Payton et al v. Southern Fidelity Insurance Company
Filing
88
ORDER AND REASONS granting 65 Motion for Summary Judgment filed by Defendant Southern Fidelity Insurance Company. Plaintiffs' claims are DISMISSED WITH PREJUDICE. Signed by Judge Carl Barbier on 7/20/21. (cg)
Case 2:18-cv-02365-CJB-DMD Document 88 Filed 07/20/21 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 Summary Judgment (Rec. Doc. 65) filed by
Defendant Southern Fidelity Insurance Company (“Southern”). Plaintiffs1 Dionne
and Steven Payton oppose the motion (Rec. Doc. 67), Southern filed a reply (Rec. Doc.
74), and the parties filed supplemental memoranda (Rec. Docs. 81, 84). Having
considered the motion and memoranda, the record, and the applicable law, the Court
finds that Southern’s motion should be GRANTED.
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.2 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,
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.
2 (Rec. Doc. 65-14, at 7).
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Case 2:18-cv-02365-CJB-DMD Document 88 Filed 07/20/21 Page 2 of 11
asserting, inter alia, that Plaintiffs concealed material information from Southern
and made fraudulent misrepresentations when applying for the Policy.
Specifically, when applying for the Policy in June 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?”3 Plaintiffs answered in the negative. Additionally,
Plaintiffs were asked if they “had a foreclosure, repossession, or bankruptcy during
the last 5 years?”4 Plaintiffs answered in the affirmative but stated only “discharged
1 year ago.”5 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 October
2012 and January 2013.6
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.7 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.8 Plaintiffs then moved for partial
summary judgment, arguing that the Exclusion did not apply here.9 The Court denied
(Rec. Doc. 65-10, at 6).
Id. at 5.
5 Id.
6 (Rec. Docs. 65-18, 65-21).
7 (Rec. Doc. 29).
8 (Rec. Doc. 33).
9 (Rec. Doc. 41).
3
4
2
Case 2:18-cv-02365-CJB-DMD Document 88 Filed 07/20/21 Page 3 of 11
Plaintiffs’ motion, finding that genuine disputes of material fact existed as to whether
Plaintiffs made a false statement on the Policy application and whether the
statements were made with the intent to deceive Southern.10 Southern now seeks
summary judgment, contending that the Exclusion bars Plaintiffs’ claims. In the
alternative, Southern asserts there is no evidence that its denial of Plaintiffs’
insurance claim was arbitrary, capricious, or without probable cause, and therefore
Plaintiffs’ claims for damages, statutory penalties, and attorney’s fees should be
dismissed.
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
10
(Rec. Doc. 61).
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Case 2:18-cv-02365-CJB-DMD Document 88 Filed 07/20/21 Page 4 of 11
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
quotation marks and citation 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 factfinder to return a verdict in favor of the moving party.” Id. at 1265.
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. Because the Court previously
denied Plaintiffs’ motion for summary judgment on this issue, finding that Southern
had submitted sufficient evidence to create genuine fact issues, the question before
the Court is whether Plaintiffs have submitted sufficient evidence to counter
Southern’s evidence and resist summary judgment.
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. 22:860,
1311(F); Charleston v. State Farm Fire & Cas. Co., No. 88-0103, 1989 WL 30244, at
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*1 (E.D. La. Mar. 30, 1989). It is well-settled law 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. 3d Cir. 1985).
Plaintiffs do not contest the third element.11 Therefore, the Court considers the first
and second elements in turn.
I.
WHETHER PLAINTIFFS MADE
APPLICATION
A
FALSE STATEMENT
ON THE
POLICY
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 persist with their argument 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
Southern has easily satisfied its burden for the third element. “A statement is material if it is of
such a nature that, had it been true, the insurer either would not have contracted, or would have
contracted only at a higher premium rate.” Willis v. Safeway Ins. Co. of La., 42,665 (La. App. 2d Cir.
10/24/07), 968 So.2d 346, 350. Shelley Roberts, a litigation specialist for Southern, declared that
“Southern would not have issued the Policy if Steven Payton and Dionne Payton had provided accurate
information in the Payton Southern Policy Application.” (Rec. Doc. 65-8, at 1).
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Case 2:18-cv-02365-CJB-DMD Document 88 Filed 07/20/21 Page 6 of 11
in the application, those representations are not binding on the insured.” State Farm
Mut. Auto. Ins. Co. v. Bridges, 45,162 (La. App. 2d Cir. 5/19/10), 36 So.3d 1142, 1147.
Plaintiffs fail to substantiate their claim that Biedenkopf was an agent of
Southern with any evidence. Instead, they merely claim that the issue is “disputed,”
referring to the Court’s prior order denying their motion for partial summary
judgment, which found that Southern had raised a genuine issue of material fact as
to whether Biedenkopf was its agent. (Rec. Doc. 67, at 10). Plaintiffs misconstrue
their burden here. Because Southern has presented evidence that Biedenkopf was
not their agent,12 Plaintiffs must rebut that with evidence of their own (or show that
it was so flimsy a reasonable juror would not be persuaded). See Int’l Shortstop, 939
F.2d at 1265. They have not done so, nor have they argued that mistake, fraud, or
negligence caused Biedenkopf to insert incorrect answers.
Plaintiffs next argue that the application questions were ambiguous because
the questions were “compound” and certain terms were not defined and therefore
should be strictly construed against Southern. This argument is unavailing because
Plaintiffs fail to identify which terms are susceptible of multiple meanings and what
those alternative definitions are. See, e.g., Guidry v. Am. Public Life Ins. Co., 512 F.3d
177, 181 (5th Cir. 2007) (“A contract is ambiguous . . . when it is uncertain as to the
parties’ intentions and susceptible to more than one reasonable meaning under the
“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 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).” (Rec. Doc. 61, at 6-7).
12
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Case 2:18-cv-02365-CJB-DMD Document 88 Filed 07/20/21 Page 7 of 11
circumstances and after applying established rules of construction.” (internal
quotation marks and citation omitted)). Plaintiffs have failed to establish that the
application was ambiguous. Moreover, Biedenkopf did not ask the questions
verbatim; the question he actually asked Plaintiffs, “have you had any claim history,”
(Rec. Doc. 65-30, at 46, 66), was broader than the question asked on the application
(and presumably clearer, since it is not “compound”), and Plaintiffs offer no
explanation for why they omitted their 2009 fire loss in response to this question.13
Further, Plaintiffs fail to address the fact that, after Biedenkopf entered
Plaintiffs’ responses on the application, he sent it to them to review and sign, and
they signed the application and returned it to him without requesting any changes.
(Rec. Doc. 65-30, at 70-73). “[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.”
Aguillard v. Auction Mgmt. Corp., 04-2804 (La. 6/29/05), 908 So.2d 1, 17. Accordingly,
Southern has demonstrated that Plaintiffs made false statements in their application
for insurance.
Plaintiffs assert that their misleading testimony regarding the 2009 fire loss (that it started at their
neighbor’s house and was resolved by their neighbor’s insurance company) was due to their
recollections being inaccurate, given that approximately 8 years had passed since those events. In
addition to failing to substantiate this argument with evidence, as opposed to mere argument of
counsel, they do not argue that their inaccurate recollections caused them to make false statements
on the insurance application.
13
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II.
WHETHER THE FALSE STATEMENTS WERE MADE WITH THE 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. App. 2d Cir. 1989). Rather, intent to deceive may 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, 939 F.2d at 1265 (“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.”). However, summary judgment may be appropriate
“if the nonmoving party rests merely upon conclusory allegations, improbable
inferences, and unsupported speculation.” Id. at 1266 (internal quotation marks and
citation omitted).
Here,
the
circumstances
suggest
that
Plaintiffs
knew
that
their
representations of no prior fire losses or foreclosures were false and material. As a
result of their 2009 fire loss claim, Plaintiffs’ previous insurer, State Farm, paid them
over $220,000. (Rec. Doc. 65-21). In 2011, Plaintiffs obtained a mortgage for the Home
from Sun Finance Company, LLC for $29,749.33. (Rec. Doc. 65-19). This mortgage
8
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was foreclosed upon in October 2012 and January 2013. (Rec. Doc. 65-18). In August
2014, Plaintiffs took out a second mortgage on the Home from William Vincent for
$150,000 to pay off the Sun Finance mortgage and other debts and to fund repairs.
(Rec. Doc. 65-5, at 28, 46). Plaintiffs offer no explanation for why they would believe
their representations of no prior fire losses and no foreclosures within the previous
five years were true in light of these experiences.
Additionally, Plaintiffs’ prior experience applying for homeowner’s insurance
suggests they recognized the materiality of their answers. In Davis v. State Farm
Mutual Automobile Insurance Co., the trial court found that the insurer had not
shown that the insured knew the materiality of his driving record because it had not
shown that the insured had a previous policy cancelled or a previous application
denied. 415 So.2d 501, 504 (La. App. 1st Cir. 1982). The court of appeal reversed,
holding that such strict proof was not required to show an insured’s awareness of
materiality. Id. Instead, the court reasoned that “[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.” Id.
at 503-04. Similarly, in Watson v. United of Omaha Life Insurance Co., the court
granted summary judgment to the insurer, reasoning that the insured recognized the
materiality of her answers because she “was 49 years old when she applied for this
life insurance” and “had at least some basic and practical experience with life
insurance to so understand the significance of each of her responses.” 735 F. Supp.
684, 686 (M.D. La. 1990).
9
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Here, the record reflects that Plaintiffs previously applied for homeowner’s
insurance on at least three occasions. First, Plaintiffs at some point applied for the
State Farm policy that covered their 2009 fire loss. (See Rec. Doc. 65-7). Second, in
October 2014, Plaintiffs applied for insurance for the Home from Louisiana Citizens
Property Insurance Corporation. (Rec. Doc. 65-29, at 2-8). Third, in the October 2014
application, Plaintiffs admitted that they had previously been declined coverage by
at least one carrier on the voluntary market. Id. at 3. As Southern points out, this
last fact satisfies the strict standard for materiality used by the trial court in Davis
that was rejected by the court of appeal in favor of a broader standard. See 415 So.2d
at 504. This circumstantial evidence overwhelmingly indicates that Plaintiffs “knew
or should have known of the importance of” their past claims history when applying
for homeowner’s insurance. Id.
In opposition, Plaintiffs offer meager argument and no evidence: “Plaintiffs did
not intend to deceive SFIC when they submitted the subject policy application. They
attempted to answer compound, ambiguous, and off-the-cuff paraphrased questions
honestly. Moreover, it cannot be established that Plaintiffs recognized the
significance, or materiality, of any inaccuracies in their responses to the questions
asked of them without a factual inquiry and a credibility determination.” (Rec. Doc.
67, at 10-11). Argument of counsel is not evidence. See Little, 37 F.3d at 1075
(unsubstantiated assertions are insufficient to defeat summary judgment).
Additionally, they again fail to address the fact that they personally signed the
application after Biedenkopf sent it to them and therefore cannot claim that they did
10
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not understand the questions. See Aguillard, 908 So.2d at 17; see also Watson, 735 F.
Supp. at 685-86 (finding that insured’s signature on application next to certification
“strongly indicates that she realized the importance of her answers”).
Finally, to the extent Plaintiffs contend that Biedenkopf’s comment that
Southern had “loosened up their underwriting” made them believe that their claims
history was not (or no longer) material to Southern, they have presented no evidence
of such. Nor have Plaintiffs explained how it would be reasonable to infer that, upon
hearing this, they would no longer believe their claims history was material yet would
still decide to conceal their 2009 fire loss. Rather, the only reasonable inference here
is that Plaintiffs, having previously applied for homeowner’s insurance on several
occasions and been denied at least once, decided to conceal their 2009 fire loss on their
application to improve their chances of obtaining insurance. Therefore, Southern is
entitled to summary judgment.
CONCLUSION
Accordingly,
IT IS HEREBY ORDERED that Southern’s Motion for Summary Judgment
(Rec. Doc. 65) is GRANTED, and Plaintiffs’ claims are DISMISSED WITH
PREJUDICE.
New Orleans, Louisiana, this 20th day of July, 2021.
CARL J. BARBIER
UNITED STATES DISTRICT JUDGE
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