Valdez v. Nationwide Ins. Co. of Am.

• Decision Date: 30 September 2022
• Docket Number: 3:20-CV-01196-YY
• Parties: SAUL VALDEZ, Plaintiff, v. NATIONWIDE INSURANCE COMPANY OF AMERICA, Defendant.
• Court: U.S. District Court — District of Oregon

SAUL VALDEZ, Plaintiff,
v.
NATIONWIDE INSURANCE COMPANY OF AMERICA, Defendant.

No. 3:20-CV-01196-YY

United States District Court, D. Oregon, Portland Division

September 30, 2022

OPINION AND ORDER

YOULEE YIM YOU UNITED STATES MAGISTRATE JUDGE

Plaintiff Saul Valdez brings this action against defendant Nationwide Insurance Company of America alleging a claim for breach of contract, including counts for breach of express contract terms and implied covenant of good faith and fair dealing. First Am. Compl., ECF 21. This court has jurisdiction pursuant to 28 U.S.C. § 1332 (diversity). Not. Removal ¶¶ 4-7, ECF 1.

Plaintiff has filed a motion for partial summary judgment, seeking dismissal of all of defendant's affirmative defenses. ECF 18. Defendant has filed a motion for summary judgment, seeking dismissal of all of plaintiff's claims. ECF 22. For the reasons explained below, plaintiff's motion for partial summary judgment is GRANTED IN PART as to defendant's

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fourth and fifth affirmative defenses and otherwise denied, and defendant's motion for summary judgment is GRANTED IN FULL.

I. Summary Judgment Standard

Under Federal Rule of Civil Procedure 56(a), “[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” The party moving for summary judgment bears the initial responsibility of informing the court of the basis for the motion and identifying portions of the pleadings, depositions, answers to interrogatories, admissions, or affidavits that demonstrate the absence of a triable issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once the moving party does so, the nonmoving party must “go beyond the pleadings” and “designate ‘specific facts showing that there is a genuine issue for trial.'” Id. at 324 (citing FED. R. CIV. PRO. 56(e)).

In determining what facts are material, the court considers the underlying substantive law regarding the claims. Anderson v. Liberty Lobby, 477 U.S. 242, 248 (1986). Otherwise stated, only disputes over facts that might affect the outcome of the suit preclude the entry of summary judgment. Id. A dispute about a material fact is genuine if there is sufficient evidence for a reasonable jury to return a verdict for the non-moving party. Id. at 248-49. A “scintilla of evidence” or “evidence that is merely colorable or not significantly probative” is insufficient to create a genuine issue of material fact. Addisu v. Fred Meyer, Inc., 198 F.3d 1130, 1134 (9th Cir. 2000). The court “does not weigh the evidence or determine the truth of the matter, but only determines whether there is a genuine issue for trial.” Balint v. Carson City, Nev., 180 F.3d 1047, 1054 (9th Cir. 1999). “Reasonable doubts as to the existence of material factual issue are

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resolved against the moving parties and inferences are drawn in the light most favorable to the non-moving party.” Addisu, 198 F.3d at 1134 (citation omitted).

II. Factual Background

This action arises out of a dispute over insurance coverage. On May 15, 2020, plaintiff called defendant, seeking to add an insurance policy to one of his properties (referred to hereafter as “the property”). Clark Decl., Ex. A at 1, ECF 24-1. Defendant's representative asked plaintiff a series of questions about the property to gather information and gauge eligibility. Id. at 2-12. After plaintiff answered those questions, the representative informed plaintiff that he would “receive an email from [defendant] with documents” within a couple of weeks for his review and signature. Id. at 2-13.

At some point over the next six days, defendant emailed plaintiff an application and insurance binder for his review and signature via DocuSign. Plaintiff signed the application on May 21, 2020, and defendant mailed plaintiff a physical copy of the policy (sans application) on either May 21 or 22, 2020. See Webb Decl., Ex. 2 at 7, ECF 20-2; Second McClain Decl. ¶¶ 4-7, ECF 33. Around that time, and in accordance with the company's underwriting guidelines for newly-insured properties, defendant opened an independent investigation to verify the information plaintiff had provided about the property. First McClain Decl. ¶ 5, ECF 23. A third-party independent investigator visited the property on May 28, 2020, and provided a report to defendant, who received it on June 2, 2020. Id. ¶¶ 5-6.

On May 31, 2020, a fire occurred at the property, resulting in a total loss. See Webb Decl., Ex. 3 at 1, ECF 20-3. Plaintiff reported the fire to defendant that day, and three days later, defendant's representatives obtained plaintiff's formal statement about the fire. Id.; Clark Decl., Ex. L, ECF 24-12. While investigating plaintiff's claim for coverage, defendant concurrently

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continued to evaluate and assess the property's eligibility for insurance coverage. See First McClain Decl. ¶¶ 8, 9, 11, ECF 23

When plaintiff did not receive any adjustments or payments from defendant, he filed this civil action in Multnomah County Circuit Court on July 10, 2020. Compl., ECF 1-1. Roughly a month-and-a-half later, on August 25, 2020, defendant issued a letter to plaintiff declaring that the insurance policy for the property was rescinded “back to the 05/15/2020 inception date.” Webb Decl., Ex. 5 at 1, ECF 20-5. The letter explained that plaintiff “at the time of application, misrepresented, concealed, or omitted multiple points of important (i.e., material) information” and that “[i]f truthful information had been provided, [defendant] would not have accepted the application for multiple underwriting reasons.” Id.; see also id. at 2 (listing reasons why plaintiff's policy was rescinded). The legality of defendant's decision to rescind plaintiff's policy is central to resolving the parties' cross-motions for summary judgment.

III. Overview of the Parties' Motions

The parties have filed cross-motions for summary judgment, and while the respective motions significantly overlap in argumentation, they seek distinct outcomes. Plaintiff's motion seeks summary judgment on all five of defendant's affirmative defenses: (1) policy recission, (2) breach of policy condition, (3) real party in interest, (4) lack of insurable interest, and (5) failure to state a claim. ECF 18. In its response to plaintiff's motion, defendant stipulated “to the dismissal of its Fourth and Fifth Affirmative Defenses.” Def. Opp. Pl. Mot. Summ. J. 3, ECF 25. Therefore, defendant concedes summary judgment on its fourth and fifth affirmative defenses.

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Defendant's motion seeks summary judgment on plaintiff's claim for breach of contract, which includes two counts: breach of express contract terms and the implied covenant of good faith and fair dealing.^[1] ECF 22.

IV. Defendant's Motion for Summary Judgment-Plaintiff's Express Breach Claim

Plaintiff's claim for breach of contract alleges that defendant's denial of and refusal to pay plaintiff's damages constitutes an express breach of contract. First Am. Compl. ¶¶ 1-14, ECF 21. Defendant seeks summary judgment on this claim, arguing there is no genuine issue of material fact that it legally rescinded its insurance contract with plaintiff and it is entitled to prevail as a matter of law. Def. Mot. Summ. J. 8-28, ECF 22.

A. Legal Elements

Oregon's Insurance Code requires that all fire insurance policies contain a provision regarding concealment, misrepresentations, or fraud by the insured. The pertinent statute, O.R.S. § 742.208, provides:

(1) Subject to subsections (2) and (3) of this section, this entire policy shall be void if, whether before or after a loss, the insured has willfully concealed or misrepresented any material fact or circumstance concerning this insurance or the subject thereof, or the interest of the insured therein, or in case of any fraud or false swearing by the insured relating thereto.

(2) All statements made by or on behalf of the insured, in the absence of fraud, shall be deemed representations and not warranties. No such statements that arise from an error in the application shall be used in defense of a claim under the policy unless:

(a) The statements are contained in a written application; and

(b) A copy of the application is indorsed upon or attached to the policy when issued.

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(3) In order to use any representation by or on behalf of the insured in defense of a claim under the policy, the insurer must show that the representations are material and that the insurer relied on them.

O.R.S. § 742.208.^[2] The statute thus requires four distinct elements for an insurer to void a fire insurance policy based on misstatements: (1) the insured willfully concealed, misrepresented, or falsely swore any fact or circumstance concerning the insurance; (2) the statements were contained in a written application that was either indorsed upon or attached to the policy; (3) the representation was material, and (4) the insurer relied on that representation. Id.

There are three other notable facets when analyzing claims under this section of the Insurance Code. First, all reliance-related elements are interpreted in a manner consistent with common law. See Eslamizar v. Am. States Ins. Co., 134 Or.App. 138, 143 (1995), rev. den., 322 Or. 228 (1995) (“[T]he language of the statute gives no indication that the legislature intended the term ‘reliance' to mean anything other than what it ordinarily means as an element of a common law fraud claim.”). Second, the insurer bears the burden of proof for demonstrating each element of a claim of voidance. Mutual of Enumclaw Ins. v. McBride, 295 Or. 398, 407 (1983) (interpreting the standard of proof for O.R.S. § 743.612, the predecessor statute for O.R.S. § 742.208). And third, “when policy language matches the requirements of the statute,” as it does in this case, the court “approaches the...