American National Property and Casualty Company v. Moore et al
Filing
130
MEMORANDUM OPINION AND ORDER denying defendant Barbara Nichols' 100 MOTION for Summary Judgment. Signed by Judge John T. Copenhaver, Jr. on 9/4/2015. (cc: counsel of record; any unrepresented parties) (taq)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF WEST VIRGINIA
AT CHARLESTON
AMERICAN NATIONAL PROPERTY
AND CASUALTY COMPANY,
Plaintiff,
v.
Civil Action No. 2:14-10340
PAUL MOORE and
BARBARA NICHOLS,
Defendants.
MEMORANDUM OPINION AND ORDER
Pending is a motion for summary judgment filed July 10,
2015, by defendant Barbara Nichols.
I.
Defendants Paul Moore (“Moore”) and Barbara Nichols
(“Nichols”), husband and wife, have an interest in a home, titled
in Nichols’ name, and its contents, situate at 38 Church Street in
Blackberry City, West Virginia.
On May 30, 2013, Moore attempted
to contact American National’s local agent, Theresa Evans, by
phone regarding a homeowner’s policy.
assistant, Lesley Reeves (“Reeves”).
He reached Evans’
Reeves asked Moore certain
pre-application questions during the telephone call.
Moore has
testified that he was not asked whether he had previously been
convicted of a felony.
Reeves contends otherwise, noting that the
form she was using at the time has the word “no” circled after the
question “Been Convicted of any type of Felony[?]” (Pl.’s Mot.
Summ. J. Ex. C.).
After Reeves mailed Moore and Nichols certain policy
proposals, Moore contacted her and advised they wished to take out
a policy.
Reeves prepared a formal American National application
for coverage using the information she learned from Moore on May
30, 2013.
She mailed the four-page, 22-question, pre-completed
application to Moore and Nichols for their signatures, attaching
“sticky notes” indicating where they were to sign, but not
indicating they needed to read the document.
Question number five
on page two asked “Have you or any member of your household ever
been convicted of a felony or drug possession.”
J. Ex. D at 2.).
(Id.).
(Pl.’s Mot. Summ.
Reeves checked the box next to the word “No.”
Moore and Nichols signed the application and returned it.
On October 19, 2013, Moore learned of a fire at the
insured premises after being contacted by a neighbor.
was a total loss.
The home
Moore called American National’s claims line
the same day to report the fire.
Moore believed the fire was the
result of arson and noticed his fireproof safe was missing.
On
December 17, 2013, the insureds presented a Sworn Statement in
Proof of Loss in the amount of $112,500, including the policy
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limits of $75,000 for the dwelling and $37,500 for the personal
property.
Four months after the fire, Moore and Nichols received a
February 27, 2014, letter from American National voiding their
policy.
American National had learned by investigation that Moore
was a convicted felon, having two prior convictions for robbery.
On February 14, 2014, American National instituted this
declaratory judgment action pursuant to 28 U.S.C. § 2201(a).
It
seeks an order voiding the policy under West Virginia Code section
33-6-7 based upon what it contends was Moore’s false response
respecting his prior felony convictions.
provided any false response.
Moore denies that he
Diversity jurisdiction of this
action is proper inasmuch as plaintiff and defendants are diverse,
and the amount in controversy exceeds the $75,000 amount as
required under 28 U.S.C. § 1332(a).
This action had reached its final settlement conference
on April 27, 2015, when the court determined that discovery would
be reopened so new issues raised in defendants’ jury instructions
could be addressed.
These included the contention that one of the
defendants could be found to be an “innocent co-insured,” entitled
to recovery under the American National policy, if only the other
was found to have committed a material misrepresentation in the
application.
3
In her summary judgment motion, Nichols contends that
she is entitled to judgment as a matter of law on the following
issues: (1) that the policy issued to defendants by American
National has less favorable coverage language than the West
Virginia Standard Fire Policy and thus should not be binding, (2)
that Nichols did not commit a material misrepresentation in the
application for the American National policy, and (3) that Nichols
is an innocent co-insured and entitled to coverage under the
American National policy, regardless of any misrepresentation
Moore made.
American National responds that (1) its action is not
based on the language in the policy, but on West Virginia law, (2)
that there is an issue of fact whether Nichols committed a
material representation, (3) and that Nichols cannot recover as an
innocent co-insured because American National seeks to void the
policy ab initio, rather than avoid coverage under a policy
exclusion.1
1American
National also argues in its response that the first
two issues are untimely raised, claiming that Nichols’ arguments
on these issues were not discussed in the pretrial order and were
not among the issues for which discovery was reopened after the
final settlement conference. (Pl.’s Resp. 3-4.); see McLean
Contracting Co. v. Waterman Steamship Corp., 277 F.3d 477, 480
(4th Cir. 2002) (“Failure to identify a legal issue worthy of
trial in the pretrial conference or pretrial order waives the
party's right to have that issue tried.”). However, these issues
are related to the argument that Nichols is an innocent coinsured, which is one of the issues for which discovery was
reopened. Given the court’s determination that Nichols is not
entitled to judgment as a matter of law on these issues for other
reasons, the court need not decide whether these issues are
properly raised.
4
II.
A.
Governing Standard
A party is entitled to summary judgment “if the
pleadings, the discovery and disclosure materials on file, and any
affidavits show that there is no genuine issue as to any material
fact and that the movant is entitled to judgment as a matter of
law.”
Fed. R. Civ. P. 56(c).
Material facts are those necessary
to establish the elements of a party’s cause of action.
Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
A genuine issue of material fact exists if, in viewing
the record and all reasonable inferences drawn therefrom in a
light most favorable to the non-moving party, a reasonable factfinder could return a verdict for the non-movant. Id.
The moving
party has the burden of showing -- “that is, pointing out to the
district court -- that there is an absence of evidence to support
the nonmoving party’s case.”
317, 325 (1986).
Celotex Corp. v. Catrett, 477 U.S.
If the movant satisfies this burden, then the
non-movant must set forth specific facts as would be admissible in
evidence that demonstrate the existence of a genuine issue of fact
for trial.
Fed. R. Civ. P. 56(c); id. at 322-23.
A party is
entitled to summary judgment if the record as a whole could not
lead a rational trier of fact to find in favor of the non-movant.
Williams v. Griffin, 952 F.2d 820, 823 (4th Cir. 1991).
5
Conversely, summary judgment is inappropriate if the
evidence is sufficient for a reasonable fact-finder to return a
verdict in favor of the non-moving party.
248.
Anderson, 477 U.S. at
Even if there is no dispute as to the evidentiary facts,
summary judgment is also not appropriate where the ultimate
factual conclusions to be drawn are in dispute.
Overstreet v. Ky.
Cent. Life Ins. Co., 950 F.2d 931, 937 (4th Cir. 1991).
A court must neither resolve disputed facts nor weigh
the evidence, Russell v. Microdyne Corp., 65 F.3d 1229, 1239 (4th
Cir. 1995), nor make determinations of credibility.
Murphy, 797 F.2d 179, 182 (4th Cir. 1986).
Sosebee v.
Rather, the party
opposing the motion is entitled to have his or her version of the
facts accepted as true and, moreover, to have all internal
conflicts resolved in his or her favor.
Charbonnages de France v.
Smith, 597 F.2d 406, 414 (4th Cir. 1979).
Inferences that are
“drawn from the underlying facts . . . must be viewed in the light
most favorable to the party opposing the motion.”
v. Diebold, Inc., 369 U.S. 654, 655 (1962).
6
United States
B.
The American National Policy Language Deviation from the
Standard Fire Policy
Nichols first asserts that the West Virginia Standard
Fire Policy (“Standard Policy”) language on exclusions in coverage
due to fraud or misrepresentations should control, because the
relevant language in American National’s policy is less favorable
to the insured.
Like many states, West Virginia requires by law
certain minimum requirements for fire insurance policies;
currently West Virginia requires adherence to the 1943 New York
Standard Fire Policy.
W. Va. Code § 33-17-2. This section
provides, in pertinent part:
No policy of fire insurance covering property located in West
Virginia shall be made, issued or delivered unless it
conforms as to all provisions and the sequence thereof with
the basic policy commonly known as the New York standard fire
policy, edition of one thousand nine hundred forty-three,
which is designated as the West Virginia standard fire
policy; except that with regard to multiple line coverages
providing casualty insurance combined with fire insurance
this section shall not apply if the policy contains, with
respect to the fire portion thereof, language at least as
favorable to the insured as the applicable portions of the
standard fire policy and such multiple line policy has been
approved by the commissioner.
Id.
The Standard Policy’s exclusion for fraud or concealment by
an insured provides:
[t]his entire policy shall be void if, whether before or
after a loss, the insured has willfully concealed or
misrepresented any material fact or circumstance concerning
this insurance or the subject thereof, or the interest of the
insured therein, or in case of any fraud or false swearing by
the insured relating thereto.
(Standard Policy at lines 1-6.).
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Nichols asserts that a difference between the Standard
Policy and the American National policy causes the latter to be
less favorable than the Standard Policy.
Mot. Summ. J. 3.).
(Def.’s Mem. Law Supp.
American National responds that the identified
distinction is irrelevant, because it is not attempting to avoid
coverage based on a provision of the policy, but rather to have
the entire policy declared void ab initio under West Virginia Code
section 33-6-7(b) and (c) because of defendants’ alleged
misrepresentations in the application for the policy.
(Pl.’s
Resp. Def.’s Mot. Summ. J. 5.).
American National is correct.
Inasmuch as American
National is not relying on the language of the American National
policy in this case, Nichols seeks judgment as a matter of law on
a question not at issue in this action
C.
The issue is thus moot.
Material Misrepresentation by Nichols
Nichols next asserts that, as a matter of law, she did
not commit a material misrepresentation by signing the insurance
application without reading it.
Whether an insurance company can
void a policy due to misrepresentations by the insured in the
application is governed by statute in West Virginia:
All statements and descriptions in any application for an
insurance policy or in negotiations therefor, by or in behalf
of the insured, shall be deemed to be representations and not
warranties. Misrepresentations, omissions, concealments of
8
facts, and incorrect statements shall not prevent a recovery
under the policy unless:
* * *
(b) Material either to the acceptance of the risk, or to the
hazard assumed by the insurer; or
(c) The insurer in good faith would either not have issued
the policy, or would not have issued a policy in as large an
amount, or would not have provided coverage with respect to
the hazard resulting in the loss, if the true facts had been
made known to the insurer as required either by the
application for the policy or otherwise.
W. Va. Code § 33-6-7(b) and (c).
In interpreting what constitutes
materiality, the Supreme Court of Appeals of West Virginia has
held:
[I]n order for a misrepresentation in an insurance
application to be material, it must relate to either the
acceptance of the risk insured or to the hazard assumed by
the insurer. Materiality is determined by whether the insurer
in good faith would either not have issued the policy, or
would not have issued a policy in as large an amount, or
would not have provided coverage with respect to the hazard
resulting in the loss, if the true facts had been made known
to the insurer as required either by the application for the
policy or otherwise.
Syl. Pt. 5, Powell v. Time Ins. Co., 181 W. Va. 289, 382 S.E.2d
342 (1989).
Materiality under section 33-6-7 should be determined
by “whether a reasonably prudent insurer would consider a
misrepresentation material to the contract.”
Id. at Syl. Pt. 6.
Nichols argues both that she did not commit a misrepresentation
and that the misrepresentation she is alleged to have committed is
not material.
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1. Whether Nichols Committed a Misrepresentation
On Nichols’ first argument, she relies heavily on a
footnote from a West Virginia Supreme Court case stating that the
court adopted the “majority rule that the insured is not presumed
to know the contents of an adhesion-type insurance policy
delivered to him.”
Nat'l Mut. Ins. Co. v. McMahon & Sons, Inc.,
177 W. Va. 734, 741, 356 S.E.2d 488, 495 n.6 (1987).
Relying on
this principle, and noting that no one from American National
spoke directly with her about the policy, that the “sticky notes”
on the application directed her where to sign and that Reeves did
not instruct her to read the completed application, she argues
that her failure to read the application was, as a matter of law,
not a misrepresentation.2
(Def.’s Mem. 15.).
2Nichols
cites to Morrison v. Allen, 338 S.W.3d 417, (Tenn.
2011), as a persuasive authority. While the decisions of another
state’s high court can be instructive, Morrison dealt with a postverdict appeal where the trial court had determined that the
defendant insurance agent failed to ask plaintiff a question on
the insurance application and the plaintiff had not read the
application containing the incorrect answer the defendant had
marked for that question. In the instant case, it is not
established fact that Reeves failed to ask Moore about his
criminal record, nor is it established that Nichols did not read
the application. Nichols also cites to West Virginia’s definition
of separate property at West Virginia Code section 48-1-237 and a
California Court of Appeal case; neither of these authorities has
any bearing on the merits of Nichols argument, so they do not
merit discussion.
10
American National counters that there is a factual
dispute over whether Nichols actually read the application.
American National points to Nichols’ deposition testimony
indicating she was unsure whether she had read the application:
Q. Okay. So it’s just as possible that you did read over it
before you signed it as saying that you didn’t do that,
correct?
A. That is an absolutely fair statement, yes.
Q. Okay
A. I could have – could have or could not have.
(Pl.’s Resp. Ex. 1, Nichols Dep. 52:3-9.).
American National also
points to Nichols’ signature on the insurance application on the
page containing a certification that the included statements were
true.3
(Pl.’s Mot. Summ. J. Ex. D.).
Viewing this evidence in
the light most favorable to American National, the factfinder
could determine Nichols actually read the application.
3As
As
to Nichols’ argument that she had no duty to read the
application, American National notes that the McMahon rule was
announced in a footnote, and points to this court’s analysis in
Nowsco Well Service, Ltd. v. Home Insurance Co. that McMahon did
not explicitly reverse the existing rule that “‘[a] party to a
contract has a duty to read the instrument.’” 799 F. Supp. 602,
610 (S.D.W. Va. 1991) (quoting Syl. Pt. 5, Soliva v. Shand,
Morahan & Co., 176 W. Va. 430, 345 S.E.2d 33 (1986)), aff'd, 974
F.2d 1331 (4th Cir. 1992). The Supreme Court of Appeals of West
Virginia has also declined to use McMahon to absolve an insured
from the duty to read a policy where the language was not “too
complex for the average person to understand.” Arbogast v.
Nationwide Mut. Ins. Co., 189 W. Va. 27, 31, 427 S.E.2d 461, 465
(1993). American National argues that, far from being a
voluminous, adhesion-style contract, the document in this case was
only a four page application. (Pl.’s Resp. 9.). Given that there
is a factual dispute as to whether Nichols actually read the
American National application, it is unnecessary to decide whether
McMahon exempted her from the duty to read it.
11
Nichols’ argument assumes that she did not read the application, a
factual dispute remains as to whether she committed a
misrepresentation.
2. Materiality of Nichols’ Misrepresentation
Nichols also contends that her alleged misrepresentation
was not material.
She argues that Moore’s felony convictions for
robbery “in no way relates to the hazard assumed” for the American
National policy.
(Def.’s Mem. 16.).
American National responds that it has provided evidence
sufficient to prove it would not have issued the policy to
defendants.
American National points to their underwriting guide
which lists “[d]wellings owned or occupied by a person(s)
convicted of a felony or drug possession” as “Ineligible
Exposures.”
(Pl.’s Mot. Summ. J. Ex H at 1.).
American National
also cites to the affidavit of its Senior Underwriter Jason
Buckert, in which he affirms that American National does not
insure homes “occupied by a person(s) with a felony conviction”
and that the company would have denied defendants’ application if
it had been informed of Moore’s felonies.
G.).
(Pl.’s Mot. Summ. J. Ex
Against Nichols’ bald assertion that “a robbery conviction
in no way relates to the hazard assumed for a fire/home owners
policy,” this evidence is more than sufficient to create an issue
of fact.
12
Nichols also asserts that the “trial application” aspect
of the American National application is ambiguous.
In
interpreting insurance policies, the West Virginia Supreme Court
of Appeals defines ambiguity as language “reasonably susceptible
of two different meanings” or “of such doubtful meaning that
reasonable minds might be uncertain or disagree as to its
meaning.”
Syl. Pt. 1, Prete v. Merchants Prop. Ins. Co. of
Indiana, 159 W. Va. 508, 223 S.E.2d 441, (1976).
This court has
applied the same principle to the interpretation of insurance
applications.
White v. Am. Gen. Life Ins. Co., 651 F. Supp. 2d
530, 542-43 (S.D. W. Va. 2009).
The Supreme Court of Appeals of
West Virginia has also explained that “[i]t is only when the
document has been found to be ambiguous that the determination of
intent through extrinsic evidence becomes a question of fact.”
Payne v. Weston, 195 W. Va. 502, 507, 466 S.E.2d 161, 166 (1995).
Nichols contends that the American National application
is ambiguous because it allows for submission of a trial
application if the applicant has a felony conviction, but American
National’s senior underwriting compliance auditor Jason Buckert
testified that the company always denies applications from felons.
(Def.’s Mem. 16-18.).
She cites to syllabus point 4 of McMahon,
which provides “that ambiguous terms in insurance contracts are to
be strictly construed against the insurance company and in favor
13
of the insured,” and argues that this discredits American
National’s evidence that they would not have issued Moore and
Nichols a policy if they had known about Moore’s felonies.
(Def.’s Mem. 18.).
American National contends that the “Trial Application”
language of its application is not ambiguous.
American National
asserts that there is no language in the contract that indicates a
trial application will be approved.
(Pl.’s Resp. 15.).
Using West Virginia’s interpretation principles, the
court does not find that the language “[m]ay submit a Trial
Application with conviction date, type, and description” is
ambiguous.
(Pl.’s Mot. Summ. J. Ex. D.).
Nichols’ argument that
the language is ambiguous is based not on the language itself, but
on extrinsic evidence about American National’s evaluation of
trial applications.
Under West Virginia law, extrinsic evidence
only becomes relevant to the analysis of language that is
determined to be ambiguous.
Even assuming, arguendo, that the
relevant language is ambiguous, its meaning would remain an issue
of fact.
Because the foregoing issue is fact-bound, the court
cannot find, as a matter of law, that Nichols did not commit a
material misrepresentation.
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D.
Nichols’ Status as an Innocent Co-Insured
The final issue Nichols raises is that she is an
innocent co-insured, entitled to recovery even if defendant Moore
committed a material misrepresentation.
Inasmuch as there is an
issue of fact respecting whether Nichols made a material
misrepresentation on the application, the matter is not
susceptible for disposition as a matter of law.
III.
Based upon the foregoing discussion, it is ORDERED that
the motion for summary judgment be, and hereby is, denied.
The Clerk is directed to transmit copies of this written
opinion and order to all counsel of record and any unrepresented
parties.
ENTER: September 4, 2015
John T. Copenhaver, Jr.
United States District Judge
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