Essex Insurance Company v. Schooner's Bar & Grill, Inc. et al
Filing
142
MEMORANDUM OPINION AND ORDER granting in part and denying in part 100 MOTION by Essex Insurance Company for Summary Judgment; denying 122 CROSS- MOTION by Huntington Harbor Marina, LLC, Schooner's Bar & Grill, Inc., Jason Tolliver for Partial Summary Judgment. Signed by Judge Robert C. Chambers on 2/28/2017. (cc: attys; any unrepresented parties) (mkw)
IN THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF WEST VIRGINIA
HUNTINGTON DIVISION
ESSEX INSURANCE COMPANY,
Plaintiff,
v.
CIVIL ACTION NO. 3:15-15881
SCHOONER’S BAR & GRILL, INC.,
dba SCHOONER’S WATERFRONT GRILLE,
HUNTINGTON HARBOR MARINA, LLC, and
JASON TOLLIVER,
Defendants.
MEMORANDUM OPINION AND ORDER
Pending before the Court is Plaintiff Essex Insurance Company’s Motion for Summary
Judgment (ECF No. 100) on Count One and the Defendants’ Counterclaim. Defendant filed a
Response that included a Cross-Motion for Partial Summary Judgment (ECF No. 122) on the
insurable interest issue in Count One. For the following reasons, the Court GRANTS in part
and DENIES in part Plaintiff’s Motion (ECF No. 100) and DENIES Defendant’s Cross-Motion
(ECF No. 122) on the same issue.
I.
Background
This case involves the applicability of a marine insurance policy to the sinking of a
permanently moored steel deck barge called SCHOONER’S (hereinafter “the Barge”). Plaintiff
filed the complaint on December 4, 2015, seeking a declaratory judgment from the Court on three
alternative theories: Count 1 alleged that the named insured, Defendant Schooner’s Bar & Grill,
Inc. (Schooner’s, Inc.), did not have an insurable interest at the time of loss; Counts 2, 3, and 4
alleged that the policy’s coverage excluded the cause of the Barge’s sinking; and Count 5 alleged
that the policy was void due to a breach of duty of cooperation. Pl.’s Compl., ECF No. 1. The
instant motion covers only Count 1 on insurable interest and Defendants’ Counterclaim for bad
faith.
Defendants are all related, but separate, entities. Defendant Jason Tolliver (Tolliver) is
the sole shareholder of both Schooner’s, Inc. and Defendant Huntington Harbor Marina, LLC
(Adam’s Landing1). Pl.’s Compl., ECF No. 1, at ¶ 11; Examination Under Oath of Jason Tolliver
(Exam. Under Oath), ECF No. 100-3, at 42:24-43:1-3. Schooner’s, Inc. and Adam’s Landing do
not have a formal relationship besides sharing a common owner. Exam. Under Oath, ECF No.
100-3, at 19:1-11. Adam’s Landing purchased the Barge in 2009. Id. at 60:14-16. Schooner’s,
Inc. was formed by Tolliver in October of 2009 to operate the restaurant on the Barge. Id. at
47:11-14. Schooner’s, Inc. applied for and was approved by Plaintiff for an insurance policy that
covered the Barge and its contents in 2012.2 Commercial Ins. Application, ECF No. 122-6; Ins.
Policy, ECF No. 122-7.
The parties do not contest that during the 2012 season Schooner’s, Inc. operated the
restaurant on the Barge and employed bartenders, cooks, and waitresses for the business. Exam.
Under Oath, ECF No. 100-3, at 107:5-8, 142:15-20.
Tolliver also provided evidence that
Huntington Harbor Marina, LLC was originally formed as Adam’s Landing Marina,
LLC. Pl.’s Compl., ECF No. 1, at ¶ 10. For clarification, the Court will refer to the corporate
entity as Adam’s Landing throughout this opinion.
2
In its response, Schooner’s, Inc. explains the relationship between Broker Lynn Dorton
and Agent Bob Becker and how Broker Dorton recommended that Schooner’s, Inc. be the listed
insured in the policy. Def.’s Resp., ECF No. 122, at 3. These facts are presented to show that
Plaintiff knew from the beginning that Schooner’s, Inc. was only the operating entity rather than
the owner. The Court finds the information irrelevant in determining whether Schooner’s, Inc.
had an insurable interest at the time of loss because neither party argues that Schooner’s, Inc.’s
insurable interest was lacking at the time the policy was acquired.
1
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Schooner’s, Inc. owned the equipment used in the restaurant. See Aff. of Jason Tolliver, ECF No.
122-2, at 2; Am. 2013 & 2014 Tax Return, ECF No. 122-9 (claiming depreciation of equipment).
The restaurant was leased out to Bar Boat, LLC during the 2013 season. Bar Boat LLC Lease,
ECF No. 122-11. The lease specifies Tolliver as the landlord and Bar Boat, LLC as the tenant.
Id. Tolliver signed another lease the following two years with Paul Runnels, who operated Sink
or Swim LLC, to run the restaurant. Sink or Swim LLC Lease 2014, ECF No. 122-12; Sink or
Swim LLC Lease 2015, ECF No. 122-13. Schooner’s, Inc. is not listed on either of these leases.
The leases, however, do contain provisions in which the tenant can use the equipment already
installed on the Barge. See Bar Boat Lease, ECF No. 122-11; Sink or Swim LLC Lease 2014,
ECF No. 122-12; Sink or Swim LLC Lease 2015, ECF No. 122-13.
On February 23, 2015, Tolliver received a call from a co-worker at Early Construction
Company (not a party to this suit) who noticed that the Barge was taking on water. Exam. Under
Oath, ECF No. 100-3, at 141:18-21, 143:15-16. Although Tolliver attempted to pump out the
excess water, the Barge sank at its moorings. Id. at 152:4-7, 153:14-15. Not long thereafter,
Tolliver filed a claim with Plaintiff for recover, which prompted this declaratory judgment action.
II.
Legal Standard
To obtain summary judgment, the moving party must show that no genuine issue as to any
material fact remains and that the moving party is entitled to judgment as a matter of law. Fed.
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. v. Zenith Radio
Corp., 475 U.S. 574, 587-88 (1986). Any inference, however, “must fall within the range of
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reasonable probability and not be so tenuous as to amount to speculation or conjecture.” JKC
Holding Co. v. Wash. Sports Ventures, Inc., 264 F.3d 459, 465 (4th Cir. 2001) (citation omitted).
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. “Mere
speculation by the non-movant cannot create a genuine issue of material fact” to avoid summary
judgment. JKC Holding, 264 F.3d at 465.
III.
Discussion
Count 1 of Plaintiff’s Complaint alleges that the insurance policy is void because
Schooner’s, Inc. did not have an insurable interest over the Barge at the time of the loss. Pl.’s
Compl., ECF No. 1. Plaintiff does not appear to challenge Schooner’s, Inc.’s insurable interest at
the time of the initial coverage. Rather, Plaintiff argues that Schooner’s, Inc.’s interest ended
when it stopped operating the restaurant. Pl.’s Mem. in Supp., ECF No. 102, at 15. After the
2012 season, Plaintiff asserts that Schooner’s, Inc. did not have a bank account, employees, listed
revenue, or assets as related to the Barge. Id. The restaurant operations were taken over in
subsequent seasons by Bar Boat LLC and Sink or Swim LLC. Id. As these leases list Tolliver
individually as the landlord, Plaintiff argues that Schooner’s, Inc. ceased to have any operating
interest in the Barge and thus cannot establish an insurable interest at the time of loss in 2015. Id.
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Plaintiff also argues that the insurance policy only insures Schooner’s, Inc., making Tolliver
individually and Adam’s Landing ineligible to collect on any insurance proceeds. Id. at 17.
Schooner’s, Inc., on the other hand, argues that the leases—although signed by Tolliver
individually—were actually authorized by Schooner’s, Inc. and that Tolliver served merely as its
corporate representative. Def.’s Resp., ECF No. 122, at 14. Schooner’s, Inc. points to its
equipment that remained on the Barge and the provisions in the leases for the equipment’s
continued use in the restaurant. Id. Each of the leases also negotiated for continued use of the
name of the restaurant, Schooner’s Bar & Grill, an agreement that only Schooner’s, Inc. would
have the authority to enter. Id. at 15. Thus, Schooner’s, Inc. argues that the Court should grant
summary judgment in its favor, declaring that Schooner’s, Inc. had an insurable interest at the time
of loss.
a. Insurable Interest
In West Virginia, an insurance policy in property is enforceable only if the insured has “an
insurable interest in the things insured.” W. Va. Code § 33-6-3(a). An insurable interest is
further defined as meaning “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.” W. Va. Code § 33-6-3(b). To measure an insurable interest in the subject property,
the court looks to “the extent to which the insured might be damnified by loss, injury, or
impairment thereof.” W. Va. Code § 33-6-3(c). An insurance policy covering an insured who
does not have an insurable interest in the property is void. See Fire Ass’n of Philadelphia v. Ward,
42 S.E.2d 713, 715-16 (W. Va. 1947) (“It is a rule of insurance law generally that the person taking
out the policy must have an insurable interest in the subject matter of the insurance; and if such
interest is lacking the policy is void.”). Having an insurable interest does not mean that the
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insured must own the property.3 Rather, the insured must prove that there is at least a “substantial
economic interest” in the property to recover on an insurance policy. The insured also has the
burden to prove that the property comes under the insurance policy’s coverage. Camden-Clark
Mem’l Hosp. Ass’n v. St. Paul Fire & Marine Ins. Co., 682 S.E.2d 566, 574 (W. Va. 2009).
Here, it is evident that Schooner’s, Inc. did not own the Barge at any point in time. See
Aff. of Jason Tolliver, ECF No. 122-2. The argument, thus, boils down to one simple question:
did Schooner’s, Inc. have a substantial economic interest in the Barge at the time of the Barge’s
sinking in February of 2015? The Court finds that this question presents at least a question of fact
properly left for the jury. As Schooner’s, Inc.’s evidence contradicts evidence presented by
Plaintiff, and Schooner’s, Inc.’s evidence is further challenged on credibility, it would be
inappropriate for the Court to decide whether Schooner’s, Inc. had an insurable interest at the time
of loss as a matter of law. The parties presented the following pieces of evidence as determinative
to whether Schooner’s, Inc. still operated in 2015 with an insurable interest: the dissolution and
then reinstatement of Schooner’s, Inc. by the West Virginia Secretary of State; Tolliver’s
Examination Under Oath, which was later clarified and corrected with a sworn affidavit; the
original and amended tax returns for Schooner’s, Inc. from 2013 to 2015; and the lease agreements
with Bar Boat LLC in 2013 and Sink or Swim LLC in 2014 and 2015. Other evidence included
In the briefs, both parties extensively discuss whether Plaintiff knew that Adam’s
Landing owned the Barge rather than Schooner’s, Inc., pointing to the application, the survey
conducted, and information gathered from the Broker and Agent. See Def.’s Resp., ECF No. 122
at 11-14; Pl.’s Reply, ECF No. 125, at 9. The Court finds this discussion irrelevant as an insurable
interest does not require ownership in the property, and the evidence is clear that Schooner’s, Inc.
never had an ownership interest in the Barge. Moreover, as discussed elsewhere in this Opinion,
Tolliver’s affidavit, which clarifies Schooner’s, Inc.’s interest, is not barred by the sham affidavit
doctrine. A jury will be tasked with judging Tolliver’s credibility regarding Schooner’s, Inc.’s
continued operation, and Plaintiff can challenge any inconsistencies during cross examination if
necessary.
3
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the lack of bank accounts and employees, the late alterations to loss and profit sheets after the
lawsuit was filed, and the general failure of corporate governance. The Court recognizes that
Plaintiff challenges the admissibility and credibility of evidence produced by Schooner’s, Inc. in
opposition, and the Court, therefore, will discuss each of the contentions in turn.4
i. Administrative Dissolution
First, the Court will turn to the effect of Schooner’s, Inc.’s administrative dissolution in
2013.
West Virginia gives power to the Secretary of State to administratively dissolve a
corporation that fails to pay fines and dues owed to the state, that has an expired period of duration,
that fails to notify the state of changes to its registered agent, or that is in default with the Bureau
of Employment Programs. W. Va. Code § 31D-14-1420. Once a corporation is dissolved, the
corporation can apply “for reinstatement within two years after the effective date of dissolution.”
W. Va. Code § 31D-14-1422.
Plaintiff highlights the dissolution of the corporation as evidence that Schooner’s, Inc. was
no longer operating after the 2012 season. Pl.’s Mem. in Supp., ECF No. 102, at 8. During the
Examination Under Oath, Plaintiff’s counsel pointed to the West Virginia Secretary of State’s
website listing Schooner’s, Inc. as being dissolved in November of 2013. Exam. Under Oath,
ECF No. 100-3, at 52:1-6. The State’s website now shows that Schooner’s, Inc. submitted annual
reports in 2011 and 2012 and then again in 2016 and 2017.5 The State reinstated Schooner’s, Inc.
Plaintiff also argues that Schooner’s, Inc. failed to dispute the material facts and certain
legal arguments in its Response. Pl.’s Reply, ECF No. 125, at 4. The Court has thoroughly
reviewed the various contentions in the briefings. The Court disagrees with Plaintiff’s
characterization that Schooner’s, Inc. did not respond to the supposed bar from asserting a
bailment. See Pl.’s Reply, ECF No. 125, at 5. Schooner’s, Inc. argues about the admissibility of
the affidavit and other evidence to support what it calls a bailment throughout its Response. The
Court, thus, does not find that Schooner’s, Inc. conceded the argument and will not award Plaintiff
judgment as a matter of law on that reasoning.
5
See
Business
Organization
Search,
W.
Va.
Sec.
of
State,
4
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on February 1, 2016. Certificate of Reinstatement, ECF No. 100-21. The website no longer
identifies a termination date for Schooner’s, Inc., and, other than its break in annual reports, the
website does not mention any break in operation of the corporation.
By reinstating the corporation, the State allows the corporate entity to relate back to the
termination date. The law specifies that once reinstatement is issued, “it relates back to and takes
effect as of the effective date of the administrative dissolution.” W. Va. Code § 31D-14-1422(c).
The reinstatement, thus, negates the dissolution as if it had never happened. See Nautilus Ins. Co.
v. Headhunters Racetrack, LLC, No. 5:13-CV-00426 (LJA), 2016 WL 1270237, at *2 (M.D. Ga.
Mar. 31, 2016) (allowing corporation to act as if dissolution never occurred after reinstatement
under similar Georgia law); Allstate Ins. Co. v. Levesque, No. 8:08-CV-2253-T-EAJ, 2010 WL
11478993, at *3 (M.D. Fla. Nov. 9, 2010) (finding that reinstatement relates back to dissolution
date under similar Florida law). Other district courts have interpreted similar laws and held that
a corporation’s reinstatement retroactively gives the corporation legal capacity when it was
administratively dissolved.
In re McKeever, 550 B.R. 623, 638 (N.D. Ga. 2016).
Here,
Schooner’s, Inc.’s administrative dissolution has no effect on whether the corporation operated in
2015 because the reinstatement relates back to November of 2013. This evidence, therefore, does
not justify a judgment as a matter of law.
ii. Sham Affidavit
Second, the Court will consider whether Tolliver’s subsequent affidavit is admissible or if
it serves as a “sham affidavit” as Plaintiff characterizes it. A sham affidavit is a subsequent
affidavit offered to contradict previous deposition testimony. “At the summary judgment stage,
http://apps.sos.wv.gov/business/corporations/
Agent/Officer/Name.
and
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search
for
Jason
Tolliver
under
if an affidavit is inconsistent with the affiant’s prior deposition testimony, courts may disregard
the affidavit ….” Kinser v. United Methodist Agency for the Retarded—Western North Carolina,
Inc., 613 F. App’x 209, 210 (4th Cir. 2015). “A genuine issue of material fact is not created where
the only issue of fact is to determine which of the two conflicting versions of the plaintiff’s
testimony is correct.” Rohrbough v. Wyeth Labs., Inc., 916 F.2d 970, 975 (4th Cir. 1990). To
apply the sham-affidavit rule, the subsequent affidavit needs to present “a bona fide inconsistency”
with a prior deposition. Spriggs v. Diamond Auto Glass, 242 F.3d 179, 185 n.7 (4th Cir. 2001);
see also Tipple Enter., LLC v. Kingsford Mfg. Co., Civ. No. 1:13CV146, 2014 WL 4925212, at *4
n.4 (N.D.W. Va. Sep. 30, 2014) (not applying sham-affidavit rule because defendant could not
point to specific contradictions).
Circuits have applied different approaches to determine whether a subsequent affidavit is
a sham, and the Fourth Circuit has not definitively weighed in on the issue besides requiring a
clear inconsistency. The Third, Fifth, Seventh, and Ninth Circuits apply a more flexible approach,
determining whether other independent evidence exists to support the subsequent affidavit. See
Jiminez v. All American Rathskeller, Inc., 503 F.3d 247, 254 (3d Cir. 2007) (citing relevant cases);
Kennett-Murray Corp. v. Bone, 622 F.2d 887, 894 (5th Cir. 1980) (“In light of the jury’s role in
resolving issues of credibility, a district court should not reject the content of an affidavit even if
it is at odds with statements made in an earlier deposition.”).
Plaintiff alleges that Tolliver’s affidavit, in which he clarifies that Schooner’s, Inc. never
owned the Barge but only served as its operating entity and that the relationship with Schooner’s,
Inc. and Adam’s Landing was that of a bailment, cannot be regarded because it creates sham issues
of fact. Pl.’s Mem. in Supp., ECF No. 102, at 11. As Tolliver explained that Schooner’s, Inc.
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owned the Barge in the Examination Under Oath, Plaintiff challenges the subsequent affidavit as
a direct contradiction to his previous sworn testimony.
Although owning the Barge and having a bailment to operate the Barge are inconsistent,
the Court is not convinced that such inconsistency is so material as to disregard the subsequent
affidavit as a sham. See Boggs v. Cintas Corp. No. 2, 2012 WL 1189915, at *4 (S.D.W. Va. Apr.
9, 2012) (declining to exclude affidavit when “discrepancies do not evince such a degree of
contradiction as to warrant the disregard of the affidavit”). The explanation of Schooner’s, Inc.’s
interest in the affidavit coordinates with previous explanations during the insurance policy
application process and when describing the purpose of the corporation during the Examination
Under Oath. See Commercial Ins. Application, ECF No. 122-6; Exam. Under Oath, ECF No.
100-3, at 47:11-14 (Schooner’s, Inc. was “[t]o operate the restaurant”). Plaintiff was aware that
Schooner’s, Inc. did not own the Barge at the time of the insurance policy, and the Court does not
find affirming information of such fact to be prejudicial to Plaintiff. The affidavit presented here
is made from personal knowledge; the affidavit includes specific assertions and clarifications that
Adam’s Landing bought the Barge and Schooner’s, Inc. served as the operating entity; the affidavit
corresponds with other independent evidence; and the affidavit clarifies inaccuracies from the
Examination Under Oath.6 The Court does not see these clarifications as direct contradictions as
6
Although the Court recognizes that the purpose of an Examination Under Oath is similar
to a sworn deposition, Plaintiff’s counsel made it clear throughout the examination that it indeed
was not a deposition. See Exam. Under Oath, ECF No. 100-3, at 6:14-15 (“it’s a lot like a
deposition, though it is not a deposition”); id. at 125:20-23 (“Okay. I realize it’s not a deposition,
and I’m not going to chide you for speaking objections, but at some point, this becomes your
testimony.”). In its Reply, however, Plaintiff argues that the examination “had all the hallmarks
of a discovery deposition.” Pl.’s Reply, ECF No. 125, at 11 n.11. Perhaps the facial hallmarks
were present—the participation of counsel, the opportunity to correct inaccuracies at the end,
etc.—but the spirit clearly was not. At the very least, these repeated assertions that the
examination was not a deposition by Plaintiff curbed Defendants from exhibiting the same tenacity
in objecting to Plaintiff’s questioning and characterizations.
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it is evident throughout the Examination that Tolliver confused many of his business entities and
stopped answering questions when prodded for specific designations of each corporation. See
Exam. Under Oath, ECF No. 100-3, at 106:12-19. Thus, the affidavit clarifies the correct
designation of which business entity—all owned exclusively by Tolliver—conducted which
actions.
Moreover, Plaintiff challenges the timing of the affidavit, pointing to the fact that it was
created over two months after Plaintiff filed its Motion for Summary Judgment. Pl.’s Reply, ECF
No. 125, at 11. However, Defendants provided Plaintiff advance notice before Plaintiff filed the
summary judgment motion that an affidavit by Tolliver would be taken and that the affidavit would
be consistent with the independent facts of the case, even if contradicting the Examination Under
Oath. See Email Exchange, ECF No. 122-29. Ultimately, the Court finds that the subsequent
affidavit does not prejudice Plaintiff, corresponds with independent facts of the case, and does not
directly contradict a sworn deposition. As the sham-affidavit rule is meant to “screen[] out sham
issues of fact”, the Court finds it appropriate to regard the subsequent affidavit in this case. See
McDonald, 914 F. Supp. at 1361. Plaintiff can challenge Tolliver’s inconsistencies at trial, and a
jury shall be tasked with making any credibility determination. The subsequent affidavit presents
a genuine issue of material fact as to whether Schooner’s, Inc. continued as an operating entity in
2015 at the time of the loss.
iii. Tax Returns
Third, Plaintiff challenges the use of Schooner’s, Inc.’s amended tax returns as evidence
of continued operation. Plaintiff asserts that Schooner’s, Inc. is legally estopped from using its
amended tax returns because it contradicts sworn statements provided to the Internal Revenue
Service (IRS) in the originals. Pl.’s Mem. in Supp., ECF No. 102, at 13. In support, Plaintiff
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cites cases that prevent a party from taking inconsistent positions, but none of these cases involve
a lawful amendment that alters a previous position. See PACE Indus. Union-Mgmt. Pension Fund
v. Dannex Mfg. Co., 394 F. App’x 188, 199 (6th Cir. 2010) (preventing shareholder from arguing
shareholder distribution when previously claimed as loan on tax returns); Muncy v. Norfolk & W.
Ry. Co., 676 F. Supp. 112, 114 (S.D.W. Va. 1987) (preventing plaintiff from claiming
discrimination when previous suit claimed disability). These cases would be persuasive if they
applied to the instant case, but they do not.
Federal tax law allows a corporation to file an amended return within three years after the
date of the original return. See IRS Form 1120X. Schooner’s, Inc.’s amended 2013 and 2014
returns all appear to fall within that three-year time period. See Am. 2013 & 2014 Tax Return,
ECF No. 122-9. Even if the Court found the timing of such amendment to be suspicious, the
Court has no reason to disregard a lawfully amended document. Unlike the situations involved
in Plaintiff’s cited cases, Schooner’s, Inc. amended the tax returns within the allowed time period,
and there is no indication that the IRS refused these amended returns. Therefore, the Court will
not disregard the amended tax returns as evidence that Schooner’s, Inc. still operated as a business
through 2015. Any issues of credibility on these amendments, including the timing of these
amendments, are proper for jury determination.
iv. Lease Agreements
Fourth, the Court considers the three commercial leases that list Tolliver as the landlord of
the restaurant in his individual capacity. The Court agrees that these leases could undermine
Schooner’s, Inc.’s claims that it remained the operating entity after 2012. However, the evidence
suggests that Tolliver failed to follow corporate formalities, and this failure, in itself, may not
terminate the interest of Schooner’s, Inc. in the operation of the restaurant as a matter of law. The
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Court recognizes that Tolliver did not have any apparent authority to lease the restaurant or the
Barge in his individual capacity because Adam’s Landing owned the Barge and Schooner’s, Inc.
operated the restaurant and owned the equipment. So even if the leases were signed by Tolliver
in his individual capacity, and not as a corporate owner, that does not automatically eliminate
Schooner’s, Inc.’s interest in the restaurant. Schooner’s, Inc. operated the restaurant, and Adam’s
Landing owned the Barge; Tolliver had no individual capacity at all. The leases, therefore, may
not have deprived Schooner’s, Inc. of its interests in the restaurant and equipment even if Tolliver
attempted to circumvent the corporation and lease it out himself. Schooner’s, Inc. could have
interrupted this lease agreement, challenged its authority, and forced its own operations to the
exclusion of the other businesses. The Court finds this perhaps an unlikely scenario, but not an
impossible one. The existence of this evidence presents enough contradicting information to
create a question of fact for the jury. Furthermore, even if Plaintiff is correct in that parol evidence
will bar the admission of the affidavits by Matt Casto and Paul Runnels, who explain that the
parties understood that Schooner’s, Inc. was the leasing entity rather than Tolliver, that decision
would not change the result here. The Court will rule on the admissibility of the affidavits or
testimony closer to trial.
v. Ownership of Contents
Finally, the Court considers Plaintiff’s challenge to Schooner’s, Inc.’s reliance on the
ownership of the equipment within the Barge when it sank. See Pl.’s Reply, ECF No. 125, at 18.
Schooner’s, Inc. provided evidence that the company purchased the kitchen equipment aboard the
Barge, and that equipment was leased out to Bar Boat LLC and Sink or Swim LLC. Plaintiff
challenges these arguments under a case decided by the Supreme Court of Appeals of West
Virginia in 1904. The Court in Tyree v. Virginia Fire & Marine Insurance Company held that a
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husband could not have an insurable interest in a house that was erected on his wife’s real estate
because the husband did not have title over the real property. 46 S.E. 706 (W. Va. 1904).
Plaintiff cites this case for the conclusion that the husband’s likely ownership of the contents in
the house could not confer an insurable interest over the house as a whole. Pl.’s Reply, ECF No.
125, at 18. Accordingly, Plaintiff argues, Schooner’s, Inc. cannot have an insurable interest in
the Barge through its ownership of the contents contained therein.
The Court disagrees with Plaintiff’s analysis for a number of reasons. First, the Tyree case
is distinguishable in that the insurance policy in that case voided the company’s liability if the
husband did not have “title or interest … [amounting to] the entire, absolute, unconditional,
unencumbered fee-simple ownership.” 46 S.E. at 706. Such clause is not present here, and
Plaintiff knew in the application process that Schooner’s, Inc. was not the owner of the Barge.
Second, the husband in Tyree represented to the agent that he owned the property for which he
sought insurance. Id. at 707-08. Here, Schooner’s, Inc. disclosed its interest in the Barge
truthfully to Plaintiff, and such concerns of misrepresentation are not present as in Tyree.
More importantly, Tyree has been distinguished in subsequent cases when the insured party
has possession of the property and can demonstrate a pecuniary loss, or an equitable right by gift
or contract, to create an insurable interest. See Hawkins v. Sw. Mut. Fire Ins. Co., 93 S.E.2d 873,
874 (W. Va. 1917) (citing cases finding insurable interest). In Hawkins, the court found an
insurable interest when the wife paid for the erection of a house on her husband’s property and had
the sole possession and control over it. Id. Here, Schooner’s, Inc. has presented evidence of
ownership of the contents, original operation of the restaurant, and leases which contain the
continued use of the equipment installed on the Barge. Plaintiff was aware at all times that
Schooner’s, Inc. did not own the Barge and was never misled to believe Schooner’s, Inc. actually
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had ownership until the confusion with the Examination Under Oath.
Thus, Hawkins
distinguishes Tyree and at least lends support for Schooner’s, Inc.’s insurable interest in the Barge
through the continued ownership and leasing of the equipment.
In ruling that Schooner’s, Inc.’s evidence supports its claim as to its continued operation
of the restaurant, the Court is not convinced that such evidence leads to the automatic conclusion
that Schooner’s, Inc. did have an insurable interest at the time of loss. Summary judgment is
appropriate only when there are no genuine issues of material fact remaining. In this case, many
of the documents one would expect with corporate transactions are missing or were never created.
Thus, much weight will be placed on Tolliver’s testimony, if he testifies at trial. A jury is required
to weigh the evidence, including Tolliver’s credibility, on the operation of Schooner’s, Inc., the
relationship with Adam’s Landing, and how the lease transactions were handled. The evidence
before the Court today would require the Court to inappropriately weigh the credibility of a
potential witness and balance the parties’ evidence against each other to resolve a question of fact.
Accordingly, looking at all of the evidence presented, the Court finds that there is at least
a question of fact for the jury to determine whether Schooner’s, Inc. had an insurable interest at
the time of loss. Plaintiff’s arguments supporting its position have all been challenged with
competing evidence presented by Defendants.
However, Defendants’ evidence has not
definitively shown an insurable interest because Plaintiff challenges the evidence’s weight and
credibility. Clearly, there are genuine issues of material facts as the evidence is disputed, and
summary judgment would be inappropriate. But see Shaffer v. Calvert Fire Ins. Co., 62 S.E.2d
699, 703-04 (W. Va. 1950) (finding undisputed evidence on insurable interest a question of law
not available to a jury). Therefore, the Court DENIES Plaintiff’s Motion for Summary Judgment
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on Count I (ECF No. 100) and DENIES Defendant’s Cross-Motion for Summary Judgment on
Count I (ECF No. 122).
b. Insureds Under the Policy
Plaintiff’s Motion for Summary Judgment also asks the Court to rule that Tolliver and
Adam’s Landing are not insureds under the policy. See Pl.’s Mem. in Supp., ECF No. 102, at 1718. The insurance policy specifies that the named insured is Schooner’s, Inc. and makes no
mention of Adam’s Landing or Tolliver. See Ins. Policy, ECF No. 122-7. Finding Adam’s
Landing or Tolliver as an equitable insured under the policy would ignore the unambiguous
declaration that the insurance policy was between Plaintiff and Schooner’s, Inc. alone. See
Farmers & Mechs. Mut. Ins. Co. v. Allen, 778 S.E.2d 718, 725 (W. Va. 2015) (finding that the
circuit court erred in reading another insured into policy when not named). “[A]n insurance
policy is a contract between the insurer and the insured named in the policy.” Id.
Schooner’s, Inc. did not address these arguments in its Response. “Although the failure
of a party to respond to a summary judgment motion may leave uncontroverted those facts
established by the motion, the moving party must still show that the uncontroverted facts entitle
the party to ‘a judgment as a matter of law.’” Custer v. Pan Am. Life Ins. Co., 12 F.3d 410, 416
(4th Cir. 1993). Thus, a district court still has the duty to review the motion, or the argument
contained therein, and determine if it justifies judgment as a matter of law. In this case, the
insurance policy only names Schooner’s, Inc. as the named insured and does not leave open the
possibility of equitable insureds. Finding the language unambiguous, the Court finds that only
Schooner’s, Inc. can collect on the insurance policy if afforded coverage. Thus, the Court
GRANTS Plaintiff’s Summary Judgment Motion and finds that Adam’s Landing and Tolliver
cannot collect on the insurance policy as a matter of law.
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c. Counterclaim
Plaintiff’s Motion for Summary Judgment also challenges Defendants’ bad faith
counterclaim for lack of evidence. Plaintiff argues that Defendants caused much of the delay at
no fault by Plaintiff. Pl.’s Mem. in Supp., ECF No. 102, at 18-19. Defendant argues that the
record contains sufficient evidence to show bad faith.
Def.’s Resp., ECF No. 122, at 29.
Schooner’s, Inc.’s counsel, moreover, submitted an affidavit requesting more discovery for the
bad faith claims, particularly for a Rule 30(b)(6) deposition of Plaintiff’s corporate representative.
Rule 56(d) Aff. of L. David Duffield, ECF No. 122-34.
Overall, the evidence presented to the Court contains little information to support summary
judgment in favor of Plaintiff for the bad faith counterclaim. Plaintiff’s reasoning seems to stem
from the understanding that Count 1 would be granted in its favor as a matter of law. See Pl.’s
Mem. in Supp., ECF No. 102, at 18 (“As it is, because there is no coverage for the Loss as a matter
of law, the Counterclaim Plaintiffs cannot ‘substantially prevail’ ….”). The Court agrees with
Defendants that more discovery may be necessary. In the Court’s Order on January 18, 2017,
discovery was extended for production and review of photographs, videos, and related documents
that were not previously disclosed to Defendants. See Court Order, ECF No. 118, at 3. The
Court finds it possible that some of these documents will assist in Defendants’ bad faith
counterclaim. Accordingly, ruling on the bad faith counterclaim as a matter of law is premature,
and Plaintiff’s Motion for Summary Judgment on the issue must be DENIED. A dispositive
motion on this issue can be raised by the June 6, 2017 deadline stated in the Order.
IV.
Conclusion
Accordingly, the parties have presented contradictory facts that make summary judgment
on Count 1 and the Counterclaim inappropriate. A jury will determine whether Defendant
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Schooner’s Bar & Grill, Inc. had an insurable interest at the time of loss. However, as Defendant
Huntington Harbor Marina, LLC and Defendant Jason Tolliver are not listed as insureds in the
policy, the Court GRANTS Plaintiff’s Motion for Summary Judgment against those parties for
Count One. Defendants Huntington Harbor Marina, LLC and Jason Tolliver, in his individual
capacity, are not entitled to collect under the insurance policy. Therefore, the Court GRANTS in
part and DENIES in part Plaintiff’s Motion for Summary Judgment (ECF No. 100) and DENIES
Defendant’s Cross-Motion for Partial Summary Judgment (ECF No. 122).
The Court DIRECTS the Clerk to send a copy of this Order to counsel of record and any
unrepresented parties.
ENTER:
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February 28, 2017
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