Hiscox Dedicated Corp. Member v. Taylor
| Docket Number | 6:18-cv-6100 |
| Decision Date | 31 August 2023 |
| Parties | HISCOX DEDICATED CORPORATE MEMBER LIMITED PLAINTIFF v. SUZAN E. TAYLOR DEFENDANT |
| Court | U.S. District Court — Western District of Arkansas |
Before the Court is the prior Order Denying Motions for Summary Judgment (ECF No. 151), issued by the Court upon remand from the Eighth Circuit.[1] Apart from an issue addressed and reversed by the Eighth Circuit, that order evaluated Plaintiff Hiscox Dedicated Corporate Member Limited's (“Hiscox”) Motion for Summary Judgment (ECF No 129) and Defendant Suzan E. Taylor's (“Taylor”) Motions for Partial Summary Judgment (ECF Nos. 124 & 127). The Court finds that the conclusions reached by the Court in ruling on those motions must be reevaluated.[2]
I. BACKGROUND
Plaintiff Hiscox is a United Kingdom insurance corporation with its principal place of Business in London, England. Hiscox provides capital to Hiscox Syndicate 33, an underwriting syndicate within the Lloyd's of London insurance marketplace. At all times relevant to this matter, Burns & Wilcox (“B&W”) was a coverholder for Hiscox and given limited authority to underwrite and bind insurance risks on behalf of Hiscox. Defendant Taylor is a citizen of Arkansas. Prior to the events giving rise to this litigation, B&W had issued insurance policies to Taylor on behalf of Hiscox and other insurance companies.
In early 2018, Taylor sought an insurance policy providing coverage for her home at 654 Springwood Road, Hot Springs National Park, Arkansas (“Hot Springs Property”). Through insurance agent Nicky Hodges (“Hodges”) Taylor filled out an industry standard ACORD form to apply for a policy. Taylor provided answers to the application questions to Hodges over the phone. The questions on the application relevant to this matter were: 1) “Has applicant had a foreclosure, repossession, bankruptcy or filed for bankruptcy during the past five (5) years?” 2) “Any losses, whether or not paid by insurance, during the last 3 years, at this or any location?”; 3) “Has any coverage been declined, cancelled or non-renewed during the last three (3) years?”; and 4) “Has applicant had a judgment or lien during the past five (5) years?” ECF No. 1-2, p. 5-6 (capitalization altered). Taylor indicated “No” for every question except for the ones regarding non-renewals of policies and losses. Explaining her “Yes” answer for the losses question, Taylor stated she had a “Brush or Brush & Grass Mixture Fire” on November 20, 2017. Id. at p. 5. For the “Yes” answer to the non-renewal question, she stated that “Builders Risk policy with American Zurich is nonrenewing on 02/15/2018.” Id. at p. 6.
On February 6, 2018, Hodges returned the completed application to Taylor with an insurance quote received from B&W for a policy covering the Hot Springs Property. Hodges directed Taylor to confirm the accuracy of the recorded answers. Taylor later signed the completed application via DocuSign email on February 7, 2018. On the last page of the application, above the signature line, is an “applicant's statement” that reads: Id. at p. 9 (capitalization altered).
B&W subsequently issued Taylor the Homeowner's Policy No. VSRD 634943 (“Policy”) covering the Hot Springs Property, with an effective period from February 8, 2018 to February 9, 2019. ECF No. 1-1. The Policy provided dwelling coverage up to $2,600,000, personal property coverage up to $1,300,000, and loss of use/rents coverage up to $260,000. Id. at p. 10. Through its participation in Hiscox Syndicate 33, Hiscox was a subscriber and insurer for the Policy issued to Taylor for the Hot Springs Property.[3] Id. at p. 13. The Policy contained a “Concealment Or Fraud” section, which stated: Id. at p. 15-16.
Taylor's Hot Springs Property was completely destroyed in a fire on August 6, 2018. Hiscox subsequently initiated an investigation into the cause of the fire. The investigation of the cause of the fire was ultimately inconclusive. Hiscox also began investigating whether Taylor's application for the Policy contained potential misrepresentations. Upon determining that Taylor's application for the Policy contained multiple material misrepresentations, Hiscox directed that the Policy be rescinded on October 15, 2018. That same day, Taylor was issued a notice stating that the Policy was rescinded ab initio because of certain material misrepresentations in her application for the Policy. The notice further stated that even if the Policy was not rescinded, any claim under the Policy would be denied because of the Policy's Concealment Or Fraud section. A check for the premium amount Taylor paid for the Policy was subsequently returned to her. Taylor's attorney mailed back the returned premium, asserting that they believed the Policy was improperly rescinded.
Hiscox filed the instant action in this Court on October 15, 2018.[4] ECF No. 1. Pursuant to 28 U.S.C.A. §§ 2201 and 2202, Hiscox seeks a declaratory judgment finding that it had properly rescinded the Policy and has no duty to pay any losses. Hiscox alleges that six material misrepresentations made by Taylor in applying for the Policy permitted Hiscox to rescind the Policy. The alleged misrepresentations on the application include: failing to disclose that foreclosure proceedings had started against the Hot Springs Property in 2018, failing to disclose the 2016 foreclosure and sale of Taylor's property in Fairfield Bay, Arkansas (“Fairfield Bay Property”), failing to disclose a 2016 theft loss at the Hot Springs Property, failing to disclose the non-renewal of a previous coverage policy for the Hot Springs Property, failing to disclose an outstanding judgment against her in favor of Deere Credit, Inc., and failing to disclose that the Hot Springs Property was for sale. Alternatively, Hiscox seeks a declaration that the Policy does not provide coverage for the loss pursuant to the Concealment Or Fraud section of the Policy.[5]
Taylor's Answer brought counterclaims against Hiscox for breach of contract, the tort of bad faith, and improper rescission.[6] ECF No. 26, p. 14-21. Regarding the breach of contract claim, Taylor alleged that the fire loss at the Hot Springs Property was explicitly covered under the Policy and that Hiscox breached its obligation to reimburse Taylor for the loss. Taylor's claim of bad faith alleges that Hiscox knew that the Policy provided coverage for the loss and maliciously sought an unfounded excuse to not pay her what she was owed under the Policy. Taylor's third claim alleges that Hiscox did not properly rescind the Policy.
Hiscox moved for summary judgment in its entirety. ECF Nos. 129, 131, & 132. With the exception of the alleged misrepresentation regarding whether the Hot Springs Property was for sale, Hiscox sought summary judgement regarding every misrepresentation it alleged in its complaint. Hiscox argues that the factual record shows that there is no genuine dispute that Taylor made five clear misrepresentations in her application for the Policy. Hiscox further argues that the factual record shows that there is no genuine dispute that those misrepresentations were material because B&W would not have issued the Policy at all or would have issued the Policy on different terms if those misrepresentations were not made. Thus, Hiscox concludes that it is entitled to summary judgment finding that it properly rescinded the policy under Arkansas law. Hiscox also argues that its alternate theory of relief must prevail because Taylor indisputably made a false statement in her application, which would preclude any coverage under the Concealment Or Fraud section of the Policy. Lastly, Hiscox argues that summary judgment should also be granted against Taylor's counterclaims because a finding that Hiscox properly rescinded the Policy precludes any possibility of success for those claims.
Taylor filed two separate motions for partial summary judgment. Taylor's first motion for partial summary judgment addressed the misrepresentation Hiscox alleges she made in not disclosing that she had a foreclosure at the Hot Springs Property. ECF Nos. 124, 125, & 126. Taylor argues that the application question regarding foreclosures in the last five years was legally ambiguous for the Hot Springs Property because it could reasonably be read to mean either the initiation of foreclosure proceedings or the ultimate sale of the foreclosed property, only one of which would apply to the Hot Springs Property. Taylor concludes that this ambiguity must be construed in her favor and that she is entitled to summary judgment finding that she did not make a misrepresentation. Taylor's second motion for partial summary judgment seeks a finding that B&W was a general agent of Hiscox. ECF Nos. 127, 128, & 130. Taylor argues that the factual record indicates there is no genuine dispute that B&W was a general agent for Hiscox and therefore all of B&W's knowledge is legally imputed to Hiscox.
The Court initially granted Hiscox's motion for summary judgment, denied Taylor's motions for partial summary judgment, and dismissed Taylor's counterclaims with prejudice. ECF Nos. 144...
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