Ocwen Loan Servicing, LLC v. Nationwide Mut. Fire Ins. Co.
| Decision Date | 29 March 2012 |
| Docket Number | 1:07-cv-01449-SEB-DML |
| Parties | OCWEN LOAN SERVICING, LLC, Plaintiff, v. NATIONWIDE MUTUAL FIRE INSURANCE COMPANY and AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Defendants. |
| Court | U.S. District Court — Southern District of Indiana |
This cause is before the Court on cross-motions for summary judgment. On May 31, 2011, Defendant, American Family Mutual Insurance Company ("American Family"), filed a Motion for Summary Judgment [Docket No. 81] seeking judgment as a matter of law as to all causes of action asserted against it by Plaintiff, Ocwen Loan Servicing, LLC ("Ocwen"), in its Complaint [Docket No. 1]. Also on May 31, 2011, Plaintiff filed its Motion for Summary Judgment [Docket No. 86] seeking judgment as a matter of law as to its breach of contract and bad faith claims against American Family and its breach of contract claim against Defendant, Nationwide Mutual Fire Insurance Company ("Nationwide"). For the reasons detailed in this entry, the Court: (1) DENIES American Family's Motion for Summary Judgment on Ocwen's breach of contract claim against American Family and GRANTS American Family's Motion for Summary Judgment on Ocwen's quasi-contract and bad faith claims against American Family; (2) GRANTS Ocwen's Motion for Summary Judgment on its breach of contract claimagainst American Family and DENIES Ocwen's Motion for Summary Judgment on its bad faith claim against American Family; and (3) DENIES Ocwen's Motion for Summary Judgment against Nationwide.
Keith and Shonda Allen ("the Allens") own real property located at 422 South Talley Avenue in Muncie, Indiana. Compl. ¶¶ 6-7. In May of 1999, the Allens executed a note and mortgage secured by this property with National City Bank.1 Compl. Ex. 1 at 1. HSBC Bank USA, N.A. purchased the note and mortgage from National City Bank in November of 2004, and service of the entire loan was contemporaneously transferred to Ocwen.2 Pl.'s Br. Ex. 3B at 1; Pl.'s Br. Ex. 6 at 1. In executing the mortgage, the Allens agreed "to procure and maintain in effect at all times hazard (fire and extended coverage) insurance in an amount which is at least equal to the total amount of indebtedness secured hereby or the replacement value of the Mortgaged Premises . . . ." Compl. Ex. 1 at 1.
On July 19, 2005, the Allens took out a homeowners' insurance policy with Nationwide, an Ohio corporation with its principal place of business in Ohio. Compl. ¶¶ 3, 9. Policy number 91 13 HP 164976 ("the Nationwide Policy") covered the Allens' Talley Avenue residence up to a liability limit of $234,000 and had a period of effectiveness running between July 15, 2005 and July 15, 2006. Compl. Ex. 2 at 1. TheNationwide Policy listed the Allens as "named insureds" and Ocwen as "first mortgagee." Id. at 1-2. It covered "accidental direct physical loss to property described" except for certain exclusions—including, but not limited to, "[i]ntentional acts, meaning loss resulting from an act committed by or at the direction of an insured." Id. at 10, 12. The term "intentional acts" excluded coverage for "all insureds." Id. at 12.
The Nationwide Policy also contained a standard mortgage clause which provided, in pertinent part, as follows:
Compl. Ex. 2 at E3. Nationwide was obligated to notify the mortgagee at least ten days before canceling the policy. Further, this provision stated that "[s]ubrogation will not impair the right of the mortgagee to recover the full amount of [its] claim." Id.
The Allens also applied for a homeowners' insurance policy with American Family Mutual Insurance Company ("American Family"), a Wisconsin corporation withits principal place of business in Wisconsin. Compl. ¶¶ 4, 10. They signed the application for policy number 13-BG1873-01-PHGS-IN ("the American Family Policy") on October 14, 2005. Am. Fam.'s Br. Ex. A at 2. Like the Nationwide Policy issued before it, the American Family Policy insured the Allens' Talley Avenue residence up to a liability limit of $234,000, and its period of effectiveness was a year (from October 14, 2005 to October 14, 2006). Id.; Pl.'s Br. at 4. On its declarations page, the American Family Policy also identified both of the Allens as "named insureds" and Ocwen as "mortgagee." Pl.'s Br. Ex. 3 at 21.
The American Family Policy also contained a mortgage clause that was substantially similar to the one set forth in the Nationwide Policy, the terms of which are as follows:
Am. Fam.'s Br. Ex. J at 9. Several other provisions in the American Family Policy were routine inclusions and are not in apparent dispute in this lawsuit.4
Agent Rick Spangler spoke with the Allens by telephone in October 2005 to facilitate submission of their application for the American Family Policy. Am. Fam.'s Br. Ex. H ¶¶ 3, 8. At that time, neither of the Allens advised Mr. Spangler of any prior property losses they had experienced or insurance claims that had been submitted. Id. ¶¶ 9-10. On the application itself, the Allens indicated "no" in response to the question of whether they had any past or current losses at any locations. Am. Fam.'s Br. Ex. A at 1. In signing the application, they expressly represented as follows: Id. at 2. One of the "general conditions" of the American Family Policy provides that "[the] entire policy is void if, before or after a loss, any insured has: intentionally concealed or misrepresented any material fact or circumstance; engaged in fraudulent conduct; or made false statements relating to this insurance." Am. Fam.'s Br. Ex. J at 13.
American Family's designated evidence of record reveals discrepancies between the Allens' statements in the American Family application and their subsequent admissions of fact. Specifically, in a recorded statement taken on or about November 16, 2005, Mr. Allen admitted the following prior property losses: two fires affecting rental property in 1993 and 1996; two automobile fires in the 1990s; a jewelry loss in 2001; and four house fires at the Talley Avenue residence in 1989, 1990, 2000, and 2003. Am. Fam.'s Br. ¶ 16; Am. Fam.'s Br. Exs. B, C, G. Lucreia Smith, an underwriter for American Family, characterized the discrepancies between Mr. Allen's remarks and theAllens' application answers as "misrepresentations," reporting as follows with respect to the property losses:
Had American Family . . . known of the misrepresentations . . . and the true facts of [the Allens'] prior fire losses and claims, the policy would not have been issued or a higher premium would have been charged. The fact that the Allens had suffered numerous fires to real property would have resulted in a rejection of the application for any coverage with American Family . . . and the policy of insurance would never have been written or issued pursuant to the underwriting guidelines. American Family . . . relied upon the misrepresentations contained in the application . . . to its detriment in issuing the policy.
Am. Fam.'s Br. Ex. I ¶¶ 12-13. Similarly, the second page of the American Family Policy warns policyholders that "we [, American Family,] may void this policy if the statements you [, the insured,] have given us are false and we have relied on them." Am. Fam.'s Br. Ex. J at 2.
American Family became aware of the Allens' misrepresentations just two days after November 14, 2005, the day the Allens submitted an insurance claim reporting a November 12, 2005 total fire loss to the Talley Avenue residence. Am. Fam.'s Br. Ex. G ¶ 14; Pl.'s Br. at 6. On November 17, 2005, American Family sent the Allens a reservation of rights letter. Am. Fam.'s Br. Ex. G ¶ 14. Then, on November 29, 2005, American Family sent Mr. Allen a letter "void[ing] the policy ab initio . . . [and] return[ing] the entire premium payment." Id. at 14-15.
Meanwhile, the Allens also sought reimbursement from Nationwide. They submitted a claim to Nationwide on November 21, 2005 for damages arising from the November 12, 2005 fire loss. Pl.'s Br. at 6. Nationwide denied the Allens' claim in aletter dated June 12, 2006. In the letter, the claims representative stated, "Our investigation found that this loss was the result of an intentional act," and that Nationwide would not provide coverage or indemnifications to the Allens for the loss. Id.; Compl. Ex. 3 at 1.
On September 8, 2006, the Allens filed a lawsuit against Nationwide, American Family, Richard Spangler d/b/a Rick Spangler Agency, and Ocwen in the Delaware County Circuit Court. Ocwen's Amended Answer contained a cross-claim against Nationwide and American Family asserting three counts against Nationwide (breach...
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