Frederick Management Company, LLC v. Arch Insurance Company et al
Filing
334
MEMORANDUM OPINION AND ORDER denying as moot Plaintiff's 266 MOTION for Summary Judgment; granting in part General Assurance of America, Inc.'s 275 MOTION for Summary Judgment in Regard to the Plaintiff's Claims, specifically as to Counts I, III, IV, VI, and VII, dismissing as moot Counts II and V; denying both Plaintiff's 324 MOTION to Strike Portions of Defendant's Supplemental Memorandum of Law as Scandalous, Impertinent, Defamatory, and Immaterial to Any Issue in this Case and General Assurance of America, Inc.'s 323 Request for sanctions; denying as moot 271 MOTION by Arch Insurance Company for Application of Missouri Law to Arch's Cross-Claim against Defendant General Assurance of America, Inc., 272 MOTION by Arch Insurance Company for Summary Judgment as to Arch's Cross-Claim against Defendant General Assurance of America, Inc. and 277 MOTION by General Assurance of America, Inc. for Summary Judgment in Regard to the Cross-Cl aim of Arch Insurance Company; as no claims remain against General Assurance of America, Inc., directing the Clerk to terminate General Assurance of America, Inc. as a party to this case; directing Plaintiff to file, within 14 days of the entry of th is Memorandum Opinion and Order, a report discussing whether it intends to continue pursuing its claim against Compass and its intentions for otherwise proceeding in this case. Signed by Judge Robert C. Chambers on 6/11/2014. (cc: attys; any unrepresented parties) (mkw)
IN THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF WEST VIRGINIA
HUNTINGTON DIVISION
FREDERICK MANAGEMENT
COMPANY, LLC, a limited liability
corporation, formerly known as
St. James Management Company, LLC,
Plaintiff,
v.
CIVIL ACTION NO. 3:12-3019
GENERAL ASSURANCE OF AMERICA,
INC., a Virginia corporation; and COMPASS
CLAIMS SERVICE, INC., a foreign corporation,
Defendants.
MEMORANDUM OPINION AND ORDER
Pending before the Court is a motion by Plaintiff Frederick Management Company, LLC,
for partial summary judgment as to choice of law on the insurance issues in this case (ECF No.
266) and a motion by Defendant General Assurance of America, Inc., (“GAA”) for summary
judgment on all of Plaintiff’s claims (ECF No. 275). Also pending is Plaintiff’s motion to strike
(ECF No. 324) and GAA’s request for sanctions (ECF No. 323).1 For the reasons explained
below, Plaintiff’s motion for summary judgment (ECF No. 266) is DENIED as moot, because
the Court assumes, without deciding, that West Virginia laws applies, and GAA’s motion for
summary judgment (ECF No. 275) is GRANTED in part, specifically as to Counts I, III, IV,
VI, and VII. Counts II and V are DISMISSED as moot. The Court DENIES both Plaintiff’s
motion to strike (ECF No. 324) and GAA’s request for sanctions (ECF No. 323). The Court also
1
GAA makes this request for sanctions within its response to Plaintiff’s supplemental
memorandum of law.
1
DENIES as moot ECF Nos. 271, 272, and 277. As no claims remain against GAA, the Court
DIRECTS the Clerk to terminate GAA as a party to this case.
Additionally, the Court DIRECTS Plaintiff to file, within fourteen (14) days of the entry
of this Memorandum Opinion and Order, a report discussing whether it intends to continue
pursuing its claims against Compass Claim Service, Inc., and its intentions for otherwise
proceeding in this case.
I.
Background Information
This case stems from damage to a commercial property owned by Plaintiff Frederick
Management Company, LLC, and the denial of an insurance claim for that damage. The
commercial property at issue is a now-vacant building located in Richwood, West Virginia.
Plaintiff, acting under its prior business name of St. James Management Company, signed a note
and deed of trust for the purchase of this property in December 2000, receiving a loan of
$80,985.50 from First Community Bank (“the Bank”) in exchange for giving the Bank a security
interest in the property. Compl. ¶¶ 10, 12, ECF No. 1. Under the terms of the deed of trust,
Plaintiff was required to insure the property for its full value. Id. ¶ 13. If Plaintiff failed to do so,
the Bank had the right to purchase “forced-placed insurance” or collateral protection insurance
for the property. Id. ¶ 15. The amount of the premiums incurred by the Bank in purchasing this
insurance would be added to the amount of the loan. Id. Plaintiff maintained the required
property insurance until November 2002, and the Bank thereafter maintained forced-placed
insurance on the property. Id. ¶ 16. Plaintiff renewed the loan in 2006, this time using its current
business name. Id. ¶ 14.
On or about March 15, 2010, a heavy snow storm caused part of the building’s roof to
collapse, causing “significant damage.” Id. ¶ 19. When the damage occurred, the Bank had a
2
forced-placed insurance policy on the property through Arch Insurance Company (“Arch”). Id. ¶
22. John Hankins, Plaintiff’s Managing Member, alerted Bank employee Gary Austin about the
collapse shortly thereafter, presumably in order to begin processing the insurance claim for the
damage. Id. ¶ 20. Mr. Austin emailed Plaintiff a Loss Notice Reporting Form on March 18,
2010, which Plaintiff returned a few days later. Id. Pursuant to instructions from Defendant
Compass Claim Service, Inc., (“Compass”) Plaintiff scheduled a property inspection with local
adjuster Lisa Watson for April 10, 2010. Id. ¶¶ 25-26. That inspection did not occur as
scheduled, however, because the adjuster suffered an accident on the day of the inspection. Id. ¶¶
27-28.
A second local adjuster, Roland Jones, contacted Mr. Hankins on April 14, 2010, and
after their attempts to set an inspection date were unsuccessful, Mr. Hankins told Mr. Jones that
the property could be accessed through an unsecured door and granted permission for inspectors
to access the property. Id. ¶¶ 29-32. That same day, Mr. Hankins sent Mr. Austin photographs of
the damages and a repairs estimate. Id. ¶ 33. Mr. Jones inspected the property that same day but
wanted to conduct a second inspection with Mr. Hankins. Id. ¶¶ 34-35. That second inspection
could not take place until May 23, 2010. Id. ¶¶ 35-36.
After the roof collapse, the property was the target of theft and vandalism, prompting Mr.
Hankins to eventually hire a watchman for the building. Id. ¶ 38. On July 26, 2010, Mr. Hankins
alerted Mr. Austin of these problems and inquired into the status of the insurance claim; Mr.
Hankins also wanted to know what company issued the forced-placed policy. Id. ¶ 39. Mr.
Austin emailed Lori Blevins, another Bank employee, about this request, but she never contacted
Mr. Hankins. Id. ¶ 40. On August 1, 2010, the property’s watchman informed Mr. Hankins about
3
even more theft and damage at the property. Id. ¶ 42. Plaintiff told Mr. Austin and local police
about this theft and vandalism. Id. ¶ 43.
Plaintiff thereafter received an undated letter from Compass, stating that,
We have made several attempts to contact you in order to set up a time for one
more inspection with a Structural Engineer. We have been informed by Chris
Lafoon of General Assurance of America that the claim report to the bank can not
[sic] be concluded until the Structural Engineer is allowed to re inspect [sic] the
property. The claim representative that has already inspected the property, Roland
Jones, will continue to attempt contact with you to set the appointment.
Compl. Ex. 8, ECF No. 1-1 at 97; Compl. ¶ 45. That letter refers to Defendant GAA, a
corporation that Plaintiff claims acted as an agent of the Bank and Arch in handling this
insurance claim. Compl. ¶ 6. Plaintiff subsequently received a second letter from Compass dated
August 26, 2010, stating that, under the insurance policy, Plaintiff was required to permit
inspection of the property, that “Roland Jones [would] help facilitate” the necessary reinspection of the property, and that the claim would be closed if Compass did not receive a
response by September 1, 2010. Compl. Ex. 9, ECF No. 1-1 at 99; Compl. ¶ 46. Plaintiff sent a
response letter by mail and fax on August 31, 2010, providing a timeline of events after the
initial collapse and requesting timely settlement of the insurance claim. Compl. Ex. 10, ECF No.
1-1 at 102-03; Compl. ¶ 48.
GAA employee Christina Lafoon sent a letter to the Bank dated September 17, 2010,
detailing its efforts to resolve the insurance claim and noting that: 1) Compass telephoned
Plaintiff multiple times from June 16 to August 31, 2010, showing Mr. Hankins’ “lack of
cooperation”; 2) the two letters were sent to Mr. Hankins; 3) Mr. Hankins faxed a response on
August 31, 2010; and 4) an adjuster spoke with Mr. Hankins by phone that same day, at which
time “Mr. Hankins told the adjuster over the phone that he did not want to drive the 300 miles to
[another] appointment and that he would not allow another inspection.” Compl. Ex. 11, ECF No.
4
1-2 at 2-4. Ms. Lafoon concluded by stating that GAA had “exhausted all of [its] efforts to
finalize the claim” and that the Bank was responsible for getting access to the property. Id.
Plaintiff claims it was unaware of this letter. Compl. ¶¶ 50-51. Although Mr. Hankins continued
to contact Mr. Austin, Mr. Austin told Mr. Hankins in fall of 2010 that he was no longer
authorized to speak on the matter and that another Bank employee would be Mr. Hankins’
contact. Id. ¶¶ 54-55.
On November 18, 2010, Ms. Lafoon sent a letter to the Bank, stating that access to the
property could not be attained and that, “[b]ased on [Bank employee Ester Fulford’s]
conversation with Laura Little, Senior Vice President [of GAA], on November 10, 2010, [Ms.
Fulford] agreed to deny the claim and close the file, [and] we have since closed the claim.”
Compl. Ex. 13, ECF No. 1-2 at 15. Plaintiff was not informed of this development. Compl. ¶¶
57-58.
On November 24, 2010, Plaintiff spoke about the claim with Ms. Lafoon, who—
according to Plaintiff—“acted in all respects as if the claim was still under investigation.” Id. ¶
60. It was not until Plaintiff contacted the structural engineer assigned to the case that Plaintiff
found out that the claim was closed. Id. ¶ 62. Starting in January 2011, Plaintiff attempted to
have the claim reopened but was unsuccessful in getting any insurance claim relating to the
property approved. Id. ¶¶ 68-93.
Plaintiff thereafter filed the pending Complaint against the Bank, GAA, Compass, and
Arch, alleging the following seven Counts: Count I - Negligence; Count II - Breach of Contract;
Count III - Breach of Insurance Contract, Common Law Bad Faith, & Hayseeds; Count IV Unfair Claims Practices; Count V - Unjust Enrichment; Count VI - Equitable Estoppel; Count
VII - Civil Conspiracy. In short, Plaintiff argues that Defendants have failed in their various
5
duties to properly settle the insurance claim regarding the property. Since that time, Plaintiff has
dismissed all claims against the Bank and Arch. Part. Dismiss. Order, ECF No. 311.
This case has been complex and contentious. There have been numerous motions for
summary judgment filed by the parties, but because certain claims have settled, only two of these
motions are still pending: Plaintiff’s motion for partial summary judgment as to choice of law on
the insurance issues in this case and GAA’s motion for summary judgment on all remaining
claims. These two motions are ripe for resolution. The Court convened a status conference on
March 10, 2014, to discuss the pending motions and ordered Plaintiff to file a supplemental
briefing to aid in resolution of the pending motions for summary judgment by March 17, 2014.
Plaintiff timely filed its supplemental memorandum, ECF No. 322, and GAA timely filed a
response, in which it requested sanctions against Plaintiff, ECF No. 323. Plaintiff also filed a
motion to strike certain references made by GAA. ECF No. 324. Before that motion to strike
became ripe for resolution, the Court held a pretrial conference on March 31, 2014. All motions
are now ripe for resolution.
In Section II, the Court discusses the legal standard applicable to motions for summary
judgment. In Section III, the Court examines miscellaneous statements made by Plaintiff which
do not necessarily bear on the pending motions but nonetheless should be addressed. In Sections
IV through X, the Court assesses each Count to determine whether summary judgment should be
granted as to any of the Counts. In Sections XI and XII, the Court discusses Plaintiff’s motion to
strike and GAA’s request for sanctions, respectively.
II.
Legal Standard
To obtain summary judgment, the moving party must show that there is no genuine issue
as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.
6
R. Civ. P. 56(a). In considering a motion for summary judgment, the Court will not “weigh the
evidence and determine the truth of the matter.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
249 (1986). Instead, the Court will draw any permissible inference from the underlying facts in
the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co., Ltd. v. Zenith
Radio Corp., 475 U.S. 574, 587-88 (1986).
Although the Court will view all underlying facts and inferences in the light most
favorable to the nonmoving party, the nonmoving party nonetheless must offer some “concrete
evidence from which a reasonable juror could return a verdict in his [or her] favor.” Anderson,
477 U.S. at 256. Summary judgment is appropriate when the nonmoving party has the burden of
proof on an essential element of his or her case and does not make, after adequate time for
discovery, a showing sufficient to establish that element. Celotex Corp. v. Catrett, 477 U.S. 317,
322-23 (1986). The nonmoving party must satisfy this burden of proof by offering more than a
mere “scintilla of evidence” in support of his or her position. Anderson, 477 U.S. at 252.
“‘[W]here the moving party has the burden—the plaintiff on a claim for relief or the
defendant on an affirmative defense—his showing must be sufficient for the court to hold that no
reasonable trier of fact could find other than for the moving party.’” Proctor v. Prince George’s
Hosp. Ctr., 32 F. Supp. 2d 820, 822 (D. Md. 1998) (quoting Calderone v. United States, 799
F.2d 254, 259 (6th Cir. 1986)). “Thus, if the movant bears the burden of proof on an issue, . . . he
must establish beyond peradventure all of the essential elements of the claim or defense to
warrant judgment in his favor.” Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir. 1986).
III.
Plaintiff’s Arguments for Amendment and Certification
7
Plaintiff filed a joint response to Defendants’ respective motions for summary judgment.
ECF No. 280 (“Jt. Resp.”).2 In this joint response, Plaintiff states that “it may be appropriate in
this case to permit or allow an amendment of the pleadings to conform to the evidence in that
other causes of action or theories of recovery may be available that have not been pled, such as
tortious interference with a contractual relationship.” Jt. Resp. 4 (footnote omitted). Plaintiff cites
to Federal Rule of Civil Procedure 15(b)(2) in support—but appears to have meant 15(a)(2),
which states that after the period to amend as a matter of right has passed, “a party may amend
its pleading only with the opposing party’s written consent or the court’s leave” and that “[t]he
court should freely give leave when justice so requires.” The time to amend as a matter of course
has long since passed, and the deadline for amendment set in the scheduling order was
November 29, 2012—nearly one year before Plaintiff filed the joint response. If Plaintiff desired
to amend its pleadings, it should have filed a motion for leave to do so. Even if leave were
properly sought, however, the Court would not be inclined to allow amendment at this time
because the case is now ripe for summary judgment, discovery has closed, and Plaintiff has
presented no evidence that the claim(s) it desires to add could not have been pled much earlier.
Additionally, “Plaintiff suggests to the Court that the insurance issues in this case may be
an appropriate submission to the West Virginia Supreme Court of Appeals via the certification of
issues process under West Virginia law.” Jt. Resp. 4. West Virginia law grants the West Virginia
Supreme Court of Appeals authority to answer questions of law certified to it by this Court:
The supreme court of appeals of West Virginia may answer a question of law
certified to it by any court of the United States . . . if the answer may be
determinative of an issue in a pending cause in the certifying court and if there is
no controlling appellate decision, constitutional provision or statute of this state.
2
This filing was made before the settlement of certain claims mooted several motions for
summary judgment.
8
W. Va. Code § 51-1A-3. The Court, however, does not believe that certification is necessary in
the instant case. Existing law is sufficiently analogous to the facts of the instant case and clear in
its result that certification is not necessary.
Having settled these preliminary issues, the Court now turns to whether summary
judgment should be granted as to the individual Counts in the Complaint.
IV.
Count I - Negligence
In Count I, Plaintiff alleges that the Bank and GAA breached their respective duties of
care owed to Plaintiff in their handling of the insurance claim. As mentioned above, Plaintiff has
dismissed all of its claims against the Bank. GAA moves for summary judgment on this Count.
Count I of the Complaint alleges that both the Bank and GAA acted negligently.
However, Plaintiff’s joint response opposing summary judgment argues that the Bank owed a
special duty and makes no argument that GAA owed any such duty. See Jt. Resp. 28-29. The
Court directed Plaintiff to file a supplemental memorandum explaining the source of any duty
owed by GAA which could form the basis of its negligence claim. In its supplemental
memorandum, Plaintiff argues that GAA violated several West Virginia statutes, namely the
licensing statutes for insurance adjusters, see, e.g., W. Va. Code § 33-12B-4, the prohibition
against the payment of “kickbacks,” see W. Va. Code § 33-11-4(8)(c), and the requirement that
notices of insurance be filed with the West Virginia Insurance Commissioner, see W. Va. Code §
33-6-8. Plaintiff additionally claims that GAA failed to properly train and supervise its
employees. However, even if the Court were inclined to find that violations of these statutes
occurred—which the Court will not do here3—the damage about which Plaintiff complains was
3
For example, GAA refutes the allegations that it has violated West Virginia licensing
requirements or paid illegal kickbacks. In the face of this conflicting evidence, the Court will not
make a conclusive finding as to whether violations of these West Virginia statutes have been
9
not caused by the alleged violation of any of these statutes. Because Plaintiff has proffered no
other evidence regarding any duties owed by GAA, Plaintiff has failed to present evidence that
could allow a reasonable juror to return a verdict in its favor. Therefore, summary judgment is
granted in favor of GAA as to Count I.
V.
Count II - Breach of Contract
As expressed at the pretrial conference on March 31, 2014, Plaintiff has voluntarily
withdrawn Count II. The Court therefore dismisses this Count as moot.
VI.
Count III - Breach of Insurance Contract, Common Law Bad Faith, & Hayseeds
Plaintiff has moved for partial summary judgment on this Count, as well as Count IV, on
the issue of choice of law. Specifically, Plaintiff argues that West Virginia law should be used
when interpreting the insurance policy in this case. GAA has also moved for summary judgment
on this Count, arguing that Plaintiff lacks standing to pursue it. The Court will assume, without
finding, that West Virginia law applies for purposes of interpreting the insurance policy at issue
in this case.
Using West Virginia law, the Court must first determine whether Plaintiff could sue as a
third-party beneficiary under the insurance policy at issue; if so, it is unnecessary to determine
whether Plaintiff is actually an insured pursuant to the policy. West Virginia law provides,
If a covenant or promise be made for the sole benefit of a person with whom it is
not made, or with whom it is made jointly with others, such person may maintain,
in his own name, any action thereon which he might maintain in case it had been
made with him only, and the consideration had moved from him to the party
making such covenant or promise.
W. Va. Code § 55-8-12; see also Erwin v. Bethlehem Steel Corp., 62 S.E.2d 337, 344 (W. Va.
1950) (noting that this provision “means, as if written as follows, including the words in
shown.
10
parentheses: ‘If a covenant or promise be made for the sole benefit of a person with whom it is
not made, or (if a covenant or promise is made for the sole benefit of a person) with whom it is
made jointly with others, such person may maintain in his own name any action thereon’”
(quoting syl. pt. 2, Johnson v. McClung, 26 W. Va. 659 (1885))). The evidence clearly
establishes that Plaintiff was not the sole beneficiary of the forced-placed insurance policy.
Rather, the Bank entered into the policy in part—if not, in whole—for its own benefit, as is made
clear by the discussion of the insurance policy that follows later in this Section. The issue of
whether Plaintiff was also intended to benefit from this policy is irrelevant, because the statute
clearly requires that, to sue as a third party beneficiary, Plaintiff must have been the sole
beneficiary of the contract at issue.
Plaintiff additionally points to West Virginia Code § 33-6-3 for the proposition that he
has an insurable interest which he may sue to protect:
(a) No insurance contract on property or of any interest therein or arising
therefrom shall be enforceable as to the insurance except for the benefit of
persons having an insurable interest in the things insured.
(b) “Insurable interest” as used in this section means any actual, lawful, and
substantial economic interest in the safety or preservation of the subject of the
insurance free from loss, destruction, or pecuniary damage or impairment.
(c) The measure of an insurable interest in property is the extent to which the
insured might be damnified by loss, injury, or impairment thereof.
W. Va. Code § 33-6-3. However, it appears that this definition of “insurable interest” is a placefiller of sorts, meant to be used in situations where an insurance policy casts a wide definition of
coverage. Cf. Selective Way Ins. Co. v. Nat’l Fire Ins. Co. of Hartford, No. CIV. JKB-12-3100,
2013 WL 6705138, at *7 (D. Md. Dec. 18, 2013) (“[T]he Policy did not define ‘insured’ or an
insured’s ‘interest’ in a restrictive way; consequently, the Court utilizes those terms as they have
been defined in [state] law.”). This broad statutory provision does not protect or otherwise confer
11
a right on Plaintiff where the plain language of the contract shows otherwise, as will be
explained below.
Even if Virginia law applied—which would be the alternative state’s law this Court
would use if West Virginia law was not applied to interpretation of the insurance contract—, the
Court would not find that Plaintiff could sue as a third party beneficiary to the insurance policy.
Virginia law provides:
[I]f a covenant or promise be made for the benefit, in whole or in part, of a person
with whom it is not made, or with whom it is made jointly with others, such
person, whether named in the instrument or not, may maintain in his own name
any action thereon which he might maintain in case it had been made with him
only and the consideration had moved from him to the party making such
covenant or promise.
Va. Code § 55-22. Although this statute may be more liberal than its West Virginia counterpart,
Virginia courts have held that “[t]he third party beneficiary doctrine is subject to the limitation
that the third party must show that the parties to the contract clearly and definitely intended it to
confer a benefit upon him.” Prof’l Realty Corp. v. Bender, 222 S.E.2d 810, 812 (Va. 1976); see
also In re Cnty. Green Ltd. P’ship, 438 F. Supp. 693, 698 (W.D. Va. 1977) (“To come within the
purview of this provision it is insufficient for a person to show that incidental to the contract he
would benefit from its enforcement.”); Norfolk-Portsmouth Newspapers, Inc. v. Stott, 156 S.E.2d
610, 612 (Va. 1967). Here, it cannot be said that the insurance policy clearly meant to confer a
benefit on Plaintiff. As will be discussed in more detail below, the policy language in fact makes
clear the opposite. Neither would Virginia Code § 38.2-303, which discusses insurable interests,
provide Plaintiff standing where it otherwise did not exist.
Having found that Plaintiff cannot sue as a third party beneficiary to the insurance policy,
the Court must now determine if Plaintiff is, in fact, an insured under the policy. The Arch
insurance policy at issue in this case covers all properties for which the Bank has established
12
forced-placed insurance coverage. Arch Insurance Policy, Compl. Ex. 5, ECF No. 1-1 at 26-72.
Each property included in this “blanket” policy has been assigned its own valuation. This is
evident from the Notice of Insurance for Plaintiff’s property, which lists commercial insurance
coverage in the amount of $71,790.13. Notice Insurance, Compl. Ex. 1, Pl.’s Mem. Supp. Mot.
Partial Summ. J., ECF No. 267-2. The “Declarations” section of the policy lists the Bank as the
only “Named Insured.” Policy at 26. “Named Insured” is defined in the policy as “the creditor,
lending institution, company, or person holding and/or servicing the Mortgagee Interest on the
Described Location.” Id. at 43 (defining terms related to forced-placed coverage on buildings
other than dwellings). The “Borrower” is defined as “the purchaser of the Described Location for
whom You have financed property or which You are servicing for others under written
agreement. The Borrower has no interest in this policy unless a Notice of Insurance is issued.”
Id. (emphasis added).4 It is undisputed that a Notice of Insurance was issued. However, just
because a borrower could not have an interest unless a Notice is issued, it does not follow that
the issuance of a Notice automatically creates an interest; that language about the effect of the
Notice could simply apply to situations where the Borrower has been named as an insured under
the policy, which is not the case here.
Contrasting this language with the applicable language for dwellings strengthens this
interpretation; the policy’s section on dwellings provides, “The Borrower is an Additional
Named Insured provided You have requested coverage on his/her Dwelling.” Id. at 28. The
policy clearly limits the rights and interests of borrowers on commercial properties to a greater
degree than those of borrowers on dwellings. This interpretation is confirmed by language
4
As described in the policy, “‘You’ and ‘Your’ refer to the Named Insured shown on he [sic]
Declarations Page.” Policy at 43.
13
appearing on the second page of the policy, above the signature line for an authorized
representative of the Named Insured:
This Policy does not provide covered for Errors & Omissions or liability
Insurance, nor does it provide coverage for the Interest or equity of the Borrower
as It Is [sic] collateral protection insurance, protecting Your Interest, subject to the
Policy terms and conditions. Please read Your Policy for specific terms and
conditions of coverage.
Id. at 27.
Plaintiff argues that because the policy creates obligations for the borrower, the policy
must likewise give the borrower an interest in the policy. In the subsection entitled “Your Duties
After Loss,” the policy states, “The Borrower may submit claims and perform any of Your
duties. However, We reserve the right, for any reason to require Your assumption of any and all
of Your duties.” Id. at 55. Although the Borrower may act on behalf of the named insured, this
does not give the Borrower independent rights under the policy which do not otherwise exist.
Plus, the policy itself does not directly place any obligations on the borrower. See id. at 55.5
Attention should also be given to the Notice of Insurance, although it is separate from the
policy, which states, “This policy names the Lender (Mortgage[e]) as the sole named insured.”
Notice Insurance. Although the Notice “neither amends, extends nor alters the coverage afforded
by the lender’s master policy which it describes,” id, it is nonetheless one more piece of evidence
showing that the policy was not meant to cover Plaintiff. It is also noteworthy that Mr. Hankins
admitted in his deposition that he understood that the Bank was the named insured under this
policy. Hankins Dep. at 101, ECF No. 161-1.
The Court is persuaded by the reasoning of Fraddosio v. Proctor Financial, Inc., No.
5
Although a letter from Compass suggests that Plaintiff must permit inspection of the property
under the terms of the policy, Compl. Ex. 9, ECF No. 1-1 at 99, the drafter of that letter was
mistaken, and the letter does not show that Plaintiff has obligations or any corresponding rights
under the policy.
14
3:10-CV-87, 2011 WL 3844087 (N.D. W. Va. Aug. 30, 2011), in analyzing the situation at hand.
In that case, an insurance company issued a forced-placed insurance policy on the plaintiff’s
home, which was issued to the plaintiff’s lender, the U.S. Department of Agriculture. After the
home sustained fire damage, payment was made to the Department on the claim. The plaintiff
then sued the insurance broker and the insurance adjuster, alleging violation of West Virginia’s
Unfair Trade Practices Act (“WVUTPA”), among other claims. The district court granted
summary judgment in the defendants’ favor on the WVUTPA claim, noting that the plaintiff
could only succeed in his WVUTPA claim if he was an insured under the forced-placed
insurance policy and finding that the plaintiff was not an insured under said policy. Id. at *3-6. In
so finding, the court noted, inter alia, that the insurance policy at issue listed the Department as
the named insured and that it defined “you” and “your” as referring to the named insured. Id. at
*3. Additionally, the fact that the Department passed on the cost of the premiums to the plaintiff
and that the plaintiff owned the property did not mean that the plaintiff was an insured under the
policy. Id. at *3-4. According to the court, “[i]t is well-settled that [a]s the mortgagor and
mortgagee each has an insurable interest in the mortgaged property, insurance taken by one on
his or her own interest and in his or her own favor alone does not inure to the benefit of the
other.” Id. at *3 (internal quotation marks omitted). The court also clarified that other alleged
ambiguities concerning the insurance policy did not create a genuine issue of material fact. Id. at
*4-6.
The Court similarly finds that Plaintiff is not covered by the insurance policy at issue in
this case. The policy language is clear that Plaintiff is not a named insured under the policy. The
commercial property was one of many covered by the blanket policy, taken out by the Bank for
its own benefit. Any alleged ambiguities in the insurance policy can easily be explained to show
15
that Plaintiff is not an insured under this policy. The Court accordingly finds that there is no
genuine issue of fact regarding Plaintiff’s status under the insurance policy and that the Plaintiff
is not an insured under the policy. Because Plaintiff is not a party to the insurance contract, it
cannot claim breach of any implied covenant of good faith and fair dealing relating to the
contract, nor collect any damages in relation therewith. The Court therefore grants summary
judgment in favor of GAA on Count III.
VII.
Count IV - Unfair Claims Practices
Plaintiff also alleges violation of the WVUTPA, found at West Virginia Code § 33-11-1
et seq, by GAA. As with the previous section, the Court assumes—without finding—that West
Virginia law applies to the interpretation of this Count. Plaintiff alleges many forms of unfair
claim settlement practices by GAA, in violation of West Virginia Code § 33-11-4(9). However,
the WVUTPA prohibits a third-party claimant from bringing a cause of action under the Act for
unfair claims settlement practices. See W. Va. Code § 33-11-4a(a) (“A third-party claimant may
not bring a private cause of action or any other action against any person for an unfair claims
settlement practice. A third-party claimant’s sole remedy against a person for an unfair claims
settlement practice or the bad faith settlement of a claim is the filing of an administrative
complaint with the Commissioner in accordance with subsection (b) of this section. A third-party
claimant may not include allegations of unfair claims settlement practices in any underlying
litigation against an insured.”); see also Fraddosio, 2011 WL 3844087, at *3 (citing this same
provision).
Plaintiff also alleges violation by GAA of § 33-11-4(2), which states:
No person shall make, publish, disseminate, circulate or place before the public,
or cause, directly or indirectly, to be made, published, disseminated, circulated or
placed before the public, in a newspaper, magazine or other publication, or in the
form of a notice, circular, pamphlet, letter or poster or over any radio or television
16
station, or in any other way, an advertisement, announcement or statement
containing any assertion, representation or statement with respect to the business
of insurance or with respect to any person in the conduct of his or her insurance
business, which is untrue, deceptive or misleading.
Although Plaintiff has made general allegations about the falsity of certain statements made by
GAA, this has largely been in the context of Plaintiff’s equitable estoppel claim. Plaintiff has
failed to sufficiently present a factual basis to sustain a claim under this specific provision.
The parties are in agreement that no private right of action would exist for Plaintiff’s
unfair trade practices claim if Virginia law applied.
In light of the foregoing, the Court grants summary judgment in favor of GAA on Count
IV.
VIII.
Count V - Unjust Enrichment
Plaintiff has withdrawn this claim. Therefore, Count V is dismissed as moot.
IX.
Count VI - Equitable Estoppel
In this Count, Plaintiff alleges that Defendants made false representations to Plaintiff, that
Plaintiff relied on those misrepresentations, and that Defendants should therefore be estopped
from asserting legal defenses to Plaintiff’s claims, disgorge any benefits, and discharge
Plaintiff’s loan. Compl. ¶¶ 159-66. GAA moves for summary judgment on this claim. To
succeed on a claim for equitable estoppel, Plaintiff must prove the following:
[T]here must exist a false representation or a concealment of material facts; it
must have been made with knowledge, actual or constructive of the facts; the
party to whom it was made must have been without knowledge or the means of
knowledge of the real facts; it must have been made with the intention that it
should be acted on; and the party to whom it was made must have relied on or
acted on it to his prejudice[.]
Harshbarger v. CSX Transp., Inc., 484 F. Supp. 2d 515, 517 (S.D. W. Va. 2007) (quoting syl. pt.
3, Cleaver v. Big Arm Bar & Grill, Inc., 502 S.E.2d 438 (W. Va. 1998)). GAA argues that
Plaintiff could not have relied on any alleged misstatements because Plaintiff has no interest in
17
the underlying insurance policy. The Court is inclined to agree. Plaintiff has no interest under the
policy, and therefore it cannot be said that those making the statements intended Plaintiff to act
upon those statements. Rather, the Bank and/or Arch relied on the denial of coverage, not
Plaintiff. The Court therefore grants summary judgment in favor of GAA on this Count.
X.
Count VII - Civil Conspiracy
In this last Count, Plaintiff argues that all Defendants engaged in a civil conspiracy.
Under West Virginia law, a civil conspiracy is defined as “a combination of two or more persons
by concerted action to accomplish an unlawful purpose or to accomplish some purpose, not in
itself unlawful, by unlawful means.” Syl. pt. 8, Dunn v. Rockwell, 689 S.E.2d 255 (W. Va. 2009).
GAA has moved for summary judgment in its favor on this claim. The Court notes that civil
conspiracy is a legal doctrine for liability, “not a per se, stand-alone cause of action.” Syl. pt. 9,
id. Because, for the reasons explained above, Plaintiff has no interest in the insurance policy at
issue in this case, and because all other claims have either been dismissed or adjudged in favor of
GAA, the Court finds that Plaintiff’s civil conspiracy claim—as derivative of the other
underlying claims—must fail. Therefore, summary judgment is granted in favor of GAA on
Count VII.
XI.
Motion to Strike
Plaintiff has moved to strike all references to Fred Davis and all exhibits referring to
his criminal indictment and sentencing. ECF No. 324. Plaintiff argues that Fred Davis was a 50%
owner of Plaintiff company at the time that the property at issue was purchased but that he
otherwise has no connection to the issues at hand; Plaintiff believes that allowing irrelevant and
scandalous references to Mr. Davis to remain in the record would harm Mr. Hankins’ reputation.
Although the Court has the discretion to strike material that is “redundant, immaterial,
18
impertinent, or scandalous,” Fed. R. Civ. P. 12(f), the Court declines to exercise its discretion
here and denies Plaintiff’s motion. Although the information included by GAA about Mr. Davis
is largely irrelevant to the case at hand, the Court does not believe that the potential for harm to
Mr. Hankins is so great, in light of the other information otherwise available, that references to
Mr. Davis must be struck from the instant case. Plaintiff’s request for attorney’s fees associated
with this motion, as reflected in ECF No. 329, is also denied. GAA requests that a hearing be
held on this motion, but that request is rejected as unnecessary.
XII.
GAA’s Request for Sanctions
GAA requests, in its response to Plaintiff’s supplemental memorandum, that sanctions be
imposed on Plaintiff pursuant to Federal Rule of Civil Procedure 11 for its failure to adequately
investigate the possible grounds underlying Counts II and V—which GAA argues would have
caused Plaintiff to uncover the lack of any basis for those Counts—and filing those Counts
anyway. ECF No. 323. The Court declines the request to grant any sanctions in this situation.
GAA’s request is denied.
XIII. Conclusion
For the reasons explained above, Plaintiff’s motion for summary judgment (ECF No.
266) is DENIED as moot, and GAA’s motion for summary judgment (ECF No. 275) is
GRANTED in part, specifically as to Counts I, III, IV, VI, and VII. Counts II and V are
DISMISSED as moot. The Court DENIES both Plaintiff’s motion to strike (ECF No. 324) and
GAA’s request for sanctions (ECF No. 323). The Court also DENIES as moot ECF Nos. 271,
272, and 277. As no claims remain against GAA, the Court DIRECTS the Clerk to terminate
GAA as a party to this case.
19
Additionally, the Court DIRECTS Plaintiff to file, within fourteen (14) days of the entry
of this Memorandum Opinion and Order, a report discussing whether it intends to continue
pursuing its claims against Compass and its intentions for otherwise proceeding in this case.
The Court DIRECTS the Clerk to send a copy of this written Opinion and Order to
counsel of record and any unrepresented parties.
ENTER:
20
June 11, 2014
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?