Opinion
Case No. CIV-20-232-SLP
2022-08-26
Alan DAY and Alice Day, Plaintiffs, v. GREAT NORTHWEST INSURANCE COMPANY, Defendant.
Bradley C. West, J. Shawn Spencer, Terry W. West, The West Law Firm, Shawnee, OK, for Plaintiffs. Mort G. Welch, Welch & Smith, Oklahoma City, OK, for Defendant.
Bradley C. West, J. Shawn Spencer, Terry W. West, The West Law Firm, Shawnee, OK, for Plaintiffs. Mort G. Welch, Welch & Smith, Oklahoma City, OK, for Defendant. ORDER SCOTT L. PALK, UNITED STATES DISTRICT JUDGE
Before the Court are Plaintiffs' Motion for Summary Judgment [Doc. No. 16] and the Motion for Summary Judgment of Defendant Great Northwest Insurance Company [Doc. Nos. 17-18]. Both Motions are fully briefed and at issue. See Def.'s Resp. [Doc. No. 20]; Pls.' Resp. [Doc. No. 19]; and Def.'s Reply [Doc. No. 21]. For the reasons that follow, Plaintiffs' Motion for Summary Judgment is DENIED and Defendant's Motion for Summary Judgment is GRANTED.
Citations to the parties' briefing submissions reference the Court's ECF pagination.
I. Introduction
On January 4, 2018, Garrett Day intentionally set fire to the home of his parents, the Plaintiffs in this action, Alan Day and Alice Day (Plaintiffs). Plaintiffs had no knowledge of their son's intent to commit arson and provided no assistance to him during his commission of the act.
Garrett Day was charged with first degree arson in violation of Okla. Stat. tit. 21, § 1401(A) in Case No. CJ-2018-21, District Court of Pottawatomie County, State of Oklahoma. He entered a "no contest" plea to the charge. See Joint Status Report [Doc. No. 8], Stipulated Facts, ¶ 3(D).
At the time of the fire, Defendant, Great Northwest Insurance Company (GNIC), insured Plaintiffs under a homeowners policy, GNW 35-0970000202-HO (the Policy). Garrett Day was also an insured under the Policy. Plaintiffs made a claim under the Policy for damages to their house and personal property as a result of the fire. The parties have stipulated that the Policy, as written, does not cover Plaintiffs' claim.
The parties each move for judgment as a matter of law on the issues of whether the Intentional Loss Exclusion and Concealment or Fraud Condition provisions in the Policy conflict with Okla. Stat. tit. 36, § 4803, which governs standard fire insurance policies in Oklahoma, and whether these provisions violate Oklahoma public policy. II. Governing Standard
"Summary judgment is appropriate when '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.' " Dullmaier v. Xanterra Parks & Resorts, 883 F.3d 1278, 1283 (10th Cir. 2018) (quoting Fed. R. Civ. P. 56(a)). "A disputed fact is 'material' if it might affect the outcome of the suit under the governing law, and the dispute is 'genuine' if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Est. of Beauford v. Mesa Cnty., Colo., 35 F.4th 1248, 1261 (10th Cir. 2022) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). "Cross-motions for summary judgment are treated as two individual motions for summary judgment and held to the same standard, with each motion viewed in the light most favorable to the non-moving party." Banner Bank v. First Am. Title Ins. Co., 916 F.3d 1323, 1326 (10th Cir. 2019).
III. Undisputed Material Facts
The facts of this case are undisputed and both Plaintiffs and GNIC incorporate the parties' stipulation of facts from the Joint Status Report [Doc. No. 8]. The Court, therefore, also incorporates the parties' stipulation of facts. Because the parties submit purely questions of law for the Court's determination, it is not necessary to repeat the facts in their entirety here. Instead, the Court sets forth only those facts as may be necessary in the context of providing clarification to the legal issues raised.
The Policy issued by GNIC to Plaintiffs includes HOMEOWNERS 3 - SPECIAL FORM (Form HO-3). Form HO-3 contains the Intentional Loss Exclusion and Fraud or Concealment Condition provisions that are at issue. It is undisputed that the Oklahoma Insurance Commissioner (the Commissioner) has approved Form HO-3.
GNIC investigated Plaintiffs' claim and made certain payments to, or on behalf of Plaintiffs. But GNIC did so subject to its reservation of rights, contending that Plaintiffs' claim was not covered by the Policy. Upon completion of its investigation, GNIC denied any further payment under the Policy to Plaintiffs for losses resulting from the January 4, 2018 fire. The basis of the denial was the Intentional Loss Exclusion and the Concealment or Fraud Condition.
The Policy's Intentional Loss Exclusion states as follows:
A. We do not insure for loss caused directly or indirectly by any of the following. Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss. These exclusions apply whether or not the loss event results in widespread damage or affects a substantial area. * * *
8. Intentional Loss.
Intentional Loss means any loss arising out of any act an "insured" commits or conspires to commit with the intent to cause a loss.
In the event of such loss, no "insured" is entitled to coverage, even "insureds" who did not commit or conspire to commit the act causing the loss.
The parties do not dispute that the Intentional Loss Exclusion applies because an "insured", Garrett Day, intentionally set fire to the insured residence and personal property with intent to damage the property.
The Policy also contains a Concealment or Fraud Condition under SECTION I - CONDITIONS, paragraph Q., which states as follows:
Q. Concealment or Fraud.
We provide coverage to no "insureds" under this policy if, whether before or after a loss, an "insured" has:It is undisputed that Garrett Day, an insured, engaged in fraudulent conduct as defined under the Policy, by intentionally setting fire to insured property. Thus the parties do not dispute that the Concealment or Fraud Condition precludes coverage under the Policy.
1. Intentionally concealed or misrepresented any fact or circumstances;
2. Engaged in fraudulent conduct; or
3. Made false statements;
relating to this insurance.
IV. Discussion
Plaintiffs move for summary judgment on the following grounds: (1) the Intentional Loss Exclusion and Concealment or Fraud Condition in the Policy conflict with the provisions of the standard fire insurance policy as set forth in Okla. Stat. tit. 36, § 4803(G); and (2) these Policy provisions violate Oklahoma public policy. GNIC moves for summary judgment on the following related grounds: (1) the Intentional Loss Exclusion and Concealment or Fraud Condition in the Policy are expressly authorized by Okla. Stat. tit. 36, § 4803(F); (2) the Policy's Concealment or Fraud Condition does not conflict with the statutory standard fire policy set forth in Okla. Stat. tit. 36, § 4803(G); and (3) Oklahoma Supreme Court authority establishes a public policy against insuring losses caused by an insured's arson.
Plaintiffs previously moved this Court to certify these issues to the Oklahoma Supreme Court but limited the issues to the Intentional Loss Exclusion provision of the Policy. The Court denied the Motion to Certify. See Order [Doc. No. 15].
As set forth, there are no factual disputes between the parties. Thus, the Court proceeds to address the applicable provisions of § 4803 and the public policy of Oklahoma.
A. GNIC's inclusion of the Intentional Loss Exclusion and Fraud or Concealment Condition in the Policy is permissible under Section 4803(F)
The Court begins with the rules governing statutory construction. Under Oklahoma law, the Court's "primary goal" must be "to ascertain and, if possible, give effect to the intention and purpose of the Oklahoma Legislature as expressed by the statutory language." Hamilton v. Northfield Ins. Co., 473 P.3d 22, 26 (Okla. 2020) (internal quotation marks and citation omitted). The words in the statute must be construed "according to their plain and ordinary meaning." Id. (internal quotation marks and citation omitted). Additionally, when construing a statute, "relevant provisions must be considered together, where possible, to give force and effect to each." Id. (internal quotation marks and citation omitted).
Section 4803 is entitled "Standard policy provisions - Permissible variations." Section 4803(A) provides that "[t]he printed form of a policy of fire insurance as set forth in subsection G of this section shall be known and designated as the standard fire insurance policy to be used in the State of Oklahoma." Okla. Stat. tit. 36, § 4803(A). As pertinent here, subsection G includes the following provision:
Concealment, fraud. 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.Id., § 4803(G) (emphasis added).
GNIC's Policy varies from the language of the standard fire policy set forth in subsection G. The standard policy does not have an intentional loss exclusion. And the Fraud or Concealment Condition provision of the Policy refers to " an insured" instead of " the insured" as used in the standard fire policy.
Plaintiffs argue that "[t]he Oklahoma legislature chose the word 'the' to use when crafting its statutory fire policy, knowing the words 'the' and 'an' have different meanings." Pls.' Resp. at 6. According to Plaintiffs, if the Policy language utilized the language of subsection G, i.e., " the insured," the Intentional Loss Exclusion and the Fraud or Concealment Condition would apply only to Garrett Day and would not preclude coverage for Plaintiffs. But because the Policy uses the phrase " an insured", it precludes coverage for Plaintiffs, too, even though they are innocent insureds. Plaintiffs contend the Policy provides "less coverage" than the standard fire insurance policy and therefore, is both statutorily prohibited and violates Oklahoma public policy.
If Plaintiffs were to prevail on their argument that the Policy conflicts with § 4803, the Policy would be read without the Intentional Loss Exclusion and with the Fraud or Concealment Condition as written in the standard fire policy. See Okla. Stat. tit. 36, § 3620 ("Any insurance policy, rider, or endorsement . . . which contains any condition or provision not in compliance with the requirements of this Code, shall not be thereby rendered invalid but shall be construed and applied in accordance with such conditions and provisions as would have applied had such policy, rider, or endorsement been in full compliance with this Code.").
The parties do not dispute that the Policy's use of "an insured" instead of "the insured" as used in the standard form policy, precludes Plaintiffs from recovering under the Policy for the intentional act of Garrett Day.
In making this argument, Plaintiffs ignore other key provisions of § 4803. First, § 4803(B) provides:
Except as provided in subsection F of this section, no policy or contract of fire insurance shall be made, issued or delivered by any insurer or by any agent or representative thereof, on any property in the state, unless it shall conform as to all provisions, stipulations, agreements and conditions, with such form of policy.Okla. Stat. tit. 36, § 4803(B) (emphasis added). As referenced in subsection B, the exception set forth in subsection F provides:
Notwithstanding any other provision of this section, the Insurance Commissioner may approve for use within the state any form of policy with variations in terms and conditions from the standard fire insurance policy provided in this section.Okla. Stat. tit. 36, § 4803(F) (emphasis added). It is undisputed that the Commissioner has approved Form HO-3 which contains the Intentional Loss Exclusion and Fraud or Concealment Condition.
Central to Plaintiffs' argument that the exclusion and condition conflict with the standard fire policy is their contention that the Policy provides "less coverage" than the statutory standard fire policy. But Plaintiffs fail to address the 2003 amendment to § 4803(F). Notably, the prior version of subsection F provided as follows:
F. 1. The Insurance Commissioner may approve for use within the state a form of policy which does not correspond to the standard fire insurance policy as provided in this section, if the coverage of said approved policy form with respect to the peril of fire shall not be less than that contained in the standard
fire insurance policy as provided in this section.See Okla. Stat. tit. 36, § 3608(F)(1) (2001) (emphasis added). But the current version of the statute, by amendment in 2003, omits the emphasized language. The omission demonstrates the Oklahoma Legislature's intent to allow the Commissioner to approve policies that vary in "terms and conditions" from the standard form policy, including scope of coverage.
GNIC underscores application of § 4803(F), in moving for summary judgment and argues that the Intentional Loss Exclusion and Fraud or Concealment Condition in the Policy - approved by the Commissioner - are statutorily authorized. Although Plaintiffs ignore this provision in moving for summary judgment, in responding to GNIC's Motion, Plaintiffs argue that approval by the Commissioner pursuant to § 4803(F) "does not in all instances bless the policy for use in the state." Pls' Resp. at 4-5 (citing Chambers v. Walker, 653 P.2d 931 (Okla. 1982)); see also id. at 5 (citing Barnett v. Merchants' Life Ins. Co., 208 P. 271, 273 (Okla. 1922)). Plaintiffs contend that the Commissioner's approval "cannot be used to enforce an otherwise void policy." Id. at 5.
In reply, GNIC argues that the cases cited by Plaintiffs, specifically Chambers and Barnett, have no application to the facts of this case because in those cases, no provision like § 4803(F) was at issue which would allow for a variation from the statutory form. The Court agrees. GNIC cites other Oklahoma authority pursuant to which the state courts have upheld the validity of policy provisions approved by the Commissioner which vary from the standard fire policy. See Reply at 4 (citing Gordon v. Continental Ins. Co., 182 Okla. 240, 76 P.2d 1055 (Okla. 1938)) (holding that form of policy different from, i.e. in conflict with, statutory standard policy was authorized where statute provided for different form if submitted to, and approved by, the insurance commissioner).
Chambers involved uninsured motorist coverage, governed by Okla. Stat. tit. 36, § 3636. Barnett involved a life insurance policy, governed by a statutory provision, the current version of which is found (in substantially the same form) in Okla. Stat. tit. 36, § 4005.
On review of the cited authority and the undisputed factual record, the Court finds, as a matter of law, that the variations in HO-3 approved by the Commissioner are valid pursuant to §§ 4803(B) and (F). The Court agrees with GNIC that the case law cited by Plaintiffs is inapposite. And the Court finds the plain and express statutory language permits the variances at issue. Thus, the Court rejects Plaintiffs' argument that the Intentional Loss Exclusion and the Fraud or Concealment Condition are statutorily prohibited.
B. The Intentional Loss Exclusion is Not Contrary to Oklahoma Public Policy
Plaintiffs further argue that it is against Oklahoma's public policy to prohibit recovery by an innocent joint insured for intentional acts committed by one joint insured. GNIC counters that Oklahoma jurisprudence demonstrates a public policy against insuring fire losses caused by an insured's act of arson, citing Short v. Okla. Farmers Union Mut. Ins. Co., 619 P.2d 588 (Okla. 1980) and its progeny.
Under Oklahoma law, "a specific Oklahoma court decision, state legislative or constitutional provision, or a provision in the federal constitution that prescribes a norm of conduct for the state can serve as a source of Oklahoma's public policy." Siloam Springs Hotel, LLC v. Century Sur. Co., 392 P.3d 262, 268 (Okla. 2017). Plaintiffs argue Oklahoma's public policy is reflected in the standard fire policy set forth in § 4803(G). Plaintiffs reiterate that the Policy at issue impermissibly provides less coverage than the standard fire policy, focusing on the Policy's use of the word "an" to modify "insured." But Plaintiffs fail to support this argument with any citation to Oklahoma law, instead relying on decisions from Idaho, California, Nebraska, and the Seventh Circuit Court of Appeals (applying Illinois law). Plaintiffs cite no authority that would permit jurisprudence from other states to serve as a valid source of Oklahoma public policy.
In any event, these decisions are distinguishable. Two of the decisions Plaintiffs cite turn on application of statutory language expressly prohibiting any coverage provided by an approved form to be "less than" the coverage provided by the statutory form. See Century-Nat'l Ins. Co. v. Garcia, 51 Cal.4th 564, 120 Cal.Rptr.3d 541, 246 P.3d 621, 623 (2011) (coverage with respect to the peril of fire must be, pursuant to applicable statutory language, "substantially equivalent to or more favorable to the insured than that contained in such standard form fire insurance policy"); Trinity Univ. Ins. Co. v. Kirsling, 139 Idaho 89, 73 P.3d 102, 106 (2003) (addressing Idaho statute permitting exception to standard form coverage so long as such coverage was not "less than the coverage afforded by such standard fire policy"). As discussed supra, such similar statutory language previously set forth in Okla. Stat. tit. 36, § 4803(F) was omitted by statutory amendment in 2003.
A third decision cited by Plaintiffs is silent with respect to this precise issue, but the governing Illinois law addressed in that decision required that in the event of a conflict between an insurer's policy and the standard fire policy the latter would control. See Streit v. Metropolitan Cas. Ins. Co., 863 F.3d 770, 773 (7th Cir. 2017). The fourth decision Plaintiffs cite resulted in a statutory amendment by the Nebraska legislature, as GNIC sets forth in detail. See Def.'s Resp. at 13-17 (addressing the Nebraska legislature's overturning of Volquardson v. Hartford Ins. Co. of the Midwest, 264 Neb. 337, 647 N.W.2d 599 (2002)). The statutory amendment to the Nebraska statute, N.E. STAT. 44-501(11), is virtually identical to Okla. Stat. tit. 36, § 4803(F). The amendment reflects the Nebraska legislature's intent to overrule the Volquardson decision and its holding that Plaintiffs rely upon. For these reasons, the cases Plaintiffs cite to support their position are not persuasive.
While placing emphasis on non-controlling authority, Plaintiffs make only passing reference to Short and its progeny. Plaintiffs acknowledge that "the Oklahoma Supreme Court has dealt with the issue of whether an innocent co-insured can recover under their fire insurance policy if a fellow insured burned the house down[.]" Pls.' Mot. at 10. But Plaintiffs contend "the Oklahoma Supreme Court has not addressed the issues of when a fire insurance policy's Intentional Loss Exclusion and Concealment of Fraud Condition violates Oklahoma public policy, or whether this exclusion and condition are directly in conflict with the standard fire provision in [Okla. Stat. tit. 36, § 4803 (2016)]." Id.
In Short, the defendant, Oklahoma Farmers Union Insurance Company (Farmers), issued a policy of insurance to Bobby Short and Zaida Short as joint insureds. Mr. Short set fire to their home, owned in joint tenancy. The policy included a "Concealment, Fraud" provision which provided:
CONCEALMENT, FRAUD. 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 the case of any fraud or false swearing by the insured related thereto.Short, 619 P.2d at 588 (emphasis added). The Oklahoma Supreme Court held that "[u]nder this insurance contract, a jointly insured party owning property jointly with an arsonist would be precluded from recovery under the contract without regard to his or her status as a spouse." Id. at 591. The Court explained: "[t]o allow recovery on an insurance contract where the arsonist has been proven to be a joint insured would allow funds to be acquired by the entity of which the arsonist is a member and is flatly against public policy." Id. at 590 (emphasis added).
In Short, no reference is made to Okla. Stat. tit. 36, § 4803, but the language of the concealment, fraud provision at issue in that case is identical to the provision in the standard fire policy in § 4803(G).
In a subsequent decision, United Servs. Auto. Ass'n. v. McCants, 944 P.2d 298, 300 (Okla. 1997) the Court held that one's status as a joint insured is, alone, sufficient to void coverage based on an act of arson committed by one of the joint insureds. In McCants, Dennis McCants (Husband) purchased a house and insured it with United States Automobile Association (USAA) at a time when he was single. He later married Rhonda McCants (Wife). Their home was damaged by a fire. USAA declined to pay benefits on grounds of arson. A jury found Wife committed the arson.
Husband and Wife were both insureds under the policy - Husband as the named insured and Wife as a spouse residing in the household. But, unlike in Short, only Husband owned the property, i.e., the property was not held in joint tenancy between Husband and Wife.
The policy included an intentional loss exclusion as follows:
h. Intentional Loss, meaning any loss arising out of any act committed:McCants, 944 P.2d at 300 (emphasis added). Additionally, the policy included a concealment or fraud condition as follows:
(1) by or at the direction of an insured; and
(2) with the intent to cause a loss.
2. Concealment or Fraud. The entire policy will be void if, whether before or after a loss, an insured has:Id. (emphasis added). The Court held that "[e]ither of these provisions provided sufficient grounds for denying the claim." Id. (emphasis added). The Court clarified that Short did not hold that "both joint ownership and joint insurance must be present before coverage may be denied." Id. Joint insurance, alone, is sufficient. And because Wife was an insured under the policy, Husband was not entitled to policy benefits. Id.
a. intentionally concealed or misrepresented any material fact or circumstances;
b. engaged in fraudulent conduct; or
c. made false statements; relating to this insurance.
The Court finds dispositive to the public policy issue these two decisions of the Oklahoma Supreme Court. Notably, the "concealment, fraud" policy language in Short is identical to the language used in the standard fire policy set forth in § 36-4803(G) - referencing " the insured" (emphasis added). And in McCants, both the "intentional loss" exclusion and the "concealment or fraud" condition referenced " an insured" - just as the Policy at issue. In both circumstances, the Oklahoma Supreme Court has found it is against public policy to permit recovery by innocent-insureds based on acts of arson committed by a co-insured.
The Court acknowledges that the Oklahoma Supreme Court was not addressing the precise issues raised by Plaintiffs. But the Oklahoma Supreme Court directly spoke to the Policy language and the public policy against permitting recovery by a joint-insured for acts of arson by one insured. Moreover, Plaintiffs again fail to address that pursuant to § 4803(B), and in conjunction with the amendment to § 4803(F), the Oklahoma legislature has expressly permitted variations to the standard fire policy with respect to coverage, i.e., "variations in terms and conditions", further supporting the conclusion that the Intentional Loss Exclusion and Concealment or Fraud Condition in the Policy do not violate Oklahoma's public policy. Accordingly, the Court finds that Plaintiffs' public policy argument fails as a matter of law.
V. Conclusion
In sum, the Court finds Okla. Stat. tit. 36, § 4803(F) permits a variance from the standard fire insurance policy set forth in § 4803(G) where, as here, approval of the Commissioner has been obtained. The Court further finds the Intentional Loss Exclusion and the Concealment or Fraud Condition in the Policy constitute such permissible variances. Thus, the Policy does not conflict with the language of the standard fire policy in § 4803(G). Finally, the Court finds that the Intentional Loss Exclusion and Concealment or Fraud Condition in the Policy do not violate Oklahoma public policy. Plaintiffs, therefore, are not entitled to recover any additional losses allegedly caused by the January 4, 2018 fire under the Policy.
Based on these findings, the Court deems it unnecessary to address GNIC's additional argument that the Concealment or Fraud Condition in the Policy does not conflict with the standard fire policy's concealment, fraud clause. See Def.'s Mot. at 19-21.
IT IS THEREFORE ORDERED that Plaintiffs' Motion for Summary Judgment [Doc. No. 16] is DENIED and the Motion for Summary Judgment of Defendant Great Northwest Insurance Company [Doc. Nos. 17-18] is GRANTED.
A separate Judgment shall be entered contemporaneously with this Order.
IT IS SO ORDERED this 26th day of August, 2022.