Jimenez did not ask, and Quiroz did not volunteer, that
the property was not owner occupied.
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In that case, a jury could
find that Quiroz did not make a knowing misrepresentation because
he was not aware it was a question on the form, and Jimenez did
not make a knowing misrepresentation because he filled out the
form absent-mindedly or simply assuming Quiroz lived at the
property.
In any case, I think a reasonable jury could find an
innocent misrepresentation.
IV.
A misrepresentation in an insurance application is material
“when, in the judgment of reasonably careful and intelligent
persons, it would so increase the degree or character of the risk
of the insurance as to substantially influence its issuance, or
substantially affect the rate of premium.”
Pinette, 52 F.3d at
411 (citing Davis Scofield Co. v. Agricultural Ins. Co., 145 A.
38, 40 (Conn. 1929)).
Generally, “matters of special inquiry,
such as questions requiring a ‘yes’ or ‘no’ answer, are
conclusively deemed material.”
Nw. Mut. Life Ins. Co. v. Gil,
No. CIV.A. 3:07-CV-00303, 2009 WL 276086, at *4 (D. Conn. Feb. 5,
2009), aff'd, 351 F. App'x 515 (2d Cir. 2009) (citing State Bank
& Trust Co., 145 A. at 566).
Here, the parties do not dispute
that owner occupancy status on the application form was the
subject of a “box” that “was checked indicating that the Property
was [Quiroz’s] current residence.”
56(a)(2) Statement ¶ 13, ECF No. 62.
Republic Franklin’s R.
Under the “special inquiry”
rule, this statement is material as a matter of law.
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V.
Shellpoint contends that it is entitled to coverage under
the policy, even if the policy can be rescinded as to Mr. Quiroz.
Republic Franklin has demonstrated that the policy’s mortgage
clause is “open” and, as a result, Shellpoint has no greater
right to coverage than Mr. Quiroz.
Shellpoint argues that it is
entitled to coverage in any event because it did not receive
timely notice of cancellation.
Whether Republic Franklin was
obliged to provide Shellpoint with such notice and, if so,
whether it failed to do so are matters that are not welldeveloped in the record.
Because the record is less than clear,
summary judgment will not be granted to Shellpoint.
VI.
Accordingly, the motions for summary judgment are denied.
So ordered this 30th day of September 2017.
/s/
Robert N. Chatigny
United States District Judge
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