Payton et al v. Southern Fidelity Insurance Company

Filing 61

ORDER AND REASONS DENYING 41 Motion for Partial Summary Judgment. Signed by Judge Carl Barbier on 7/31/2020. (my)

Case 2:18-cv-02365-CJB-DMD Document 61 Filed 07/31/20 Page 1 of 11

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
STEVEN PAYTON, et al

CIVIL ACTION

VERSUS

18-2365

SOUTHERN FIDELITY
INSURANCE COMPANY

SECTION: “J” (3)

ORDER & REASONS
Before the Court is a Motion for Partial Summary Judgment (Rec. Doc. 41)
filed by Plaintiffs, Dionne and Steven Payton (“Plaintiffs”), and an opposition thereto
(Rec. Doc. 48) filed by Defendant, Southern Fidelity Insurance Company
(“Southern”). 1 Having considered the motion and legal memoranda, the record, and
the applicable law, the Court finds that Plaintiffs’ motion should be DENIED.
FACTS AND PROCEDURAL BACKGROUND
This case arises out of an August 20, 2017 fire that destroyed Plaintiffs’ home
located at 3501 Red Oak Court, New Orleans, Louisiana (“the Home”). The cause of
the fire was determined to be arson. (Rec. Doc. 48-12 at 19). Plaintiffs filed the instant
lawsuit to recover insurance proceeds they believe are owed to them under the terms
of their fire insurance policy with Southern (“the Policy”). Southern has refused to
pay Plaintiffs, asserting, amongst other things, that Plaintiffs concealed material

As Plaintiffs are a married couple and aligned on every issue in this case, this Order will occasionally
refer to “Plaintiffs” in the plural, even though the actual actions described may have only been
undertaken by one member of the couple.

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information from Southern and made fraudulent misrepresentations when applying
for the Policy.
Specifically, when applying for the Policy in June of 2017, Plaintiffs were
asked if they had “ever incurred a fire or a liability loss, or in the past 36 months,
incurred more than two losses of any type?” (Rec. Doc. 48-8 at 4). Plaintiffs answered
in the negative. Additionally, Plaintiffs were asked if they “had a foreclosure,
repossession, or bankruptcy during the last 5 years?” Id. at 3. Plaintiffs answered in
the affirmative but stated the only lien, a bankruptcy, had been discharged a year
prior. As it turns out, Plaintiffs incurred a fire loss in 2009 on a previous residential
property, and the Home was subject to foreclosure proceedings in 2012. (Rec. Docs.
48-9 and 48-10).
If

Plaintiffs’

statements

constitute

intentional

concealment

or

misrepresentation, as Southern claims, then the “concealment and fraud exclusion”
(“the Exclusion”) contained in the Policy would be triggered, thereby absolving
Southern of any obligation to reimburse Plaintiffs for the loss of the Home.
On November 16, 2018, the Court stayed this case to allow the Louisiana Office
of the State Fire Marshal to complete its investigation into the fire. (Rec. Doc. 29). On
March 2, 2020, the case was reopened after the Court was notified the Fire Marshall’s
office had closed its investigation for the time being. (Rec. Doc. 33). On March 13,
2020, Plaintiffs filed the instant Motion for Partial Summary Judgment asking the
Court to find that the Exclusion does not apply in this case.

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LEGAL STANDARD
Summary judgment is appropriate when “the pleadings, the discovery and
disclosure materials on file, and any affidavits show that there is no genuine issue as
to any material fact and that the movant is entitled to judgment as a matter of law.”
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (citing Fed. R. Civ. P. 56); Little v.
Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994). When assessing whether a
dispute as to any material fact exists, a court considers “all of the evidence in the
record but refrains from making credibility determinations or weighing the evidence.”
Delta & Pine Land Co. v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 398 (5th
Cir. 2008). All reasonable inferences are drawn in favor of the nonmoving party, but
a party cannot defeat summary judgment with conclusory allegations or
unsubstantiated assertions. Little, 37 F.3d at 1075. A court ultimately must be
satisfied that “a reasonable jury could not return a verdict for the nonmoving party.”
Delta, 530 F.3d at 399.
If the dispositive issue is one on which the moving party will bear the burden
of proof at trial, the moving party “must come forward with evidence which would
entitle it to a directed verdict if the evidence went uncontroverted at trial.” Int’l
Shortstop, Inc. v. Rally’s, Inc., 939 F.2d 1257, 1264-65 (5th Cir. 1991) (internal
citations omitted). The nonmoving party can then defeat the motion by either
countering with sufficient evidence of its own, or “showing that the moving party’s
evidence is so sheer that it may not persuade the reasonable fact-finder to return a
verdict in favor of the moving party.” Id. at 1265.

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If the dispositive issue is one on which the nonmoving party will bear the
burden of proof at trial, the moving party may satisfy its burden by merely pointing
out that the evidence in the record is insufficient with respect to an essential element
of the nonmoving party’s claim. See Celotex, 477 U.S. at 325. The burden then shifts
to the nonmoving party, who must, by submitting or referring to evidence, set out
specific facts showing that a genuine issue exists. See id. at 324. The nonmovant may
not rest upon the pleadings but must identify specific facts that establish a genuine
issue for trial. See, e.g., id. at 325; Little, 37 F.3d at 1075.
DISCUSSION
Southern’s invocation of the Exclusion is an affirmative defense, and therefore
Southern

must

prove

at

trial

that

Plaintiffs

intentionally

concealed

or

misrepresented facts when they applied for the Policy. Accordingly, Plaintiffs have
met their initial burden by alleging that there is insufficient evidence in the record
with respect to their alleged fraud. Thus, the ultimate question presented by
Plaintiffs’ motion is if Southern can show there exists a genuine issue of material fact
as to whether Plaintiffs intentionally misrepresented or concealed material facts
when applying for the Policy.
Although the Exclusion is technically part of the insurance contract between
Plaintiffs and Southern, fraud and concealment exclusions in fire insurance contracts
are heavily regulated by both Louisiana statute and caselaw. See La. R.S. §
22:1311(F) and La. R.S. 22:860; Charleston v. State Farm Fire & Casualty Co., Civ.
A. No. 88-0103, 1989 WL 30244 at *1 (E.D. La. Mar. 30, 1989). It is well-settled law,

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and both parties agree, that in order for Southern to avail itself of the Exclusion and
bar Plaintiffs’ recovery, it must prove “(1) the insured made a false statement in his
application for the insurance policy, (2) the false statement was made with the intent
to deceive, and (3) the false statement materially affected the acceptance of the risk
by the insurer or the hazard assumed.” Gwin v. Liberty Mut. Ins. Co., No. 16-1222,
2017 WL 3574443, at *5 (W.D. La. Aug. 17, 2017); see also Jamshidi v. Shelter Mut.
Ins. Co., 471 So. 2d 1141, 1143 (La. App. 3rd Cir. 1985). Plaintiffs do not dispute the
presence of the third element. Therefore, the Court will focus its inquiry on whether
there is a genuine issue of material fact as to whether Plaintiffs made a false
statement, and if so, whether that false statement was made with intent to deceive.
I.

Whether Plaintiffs Made a False Statement on the Policy
Application

As discussed in the recitation of facts, it is undisputed that Plaintiffs’
application for the Policy contained false answers to two prequalification questions,
thereby concealing from Southern Plaintiffs’ 2009 fire loss and 2012 foreclosure
proceedings. Nevertheless, Plaintiffs argue that the false answers in the Policy
application cannot be imputed to them because the answers were the result of
mistakes made by Tim Biedenkopf, the insurance salesman who sold Plaintiffs the
policy. Under Louisiana law, if an agent of the insurer “by mistake, fraud, or
negligence inserts erroneous or untrue answers to the questions contained in the
application, those representations are not binding on the insured.” State Farm Mut.
Auto. Ins. Co. v. Bridges, 45,162 (La. App. 2 Cir. 5/19/10).

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Biedenkopf asked Plaintiffs the prequalification questions verbally via
telephone and then typed in their responses. (Rec. Doc. 41-15). He did not, however,
ask them verbatim. As is relevant here, instead of asking “[h]as the applicant ever
incurred a fire or liability loss or in the past 36 months incurred more than two losses
of any type,” Biednkopf asked, “[h]ave you had any past claim history?” Id. After
inputting Plaintiffs’ responses, he sent them the document to be signed electronically.
Plaintiffs contend that Biedenkopf’s failure to “read the insurance application
questions verbatim” constitutes mistake or negligence sufficient to defeat Southern’s
use of the Exclusion. (Rec. Doc. 41-1 at 11). Plaintiffs argument fails for two reasons.
First, there is a genuine issue of material fact as to whether Biedenkopf is an
agent for Southern or, in the alternative, an “insurance broker” not tied to any
particular company. “Insurance agents are persons employed by the insurance
company” whereas “[i]nsurance brokers solicit insurance from the public under no
employment from any special company, placing the insurance with any company
selected by the insured, or, failing such selection, by the broker himself.” Raymond v.
Zeringue, 422 So.2d 534, 536 (La. App. 1982). An insurer is not responsible for the
negligent acts of an independent broker in the same way it is for the actions of its
legal agent. See Manzella v. Paul Revere Life Ins. Co., 872 F. 2d 96, 98 (5th. Cir. 1989).
Here, the record shows Biedenkopf does not work for Southern. Rather, he
operates an independent agency, Biedenkopf Insurance, which has a loose affiliation
with a larger entity called The Woodlands Financial Group. (Rec. Doc. 48-18). Indeed,
Biedenkopf stated that Southern only accounts for around ten percent of his overall

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business. Id. Moreover, Steven Payton refers to Biedenkopf as his insurance agent,
having used him in 2014 to purchase an insurance policy from a different insurance
company than Southern, and further states his belief that Biedenkopf was working
for The Woodlands Financial Group at the time Plaintiffs purchased the Policy from
him. (Rec. Doc. 48-3). At a minimum, this serves as a genuine issue of material fact
as to whether Biedenkopf was Southern’s legal agent when he sold the Policy to
Plaintiffs.
Second, there is a genuine issue of material fact as to whether Biedenkopf’s
actions constituted mistake or negligence. Although Biedenkopf initially asked
Plaintiffs the prequalification questions over the phone, Plaintiffs were sent the
finalized written copy of the application to peruse and sign. “[A] a party who signs a
written instrument is presumed to know its contents and cannot avoid its obligations
by contending that he did not read it, that he did not understand it, or that the other
party failed to explain it to him.” Sacks v. Allstate Prop. & Cas. Ins. Co., No. 16-16578,
2018 WL 1409269, at *3 (E.D. La. Mar. 21, 2018). Plaintiffs’ signature
notwithstanding, Biedenkopf’s questions, while not verbatim, effectively conveyed
the gist of the prequalification questions. Plaintiffs offer no satisfying explanation as
to how the question, “have you had any past claims history,” prompted a negative
response in light of their 2009 fire loss claim. 2

In their filings, the parties briefly make similar arguments and counterarguments regarding
Plaintiffs’ failure to disclose foreclosure proceedings, i.e. Biedenkopf did not ask the question verbatim
so the false statement by Plaintiffs cannot be imputed to them. As the analysis is the exact same as
the failure to disclose the 2009 fire loss, the Court sees no need to discuss that in detail.

2

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As such, the Court finds that Southern has established the existence of genuine
issues of material fact regarding whether Plaintiffs made a false statement imputable
to them on the Policy application.
II.

Whether the False Statement Was Made with the Intent to
Deceive

Plaintiffs claim there is no evidence in the record of an intent to deceive. In
disputes such as this, the insurer is not required to provide strict proof of fraud
“because of the inherent difficulties in proving intent.” Benton v. Shelter Mut. Ins.
Co., 550 So. 2d 832, 835 (La. Ct. App. 2d Cir. 1989). Rather, intent to deceive must be
determined from the “surrounding circumstances indicating the insured’s knowledge
of the falsity of the representation made in the application and his recognition of the
materiality of the misrepresentations, or from circumstances which create a
reasonable assumption that the insured recognized the materiality.” Cousin v. Page,
372 So. 2d 1231, 1233 (La. 1979).
Typically, factual questions involving a person’s state of mind are
inappropriate for summary judgment. Int’l Shortstop, Inc., 939 F.2d at, 1266 (“When
state of mind is an essential element of the nonmoving party's claim, it is less
fashionable to grant summary judgment because a party's state of mind is inherently
a question of fact which turns on credibility.”). A fortiori, summary judgment is
particularly inappropriate when there is at least some evidence in the record of an
intent to deceive. In the case at bar, Plaintiffs’ experience applying for insurance
combined with the destruction of their previous home by fire certainly gives a fact-

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finder enough circumstantial evidence to infer that Plaintiffs intentionally failed to
disclose the 2009 fire loss.
Indeed, some courts relying on similar facts have gone as far as to render
judgment in favor of the insurer. See Davis v. State Farm Mut. Auto. Ins. Co., 415 So.
2d 501, 503 (La. Ct. App. 1st Cir. 1982) (stating, in overturning a trial court’s
judgment in favor of the insured, “[b]ecause of the fact that [the insured] had had
automobile insurance previously, he either knew or should have known of the
importance of a driving record when seeking automobile insurance.”); Watson v.
United of Omaha Life Ins. Co., 735 F. Supp. 684, 685 (M.D. La. 1990) (granting
summary judgment in favor of insurer in part because “Watson was 49 years old when
she applied for this life insurance. The record reveals that she had at least some basic
and practical experience with life insurance to so understand the significance of each
of her responses.”). The courts also considered the presence of the insured’s signature
to be a sign of an intent to deceive. See Davis, 415 So. 2d at 503; Watson, 735 F. Supp.
at 685. As previously mentioned, Plaintiffs signed the Policy application here as well.
Plaintiffs counter by pointing to Plaintiffs’ testimony in the post-fire insurance
investigation conducted by Southern in December of 2017. (Rec. Doc. 41-11). During
this investigation, Plaintiffs’ claim they were “candid and forthright” in their
testimony, and thus this proves they were candid and forthright when they applied
for the Policy in June of 2017. The Court finds a myriad of issues with Plaintiffs’
position.

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First, Plaintiffs fail to sufficiently articulate how Plaintiffs’ behavior during
the investigation, subsequent to the fire, bears in any appreciable way on the question
of whether they intentionally made false statements six months earlier when
applying for the Policy. Secondly, to the extent said behavior does make it less likely
Plaintiffs intentionally lied on their Policy application, it is simply a factor for the
jury to consider. It does not render the issue appropriate for summary judgment in
light of the countervailing evidence. Finally, Southern has provided evidence that
Plaintiffs were, in fact, not candid during the insurance investigation. On the
contrary, Plaintiffs continued to conceal material information by claiming the 2009
house fire started on a neighbor’s property and was handled through the neighbor’s
insurance. (Rec. Doc. 48-3 at 37). The record, however, reflects that the fire originated
on Plaintiffs’ property and the claim was paid out via State Farm, Plaintiffs’ insurer
at the time. (Rec. Doc. 48-9). Additional evidence suggests Plaintiffs remained less
than forthcoming about various liens on the Home that they failed to disclose on the
initial application. (Rec. Docs. 48-3 at 35, Rec. Doc. 48-10, Rec. Doc. 48-16).
As Plaintiffs bring this motion for summary judgment and not Southern, it is
not necessary for the Court to dwell on whether the evidence in the record
conclusively proves or does not prove that Plaintiffs made false statements on the
Policy application with intent to deceive. The Court does find, however, that there is
sufficient evidence in the record to establish a genuine issue of material fact on that
question.
CONCLUSION

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Accordingly,
IT IS HEREBY ORDERED that Plaintiffs’ Motion for Partial Summary
Judgment (Rec. Doc. 41) is DENIED.
New Orleans, Louisiana, this 31st day of July, 2020.

CARL J. BARBIER
UNITED STATES DISTRICT JUDGE

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