Crews v. Shelter General Ins. Co.
| Decision Date | 25 May 2005 |
| Docket Number | No. CIV-04-749-M.,CIV-04-749-M. |
| Citation | 393 F.Supp.2d 1170 |
| Parties | Stephen R. CREWS and Cathie L. Hughes, individually and as husband and wife, Plaintiffs, v. SHELTER GENERAL INSURANCE COMPANY, a Missouri corporation, Defendant. |
| Court | U.S. District Court — Western District of Oklahoma |
Carin L. Marcussen, Kent R. McGuire, Whitten Nelson, Oklahoma City, OK, David A. Burrage, Michael Burrage, Burrage Law Firm, Durant, OK, for Plaintiffs.
Virginia Cathcart Holleman, William R. Cathcart, Cathcart & Dooley, Oklahoma City, OK, for Defendant.
Pending before the Court is Defendant's Motion for Summary Judgment or In the Alternative, Motion for Partial Summary Judgment. The Motion has been fully briefed and is now ripe for determination. For the reasons that follow, Defendant's Motion will be denied.
The following facts are undisputed. At all times relevant to this litigation, Plaintiffs Stephen R. Crews and Cathie L. Hughes, husband and wife, owned a second home in Stillwater, Oklahoma.1 On November 20, 2002, Plaintiffs applied to Defendant Shelter General Insurance Company ("Shelter") for insurance on the home. The insurance application included, among other things, the following question: "Have you or any member of your household ever been convicted of or plead guilty to a felony offense?" Ex. 4 to Mot. for Summ. J. at 2 (emphasis in original). Mr. Crews answered the criminal history question by checking the box next to the word "No." Id. Shelter ultimately approved the application and issued the policy.
On July 27, 2003, the home was completely destroyed by fire. Plaintiffs immediately contacted Shelter, which assigned Scott McGuire, Senior Claims Adjuster, to process Plaintiffs' claim. Mr. McGuire investigated the scene of the fire on July 29, 2003 and took a recorded statement from Mr. Crews the next day. The recorded statement consisted of Mr. McGuire orally asking Mr. Crews a number of fairly routine questions regarding the location and size of the home and the extent of the fire damage, and whether Mr. Crews suspected that anybody may have set the fire intentionally. In addition, Mr. McGuire asked Mr. Crews about his criminal history, which prompted the following exchange:
Q. Um, have you ever been convicted or arrested for any felonies?
A. Um, yeah I guess you could say that. I was arrested at a party one time where they found marijuana and they arrested all of us.
Q. For uh, was it a felony charge or ...
A. Yeah they said it was a felony charge.
Q. Okay. Um, is that all?
A. Yeah. It was supposed to be a deferred sentence but uh, it's still on there and I can't get `em to take it off so who knows.
Q. Um, do you know when that was?
A. Yeah that was like 1977, 78, 79 some where in there. Late 70's.
Q. Okay. Um, spend any jail time on that or ...
A. No. No.
Q. Okay. Um ...
A. Didn't even spend any time in a cell, I mean nothin'.
Q. Okay. Was that, what county was that in?
A. Um ...
Q. Or was that in Oklahoma?
A. No it was, it was in Oklahoma State but I think it was Custer County maybe.
Ex. 3 to Mot. for Summ. J. at 4-5.
After taking the recorded statement, Mr. McGuire obtained a copy of the felony information filed against Mr. Crews on June 4, 1979 in Custer County, Oklahoma, Ex. 5 to Mot. for Summ. J., as well as the Judgment and Sentence reflecting that on September 17, 1979, Mr. Crews pleaded guilty to the crime of "unlawful delivery of cannibus sativa (marihuana)," and received a two-year suspended sentence upon entering his plea. Ex. 6 to Mot. for Summ. J. Based on this information, which appeared to Mr. McGuire to indicate that Mr. Crews incorrectly and untruthfully answered the criminal history question on Plaintiffs' insurance application, Mr. McGuire contacted Terry Kloeppel, Senior Underwriter for Shelter, for assistance.
In the meantime, Shelter began processing Plaintiffs' claim, requesting and then receiving a Proof of Loss form from Plaintiffs, advising Plaintiffs that the initial Proof of Loss form was incomplete, and then requesting and receiving a corrected form on August 20, 2003.
Mr. Kloeppel, after consulting with his supervisor, Jane Breen, made the decision to void Plaintiffs' insurance policy on the ground that Mr. Crews misrepresented his criminal history on Plaintiffs' insurance application. In reaching this decision, Mr. Kloeppel relied exclusively on the insurance application, Mr. Crews's answer to Mr. McGuire's criminal history question during the taking of the recorded statement, and the court documents indicating that Mr. Crews had, in fact, been convicted of a felony in 1979. Neither Mr. Kloeppel nor any other Shelter employee asked Mr. Crews to explain the apparent inconsistency between his answer to the criminal history question on the insurance application and his answer to a similar question during the taking of the recorded statement. In Shelter's October 1, 2003 letter to Plaintiffs explaining the decision to void the policy, Mr. Kloeppel stated:
The binder on the above application would not have been executed, and the purported policy of insurance would not have been issued had not our Agent and Company been induced to execute the binder and issue a policy of insurance by your false representation contained in your answer to the [criminal history] question referred to above. Our underwriting regulations are such that insurance would not have been provided if you would have given a correct answer to the above question at the time you applied for insurance.
Ex. 14 to Mot. for Summ. J. The underwriting regulations referenced by Mr. Kloeppel in the letter provide, in relevant part:
Since this policy embodies risks of individuals and property, applications should be solicited only from persons of good moral and financial reputation.... The following categories of property and persons have been defined in three categories of `Do Not Submit', `Do Not Bind' and `Prior Underwriting Approval Required.' In order to assist in keeping rates equitable, we ask you to follow these rules very closely.
2. DO NOT SUBMIT
a. PERSONS
* * * * * *
8. Persons who have been convicted of, or plead guilty to, a felony offense.
Ex. 11 to Mot. for Summ. J. at 1-2.
Plaintiffs instituted this diversity action on June 18, 2004, asserting two state law claims against Shelter: (1) breach of contract, and (2) bad faith breach of the insurer's duty of good faith and fair dealing. In relief, Plaintiffs seek both compensatory and punitive damages. Shelter moves the Court for summary judgment as to both claims, and separately moves to strike the request for punitive damages. The parties agree that Oklahoma law controls.
Under Fed.R.Civ.P. 56(c), summary judgment is appropriate if "there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The determination as to whether facts are "material" must be made by reference to the substantive law applicable to the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). "Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Id. "An issue is `genuine' if there is sufficient evidence on each side so that a rational trier of fact could resolve the issue either way." Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir.1998) (citing Anderson, 477 U.S. at 248, 106 S.Ct. 2505). The non-movant must present more than a mere "scintilla" of evidence to satisfy its burden of demonstrating that the dispute is "genuine." Anderson, 477 U.S. at 252, 106 S.Ct. 2505; Simms v. Oklahoma ex rel. Dep't of Mental Health & Substance Abuse Servs., 165 F.3d 1321, 1326 (10th Cir.1999) (quoting Lawmaster v. Ward, 125 F.3d 1341, 1347 (10th Cir.1997)). In application of the foregoing standard, the court examines "the record and reasonable inferences drawn therefrom in the light most favorable to the non-moving party." 19 Solid Waste Dep't Mechanics v. City of Albuquerque, 156 F.3d 1068, 1071 (10th Cir.1998). The non-movant's version of any disputed issue of fact is presumed correct. Eastman Kodak Co. v. Image Tech. Services, Inc., 504 U.S. 451, 456, 112 S.Ct. 2072, 119 L.Ed.2d 265 (1992).
The Court first considers whether summary judgment should be entered on Plaintiffs' breach of contract claim. Shelter argues that summary judgment is appropriate because Mr. Crews undisputedly misrepresented his criminal history on Plaintiffs' insurance application, and under Oklahoma law, Shelter was undisputedly entitled to void the policy on the basis of that misrepresentation.2 Plaintiffs concede that Mr. Crews technically misstated his criminal history, but emphasize that under Oklahoma law, an insurer is not entitled to void an insurance policy on the basis of a misrepresentation unless the misrepresentation was made with intent to deceive. Plaintiffs argue that there exists a genuine issue of material fact as to Mr. Crews's state of mind.
In Oklahoma, insurers are statutorily barred from declining coverage on the basis of their insureds' misrepresentations and omissions except in limited circumstances. Those circumstances are set out in Okla. Stat. tit. 36, § 3609, which provides in part:
A. All statements and descriptions in any application for an insurance policy or in negotiations therefor, by or in behalf of the insured, shall be deemed to be representations and not warranties. Misrepresentations, omissions, concealment of facts, and incorrect statements shall not prevent a recovery under the policy unless:
1. Fraudulent; or
2. Material either to the acceptance of the risk, or to the hazard assumed by the insurer; or
3. The insurer in good faith would either not have issued the policy, or would not have issued a...
To continue reading
Request your trial
-
Thompson v. State Farm Mut. Auto. Ins. Co.
...a claim in which "reasonable minds could [not] disagree as to the coverage-determining facts or law"); Crews v. Shelter Ins. Co. , 393 F. Supp. 2d 1170, 1178-79 (W.D. Okla. 2005) (denying summary judgment on bad faith claim where factual issues called into question whether insurer's denial ......
-
U.S. v. Neeley
...court pronounces judgment and sentence." Belle v. State, 516 P.2d 551, 552 (Okla.Crim.App. 1973). See Crews v. Shelter General Ins. Co., 393 F.Supp.2d 1170, 1176 (W.D.Okla. 2005); U.S. v. Turner, 497 F.2d 406, 407 (10th Cir.1974); U.S. v. Stober, 604 F.2d 1274 (10th Cir.1979) (holding that ......
-
Traywicks v. American Nat'l Prop. & Cas. Co.
...resolution." City Natl. Bank, 804 P. 2d at 466. Facts similar to those in this case were considered in Crews v. Shelter General Insurance Co., 393 F. Supp. 2d 1170 (W.D. Okla. 2005). In Crews, the insurer voided an insurance policy pursuant to § 3609)(A) on the grounds that the plaintiff ha......
-
Morecraft v. Farmers Ins. Co.
...and convincing evidence that the insurer's breach was either reckless or intentional and with malice. See Crews v. Shelter Gen. Ins. Co., 393 F. Supp. 2d 1170, 1179 (W.D. Okla. 2005). Because the Court finds summary judgment appropriate as to Plaintiff's bad faith claim, the Court grants su......