Metropolitan Casualty Insurance Company v. Goriola
Filing
53
ORDER granting 47 Motion for Summary Judgment. The Clerk of the Court is DIRECTED to enter judgment in favor of Metropolitan Casualty Insurance and against defendant and counterclaim-plaintiff Georgia Goriola. Signed by Chief Judge David R. Herndon on 12/11/2013. (kbl)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ILLINOIS
METROPOLITAN CASUALTY
INSRUANCE COMPANY,
No. 3:11-cv-00745-DRH-DGW
Plaintiff/Counterclaim-Defendant,
vs.
GEORGIA GORIOLA,
Defendant/Counterclaim-Plaintiff.
MEMORANDUM AND ORDER
HERNDON, Chief Judge:
I.
Introduction and Background
Before the Court is plaintiff and counterclaim-defendant Metropolitan
Casualty Insurance’s (“Metropolitan”) motion for summary judgment (Doc. 47).
Metropolitan argues that it is entitled to summary judgment because there are no
genuine issues of material fact as to defendant and counterclaim-plaintiff Georgia
Goriola’s (“Goriola”) material misrepresentations which defeat her homeowner’s
insurance coverage in this instance. Goriola opposes the motion (Doc. 49). For
the following reasons, the Court GRANTS Metropolitan’s motion for summary
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judgment.
Metropolitan brought this declaratory judgment action pursuant to 28 U.S.C.
§§ 2201 and 2202 against Goriola seeking declaration by this Court that it does not
owe a duty to indemnify Goriola in accordance with a homeowner’s insurance
policy issued to Goriola by Metropolitan. Metropolitan further seeks recovery of
any advance payments, the amount paid to the mortgage holder, if any, and the
amount of expenses incurred in investigation, adjustment, and evaluation of the
claim including attorney’s fees. Metropolitan generally argues that the underlying
harm to the property, a fire, was intentionally set and that even if Goriola was not
responsible for the fire, she has misrepresented the value of the home and her
personal property thereby defeating her coverage (Doc. 2).
II.
Summary Judgment
Summary judgment is proper when “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 a judgment as to a matter of law.” Fed. R. Civ. P. 56(c). A genuine
issue of material fact exists when the evidence is such that a reasonable jury could
find for the nonmovant. Buscaglia v. United States, 25 F.3d 530, 534 (7th Cir.
1994). The movant in a motion for summary judgment bears the burden of
demonstrating the absence of a genuine issue of material fact; if the party succeeds
in doing so, the burden shifts to the nonmovant to set forth specific facts showing
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that there is a genuine issue of fact for trial. Fed. R. Civ. Pro. 56(e); Celotex Corp.
V. Catrett, 477 U.S. 317, 325 (1986). In considering motions for summary
judgment, a court construes all facts and draws all inferences from the record in
favor of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255
(1986).
III.
Facts
Metropolitan issued a homeowner’s insurance policy, No. 3492236000, to
Goriola covering Goriola’s dwelling for $149,856 and her personal property for
$104,899 (Doc. 47, Ex. A). On September 24, 2010, a fire occurred at Goriola’s
residence causing damage to the dwelling and the personal property located within.
While the State Fire Marshall’s Office determined the next day that the cause of the
fire was undetermined, on September 28, 2010, private firm Pyr-tech, Inc.
concluded that the fire was intentionally set (Doc. 49, Ex. 2). At the time of the fire,
Goriola was behind on her mortgage payments (Doc. 47, Ex. B at 11:9-12).
On November 4, 2010, Goriola submitted a Sworn Statement in Proof of Loss
to Metropolitan, making a formal demand for payment under the policy and
claiming an actual cash value of the property of $110,000 and loss and damage
amounting to $89,000 (Doc. 47, Ex. E). Attached to the proof of loss, Goriola
submitted a handwritten list indicating the value of each item of personal property
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and its approximate age (Doc. 47, Ex. E at 3-7).1 At issue in Metropolitan’s motion
for summary judgment is whether the statements in the proof of loss accurately
reflect the value of the home and the personal property contained within.
There is a genuine issue of fact as to whether the proof of loss was accepted
or rejected. In his deposition, Roger Faulke, the claims adjuster, indicated that he
did not know whether the proof of loss was accepted or rejected by Metropolitan
(Doc. 49, Ex. 3 at 58:6-59:10) and, in her deposition, Vickie Nolan, also from
Metropolitan, stated that she did not think Goriola had ever submitted a complete
proof of loss statement (Doc. 47, Ex. G at 111:22-112:23). On December 30,
2010, Metropolitan sent Goriola a certified letter indicating that Metropolitan had
neither accepted nor rejected Goriola’s proof of loss (Doc. 49, Ex. 7). It again
contacted Goriola on August 12, 2011 stating it was still investigating the claim
(Doc. 49, Ex. 8).
The relevant portion of the applicable policy provision is as follows:
10.
Under GENERAL CONDITIONS:
A.
Item 2. Concealment or Fraud is deleted and replaced by:
2.
Concealment or Fraud. If any person defined as you conceals
or misrepresents any material fact or circumstance or makes
any material false statement or engages in fraudulent conduct
affecting any matter relating to this insurance or any loss for
which coverage is sought, whether before or after a loss, no
coverage is provided under this policy to any person defined as
you.
(Doc. 47, Ex. A at 46.)
1
For example Goriola’s handwritten list includes TV smoke damage 4,000.00 10 yr; sewing machine 2,000.00 15 yr;
Lamp $500.00 5[y]r etc. (Doc. 47, Ex. E at 3).
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The exact cash values of the house and Goriola’s personal property are
disputed; counsel provides the Court with several different figures and benchmarks
to review. Goriola bought the house for approximately $47,000 (Doc. 47, Ex. B at
2).
However, upon obtaining the insurance policy with Metropolitan, Goriola
reported to Metropolitan that the fair market value of the home was $135,000
(Doc.47, Ex. B at 30). She also reported different figures in her two bankruptcy
hearings. In 2007, Goriola filed for bankruptcy declaring $3,870.00 of personal
property2 and $60,000 of real property. In re Goriola, No. 07-31711-kjm (Bankr.
S.D. Ill. 2007). Her case was dismissed for failure to make the required payments,
Id. at Doc. 126, and she refiled for bankruptcy in 2009.
In re Goriola, No.
09-32341-lkg (Bankr. S.D. Ill. 2009). In that case, she claimed that she owned
$2,573 of personal property and $60,000 of real property. Id. at Doc. 1. The
second bankruptcy was also dismissed, this time because Goriola failed to pay, or
otherwise disclose, a tax refund check to the Court.
Id. at Doc. 83.
Goriola
indicates that she had two different attorneys prepare her 2007 and 2009
bankruptcy petitions and “[w]e . . . do not know the tactics or methods for valuation
used by the bankruptcy attorneys, whether certain items were left out of the
proceeding for an excusable reason, or whether any mistakes have been made in the
bankruptcies” (Doc. 49 at 5).
Approximately a year later, making less than $30,000 in total income,
Personal property indicated here and infra this paragraph represents the personal property claimed by Goriola before
the bankruptcy court potentially covered by the Metropolitan’s insurance policy. Goriola made additional claims of
personal property in her bankruptcy filings not covered including, for example, pending workers compensation cases
and her vehicles. See In Re Goriola, No. 07-31711-kjm, Doc. 1 at 10, 11.
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2
Goriola submitted the sworn statement at issue here (Doc. 47, Ex. B at 53:16-56:4).
Goriola, a 64-year old woman, stated in her deposition that she acquired the
personal property over decades and that the proof of loss represented her best
recollection (Doc. 49 at 6, Ex. 10). She acknowledged that she may have made a
mistake on her proof of loss but indicated that she did not intend to defraud
Metropolitan (Doc. 49, Ex. 9 at 164:4-8). After the fire, Metropolitan’s adjuster,
Roger Faulk, determined that the total replacement cost of Goriola’s personal
property was $34,387.91 (Doc. 49, Ex. 5). Goriola submits the report of Dan
Long, a retained expert, indicating the cost to repair and replace Goriola’s personal
property as $64,404.15 (Doc. 49, Ex. 11).
IV.
Analysis
A federal court sitting in diversity jurisdiction must attempt to determine
how the dispute before it would be resolved by the state’s highest court. State
Farm Mut. Auto Ins. Co. v. Pate, 275 F.3d 666, 669 (7th Cir. 2001). In both
Illinois state and federal court, concealment and fraud provisions are enforceable.
Trzcinski v. American Cas. Co., 953 F.2d 307, 313 (7th Cir. 1992). To rescind an
insurance policy under Illinois law for misrepresentations by the insured, the
insurer must show that the only reasonable inferences from the record are that
misrepresentations were made and that the misrepresentations were either made
with intent to deceive or materially affected the risk accepted or hazard assumed.
215 ILCS 5/154; Methodist Medical Center of Illinois v. American Medical Sec.
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Inc., 38 F.3d 316, 319 (7th Cir. 1994). An insured’s misrepresentations regarding
the value of insured property are material misrepresentations, even when the
insured does not rely on the misrepresentations. See Passero v. Allstate Ins. Co.,
554 N.E.2d 384, 387(Ill. App. Ct. 1990); Barth v. State Farm Fire & Cas. Co., 867
N.E.2d 1109, 1116 (Ill. App. Ct. 2007), aff’d, 867 N.E.2d 1109, 1116 (2008).
When an insured knowingly makes false statements in a proof of loss, the
insured’s intent to defraud will be presumed.
Trzcinski, 953 F.2d at 313.
However, “intent to defraud should not be presumed and . . . the trier of fact should
make all reasonable allowance for lack of knowledge or sound judgment or for
honest mistake on the part of the insured as well as for the tendency to believe that
which is to one’s own interest.” Id. “Ordinarily, the defense of fraud and false
swearing presents a question of fact for the jury, but it becomes a question of law
when the insured’s misrepresentations cannot be seen as innocent.” Lykos v. Am.
Home Ins. Co., 609 F.2d 314, 315 (7th Cir. 1979) (citing Folk v. National Ben
Franklin Insurance Co., 359 N.E.2d 1056, 1057 (1976)).
Both parties rely on Lykos. In that case, the Court affirmed a district court’s
grant of judgment notwithstanding the verdict where uncontradicted evidence
showed that the insured knowingly and grossly overvalued the contents of a
building that was damaged by fire. Id. at 316. Specifically, the insured did not
consult business records or merchants regarding the items, inflated their
quantities, and duplicated claims.
Id. at 315-16.
Instead of justifying the
miscalculations, the insured attempted to dismiss them as merely a starting point
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for negotiations. Id. at 316. Metropolitan asserts that Goriola’s case is similar;
Goriola grossly inflated and misrepresented her claimed losses contained in her
sworn proof of loss, in violation of her policy, beyond any reasonable explanation
(Doc. 47 at 6). Goriola, in turn, asks the Court to distinguish this case from Lykos
because Goriola’s proof of loss statement has yet to be accepted or rejected and,
unlike here, in Lykos the insureds admitted to intentionally submitting inflated
figures as a negotiating tactic (Doc. 49 at 8).
As a preliminary matter, Goriola incorrectly frames the argument.
Acceptance or rejection of the proof of loss is irrelevant.
Goriola sent to
Metropolitan a sworn, notarize statement in proof of loss thereby submitting these
representations to the insurer. Again, the insurer need not rely on the statements
for them to be material. See Passaro, 554 N.E.2d at 387; Barth, 867 N.E.2d at
1116.
Goriola then essentially urges the Court to accept her representations on the
proof of loss as the honest mistake of a senior woman. However, “an applicant’s
professed belief in the truthfulness of her answers is not sufficient to enforce the
contract if actual knowledge clearly contradicts the belief.” Conti v. Health Care
Serv. Corp., 882 N.E.2d 614, 621 (Ill. App. Ct. 2007) (citing Golden Rule Insurance
Co. v. Schwartz, 786 N.E.2d 1010, 1016 (2003)). The Court cannot overlook
Goriola’s sworn statements to the bankruptcy court.
Goriola is ultimately
responsible for them, notwithstanding representation in both proceedings.
While some discrepancy could be interpreted as unintentional, the evidence
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presented to the Court establishes that the amounts claimed by Goriola were
grossly overstated such that the Court cannot find the conduct innocent.
She
bought her home for $47,000, claimed it was worth $60,000 in the bankruptcy
proceedings, and then submitted a proof of loss for almost twice that amount
($110,000). Her representations regarding the value of her personal property are
equally egregious. In the proof of loss she submitted a number $24,595.85 greater
than what even her expert established and, to the untrained eye, the
representations are patently unreasonable given the age of some of the items. See
Tenore v. American & Foreign Ins. Co. of N.Y., 256 F.2d 791, 795 (7th Cir. 1958)
(finding fraud as a matter of law where a homeowner overvalued his gun collection
even though he used a catalog wholesale value of the new guns, when the evidence
showed that the guns were old and missing parts and the insured’s own expert
testified that the collection was worth less than half of what the insured claimed).
Therefore, while it is unusual for a court to resolve a factual dispute with
summary judgment, upon a full review of the record and “all reasonable allowance
for the possibility of innocent mistake,” the Court is compelled to find that the
claims were deliberately false. Lykos, 609 F.2d at 316. Here, as the Court in
Lykos concluded, “[t]he misrepresentations can in no way be seen as innocent and
no reasonable jury could find otherwise.” Id. The Court consequently need not
discuss Goriola’s financial troubles or the arson evidence and concludes that
Metropolitan may rescind her homeowner’s insurance policy.
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V.
Conclusion
Accordingly, the Court GRANTS plaintiff and counterclaim-defendant
Metropolitan Casualty Insurance’s motion for summary judgment (Doc. 47).
Further, the Court DIRECTS the Clerk of the Court to enter judgment in favor of
Metropolitan Casualty Insurance and against defendant and counterclaim-plaintiff
Georgia Goriola.
IT IS SO ORDERED.
Signed this 11th day of December, 2013.
David R.
Herndon
2013.12.11
04:30:59 -06'00'
Chief Judge
United States District Court
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