Opinion
CIVIL ACTION NO. 3:20-cv-640-TSL-RPM
2021-11-08
Demarkus BRADLEY and Angela Hawkins, Plaintiffs/Counter-Defendants v. VIKING INSURANCE COMPANY OF WISCONSIN, Defendant/Counter-Plaintiff
Brent Hazzard, Richard Schwartz & Associates, PA, Emily Bradley, Schwartz & Associates, P.A., Jackson, MS, Ronald E. Stutzman, Jr., The Stutzman Law Firm, PLLC, Flowood, MS, for Plaintiffs/Counter-Defendants. James E. Welch, Jr., William E. Whitfield, III, Copeland, Cook, Taylor & Bush, PA, Gulfport, MS, for Defendant/Counter-Plaintiff.
Brent Hazzard, Richard Schwartz & Associates, PA, Emily Bradley, Schwartz & Associates, P.A., Jackson, MS, Ronald E. Stutzman, Jr., The Stutzman Law Firm, PLLC, Flowood, MS, for Plaintiffs/Counter-Defendants.
James E. Welch, Jr., William E. Whitfield, III, Copeland, Cook, Taylor & Bush, PA, Gulfport, MS, for Defendant/Counter-Plaintiff.
MEMORANDUM OPINION AND ORDER
Tom S. Lee, UNITED STATES DISTRICT JUDGE This cause is before the court on the motion of defendant/counter-plaintiff Viking Insurance Company of Wisconsin (Viking) for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure and the motion of plaintiffs/counter-defendants Demarkus Bradley and Angela Hawkins for partial summary judgment. There is also pending a motion by plaintiffs/counter-defendants to strike the affidavit of John Wells submitted by Viking. The court, having considered the memoranda of authorities, together with attachments, submitted by the parties, concludes that while there is merit to plaintiffs' position on the limited matter to which its partial summary judgment motion is directed, Viking is entitled to summary judgment on all of plaintiffs' causes of action.
Background Facts and Proceedings
This action involves a dispute over insurance coverage for an April 6, 2018 automobile accident in which twenty-two-year-old Demarkus Bradley was injured when the vehicle he was driving, a 2007 Chevy Impala, was struck by an uninsured motorist. At the time of the accident, the Impala was insured under a policy issued by Viking to Bradley's mother, Angela Hawkins, which included uninsured/underinsured motorist (UM) bodily injury coverage of $25,000 per person/$50,000 per occurrence. As is pertinent to this case, the policy defined "insured" for purposes of the policy's UM coverage to include a "relative," which the policy defined to mean
a person living in your household. This person must be related to you by blood , marriage or adoption. Relative includes a ward, foster child or a minor under your guardianship who lives in your household. Your unmarried dependent children living temporarily away from home qualify as a relative only if they intend to continue to live in your household. Any relative of legal driving age or older must be listed on the application or endorsed on the policy. This must occur prior to a car accident or loss.
(Emphasis added). The policy's definition of "insured" also included "[a]ny other person occupying your insured car with the permission of you or a relative."
At the time of the accident, Bradley was living with his mother and was using the vehicle with her permission. He thus qualified as an "insured" for purposes of the policy's UM coverage. However, by letter of October 11, 2018, Viking denied plaintiffs' claim for UM benefits, citing an exclusion in its policy, which stated:
This coverage does not apply to bodily injury sustained by an insured person described by any of the following. ...
While your insured car is being operated by a regular operator who was not reported to us. The regular operator must be reported on the original application for insurance or otherwise disclosed to us and listed on your Declarations Page before the car accident.
...
"Regular operator" means any person of legal driving age or older and a resident of your household. Regular operator also means any person who drives your insured
car while it is furnished or available for their regular use.
It is undisputed that Hawkins had not disclosed Bradley as a resident of her household at any time prior to the accident and that Bradley was not listed on the policy's declaration page before the accident.
After Hawkins, through her attorney, threatened to file suit for Viking's wrongful denial of coverage, Viking took examinations under oath of both Hawkins and Bradley, following which it again denied coverage, stating as its reasons both that Bradley was not identified in the application and thus was not a named insured under the policy and that Hawkins had made material misrepresentations by failing to disclose, at the time of her initial application and on subsequent renewals, that Bradley was a resident of her household and a regular operator of her insured vehicle, despite provisions in the application and policy requiring such disclosure and excluding coverage for persons not properly disclosed.
Bradley, subsequently joined by Hawkins, brought the present action, alleging claims for breach of contract and tortious/bad faith breach of contract, among others, based on his contention that the regular operator/unnamed driver exclusion in Viking's policy violates public policy by impermissibly diminishing the UM coverage mandated by the Mississippi legislature and is thus void. Viking answered, denying that the exclusion is invalid, and counterclaimed for a declaratory judgment that the policy provides no coverage for the subject accident due to Hawkins' failure to disclose Bradley as a resident of her household. In its motion for summary judgment, Viking contends that as a matter of law, no insurance coverage exists for Bradley for the subject accident based on the undisputed material fact that Hawkins made material misrepresentations in her application for insurance coverage by failing to disclose members of her household, including Bradley, who were of driving age and/or who had regular access to the insured vehicle(s). Plaintiffs seek partial summary judgment, requesting that the court rule, as a matter of law, that the "regular operator"/"unnamed driver" exclusion in Viking's policy is void as against public policy and hold that for purposes of UM coverage under the policy, Bradley is an "insured" based on Mississippi's statutory definition of that term. See Miss. Code Ann. § 83-11-103(b) (defining term "insured" for purposes of uninsured motorist coverage as "the named insured and, while resident of the same household, the spouse of any such named insured and relatives of either, while in a motor vehicle or otherwise, and any person who uses, with the consent, expressed or implied, of the named insured, the motor vehicle to which the policy applies ....").
Summary Judgment Standard
Summary judgment is appropriate "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." Fed. R. Civ. P. 56(a). "The party that moves for summary judgment bears the initial burden of identifying those portions of the pleadings and discovery on file, together with any affidavits, which it believes demonstrates the absence of a genuine issue of material fact." Tubacex, Inc. v. M/V Risan, 45 F.3d 951, 954 (5th Cir. 1995) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 2553, 91 L. Ed. 2d 265 (1986) ). "If the moving party fails to meet this burden, the motion must be denied, regardless of the nonmovant's response." Id. If the movant does meet this burden, the nonmovant is then required to go beyond the pleadings and show that there is a genuine issue of material fact for trial. Id. (citing Celotex, 477 U.S. at 323, 106 S.Ct. 2548 ; Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S. Ct. 2505, 2511, 91 L. Ed. 2d 202 (1986) ). On cross-motions for summary judgment, the court "review[s] each party's motion independently, viewing the evidence and inferences in the light most favorable to the nonmoving party." Amerisure Ins. Co. v. Navigators Ins. Co., 611 F.3d 299, 304 (5th Cir. 2010) (internal citation and quotation omitted.)
Plaintiffs' Motion
In the court's opinion, plaintiffs' position regarding Viking's regular operator/unnamed driver is correct for the same reasons Judge Jordan declared a similar named driver exclusion void as against public policy in Godwin v. United States, No. 3:14CV391-DPJ-FKB, 2016 WL 6127405, at *2 (S.D. Miss. Oct. 19, 2016). It is true, as Viking points out, that Judge Jordan's opinion is not binding on the undersigned and was in any event merely an Erie-guess. The undersigned, however, fully concurs in his reasoning and conclusion, which leads this court to conclude that Bradley, as a resident member of Hawkins' household and as a person operating the vehicle with her permission, was an "insured" for UM purposes and was not excluded from coverage by virtue of the regular operator/unnamed driver exclusion. But in the end, the validity vel non of the exclusion is of no moment, because in the court's opinion, coverage is defeated by Hawkins' failure to disclose in the application for coverage, or at any other time prior to the accident, that she was not the only member of her household of driving age and/or who had regular access to the insured vehicle(s).
Plaintiffs have moved to strike the affidavit of John Wells, Rating Director with the Mississippi Department of Insurance (MDI), in which he states that the MDI approved Viking's policy form containing the exclusion. The fact that the policy form was approved by the MDI does not insulate every provision therein from challenge; but given the court's conclusion that the invalidity of the exclusion ultimately is immaterial, the court will deny the motion to strike as moot.
Vikings' Motion
Viking's and plaintiffs' summary judgment briefs discuss, but do not distinguish between principles and standards applicable to claims of common law misrepresentation and to Viking's claim herein that the policy expressly and unambiguously gave it the right to deny coverage based on Hawkins' misrepresentation that she was the only driving-aged member of her household. The court undertakes herein to address all of their arguments on these issues.
An insurance company has a common law right to void an insurance policy due to material misrepresentations in the application. See Jones-Smith v. Safeway Ins. Co., 174 So. 3d 240, 241 (Miss. 2015) ("For more than one hundred and thirty years, [the Mississippi Supreme Court] has held that an insurance company may void a policy when the insured made material misrepresentations during the application process."); see also Carroll v. Metro. Ins. & Annuity Co., 166 F.3d 802, 805 (5th Cir. 1999) ("Under Mississippi law, if an applicant for insurance is found to have made a misstatement of material fact in the application, the insurer that issued a policy based on the false application is entitled to void or rescind the policy."). "To establish that, as a matter of law, a material misrepresentation has been made in an insurance application, (1) it must contain answers that are false, incomplete, or misleading, and (2) the false, incomplete, or misleading answers must be material to the risk insured against or contemplated by the policy." Carroll, 166 F.3d at 805. "The party seeking to void the insurance contract" on this basis must establish both these elements by clear and convincing evidence. Id. See also Imperium Ins. Co. v. Shelton & Assocs., Prof'l Ass'n, 761 F. App'x 412, 419 (5th Cir. 2019) (quoting Carroll, 166 F.3d at 805 ).
In her March 2016 application for the subject policy, Hawkins did not disclose that there were other persons of legal driving age living in her home, including Bradley, despite her express acknowledgement in the application that she understood
that I must report to the Company all persons of legal driving age or older who live with me temporarily or permanently, including all children at college. I understand that I must report all persons who are regular operators of any vehicle to be insured, regardless of where they reside.
The application further warned:
This policy is issued by us in reliance upon the statements which you made in your application for insurance ... We rely upon you to provide us with accurate information. This policy, your application (which is made a part of this policy as if attached), and your Declarations Page include all the agreements between you and us relating to this insurance. If you have made any misrepresentations in your application or when subsequently asked, this policy may not provide any coverage.
The policy was renewed at six-month intervals, and while the policy clearly required that the insured notify Viking of any changes, including changes to "the residents of your household and/or regular operators of your insured car," at no time prior to Bradley's April 6, 2018 accident did Hawkins disclose any residents of her household of driving age or anyone who had regular access to and/or drove any of the insured vehicles. Plaintiffs do not dispute that Hawkins' representation that she was the only person of driving age in her household was false. See Jones-Smith, 174 So. 3d at 241 (insured's application was "entirely false because the application required [her] to disclose all household residents over age fourteen and she did not provide all of the names she was required to provide."). Her representation was also material.
"A misrepresentation in an insurance application is material if knowledge of the true facts would have influenced a prudent insurer in determining whether to accept the risk." Carroll, 166 F.3d at 805 (citing Massachusetts Mut. Life Ins. Co. v. Nicholson, 775 F. Supp. 954, 959 (N.D. Miss. 1991) ). "Stated differently, a fact is material if it might have led a prudent insurer to decline the risk, accept the risk only for an increased premium, or otherwise refuse to issue the exact policy requested by the applicant." Id. (citing Nicholson, 775 F. Supp. at 959 ). Dan Rosenow, Viking's 30(b)(6) designee, has provided uncontroverted testimony that had Hawkins disclosed Bradley on her application, her six-month premium would have increased by approximately $160, from $2,837.07 to $2,994.22.
Plaintiffs argue, though, that Hawkins' alleged misrepresentation by failing to disclose her other driving-aged household members could not have been material "to a void provision of the policy." It seems by this they mean that since under Mississippi law, all the members of Hawkins' household were insureds for purposes of her UM coverage, regardless of whether they were disclosed in the policy application, and since Viking's contrary policy provision is void, then it follows that her failure to disclose Bradley could not have been material to the policy's UM coverage for Bradley. Plaintiffs' argument might have merit if materiality were determined by reference to the cause of a claimed loss. In Mississippi, however, materiality of a misrepresentation is measured by the extent to which it influenced the insurer in determining whether and on what terms to accept the risk of coverage at the outset, not by the existence or not of any causal relation between the misrepresentation and a particular loss. See Wesley v. Union Nat. Life, 919 F. Supp. 232, 234 (S.D. Miss. 1995) (observing that "there is no requirement under Mississippi law that the actual cause of [loss] be related to risks concealed by an insurance applicant in order for the concealed facts to be material.") (citing Golden Rule Ins. Co. v. Hopkins, 788 F. Supp. 295, 303 (S.D. Miss. 1991) (each misrepresentation by insured regarding physical conditions unrelated to cause of death constituted "an independent basis for rescission")); cf.; Republic Fire and Cas. Ins. Co. v. Azlin, No. 4:10-CV-037-SA-JMV, 2012 WL 4482355, at *6 (N.D. Miss. Sept. 26, 2012) (citing Edmiston v. Schellenger, 343 So. 2d 465, 467 (Miss. 1977) ) ("Materiality is determined by reference to the time of the misrepresentation.").
Plaintiffs further argue that Hawkins' failure to disclose other drivers in her household was merely negligent and was not a "misrepresentation" under the terms of the policy, which defined "misrepresent" or "misrepresentation" as information provided "to us that is known by you to be false, misleading or fraudulent." (Emphasis plaintiffs'). Even were that true, under the law, if the misrepresentation is material, the insurer has the right to declare the policy void; "[w]hether the misrepresentation was intentional, negligent, or the result of mistake or oversight is of no consequence." Carroll, 166 F.3d at 805.
The policy does state that Viking has the right to rescind the policy or deny coverage if the insured "made any misrepresentations in your application or when subsequently asked," and it defines misrepresentation as providing knowingly false information. This is what Hawkins did. The facts, as admitted by Hawkins in her sworn examination under oath, are these: The application for coverage, which Hawkins signed, stated that she was required to report all persons of driving age living with her. In addition, the insurance agent with whom she completed the application told her that she needed to tell him anybody that was of driving age that lived with her. Bradley was of driving age and lived with her, and yet she did not report this to the agent at the time of the initial application or at any subsequent time. Presumably by way of explanation, Hawkins did testify that at the time she completed the application, Bradley "didn't really drive"; but he was of driving age, and, as Hawkins further acknowledged, he had access to the covered vehicle(s) and he did drive "sometimes." Thus, even accepting that Hawkins did not specifically intend to defraud or mislead Viking, it is undisputed that she knew she had failed to provide required information. Thus, contrary to plaintiffs' urging, Hawkins' misrepresentation (by omission) was knowingly false and thus was a "misrepresentation," even under the policy definition.
Based on Hawkins' material misrepresentation in the application for coverage, the policy was voidable. Jones-Smith, 174 So. 3d at 242. Viking thus had the " ‘right to declare null and void the insurance’." Imperium Ins. Co., 761 F. App'x at 422 (quoting Coffey v. Standard Life Ins. Co. of the S., 238 Miss. 695, 120 So. 2d 143, 148–49 (1960) ). See also Carroll, 166 F.3d at 805 (material misrepresentations in application give insurer right to void or rescind the policy). Viking, however, chose not to void or rescind the policy. Instead, upon learning that Bradley was a member of Hawkins' household when it received the claim for UM benefits for Bradley's accident, Viking, rather than rescind the policy, promptly added Bradley to the policy and increased the six-month premium to reflect his addition as a named insured.
In May 2018, the month following the accident, Viking wrote to Hawkins, informing her of the following:
We recently discovered that [Demarkus Bradley] may have access to the vehicle(s) listed on your policy. As a result, we have added [him] as a listed driver. Please provide us with a clear copy of their driver's license in order to complete this process and to get the correct rate for this driver. If [he] does not live in your household and does not have regular access to your vehicle(s); please contact your agent or [Viking] directly within 10 business days and we will remove them from your policy. If [he] lives in your household or has regular access to your vehicle(s) but you wish to exclude them from coverage on your policy, please contact your agent or [Viking] directly within 10 business days to see if they qualify.
Under Mississippi law,
[a] voidable contract will only be invalidated if "the one defrauded ... act[s] promptly and finally to repudiate the agreement[.]" Turner v. Wakefield, 481 So. 2d 846, 848–49 (Miss. 1985). If no action is taken by the defrauded party, the voidable contract will continue legally in existence. A voidable contract can be revived, but a void contract cannot.
Home Base Litter Control, LLC v. Claiborne Cty., 183 So. 3d 94, 101 (Miss. Ct. App. 2015). As Viking did not purport to repudiate its policy, the policy therefore, was and remained legally in existence from its inception. The question, therefore, is whether Viking had a contractual right, i.e., based on the terms of the policy, to deny coverage because of Hawkins' misrepresentation.
The relevant policy language states: "If you misrepresent any fact or condition that affects whether a risk is eligible or contributes to a loss, we reserve the right to rescind the policy and/or deny coverage." The policy defines "misrepresent" or "misrepresentation" to mean
providing information to us that is known by you to be false, misleading or fraudulent. This could be presented to us during the application for coverage, or during the policy period. It must affect either the eligibility for coverage and/or the premium that is charged. Concealing information relevant to the application, or maintenance of coverage, is also misrepresentation.
As Viking's uncontroverted evidence establishes that Hawkins' misrepresentation "affect[ed] ... the premium that [was] charged," the court concludes that Viking had the right, under the terms of the policy, to deny the claim for UM coverage for Bradley's accident.
In its complaint, Viking requests that the court award its attorneys' fees, costs and expenses "caused by Hawkins' intentional misconduct under the doctrine of common law indemnity." Viking's motion for summary judgment does not mention this request and the court thus considers that Viking has abandoned this claim for relief.
Conclusion
Based on the foregoing, it is ordered that plaintiffs' motion for partial summary judgment is well-taken and is granted, but it is further ordered that Viking's motion for summary judgment is granted, and plaintiffs' complaint is therefore dismissed with prejudice. It is further ordered that plaintiffs' motion to strike the affidavit of John Wells is denied as moot.
A separate judgment will be entered in accordance with Rule 58 of the Federal Rules of Civil Procedure.
SO ORDERED this 8th day of November, 2021.