Wells Fargo Bank, N.A. v. Allstate Insurance Company
Filing
36
Memorandum of Opinion and Order For the reasons set forth herein, Allstate's Motion for Summary Judgment (ECF No. 29 ) is granted; Wells Fargo's Motion for Summary Judgment (ECF No. 30 ) is denied. The sole remaining claim is Well s Fargo's claim for unjust enrichment. The parties are hereby on notice that the Court questions the viability and breadth of this claim. Not later than10 (ten) days from the date of this Order, Wells Fargo shall file a notice advising the Court of its expectations regarding its claim for unjust enrichment. Not later than 7 (seven) days from the date of Wells Fargo's notice, Allstate shall file a reply. Judge Benita Y. Pearson on 3/28/2016. (JLG)
PEARSON, J.
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
WELLS FARGO BANK, N.A.,
Plaintiff,
v.
ALLSTATE INSURANCE COMPANY,
Defendant.
)
)
)
)
)
)
)
)
)
)
CASE NO. 4:14CV01379
JUDGE BENITA Y. PEARSON
MEMORANDUM OF OPINION AND
ORDER [Resolving ECF Nos. 29 and 30]
Pending are cross-motions for summary judgment filed by Defendant Allstate Insurance
Company (ECF No. 29) and Plaintiff Wells Fargo Bank, N.A. (ECF No. 30). Both motions have
been fully briefed. See ECF Nos. 31, 33, 34, and 35. For the reasons below, Allstate’s motion
for summary judgment (ECF No. 29) is granted. Wells Fargo’s motion for summary judgment
(ECF No. 30) is denied.
I. BACKGROUND 1 2
1
Wells Fargo informs that Allstate filed its motion for summary judgment
without first consulting with Wells Fargo, in writing, as directed by the Court in its Case
Management Conference Order (ECF No. 17 at PageID #: 160). ECF No. 31 at PageID
#: 510. Allstate retorts that such consultation in this case would have been futile. ECF
No. 35 at PageID #: 561. The Court’s Order does not provide an exception for parties
when they believe submitting a written request for dismissal to opposing counsel would
not be fruitful. This failure, while lamentable, does not go to the merits of the motions
for summary judgment before the Court. Counsel is, however, cautioned to abide by the
Court’s orders going forward.
2
Wells Fargo contends that Allstate should be precluded from relying on the
(continued...)
(4:14CV01379)
The following are the pertinent facts.3
Barbara Bailey and her daughter Victoria Gunther were joint tenants of a residence,
located in Warren, Ohio. See ECF No. 1-3 at PageID #: 79. As of November 2, 2000, the
property was titled in the names of Bailey and Gunther. ECF No. 28 at ¶ 5. Bailey purchased
homeowners insurance on the property through Allstate. Wells Fargo is the mortgagee on the
property.4 Id. at ¶ 2. In 2007, Wells Fargo initiated a complaint in foreclosure on the property
against Bailey and Gunther. Id. at ¶ 6. On May 3, 2009, Bailey executed a survivorship deed to
Gunther for the property. Id. at ¶ 7. Later that month, on May 20, 2009, Bailey died. Id. at ¶ 8.
In 2009, Wells Fargo had knowledge of Bailey’s death. Id. Wells Fargo continued to pay
premiums to Allstate after Bailey’s death. Id. at ¶ 10. In 2012, Wells Fargo initiated another
foreclosure action with respect to the property. Id. at ¶ 9.
Unaware of Bailey’s death, in February 2013, Allstate issued a renewed “Deluxe Select
Value Homeowners Policy” (“Policy”) on the property. See ECF No. 1-1. The term of the
renewed Policy was from April 15, 2013 to April 15, 2014. ECF No. 1 at ¶ 9. The Policy
provided up to $100,000.00 in insurance coverage for any sudden and accidental direct physical
2
(...continued)
affidavit of third-party witness Attorney Randil Rudloff because it failed to disclose the
witness and his affidavit in discovery. See ECF No. 29-1. Allstate argues, inter alia, that
it uses the affidavit “only to qualify documents” and that Attorney Rudloff “attests to
nothing substantive.” While Attorney Rudloff does not make substantive attestations,
counsel for Allstate is again cautioned against skirting the rules. Futher, the documents,
not the affidavit transmitting them, matter.
3
4
See also Stipulation of Facts, ECF No. 28.
Wells Fargo Bank, N.A., d/b/a America’s Servicing Company (ASC).
2
(4:14CV01379)
loss to the subject property. Id. at ¶ 10. Bailey alone was listed as the named insured on the
Policy. See ECF No. 1-1 at PageID #: 15. On June 25, 2013, a fire loss occurred at the subject
property. ECF No. 28 at ¶ 11. On October 4, 2013, Wells Fargo purchased the property at a
sheriff’s sale and a deed was recorded. Id. at ¶ 14. In November 2013, Wells Fargo made a
claim with Allstate for the fire loss. Id. at ¶ 15. No one, including Wells Fargo, informed
Allstate that Bailey had died until after the fire loss had occurred. Id. at ¶ 16. Allstate denied
Wells Fargo’s claim on the basis that the Policy had expired on April 15, 2010 following
Bailey’s death. ECF No. 1 at ¶ 20.
Wells Fargo filed this lawsuit (ECF No. 1), asserting four claims for relief: breach of
contract, declaratory judgment, specific performance, and unjust enrichment. At issue is whether
Allstate properly denied Wells Fargo’s insurance claim on the basis that Wells Fargo had
knowledge of the name insured’s death, but failed to notify Allstate of that fact prior to the fire
loss.
II. STANDARDS
A. Summary Judgment
Summary judgment is appropriately granted when the pleadings, the discovery and
disclosure materials on file, and any affidavits show “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);
see also Johnson v. Karnes, 398 F.3d 868, 873 (6th Cir. 2005). The moving party is not required
to file affidavits or other similar materials negating a claim on which its opponent bears the
burden of proof, so long as the movant relies upon the absence of the essential element in the
3
(4:14CV01379)
pleadings, depositions, answers to interrogatories, and admissions on file. Celotex Corp. v.
Catrett, 477 U.S. 317, 322 (1986). The moving party must “show that the non-moving party has
failed to establish an essential element of his case upon which he would bear the ultimate burden
of proof at trial.” Guarino v. Brookfield Twp. Trustees, 980 F.2d 399, 403 (6th Cir. 1992).
After the movant makes a properly supported motion, the burden shifts to the non-moving
party to demonstrate the existence of material facts in dispute. An opposing party may not
simply rely on its pleadings; rather, it must “produce evidence that results in a conflict of
material fact to be resolved by a jury.” Cox v. Ky. Dep't of Transp., 53 F.3d 146, 150 (6th Cir.
1995). A fact is “material” only if its resolution will affect the outcome of the lawsuit. In
determining whether a factual issue is “genuine,” the court must evaluate whether the evidence
could persuade a reasonable factfinder that the non-moving party is entitled to a verdict. Id.
To defeat a motion for summary judgment, the non-moving party must “show that there is
doubt as to the material facts and that the record, taken as a whole, does not lead to a judgment
for the movant.” Guarino, 980 F.2d at 403. In reviewing a motion for summary judgment, the
court must view the evidence in the light most favorable to the non-moving party when deciding
whether a genuine issue of material fact exists. Matsushita Elec. Indus. Co. v. Zenith Radio
Corp., 475 U.S. 574, 587–88 (1986); Adickes v. S.H. Kress & Co., 398 U.S. 144 (1970). The
existence of a mere scintilla of evidence in support of the non-moving party’s position ordinarily
is not sufficient to defeat a motion for summary judgment. Klepper v. First Am. Bank, 916 F.2d
337, 342 (6th Cir. 1990).
4
(4:14CV01379)
The legal standard applied to cross-motions for summary judgment does not differ from
the standard applied when only one party to the litigation files a motion for summary judgment.
Ferro Corp. v. Cookson Group, PLC, 585 F.3d 956, 949 (6th Cir. 2009). Each motion must be
evaluated on its own merits, with the court viewing all facts and reasonable inferences in the light
most favorable to the nonmoving party. See Appoloni v. U.S., 450 F.3d 186, 189 (6th Cir. 2006).
B. Ohio Insurance Contract Law
The substantive law of Ohio applies, as this case is before the Court on the basis of
diversity of citizenship pursuant to 28 U.S.C. § 1332(a). See Burniac v. Wells Fargo Bank, N.A.,
810 F.3d 429, 436 (6th Cir. 2016) (applying Michigan law in a diversity-of-citizenship case).
The Ohio Court of Appeals’ decision in Allstate Ins. Co. v. Eyster is instructive when
interpreting an insurance contract under Ohio law:
An insurance policy is a contract, and its interpretation is a matter of law for the
court. The coverage under an insurance policy is determined by construing the
contract “in conformity with the intention of the parties as gathered from the
ordinary and commonly understood meaning of the language employed.”
Contract terms are to be given their plain and ordinary meaning, and “[w]hen the
contract is clear and unambiguous, the court ‘may look no further than the four
corners of the insurance policy to find the intent of the parties.’”
However, when a portion of an insurance contract is reasonably susceptible of
more than one interpretation, it will be strictly construed against the insurer and in
favor of the insured. Nevertheless, this rule of insurance-policy interpretation will
not be applied in an unreasonable manner.
189 Ohio App.3d 640, 648-49 (Ohio Ct. App. 2010) (citations omitted). The Court interprets the
Policy at issue under this rubric.
5
(4:14CV01379)
III. DISCUSSION
Both parties move for summary judgment on Wells Fargo’s claims for breach of contract,
declaratory judgment, and specific performance. They do not, however, delineate the claims in
their motions and responsive pleadings. Wells Fargo argues that (1) the Policy was valid at the
time of the fire loss; (2) Wells Fargo was not obligated to inform Allstate of Bailey’s death,
because her death did not constitute a change in ownership; (3) there were no grounds for
cancellation of the Policy; and (4) Allstate failed to provide proper notice of cancellation.
Allstate argues that (1) the Policy terminated before the fire loss; (2) Wells Fargo was required to
inform Allstate of Bailey’s death; (3) Wells Fargo’s failure to provide notice of Bailey’s death
constituted grounds for cancellation of the Policy; and (4) Allstate was not required to provide
notice of cancellation on these facts.
A. Whether the Policy Was Valid at the Time of the Fire Loss
Wells Fargo urges that the Policy was valid at the time of the fire loss because Allstate
renewed the Policy on February 28, 2013, almost four months before the fire. ECF No. 30 at
PageID #: 483. Allstate retorts that had Allstate been informed of Bailey’s death, the Policy
would have automatically terminated at the end of the premium period during which Bailey, the
sole insured, died. ECF No. 29 at PageID #: 256.
1.
Analogous Case
In an unreported decision, Ramsey v. Allstate Ins. Co., 416 Fed.App’x. 516 (6th Cir.
2011), the Sixth Circuit decided an insurance contract dispute that involved facts very similar to
6
(4:14CV01379)
those underlying the case at bar.5 In Ramsey, the named insured on an Allstate homeowners
insurance policy died. Id. at 518. After the named insured died, his son (the plaintiff) inherited
the property. Id. at 519. Bank of America, the mortgagee on the property, continued to pay
insurance premiums to Allstate from the named insured’s account after the insured’s death. Id. at
518. In turn, Allstate continued to renew the policy in the name of the deceased named insured.
Id. Nearly six (6) years after the named insured’s death, a fire loss occurred at the property. Id.
Ultimately, Allstate denied the plaintiff’s claim for coverage of the loss, stating that it did not
learn of the named insured’s death until after the loss had occurred. Id. The district court
granted summary judgment to Allstate. Id.
In its analysis, the Sixth Circuit cited to the following provisions of the insurance policy
at issue:
Policy Transfer
You may not transfer this policy to another person without our written consent.
Continued Coverage After Your Death
If you die, coverage will continue until the end of the premium period for:
1) your legal representative while acting as such, but only with respect to the residence
premises and property covered under this policy on the date of your death.
2) an insured person, and any person having proper temporary custody of your property
until a legal representative is appointed and qualified.
5
Neither party drew the Court’s attention to this decision. While an unreported
decision is not binding, counsel is ethically obligated to disclose decisions rendered by a
controlling legal authority that are known to counsel and adverse to the position of the
client and not disclosed by opposing counsel. See Ohio R. Prof. Cond. 3.3(a)(2).
7
(4:14CV01379)
Ramsey, 416 Fed.App’x. at 518. Based on these provisions, the Sixth Circuit agreed with the
district court that “the express insurance contract terminated at the end of the premium period
following [the named insured]’s death.” Id. at 519.
The Sixth Circuit made this ruling in favor of Allstate even though premiums were kept
current and Allstate had renewed the policy. See id. The Sixth Circuit reversed and remanded
the case because the district court had not considered whether Allstate had received constructive
notice of the named insured’s death in advance of the loss, and whether there was an
implied-in-fact contract between Allstate and the plaintiff. See id. at 521-22. The case returned
to the Circuit after the district court again granted summary judgment to Allstate. See Ramsey v.
Allstate Ins. Co., 514 Fed.App’x. 554 (6th Cir. 2013). The Circuit affirmed in part and reversed
in part, agreeing that there was no constructive notice, but finding that there may have been an
implied-in-fact contract because facts in the record indicated that Allstate may have known of the
named insured’s death before the fire loss. Id. at 558-59.
2.
Termination of the Policy
In the case at bar, the Policy contains “policy transfer” and “continued coverage after your
death” provisions that are identical to those provisions in Ramsey. See ECF No. 1-1 at PageID #:
44. The rationale used by the Sixth Circuit in Ramsey applies to this case as well. The Policy
terminated at the end of the premium period for the policy in effect at the time of Bailey’s death,
i.e., on April 15, 2010. See ECF No. 29 at PageID #: 256. The fire loss occurred more than three
years after the Policy had terminated. Wells Fargo’s argument that it had performed its duties
under the Policy by continuing to pay premiums is unavailing. ECF No. 30 at PageID #: 485. In
8
(4:14CV01379)
Ramsey, the mortgagee also continued making premium payments after the death of the named
insured. Nevertheless, the Circuit found that Allstate was not required to provide coverage if it
had not been made aware of the named insured’s death prior to the loss. Moreover, paying
premiums is only one requirement under the Policy. Payment alone does not demonstrate that
Wells Fargo had performed all of its obligations under the Policy.
Additionally, there is no indication from the facts in the record (and no argument
advanced by Wells Fargo) that Allstate had actual or constructive notice of Bailey’s death prior
to the fire loss. The parties stipulate that “[n]o one, including Wells Fargo, informed Allstate
that Barbara Bailey had died until after the fire loss at the subject property.” ECF No. 28 at ¶ 16,
PageID #: 191. There are also no facts in the record to support a finding of an implied-in-fact
contract between Wells Fargo and Allstate. In any case, Allstate could not have entered into such
an agreement without first knowing that Bailey had died. See Ramsey, 514 Fed.App’x. at 558
(indicating that Allstate’s awareness of the named insured’s death was prerequisite to finding an
implied-in-fact contract under the circumstances).
There is no genuine issue of material fact that the Policy was not valid at the time of the
fire loss.
B. Whether Allstate Had a Right to Cancel the Policy
Assuming the Policy had not terminated before the fire loss, as Wells Fargo suggests, the
Court must determine whether Allstate had a right to retroactively cancel the Policy.
9
(4:14CV01379)
1.
Whether Bailey’s Death Constitutes a Change in Ownership
Allstate asserts that Bailey’s death constitutes a “change in ownership,” pursuant to the
terms of the Policy. ECF No. 33-1 at PageID #: 542. Wells Fargo offers that there was no
“change in ownership” upon Bailey’s death because Gunther was an owner of the property before
and after Bailey’s death. ECF No. 30 at PageID #: 484-85. Wells Fargo’s argument is risible. It
cannot reasonably be said that a change in the composition of ownership does not constitute a
change in ownership. See Eyster, 189 Ohio App.3d at 648-49 (requiring a court to construe an
insurance policy by using “the ordinary and commonly understood meaning of the language
employed”). Bailey was an owner of the property. After she died, she was no longer an owner of
the property. Applying the ordinary and commonly understood meaning of the word “change,”
the ownership changed when Bailey died, irrespective of whether Gunther retained her interest in
the property. See Black’s Law Dictionary (6th ed. 1990) (defining “change” as “alter” and “make
different in some particular”).
There is no genuine issue of material fact that the death of Bailey, an owner of the
property, constitutes a change in ownership under the Policy.
2.
Whether Wells Fargo was Required to Inform Allstate of Bailey’s
Death in Order to Obtain Coverage
Wells Fargo argues that “[t]here is absolutely no provision in the Policy that directs Wells
Fargo to notify Allstate of Bailey’s death as a condition precedent to insurance coverage.” ECF
No. 30 at PageID #: 484. The Policy explicitly states that “[t]he mortgagee will . . . notify us in
writing of any change of ownership or occupancy . . . of which the mortgagee has knowledge . . .
.” ECF No. 1-1 at PageID #: 58 (emphasis added). Furthermore, the Policy provides that
10
(4:14CV01379)
Allstate will “protect the mortgagee’s interest in a covered building structure in the event of . . . a
change in ownership . . . if the mortgagee has no knowledge of these conditions.” Id. (emphasis
added).
Pursuant to the terms of the Policy, Wells Fargo’s interest is protected in the event of
change in ownership if it does not have knowledge of the change in ownership. ECF No. 29 at
PageID #256. As explained above, Bailey’s death clearly constituted a change in ownership.
Wells Fargo admits that it was aware of Bailey’s death years before the fire loss and did not
inform Allstate. See ECF No. 28 at ¶¶ 8 and 16, PageID #: 190-91. Wells Fargo failed to satisfy
its obligation under the Policy, and should not now benefit from its dereliction.
There is no genuine issue of material fact that Wells Fargo was required to notify Allstate
of Bailey’s death, in order to protect its interest as the mortgagee and maintain coverage.
3.
Whether Wells Fargo’s Failure to Inform Allstate of Bailey’s Death
Constitutes Grounds for Cancellation
According to Wells Fargo, Allstate had no right to retroactively cancel the Policy because
the requirements for cancellation under the Policy were not met and Allstate continued to renew
the policy without inquiring about Bailey’s state of being. ECF No. 30 at PageID #: 483-84. The
Policy provides the following regarding Allstate’s right to cancel:
When this policy has been in effect for 60 days or more, or if it is a renewal with
us, we may cancel this policy for one or more of the following reasons:
1) non-payment of premium;
2) the policy was obtained by misrepresentation, fraud or concealment of
material facts;
3) material misrepresentation, fraud or concealment of material facts in
presenting a claim, or violation of any of the policy terms; or
4) there has been substantial change or increase in hazard in the risk we
originally accepted.
11
(4:14CV01379)
ECF No. 1-1 at PageID #: 44-45.
Wells Fargo argues that it was not “on notice that Ms. Bailey’s death was a ‘substantial
change or increase in risk’ or was somehow a ‘material fact’ that affected the Policy.” ECF No.
30 at PageID #: 485-86. What constitutes a “material misrepresentation, fraud or concealment of
material facts in presenting a claim” or a “substantial change or increase in hazard in the risk” is
ambiguous, Wells Fargo contends. Id. Furthermore, Wells Fargo suggests that “[b]ecause
Gunther and Wells Fargo were, at all times, intended insured parties under the Policy, Bailey’s
death caused no material change or increase in risk to Allstate.” ECF No. 31 at PageID #: 508.
Again, Wells Fargo promotes an argument that is hard to take seriously. That Wells
Fargo did not know failing to disclose the death of the sole named insured on an insurance policy
would constitute a “material misrepresentation” or a “concealment of material facts” strains
credulity. Equally difficult to fathom is Wells Fargo’s argument that it did not know Bailey’s
death constituted a “substantial change” in the risk Allstate initially accepted, when Bailey’s
death meant that the sole person with whom Allstate had entered into the insurance contract was
no longer alive. Any ambiguity that can be found in these provisions of the Policy has no
application under the facts of this case.
The Court finds irrelevant Wells Fargo’s argument that Allstate never inquired about
Bailey when renewing the Policy, “suggesting that her status was completely immaterial.” ECF
No. 30 at PageID #: 484. As explained above, the Policy placed the onus on Wells Fargo to
report Bailey’s death. Furthermore, as the Sixth Circuit found in Ramsey, Ohio law does not
12
(4:14CV01379)
require an insurer to investigate the life or death status of its insured, even when renewing a
policy. See 514 Fed.App'x. 554 at 557. Specifically, the Circuit stated:
[Plaintiff] points to no case or law that imposes upon an insurance company
constructive notice of the death of one of its insureds upon publication of a death
notice. . . . [S]uch a hypothetical rule would require Allstate to comb public
records every day and compare death notices and estates in probate to its list of
policyholders to protect itself in circumstances similar to those here.
Id. Allstate was not required to confirm that Bailey was still alive before renewing the Policy.
There is no genuine issue of material fact that Allstate had a right to retroactively cancel
the Policy.
C. Whether Allstate Was Required to Provide Notice Before Cancellation
Wells Fargo argues that Allstate’s failure to give notice of cancellation in accordance
with the terms of the Policy constitutes breach of contract. See ECF No. 30 at PageID # 479-80.
In pertinent part, the Policy states:
If the cancellation is for non-payment of premium, we will give you at least 10
days notice. If the cancellation is for any other reasons, we will give you at least
30 days notice.
ECF No. 1-1 at PageID #: 44-45.
There is no evidence that Allstate was aware of the named insured’s death until after the
fire loss occurred. As indicated above, the parties stipulated that no one, including Wells Fargo,
informed Allstate of the death until after the fire loss. See ECF No. 28 at PageID #: 191. It
would be unreasonable (and inequitable) to construe the Policy as requiring Allstate to provide
notice in advance of cancellation, when the mortgagee withheld material facts until after grounds
for cancellation and a loss had occurred. See Laboy v. Grange Indemn. Ins. Co., 144 Ohio St.3d
13
(4:14CV01379)
234, 236 (2015) (“The fundamental goal when interpreting an insurance policy is to ascertain the
intent of the parties from a reading of the policy in its entirety and to settle upon a reasonable
interpretation of any disputed terms in a manner designed to give the contract its intended
effect.”) (citation omitted).
There is no genuine issue of material fact, under the circumstances presented in this case,
that Allstate was not required to give notice of cancellation in accordance with the terms of the
Policy. Stated differently, Allstate was deprived of the opportunity to give notice in accordance
with the Policy when Wells Fargo withheld timely notice of Bailey’s demise.
IV. Conclusion
For the foregoing reasons, Allstate’s motion for summary judgment (ECF No. 29) is
granted; Wells Fargo’s motion for summary judgment (ECF No. 30) is denied.
The sole remaining claim is Wells Fargo’s claim for unjust enrichment. The parties are
hereby on notice that the Court questions the viability and breadth of this claim. Not later than
10 (ten) days from the date of this Order, Wells Fargo shall file a notice advising the Court of its
expectations regarding its claim for unjust enrichment. Not later than 7 (seven) days from the
date of Wells Fargo’s notice, Allstate shall file a reply.
IT IS SO ORDERED.
March 28, 2016
Date
/s/ Benita Y. Pearson
Benita Y. Pearson
United States District Judge
14
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?