Doaks v. Safeco Ins. Co. of Am.

• Decision Date: 12 March 2013
• Docket Number: No. 3:09 CV 367,3:09 CV 367
• Parties: DOROTHY DOAKS, Plaintiff, v. SAFECO INSURANCE COMPANY OF AMERICA, Defendant.
• Court: U.S. District Court — Northern District of Indiana

DOROTHY DOAKS, Plaintiff,

v.SAFECO INSURANCE COMPANY OF AMERICA, Defendant.

No. 3:09 CV 367

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF INDIANA SOUTH BEND DIVISION

Date: March 12, 2013

OPINION and ORDER

This matter is before the court on defendant's motion for summary judgment (DE # 74). For the reasons set forth below, the motion is granted.

I. BACKGROUND

In January of 2008, plaintiff Dorothy Doaks lived on Sheridan Street in South Bend, Indiana, with her 15-year-old son. She had lived there for over 17 years. (DE # 77-2 at 10, Dep.¹ 13:16-20.) The residence was insured under a homeowners insurance policy that she applied for, and was granted, in November of 2007. (DE # 77-11.)

For 14 years prior, plaintiff had provided daycare and babysitting services to various individuals, on and off. (DE # 77-2 at 13, Dep. 18:1-2.) But for at least the two to three years immediately preceding 2008, possibly longer, plaintiff was actively engagedin childcare services (DE # 77-3 at 4, Dep. 105:6-10), not counting a break for some medical issues (DE # 77-2 at 13, Dep. 18:2-11).

Plaintiff provided childcare seven days a week. (DE # 77-2 at 27, Dep. 118:14-16.) She typically cared for four children (DE # 77-2 at 13-14, Dep. 18:16-17, 20:25), and considered watching up to five (DE # 77-3 at 3, Dep. 101:16-18). To help her with her childcare duties, plaintiff hired an assistant. (DE # 77-2 at 18-20, Dep. 77:1 - 79:4.) Plaintiff advertised for more business, posting fliers in a laundromat every six months or so, though possibly less often than that. (DE # 77-3 at 3, Dep. 99:22 - 101:8.)

Although one of the children plaintiff cared for belonged to a relative whom she did not charge (DE # 77-2 at 16, Dep. 23:6-9), plaintiff generally received close to $500 per month from childcare services (DE # 77-6 at 6, Answers to Interrog. 13). For one child, she received childcare payments from the State of Indiana. In order to receive these payments, plaintiff undertook additional safety precautions and underwent medical training, medical testing, and home inspections. (DE # 77-2 at 28, Dep. 123:7-18; DE # 77-3 at 4, Dep. 105:11 - 106:24.) Plaintiff was not employed elsewhere, and other than Social Security benefits, food stamps, and the occasional monetary gift from family (DE # 77-3 at 6, Dep. 111:6-18), plaintiff had no source of income other than babysitting. (DE # 77-2 at 25, Dep. 102:5-15, 13-18.) For the 2007 tax year, Plaintiff reported $5,722 in childcare income on her federal tax returns (DE # 77-2 at 25, Dep. 102:5-15), reported no income from any other source (id.), and listed her occupation on her tax return as "daycare provider" (DE # 77-16 at 12).

In January of 2008, plaintiff's home was destroyed in a fire. During the investigation, defendant discovered that plaintiff had been using the insured premises to provide childcare services, despite the fact that on her insurance application plaintiff had answered "No" to the question "Is there a business on the premises?" (DE # 77-11 at 9.) The contract included a misrepresentation clause, which stated: "This policy will be void if any insured has, before or after a loss[,] . . . intentionally concealed or misrepresented any material fact or circumstance; or . . . made false statements or engaged in fraudulent conduct relating to this insurance." (DE # 77-12 at 34.) Defendant ultimately denied plaintiff's claim.

Plaintiff then filed suit, claiming that she was entitled to benefits under the insurance contract and that defendant should be estopped from denying the claim. (DE # 1.)² Plaintiff also seeks one year of lost babysitting income at a rate of $500 per month. (DE # 77-6 at 6, Answers to Interrog. 14.) Defendant moved for summary judgment, arguing that plaintiff's misrepresentation regarding her use of the home for business purposes permits defendant to rescind the contract, that plaintiff's failure to cooperate with the investigatory process permits the same, and that plaintiff could not satisfy the elements of a claim for equitable estoppel. (DE ## 74, 75.) In a three-and-a-half pageresponse, plaintiff briefly contested only the first two arguments.³ (DE # 83.) Defendant filed a reply. (DE # 85.) Accordingly, the motion is ripe for ruling.

II. LEGAL STANDARD

A motion for summary judgment must be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c). The parties' burdens in the context of a motion for summary judgment depend on whether the movant or the non-movant would ultimately bear the burden of proof on a disputed issue at trial. Where the movant would bear the burden of proof, the movant "must show that the evidence . . . is 'so one-sided that . . . [the movant] must prevail as a matter of law'" in order to obtain summary judgment in his favor. Reserve Supply Corp. v. Owens-Corning Fiberglass Corp., 971 F.2d 37, 42 (7th Cir. 1992) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986)); Addicks Servs., Inc., v. GGP-Bridgeland, LP, 596 F.3d 286, 293 (5th Cir. 2010) (where movant also bears burden of proof, "movant must establishbeyond peradventure" all essential elements in order to warrant judgment in his favor").⁴

The court's role in deciding a summary judgment motion is not to evaluate the truth of the matter, but instead to determine whether there is a genuine issue of triable fact. Anderson, 477 U.S. at 249-50; Doe v. R.R. Donnelley & Sons Co., 42 F.3d 439, 443 (7th Cir. 1994). In viewing the facts presented on a motion for summary judgment, a court must construe all facts in a light most favorable to the non-moving party and draw all legitimate inferences and resolve all doubts in favor of that party. NLFC, Inc. v. Devcom Mid-Am., Inc., 45 F.3d 231, 234 (7th Cir. 1995).

III. DISCUSSION

The parties' primary dispute is whether defendant may rescind the contract because plaintiff made a material misrepresentation on her insurance application as to whether or not she operated a "business" on the premises. Because "a party that seeks to avoid a contract bears the burden of proof on matters of avoidance," defendant ultimately has the burden of proof on this issue. In re Paternity of M.F., 938 N.E.2d 1256, 1260 (Ind. Ct. App. 2010). It is undisputed that plaintiff stated, on her application, thatshe was not running a business out of her home. (See DE # 77-11 at 9 (plaintiff's insurance application).) However, the parties dispute whether plaintiff's daycare activities constituted a "business" under Indiana law.

When interpreting insurance documents under Indiana law, "an insured is engaged in a business pursuit only when he pursues a continued or regular activity for the purpose of earning a livelihood." Am. Family Mut. Ins. Co. v. Bentley, 352 N.E.2d 860, 865 (Ind. Ct. App. 1976) (adopted by Frankenmuth Mut. Ins. Co. v. Williams by Stevens, 690 N.E.2d 675, 680 (Ind. 1997)). There are two parts to this inquiry: (1) whether the insured pursues a continued or regular activity; and (2) whether the purpose of the activity is earning a livelihood. See id.

As to the first part of the test, whether the insured pursued a continued or regular activity, a one-time occurrence of a particular activity does not render the activity continued or regular. Bentley, 352 N.E.2d at (homeowner did not engage in continued or regular activity by renting portion of garage to Boy Scout troop for storage of canoes and camping equipment for nominal amount of money). However, even irregular activity that is, at times, a daily occurrence leans towards the "continuous and regular" end of the spectrum. Frankenmuth Mut. Ins. Co. v. Williams by Stevens, 690 N.E.2d 675, 680 (Ind. 1997) (court surmised that woman who babysat for up to four to five children at a time on irregular basis that became "at times a daily activity" for her was engaged in continuous and regular business activity, but ultimately found question of fact on second part of Bentley test).

In this case, it is undisputed that plaintiff engaged in childcare services for at least two to three years before the fire, and maybe longer (DE # 77-3 at 4, Dep. 105:6-10), not counting a break for some medical issues (DE # 77-2 at 13, Dep. 18:2-11), and that she provided childcare seven days a week (DE # 77-2 at 27, Dep. 118:14-16). It is further undisputed that plaintiff typically cared for four children (DE # 77-2 at 13-14, Dep. 18:16-17, 20:25), and considered watching up to five (DE # 77-3 at 3, Dep. 101:16-18). Additionally, plaintiff advertised for more business, posting fliers in a laundromat every six months or so, maybe less (DE # 77-3 at 3, Dep. 99:22 - 101:8). These facts reveal no dispute that plaintiff engaged in a "continued or regular activity" satisfying the first part of the Bentley test, even if her childcare services were irregular in nature and varied in intensity over time.

As to the second part of the test, whether the homeowner engaged in the activity in order to earn a livelihood, Indiana courts consider numerous fact-sensitive factors. First, courts consider whether a homeowner is gainfully employed elsewhere. Asbury v. Indiana Union Mut. Ins. Co., 441 N.E.2d 232, 242 (Ind. Ct. App. 1982) (plaintiff was gainfully employed as mill operator, and only hunted and skinned animals as a hobby, so the latter was not considered a business under his homeowners insurance policy). However, other sources of employment or income may not matter as much if most of the homeowner's income comes from the activity in question. Mid-Am. Fire & Cas. Co. v. Shoney's, Inc., 843 N.E.2d 548, 552 (Ind. Ct. App. 2006) (though defendant was a college professor, he regularly engaged in numerous real estate business ventures and oftenmade more money from his business investments than he did as a college...