Utica Mut. Ins. Co. v. Stockdale Agency
| Decision Date | 10 July 1995 |
| Docket Number | No. C 95-4010.,C 95-4010. |
| Citation | 892 F. Supp. 1179 |
| Court | U.S. District Court — Northern District of West Virginia |
| Parties | UTICA MUTUAL INSURANCE COMPANY, Plaintiff, v. The STOCKDALE AGENCY, Stockdale Bancorporation, Jerry Stockdale, and Ray Bryan, Defendants. |
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Walter J. Andrews of Wiley, Rein & Fielding, Washington, DC, and John D. Mayne of Mayne & Mayne, Sioux City, IA, for plaintiff Utica.
Michael L. Zenor and Michael J. Houchine of Zenor & Carr Law Office, Spencer, IA, for Stockdale defendants.
This lawsuit for declaratory judgment pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201-2202, presents the unusual circumstance that the parties do not even agree on the nature of the cause of action asserted by the plaintiff. The plaintiff insurer asserts that its cause of action is for rescission of contracts for errors or omissions insurance for three policy years, alleging as grounds for rescission that the defendant insured, an insurance agency, made misrepresentations in the applications for insurance. The defendant insured, on the other hand, asserts that the insurer's cause of action is for fraudulent misrepresentation, and that rescission is a possible remedy.
This disagreement between the parties on the nature of the plaintiff's cause of action has repercussions for the court's disposition of the insurer's motion for partial summary judgment. The insurer asserts that its right to rescission may be decided as a matter of law on the sole issue of whether or not a question in its application form was ambiguous. The insurer argues that the question was clear and unambiguous, and that the insured's answer was therefore false and fraudulent. The insurance agency argues that even if the application question was not ambiguous, and therefore its answer was false, there are genuine issues of material fact on other elements of a claim of fraudulent misrepresentation precluding summary grant of the relief requested by the plaintiff.
The parties' disagreement over the elements that must be proved is only a reflection of the arcane, obscure, and confusing nature of Iowa law on the issue. The court therefore sympathizes with the parties' attempts to frame cogent arguments. After painstaking research, which would not have been necessary had Iowa law been clearer, this court has discovered that, historically, Iowa courts have recognized four distinct actions based on fraud, each with differing elements or differing effect on the rights of the parties involved. Thus, the court must determine the nature of this plaintiff's action founded on fraud and precisely what elements the plaintiff must prove in order to obtain rescission of the insurance contracts. This federal court will therefore attempt to illuminate for itself and the parties some abstruse points of the applicable state law in order to dispose of the plaintiff's motion for partial summary judgment.
Plaintiff Utica Mutual Insurance Company (Utica) filed this lawsuit for declaratory judgment pursuant to 28 U.S.C. § 2201 on February 10, 1995. Utica is an insurance company incorporated under the laws of New York with its principal place of business in Utica, New York. Utica's business includes underwriting liability insurance. Defendants in this action are the Stockdale Agency and Stockdale Bancorporation, both Iowa corporations with their principal place of business in Okoboji, Iowa; Jerry Stockdale, an owner of the two Stockdale entities and a resident of Iowa; and Ray Bryan, a South Carolina resident who was formerly the president of the Stockdale Agency and is still an owner of some percentage of the Stockdale Agency's stock.1 Defendants are collectively referred to in this opinion as "Stockdale," unless the conduct of a specific defendant is discussed.
The complaint seeks declaratory judgment that three errors and omissions insurance policies Utica provided to Stockdale covering insurance years from 1992 to 1995 may be rescinded and are null, void, and of no effect. Utica alleges that the basis for rescission of each of the policies is false statements made by Stockdale in the applications for the policies. In addition to rescission of the policies, Utica seeks a declaration that it has no obligations to provide Stockdale with any indemnity or defense in connection with a claim against Stockdale made by the Aspen Lodge, reimbursement for all costs incurred in defense of the Aspen Lodge claim, an award of costs in this action, and such other relief as the court deems just and proper.
Stockdale answered the complaint on February 24, 1995, denying Utica's entitlement to any relief, and including a counterclaim against Utica. Stockdale moved for leave to file an amended and substituted answer and counterclaim on March 17, 1995. Chief Magistrate Judge John A. Jarvey granted Stockdale's motion on April 13, 1995. Stockdale's amended counterclaim seeks declaratory judgment that Stockdale has performed all obligations under the policies of insurance issued by Utica, and that Utica is therefore required to maintain the insurance coverage in question, including paying and defending all claims, and providing all automatic and optional extended coverage under the polices. Utica denies Stockdale's right to relief on its counterclaim.
On March 7, 1995, prior to the filing of Stockdale's amended answer and counterclaim, Utica moved for partial summary judgment as to the latest renewal of the errors and omissions policy for the 1994-1995 period. Stockdale resisted the motion for partial summary judgment on March 17, 1995, requested a hearing on the motion, and moved to continue disposition of the motion for partial summary judgment to allow for discovery on a number of issues. Following a status conference on May 22, 1995, this court withdrew the referral of dispositive motions in this matter to the magistrate judge, if there in fact was one, set a briefing schedule on the motion for partial summary judgment, and set the motion down for hearing on July 7, 1995. The hearing was subsequently rescheduled for June 30, 1995.
At the hearing on Utica's motion for partial summary judgment, Utica was represented by counsel Walter J. Andrews of Wiley, Rein & Fielding in Washington, D.C., and John D. Mayne of Mayne & Mayne in Sioux City, Iowa. Stockdale was represented by counsel Michael L. Zenor and Michael J. Houchine of Zenor & Carr Law Office in Spencer, Iowa. The oral arguments in this matter were ably and courteously presented by counsel and did much to clarify, although not to resolve, the dispute between the parties as to the nature of the plaintiff's cause of action and the basis on which this motion must be resolved. This matter is now fully submitted, and the court turns to disposition of Utica's motion for partial summary judgment by first considering the standards applicable to such a motion.
The Eighth Circuit Court of Appeals recognizes "that summary judgment is a drastic remedy and must be exercised with extreme care to prevent taking genuine issues of fact away from triers of fact." Wabun-Inini v. Sessions, 900 F.2d 1234, 1238 (8th Cir.1990). On the other hand, the Federal Rules of Civil Procedure have authorized for nearly 60 years "motions for summary judgment upon proper showings of the lack of a genuine, triable issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 2555, 91 L.Ed.2d 265 (1986). Thus, "summary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a...
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