Nationwide Mutual Fire Insurance Company v. Castle et al
Filing
51
MEMORANDUM OPINION & ORDER: (1) Nationwides motion for S/J, R. 46 , is GRANTED IN PART AND DENIED IN PART. (2) Nationwide is entitled to a declaration that it need not honor the insurance policy for the Beaver Valley Road property. (3) Genuine issues of material fact remain for trial as to the Main Street property. Signed by Judge Amul R. Thapar on 4/21/14.(MJY)cc: COR
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
SOUTHERN DIVISION
PIKEVILLE
NATIONWIDE MUTUAL FIRE
INSURANCE COMPANY,
)
)
)
)
)
)
)
)
)
)
Plaintiff,
v.
MATTHEW CASTLE, et al.,
Defendants.
Civil No. 13-25-ART
MEMORANDUM OPINION &
ORDER
*** *** *** ***
“[F]or mortals, living means lying.” United States v. Alvarez, 638 F.3d 666, 674–75
(9th Cir. 2011) (Kozinski, J., concurring in the denial of rehearing). Indeed, liars may even
invoke the First Amendment. United States v. Alvarez, 132 S. Ct. 2537, 2547–48 (2012).
But a constitutional right is no substitute for a clear conscience, and the First Amendment
comes in handy less frequently than one might expect. Lying can place you at odds with the
Almighty, Exodus 20:16, land you in prison, 18 U.S.C. § 1001, and even wreak havoc on
NCAA football programs, see NCAA Notice of Allegations to the President of the Ohio
State
University
at
4
(April
21,
2011),
available
at
http://i.usatoday.net/sports/college/football/2011-04-25-osu-letter.pdf (“[Jim] Tressel falsely
attested that . . . .”). Or, as Matthew Castle and his parents found out, lying can lead your
insurance company to sue you after your house burns down.
BACKGROUND
Matthew Castle purchased two home insurance policies from Nationwide Mutual Fire
Insurance Company (“Nationwide”). R. 35 at 1–2. Both homes were in Martin, Kentucky.
Id. The first policy covered a property at 181 Beaver Valley Road, and the second was for a
house at 109506 Main Street. Id. In his applications, Castle stated that the properties were
“owner occupied” and that they had not been purchased by a contract-for-deed. R. 46-2 at
40–42, 65. After Nationwide issued the policies, both properties burned to the ground. R. 35
at 1–2. Nationwide then initiated this action, seeking a declaration that it was not obliged to
pay Matthew or his parents (who also asserted an insurable interest in the properties, R. 4
¶ 3), because he lied in his applications. R. 1.
DISCUSSION
Kentucky law requires insurance applicants to be “honest and forthright in their
representations.” Progressive N. Ins. Co. v. Corder, 15 S.W.3d 381, 383 (Ky. 2000) (internal
quotation marks omitted). An insurance company need not honor an insurance policy if the
insured made a material misrepresentation in his application. Ky. Rev. Stat. § 304.14-110.
When an insurance company can prove that a policy-holder lied in his insurance application,
and that it would not have issued the policy but for the lie, then the insurer may treat the
policy as a nullity and deny the insured’s claim. Ky. Rev. Stat. § 304.14-110(3); Nationwide
Mut. Fire Ins. Co. v. Nelson, 912 F. Supp. 2d 452, 454 (E.D. Ky. 2012).
Nationwide moved for summary judgment, arguing that it would not have issued
Matthew the insurance policies but for his misrepresentations. R. 46-1 at 5–12. Summary
judgment is appropriate if there are no genuine issues of material fact and the moving party is
entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a); see also Celotex Corp. v.
2
Catrett, 477 U.S. 317, 322–23 (1986). The Court must view the evidence in the light most
favorable to the Castles and draw all reasonable inferences in their favor, because they are
the non-moving parties. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). For the
reasons explained below, Nationwide is entitled to summary judgment as to the Beaver Road
property but not the Main Street property.
I.
The Beaver Valley Road Property Was Purchased Through a Contract-forDeed, So Nationwide Is Entitled to Summary Judgment.
Nationwide is entitled to summary judgment as to the Beaver Valley Road Property
for two independent reasons: Because the Castles admitted that Matthew purchased the
property with a contract-for-deed, and because—even ignoring their admission—the Castles
have failed to show that any disputed question of material fact remains for trial.
A. The Castles Admitted that Matthew Purchased the Property with a Contractfor-Deed.
Three key facts are undisputed: (1) When Matthew applied for the policy, he certified
that the Beaver Valley Road Property was not purchased through a contract-for-deed, R. 46-2
at 40–42; (2) in fact, Matthew had purchased the property via a contract-for-deed from his
parents, see, e.g., R. 46-2 at 41; and (3) Nationwide would have refused to issue the policy
had it known the truth of the matter, R. 46-5 at 2–3. Thus, the requirements of Ky. Rev. Stat.
§ 304.14-110(3) are satisfied: Matthew lied, and but for the lie Nationwide would not have
issued the policy. Nationwide is therefore entitled to a declaration that it need not honor the
Beaver Valley Road policy.
The Castles attempt to resist this straightforward conclusion by suggesting that they
dispute whether Matthew purchased the property by a contract-for-deed. R. 47 at 5. But
Matthew and his father Anthony admitted that fact in their depositions, R. 46-2 at 41; R. 46-3
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at 34–35, and the Castles have admitted that fact at least six times in their pleadings: Twice
in their answer, R. 4 ¶¶ 2, 3, twice in their response to Nationwide’s amended petition, R. 15
¶¶ 2, 3, and they effectively admitted that fact twice more in their response to Nationwide’s
summary judgment motion, see R. 47 (failing to dispute Nationwide’s statement of facts).
For present purposes, the effective admissions in their briefing of the summary judgment
motion are the most damning. In its opening brief, Nationwide stated that Castle bought the
property with a contract-for-deed and that he lied when he denied doing so in his application.
R. 46-1 at 1–2. This Court’s previous order required the Castles to respond by identifying
any disputed facts in separately numbered paragraphs with accompanying record citations.
R. 45 at 4. The order clearly stated that the Court would treat any facts not properly disputed
as admitted for purposes of summary judgment. Id. at 5. The Castles failed to respond as
required by the Court’s order. They did not include a section of numbered paragraphs
specifically disputing Nationwide’s statement of facts. See R. 47. They have thus conceded
that the Beaver Valley Road Property was purchased through a contract-for-deed.1
B. The Castles Do Not Deny the Validity of the Contract-for-Deed.
Even if the Court were inclined to overlook the Castles’ failure to comply with the
briefing requirements, Nationwide would still prevail, because the Castles do not deny that
the property was purchased with a contract-for-deed. Nationwide carried its initial burden at
the summary judgment stage by pointing to the Castles’ previous admissions and the
undisputed fact that it would not have issued the policy had it known about the contract-fordeed. R. 46-1 at 2–5. The burden therefore shifted to the Castles to show that genuine issues
1
The Court gave the Castles’ counsel a chance to explain the failure to comply during a telephonic conference.
Counsel stated that a different attorney had prepared the response.
4
of material fact remained for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475
U.S. 574, 586 (1986).
The Castles claim that portions of Anthony’s deposition testimony create a genuine
issue of material fact regarding whether the property was purchased with a contract-for-deed.
R. 47 at 4–5. Anthony stated that he executed a separate deed granting the land to Matthew,
in addition to the contract-for-deed. R. 46-3 at 31. Anthony nevertheless admitted that
Matthew was purchasing the property from him via a contract-for-deed, and he never
suggested that the other deed somehow voided or superseded the contract-for-deed. Id. at
34–35.
Merely noting that Anthony referred to another deed cannot get the Castles to trial,
because the non-moving party must “do more than simply show that there is some
metaphysical doubt as to the material facts.” Matsushita, 475 U.S. at 574. The Castles
offered no legal argument explaining why the existence of the other deed is material or how
the possible existence of that deed bears on the validity of the contract-for-deed. See R. 47 at
4–5 (offering one paragraph of argument without citation to any legal authority). In short,
the Castles have offered no reason to doubt what Matthew and Anthony both repeatedly
admitted: That Matthew was purchasing the property from Anthony via a contract-for-deed.
Because it is undisputed that Matthew lied about that fact on his application, and that
Nationwide would not have issued the policy had it known the truth, Nationwide is entitled
to summary judgment as to the Beaver Valley Road property. See KRS § 304.14-110.
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II.
A Genuine Issue of Material Fact Precludes Summary Judgment as to the Main
Street Property.
Nationwide contends that Matthew also fibbed about whether the Main Street
Property was “owner occupied.” R. 46-1 at 11–12. Nationwide does not dispute that
Matthew owned the home, but it quarrels with whether he “occupied” it. See id. Nationwide
neither points to a contractual definition of “owner occupied” nor offers a definition of its
own. See id. Nationwide apparently believes that Matthew did not occupy the home because
he did not sleep or live there. See id. at 4–5, 11–12 (arguing that Matthew did not “occupy”
the home and noting that he did not live there or sleep there).
Nationwide’s failure to define the key term nearly dooms its argument. How can the
Court judge whether Nationwide has carried its burden of showing that no “material” facts
are in dispute when it does not know which facts matter? Insofar as Nationwide simply
assumes that the plain meaning of “occupy” required Matthew to sleep or live at the
property, the Court is unpersuaded. If sleeping and living are elements of “occupying,” then
nobody (or almost nobody) occupies office buildings, or baseball stadiums, or amusement
parks, or the other innumerable places that are packed during the day and vacant at night.
But it makes perfect sense to say that a company occupies an office building, that the Red
Sox occupy Fenway Park, and that children occupy Six Flags.
And it may similarly make sense to say that Matthew occupied the Main Street
property. Viewing the record most favorably to the Castles, the relevant facts are as follows.
Matthew acquired the property on February 28, 2013. R. 46-3 at 58. It was apparently in
poor condition. Id. at 59. Matthew immediately began to improve the property by installing
drywall and wiring. R. 46-2 at 54–55. When Matthew submitted his insurance application
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on March 7, Anthony informed a Nationwide agent that the Castles needed some time to
renovate the home before anyone could live there. R. 46-3 at 59, 106. The agent told
Anthony “that will be fine,” suggesting that the Castles’ plan comported with the terms of
Matthew’s application. Id. at 59. The property burned down on March 11. Id. at 61.
If a jury credited Anthony’s testimony, then the Nationwide agent’s approval of the
Castles’ plan could provide powerful evidence that the property was “owner occupied”
within the meaning of the application. Although parol evidence cannot contradict a written
term, evidence such as the parties’ course of performance is admissible to explain a term’s
meaning. KRS § 355.2-202(1) (permitting evidence of “course of performance” to explain a
term’s meaning); KRS § 355.1-303 (defining “course of performance” to include a situation
in which one party “with knowledge of the nature of the performance and opportunity for
objection to it, accepts the performance or acquiesces in it without objection”). Clarification
is appropriate here, because neither party has pointed the Court to a definition of “owner
occupied,” and Nationwide is not entitled to summary judgment based on the term’s ordinary
meaning.2 A genuine issue of material fact thus remains for trial.
CONCLUSION
The disposition of this motion turns largely on the parties’ respective failures to carry
certain burdens. The Castles admitted key facts by failing to follow the Court’s briefing
requirements, and they could not explain why Anthony’s deposition testimony concerning a
separate deed was relevant to whether Matthew lied about the contract-for-deed. On the
other hand, Nationwide never explained what “owner occupied” means, and it never
2
The Castles’ failure to dispute Nationwide’s statement of facts does not resolve this point, because Nationwide’s
statement does not explain what “owner occupied” means. See R. 46-1 at 4–5.
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grappled with Anthony’s testimony about his conversation with a Nationwide agent. Thus,
Nationwide is entitled to summary judgment as to the Beaver Valley Road property, but not
the Main Street property. Accordingly it is ORDERED that:
(1) Nationwide’s motion for summary judgment, R. 46, is GRANTED IN PART
AND DENIED IN PART.
(2) Nationwide is entitled to a declaration that it need not honor the insurance policy
for the Beaver Valley Road property.
(3) Genuine issues of material fact remain for trial as to the Main Street property.
This the 21st day of April, 2014.
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