VIRGINIA EMERSON HOPKINS, United States District Judge.
Plaintiff/Counterclaim Defendant Liberty Corporate Capital Limited ("Liberty")
On October 17, 2016, Liberty filed a Motion for Summary Judgment (Doc. 36) (the "Motion") as to all remaining claims and counterclaims. Club Exclusive has not responded to the Motion, and the 21-day deadline to do so under Appendix II of the court's Uniform Initial Order (Doc. 2 at 14) has expired. Thus, the Motion is now ripe for disposition and, for those reasons explained below, is due to be granted.
Summary judgment is proper only when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c). All reasonable doubts about the facts and all justifiable inferences are resolved in favor of the non-movant. See Fitzpatrick v. City of Atlanta, 2 F.3d 1112, 1115 (11th Cir. 1993) (instructing that "district court should resolve all reasonable doubts about the facts in favor of the non-movant, and draw all justifiable inferences in his [or its] favor" (internal quotation marks omitted) (quoting United States v. Four Parcels of Real Property, 941 F.2d 1428, 1438 (11th Cir. 1991) (en banc))). A dispute is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). When, such as here, the moving party is the plaintiff, satisfying this initial Rule 56 burden means "affirmatively... support[ing] its motion with credible evidence.... [and] show[ing] that, on all the essential elements of its case on which it bears the burden of proof at trial, no reasonable jury could find for the non-moving party." Fitzpatrick, 2 F.3d at 1115 (citations and internal quotation marks omitted) (emphasis in original) (quoting Four Parcels, 941 F.2d at 1438). Only "[o]nce the moving party has properly supported its motion for summary judgment, [does] the burden shift[] to the nonmoving party to `come forward with specific facts showing that there is a genuine issue for trial.'" International Stamp Art, Inc. v. U.S. Postal Serv., 456 F.3d 1270, 1274 (11th Cir. 2006) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)).
Rule 56(e) of the Federal Rules of Civil Procedure provides:
FED. R. CIV. P. 56(e). Regardless of these available options in the event of a non-movant's failure to oppose, "[t]he movant... continues to shoulder the initial burden of production in demonstrating the absence of any genuine issue of material fact, and
As this court has previously stated when the non-movant offers no opposition to a summary judgment motion:
Griffin v. U.S. Postal Serv., No. 1:06-CV-0124-VEH (Doc. 29 at 3) (N.D. Ala. Nov. 7, 2008); see also United States v. One Piece of Real Property, 363 F.3d 1099 (11th Cir. 2004) ("[T]he district court
Club Exclusive is an Alabama corporation formed on October 5, 2011. AF No. 1.
On June 23, 2012, Ms. White purchased approximately 13 acres of land in rural Alabama from Bruce Hutchinson for $2,000. AF No. 4.1. This property was located at 3479 Barclay Road, Alpine, Alabama 35014 (the "Property"). AF No. 4.2. Ms. White personally owned the Property. AF No. 4.3.
Ms. White built a commercial building (the "Building") on the Property using her personal funds. AF No. 5. Ms. White did not take out a loan to assist in paying for the construction of the Building, paying for the construction with unencumbered funds. AF No. 6.
Ms. White also paid for the contents of the Building with her personal funds. AF No. 7.1. She never transferred the ownership of such contents to Club Exclusive. AF No. 7.2.
On April 30, 2012, Ms. White leased the Property to Club Exclusive (the "Lease"). AF No. 8. The Lease's three-year term expired on the last day of April 2015, and Club Exclusive did not renew the Lease pursuant to its terms. AF No. 9. The Lease expressly states that in the event Club Exclusive continued to occupy the Property after the Lease's term expired, "whether with or against the consent of [Ms. White], such tenancies shall be a tenancy
In June 2012, Club Exclusive applied for a liquor license. AF No. 11. In the liquor license application, Club Exclusive is correctly identified as leasing the Property from Ms. White. AF No. 12. Ms. White signed the liquor license application on behalf of Club Exclusive, thereby attesting to the truthfulness of the responses given within the application in reference to the "lease/property ownership." AF No. 13.
On April 4, 2014, Club Exclusive submitted an application for insurance for the Property (the "Application"). AF No. 14. Club Exclusive is the only one listed as an applicant on the Application. AF No. 15. In the Application's section inquiring into Club Exclusive's interest in the Property, Club Exclusive specifically marks "owner" instead of "tenant." AF No. 16.
Ms. White provided the information contained in the Application and signed the Application. AF No. 17.1. At the time she signed the Application, the information had been filled out. AF No. 17.2. The Application explicitly states that "the undersigned is an authorized representative of the Applicant and represents that reasonable inquiry has been made to obtain the answers to questions on this application." AF No. 17.3. "He/she represents that the answers are true, correct and complete to the best of his/her knowledge." AF No. 17.4.
Based on the information included in the Application, Liberty subscribed to Policy (No. SMF 26514), which was issued to "Club Exclusive, Inc." through Southern Insurance Underwriters, Inc. ("SIU"). AF No. 18. "SIU is a managing general agent for Liberty with regard to the Policy and generally subscribes to policies on behalf of Liberty subject to certain conditions." (Doc. 36-5 at 2 ¶ 4).
Sometime between July 14, 2015, and July 16, 2015 (after the Lease had expired), the Building burned (the "Loss" or "Fire"). AF No. 20. In furtherance of its claim for the loss, Club Exclusive submitted a Sworn Statement in Proof of Loss (the "Proof of Loss") and attached a Statement of Loss in support. AF No. 21.
Through the Proof of Loss and Statement of Loss, Club Exclusive made a claim for $549,000 in alleged damage to the Building, for $151,975.03 in alleged damage to business personal property in the Building (the "BPP"), and $24,033.49 for debris removal (collectively known as the "Claim"). AF No. 22.
On May 13, 2016, Liberty filed this declaratory judgment action (the "DJ Action") seeking a declaration that it owes no duty or obligation to Club Exclusive under
On June 22, 2016, Club Exclusive filed its Answer, Counterclaim Complaint against Liberty, and Crossclaim Complaint against Mr. Duesenberg and Ms. Washburn. AF No. 24. In the Counterclaim Complaint, Club Exclusive asserts causes of action against Liberty for breach of contract, bad faith failure to investigate, bad faith failure to pay a valid claim, and negligent hiring. AF No. 25.1. The negligent hiring claim is based on the alleged wrongful acts Club Exclusive asserts against Mr. Duesenberg and Ms. White in the crossclaims. AF No. 25.2.
On August 19, 2016, Mr. Duesenberg filed a Motion To Dismiss Club Exclusive's crossclaims against him. AF No. 26. On August 22, 2016, Ms. Washburn filed a Motion To Dismiss Club Exclusive's cross-claims against her. AF No. 27. As mentioned in the procedural history section, the court granted both Motions To Dismiss on October 24, 2016, and both Mr. Duesenberg and Ms. Washburn were dismissed from this action. (Doc. 37). At no point in time has Ms. Washburn been an employee or agent of Liberty. AF No. 28.
Liberty's first argument in favor of voiding the Policy pertains to Club Exclusive's misstatement in the Application about its ownership interest in the Property. (Doc. 36 at 11-13). As discussed below, Liberty has met its summary judgment burden with respect to this reason.
Concerning the contents of an application for insurance, Ala. Code § 27-14-7(a) provides:
Id. (emphasis added); see also In re HealthSouth Corp., 308 F.Supp.2d 1253, 1269-70 (N.D. Ala. 2004) (recognizing that an insurer can rescind a policy under Alabama law if an insured's misrepresentation meets § 27-14-7(a)(1), (2), or (3)). Thus, Alabama law does not require proof of an insured's intent to deceive when answering
The materiality of a misrepresented fact on an application for insurance is customarily a question for a jury to resolve. Mega Life and Health Ins. Co. v. Pieniozek, 585 F.3d 1399, 1404 (11th Cir. 2009). Nonetheless, as Liberty points out, Alabama law recognizes some exceptions to the general rule that materiality of a fact reported on an application is typically triable issue. See, e.g., Integon Nat. Ins. Co. v. MT & R Enterprises, Inc., No. 4:10-CV-02021-HGD, 2012 WL 6043504, at *4 (N.D. Ala. Nov. 8, 2012) (analyzing § 27-14-7 and citing series of Alabama cases holding that certain misrepresentations can be material as a matter of law).
One such exception is when a misrepresentation is made about an insured's ownership interest. More specifically, in Camden Fire Ins. Ass'n v. Landrum, 229 Ala. 300, 156 So. 832 (1934), the Supreme Court of Alabama held that the insured's failure to disclose an adverse occupant possessing the property "was material, and, as [a] matter of law, increased the risk of loss under the law of fire insurance." Id., 229 Ala. at 302, 156 So. at 833. Similarly, in Gunn v. Palatine Ins. Co., 217 Ala. 89, 114 So. 690 (1927), the Supreme Court of Alabama recognized that "the ownership of a mere life estate in the insured will not be sufficient to meet these provisions of the policy" and "that, as a matter of law, the ownership of only a life estate, in view of the warranties as to ownership herein set out, was such as to increase the risk of loss...." Id., 217 Ala. at 92, 114 So. at 692.
In this case, the undisputed facts and the underlying evidence supporting those facts, including the Property and Lease records, affirmatively establish that Club Exclusive misrepresented its ownership interest in the Property when submitting its Application for the Policy by incorrectly indicating that it was the "owner" of the Property. (Doc. 6-9 at 3). To the contrary, Ms. White owned the Property and Club Exclusive was, instead, a tenant which leased the Property from her.
Further, while Camden and Gunn do not involve the exact set of circumstances surrounding the issuance of this particular Policy, those decisions do provide persuasive support for finding that the ownership-related misrepresentation made by Club Exclusive in the Application was material to Liberty's risk as a matter of law such that the Policy is void and unenforceable under Ala. Code § 27-14-7(a)(2); (see also Doc. 36-5 at 4 ¶ 12 ("SIU considers the ownership interest in the Property to be a material fact, as evidence by the Application's question addressing the subject.") (emphasis added)).
Alternatively, pursuant to Ala. Code § 27-14-7(a)(3), Liberty has affirmatively shown-through the affidavit of Managing Underwriter for SIU, Hank Butler-that had the truth regarding ownership been known, the Policy would not have issued under the terms that it did. (See Doc. 36-5 at 3 ¶ 10 ("If SIU had been advised that Club Exclusive was not the owner of the Property, then this Policy would not have issued to Club Exclusive.")).
Accordingly, Liberty's Motion concerning its right to rescind the Policy as void
Liberty alternatively contends that the Policy is void because Club Exclusive did not have an insurable interest in the Property or the BPP in the Building. (Doc. 36 at 13-15).The court agrees.
Concerning the parameters of an insurable interest pertaining to property, Ala. Code § 27-14-4 provides:
Ala. Code § 27-14-4(a)-(c). Further, "a party cannot collect insurance upon property in which he has no insurable interest." N. British & Mercantile Ins. Co. v. Sciandra, 256 Ala. 409, 417, 54 So.2d 764, 770 (1951).
In establishing Club Exclusive's lack of an insurable interest, Liberty points out that it did not own the Property and that, at the time of the Loss-occurring between July 14, 2015, and July 16, 2015-Club Exclusive was a tenant by sufferance as the Lease had expired at the end of April 2015. (Doc. 36 at 14-15). Further, relying upon Fid. Phenix Fire Ins. Co. of N.Y. v. Raper, 242 Ala. 440, 6 So.2d 513 (1941), Liberty maintains that in simply possessing the Property merely as a tenant by sufferance, Club Exclusive had no valid insurable interest. See Raper, 242 Ala. at 442, 6 So.2d at 514 ("The law is clear that a person with no interest in the land other than that of a tenant by sufferance, or a squatter, or a trespasser, has no insurable interest in the property." (citing Royal Exchange Assur. of London, England v. Almon, 206 Ala. 45, 89 So. 76, 78 (1921))); see also Almon, 206 Ala. at 48, 89 So. at 78 ("Just bare possession of the barn with no facts averred except being the husband, to show right of possession and use of the barn, is not sufficient interest in the barn by plaintiff to be insured. It is not an insurable interest.").
Likewise, the undisputed facts show that Ms. White, and not Club Exclusive, held the insurable interest with respect to the BPP within the Building. More specifically, Ms. White confirmed under oath that she paid for the BPP with her personal funds and never transferred ownership of such items to Club Exclusive. (See generally Doc. 36-1 at 33-34 (Ms. White's examination under oath taken on Apr. 19, 2016)).
Accordingly, Liberty's Motion concerning its right to rescind the Policy as void due to Club Exclusive's lack of an insurable interest at the time of the Loss is due to be granted under § 27-14-4.
Club Exclusive has alleged four counterclaims against Liberty: (1) breach of contract;
Club Exclusive's first counterclaim against Liberty is for breach of contract. (Doc. 12 at 47-52 ¶¶ 42-46). An action for breach of contract require proof of: "(1) a valid contract binding the parties; (2) the plaintiffs' performance under the contract; (3) the defendant's nonperformance; and (4) resulting damages." Reynolds Metals Co. v. Hill, 825 So.2d 100, 105 (Ala. 2002) (citing State Farm Fire & Cas. Co. v. Slade, 747 So.2d 293, 303 (Ala. 1999)). Club Exclusive cannot satisfy the first prima facie element because, for those various reasons explained above, the Policy is void as a matter of law. Thus, Liberty's Motion is due to be granted with respect to Club Exclusive's counterclaim for breach of contract.
Club Exclusive asserts two bad-faith counts against Liberty. (See Doc. 12 at 52-57 ¶¶ 47-53 (refusal to investigate and/or pay a valid claim); id. at 57-61 ¶¶ 54-61 (failure to pay)). In collectively addressing the elements of bad-faith liability against an insurer, such as Liberty, whether premised upon the failure to pay an insurance claim or upon the failure to investigate an insurance claim, the Supreme Court of Alabama has summarized:
State Farm Fire & Cas. Co. v. Brechbill, 144 So.3d 248, 258 (Ala. 2013) (emphasis by underlining added). Therefore, regardless of whether a plaintiff is pursuing a traditional bad-faith claim or a non-traditional one, it must establish breach of an insurance agreement as the initial element. See Slade, 747 So.2d at 318 ("We think it clear that these authorities limit bad-faith liability to those cases in which the insured is entitled to benefits under the policy."); id. ("Although this Court has recognized several abnormal cases of bad faith, that recognition did not eliminate the requirement that the plaintiff prove an entitlement to benefits under the insurance policy."). Thus, Liberty's Motion is due to be granted with respect to Club Exclusive's counterclaim(s) premised upon bad-faith liability because the Policy is void as a matter of law; consequently, it has no cognizable right to pursue benefits against Liberty for a breach of the Policy.
Finally, Club Exclusive counterclaims that Liberty is liable because it
Consistent with the foregoing cases, essential to establishing negligent hiring or training on the part of Liberty, Club Exclusive must show wrongful conduct on the part of either Mr. Duesenberg or Ms. Washburn. However, as explained above, all claims brought by Club Exclusive against Mr. Duesenberg and Ms. Washburn were dismissed by the court as non-cognizable on October 24, 2016, and both individual defendants are no longer parties to this action.
Thus, Liberty's Motion is due to be granted with respect to Club Exclusive's counterclaim for negligent hiring, training, monitoring, and supervision against Liberty.
Therefore, Liberty's Motion is due to be granted in all respects. Further, with no pending claims remaining, this case is due to be dismissed with prejudice. The court will enter a final judgment order consistent with this opinion.
