Erie Ins. Exchange v. Stark, s. 90-2452

CourtUnited States Courts of Appeals. United States Court of Appeals (4th Circuit)
Citation962 F.2d 349
Docket Number90-2460,Nos. 90-2452,s. 90-2452
PartiesERIE INSURANCE EXCHANGE, Plaintiff-Appellant, v. Ray E. STARK; Dottie K. Stark, Defendants-Appellees. ERIE INSURANCE EXCHANGE, Plaintiff-Appellee, v. Ray E. STARK; Dottie K. Stark, Defendants-Appellants.
Decision Date01 May 1992

Page 349

962 F.2d 349
Ray E. STARK; Dottie K. Stark, Defendants-Appellees.
Ray E. STARK; Dottie K. Stark, Defendants-Appellants.
Nos. 90-2452, 90-2460.
United States Court of Appeals,
Fourth Circuit.
Argued May 7, 1991.
Decided May 1, 1992.

Page 350

Paul K. Geer, Jones, Gregg, Creehan & Gerace, Pittsburgh, Pa., argued, for Erie Ins. Exchange.

C. Robert Loskot, Bernstein, Sakellaris & Ward, Baltimore, Md., argued (Charles G. Bernstein, on brief), for Ray and Dottie Stark.

Page 351

Before PHILLIPS, Circuit Judge, HALLANAN, United States District Judge for the Southern District of West Virginia, sitting by designation, and KELLAM, Senior United States District Judge for the Eastern District of Virginia, sitting by designation.


PHILLIPS, Circuit Judge:

This is an appeal and cross-appeal growing out of the denial by Erie Insurance Exchange (Erie) of a claim by Ray and Dottie Stark for fire damage loss under their homeowner's policy with Erie. The principal issue is whether the policy covered the loss, which indisputably was caused by Ray Stark's setting fire to the residence in the course of an alleged effort to commit suicide by self-immolation. We conclude that genuine issues of material fact respecting Ray Stark's conduct and purpose in causing the fire and his mental state at the time made summary judgment in the Starks' favor improper. We affirm the district court's dismissal of the Starks' tort counterclaims based upon Erie's conduct in denying their insurance claims.


On July 25, 1988, Ray Stark visited the grave of his recently deceased son. Ray had been suffering severe depression due to his son's death, one month earlier, in an automobile crash. After leaving the cemetery, Ray consumed a substantial amount of alcohol, became very drunk, and returned to his home in Lonaconing, Maryland. There he quarreled violently with his wife, Dottie. He then left the house, got in his car, and began ramming it into his wife's car. Dottie Stark called Ray's father for assistance. Ray's father came to their house and tried to take Ray's car keys away from him. When he was unable to do so, Dottie called the Maryland State Police for help.

Before the police arrived on the scene, Ray left the area. The police told Dottie, and their daughter Kelli, to leave the house. At some point later that evening, Ray returned, spread gasoline about the house and ignited it. When firefighters arrived, they found Ray lying 100 yards from the house, suffering second and third degree burns on his legs and feet.

Ray was taken to Memorial Hospital in Cumberland, Maryland where in due course he was interviewed and treated by a psychiatrist, Dr. Veluppillai Nagulendran. Dr. Nagulendran diagnosed major depression and placed Ray on anti-depressant medication. Dr. Nagulendran later saw Ray in psychotherapy on nine occasions during the month in which Ray remained in the hospital. He also treated Ray on four occasions following his discharge from Memorial Hospital.

In deposition testimony and a letter report later included in the summary judgment materials, Dr. Nagulendran opined, on the basis of Ray's account to him and of his ensuing psychiatric treatment, that Ray had set fire to the house in the course of attempting to commit suicide by pouring gasoline on himself and igniting it, and that, as Ray claimed, he did not intend to set the house on fire. He attributed the suicide effort to Ray's deep depression. He concluded that though Ray was mentally able to form the intent to commit suicide by this means, he was then experiencing a "severe form of mental disorder" such that he "didn't know right from wrong" and "lacked substantial capacity to appreciate the criminality of his alleged conduct or to conform his conduct to the requirements of the law." J.A. 364-65, 376-77. When the state instituted a criminal arson charge against Ray, a state court judge on a preliminary hearing found no probable cause based on the portion of Dr. Nagulendran's medical opinion just quoted. The judge thought this "raised a substantial question with regard to" the state's ability to prove the essential element of "malice" under state law, and accordingly dismissed the charges. J.A. 155-56.

The day after the fire, Dottie Stark had filed an insurance claim under the Starks' homeowner's policy with Erie. Erie denied coverage. The parties could not resolve the dispute amicably. Erie made repeated

Page 352

demands for information from the Starks. The Starks' responses were, in Erie's estimation, inadequate. Erie therefore filed this action in the District of Maryland, seeking a declaration of noncoverage. In particular, Erie relied upon the increase in hazard, neglect, and intentional loss clauses in the insurance contract. The Starks counterclaimed for breach of contract, conversion, and tortious interference with prospective advantage. The district court dismissed the conversion and tortious interference counterclaims, under Rule 12(b)(6). On cross-motions for summary judgment on the opposing policy-coverage claims, the court then ruled against Erie and for the Starks on Erie's claim of non-coverage, holding Erie liable under its policy for the fire damage to the Stark residence and contents. The court gave a joint judgment to the Starks for the amount of the loss reduced by an offset for insurance proceeds paid under the policy to the Starks' mortgagee. The Starks filed a motion for attorney fees and a motion for prejudgment interest. The court denied both motions.

Erie appealed from the adverse judgment on policy coverage, and the Starks cross-appealed the district court's dismissal of their tort claims and denial of their motions for prejudgment interest and attorney fees. 1


The critical issue on appeal is whether the district court erred in determining that, as a matter of law on the summary judgment record, Erie's insurance policy covered this incendiary fire loss. In so concluding, the court rejected each of the three substantive grounds upon which Erie relied to defeat recovery: 2 that Ray Stark's undisputed act of setting fire to the residence violated the policy's (1) "intentional act" exclusion; (2) its "increase in hazard" provision; and (3) its "neglect" exclusion.

The court rejected each of these on the same legal basis: that each of these policy provisions required a particular state of mind that Ray Stark indisputably was incapable of possessing, being "quite insane (mad)," J.A. 35, at the critical time. The court found "insanity" having that disabling effect on the basis of Dr. Nagulendran's deposition and report. The court apparently considered the critical facts and inferences embodied in Nagulendran's opinion--Ray Stark's immediate purpose (suicide) and mental state (incapable of distinguishing right from wrong)--indisputably established (not in genuine issue) simply because Erie did not oppose that medical opinion with a countering expert opinion. See J.A. at 220 (ruling on motion to reconsider).

We conclude that the court erred in granting summary judgment on this basis. Assuming, as we do, and as will later be discussed, that under Maryland law some forms of "insanity" might preclude possession of the particular mental states required to invoke each of these coverage-avoiding provisions, there yet are genuine issues of material fact which do not allow that to be determined as a matter of law on

Page 353

this summary judgment record. Specifically, we perceive genuine issues as to (1) whether Ray was in fact attempting to commit suicide or instead accidentally burned himself in the course of deliberately setting fire to the residence; and (2) whether, assuming a bungled or aborted suicide attempt, this demonstrated a form of "insanity" that precluded possession of the particular mental states required to invoke any of the non-coverage provisions.

These two issues obviously are of "material" fact, being, in conjunction, dispositive of the ultimate coverage claim. They also are "genuine issues" not subject to resolution by summary judgment, as a careful assessment of the summary judgment record demonstrates. We turn now to that assessment, taking first the issue of Stark's actual purpose.


Contrary to the district court's expressed view that "it is not reasonably open to dispute that the fire was caused by Ray Stark's attempted self-immolation," we think that is a disputable factual issue on this record. The district court relied essentially upon the fact that Dr. Nagulendran's opinion of a suicidal purpose was not countered by an opposing expert opinion. J.A. 35 (on motion for reconsideration). But summary judgment doctrine does not dictate that result. Neither the factual assumptions underlying an expert's opinion nor the expert's inferences from the facts assumed are automatically established by the absence of directly countering expert opinion. Certainly that is so when the credibility of the source for the expert's factual assumptions is put in issue by internal inconsistencies in, or external contradictions of, the source's account. That surely is the case here. The sole source of Dr. Nagulendran's factual assumptions leading to his suicidal purpose opinion was Ray Stark's account of his conduct and intentions. And that account--of the circumstances leading to the fire's ignition, of his purpose in setting the fire, and of the act of ignition itself, as given to Dr. Nagulendran--is inconsistent with later accounts given by Ray Stark. Furthermore, it is implicitly contradicted in critical respects by sworn testimony of a deputy fire marshal who investigated the fire damage shortly after the fire. As Erie points out, it is as readily inferable from the total record that Ray's purpose was, in part at least, to set fire to the residence as it was solely to set fire to himself. We identify the most obvious of...

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