United States District Court, N.D. West Virginia
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.
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. 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.
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.
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.
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.
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.
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))).
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).
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
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.
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
Defendant Liberty is Entitled to Summary Judgment as to
Count II of the Plaintiffs' Amended Complaint.
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.
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.”).
Defendant Liberty Did Not Owe the Plaintiffs a Duty to
Inspect the Correct Property.
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.
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).
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.
“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 ...