Hayes v. Metropolitan Property & Casualty Insurance Company

Filing 117

MEMORANDUM AND ORDER - Defendant's motion to strike 113 is denied. Defendant's motion for summary judgment 103 is denied. Ordered by Senior Judge Lyle E. Strom. (KLF)

IN THE UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF NEBRASKA
ERIC D. HAYES,

)
)
Plaintiff,
)
)
v.
)
)
METROPOLITAN PROPERTY &
)
CASUALTY INSURANCE COMPANY,
)
)
Defendant.
)
______________________________)

8:14CV339

MEMORANDUM AND ORDER

This matter is before the Court on two motions filed by
the defendant, Metropolitan Property & Casualty Insurance Company
(“Met” or “defendant”).

Met moves for summary judgment (Filing

No. 103) and to strike (Filing No. 113) selected portions of the
plaintiff, Eric D. Hayes’ (“plaintiff” or “Hayes”) index of
evidence (Filing No. 110).

The summary judgment matter has been

fully briefed by the parties.

See Filing Nos. 104, 109, and 115.

Along with its motion to strike (Filing No. 113), defendant has
submitted a brief in support (Filing No. 114) and plaintiff has
filed a brief in opposition (Filing No. 116).
failed to timely file a reply brief.

Defendant has

See NECivR 7.1(c)

(providing reply briefs to be filed “within 7 days after the
opposing party files and serves the opposing brief”).
Accordingly, both these matters are ready for disposition.

After

review of the motions, the parties’ briefs, and the applicable
law, the Court finds as follows.
BACKGROUND
On October 17, 2014, plaintiff filed a complaint in the
District Court of Sarpy County, Nebraska, alleging breach of
contract and bad faith denial/investigation (Filing No. 1-1).

On

October 31, 2014, the action was removed from state court under
28 U.S.C. §§ 1441 and 1446 (Filing No. 1).

On December 24, 2014,

plaintiff filed an amended complaint (Filing No. 15).
Plaintiff’s claims arise out of a homeowners insurance policy
which was issued to plaintiff by defendant.

On January 24, 2013,

plaintiff’s residence, located at 480 South 6th Street,
Springfield, Nebraska, was destroyed by a fire (Id. at ¶ 6). At
the time of the fire, plaintiff’s residence was insured under the
policy issued by Met (Id. at ¶ 7).
On March 29, 2013, Met advised plaintiff that it would
investigate the claim arising out of the fire (Id. at ¶ 11).
Between March 29, 2013, until approximately April 17, 2014,
plaintiff claims that he fully complied with defendant’s
investigation.

See Filing No. 23 at 2, Filing No. 25.

On August

5, 2014, defendant sent what plaintiff terms as a “denial letter”
to plaintiff, cancelling the policy and enclosing a check for all
premiums paid with interest (Filing No. 15 at ¶ 67).
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Defendant

also advised plaintiff that a check would be delivered to
Springfield State Bank for payment of the balance due on the
mortgage (Id. at ¶ 68).

Defendant claims it had the right to

void the policy ab initio due to plaintiff’s “material
misrepresentations” in his policy application (Filing No. 47 at
¶¶ 33-35).

Specifically, defendant contends plaintiff’s failure

“to disclose the commercial use of the residence” (Id. at ¶ 33),
and the fact that plaintiff “was renting out the [r]esidence to
tenants,” (Filing No. 104 at 4) allowed for a proper rescission
and avoidance of the policy.
On February 20, 2015, the Court granted in part, and
denied in part, defendant’s motion to dismiss (Filing No. 27).
Applying Neb. Rev. Stat. §§ 44-357 and 44-501 “and Chapter 44 of
the Nebraska Revised Statutes as a whole,” the Court concluded
that plaintiff’s breach of contract claim was time barred under a
twelve-month limitation period (Id. at 5-7).

However, the Court

found a twelve-month limitation period inapplicable to
plaintiff’s bad faith tort claim (Id. at 7).

Thus, the Court

granted defendant’s motion to dismiss with respect to plaintiff’s
breach of contract claim but denied the motion with respect to
plaintiff’s bad faith claim (Id. at 7-8).
On March 2, 2015, plaintiff filed a notice of appeal
(Filing No. 28), a motion to stay the proceedings pending appeal
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(Filing No. 29), and a motion to extend time to file his
interlocutory appeal (Filing No. 30).

The following day, on

March 3, 2015, the Court granted plaintiff’s motion to stay the
proceedings pending his interlocutory appeal but denied
plaintiff’s motion to extend time in which to file his appeal
(Filing No. 31).

On April 21, 2015, the United States Court of

Appeals for the Eighth Circuit dismissed plaintiff’s appeal for
lack of jurisdiction (Filing No. 44).

Two days later, on April

23, 2015, defendant filed a motion to vacate the Court’s stay
(Filing No. 45).

The Court granted defendant’s motion to vacate

the stay the following day (Filing No. 46).
Defendant filed its answer on April 27, 2015 (Filing
No. 47).

On May 15, 2015, defendant filed a motion for judgment

on the pleadings (Filing No. 49), and plaintiff filed a motion to
stay the proceedings pending a request for permission to appeal
(Filing No. 51).

Plaintiff’s second motion to stay alleged that

the Eighth Circuit’s dismissal for lack of jurisdiction “was
based upon the [p]laintiff appealing the [February 20, 2015]
Memorandum and Order without any specific requisite finding [from
this Court] that the matter could be appealed.”
at 1).

(Filing No. 52

The plaintiff thus sought the Court’s “permission to

appeal to the Eighth Circuit Court of Appeals or, in the
alternative, for the Court to amend its [February 20, 2015]
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Memorandum and Order . . . to include the required permission or
statement allowing the appeal . . . .”

(Id. at 2).

On July 2, 2015, the Court denied both plaintiff’s
motion to stay and plaintiff’s motion for permission to appeal
or, in the alternative, for entry of an amended order granting
permission to appeal (Filing No. 56).

The Court specifically

stated that “the Eighth Circuit notified the plaintiff on two
occasions that the plaintiff needed to request permission to
appeal from the district court . . . plaintiff failed to file a
request for permission to appeal.

As a result, the Eighth

Circuit dismissed the plaintiff’s appeal for lack of
jurisdiction.”

(Id. at 2) (internal cites omitted).

On July 13, 2015, the Court denied defendant’s motion
for judgment on the pleadings (Filing No. 57).

On October 27,

2016, defendant filed a motion seeking an order to exclude
plaintiff’s expert’s opinions and testimony under Fed. R. Evid.
702 and Daubert (Filing No. 91).

On December 16, 2016, the Court

denied, without prejudice, defendant’s motion in limine (Filing
No. 102).
On January 20, 2017, defendant moved for summary
judgment (Filing No. 103).

The defendant asks this Court to

enter summary judgment on plaintiff’s remaining bad faith claim
arguing that “[p]laintiff has failed to offer any genuine
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evidence to overcome Met’s showing that the [p]olicy was voided
ab initio and was not cancelled.”

(Filing No. 115 at 9).

Therefore, defendant contends that “the undisputed material facts
conclusively establish [that] the [p]olicy was voided from its
inception [and therefore] no duty of good faith arose as between
the parties.”

(Id.).

On March 8, 2017, defendant moved to strike portions of
plaintiff’s index of evidence in support of his opposition to
summary judgment (Filing No. 110).

(Filing No. 113).

Defendant

requests that “paragraphs 2 and 3 of the Jolly Affidavit, along
with Exhibit “B” thereto” be stricken.

(Filing No. 114 at 3).

Defendant argues paragraph 2 and Exhibit “B” are inadmissible
under Rule 408 of the Federal Rules of Evidence (Id. at 2).
Defendant also contends that paragraph 3 “contains an improperly
supported assertion of fact concerning Exhibit ‘C’ . . . .”
(Id.).
SUMMARY JUDGMENT STANDARD
Summary judgment is only proper when the Court
determines the evidence “show[s] that there is no genuine dispute
as to any material fact and that the movant is entitled to
judgment as a matter of law.”

Fed. R. Civ. P. 56(a); Semple v.

Federal Exp. Corp., 566 F.3d 788, 791 (8th Cir. 2009) (quoting
Fed. R. Civ. P. 56(c)).

The evidence must be viewed in the light
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most favorable to the nonmoving party, giving the nonmoving party
the benefit of all reasonable inferences.

Kenney v. Swift

Transp., Inc., 347 F.3d 1041, 1044 (8th Cir. 2003).

At the

summary judgment stage, it is not the function of the Court to
“weigh the evidence and determine the truth of the matter but to
determine whether there is a genuine issue for trial.”

Anderson

v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S. Ct. 2505, 91 L.
Ed. 2d 202 (1986).
DISCUSSION
As discussed more fully below, the Court finds the
existence of genuine disputes as to material facts prevent
granting defendant’s motion for summary judgment.

In addition,

the Court finds that defendant’s motion to strike should be
denied.
I. Defendant’s Motion to Strike
Defendant moves to strike paragraphs 2 and 3 of the
Jolly Affidavit and Exhibit B attached thereto (Filing No. 113).
Defendant argues that Federal Rule of Evidence 408 precludes the
admissibility of paragraph 2 and Exhibit B (Filing No. 114 at 2).
Defendant also argues that paragraph 3 of the Jolly Affidavit
“contains an improperly supported assertion of fact concerning
Exhibit ‘C’ thereto . . . .”

(Id.).

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Plaintiff counters that defendant has waived its
objection to paragraph 2 and Exhibit B “[b]y stating that the
evidence exists and by stipulating that such evidence is an
undisputed fact . . . .”

(Filing No. 116 at 1).

Plaintiff also

argues the application of Rule 408 does not bar paragraph 2 or
Exhibit B (Id. at 2).

Finally, plaintiff contends that paragraph

3 of the Jolly Affidavit should not be stricken because defendant
has admitted plaintiff’s assertion in its answer (Id. at 3).
Under Fed. R. Civ. P. 56(c)(4) “[a]n affidavit or
declaration used to support or oppose a motion must be made on
personal knowledge, set out facts that would be admissible in
evidence, and show that the affiant or declarant is competent to
testify on the matters stated.”

Fed. R. Civ. P. 56(c)(4).

Despite defendant’s contentions to the contrary, the Court finds
that plaintiff has carried his burden to show, for purposes of
summary judgment review, that the paragraphs and exhibit sought
to be stricken are admissible and not improper under Fed. R. Civ.
P. 56.

Accordingly, defendant’s motion to strike will be denied

in its entirety.
II. Defendant’s Motion for Summary Judgment
Even if the Court were to conclude that paragraphs 2
and 3 of the Jolly Affidavit and Exhibit B thereto should be
stricken, the Court’s analysis and decision as to defendant’s
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motion for summary judgment would not be altered.

The Court

finds that genuine disputes as to material facts exist.

The

Court will therefore, deny defendant’s motion for summary
judgment.
The Court has jurisdiction of this case pursuant to 28
U.S.C. § 1441.
apply.

Neither party disputes that Nebraska law ought to

See Filing No. 104 at 14 and Filing No. 109 at 21 (citing

Nebraska state law).

Therefore, Nebraska law controls.

See

Nat’l Ind. Truckers Ins. Co. v. Gadway, 860 F. Supp. 2d 946, 950
n.2 (D. Neb. 2012) (“when neither party raises a conflict of law
issue in a diversity case, the federal court simply applies the
law of the state in which the federal court sits.”) (citing
BBSerCo, Inc. v. Metrix Co., 324 F.3d 955, 960 n.3 (8th Cir.
2003)).
Under Nebraska law, in order for a plaintiff to prove a
bad faith claim, two elements must be established: (1) that there
was no reasonable basis for denying the claim; and (2) that the
insurer knew of, or recklessly disregarded, the lack of a
reasonable basis for denying the claim.

Bailey v. Farmers Union

Co-op. Ins. Co. of Nebraska, 498 N.W.2d 591, 599 (Neb. 1992)
(internal citations omitted).

Defendant argues that

“[p]laintiff’s bad faith claim rests upon the erroneous
allegation that the property claim he submitted to Met was
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denied.”

(Filing No. 104 at 14) (emphasis in original).

Defendant insists that plaintiff’s insurance claim was never
denied (Id.).

Instead, defendant alleges plaintiff’s policy was

voided ab initio (Id.).

Therefore, because no denial was made by

Met, and the contract was voided, no enforceable contract existed
between the parties and Met owed no duty of good faith to
plaintiff (Id.).

Defendant contends that the evidence

conclusively establishes that plaintiff’s material
misrepresentations with respect to his business operations on the
property and the renting of the property provide Met
justification for voiding the policy (Id.).

Specifically, Met’s

brief in support of summary judgment provides:
Met’s determination to void the
policy was made under the clear and
unambiguous terms of the [p]olicy
and Nebraska law taking into
consideration all of the facts
developed during investigation.
The misrepresentation made by
[p]laintiff in the [a]pplication
for the [p]olicy was material, made
with the intent to deceive, was
relied on by Met . . . and Met was
deceived to their injury.
(Id. at 20).
The Court finds a number of faults with defendant’s
analysis.

More importantly, the Court finds that defendant has

failed to carry its burden to show the absence of genuine

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disputes of material facts.

With respect to material

misrepresentations, the policy1 provides:
Concealment or Fraud.
If any person defined as you
conceals or misrepresents any
material fact or circumstance or
makes any material false statement
or engages in fraudulent conduct
affecting any matter relating to
this insurance or any loss for
which coverage is sought, whether
before or after a loss, no coverage
is provided under this policy to
any person defined as you.
(Filing No. 15 at 51).
The Nebraska Supreme Court has held that if an insurer
wishes to avoid liability on the basis of an insured’s
misrepresentation, an insurer “must plead and prove (1) that the
misrepresentation was made knowingly and with intent to deceive,
(2) that the insurer relied and acted upon such statement, and
(3) that the insurer was deceived to its injury.”

Lowry v. State

Farm Mut. Auto. Ins. Co., 421 N.W.2d 775, 778 (Neb. 1988)
(internal citations omitted).

The Court cannot say at this time

that defendant has sufficiently pleaded and proved each of these
elements as a matter of law.

1

Although the Court cites to the policy and the policy
application in its analysis of defendant’s motion for summary
judgment against plaintiff’s bad faith claim, nothing within this
Memorandum and Order should or ought to be construed by the
parties as a revival of plaintiff’s breach of contract claim.
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With respect to the first element that Met must
establish in order to show it could legally void the policy -and thus provide a reasonable basis for denying plaintiff’s claim
-- the Court finds that genuine disputes of material facts exist.
This prevents the Court from concluding, as a matter of law, that
plaintiff’s “misrepresentations” were made knowingly and with the
intent to deceive.

Defendant relies on plaintiff’s use of the

insured property for his plumbing business and the fact that
plaintiff rented out part of the house as the basis for its
misrepresentation defense.

See Filing No. 104 at 15-19.

Met

claims that these misrepresentations allow it to legally void the
policy.

However, a close examination of the facts and events

giving rise to policy’s issuance necessitate determinations to be
made by the finder of fact.
The application for the insurance policy is a standard,
printed, fill-in form produced by Agent Resource Site (Filing No.
110-1 at 4-7, Exhibit A).

Defendant concedes that the

application was not filled out by plaintiff, but the insurance
agency, One Way Insurance.

See Filing No. 115 at 2.

Under a

section entitled “General Information,” the application asks if
there is “[a]ny farming or other business conducted on premises?
(Including day/child care).”

(Filing No. 110-1 at 5).

The box

indicating “NO” to that answer is marked with a computer-printed
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“X” (Id.).

The application also contains a question that asks

“Is the residence held exclusively for rental?”

(Id. at 6).

The

line next to the “N” instead of the “Y” is marked with a
computer-printed “X” (Id.).
Plaintiff contends that “there are disputed facts as to
whether Hayes’ answers [to the above mentioned questions] were
untrue in light of his understanding of the questions.”
No. 109 at 21).

(Filing

Specifically, plaintiff argues that “[w]hile it

is undisputed that Hayes utilized his [unattached] garage for
business purposes . . . it is disputed whether such use
constitutes a material misrepresentation on the insurance
application . . . due to the fact that the ‘premises’ referenced
. . . was referring to the house in which coverage was sought by
Hayes . . . .”

(Id. at 22).

In addition, plaintiff argues “[i]t

is undisputed . . . that Hayes occasionally had tenants that
rented out a portion of the residence . . . [but] [i]t is also
undisputed that the residence was not used exclusively for rental
. . . [therefore] Hayes did not make a material misrepresentation
when he answered ‘no’ to such an inquiry on the application.”
(Id.) (emphasis added).

Plaintiff thus contends that “[b]ecause

Hayes only used a separately insured unattached garage for
business purposes and because his residence was not used
exclusively for rental, Hayes did not intentionally make
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misrepresentations in order to deceive Met.”

(Id.) (emphasis

added).
Given that plaintiff did not personally fill out the
insurance policy application, taken in conjunction with
plaintiff’s aforementioned contentions supported by his
affidavit, and viewing the evidence in the light most favorable
to Hayes; the Court cannot conclude as a matter of law that
defendant has sufficiently satisfied its burden of proving the
first element of its misrepresentation defense.

Defendant’s

failure to sufficiently plead and prove its ability to void the
policy under Nebraska law as provided in Lowry, leads to the
conclusion that genuine disputes of material facts exist as to
whether Met had any reasonable basis for denying plaintiff’s
claim.

See Lowry, 421 N.W.2d at 778.

be left up to the finder of fact.

Such determinations must

Therefore, defendant’s motion

for summary judgment will be denied.

Accordingly,

IT IS ORDERED:
1) Defendant’s motion to strike is denied.
2) Defendant’s motion for summary judgment is denied.
DATED this 30th day of March, 2017.
BY THE COURT:
/s/ Lyle E. Strom
____________________________
LYLE E. STROM, Senior Judge
United States District Court

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