American Land Investments, Ltd. v. Allstate Insurance Company et al
Filing
48
ENTRY AND ORDER GRANTING DEFENDANT ALLSTATE INSURANCE COMPANYS MOTION FOR SUMMARY JUDGMENT 37 AND TERMINATING CASE. Signed by Judge Thomas M. Rose on 3-19-2019. (de)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION AT DAYTON
AMERICAN LAND INVESTMENTS,
LTD.
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Plaintiff,
v.
ALLSTATE INSURANCE COMPANY, et al.
Defendants.
Case No.: 3:16-cv-489
Judge Thomas M. Rose
ENTRY AND ORDER GRANTING DEFENDANT ALLSTATE
INSURANCE COMPANY’S MOTION FOR SUMMARY JUDGMENT (ECF
37) AND TERMINATING CASE.
Defendants Allstate Insurance Company has moved the Court for entry of summary
judgment on Plaintiff American Land Investments, Ltd.’s claims of breach of contract and lack
of good faith under Ohio common law. (ECF 37) Because the motion is well-taken, it will be
granted.
I.
FACTUAL AND PROCEDURAL HISTORY
Plaintiff American Land Investments is in the business of residential real estate. (ECF 12, at PageID 8.) Three of the commercial property units owned by American Land Investments
are 221, 223, and 225 South Walnut Ave., Sidney, Ohio are interconnected buildings. A fourth,
227 South Walnut, is a free-standing building. Duaine Liette is the sole member of American
Land Investments, Ltd. (EUO-I, p. 4.). American Land Investments’ properties were insured
under a policy issued by Defendant Allstate Insurance Company.
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On October 25, 2015, while the policy was in force, residential units 223, 225 and 227
were vandalized. (ECF 1-2, at PageID 8.) American Land Investments reported the loss to
Allstate on October 26, 2015. Plaintiff reported that vandals spray-painted the complex’s roof,
consisting of some white and yellow marks, and caused other claimed damage. (EUO-II, p. 179200, and Exhibits 39-44, 49.) After investigating the matter, Allstate paid half of the claim to
American Land Investments. (Id.) (The other half was paid to unserved Co-Defendant Minster
Bank.)
The property was again vandalized on or about November 19, 2015, and American Land
Investments reported another insurance claim. (Id.) Plaintiff reported to Allstate that vandals
forcibly entered the premises and cut interior loadbearing columns and beams supporting the
roof inside the structure within 221 South Walnut with a saw. (ECF 5, Complaint, Par. 10; EUOII, p. 219.) Allstate began a second investigation into the matter and has yet to issue a claims
decision. (Id.). The policy provides that “any suit of claim for loss must be brought within one
year after the loss or damage occurs.” (ECF 1-2, at PageID 8.)
On October 20, 2016, American Land Investments filed three causes of action in the
Shelby County Court of Common Pleas. (Id.) The first cause of action alleged that Allstate
breached the insurance contract by failing to pay the amount due under the policy for both
claims; the second cause of action alleged that Allstate lacked good faith in its handling of both
claims; and the third cause of action sought declaratory judgment as to how Allstate should
disburse payments. (Id.)
Plaintiff’s Complaint against Allstate asserts causes of action for breach of contract and
bad faith. (ECF 5, Complaint, First Cause of Action, Par. 14-19; Second Cause of Action, Par.
20-25.) Specifically, Plaintiff alleges that Allstate only paid “half” of Plaintiff’s claim arising
2
from the reported October 26, 2015 spray painting loss. (ECF 5, Complaint, Par. 9.) As to the
November 19, 2015 structural vandalism claim, Plaintiff alleges that it cooperated with Allstate
and submitted the necessary proofs of loss, but that Allstate had, to that date, failed to issue a
claim decision, necessitating that Plaintiff file suit. (ECF 5, Par. 11-13.) Plaintiff’s Complaint
further seeks a declaratory judgment declaring that the alleged vandalism losses are covered
under the Allstate Policy. (ECF 5, Complaint, Third Cause of Action, Par. 29.)
In addition to the foregoing, the Complaint named Plaintiff’s mortgagee, Minster Bank,
as an additional defendant, on the theory that Plaintiff was entitled to a judgment declaring that
Allstate was obligated to pay Minster regardless of Allstate’s decision with respect to the
payment of Plaintiff’s claims. (ECF 5, Complaint, Third Cause of Action, Par. 29.)
On November 21, 2016, Allstate removed the case to this Court based on diversity
jurisdiction pursuant to 28 U.S.C. § 1332. (ECF 1, at PageID 1.)
On November 21, 2016, Allstate filed its Notice of Removal to federal court, based on
diversity jurisdiction, pursuant to 28 U.S.C. §§ 1332, 1441, and 1446. (ECF 1, Notice of
Removal.) On that same date, Allstate filed its Answer, denying the essential allegations of
Plaintiff’s Complaint. (ECF 2, Allstate’s Answer.) As to Plaintiff’s allegations against Allstate,
Allstate raised affirmative defenses including: (1) Plaintiff, through its principal, or someone
acting at their direction, intentionally vandalized Plaintiff’s own property, and, therefore,
Plaintiff’s claims were barred by the terms and conditions of the Allstate Policy (ECF 2,
Allstate’s Answer, Affirmative Defenses, Par. 6); (2) the reported vandalism losses did not occur
as Plaintiff claimed, and were not sudden and accidental losses, and, therefore, were not covered
losses under the policy (ECF 2, Allstate’s Answer, Affirmative Defenses, Par. 7); and (3)
Plaintiff, through Liette, concealed and misrepresented material facts relating to the claims, and,
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therefore, the Allstate Policy was void, and Plaintiff’s claims thus were barred by the terms and
conditions of the Policy (ECF 2, Allstate’s Answer, Affirmative Defenses, Par. 1, 8, 10, 11).
On August 25, 2017, Allstate formally advised Plaintiff that it was denying Plaintiff’s
claim arising from the reported October 26, 2015 spray painting loss. (See, Exhibit A, Denial
Letter for Date of Loss October 26, 2015.) Allstate’s letter cited Plaintiff to the pertinent terms
and conditions of Plaintiff’s Allstate Policy, and advised Plaintiff that Allstate was denying
Plaintiff’s claim because the same or similar spray painting condition already existed on the roof
from a prior claimed act of vandalism that had remained unrestored; and Liette intentionally
concealed or misrepresented material facts relating to Plaintiff’s claim, and the policy was void.
That same day, Allstate also formally advised Plaintiff that it was denying Plaintiff’s
claim arising from the reported November 19, 2015 structural vandalism loss. (See, Exhibit B,
Denial Letter for Date of Loss November 19, 2015.) Allstate’s letter again cited Plaintiff to the
pertinent terms and conditions of Plaintiff’s Allstate Policy, and advised Plaintiff that Allstate
was denying Plaintiff’s claim because the cutting of the structural columns occurred three to four
weeks prior to the reported loss date of November 19, 2015, and was done by Liette, or someone
acting at his request, as Liette was the only person who had access to the property during that
period, and, thus, the claimed damages were excluded under the Policy’s “Dishonest or Criminal
Act” exclusion; alternatively because the claimed vandalism loss did not occur as reported, it
was not a sudden and accidental loss, and, therefore was not a covered loss under the policy;
additionally, because Liette intentionally concealed or misrepresented material facts relating to
Plaintiff’s claim, coverage was void pursuant to the Policy’s “Concealment, Misrepresentation or
Fraud” provision.
4
Allstate contends that Plaintiff, through Liette, concealed or misrepresented material facts
relating to Plaintiff’s claims, and so Allstate was reasonably justified in denying Plaintiff’s
claims pursuant to the Policy’s “Concealment, Misrepresentation or Fraud” provision. Allstate
contends it did not breach Plaintiff’s Allstate Policy, nor act in bad faith, and, thus, is entitled to
judgment on all of Plaintiff’s causes of action as a matter of law.
Allstate’s motion for summary judgement is based largely on Liette’s actions during the
investigation and what Allstate learned through the investigation. Allstate questioned Liette
about business tenants at the commercial premises, for the purpose of identifying possible
witnesses who may have knowledge about the reported vandalism losses, or information helpful
to the investigation of the reported losses – such as who may have been in the building at the
time of the reported losses, and who had access to the building. (See, e.g., EUO-I, at 127, 147148, 152.) Liette identified Mary Layman as the only “business tenant” in the building at the
time of the reported losses. (EUO-1, p. 82, 141, 151-152.)
Liette testified that he was told Layman and her daughter-in-law were “working that
night in her storefront unit” at 223 South Walnut, when around midnight, they heard a noise at
the back door of 221 South Walnut. (EUO-I, p. 159-160.) Layman called the police. (See, EUOII, Exhibit 59, police report.) Liette testified he “understood” that Layman subsequently tried to
call him, and after failing to reach him, then called Liette’s wife, who then contacted Liette. (See,
EUO-II, p. 161-162.)
On December 7, 2015, months before Liette’s Examination Under Oath, Allstate’s
investigator obtained a recorded statement from Layman in which she confirmed that she had
been residing at 223 South Walnut at the time of the reported losses: “*** There’s a little
5
apartment in there I stay in, yes.” (See, Exhibit C, Transcript of Recorded Statement of Mary
Layman December 7, 2015, p. 4.)
During Liette’s first examination under oath, Liette was asked if Layman was living in
223 South Walnut. Liette responded: “Not that I know of. I don’t know if she does. I don’t
know. I don’t know if she stays there or not.” (ECF 42, PageID 938, EUO-I, p. 160.) During
Liette’s second examination under oath, Liette was again asked questions about whether Layman
was living there, or if anybody had ever told him she was living there. Liette testified: “No,
nobody told me she was living there. I don’t know anything about her living there. If she was
living there or if she wasn’t living there, I have no idea. The only thing I know is I leased her the
building at that date. I never got involved with it.” (ECF 37-12, PageID 710, EUO-II, p. 153154.)
Allstate obtained inspection reports and related records from the Sidney-Shelby County
Health Department, Sidney Fire Department, and Sidney Police Department, concerning various
violations and conditions at the property. The records document that Layman was living at 223
South Walnut. (EUO-II, p. 154-159, and Exhibits 32-36.) Liette acknowledged receiving the
health department letters (EUO-II, p. 154, 156, 157), but denied the letters served as notice to
him that someone was living there. (EUO-II, p. 154-155.) Liette acknowledged only that, on one
occasion, Layman told him that, at times when she was there working late, she “had laid down
there when she was tired.” Liette testified he had told Layman that she could not stay there.
(EUO-II, p. 155-156.) However, Liette claimed to have never actually seen Layman sleeping
inside the building, and that he “ha[d] no idea where she lived at.” (EUO-II, p. 154-155.) Liette
testified that Layman could have been living there, but, he never asked, and he did not know.
(EUO-II, p. 165.) Liette testified: “I didn’t let her stay there.” (EUO-II, p. 156.)
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Month prior to the spray-painting claim reported to Allstate, on June 8, 2015, the Sidney
Police Department investigated the death of Layman’s husband, Gerald Layman. The certificate
of death documents that Layman died at the Laymans’ home at 223 South Walnut. (EUO-II, p.
167-168 Exhibit 37) Liette acknowledged that Layman died on his commercial property;
however, Liette again denied any knowledge that Layman was living at his commercial property
at 223 South Walnut: “I never asked, never even got into it with them [Laymans] at all except
telling them they cannot live there. That’s all I know.” (EUO-II, p. 167.)
Liette’s wife, who performed bookkeeping functions for Plaintiff, testified that if the
notices were sent by the Sidney Fire Department, she would have received them and she would
have given them to her husband. (Angela Liette Depo p. 44).
Lieutenant Kittle of the Sidney Fire & Emergency Services Fire Prevention Division,
performed the inspections of Plaintiff’s property. Kittle has reaffirmed the truth and accuracy of
his written reports and correspondence, regarding the violations he found at the property,
including the fact that Layman was living there illegally. Further, Kittle attested that he
personally advised Liette of the violations, contrary to Liette’s sworn testimony. (See, Exhibit D,
Affidavit of Brett A. Kittle.) Rusty Schwepe, Registered Sanitarian with the Board of Health,
Sidney-Shelby County, has also reaffirmed the truth of this information, as documented in the
written health department notices served on Liette. (See, Exhibit E, Affidavit of Rusty Schwepe.)
On May 7, 2018, Layman confirmed her January 30, 2017 recorded statement to
Allstate’s investigator, that between September and December 2012, Liette knew she was living
there. (Deposition of Mary Layman (“Layman Dep.”), p. 19.) Layman testified she lived there
continuously through 2015. (Layman Dep. p. 19-20.) Further, Layman testified that Liette knew
she was living there, and that Liette knowingly continued to let her live there: “I mean he knew
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we were living there but wasn’t making me move out ***.” (Layman Dep. p. 56- 57.) When
Plaintiff’s counsel asked Layman if Liette was lying when he testified that he did not believe 223
South Walnut was her primary residence, Layman responded: “Yes, because he asked me if we
were living there.” (Layman Dep. p. 67.)
Allstate’s investigation extended to the question of whether Liette’s attempt to conceal
Layman’s continuous residence at the property during October and November of 2015 was
material to Allstate’s investigation. During his second examination under oath, Liette conceded
that, if the damage to the structural support beams and posts was done by a chainsaw, someone
should hear it. Liette testified that neither the neighbors, nor Layman, told him that they heard a
saw of any kind. (EUO-II, p. 221-222.)
Layman testified in her deposition that she did not hear chainsaws during the evening of
November 19, 2015. (Layman Dep. p. 48.) To the contrary, Layman testified that the sound of a
chainsaw woke her up around 8:00 a.m. to 8:30 a.m., while she was sleeping at her residence at
223 S. Walnut, two to three weeks prior to the date of the alleged burglary of November 19,
2015, the date Liette presented to Allstate as an act of vandalism that occurred during the night
of November 19, 2015. (Layman Dep. p. 48-49, 51, 65-67.) Layman testified that the sound of
sawing lasted “[p]robably about an hour.” (Layman Dep. p. 51.) Liette testified that he was
present at his warehouse nearly every day of the week. (EUO-II, p. 202-203.)
Liette also testified concerning the multiple prior insurance claims that had been made by
Plaintiff, involving the insured property. Liette testified that Plaintiff’s prior insurance claims
included a September 30, 2010 spray-painting vandalism claim, (nearly identical to his October
2015 claim) for which Liette acknowledged receiving “over $100,000” in insurance proceeds as
compensation from his former insurer, Nationwide. (EUO-I, p. 97.) Liette testified that,
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although having received over $100,000 in insurance proceeds for estimated repairs, he did not
have a commercial vendor repair the roof on the structure following that claim, but instead kept
the money for himself. (EUO-I, p. 100.) Liette claims he used his power washer and attempted
to wash off the paint. (EUO-I, p. 98-99.)
Liette testified that he then had another spray-painting vandalism claim on July 27, 2011,
involving damage to the roof, for which Liette thought Nationwide paid “[$]50,000 or more.”
(EUO-I, p. 102-109.) Liette testified that following the 2011 spray-painting vandalism claim, he
engaged independent vendor Thomas Beaver of Eager Beaver Roofing to replace the roof.
Beaver, however, allegedly “le[]t everything to go to pieces.” (EUO-I, p. 20, 110.) Liette
testified that Beaver failed to properly tarp the roof, which allowed rain to enter the building.
(EUO-I, p. 47.) Liette testified that the rain intrusion ruined drywall and Liette’s tools and
materials. (EUO-I, p. 47, 49.) Liette testified that he sued Beaver, who was then insured with
United Ohio; however, that lawsuit “did not go anywhere,” because United Ohio took the
position that the damages were the result of “faulty workmanship.” (EUO-I, p. 48, 50.) Liette
testified that he did not make a claim against his own insurance company for the water damage
loss, stating he “didn’t have insurance for that.” (EUO-I, p. 49, 51.) Liette testified that he
wound up doing the work himself, and that he “put a whole new roof on.” (EUO-I, p. 111.)
Allstate obtained records regarding Plaintiff’s 2011 claim from United Ohio and Century
Insurance. The records established that, not only did Liette conceal or misrepresent to Allstate
the material facts underlying this 2011 claim, but also the events surrounding the claim were in
fact the subject of the 2012 lawsuit that was filed by United Ohio against Plaintiff and Liette
individually, for making a fraudulent insurance claim. (See, EUO-II, p. 132-149, and Exhibits
29-30.)
9
Following Beaver’s commencement of the roof work, Plaintiff and Liette presented a
claim to United Ohio in June, 2011, for claimed water damage originating from the property’s
roof; then withdrew that claim on the same day Beaver applied for the subject United Ohio
policy; Plaintiff and Liette thereafter had Beaver’s insurance agent add American Land
Investment as an additional insured on the Beaver/United Ohio policy; and, Plaintiff and Liette
then filed another claim with United Ohio in July, 2011, for water damage that reportedly
occurred on July 11, 2011. (See, id.)
During the investigation of his 2011 claim by United Ohio, Beaver had his Examination
Under Oath conducted by United Ohio’s counsel on September 22, 2011. Beaver testified he
believed that Liette “was trying to get the insurance to pay for long-standing leak and mold
damage,” which was already preexisting within the building. (See, Exhibit F, Transcript of
Examination Under Oath of Thomas Beaver, September 14, 2011, In the Matter of: Thomas
Beaver, Eager Beaver Construction and Ohio Mutual Insurance Company, Claim No. 11-14570
(“Beaver EUO”), p. 24, 27-31, 35, 39-41, 45-46, 74, 78.) Beaver testified that Liette called him
and said they had to work together in the presentation of the claim. Beaver testified that they sat
in Liette’s truck, and Liette said “we got to keep our stories straight you know. We got to be on
the same page. You can’t say one thing and me say another.” (Beaver EUO, p. 77.) Liette’s
claim was eventually resolved by the entry of default judgment against him in the Shelby County
Court of Common Pleas on March 29, 2012.
During his second examination under oath, Liette was asked questions about the
condition of the roof leading up to the subject 2015 claims with Allstate. Liette initially testified
that there was a “little leak” in the roof at one time, which, from what he understood, he had
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fixed, and then “the same leak came back and I had to refix it again.” (EUO-II, p. 19-20.) Liette
testified: “There were no other leaks in the roof.” (EUO-II, p. 20.)
Liette was asked whether there was any mold problem in the interior of the insured
property. Liette initially testified: “I believe I seen mold on the walls – on one wall one time” in
225 S. Walnut, in or around 2010. (EUO-II, p. 21.) Liette testified that: “*** we usually just
used bleach and water and cleaned it off[,]” (EUO-II, p. 22-23), and that “[w]e didn’t have any
more problems with it.” (EUO-II, p. 130-131.) Liette also testified that “221 had some mold in
it, too, at one time, too[,]” in 2013. (EUO-II, p. 131.) According to Liette, the tenants that had
moved in to 225 S. Walnut in February, 2013, thereafter took care of the mold problem, and
Liette testified he “didn’t see it any more after that.” (EUO-II, p. 131-132.)
The records obtained by Allstate from the Sydney-Shelby County Health Department and
Police Department document that, contrary to Liette’s sworn testimony to Allstate, there were
serious health conditions present within the property going back to at least 2011, and still
continuing through 2013, including a long-standing roof-leak problem, and the presence of mold.
When confronted with the records concerning a prior commercial tenant’s 2011 mold complaint,
Liette testified that the issues were “definitely” corrected in 2011, following that complaint.
(EUO-II, p. 150-152, and Exhibit 31.) However, the April 23, 2013 fire prevention inspection
performed by Lt. Kittle not only found Layman living there, but also that there was mold,
evidence of a long-standing roof leak, collapsed ceiling tiles, and a potential structural issue.
(See, EUO-II, p. 154, and Exhibit 32.) Liette testified that the fire department advised him that
there was no problem with the mold as long as that area was boarded off and no one was using it,
and that he fixed the roof. (EUO-II, p. 160-161.) Liette was again asked about the condition of
the roof, as of the time that Layman’s husband died in June, 2015, and whether there were any
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signs of leaking anywhere. Liette responded that he did not remember, but if there was, it was
something “minute.” (EUO-II, p. 169-170.)
Layman has since confirmed in her deposition that she observed mold inside of her own
apartment as 223 S. Walnut, and what looked like a roof leak. (Layman Dep. p. 31-32.) Layman
testified that she told Liette about it, and although she recalled “they” did some repairs to some
parts of the roof after that, “they” did not repair all of the roof. (Layman Dep. p. 33.) The fact
that there was significant, long-standing damage within the insured structure has also since been
confirmed through Beaver’s 2011 Examination Under Oath in the United Ohio case. (Beaver
EUO, p. 24, 27-31, 35, 39-41, 45- 46.)
II.
STANDARD OF REVIEW
The standard of review applicable to motions for summary judgment is established by
Federal Rule of Civil Procedure 56 and associated case law. Rule 56 provides that summary
judgment “shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show that there is no genuine issue as to
any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed. R.
Civ. P. 56(c). Alternatively, summary judgment is denied “[i]f there are any genuine factual issues
that properly can be resolved only by a finder of fact because they may reasonably be resolved in
favor of either party.” Hancock v. Dodson, 958 F.2d 1367, 1374 (6th Cir. 1992) (quoting Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986)). Thus, a court must enter summary judgment
“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 (1986). The party seeking summary judgment has the initial
burden of informing the court of the basis for its motion, and identifying those portions of the
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pleadings, depositions, answers to interrogatories, admissions and affidavits which it believes
demonstrate the absence of a genuine issue of material fact. Id., at 323. The burden then shifts to
the nonmoving party who “must set forth specific facts showing that there is a genuine issue for
trial.” Anderson, 477 U.S., at 250 (quoting Fed. R. Civ. P. 56(e)). Once the burden of production
has shifted, the party opposing summary judgment cannot rest on its pleadings or merely reassert
its previous allegations. It is not sufficient to “simply show that there is some metaphysical doubt
as to the material facts.” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574,
(1986). Rule 56 “requires the nonmoving party to go beyond the pleadings” and present some type
of evidentiary material in support of its position. Celotex Corp., 477 U.S., at 324.
In determining whether a genuine issue of material fact exists, a court must assume as true
the evidence of the nonmoving party and draw all reasonable inferences in the favor of that party.
Anderson, 477 U.S., at 255. If the parties present conflicting evidence, a court may not decide
which evidence to believe by determining which parties’ affiants are more credible. 10A Wright
& Miller, Federal Practice and Procedure, § 2726. Rather, a court must leave credibility
determinations to the fact-finder. Id.
Both parties seek summary judgment on claims brought under Ohio law. In reviewing an
Ohio claim, the Court must apply the law of Ohio, as interpreted by the Supreme Court of Ohio.
Northland Ins. Co. v. Guardsman Prods. Inc., 141 F.3d 612, 617 (6th Cir. 1998). Specifically, the
Court must apply the substantive law of Ohio “‘in accordance with the then-controlling decision
of the highest court of the State.’” Imperial Hotels Corp. v. Dore, 257 F.3d 615, 620 (6th Cir.2001)
(quoting Pedigo v. UNUM Life Ins. Co., 145 F.3d 804, 808 (6th Cir.1998). Also, to the extent that
the highest court in Ohio has not addressed the issue presented, this Court must anticipate how
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Ohio’s highest court would rule. Id. (quoting Bailey Farms, Inc. v. NOR-AM Chem. Co., 27 F.3d
188, 191 (6th Cir. 1994).
Finally, in ruling on a motion for summary judgment, “[a] district court is not ... obligated
to wade through and search the entire record for some specific facts that might support the
nonmoving party’s claim.” InterRoyal Corp. v. Sponseller, 889 F.2d 108, 111 (6th Cir.1989). Thus,
in determining whether a genuine issue of material fact exists on a particular issue, the court is
entitled to rely upon the Rule 56 evidence specifically called to its attention by the parties.
III.
ANALYSIS
Defendant Allstate Insurance Company asserts that its policy with Plaintiff American
Land Investments is void because American Land Investments, whose sole shareholder is Duaine
Liette, violated the policy’s “Misrepresentation, Fraud or Concealment” provision, which reads:
This Coverage Part is void in case of any fraud by you as it
relates to this Coverage Part at any time. It is also void if you or
any other insured, at any time, intentionally conceal or
misrepresent a material fact concerning:
1. This Coverage Part;
2. The Covered Property;
3. Your interest in the Covered Property; or
4. A claim under this Coverage Part.
(Exhibit G, Excerpt of Allstate Policy’s Commercial Property Conditions (Form CP 00 90 07
88), Bates Stamp p. 002947.)
“‘Concealment or fraud clauses are fully enforceable under Ohio law.’” Hague v. Allstate
Property & Cas. Ins. Co., No. 3:13 CV 2677, 2014 WL 5465841 *7 (N.D. Ohio Oct. 28, 2014)
(quoting McCurdy v. Hanover Fire & Casualty Insurance Company, 964 F.Supp.2d 863, 869
(N.D. Ohio 2013)). In order to void the contract due to fraud or concealment, the
misrepresentation must be material. Id. “‘[A] misrepresentation will be considered material if a
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reasonable insurance company, in determining its course of action, would attach importance to
the fact misrepresented.’” Id. (quoting Latimore v. State Farm Fire and Casualty, Company,
2012 WL 3061263, at *4 (N.D. Ohio 2012) (quoting Abon, Ltd. v. Transcon Insurance
Company, 2005 WL 1414486, *13 (Ohio App. Ct. June 16, 2005), in turn quoting Long v.
Insurance Company of North America, 670 F.2d 930, 934 (10th Cir. 1982)). The subject of the
misrepresentation “need not ultimately prove to be significant to the disposition of the claim, so
long as it was reasonably relevant to the insurer’s investigation at the time.” Id. (citing Abon,
2005 WL 1414486, at *13).
While “[t]he materiality of a misrepresentation is a mixed question of law and fact that
under most circumstances should be determined by the trier of fact[,]” id, citing McCurdy, where
“there is no jury question[,]” the court may determine the issue of misrepresentation as a matter
of law. Hague, at *8 (finding Allstate properly denied the plaintiff insured’s claim because the
plaintiff made material misrepresentations during the post-loss investigation, and found that
Plaintiff had made material misrepresentations to Allstate as a matter of law).
Moreover,
“The requirement that a misrepresentation be material is satisfied,
in the context of an insurer’s post-loss investigation, if the false
statement concerns a subject relevant and germane to the insurer’s
investigation as it was then proceeding. Accordingly, false answers
are material if they might have affected the attitude and action of
insurer, and they are equally material if they may be said to have
been calculated either to discourage, mislead, or deflect the
company’s investigation in any area that might seem to the
company, at that time, a relevant or productive area to investigate.
*** Since the purpose of requiring answers to questions is to protect
the insurer against false claims, the materiality of false answers
should be judged at time of the misrepresentation, and not at time of
trial.” Id., citing 6 Russ & Segalia, Couch on Insurance (3d Ed.
2005), § 197:16 (footnotes omitted).
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Nationwide Mut. Ins. Co. v. Skeens, Miami App. No. 07-CA-29, 2008-Ohio-1875, 2008 WL
1759101 at ¶10 (Apr. 18, 2008).
The Court concludes that there is no genuine issue of material fact but that Liette, as the
sole member of Plaintiff, American Land Investments, LLC, concealed material facts, and made
material misrepresentations in his examination under oath, which “concern[ed ] subject[s]
relevant and germane to [Allstate’s] investigation as it was then proceeding[,]” “might have
affected the attitude and action of [Allstate,]” and/or were “calculated either to discourage,
mislead, or deflect [Allstate’s] investigation in *** area[s] that ***, at that time, [were] relevant
or productive area[s] to investigate[.]” Id.
Liette concealed from Allstate that he did not know Layman was living at the property at
the time of the reported losses; concealed facts underlying the 2011 insurance claim; and
concealed his knowledge of the condition of the property before he reported the structural
damage claim to Allstate. These subjects were all material to Allstate’s investigation of possible
witnesses who may have had knowledge about the reported vandalism losses or information
helpful to the investigation of the reported losses; the condition of the property as it related to the
value of the claim; and whether there was a motive for the presentation of a fraudulent insurance
claim. Accordingly, Allstate is entitled to summary judgment on Plaintiff’s breach of contract
claim as a matter of law.
Also, Allstate was reasonably justified in denying Plaintiff’s claims pursuant to the
“Misrepresentation, Fraud or Concealment” provision of Plaintiff’s Allstate Policy, based on
Plaintiff’s material misrepresentations.
“[A]n insurer has the duty to act in good faith in the handling and
payment of the claims of its insured. McCurdy, supra, 964 F.
Supp.2d at 874. An insurer fails to exercise good faith in processing
an insurance claim when ‘its refusal to pay the claim is not
16
predicated upon circumstances that furnish reasonable justification
therefor.’ Corbo Properties, Ltd v. Seneca Insurance Company,
Incorporated, 771 F.Supp.2d 877, 887 (N.D. Ohio 2011) (citing
Zoppo v. Homestead Insurance Company, 71 Ohio St.3d 552, 554,
644 N.E.2d 397, 400 (1994); Rose v. Hartford Underwriters
Insurance Company, 203 F.3d 417, 421 (6th Cir. 2000)). Denial of
a claim is not reasonably justified when it is done arbitrarily and
capriciously. Id. (See Hoskins v. Aetna Life Insurance Company, 6
Ohio St.3d 272, 277, 452 N.E.2d 1315, 1320 (1983); Thomas v.
Allstate Insurance Company, 974 F.2d 706, 711 (6th Cir. 1992)).
However, denial of a claim may be reasonably justified when ‘the
claim was fairly debatable and the refusal was premised on either
the status of the law at the time of the denial or the facts that gave
rise to the claim.’ Id. (citing Tokles & Son v. Midwestern Indemnity
Company, 65 Ohio St.3d 621, 630, 605 N.E.2d 936, 943 (1992);
Maxey v. State Farm Fire & Casualty Company, 689 F. Supp. 2d
946, 953 (S.D. Ohio 2010)). ‘The test, therefore, is not whether the
defendant’s conclusion to deny benefits was correct, but whether the
decision to deny benefits was arbitrary or capricious, and there
existed a reasonable justification for the denial.’” Id. (citing Thomas,
supra, 974 F.2d at 711).
Hague, at *8:
Allstate was reasonably justified in denying Plaintiff’s claims for breach of the
“Concealment or Fraud” provisions of Plaintiff’s Allstate policy. Plaintiff, through Liette,
concealed material facts, and made material misrepresentations in his examination under oath,
which were material to Allstate’s investigation. Liette had the only key to the warehouse at 221
S. Walnut (EUO-I, p. 147); and Mary Layman heard the sound of a chain saw operating in the
warehouse two to three weeks prior to the date of the reported loss of November 19, 2015; and
Layman did not hear the sound of chain saws on the date of the reported loss. These facts justify
Allstate’s conclusion that Liette was responsible for the structural damage to posts and beams of
a structure with a leaking roof and mold issues that he was unable to sell for “two-plus years”
before October, 2015. (EUO-II, p. 192.)
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There is no evidence tending to show a lack of good faith on the part of Allstate in the
handling of Plaintiff’s claim. Rather, the circumstances provided reasonable justification for
Allstate’s denial. At the very least, the claim was “fairly debatable.” For these reasons, Allstate
is further entitled to summary judgment on Plaintiff’s bad faith claim. See, id.
CONCLUSION
Allstate is entitled to summary judgment on American Land Investments claim that
breached the insurance contract by failing to pay two claims because the insurance contract
contained a “concealment or fraud” clause that Allstate is entitled to enforce. Allstate is entitled
to summary judgment on the claim that it lacked good faith in its handling of the claims because
the circumstances provided reasonable justification for Allstate’s denial. Finally, for these same
reasons, Allstate is entitled to summary judgment on Plaintiff’s claim for declaratory judgment
as to how Allstate should disburse payments. Thus, the Court GRANTS Defendant Allstate’s
Motion for Summary Judgment. (ECF 37). The Clerk is ORDERED to enter judgment in favor
of Allstate and against American Land Investments on all claims and to TERMINATE this case
from the dockets of the United States District Court, Southern District of Ohio, Western Division
at Dayton.
DONE and ORDERED in Dayton, Ohio, this Tuesday, March 19, 2019.
s/Thomas M. Rose
________________________________
THOMAS M. ROSE
UNITED STATES DISTRICT JUDGE
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