Newport News Holdings, LLC v. Great American Insurance Company
Filing
70
OPINION & ORDER denying 39 Motion for Summary Judgment; denying 50 Motion for Partial Summary Judgment. Signed by District Judge Henry C. Morgan, Jr., on 6/25/18. (bpet)
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
Newport News Division
NEWPORT NEWS HOLDINGS, LLC,
Plaintiff,
V.
Civil Action No. 4;17cvl24
GREAT AMERICAN INSURANCE COMPANY,
d/b/a Great American Insurance Group,
Defendant.
OPINION & ORDER
This matter comes before the Court on Plaintiff Newport News Holdings, LLC's
("Newport News Holdings" or "Plaintiffs") Motion for Partial Summary Judgment ("Plaintiffs
Motion"), Doc. 50, and Defendant, Great American Insurance Company's ("GAIC", or
"Defendanf) Motion for Summary Judgment ("Defendant's Motion"), Doc. 39 (collectively
"Motions for Summary Judgment). For the reasons stated herein, the Court DENIES both
Motions for Summary Judgment.
I.
BACKGROUND & PROCEDURAL HISTORY
This case involves Plaintiff, the owner of a hotel in Newport News, suing Defendant, its
insurance company, for denying coverage of damage that occurred as a result of vandalism to its
hotel. See Doc. 1, Ex. 1 ("CompL").
Plaintiff filed its complaint in the Circuit Court for the City of Newport News on
September 26, 2017. See Compl. Defendant timely removed the case to this Court on October
31, 2017. Doc. 1. On November 27, 2017, the Parties joints moved to bifurcate the bad faith
claims from the remainder of the insurance claims.
bifurcation on November 28, 2017. Doc. 14.
1
Doc. 13.
The Court GRANTED that
On November 30, Plaintiff filed a Motion to Quash Defendant's subpoena duces tecum in
regard to Plaintiffs expert witness. Doc. 15. On January 31, 2018, this Court entered an Order
GRANTING Plaintiffs Motion to Quash. Doc. 22.
On March 9, 2018, Plaintiff filed a Motion to Compel Discovery Responses from
Defendant. Doc. 24. On April 12, 2018, Defendant filed a Cross-Motion to Compel Discovery
from Plaintiff. Doc. 30. On April 26, 2018, the Court heard oral argument on Plaintiff and
Defendant's Motions to Compel. Doc. 36. On May 3, 2018, this Court entered an Order
GRANTING Plaintiffs Motion to Compel IN PART and GRANTING Defendant's Motion to
Compel IN PART. Doc. 38. Defendant and Plaintiff filed their respective Motions for Summary
Judgement and Partial Summary Judgment on May 14, 2018. Docs. 39, 50. On May 14, 2018,
this Court also entered an Order for Expedited Briefing on Plaintiff and Defendant's Motions for
Summary Judgment and Partial Summary Judgment. Doc. 49. Plaintiff and Defendant filed
responses in Opposition to their respective Motions for SummaryJudgment and Partial Summary
Judgment on May 24, 2018. Docs. 59, 60. Plaintiff and Defendant replied on May 29, 2018.
Docs. 61,62.
II. LEGAL STANDARDS
A. Summary Judgment
Summaryjudgment under Rule 56 is appropriate only when the court, viewing the record
as a whole and in the light most favorable to the nonmoving party, determines that no genuine
issue of material fact exists and that the moving party is entitled to judgment as a matter of law.
Fed. R. Civ. P. 56; see, e.g.. Celotex Corp. v. Catrett. 477 U.S. 317, 322-24 (1986); Anderson v.
Libertv Lobbv. Inc.. 477 U.S. 242, 248-50 (1986); Terry's Floor Fashions v. Burlington Indus..
763 F.2d 604, 610 (4th Cir. 1985). Once a party has properly filed evidence supporting the
motion for summary judgment, the nonmoving party may not rest upon mere allegations in the
pleadings but must instead set forth specific facts illustrating genuine issues for trial. Celotex.
477 U.S. at 322-24. Such facts must be presented in the form of exhibits and swom affidavits.
Failure to rebut the motion with such evidence will result in summary judgment when
appropriate. "[T]he plain language of Rule 56(c) mandates the entry of 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." Id
at 322.
A mere scintilla of evidence is insufficient to withstand a motion for summary judgment.
Rather, the evidence must be such that the factfinder reasonably could find for the nonmoving
party. S^ Anderson. 477 U.S. at 252. Although the court must draw all justifiable inferences in
favor of the nonmoving party, in order to successfully defeat a motion for summaryjudgment, a
nonmoving party cannot rely on "mere belief or conjecture, or the allegations and denials
contained in his pleadings." Dovie v. Sentry Ins.. 877 F. Supp. 1002, 1005 (E.D. Va. 1995)
(citing Celotex. 477 U.S. at 324).
B. Applicable Law
A federal court sitting in diversity jurisdiction must apply the substantive law of the
forum state, including that state's choice of law rule. Erie R. Co. v. Tompkins. 304 U.S. 64, 78
(1938). "Under Virginia law, a contract is made when the last act to complete it is performed,
and in the context of an insurance policy, the last act is the delivery of the policy to the insured."
Res. Bankshares Corp. v. St. Paul Mercury Ins. Co.. 407 F.3d 631, 635-36 (4th Cir. 2005) (citing
Seabulk Offshore. Ltd. v. Am. Home Assurance Co.. 377 F.3d 408, 419 (4th Cir. 2004);
Buchanan v. Doe, 246 Va. 67, 431 S.E.2d 289, 291 (1993) ("generally, the law of the place
where an insurance contract is written and delivered controls issues as to its coverage.")). It is
undisputed that the contract for insurance was delivered and executed in Virginia.
Under Virginia law, when the terms in a contract are clear and unambiguous, then the
contract is construed according to its plain meaning. TravCo Ins. Co. v. Ward. 284 Va. 547, 552,
736 S.E.2d 321, 325 (2012). "Words that the parties used are normally given their usual,
ordinary, and popular meaning. No word or clause in the contract will be treated as meaningless
if a reasonable meaning can be given to it, and there is a presumption that the parties have not
used words needlessly." Id, (citing Citv of Chesapeake v. States Self-Insurers Risk Retention
Group. Inc.. 271 Va. 574, 579, 628 S.E.2d 539, 542 (2006) (internal quotations omitted)).
The question of whether a writing is ambiguous is a question of law for the Court.
Pennsvlvania Nat. Mut. Cas. Ins. Co. v. Block Roofing Corp.. 754 F. Supp. 2d 819, 823-24
(E.D. Va. 2010) (citing Riverton Investment Corp. v. United States. 170 F.Supp.2d 608, 613
(W.D.Va.2001) (citing Virginia law). "A contract is not ambiguous merely because the parties
disagree as to the meaning of the terms used." TM Delmarva Power. L.L.C. v. NCP of Virginia.
L.L.C.. 263 Va. 116, 557 S.E.2d 199, 200 (2002). The Court may not strain to find ambiguities
in a policy provision. Pennsvlvania Nat. Mut. Cas. Ins. Co.. 754 F. Supp.2d at 823. A policy
provision is ambiguous only when, in context, it is capable of more than one reasonable
meaning. Id Further, Virginia law construes ambiguities in insurance contracts against the
msurer:
Insurance policies are contracts whose language is ordinarily selected by insurers
rather than by policyholders. The courts, accordingly, have been consistent in
construing the language of such policies, where there is doubt as to their meaning,
in favor of that interpretation which grants coverage, rather than that which
withholds it. Where two constructions are equally possible, that most favorable to
the insured will be adopted. Language in a policy purporting to exclude certain
events fi"om coverage will be construed most strongly against the insurer.
Gov't Employees Ins. Co. v. Moore. 266 Va. 155,165, 580 S.E.2d 823, 828 (2003).
III. ANALYSIS
A. Undisputed Facts
On November 13, 2015, Plaintiff purchased a property located at 6128 Jefferson Ave.,
Newport News, VA 23605 ("The Hotel"), and obtained a one-year commercial property policy
from Defendant to insure the Hotel against all casualty risks ("The Policy"). Doc. 51 at 5, 6;
Doc. 40 at 6. Plaintiff paid the full premium for the insurance. Doc. 51 at 6. In the process of
obtaining the insurance. Plaintiff, through insurance agents, told Defendant that the Hotel was
not currently operational, but that Plaintiff expected to open the Hotel on January 1, 2016, after
Plaintiff was able to make "any minor/cosmetic repairs necessary." Doc. 52-10 at 2; Doc. 41-4
at 3.
In early December, Plaintiff had the property inspected by the Health Department, and
had a contractor visit the property to evaluate how long it would take to complete repair work on
the property. Doc. 51 at 9-10. Between November 13,2015 and January 26, 2016, police visited
the Hotel on several occasions to investigate incidents of trespass and vandalism. Doc. 51 at 11 -
12. During part of this time, two of the Hotel's owners, Bharat Patel ("B. Patel"), and Sanjay
Patel ("S. Patel") (collectively "the Hotel Owners"), were out of the country from mid-December
until late January. Doc. 51 at 10. Therefore, they had an individual named Nick Sheth
("Sheth"), visit the property while they were gone.' Id Atthe end of December, Sheth became
aware that there were vandals on the property. Doc. 51 at 11. The police contacted Sheth on
December 30, 2015 regarding a possible theft at the hotel. Id. On January 14, 2016, the police
' It isundisputed that Nick Sheth visited the Property during thetime period that B. Patel and S. Patel were
out of the country, however, as noted in the "Disputed Facts" section, the parties dispute what Sheth did
when he visited the Property.
came to the building again, this time in regard to a broken pipe that had caused water to release
in the kitchen. Id at 12. At that time, Sheth cut off the water supply to the kitchen. Doc. 51 at
12. B. Patel and S. Patel returned from their trip on or about January 22 and January 25, 2016.
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On the morning of January 26, 2016, two persons were arrested leaving the hotel, and the
following morning, Sheth discovered that the water supply line of the toilet in room 510 had
been cut, causing water to leak down to the first floor (the "January 26 Loss"). Id; See also Doc.
40 at 2. Plaintiff contacted GAIC on January 27, 2016, and Defendant hired an adjuster to
inspect the property. The adjuster inspected the property on January 29, 2016 and February 3,
2016. Doc. 40 at 2. On February 11, 2016, the adjuster provided Plaintiff with a timeline of
events based on their conversations regarding the January 26 Loss. Id at 7. Defendant also
hired various individuals to provide an estimate for the scope of damage related to the cut toilet
supply line and the any repairs related to the cut toilet supply line. Doc. 40 at 7. Their report
determined that the losses were valued at $657,187.88. Doc. 51 at 15. On March 7, 2017,
Plaintiff submitted its Sworn Proof of Loss, in which it stated that the full cost to repair or
replace the Building damage caused by the January 26, 2016 vandalism is $1,582,832.12 and the
cost to repair or replace the Business Personal Property is $405,832.66. Doc. 40, Ex. 14. Their
Sworn Proof of Loss was based on an estimate they obtained from Atlantic Estimating, LLC and
Rollins Inventory. Doc. 40 at 9; Doc. 59 at 13. On May 25, 2017, Defendant denied Plaintiffs
insurance policy citing the following provisions:
G. Vacancy
1. Description of Terms
a. As used in the Vacancy Condition, the term building and the
term vacant have the following meaning set forth in (1) and (2)
below..,.
(2) When this policy is issued to the owner or general
lessee of a building, building means the entire building.
Such building is vacant unless at least 31% of its total
square footage is:
(a) rented to a lessee or sub-lessee and used by the lessee or
sub-lessee to conduct its customary operations; and/or
(b) used by the building owner to conduct customary
operations.
b. Buildings under construction or renovation are not considered
vacant.
2. Vacancy Provisions
If the building where loss or damage occurs has been vacant for
more than 60 consecutive days before that loss or damage occurs:
a. We will not pay for loss or damage caused by any of the
following even if they are Covered Causes of Loss:
(1) vandalism;
(2) sprinkler leakage, unless you have protected the system against
freezing;
(3) building glass breakage;
(4) water damage;
(5) theft; or,
(6) attempted theft.
Doc. 40 at 27-28.
A. Concealment, Misrepresentation or Fraud
This Coverage Part is void in any case of 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.
Doc. 40 at 12.
B. Disputed Facts
There are several facts that the parties dispute, including but not limited to:
1. Whether Plaintiffs, through Nimesh "Nick" Sheth, performed caulking and cleaning work at
the Hotel during the months prior to the loss;
2. Whether caulking and cleaning amounts to performing "renovations" under the Policy;
3. Whether the Hotel Owners disclosed to Defendant's adjuster the fact that Plaintiff had been
doing caulking and cleaning work at the Hotel prior to the loss;
4. Whether Plaintiffs Sworn Proof of Loss attempted to claim damage to the Hotel that
exceeded the January 26 Loss;
5. Whether Plaintiff disclosed to GAIC that it was claiming loss that occurred prior to January
26, 2016;
6. Whether Plaintiff intended to conceal the timing or scope of the vandalism that occurred prior
to January 26,2016 in its initial interview with Defendant's insurance adjustor.
C. Waiver or Applicability of the Vacancy Provision
i. Summary ofParties' Arguments
Plaintiff argues that it is entitled to partial summary judgment on the issue of liability
because Defendant is estopped from relying on its vacancy provision, while Defendant argues
that it is entitled to summary judgment because: 1) it is not estopped from relying on the vacancy
provision and 2) the undisputed facts show that the Property was vacant. Doc. 40 ("Defendant's
Motion"); Doc. 51 ("Plaintiffs Motion").
a. Plaintiff's Motion for Summary Judgment on Vacancy
Plaintiff argues that the undisputed facts show that Defendant waived its vacancy
provision is thereby estopped from using the defense that the property was vacant at the time of
the alleged loss. Doc. 51 at 22. In support of its argument, Plaintiff cites Roval Indem. Co. v.
Hook, which held that",. .provisions as to forfeiture and avoidance of breach of conditions being
for [a company's] benefit, may be waived by it, and the company is estopped to set up forfeitures
when, with such knowledge, it issues a policy and accepts a premium." 155 Va. 956, 965, 157
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S.E. 414, 417 (1931).
Plaintiff also argues that because Virginia law construes language in
insurance policies in favor of liability of the insured, that Defendant's knowledge that the
property was unoccupied at the time of issuing the coverage waived their right to assert the
vacancy provision. Doc. 51 at 23-24. Plaintiff also alleges that Defendant took the fact that it
was insuring a vacant property into account at the time of issuing the policy because it raised the
insurance premium. Id And, that by increasing the premium. Defendant impliedly waived the
vacancy provision. Id
In response. Defendant contends that Plaintiffs argument against the vacancy policy is
deficient for two reasons. First, Defendant argues that Plaintiff incorrectly cites Virginia law;
and second. Defendant argues that Plaintiff misstated the facts in regard to the e-mail sent to
Angie Mills ("Ms. Mills")- Doc. 60 at 10-13. Defendants cite to an exhibit with the actual e-
mail exchange between Plaintiff and Ms. Mills prior to insuring the property. Id In the e-mail
she states "Let me ask you this, though... if the insured is just now purchasing, then this hotel is
not up and running? That's a big issue because it would almost be a vacant building (and you
know we don't do those)." Def. 0pp. Ex. 2. And, in response to her question. Plaintiff provided
information that the property was expected to open on January 1 after Plaintiff spent forty-five
days making minor repairs. Id
Defendant cites Ruffin v. United States Insurance Co.. 208 Va. 463, 158 S.E.2d 672
(1968)) and argues that when an insurer knows that a property is vacant at the time of issuing the
policy, but is unaware that the property will remain vacant and does not otherwise communicate
to the insured that it is waiving the vacancy provision, the insurer is not estopped from relying on
the vacancy provision. Id; Ruffm. 158 S.E.2d at 674.
The Court FESFDS that Defendant is not estopped from arguing that its vacancy provision
applies because the case law cited by Defendant is on point with its alleged factual circumstances
in this case.
Ms. Mills was told that the building was unoccupied, but that the Insured would spend
the next forty-five (45) days conducting renovations. As in Ruffm. where the court found that
the vacancy provision was not waived when the insurer allegedly did not know that the property
would remain vacant, Ms. Mills allegedly was under the impression that the property would be
up and running within the relevant time period. Defendant also denies that it expressly or
impliedly waived its vacancy provision. And, Ms. Mills' e-mail allegedly communicated that
Defendant would not insure a vacant property and asked further questions to determine whether
the property would somehow fit within in exception.
Plaintiff also argues that the vacancy provision was later waived when Defendant's agent,
Ms. Mills, was notified in late December that the property would not be open by January 1, and
Defendant decided not to cancel the policy on that basis prior to the loss. However, the
Defendant also alleges that it had prepared for an individual to inspect the property in early
January, but that the individual became sick and was unable to do so. Doc. 51 at 9; Doc. 60 at 6-
10. It appears from this allegation that Defendant was in the process of determining whether the
property was indeed vacant at that time, but was unable to do so prior to the loss.
a. Defendant's Motionfor Summary Judgment on Vacancy
Defendant's Motion for Summary Judgment alleges that the undisputed facts show that
the property was vacant because the building was both unoccupied, and no construction or
renovation was being conducted at the property in the sixty days prior to the January 26 Loss.
Doc. 40 at 28-34.
Plaintiff alleges that it performed several tasks that would qualify as
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renovations in the sixty days prior to the January 26 Loss, including caulking and cleaning. Doc.
61 at 6. They also had health inspectors and contractors visit the property. Id Defendant argues
that there was no caulking or cleaning done at the hotel prior to the January 26 Loss. Doc. 40 at
29-31. Defendant submits police cam videos and photographs, which they allege do not show
evidence that those activities were being performed. Doc. 45-1 ("Shaw Ex. 1"); Def. Exs. 11-13.
Defendant also points to several inconsistencies in the testimony of Plaintiffs employee who
allegedly performed the caulking and cleaning. Doc. 40 at 30-31.
The Policy's vacancy provision provides that "buildings under construction or renovation
are not considered vacant." Pi's Ex. 4 at 28. However, the policy does not define the terms
"construction" or "renovation."
Pi's Ex. 4.
Additionally, the determination of whether Plaintiff actually performed the alleged
caulking and cleaning activities rests on the credibility of Plaintiffs witness. Credibility is an
issue to be determined by the trier of fact.
Maeill v. Gulf & Westem Industries. Inc.. 736
F.2d 976, 979 (4th Cir. 1984) ("Summary judgement... is inappropriate if an issue depends upon
the credibility of witnesses, because such credibility can best be determined after the trier of fact
observes the witness' demeanor"). Therefore, viewing the evidence presented in Defendant's
Motion for Summary Judgment in the light most favorable to the Plaintiff, the Court FINDS that
there are genuine issues of material fact in dispute as to whether Plaintiff performed the caulking
and cleaning activities at the hotel and whether these activities amount to "renovations."
D. Applicability of Misrepresentation Provision
i. Summary ofArguments
Defendant argues that it is entitled to Summary Judgment because Plaintiff violated
Defendant's Policy provision regarding misrepresentation or fraud. Doc. 40 at 12.
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Plaintiff argues that Defendant is barred from raising its misrepresentation defense
because Defendant failed to allege fraud with particularity in its responses to Plaintiffs
interrogatories, or in the alternative, that the undisputed facts show that Plaintiff did not make a
material misrepresentation. See Doc. 40; Doc. 51.
a. Plaintiff's Motionfor Partial SummaryJudgment on Misrepresentation Defense
At oral argument on Plaintiffs Motion to Compel, this Court FOUND that Defendant had
failed to allege its fraud defense with sufficient particularity in its answers to Plaintiffs First Set
of Interrogatories. Doc. 38. As a result, this Court ordered Defendant to provide Plaintiff with
the exact statements, including page and line numbers, of any recorded testimony that Defendant
claimed as the language of the misrepresentation. Id at 9. Plaintiff now argues that Defendant
has violated the Court's Order and that Defendant should be barred from raising its affirmative
defense at trial. Doc. 51 at 30. When the disclosure was made on May 2, 2018, pursuant to the
Court's order. Defendant identified 134 pages of false testimony, which amounted to over 1000
lines of false testimony. Id Plaintiff contends that because the disclosure of so many lines of
testimony was made after the close of Plaintiffs discovery. Plaintiff is entitled to one of the
remedies outlined in Rule 37 of the Federal Rules of Civil Procedure. Doc. 51 at 29-30 (citing
Mutual Federal Savings and Loan Association v. Richards & Associates. Inc.. 872 F.2d. 88, (4th
Cir. 1989) for the proposition that courts are permitted wide discretion to address failures to
comply with discovery orders pursuant to Rule 37).
Rule 37 of the Federal Rules of Federal Procedure states that "If a party fails to provide
information...the party is not allowed to use that information...unless the failure was
substantially justified or is harmless." Fed. R. Civ. P. 37. The rule also provides the court with
alternative sanctions, such as the payment of attorney's fees caused by the failure, informing the
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jury of the failure, or utilizing one of the orders listed in Rule 37(b)(2)(A)(i)-(vi). Id. One of the
orders listed in Rule 37(b)(2)(A)(i)-(vi) mcludes striking a party's affirmative defense where it
has not been alleged with sufficient particularity. Id.
Plaintiff contends that he would have had to do discovery "on the context of and prior
statements concerning each of the subjects of each of these alleged misrepresentations." Doc. 51
at 30. Therefore, Defendant's failure to provide Plaintiff with the misrepresentations until after
the close of discovery prejudiced Plaintiff because Plaintiff deposed Defendant's witnesses
without being able to ask them about the specific misrepresentations that were later alleged. Id.
at 32.
Defendant responds that the case that Plaintiff cites. Mutual Federal Savings and Loan
Association, illustrates a much more egregious situation where a defendant disobeyed multiple
court orders. Doc. 60 at 16.
The Court DENIES Plaintiffs Motion to Strike Defendant's affirmative defense.
Although the statements were provided at the close of Plaintiffs discovery, they were disclosed
over a month (now two months) prior to trial, which still allows Plaintiff to prepare its witnesses
to address these alleged misrepresentations at trial.
Plaintiff also argues that the undisputed statements provided in Plaintiffs Examinations
Under Oath fail to demonstrate, as a matter of law, that Plaintiff intended to make a material
misrepresentation. Doc. 51 at 34-35. In support of this argument. Plaintiff alleges that Plaintiff
fully cooperated in the investigation, which weighs heavily against Defendant's dispute that
Plaintiff also sought to conceal facts regarding prior vandalism from Defendant.
Id at 35.
Second, Plaintiff contends that there is no way that Defendant can show that it relied on any
alleged misrepresentations because Plaintiff submitted its Swom Proof of Loss after Defendant
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had already independently examined the property and provided its own estimate.
Because
Defendant addresses these arguments in its Motion for Summary Judgment, the Court will
address Defendant's position below.
in. Defendant's Motionfor SummaryJudgment on Misrepresentation Defense
Defendant argues that it is entitled to Summary Judgment because the undisputed facts
show, as a matter of law, that Plaintiff intentionally made materially false statements regarding
its claim of loss. Doc. 40 at 12-22.
Defendant argues that Plaintiff is intentionally misrepresented its claim by submitting a
Sworn Proof of Loss that claimed damage to nearly all of the rooms of the Hotel, when the
evidence shows that nearly all rooms of the hotel could not possibly have been damaged as a
result of the cut toilet line in room 510 on January 26, 2016. Id at 19. In support of its argument
that the inflation was "intentional," Defendant presents a report that was conducted by Plaintiffs
architect and engineer, who found that only nine rooms were damaged from the cut toilet line.
Id. Defendant also points to other allegedly intentional inconsistencies and argues that these
'y
inconsistencies amount to material misrepresentations.
Plaintiff disputes that its architect and engineer will be allowed to offer testimony on the
scope of the loss at trial because the architect and engineer were not disclosed as expert
witnesses during discovery, and the testimony relating to the scope of loss would require expert
testimony. Doc. 59 at 8. Additionally, Plaintiff contends that the Hotel owners innocently relied
^Defendant notes the following facts as misrepresentations: theemployee stated that he never noticed
bubbled paint, even though bubbled paint is visible on the hotel walls in one of the police cam videos; there
were no puddles in the Hotel hallways before January 26, when a video shows a puddle in the hallway
before January 26; there were no stains on the floor in the ballroom area before January 26, when a video
shows stains on the floor before January 26; the damage to the front desk area occurred within a day of the
cut toilet line when a video shows damage in that area before then; that the employee was not aware of cut
or broken water lines in the kitchen before January 27, when the police report indicates that there was a
leak in the kitchen before January 27; that the employee discovered damage caused by the cut toilet line
before discovering water damage to the kitchen, when there is evidence that the kitchen damage occurred
first. Doc. 60 at 21.
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on an estimate that was conducted by their estimator, Atlantic Estimating, LLC, on June 6, 2016,
in submitting their Sworn Proof of Loss, and that the report more accurately claims damage to
only eighty (80) rooms as a result of the January 26 loss instead of nearly all of the rooms. Id at
14.
Plaintiff also avers that there was a vast difference in the Plaintiffs estimate and
Defendant's estimate because Plaintiffs estimator included costs for cleaning due to mold
accumulation that would have been much greater by June than in February. Id. at 15.
Under Virginia law a party alleging fraud must prove those allegations by clear and
convincing evidence. Utica Mut. Ins. Co. v. Preseraves. 2002 WL 1162602 *3 (W.D. Va. May
28, 2002). A material misrepresentation as to the value of an insurance claim will void an
insurance policy. Id at *8. A misrepresentation is material if it "might have affected the attitude
and action of the insurance company, or was calculated [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." Id (citing Fine v. Bellafonte Underwriters Ins.. 725 F.2d 179,
184 (2d. Cir. 1984) (internal quotations omitted). The representation must be made with the
intent to deceive or defraud.
Id
An innocent misrepresentation does not trigger a "false
swearing" provision. Chase v. CAN Ins. Co.. 1990 WL 1100518 *2 (Feb. 28, 1990) (false
statement on proof of loss listed items as "destroyed" but were later recovered).
When an
insured has submitted false information to an insurer, he can recover if he shows that his actions
were not in fact fraudulent. Id
Further, a knowing and intentional overvaluation in sworn proofs of loss voids a policy.
Globe & Rutgers Fire Ins. Co. v. Stallard. 68 F.2d 237, 240 (4th Cir. 1934) (citing Lvkos v.
American Home Ins. Co.. 609 F.2d 314 (7th Cir. 1979) (finding that an insured made fraudulent
15
misrepresentations where insured intentionally listed higher prices in its proof of loss when the
actual amount spent on the items was a lot lower)).
Based on the varying testimony regarding the scope of loss, the Court FINDS that there
are genuine issues of material fact regarding whether Plaintiff submitted its Sworn Statement of
Loss with the intent to produce a false sworn statement. Additionally, the issue of whether
Plaintiffs higher valuations stem from Plaintiffs intent to falsely represent the amount of loss is
an issue to be determined by a jury. See Magill. 736 F.2d at 979 ("Summary judgment is seldom
appropriate in cases which particular states of mind are decisive elements of [a] claim or
defense). Plaintiff has provided several alternate explanations that, if believed by the jury, would
result in a finding in Plaintiffs favor, including the issue of whether Plaintiffs language barrier
or lack of memory due to the length of time between the incidents and the examinations under
oath, explain why there were inconsistencies in Plaintiffs representations.
IV. CONCLUSION
Because the Court FINDS that Defendant is not estopped from relying on its vacancy
provision and that there are genuine issues of material fact as to whether Plaintiffs
miscalculations rise to the level of material misrepresentations or whether Plaintiffs property
was vacant, the Court DENIES Plaintiffs Motion for Partial Summary Judgment, Doc. 50, and
Defendant's Motion for Summary Judgment, Doc. 39.
The Clerk is REQUESTED to send a copy of this Opinion & Order to all counsel of
record.
It is so ORDERED.
/s/
Henry Coke Morgan, Jr.
Senior United States District Judge
HENRY COKE MORGAN, JR. f jT tf'
SENIOR UNITED STATES DISTRICT JUDGE
16
Norfolk, Virginia
June '.^17^2018
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