Allstate Indemnity Company v. Richey et al
MEMORANDUM OPINION re 66 Order on Motion for Summary Judgment. Signed by Senior Judge Neal B. Biggers on 9/15/2016. (llw)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF MISSISSIPPI
ALLSTATE INDEMNITY COMPANY
CIVIL ACTION NO. 1:15CV00073-NBB-DAS
TERRY W. RICHEY, II, AND
BNA BANK A/K/A
BANK OF NEW ALBANY
This cause comes before the court upon the plaintiff Allstate Indemnity Company’s
motion for summary judgment or, in the alternative, for partial summary judgment; its
supplemental motion for summary judgment; its motion to dismiss certain claims; and its motion
to strike. Upon due consideration of the motions, responses, exhibits, and supporting and
opposing authority, the court is ready to rule.
Factual and Procedural Background
Plaintiff Allstate Indemnity Company issued a “landlords package policy with builders
risk coverage” to defendant T.J. Richey for the period of October 17, 2014, to October 17, 2015.
On October 22, 2014, the property at issue, 254 County Road 1562 in Tupelo, Mississippi,
suffered a fire loss. Allstate retained EFI Global to investigate the cause of the fire which was
ultimately classified as “undetermined.”
Prior to the fire loss, Richey telephoned Brittany McGee, an agent with the Stephen Hood
Insurance Agency, to inquire about the policy for the loss property. McGee obtained some
initial information from Richey over the telephone, and the following day Richey came to
McGee’s office to finalize the application process. The information Richey provided was sent
electronically to Allstate in order for the company to determine whether it would bind coverage.
During her interview with Richey, McGee inquired as to whether the property was under
a mortgage or any liens, to which Richey answered in the negative. It is undisputed that Richey
misrepresented the lienholder information as well as certain other facts when applying for the
policy. Richey listed himself as the applicant and owner of the property in question and signed
the application as an individual, not as the representative of his LLC, C&R Holdings, which was
the true owner of the property. He further represented that he had no prior insurance loss and
had never had a policy of insurance canceled or non-renewed. It was revealed during the
investigation, however, that C&R Holdings had claimed a prior loss and had insurance canceled
Prior to making its coverage determination, Allstate requested that Richey be examined
under oath in January 2015, pursuant to the terms and conditions of the policy. Richey complied
and testified during this examination under oath that C&R Holdings, LLC, was the actual owner
of the property. He further admitted that C&R had a prior insurance loss claimed in January
2014 and had insurance canceled or non-renewed by MESA Insurance Company approximately
nine months prior to Richey’s application with Allstate.
Allstate has presented the affidavit of its representative, Tara Murnane, an underwriter
and analyst with the company, who stated that if Allstate had been apprised of the true facts
regarding the ownership of the property and other material information about the true owner,
C&R Holdings, LLC, including C&R’s loss history and prior cancellation or non-renewal of
insurance, the policy in this case would not have been issued.
Allstate ultimately denied coverage based on the foregoing misrepresentations and
advised Richey of its decision in an April 16, 2015 letter from its claim representative Wilbur
Jordan, a copy of which Allstate attached to its complaint. Allstate filed its complaint for
declaratory judgment and other relief in this court the following day. Allstate seeks a declaration
from this court that the policy is void in its entirety and that Richey has no legitimate claim to
any proceeds under the policy.
Allstate also named the Bank of New Albany (“BNA”), the apparent mortgagee of the
loss property, as a defendant and asks the court to confirm that the bank has no claim to any
proceeds under the policy. BNA was properly and timely served but did not answer or otherwise
appear to defend this action. Allstate has filed a motion for default judgment against BNA,
which the court will address separately.
Richey answered Allstate’s complaint and filed counter-claims for bad faith refusal to
pay the benefits of coverage, tortious breach of contract, and damages for pain and suffering.
Richey seeks actual and punitive damages. Allstate subsequently moved for summary judgment
on its own claims and, alternatively, for partial summary judgment as to Richey’s counterclaims. Allstate also filed a separate motion to dismiss Richey’s counter-claim for pain and
suffering after Richey submitted an answer to an interrogatory propounded by Allstate in which
he admitted he had no such claim.
Allstate also filed a supplemental motion for summary judgment based on the fact that
Richey accepted and cashed Allstate’s check for return of premium in the amount of $196.37.
Allstate asserts that Richey’s acceptance and negotiation of this check acts “as an
acknowledgment of his agreement that the policy is void and, as a result, provides no coverage
for the October 22, 2014 loss, barring any claim that could be asserted under the policy.” The
April 16, 2015 letter in which Allstate advised Richey of its denial of coverage stated, in part:
Since the policy has been determined to be void, all premiums are
being returned to you in the amount of $196.37. You are advised
that acceptance of this premium will be regarded as your
acknowledgment of your agreement that the policy is void and, as
a result, that the policy provides no coverage for the above loss
and would bar any claim you could assert under the policy.
Finally, Allstate has also moved to strike Richey’s response to Allstate’s motion for
summary judgment or, in the alternative, for partial summary judgment as untimely.
Standard of Review
“The court shall grant summary judgment if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.
R. Civ. P. 56(a). On a motion for summary judgment, the movant has the initial burden of
showing the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317,
325 (1986). If the movant makes such a showing, the burden then shifts to the non-movant to
“go beyond the pleadings and . . . designate specific facts showing that there is a genuine issue
for trial.” Id. at 324. Before finding that no genuine issue for trial exists, the court must first be
satisfied that no rational trier of fact could find for the non-movant. Matsushita Elec. Indus. Co.,
Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). “Summary judgment, although a useful
device, must be employed cautiously because it is a final adjudication on the merits.” Jackson v.
Cain, 864 F.2d 1235, 1241 (5th Cir. 1989).
In Mississippi, a material misrepresentation of fact in an insurance policy application
provides grounds to declare the policy issued in reliance thereon void ab initio and to rescind the
policy. Massachusetts Mut. Life Ins. Co. v. Nicholson, 775 F. Supp. 954 (N.D. Miss. 1991);
Nationwide Mut. Fire Ins. Co. v. Dungan, 634 F. Supp. 674, 681 (S.D. Miss. 1986). If the
insurance company provides proof that the application contains material misstatements of fact, as
here, the company does not have to prove intent to misrepresent material facts on the part of the
insured. Dungan, 634 F. Supp. at 681 (citing Dukes v. South Carolina Ins. Co., 590 F. Supp.
1166, 1169 (S.D. Miss. 1984)). A misstatement is material to the risk “if knowledge of the true
facts would have influenced a prudent insurer in determining whether to accept the risk.”
Nicholson, 775 F. Supp. at 959. “Materiality is determined by reference to the time of the
misrepresentation.” Republic Fire and Cas. Ins. Co. v. Azlin, No. 4:10-CV-037-SA-JMV, 2012
WL 4482355, at *6 (N.D. Miss. Sept. 26, 2012) (citing Edmiston v. Schellenger, 343 So. 2d 465,
467 (Miss. 1977)). “The party seeking to void the insurance contract . . . must establish the
existence of a factual misrepresentation and its materiality by clear and convincing evidence.”
Carroll v. Metropolitan Ins. and Annuity Co., 166 F.3d 802, 805 (5th Cir. 1999). “If the
applicant for insurance undertakes to make a positive statement of fact, if it be material to the
risk, such fact must be true. It is not sufficient that he believe it true, but it must be so in fact, or
the policy will be avoided.” Dungan, 634 F. Supp. at 681. Therefore, “[w]hether the
misrepresentation was intentional, negligent, or the result of mistake or oversight is of no
consequence.” Carroll, 166 F.3d at 805.
The threshold inquiry in the case sub judice is whether Allstate relied upon material but
untrue information in issuing the policy to Richey and whether the company would have issued
the policy if the accurate facts had been known. It is undisputed that Richey provided
misstatements of fact as to the ownership of the property, the loss history, and whether the
insured had a policy canceled or non-renewed. It is also undisputed that Allstate reasonably
relied upon these misstatements of fact in issuing the policy and would not have issued the
policy if the true facts had been known.
In response to the plaintiff’s motion for summary judgment, Richey states that he
believed he was signing the application on behalf of the LLC. As set forth above, under
Mississippi law it is irrelevant whether Richey’s misstatements were intentional, negligent, or
the result of mistake or oversight.
Richey also argues that Allstate denied his claim due to his undisclosed prior felony
conviction. Allstate maintains, and the record reflects, that Allstate does not take a position
regarding Richey’s felony conviction and did not base its denial of coverage on this matter.
Richey’s argument to this effect is therefore not relevant to the coverage issues presently before
In his examination under oath, Richey admitted that he does not own the loss property as
an individual and that it was in fact owned by C&R Holdings, LLC. He further admitted that
C&R Holdings, LLC, had claimed a prior loss, though he represented in his application that he
had no prior losses. He also admitted that C&R Holdings, LLC, had been canceled or nonrenewed by MESA Insurance Company prior to Richey seeking coverage with Allstate. Richey
does not dispute that he provided the inaccuracies upon which Allstate reasonably relied in
issuing the insurance policy in question. Allstate’s representative testified that Allstate would
not have issued the policy had it been apprised of the true facts regarding these matters in
Richey’s application, and Richey does not contest this assertion. The court, therefore, finds no
genuine dispute as to the materiality of Richey’s misrepresentations, as a misrepresentation is
material if it affects either the acceptance of the risk or the hazard assumed by the company.
Mattox v. Western Fidelity Ins. Co., 694 F. Supp. 210, 214 (N.D. Miss. 1988). For these reasons,
no genuine issue of material fact exists, and Allstate is entitled to judgment as a matter of law.
Richey filed counter-claims for bad faith refusal to pay the benefits of coverage, tortious
breach of contract, and pain and suffering. The court’s ruling above renders these claims and,
likewise, Allstate’s corresponding motion for partial summary judgment on these claims, moot.
Allstate also moved separately to dismiss Richey’s claim for pain and suffering based on his
admission in a propounded interrogatory that he claims no physical or emotional injury in this
case. The court would grant this motion if it were not rendered moot by the court’s ruling on the
plaintiff’s motion for summary judgment. Allstate’s supplemental motion for summary
judgment and motion to strike Richey’s response are also moot.
For the foregoing reasons, the court finds that the plaintiff’s motion for summary
judgment is well taken and should be granted. The remaining pending motions, with the
exception of Allstate’s motion for default judgment, are rendered moot by the court’s ruling
herein. The court will address the motion for default judgment separately. A separate order in
accord with this opinion shall issue this day.
This, the 15th day of September, 2016.
/s/ Neal Biggers
NEAL B. BIGGERS, JR.
UNITED STATES DISTRICT JUDGE
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