Opinion
CV-15-104
11-23-2016
KHERALLAH SALLEH, Plaintiff v. TRAVELERS CASUALTY INSURANCE CO., et al., Defendants
Thomas D. Warren Justice
This case concerns an insurance claim made by plaintiff Kherallah Salleh with respect to fire damage at the location where Salleh maintained an auto repair business.
Before the court are four motions: (1) a motion for summary judgment by defendant Travelers Casualty Insurance Co.; (2) a motion for summary judgment by defendant Michals Insurance Agency Inc.; (3) a motion by Salleh to strike an expert witness designated by Travelers; and (4) a motion in limine by the Michals Agency to exclude a recorded out of court statement by Nick Lotfey, an employee of the Michals Agency.
Summary Judgment
Summary judgment should be granted if there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. In considering a motion for summary judgment, the court is required to consider only the portions of the record referred to and the material facts set forth in the parties' Rule 56(h) statements. E.g., Johnson v. McNeil, 2002 ME 99 ¶ 8, 800 A.2d 702. The facts must be considered in the light most favorable to the non-moving party. Id. Thus, for purposes of summary judgment, any factual disputes must be resolved against the movant. Nevertheless, when the facts offered by a party in opposition to summary judgment would not, if offered at trial, be sufficient to withstand a motion for judgment as a matter of law, summary judgment should be granted. Rodrigue v. Rodrigue, 1997 ME 99 ¶ 8, 694 A.2d 924.
Travelers Summary Judgment Motion Based on Alleged Misrepresentations
In its motion Travelers has assembled a lengthy list of alleged misrepresentations that it contends void Salleh's insurance policy. Salleh argues that misrepresentations, under the policy, have to be "intentional" or "willful." He acknowledges one misrepresentation but contends that it was innocent because he was advised to make the misrepresentation by Nick Lotfey, the insurance agent from the Michals Agency who sold him the policy. Salleh contends that under 24-A M.R.S. §§ 2422(1) and (2) Lotfey was an agent of Travelers and that any information known to Lotfey (including the information that Omar Martinez was the actual owner of the two car lifts that Salleh originally claimed were owned by Salleh) is regarded as having been known by Travelers.
Salleh has also submitted an affidavit disputing all of the other allegedly willful misrepresentations relied upon by Travelers. On all of the alleged misrepresentation issues the court concludes that Salleh has submitted sufficient evidence to raise disputed issues for trial.
Travelers Summary Judgment Motion relating to Coverage for Damage to Building
In addition to seeking reimbursement for alleged losses to his tools, office furniture and equipment, an allegedly expensive painting, and car parts (batteries, tires, radios and car computers), Salleh contends that he is entitled to reimbursement for damage to the portion of the building which he leased for his auto repair business. However, the Declarations to the policy for "property damage" do not cover damage to the building but only "business personal property, " business interruption, accounts receivable, and valuable papers. The policy also provides that property only qualifies as "covered property" if a limit on coverage is shown in the Declarations. No such limit is shown for any buildings.
It appears that "fine arts" is also covered, and Salleh has a claim for a painting that he contends is worth $6000.
Salleh argues that he is entitled to coverage under a provision applicable to "newly acquired" property including "buildings you acquire by purchase or lease at any premises including those premises shown on the Declarations." This provision, however, applies to the future purchase or lease of additional premises. It is undisputed that Salleh had already leased the property where the fire occurred and had done so six weeks before the policy was issued. Travelers SMF ¶ 54.
Although Salleh responded to ¶ 54 by stating "qualified, " a review of his qualification demonstrates that the factual assertions in ¶ 54 are admitted.
It makes no sense to construe coverage for "buildings you acquire" to mean coverage for "buildings you have already leased at the time the policy was issued." Moreover, the language that the "buildings you acquire" can be at the premises shown on the Declarations as well as at other premises demonstrates that this provision is intended to apply to new premises and not to the insured's existing premises.
The court concludes that even under the principle that ambiguities are to be construed in favor of the insured, there is no ambiguity here and coverage is not available for Salleh's claim of damage to the building. Travelers is entitled to summary judgment on Salleh's claim for damage to the building.
Michals Summary Judgment Motion
Salleh's claims against the Michals Agency are based on the advice allegedly provided by Nick Lotfey that Salleh should represent that Salleh owned two car lifts that were actually owned by Omar Martinez. In Count V of the complaint Salleh alleges that Lotfey, in addition to having a statutory agency relationship with Travelers pursuant to 24-A M.R.S. § 2422(1), was Salleh's insurance agent and violated a fiduciary relationship by giving him bad advice. In Count VI of the complaint Salleh alleges that Lotfey is liable for negligent misrepresentation for giving him the bad advice which he contends resulted in Travelers' denial of his claim.
Salleh is suing the Michals Agency rather than Lotfey, and his claims against the Michals Agency therefore depend on whether Lotfey's actions were within the course and scope of his duties as an insurance agent employed by Michals. Although Michals argues that Salleh has not demonstrated that there is a disputed issue for trial as to whether Michals can be vicariously liable for Lotfey's actions, the court concludes that there is a disputed issue for trial on this issue. This is especially true because the Law Court has most recently looked to section 7.07 of the Restatement (Third) of Agency. See Picher v. Roman Catholic Bishop of Portland, 2009 ME 67 ¶ 32, 974 A.2d 286. Section 7.07(2) indicates that an employee is within the scope of employment when he is engaging in conduct subject to the employer's control and is not within the scope of employment when he is engaging in an independent course of conduct not intended to serve any purpose of the employer.
In this case Michals argues that Lotfey was not authorized to provide advice to customers with respect to insurance claims. However, Michals does not dispute Lotfey was authorized to discuss insurance with Salleh because Lotfey sold Salleh the policy. Michals also acknowledges that Lotfey would have been authorized to convey information to the insurance company if requested by Salleh. Michals Aff. ¶ 6. The argument that Lotfey was in the scope of his employment in discussing insurance with Salleh but was outside the scope of employment if he gave advice with respect to insurance claims is too fine a distinction to be resolved on summary judgment. Lotfey, as an insurance agent for Michals, also may have been cloaked with apparent authority. See Gniadek v. Camp Sunshine, 2011 ME 11 ¶¶ 33-34, 11 A.3d 308. On this record, whether Michals should be held responsible for Lotfey's conduct is an issue for trial.
Michals separately argues that summary judgment should be granted with respect to Salleh's breach of fiduciary duty claim. The court would agree if Salleh's only argument that his relationship with Lotfey constituted a fiduciary relationship involving a great disparity of position and influence between the parties. See Stewart v. Machias Savings Bank, 2000 ME 207 ¶ 10, 762 A.2d 44. To establish a great disparity of position and influence, a party must demonstrate diminished emotional or physical capacity or show that he was in such a vulnerable position that he let down all guards and defenses. Oceanic Inn Inc. v. Sloan's Cove LLC, 2016 ME 34 ¶ 18, 133 A.3d 1021; Stewart, 2000 ME 207 ¶¶ 11-12.
Salleh has not demonstrated that there is a disputed issue for trial on that issue. See Szelenyi v. Morse Payson & Noyes Insurance, 594 A.2d 1092 (Me. 1991). In Szelenyi the Law Court ruled that absent a special relationship between the parties, an insurance agent assumes only the duties found in an ordinary agency relationship - the duty to use reasonable care, diligence, and judgment. 594 A.2d at 1094. It did not hold that an insurance agent had an enhanced duty even though there was evidence that the plaintiff in Szelenyi was elderly, lacked sophistication in insurance matters, and had difficulty with the English language. See id. at 1095 n.4.
However, to the extent that Salleh is simply alleging that Lotfey violated his duty as Salleh's insurance agent to use reasonable care, diligence, and judgment - the duties that Szelenyi found were applicable to insurance agents - the court fmds that there is a disputed issue for trial. If providing information with respect to the filing of claims fell within the scope of Lotfey's services to Salleh as his insurance agent - which is itself a disputed issue for trial -Michals is not entitled to summary judgment on Count V.
The court has also considered the arguments made by Michals in support of its argument that it is entitled to summary judgment on Salleh's negligent misrepresentation claim. For essentially the same reasons discussed above with respect to Salleh's breach of duty claim, Salleh's negligent misrepresentation claim also presents disputed issues for trial. The court does not conclude that expert testimony is necessary to support the negligent misrepresentation claim. It also finds that while it may appear likely that Travelers would have turned down Salleh's claim even if there has been no misrepresentation with respect to the car lifts, the court cannot find that to be undisputed for purposes of summary judgment.
Michals argues that because it is not alleged that Lotfey misrepresented any facts, count VI is really a negligence claim. The court reserves decision on that issue. Restatement (Second) of Torts § 552 refers to false "information" that is negligently supplied, and it can perhaps be argued that "information" would include bad advice.
Salleh's Motion to Exclude Expert Testimony
Salleh's motion to strike any expert testimony from Victor Collazo is based on the theory that Collazo's expert designation was insufficient. However, the designation was timely made and was made after all of the proposed testimony had already been disclosed to counsel for Salleh in Collazo's deposition. It was therefore permissible for Travelers to simply state that Collazo's expert testimony would be consistent with his deposition.
It can be argued that the challenged testimony offered by Collazo is not expert testimony but rather factual testimony by a witness who happened to be knowledgeable with respect to auto parts. Travelers therefore may have designated Collazo to avoid any argument at trial as to whether or not Collazo was testifying as an expert, However, assuming that Collazo qualifies as an expert, the theory of expert designations is to give notice of the expert testimony to be offered. In this case Salleh was given notice of the testimony, and the court will not grant Salleh's motion to exclude.
Michals Motion in Limine
If Lotfey was acting in the scope of his employment, his recorded out of court statement would qualify as an admission not subject to a hearsay objection under M.R.Evid. 801(d)(2)(D). Because there is a disputed issue of fact with respect to scope of employment, the court will not grant the Michals Agency's motion to exclude Lotfey's out of court statement at this time.
However, this does not mean that Salleh can simply introduce the statement. Under Rule 801(d)(2)(D) the statement itself cannot establish that Lotfey was within the scope of his employment. At trial Salleh would have to provide sufficient independent evidence that Lotfey was acting within the scope of his employment before the court could rule on the admissibility of the statement pursuant to M.R.Evid. 104(a) and 801(d)(2)(D) and before the out of court statement could be admitted.
The entry shall be:
1. The motion for summary judgment by defendant Travelers Casualty Insurance Co. if granted as to plaintiffs claims for damage to the building and is otherwise denied.
2. The motion for summary judgment by defendant Michals Insurance Agency Inc. is denied.
3. Plaintiffs motion to exclude expert testimony by Victor Collazo is denied.
4. The motion in limine by defendant Michals Insurance Agency to exclude out of court statements by Nick Lotfey is denied without prejudice.
5. The clerk is directed to incorporate this order in the docket by reference pursuant to Rule 79(a).