Nationwide Mutual Insurance Company v. Baptist et al

Filing 51

MEMORANDUM OPINION re 50 Order on Motion for Summary Judgment. Signed by District Judge Sharion Aycock on 9/10/2013. (psk)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF MISSISSIPPI
DELTA DIVISION
NATIONWIDE MUTUAL INSURANCE COMPANY
V.

PLAINTIFF

CIVIL ACTION NO. 2:12-CV-00097-SA-JMV

FRED L. AND DEBBIE BAPTIST;
WILSHIRE CREDIT CORPORATION;
AND JOHN DOES A-C

DEFENDANTS

MEMORANDUM OPINION
Presently before the Court is Plaintiff=s Motion for Summary Judgment [40] seeking a
declaratory judgment voiding an insurance policy purchased by Fred and Debbie Baptist. After
reviewing the motion, responses, rules, and authorities, the Court finds the following:
FACTUAL AND PROCEDURAL BACKGROUND
Defendants Fred and Debbie Baptist (ABaptists@) purchased a homeowner=s policy from
Plaintiff Nationwide Mutual Insurance Company (ANationwide@) on October 20, 2006. The
policy covered the Baptists= home at 65 Bailey Road, Nesbitt, Mississippi, and the initial policy
term was for a period of one year. On November 13, 2008, The Bank of New York purchased the
Baptists= home at a foreclosure sale and thereafter attempted to remove the Baptists from the
property. The Baptists attempted to have the foreclosure set aside by filing suit in federal court
but were unsuccessful. See Baptists v. The Bank of New York Mellon, 2010 WL 1539973 (W.D.
Tenn. 2010). Despite the foreclosure, the policy was renewed four times following the expiration
of the initial term in 2007.
On December 27 and 28, 2011, the insured property suffered significant damage from fire,
and the Baptists filed a claim against their homeowner=s policy. The Baptists had previously filed
claims and received payments from Nationwide for incidents occurring on April 25, 2010 and

May 4, 2010. Nationwide brought this action on June 6, 2012 seeking a judicial determination of
the parties= rights and responsibilities with regard to the homeowner=s policy. Nationwide then
filed the present motion for summary judgment on June 7, 2013 asserting that no genuine issue of
material fact exists and that Nationwide is entitled to judgment as a matter of law.
SUMMARY JUDGMENT STANDARD
Summary judgment is warranted under Rule 56(a) of the Federal Rules of Civil Procedure
when the evidence reveals both that there is no genuine dispute regarding any material fact and that
the moving party is entitled to judgment as a matter of law. The rule Amandates the entry of
summary judgment, after adequate time for discovery and upon motion, against a party who fails
to make a showing sufficient to establish the existence of an element essential to that party's case,
and on which that party will bear the burden of proof at trial.@ Celotex Corp. v. Catrett, 477 U.S.
317, 322, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986).
The party moving for summary judgment Abears the initial responsibility of informing the
district court of the basis for its motion, and identifying those portions of [the record] which it
believes demonstrate the absence of a genuine issue of material fact .@ Id. at 323, 106 S. Ct. 2548.
The nonmoving party must then Ago beyond the pleadings@ and Adesignate >specific facts showing
that there is a genuine issue for trial.=@ Id. at 324, 106 S. Ct. 2548 (citation omitted). In reviewing
the evidence, factual controversies are to be resolved in favor of the nonmovant, Abut only when ...
both parties have submitted evidence of contradictory facts.@ Little v. Liquid Air Corp., 37 F.3d
1069, 1075 (5th Cir.1994) (en banc). When such contradictory facts exist, the Court may Anot
make credibility determinations or weigh the evidence.@ Reeves v. Sanderson Plumbing Prods.,
Inc., 530 U.S. 133, 150, 120 S. Ct. 2097, 147 L. Ed. 2d 105 (2000). However, conclusory
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allegations, speculation, unsubstantiated assertions, and legalistic arguments have never
constituted an adequate substitute for specific facts showing a genuine issue for trial. TIG Ins. Co.
v. Sedgwick James of Wash., 276 F.3d 754, 759 (5th Cir. 2002); SEC v. Recile, 10 F.3d 1093,
1097 (5th Cir.1997); Little, 37 F.3d at 1075.
ANALYSIS AND DISCUSSION
Nationwide argues that the Baptists had no insurable interest in the insured property after
the foreclosure sale and therefore the Court should allow it to void their insurance policy as against
public policy. In the alternative, Nationwide seeks relief from payment of the December 2011
claim due to the Baptists= allegedly material misrepresentation and an increased hazard following
the foreclosure. In response, the Baptists argue that they had an insurable interest at the inception
of the policy and maintained an insurable interest in the contents of the property, that there was no
increased risk or hazard to the property, and that they made no misrepresentations to Nationwide.
As the Court finds the policy at issue void due to the foreclosure of the insured property, the Court
need not address the issues of increased hazard or material misrepresentation.
It is undisputed that the Baptists lost their home, the insured property, in 2008 due to
foreclosure. As such, the Baptists ceased to have any interest in the property once it was
purchased by The Bank of New York on November 13, 2008. AAfter a foreclosure sale, the
debtor is divested of all legal and equitable interest in the foreclosed property.@ Moore v. Marathon
Asset Mgmt., LLC, 973 So. 2d 1017, 1021 (Miss. Ct. App. 2008) (internal citations omitted); Dean
v. Simpson, 235 Miss. 162, 170-71, 108 So. 2d 546, 549 (Miss. 1959) (no right of redemption
survives foreclosure of mortgage and sale of land under Mississippi law). Though the Baptists
filed suit in an attempt to have the foreclosure set aside, it is clear that they had no rights or
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interests in the property whatsoever after November 2008. Additionally, the Baptists allow that
the only insurable interest in the property during the relevant times may belong to the 2008
purchaser.1
Mississippi law requires a purchaser of property insurance to have an insurable interest in
the subject property at the time of purchase and at the time of loss. AMississippi follows the
general rule that in order to be entitled to proceeds from an insurance policy, the purchaser of the
policy must have an insurable interest in the property or life insured.@ Aetna Cas. & Sur. Co. v.
Davidson, 715 F. Supp. 775, 776 (S.D. Miss. 1989) (citing Southeastern Fid. Ins. Co. v. Gann, 340
So. 2d 429 (Miss.1976); Nat=l Life & Acc. Ins. Co. v. Ball, 157 Miss. 163, 127 So. 268 (Miss.
1930)); Rentrop v. Trustmark Nat=l Bank, 2008 WL 4371375, *2 (S.D. Miss. 2008) (citing Estate
of Murrell v. Quin, 454 So. 2d 437, 444 (Miss. 1984)). AThe reason for the rule requiring an
interest in property upon which insurance is sought is to prevent the coverage from becoming a
wagering contract contrary to public policy.@ Southeastern Fid. Ins. Co., 340 So. 2d at 434.
The Baptists argue that they had an insurable interest at the inception of the policy and that,
even if they had no insurable interest in the property itself after the foreclosure, they at all times
had an undisputed insurable interest its contents. In support of their position, they point to a
Southern District case with a similar fact scenario in which the court denied the insurer=s motion
for summary judgment because of disputed factual issues regarding contents coverage. State Farm
Fire & Cas. Co. v. Ramsey, 719 F. Supp. 1337 (S.D. Miss. 1989). As is the case here, the
defendant in State Farm had an undisputed insurable interest in the insured property at the time he
purchased the relevant homeowner=s policy but subsequently lost his interest as a result of
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A[I]t is foreseeable that the insurable interest in the home structure belonged to the 2008
purchaser (and his heirs and assigns). . . .@ Def. Resp. at 6.
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foreclosure proceedings. Id. at 1339. Like the Baptists, the defendant continued to occupy the
property despite the foreclosure until it was later destroyed by fire. Id. Despite the defendants=
initial insurable interest, the Southern District found the defendants had no insurable interest in the
property at the time of the claim and granted the insurer=s motion for summary judgment as to
coverage of the dwelling. Id. at 1341-42. However, the court found genuine issues of disputed
fact existed as to the coverage of the property=s contents and denied the motion as to that issue. Id.
at 1344. The Baptists argue that their insurable interest in the contents of the property at issue in
the case sub judice likewise prevents the Court from granting Nationwide=s motion.
Despite its similarities, the Court finds State Farm distinguishable.

In that case, the

purchase of the policy, foreclosure of the insured property, and claim for benefits all occurred
within the original policy period. Id. at 1339. While the defendants had clearly lost their insurable
interest to the dwelling, nothing had occurred to void the policy altogether or otherwise affect any
potential contents coverage. The issue here, however, is whether the Baptists had a right to renew
their homeowner=s policy after they lost ownership of the insured property. Nationwide contends
they did not and that the policy is void ab initio in its entirety for each of the renewal periods
following the foreclosure.
A[W]hen a contract is in contravention of public policy. . . . the individual interests of the
immediate parties are subordinated to the superior concern of the public in general, so that. . . .
there is nothing that the particular parties to the contract may do which will make it otherwise than
it was ab initio - void as against public policy, and therefore nonenforceable by the courts.@ Ball,
127 So. at 268 (finding a life insurance policy unenforceable despite the insurer=s collection of
premiums and knowledge of insured=s lack of insurable interest); Estate of Murrell, 454 So. 2d at
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444 (A[A]n insurable interest is not dependent upon payment of the premium.@).
The application for insurance signed by Fred Baptist states in pertinent part, AI am applying
for issuance of a policy of insurance and, at its expiration, for appropriate renewal policies issued
by Nationwide Mutual Insurance Company and/or other members of the Nationwide group of
insurance companies.@ The Baptists have failed to establish a genuine issue of material fact exists
with respect to Nationwide=s claim that they were ineligible for the renewal policies issued after
the 2008 foreclosure. Indeed, the Baptists have not submitted any evidence of facts contradicting
Nationwide=s argument. As such, the Court finds the Baptists had no insurable interest in the
subject property at the time the renewal policies were issued, the Baptists were therefore ineligible
for such renewal policies, and consequently, the renewal policies are void.
CONCLUSION
Accordingly, the Court finds Defendants have failed to establish a genuine issue of
material fact entitling them to a trial on the merits and as such, the Plaintiff=s Motion for Summary
Judgment [40] is GRANTED.2 Additionally, as the Court finds the policy at issue to be void for
the renewal periods after the 2008 foreclosure, Nationwide is entitled to recover all benefits paid
for the two undisputed claims filed during those periods.
SO ORDERED on this, the 10th day of September, 2013.
/s/ Sharion Aycock_________
U.S. DISTRICT JUDGE

2

Plaintiff failed to serve Defendant Wilshire Credit Corporation in accordance with
Federal Rule of Civil Procedure 4(m) despite two notices from the Court. As such, the Court
hereby dismisses Plaintiff=s claims against Wilshire Credit Corporation without prejudice.
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