ORDER
G.R. SMITH, United States Magistrate Judge.
Before the undersigned in this insurance coverage dispute is plaintiff Colony Insurance Company's (Colony's) motion to compel defendant 944 Abereorn, LCC's (Abercorn's) discovery responses. Doc. 34. Colony also moves to amend its complaint. Doc. 35. The resolution of the legal issues driving those motions may conflict with that of the district judge when he resolves Abercorn's pending summary judgment motion, doc. 29. Thus, the Court must defer the motions to the district judge.
I. BACKGROUND
The dispute arises from water damage to a Savannah, Georgia apartment complex known as the "English Oaks Apartments." Abereorn owned it during the 2008-2009 term of a damage policy issued by Colony. Abereorn thus filed a damage claim with Colony. The parties conducted an appraisal under the policy's terms and Colony partially paid, doc. 29 at 3, doc. 42 at 3, 8, but then stopped and filed this Declaratory Judgment action to limit coverage. Doc. 1. Even though Abereorn lost the complex to foreclosure in July 2010,1 it insists that it still has standing to pursue the policy's proceeds (it claims it purchased that right from the lender) and thus has moved for partial summary judgment on that score. Doc. 29. That motion is before the district judge.
The gist of Colony's "compel" motion turns on the water damages. It wants details on Abercorn's claim, but Abereorn says Colony has all it needs — indeed, the appraisal process resolved coverage, it contends. In fact, Abereorn moved to stay discovery pending its summary-judgment motion. Doc. 30 (motion); doc. 59 (Order denying it). Abereorn had recounted its discovery disclosures and insisted that "Colony has turned to needlessly expanding the scope of discovery in order to further delay the payment pursuant to the Appraisal Award, and to increase unnecessarily the cost of this litigation to [Abercorn]." Doc. 30 at 4. Abercorn repeats that theme in its response to Colony's compel motion. Doc. 48 at 3 (insisting it has provided all of the requested information through the Appraisal process).
Colony's motion to amend its complaint centers on the misrepresentation and standing defenses that it wants to raise: "What began as a straight-forward action to set aside an unlawful appraisal," Colony contends, "has become an active investigation of insurance fraud." Doc. 70 at 1. Accusing Abercorn of "wordplay and gamesmanship," id. at 6, Colony recounts Abercorn's failure to disclose its foreclosure and questions Abercorn's claim that it purchased the right to collect the insurance policy proceeds. In fact, Colony sought documentation on that latter point but accuses Abercorn of giving it a false affidavit — during this litigation.2 Id. at 12.
II. GOVERNING STANDARDS
A. Insurable Interest
Both the compel and amend motions will be substantially affected (if not mooted outright) if Abercorn lost the insurable interest covered by the policy's proceeds, and thus lacks standing here. See Muhammad v. Allstate Ins. Co., 313 Ga.App. 531, 534, 722 S.E.2d 136 (2012) (insured's wholly owned corporation lacked standing to make a claim under home-owner's policy; insured lost any insurable interest in property following foreclosure). An
"insurable interest" is defined in OCGA § 33-24-4(a) to mean "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." And under subsection (b) of that Code section, "[n]o insurance contract on property or of any interest therein or arising therefrom shall be enforceable except for the benefit of persons having, at the time of the loss, an insurable interest in the things insured." And mere possession of property, while it might give the possessor certain rights against a trespasser, is not in and of itself sufficient to create an insurable interest.
313 Ga.App. at 534, 722 S.E.2d 136. The parties have cited a number of cases that analyze pre- and post-foreclosure insurable interests. Doc. 63 at 6-8; doc. 70 at 10-11. That area of law is laced with subtle nuances. See, e.g., Ocwen Loan Servicing, LLC v. Nationwide Mid. Fire Ins. Co., 2012 WL 1067854 at *5-7 (S.D.Ind. Mar. 29, 2012).
B. Misrepresentation Defense
The compel and amend motions also pivot on an insurer's right to deny coverage based on the insured's misrepresentations:
Misrepresentations, incorrect statements, or omissions of fact on an insurance application do not prevent recovery under the policy unless (a) fraudulent, or (b) material either to acceptance of the risk or the hazard assumed, or unless (c) the insurer in good faith would not have issued the policy in the amount and at the rate charged if the truth had been known to the insurer. OCGA § 33-24-7(b); Taylor v. Ga. Intl. Life Ins. Co., 207 Ga.App. 341, 342, 427 S.E.2d 833 (1993). To void the policy, the burden rests on the insurer to show that the misrepresentation was material to its acceptance of the terms of the policy. Jackson Nat. Life Ins. Co. v. Snead, 231 Ga.App. 406, 410(3)(b), 499 S.E.2d 173 (1998). "A material misrepresentation is one that would influence a prudent insurer in determining whether or not to accept the risk, or in fixing a different amount of premium in the event of such acceptance." (Citation and punctuation omitted.) Id.; Ga. Intl. Life Ins. Co. v. Bear's Den, 162 Ga.App. 833, 838(3), 292 S.E.2d 502 (1982).
Thompson v. Permanent General Assur. Corp., 238 Ga.App. 450, 451, 519 S.E.2d 249 (1999). "However, the insurer need not actually rely on the misrepresentation or suffer any prejudice therefrom." Scott v. Allstate Property & Cas. Ins. Co., 2010 WL 1254295 at *3 (S.D.Ga. Mar. 30, 2010) (quotes and cite omitted), reconsideration denied, 2010 WL 1526050 (S.D.Ga. Apr. 15, 2010).
A sub-issue arises — the degree of due diligence an insurer must exercise in evaluating an application for insurance. Here "[a]n insurer is entitled to rely on the statements of an applicant as true, without conducting an independent investigation." 16 GA. JUR. INSURANCE § 9:1 (Mar. 2012) (emphasis added) (citing Graphic Arts Mut. Ins. Co. v. Pritchett, 220 Ga.App. 430, 431-32, 469 S.E.2d 199 (1995)). Thus, no "buyer beware" or caveat emptor doctrine applies here.3
III. ANALYSIS
Colony wants to amend its complaint so it can litigate Abercorn's standing — whether Abercorn has an insurable interest in light of the July 2010 foreclosure. Colony says Abercorn lacks an insurable interest. Doc. 35 at 3. Abercorn insists it does have an insurable interest and cites the fact that its lender was not a loss-payee on the policy. Doc. 63 at 6-10. It also cites precedent holding that one's insurable interest is fixed at the time of loss. Id. And finally, argues Abercorn, even if its lender acquired the insurable interest (the right to the disputed policy proceeds), Abercorn reacquired it. Id. at 8-10.
Abercorn further argues that Colony's motion to amend is untimely (well past this Court's January 3, 2012 Scheduling Order deadline for filing motions to amend, docs. 15 & 62) because, even though Abercorn never volunteered its "foreclosed" status to Colony, Colony could have easily found that out by checking the public records or even asking Abercorn, but it did not. Id. at 1-8.
Colony challenges many of the factual assertions Abercorn makes to support its arguments. In fact, it wants to add breach of contract and common law fraud theories to its complaint, then set aside the appraisal award.4 It contends that Abercorn "concealed the fact that it had lost all interest" in the property due to the foreclosure. Doc. 35 at 1.5 Also, Abercorn purchased the property in April 2007, but it misrepresented to Colony in its March 2008 application for insurance that it was a "new purchase."6 Finally, Colony contends, Abercorn misrepresented that it had no prior incidents of water or mold damage, when in fact documents recently obtained from a third party show that Abercorn had been experiencing water damage and mold-related issues before it even applied for insurance with Colony. Doc. 35 at 2. And, of course, there is the false-affidavit accusation noted supra.
These core issues (standing and misrepresentation) drive not only the amend and compel motions7 before the undersigned, but also the summary judgment motion before the district judge. Colony opposes Abercorn's summary judgment, for example, by citing Abercorn's foreclosure (hence, it challenges Abercorn's standing) as well as the alleged policy breach "by [Abercorn] concealing its interest in the property." Doc. 42 at 1. Another issue is "whether the property loss occurred during the terms of the policy." Id. at 1-2. That, in turn, is tied into Colony's misrepresentation and fraudulent affidavit charges. Abercorn, meanwhile, does not dispute that whether it has the insurable interest, and thus has standing in this case, is a make-or-break summary judgment issue. Doc. 64 at 4-6.
Hence, an interpretation of the law embedded within those arguments here could conflict with the district judge's interpretation of the law in resolving the summary judgment motion. And given the subtle nuances resonating within those legal areas, see supra Part II(B), the chance of a conflict is reasonably high. This supplies good cause to reconsider and vacate the Court's prior ruling on Abercorn's stay motion, doc. 30, though Abercorn based that motion on different grounds than those illuminated here. Id. at 9-11 (it basically argues that the parties' appraisal process obviates the discovery Colony seeks and thus Abercorn is entitled to summary judgment based on the appraisal results). The district judge must decide, in reaching the pending summary-judgment motion, the insurable-interest if not other core issues detailed above.8 If Abercorn has no interest and thus no standing, then this case will be substantially altered (e.g., an addition, if not realignment of, parties under Fed.R.Civ.P. 17 and 21).
Finally, serious fraud allegations have been raised, and it is for the district judge to draw the precise materiality/reliance/diligence line in addressing them.9 That, in turn, determines what is relevant discovery-wise. If Abercorn is right (that all of the fraud-based discovery that Colony seeks is irrelevant in light of the appraisals and Colony's failure to exercise due diligence), then Colony's compel and amend motions should be denied. If not, then that supplies grounds for granting them. To resolve these core issues is in no small to part resolve the summary-judgment issues.
IV. CONCLUSION
Because Colony's compel and amend motions are inextricably intertwined with Abercorn's summary-judgment motion, they must be deferred to the district judge. Before him each party will be free to invoke Fed.R.Civ.P. 56(d) to show what, if any, additional discovery is needed. The Court thus VACATES its "Stay" ruling, doc. 59, and now STAYS discovery pending the district judge's resolution of the summary-judgment motion (doc. 29). The Court also DEFERS to the district judge Colony's motions to compel and for leave to file an amended complaint. Docs. 34 & 35. For the same reasons, the Court also DEFERS the motion of SMF Apts., LLC for a protective order. Doc. 75.10
