ABDUL K. KALLON, UNITED STATES DISTRICT JUDGE.
Charles Baker filed this action against Travelers Insurance Company in the Circuit Court of Morgan County, Alabama, alleging claims for breach of contract and bad faith. Doc. 1-2 at 2-5. Travelers timely removed the action to this court and now moves for summary judgment on all of Baker's claims, arguing that Soquetta Griffin, the individual who obtained the homeowners insurance policy, made misrepresentations on her insurance application and during the post-loss investigation that void the policy. The motion is fully briefed,
SUMMARY JUDGMENT STANDARD OF REVIEW
Under Federal Rule of Civil Procedure 56(c), summary judgment is proper "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). "Rule 56(c) mandates the entry of summary judgment, after adequate
FACTUAL BACKGROUND 2
On April 27, 2011, Griffin purchased property located at 1031 Bedford Drive S.W., in Decatur, Alabama for $39,000.00. Approximately five months thereafter, Griffin executed a quit claim deed transferring ownership of the property to Baker, in connection with their agreement to form a partnership to operate a group home at the property. Around the same time she transferred ownership to Baker, Griffin "got into it" with her mother and, as a result, moved into the property. Doc. 29-4 at 138-139. Prior to the incident with her mother, Griffin had no intent to live in the house, id. and instead "wanted to do [a group home] because ... it's easy money," doc. 20-2 at 124.
Three months after she transferred ownership to Baker, on December 12, 2011, Griffin reviewed and signed a completed application with Travelers for insurance for the property. Relevant here, the application stated that no business was conducted on premises, failed to disclose the intent to open a group home, and failed to list Baker as the owner of the property. Also, although the application asked whether Griffin had previously filed for bankruptcy, Griffin left this portion of the application blank and did not check either the "yes" or "no" box. Based on the information Griffin provided in her application, Travelers issued a policy with dwelling limits of $113,000 and personal property limits of $79,100 to Griffin. Eight days later, at Griffin's request, Travelers added Baker as an insured on the policy.
Just two weeks after obtaining the policy, specifically, sometime between 11:00 p.m. on New Year's Eve and 8:00 a.m. on New Year's Day, someone allegedly broke into the property, stole various items primarily consisting of electronics, and attempted to set the house on fire. The next day, the house suffered fire damage in a second incident. Following the January 2, 2012 loss, Griffin notified Travelers and an investigation of the claim ensued. The investigation revealed multiple discrepancies that are the basis for Travelers' contention that it is entitled to void the policy. For example, Travelers learned during Griffin's examination under oath that Griffin
During the investigation, Griffin also made misstatements about the intent to operate a business at the property. For example, during the second recorded statement, Griffin never mentioned that she and Baker had started a joint venture to operate a group home at the property. Griffin finally disclosed that she and Baker intended to operate the home as a group home during the third recorded statement she provided on February 8, 2012.
Based on Griffin's misrepresentations in the application and in the post-loss investigation, Travelers denied the claim Baker submitted for the loss from the theft and fires. Baker filed this lawsuit as a result, alleging claims for breach of contract and bad faith. Doc. 1-2 at 2-5.
In a nutshell, Travelers asserts that it is due summary judgment because Griffin made misrepresentations or concealed facts in her application that were either fraudulent, material to Travelers acceptance of the risk or hazard assumed, or such that Travelers would not have agreed to provide coverage for the property. More specifically, Travelers claims that if Griffin had informed it in the application of the intent to open a group home, it would not have issued the policy. Doc. 20-6 at 2. Also, Travelers claims that if Griffin had disclosed in the application that Baker was the legal owner of the property, it would have underwritten the policy for eligibility using the risk characteristics for Baker to determine the risks eligibility. Id. Based on these misrepresentations, Travelers contends that the policy is void under Section 27-14-7 of the Alabama Code.
Travelers is not entitled to void the policies based on misrepresentations or fraud
Travelers is correct that under Alabama law, material misrepresentations or suppressions in insurance applications may constitute fraud that is sufficient to void the resulting policy. Ala. Code §§ 6-5-100 to 102;
1. Fraud based on material misrepresentation
To prove fraud based on misrepresentation, Travelers must show the existence of a misrepresentation of a material fact, reliance, and that it sustained damages as a proximate result of the misrepresentation. Sherrin v. Nw. Nat. Life Ins. Co., 2 F.3d 373, 378 (11th Cir.1993) (citing Earnest v. Pritchett-Moore, 401 So.2d 752, 754 (Ala.1981)); AmerUs Life Ins. Co. v. Smith, 5 So.3d 1200, 1207 (Ala.2008). A "material fact" is "a fact of such a nature as to induce action on the part of the complaining party." Graham v. First Union Nat. Bank of Georgia, 18 F.Supp.2d 1310, 1317 (M.D.Ala.1998) (citing Bank of Red Bay v. King, 482 So.2d 274 (Ala. 1985)). "Further, the misrepresentation need not be the sole inducement. It is sufficient if it materially contributes and is of such a character that the [complaining] party would not have consummated the contract had he known the falsity of the statement." Id. (citation omitted).
In support of its claim, Travelers contends (1) that Griffin misrepresented the owner of the property and the intent to
Travelers is correct that some misrepresentations, whether made intentionally or innocently, increase the risk of loss as a matter of law and are therefore material to the issuance of the policy. See, e.g., Alfa Life Ins. Co. v. Lewis, 910 So.2d 757, 762 (Ala.2005); Clark v. Alabama Farm Bureau Mut. Cas. Ins. Co., 465 So.2d 1135, 1140 (Ala.Civ.App.1984). However, the limited cases that have found materiality as a matter of law are distinguishable from this case. In fact, Travelers does not cite to a case that granted summary judgment based on misrepresentations that are similar to those here. See docs. 20-1; 32. Therefore, based on the case law and the record before this court, this court cannot conclude as a matter of law that Griffin made material misrepresentations in her application to warrant summary judgment under § 24-14-7. Consequently, as it relates to the alleged fraudulent misrepresentations of material facts, Travelers failed to carry its burden.
2. Rescission based on § 27-17-7(a)(3)
Travelers argues also that it is entitled to void the policy under § 27-17-7(a)(3) because Griffin's misrepresentations factored into its decision to issue the policy. See doc. 20-6 at 2. To establish a defense under § 27-14-7(a)(3), an insurer "need only have presented evidence that the [applicant] made the misrepresentation
The key question with regard to the availability of § 27-14-7(a)(3) as a defense is the good faith of the insurer in refusing to issue the policy. Henson v. Celtic Life Ins. Co., 621 So.2d 1268, 1275 (Ala.1993). Moreover, an insurer relying on § 27-14-7(a)(3) has the burden of demonstrating that its underwriting guidelines in dealing with similar misrepresentations are universally applied. Sharp Realty & Mgmt., LLC v. Capitol Specialty Ins. Corp., CV-10-AR-3180-S, 2012 WL 2049817 (N.D.Ala. May 31, 2012) (citing Mega Life and Health Ins. Co. v. Pieniozek, 516 F.3d 985, 989 (11th Cir. 2008)). In that regard, Travelers offers the affidavit of Richard Maestri, who attests that "[h]ad Travelers been informed in the application for insurance of the intent to open a group home, the policy ... would not have been issued," and that "had Travelers been informed... that Charles Baker was the legal owner of the property, the policy would have been underwritten for eligibility using the risk characteristics for Charles Baker ... to determine the risks eligibility." Doc. 20-6 at 2. While Travelers' assertions are logically sound, Travelers failed to provide evidence of a universal application of its underwriting policy or similar situations in which it denied coverage. Therefore, the court cannot conclude as a matter of law that Travelers in good faith would not have issued the policy. As the Eleventh Circuit found in a case interpreting § 27-14-7(a)(3), "under Alabama law, the uncontradicted testimony of an insurance company's underwriter that a misrepresentation was material and that the company in good faith would not have issued the policy as written, is not necessarily dispositive." Bennett, 976 F.2d at 661. In light of the failure to present evidence regarding the universal application of Travelers' underwriting policies, the alternate ground for relief under § 27-14-(a)(3) also fails.
Finally, Travelers contends also that the policy is void because Griffin made multiple misrepresentations during the post-loss investigation. Indeed, the record is replete with such misrepresentations. Among other things, Griffin initially failed to disclose that she and Baker intended to use the property as a group home or that Baker actually owned the property. Instead, she first described Baker as someone she listed on the policy solely because she believed she needed to identify a second person on the policy, and then subsequently described him as a joint owner. Finally, during the third recorded statement she provided about a month after the first, Griffin disclosed that Baker owned the insured property, but only after Travelers confronted her with the quit claim deed she issued to Baker months before she took out the policy. Doc. 20-5 at 2-3.
To prevail on this alternate contention for summary judgment, Travelers must
In response to Travelers' contention, Baker counters that Griffin had no intent to deceive because Griffin purportedly believed she still owned the property notwithstanding the deed she executed: "Recognizably, Ms. Griffin is not the most savvy as related to legal distinctions, but no intent to deceive existed. This [is] evident in Ms. Griffin's statement regarding ownership, [doc #20 Defendant Ex. 4 pg. 116, line 1] she states, `[Baker] may be the sole owner but it is still my house.'"
In short, because the policy states unequivocally that it provides no coverage to the insureds when one of them makes any false statements after a loss, see doc. 20-3 at 27, and because Griffin admitted that she knew she was lying when she made the statements, Baker is precluded from receiving coverage under the policy, and his claims must fail.
Based on the evidence before this court, Travelers' motion for summary judgment is due to be granted.
Doc. 20-2 at 246.
(a) All statements and descriptions in any application for an insurance policy or annuity contract, or in negotiations therefor, by, or in behalf of, the insured or annuitant shall be deemed to be representations and not warranties. Misrepresentations, omissions, concealment of facts and incorrect statements shall not prevent a recovery under the policy or contract unless either:
Ala. Code § 27-14-7.
Ala. Code §§ 6-5-100-102.