Blitch Ford v. Mic Property and Cas. Ins. Corp.
| Decision Date | 28 March 2000 |
| Docket Number | No. 7:97-CV-21(WDO).,7:97-CV-21(WDO). |
| Citation | 90 F.Supp.2d 1377 |
| Parties | BLITCH FORD, INC., Plaintiff, v. MIC PROPERTY AND CASUALTY INS. CORP., et al., Defendants. |
| Court | U.S. District Court — Middle District of Georgia |
J. Converse Bright, Valdosta, GA, Berrien L. Sutton, Homerville, GA, for Blitch Ford, Inc.
Berrien L. Sutton, Homerville, GA, for Brett Blitch.
Jack J. Helms, Jr., Charles Joseph Steedley, Homerville, GA, for Empire Banking Company of Homerville Georgia.
Clayton H. Farnham, William P. Clayton, Atlanta, GA, for Mic Property and Casualty Insurance Corp.
Alan David Tucker, Brunswick, GA, for Robert F. Williams.
Alan Gantzhorn, Atlanta, GA, for Ronnie Dobbins, State Fire Marshall for the State of Georgia.
Richard S. Moultrie, Jr., Macon, GA, for USA.
Before the Court is Plaintiff Blitch Ford, Inc.'s ("Blitch Ford") Motion For Partial Summary Judgment [Tab # 227] and Defendant MIC Property And Casualty Insurance Corporation's ("MIC") Motion For Summary Judgment [Tab # 229].
This action arises from an arson fire that destroyed the building and contents of the Blitch Ford dealership in Homerville, Georgia, on the night of June 19, 1996. Margaret Blitch owns 51% of the Blitch Ford, and is also the company's president. Brett Blitch, her son, owns the remaining 49% of the company, and is the company's secretary. Brett Blitch and Margaret Blitch are the sole directors of the company.
Margaret Blitch submitted an application as a replacement dealer for the Ford dealership in Homerville, Georgia in 1993 and resigned the agreement in June, 1997. Blitch Ford lost money for most of the period between its inception and the fire. During the 18 months prior to the fire, the company had 714 checks returned for insufficient funds.
Prior to the fire, Blitch Ford had entered into a contract with MIC to provide insurance for Blitch Ford under MIC Policy No. MPK 0007033 00 (the "Policy"). The policy covered losses to the dealership property owned by Blitch Ford, and provided approximately $605,000 in coverage.
The Policy contained a list of general exclusions (acts not covered by the Policy). One of these exclusions was: "Acts Committed by You or Your Partners: Loss resulting from any dishonest or criminal act committed by you or any of your partners whether acting alone or in collusion with other persons." Policy, Crime General Provisions.1
The Policy also stated that MIC "will not pay for any `loss' or damage in any case of: ... (2) concealment or misrepresentation of a material fact; or (3) Fraud ... committed by you or any other `insured', at any time, and relating to coverage under this policy." Id.
MIC paid Blitch Ford a lump-sum of $50,000 following a submission by the shareholders of a claim for benefits under the policy. Later, the state fire marshal informed MIC that Brett Blitch may have been involved in the fire. On July 31, 1996, MIC communicated to Blitch Ford that it was denying the claim on the grounds of violations of the Fraud and Concealment provision and Criminal Acts exclusion contained in the policy. MIC made no payments to Blitch Ford after the initial $50,000 lump-sum payment.
Brett Blitch was indicted for arson and conspiracy related to the June 19, 1996 fire, and a jury found Brett Blitch guilty of these counts.
In civil litigation arising from the fire, Blitch Ford filed a cross-claim against MIC for benefits under the Policy on February 28, 1997 in the Superior Court of Clinch County. MIC then removed the action to this court.
Blitch Ford has filed a motion for partial summary judgment against MIC with regard to liability under the Policy, and MIC has filed a motion for summary judgment on Blitch Ford's claims.
Federal Rule of Civil Procedure 56(c) provides that summary judgment may be entered in favor of the movant where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is (1) no genuine issue as to any material fact and that (2) the moving party is entitled to judgment as a matter of law." Federal Rules of Civil Procedure 56(c). See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Irby v. Bittick, 44 F.3d 949, 953 (11th Cir.1995).
The evidence and all reasonable factual inferences arising from it must be viewed in the light most favorable to the Plaintiff, the non-moving party. See Welch v. Celotex Corp., 951 F.2d 1235, 1237 (11th Cir. 1992). The movant's entitlement to judgment as a matter of law is satisfied where "the nonmoving party has failed to make a sufficient showing on an essential element of her case with respect to which she has the burden of proof." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once a party has moved for summary judgment and properly supported its motion, the burden shifts to the nonmovant to create, through the evidentiary forms listed in Federal Rules of Civil Procedure 56(c), genuine issues of material fact necessitating a trial. See id. at 324, 106 S.Ct. 2548.
The Court's jurisdiction lies in diversity, therefore Georgia law applies. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). Under Georgia law, a policy of insurance is a contract and contract law principles apply to questions involving insurance. See Bradham v. Randolph Trucking Co., Inc., 775 F.Supp. 395 (M.D.Ga.1991), aff'd 960 F.2d 1018. See also Richards v. Hanover Ins. Co., 250 Ga. 613, 299 S.E.2d 561, 563 (1983). The rights of the parties are determined by the language of the contract. See Fidelity Deposit Co. v. Sun Life Ins. Co., 174 Ga.App. 258, 329 S.E.2d 517, 519-20 (1985).
Blitch Ford argues that it has not been paid for the losses it incurred due to the fire, and that MIC is liable for coverage proceeds under the Policy. MIC claims that it is not liable because the plan excludes coverage in instances of criminal acts committed by the insured, and in instances of misrepresentation of material facts or fraud by the insured.
Blitch Ford disputes whether Brett Blitch committed arson, and argues that it can recover, in spite of any criminal acts, because it was Brett Blitch and not Blitch Ford that was convicted of arson. This argument rests on the fact that "Blitch Ford, Inc." was the named insured, and not Brett Blitch.
Blitch Ford argues that Brett Blitch's involvement in the fire that destroyed the Blitch Ford dealership has not been proven and that res judicata cannot bind it on the issue of Brett Blitch's culpability. The Court does not need to address the issue of res judicata (claim preclusion) because, as MIC argues, Blitch Ford is collaterally estopped from denying Brett Blitch's involvement.
Three requirements must be met before collateral estoppel can apply to a given issue:
(1) the issue be identical in both the prior and current action; (2) the issue was actually litigated; (3) the determination of the issue was critical and necessary to the judgment in the prior action; and (4) the burden of persuasion in the subsequent action not be significantly heavier.
Securities & Exchange Commission v. Bilzerian, 153 F.3d 1278, 1281 (11th Cir.1998) (citing In re Bilzerian, 100 F.3d 886, 892 (11th Cir.1996)). See also United States v. $80,080.00 In U.S. Currency, 779 F.Supp. 169 (N.D.Ga.1991) (citing United States v. "Monkey", 725 F.2d 1007, 1010 (5th Cir. 1984)); United States v. Powell, 494 F.Supp. 260, 263 (S.D.Ga.1980) (quoting International Ass'n of Machinists & Aerospace Workers v. Nix, 512 F.2d 125, 132 (5th Cir.1975)).
The issue in the case sub judice and a necessary issue in the criminal trial of Brett Blitch was whether Brett Blitch committed arson. Brett Blitch was convicted of arson and conspiracy related to the fire that destroyed the dealership. As the burden of proof in the present action is lower than that in the previous action, collateral estoppel applies to the case sub judice. See Defenders of Wildlife v. Andrus, 77 F.R.D. 448, 454 (D.D.C.1978). Therefore collateral estoppel prevents Blitch Ford from asserting that Brett Blitch did not destroy the Blitch Ford dealership.2
Even if collateral estoppel did not apply, there can be no issue of material fact regarding Brett Blitch's arson conviction.
Blitch Ford suggests that Brett Blitch's fraud cannot defeat the insurance coverage because of the interest of innocent persons. For this, Blitch Ford relies on what it describes as Georgia's doctrine of innocent co-insureds. This doctrine was arguably established in Richards v. Hanover Insurance Co., 250 Ga. 613, 299 S.E.2d 561 (1983). The Richards court decided that whether the fraud of one co-insured spouse barred recovery by the innocent co-insured spouse depended upon the language of the insurance contract. See id. 299 S.E.2d at 563. The Richards contract provided that the insurance company would not be liable "in the event of `neglect of the insured to use all reasonable means to save and preserve property ...'" Id. (emphasis in contract). The Supreme Court of Georgia determined that this "neglect" provision was ambiguous, and that Georgia law required the courts to interpret the provision in favor of the insured. See id. The court held that Mrs Richards' obligations were severable from Mr. Richards' obligations, and therefore Mrs. Richards could recover under the insurance contract if she had not participated in the arson. See id. at 564.3
The Court finds Richards to be distinguishable from the case sub judice. The Richards decision turned upon the language of the policy, the Georgia Supreme Court's construction of that policy, and whether the parties' obligations...
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