Nationwide Mut. Fire Ins. Co. v. Guster Law Firm, LLC

• Decision Date: 28 March 2013
• Docket Number: Civil Action No. 2:11–cv–1183–AKK.
• Citation: 944 F.Supp.2d 1116
• Parties: NATIONWIDE MUTUAL FIRE INSURANCE COMPANY, Plaintiff/Counter Defendant, v. GUSTER LAW FIRM, LLC, et al., Defendants/Counter Claimants.
• Court: U.S. District Court — Northern District of Alabama

944 F.Supp.2d 1116

NATIONWIDE MUTUAL FIRE INSURANCE COMPANY, Plaintiff/Counter Defendant,

v.GUSTER LAW FIRM, LLC, et al., Defendants/Counter Claimants.

Civil Action No. 2:11–cv–1183–AKK.

United States District Court,

N.D. Alabama,

Southern Division.

March 28, 2013.

Kori L. Clement, Hare Clement & Duck PC, Birmingham, AL, for Plaintiff/Counter Defendant.

Steven W. Couch, Mallory L. Schneider, Hollis Wright and Couch PC, Birmingham, AL, for Defendants/Counter Claimants.

MEMORANDUM OPINION AND ORDER

ABDUL K. KALLON, District Judge.

A fire destroyed commercial property insured by Nationwide Mutual Fire InsuranceCompany. Nationwide's investigation of the ensuing claim revealed discrepancies in the details outlined in the insurance applications, including, among other things, the age of the property, the identity of the true owner, and its occupancy and habitability status. Nationwide subsequently filed this action against its insured, Guster Law Firm, LLC, alleging that Guster Law had no insurable interest in the property and that its applications contained material misrepresentations or were fraudulent. Nationwide seeks a declaratory judgment as to the rights and liabilities of the parties under both the commercial property and general liability policies.¹ Doc. 1. Guster Law and Guster Properties, LLC, the true owner of the insured property, filed a counterclaim alleging breach of contract, bad faith refusal to pay the insurance claims, and reformation of the named insured in the insurance policies due to mutual mistake. Doc. 15.

Nationwide moved for summary judgment contending that it is not liable for the loss, doc. 34, and Guster Law subsequently filed a cross motion for summary judgment, doc. 37. Both motions and the related motions to strike are fully briefed. Docs. 40, 42–44, 46, 48. For the reasons stated below, the court GRANTS Nationwide's motion for summary judgment based on Guster Law's lack of an insurable interest in the property.

I. MOTIONS TO STRIKE

Nationwide moves to strike Guster Law's brief opposing Nationwide's motion for summary judgment, doc. 40, and Guster Law's reply brief to its motion for summary judgment, doc. 46, for exceeding the court's page limitations, and, on hearsay and authentication grounds, several exhibits Guster Law submitted. Docs. 43 and 48. The court GRANTS Guster Law's motions for leave to exceed the page limits which it filed concurrently with the challenged briefs, docs. 39 and 45, and DENIES Nationwide's motions to strike the briefs as MOOT.

Regarding the exhibits, Nationwide moves to strike as unauthenticated hearsay, Exhibits A (Loan Applications—docs. 40–1), B (Recorded Interview of Syndey Brooks—doc. 40–2), C (Appraisal Report of Joseph & Company—doc. 40–3), F (Affidavit of Eric Guster—doc. 40–6), G (Document from Nationwide's Website—doc. 40–7), J (Birmingham Fire & Rescue Run Report—doc. 40–10), and A from docs. 46–1 to 46–11 (“A2”—Loan Application documents). See docs. 43 and 48. Except for Mr. Guster's affidavit and the appraisal, the challenged exhibits are documents Guster Law can authenticate and introduce at trial by calling the individuals who prepared the documents or through Mr. Guster's testimony. SeeFed.R.Evid. 901. Therefore, the court may consider these documents at the summary judgment stage. See Macuba v. Deboer, 193 F.3d 1316, 1323 (11th Cir.1999) (“a district court may consider a hearsay statement in passing on a motion for summary judgment if the statement could be ‘reduced to admissible evidence at trial’ or ‘reduced to admissible form.’ ”) (citations omitted). Accordingly, the court DENIES the motion to strike Exhibits A, A2, B, G, and J.

Likewise, the court DENIES the motion to strike the rest of the documents since these documents aided the court in evaluating Guster Law's contentions regarding the insurable interest and reformation contentions. Docs. 43 and 48.

II. SUMMARY JUDGMENT STANDARD OF REVIEW

Under Federal Rule of Civil Procedure 56(c), summary judgment is proper “if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c). “Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The moving party bears the initial burden of proving the absence of a genuine issue of material fact. Id. at 323, 106 S.Ct. 2548. The burden then shifts to the nonmoving party, who is required to “go beyond the pleadings” to establish that there is a “genuine issue for trial.” Id. at 324, 106 S.Ct. 2548 (citation and internal quotation marks omitted). A dispute about a material fact is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The court must construe the evidence and all reasonable inferences arising from it in the light most favorable to the non-moving party. Id. However, “mere conclusions and unsupported factual allegations are legally insufficient to defeat a summary judgment motion.” Ellis v. England, 432 F.3d 1321, 1326 (11th Cir.2005)(per curiam) (citing Bald Mountain Park, Ltd. v. Oliver, 863 F.2d 1560,1563 (11th Cir.1989)).

III. FACTUAL BACKGROUND

On June 16, 2010, Guster Law, through its principal and sole member, Eric Guster, an attorney and a licensed real estate agent, applied for commercial liability and property insurance policies with the Sydney Brooks Insurance Agency. Docs. 35–3 and 35–4. Mr. Guster called Sydney Brooks, the principal of the Sydney Brooks Agency, and relayed that Guster Law needed an insurance policy to close on a loan for renovation of a commercial property.² Docs. 35–2 at 16; 34 at 5; 37 at 2; 42 at 4. Based on the information Mr. Guster provided, Brooks entered background information on the applications and faxed the applications to Mr. Guster for completion. Doc. 35–1 at 22–24. Mr. Guster allegedly called Brooks sometime thereafter to relay that “everything looked good” on the applications. Id. at 22.

The parties disagree on the source of the information on the applications. Nationwide contends that Mr. Guster provided the information, filled in personally the sections marked by handwritten X's which Brooks had purportedly left blank, and that Mr. Guster faxed the completed applications back to Brooks. Id. at 24; doc. 34 at 5 ¶ 2. Brooks testified that he and Mr. Guster did not have any conversations about the substantive questions on the applications, and that Mr. Guster completed those portions of the applications. Doc. 35–1 at 25. Allegedly, Mr. Guster subsequently delivered the originals to Brooks. Id. at 22–24.

Mr. Guster disagrees and asserts that he met Brooks at his office, that Brooks filled out the applications, and that, although he is a skilled legal practitioner, he signed without reading or verifying their accuracy. Doc. 35–2 at 18. Mr. Guster contends further that Brooks lost the original, partially handwritten applications and instead submitted typewritten applications to Nationwide's underwriting department. Doc. 46 at 3 ¶ 3 (citing doc. 40–2 at 4). Presumably, Mr. Guster is maintaining that the documents he signed are different from the documents Nationwide produced in this case. However, allegedly, Mr. Guster's contention is a quintessential red herring because he purportedly testified that, except for his missing signature, his personal copies of the “missing” original applications match the copies Nationwide submitted into evidence. Docs. 35–2 at 17–18; 44 at 2. Thus, Nationwide asserts that even if Brooks misplaced the original applications, the applications it submitted as evidence are identical to the originals. Doc. 35–2 at 19.

In any event, as part of the application process, Brooks apparently visited the insured premises to verify that the property actually existed and to determine square footage. Doc. 35–1 at 7–9. The parties agree that Brooks never entered the building. Id. Nonetheless, Guster Law contends the inspection of the outside placed Nationwide on notice of the conditions and details of the property, including the inside conditions that Nationwide claims Guster Law never disclosed. Doc. 46 at 3–4 ¶ 5.

A. The application details

Nationwide contends that Guster Law provided fraudulent or material misrepresentations in its applications. See doc. 34. Although Mr. Guster acknowledges that many of the answers are incorrect, he denies that he provided the disputed information and maintains that he never personally filled in anything on the applications. Doc. 35–2 at 18–19. The incorrect information Mr. Guster denies providing includes representations: (1) that Guster Law had a 10 year business history instead of eight, docs. 35–1 at 25; 35–3 at 3; 35–4 at 3; 35–2 at 18; (2) that Guster Law had “gross annual receipts [of] $125,000,” instead of actual receipts of at least $300,000,³ docs. 35–1 at 26; 35–3 at 3; 35–4 at 3; (3) that Guster Law has never “been involved in any lawsuits” or “ha[s] any judgments or liens ... rendered against [it],” docs. 35–3 at 3; 35–4 at 3; 35–2 at 18; and (4) that “the roof, wiring, heating, and/or plumbing systems [have] been updated” and that the property had battery operated smoke detectors and fire extinguishers, when in fact there were none, doc. 35–3 at 4–5.

Mr. Guster testified that he “told [Brooks] [he] did some work on [the building] but the years [related to the improvements], [Mr. Guster] didn't know where [Brooks] got that,” but that Mr. Guster did “not necessarily” disagree with the information ...