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Orum v. Liberty Insurance Corp.

United States District Court, N.D. West Virginia

December 3, 2019

ROBERT ORUM and CONNIE ORUM, Plaintiffs,
v.
LIBERTY INSURANCE CORPORATION, CORELOGIC, INC., RELIABLE REPORTS OF TEXAS, INC., JOHN DOE COMPANY and JANE DOE COMPANY, Defendants.

          MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT LIBERTY INSURANCE CORPORATION'S RENEWED MOTION FOR SUMMARY JUDGMENT AND GRANTING AS FRAMED PLAINTIFFS' REQUEST FOR DISCOVERY AS TO COUNT V OF THE PLAINTIFFS' AMENDED COMPLAINT

          FREDERICK P. STAMP, JR. UNITED STATES DISTRICT JUDGE.

         I. Background

         The defendant removed this civil action to this Court on September 11, 2017. ECF No. 1. The plaintiffs originally filed their complaint in the Circuit Court of Ohio County, West Virginia. ECF No. 1-2. The plaintiffs later filed an amended complaint. ECF No. 68. The amended complaint asserts claims arising out of a fire that burned the plaintiffs' house to the ground. Id. at 5. The plaintiffs allege that the defendant, Liberty Insurance Corporation (“Liberty”), in bad faith, failed to pay the plaintiffs' homeowners insurance claim. Id. at 12. The plaintiffs further allege that Corelogic, Inc. (“Corelogic”) by and through its agent, Reliable Reports of Texas, Inc. (“Reliable Reports”), performed a homeowners property inspection under the direction and supervision of defendant Liberty. ECF No. 68 at 6. The plaintiffs state that Corelogic, through defendant Reliable Reports documented no exterior premises risks and documented multiple wood-burning stoves and exterior roof flues/vents. Id. at 7. The plaintiffs allege that Corelogic, through defendant Reliable Reports, failed to inspect the plaintiffs' property at issue and provided an inspection report to defendant Liberty that covered the wrong property.[1] Id. at 7-8. What is titled as Count I is a list of general allegations and statements regarding this Court's jurisdiction and venue. Id. at 2-5. Count II is a claim of negligence against all the defendants. Id. at 5-11. Count III is a claim of first party bad faith against defendant Liberty. Id. at 11-13. Count IV is a claim of common law bad faith against defendant Liberty. Id. at 13-14. Count V is a claim based on West Virginia Code § 33-11-4 against defendant Liberty. Id. at 14-18. Count VI is a claim of breach of the implied covenant of good faith and fair dealing against defendant Liberty. Id. at 18-19. Lastly, what is titled as Count VII is a description of the damages the plaintiffs seek to recover from all the defendants. Id. at 19-21.

         On April 12, 2019, defendant Liberty filed a motion for summary judgment pursuant to Federal Rule of Civil Procedure 56. ECF No. 57. On May 17, 2019, the plaintiffs filed a motion for leave to amend their initial complaint to add additional defendants and to allege a new claim of negligence against defendant Liberty. ECF No. 63. On June 28, 2019, this Court granted the plaintiffs' motion for leave to amend their initial complaint. ECF No. 67. This Court also denied defendant Liberty's motion for summary judgment (ECF No. 57) without prejudice, in light of this Court's order granting the plaintiffs' motion for leave to amend their complaint. ECF No. 69. This Court then scheduled a status and scheduling conference that was held on September 3, 2019. ECF No. 78. At the conference, the parties agreed to certain dispositive motion deadlines regarding the issue of rescission of the insurance policy. ECF No. 82.

         Defendant Liberty then timely filed a renewed motion for summary judgment pursuant to Federal Rule of Civil Procedure 56. ECF No. 87. In its memorandum in support of summary judgment, defendant Liberty contends that there are no genuine issues of material fact with respect to the plaintiffs' misrepresentations to defendant Liberty in the insurance application and the materiality of these misrepresentations, indicating that it would not have issued the policy if the plaintiffs had provided correct information. Id. at 1, 7. Specifically, defendant Liberty states that the plaintiffs made various false statements in their insurance application: (1) that they never had any insurance declined, canceled or non-renewed in the past twelve months, although the plaintiffs were discovered to have received a Notice of Cancellation by a prior homeowners insurer, Foremost; (2) that there was not any business conducted at the insured location; and (3) that there were no physical conditions on the property in need of repair which clearly present a likelihood of injury. Id. at 5-6. Therefore, defendant Liberty asserts that it was entitled to rescind the policy based on such material misrepresentations. Id. at 7, 10-11. Moreover, with respect to the plaintiffs' negligence claim, defendant Liberty states that the plaintiffs have failed to identify any duty defendant Liberty owed to the plaintiffs. Id. at 12. Specifically, defendant Liberty states that its decision to try to inspect the plaintiffs' property to confirm insurability does not mean that it was required to inspect the plaintiffs' property or that defendant Liberty had to disclose any results to the plaintiffs. Id. Further, defendant Liberty states that even if defendant Reliable Reports inspected the correct property, such an inspection would not have revealed the plaintiffs' misrepresentation regarding the cancellation of their prior insurance, which as a matter of law, is a material representation that led defendant Liberty to properly rescind the policy. Id. at 12-13.

         The plaintiffs filed a response in opposition to defendant Liberty's renewed motion for summary judgment. ECF No. 91. The plaintiffs assert that defendant Liberty engaged in “post claim underwriting” which violated contractual obligations of good faith and fair dealing and insurance industry standards. Id. at 2. The plaintiffs state that defendant Liberty could have discovered that the plaintiffs had a trampoline and a pool if it inspected the correct property, but rather chose to accept premium payments. Id. at 3. The plaintiffs also contend that defendant Liberty is vicariously liable for the acts and omissions of defendant Reliable Reports. Id. at 4. As part of their response, the plaintiffs attach a Notice of Cancellation from Foremost (ECF No. 91-1) and the affidavit of Robert Orum (ECF No. 91-2). Lastly, the plaintiffs request additional time to conduct depositions pursuant to Federal Rule of Civil Procedure 56(d)(2). Id. at 8.

         Defendant Liberty filed a reply to the plaintiffs' response in opposition to its renewed motion for summary judgment. ECF No. 93. First, defendant Liberty notes that certain documents attached to the plaintiffs' response in opposition to its prior motion for summary judgment (ECF No. 61-5) are not affidavits, because those documents are not sworn or notarized; therefore, the plaintiffs did not refute defendant Liberty's renewed motion for summary judgment. Id. at 5. However, defendant Liberty states that even if the Court considers what is contained in those documents (ECF No. 61-5) or in Robert Orum's affidavit (ECF No. 91-2), it is entitled to summary judgment due to the plaintiffs' misrepresentation regarding the Notice of Cancellation from Foremost, which defendant Liberty contends is material as a matter of law. Id. at 6-10. Moreover, defendant Liberty maintains that it did not waive its right to rescind the policy by attempting to investigate the property or due to the passage of time. Id. at 10-13. Further, defendant Liberty notes that the plaintiffs' spoilation argument is without merit since there is no evidence that a recording of an alleged telephone call exists. Id. at 13-14. Moreover, defendant Liberty contends that the plaintiffs have failed to introduce admissible evidence regarding the substance of the conversation. Id. at 14. Lastly, defendant Liberty contends that the plaintiffs' request for additional time in order to take depositions should be denied, stating that the plaintiffs have had sufficient time to take depositions and have not provided any specific reasons that warrant additional time to take depositions. Id. at 14-16.

         II. Applicable Law

         Under Rule 56(c) of the Federal Rules of Civil Procedure, A party asserting that a fact cannot be or is genuinely disputed must support the assertion by:

(A) citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations . . . admissions, interrogatory answers, or other materials; or
(B) showing that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact.

Fed. R. Civ. P. 56(c). The party seeking summary judgment bears the initial burden of showing the absence of any genuine issues of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). “The burden then shifts to the nonmoving party to come forward with facts sufficient to create a triable issue of fact.” Temkin v. Frederick County Comm'rs, 945 F.2d 716, 718 (4th Cir. 1991), cert. denied, 502 U.S. 1095 (1992) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986)). However, as the United States Supreme Court noted in Anderson, “Rule 56(e) itself provides that a party opposing a properly supported motion for summary judgment may not rest upon the mere allegations or denials of his pleading, but . . . must set forth specific facts showing that there is a genuine issue for trial.” Anderson, 477 U.S. at 256. “The inquiry performed is the threshold inquiry of determining whether there is the need for a trial-whether, in other words, there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party.” Id. at 250; see also Charbonnages de France v. Smith, 597 F.2d 406, 414 (4th Cir. 1979) (“Summary judgment ‘should be granted only in those cases where it is perfectly clear that no issue of fact is involved and inquiry into the facts is not desirable to clarify the application of the law.'” (citing Stevens v. Howard D. Johnson Co., 181 F.2d 390, 394 (4th Cir. 1950))).

         In Celotex, the Supreme Court stated that “the plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.” Celotex, 477 U.S. at 322. In reviewing the supported underlying facts, all inferences must be viewed in the light most favorable to the party opposing the motion. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

         III. Discussion

         Following its review of the parties' motions and for the reasons set forth below, this Court grants in part and denies in part defendant Liberty's renewed motion for summary judgment (ECF No. 87). Specifically, defendant Liberty is entitled to summary judgment on Counts I, II, III, IV, and VI of the plaintiffs' amended complaint. However, further discovery is needed as to Count V of the plaintiffs' amended complaint. This Court will proceed to address each of the plaintiffs' counts in the manner presented in the amended complaint.

         A. Defendant Liberty is Entitled to Summary Judgment as to Count I of the Plaintiffs' Amended Complaint and Construes Count I as a Factual Predicate for the Other Counts in the Amended Complaint.

         Count I of the plaintiffs' amended complaint is a list of general allegations, and statements regarding this Court's jurisdiction and venue. Id. at 2-5. Since that particular count does not seek any specific relief, this Court construes Count I as a factual predicate and not a claim for seeking relief for damages. Accordingly, this Court grants defendant Liberty's renewed motion for summary judgment as to Count I of the plaintiffs' amended complaint and will construe Count I as a factual predicate for the other counts in the plaintiffs' amended complaint.

         B. Defendant Liberty is Entitled to Summary Judgment as to Count II of the Plaintiffs' Amended Complaint.

         The plaintiffs assert in their amended complaint that defendant Liberty owed the plaintiffs a “non-delegable” duty to inform the plaintiffs that the wrong residence had been inspected for exterior insurability risks. ECF No. 68 at 10. The plaintiffs allege that defendant Liberty directed Corelogic and defendant Reliable Reports in their negligent and/or grossly negligent, reckless, willful, and wanton failure to inspect the correct residence. Id. at 11. The plaintiffs state that in doing so, defendant Liberty proximately caused and thereby prevented the plaintiffs from securing other homeowners insurance coverage prior to the fire at issue. Id.

         “To recover in an action based on negligence the plaintiff must prove that the defendant was guilty of . . . negligence and that such negligence was the proximate cause of the injury of which the plaintiff complains.” Syl. Pt. 1, Atkinson v. Harman, 151 W.Va. 1025, 158 S.E.2d 169, 171 (1967) (citation omitted). “These elements of duty, breach, and injury are essential to actionable negligence and in the absence of any of them the action must fall.” Id. at 173; see also McNeilly v. Greenbrier Hotel Corp., 16 F.Supp.3d 733, 738 (S.D. W.Va. 2014) (“The basic elements of a negligence claim are duty, breach of that duty, causation, and damages.”).

         1. Defendant Liberty Did Not Owe the Plaintiffs a Duty to Inspect the Correct Property.

         “Duty is a question of whether the defendant is under any obligation for the benefit of the particular plaintiff, and in negligence cases, the duty is always the same, to conform to the legal standard of reasonable conduct in light of the apparent risk.” Robertson v. LeMaster, 171 W.Va. 607, 611, 301 S.E.2d 563, 568 (1983) (internal quotation marks omitted). The scope of the duty owed to another is focused on the foreseeability of injury. Id. “Due care is a relative term and depends on time, place, and other circumstances. It should be in proportion to the danger apparent and within reasonable anticipation.” Syl. Pt. 2, Johnson v. United Fuel Gas Co., 112 W.Va. 578, 166 S.E. 118 (1932). “The test is, would the ordinary man in the defendant's position, knowing what he knew or should have known, anticipate that harm of the general nature of that suffered was likely to result?” Marcus v. Staubs, 230 W.Va. 127, 137, 736 S.E.2d 360, 370 (2012) (internal quotation marks omitted). It is a court's task to determine “in general terms whether the type of conduct at issue is sufficiently likely to result in the kind of harm experienced based on the evidence presented.” Id. at 137-38.

         Under the circumstances of this case, defendant Liberty does not assume responsibility to perform an inspection principally for the benefit of the plaintiffs. Specifically, when defendant Liberty inspected the plaintiffs' premises for hazards, that inspection did not in itself demonstrate an undertaking to render an inspection and services to the plaintiffs. The plaintiffs have not provided sufficient evidence for this Court to conclude that defendant Liberty's inspection was conducted other than to serve its interests. Moreover, it was appropriate for defendant Liberty to rely on information that was contained in the plaintiffs' application. “[I]nsurers can rely on the information contained in [ ] applications, without conducting further investigation, when completing their underwriting investigations.” Massachusetts Mutual Life Ins. Co. v. Jordan, 2011 WL 1770435, at *5 (citing Wesley v. Union Nat'l Life, 919 F.Supp. 232, 235 (S.D.Miss. 1995); Harper v. Fidelity & Guaranty Life Ins. Co., 234 P.3d 1211, 1218-19 (Wyo. 2010); Hornback v. Bankers Life Ins. Co., 176 S.W.3d 699, 704-05 (Ky. App. 2005).

         2. Even if Defendant Liberty Had a Duty to Inspect the Correct Premises, Failure to Inspect the Correct Premises Was Not the Proximate Cause of the Plaintiffs' Injuries.

         The “proximate cause of an injury is the last negligent act contributing to the injury and without which the injury would not have occurred.” Sergent v. City of Charleston, 209 W.Va. 437, 446549 S.E.2d 311, 320 (2001). As defendant Liberty correctly noted, even if the correct property was inspected, such an inspection would not have revealed the plaintiffs' misrepresentation regarding the cancellation of their prior insurance. As explained in greater detail below, the plaintiffs' material misrepresentations provided a valid basis for defendant Liberty to rescind the policy. SeeGouge v. Penn America Ins. Co, No. 2:04-1083, 2005 WL 1639291, at *6 n.7 (S.D. W.Va. July 12, 2005) (“Failure ...


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