Summary
In Liberty Mutual Fire Insurance Co. v. Sahawneh, 2001 WL 530424 (S.D. Ala. 2001), the Court ruled only that there was no coverage for property damage where the insureds' fraud (concerning the property's history of flooding) occurred while the policy was in place but the only property damage alleged by the purchasers — from post-sale incidents of flooding — occurred after the insureds sold the property and cancelled the policy.
Summary of this case from SUA INSURANCE COMPANY v. S O INVESTMENTS, LLCOpinion
Civil Action 00-0498-M
May 11, 2001
JUDGMENT
It is ORDERED, ADJUDGED, and DECREED that JUDGMENT be entered in favor of Plaintiff Liberty Mutual Fire Insurance Co. and against Defendants Jehad I. Sahawneh, Kemberlie Layne Sahawneh, Robert Brothers, Inc., Melinda Hicks, Edward D. Salva, and Toni F. Salva. Each party shall bear his or her own costs.
MEMORANDUM OPINION AND ORDER
This matter comes before the Court on Plaintiff's Motion for Summary Judgment (Docs. 16-18). Jurisdiction has been invoked in this Court under 28 U.S.C. § 1332 on the basis of diversity (Doc. 1, ¶ 4). The parties consented in writing to have all matters and proceedings in this action conducted by the undersigned Magistrate Judge pursuant to 28 U.S.C. § 636(c) ( see Doc. 24). After consideration, Plaintiff's Motion for Summary Judgment is GRANTED.
The facts of this case, briefly, are as follows. Defendants Edward D. Salva and Toni F. Salva (hereinafter the Salvas) sold their house to Defendants Jehad I. Sahawneh and Kemberlie Layne Sahawneh (hereinafter the Sahawnehs) on March 29, 1999 (Doc. 1, Exhibit 4, ¶ 5). At the completion of the sale, the Salvas canceled the homeowners insurance policy issued on the property by Plaintiff Liberty Mutual Fire Insurance Co. (hereinafter Liberty) ( see Doc. 1, ¶ 5). Subsequently, the Sahawnehs discovered that their property flooded during heavy rain (Doc. 1, Exhibit 4). The Sahawnehs brought suit against the Salvas, inter ahios, in the Mobile County Circuit Court, alleging claims of misrepresentation, misrepresentation and deceit, suppression and deceit, negligence, and wantonness (Doc. 1, Exhibits 2-4). The Salvas have sought representation and, in the event of a judgment against them, indemnification from Liberty (Doc. 1, ¶¶ 7-9). Liberty brought suit in this Court seeking a declaratory judgment, under 28 U.S.C. § 2201, as to whether it is obligated to defend and indemnify the Salvas in the underlying state court action (Doc. 1). Liberty has filed a Motion for Summary Judgment on the claims made in this action (Docs. 16-18); the Salvas have filed an opposing brief (Doc. 23).
The Court notes that the Sahawnehs originally included a claim for recission but, through amended complaints, have withdrawn it (Doc. 1, Exhibits 2, 4.
The Rules of Civil Procedure, in discussing summary judgment, state that
an adverse party [to a motion for summary judgment] may not rest upon the mere allegations or denials of the adverse party's pleading, but the adverse party's response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If the adverse party does not so respond, summary judgment, if appropriate, shall be entered against the adverse party.
Fed.R.Civ.P. 56(e); see also Celotex Corporation v. Catrett, 477 U.S. 317, 325-27 (1986). The Court further bears in mind, with regard to the motion for summary judgment, that "there is no issue for trial unless there is sufficient evidence favoring the non-moving party for a jury to return a verdict for that party. If the evidence is merely colorable or is not significantly probative, summary judgment may be granted." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986) (citations omitted). Summary judgment may be granted against a party who fails to establish the existence of an element essential to that party's case and on which that party will bear the burden of proof at trial. Id.
The Court will initially set out the pertinent provisions of the insurance contract. The section which discusses liability coverage states as follows:
If a claim is made or a suit is brought against an "insured" for damages because of "bodily injury" or "property damage" caused by an "occurrence" to which this coverage applies, we will:
1. Pay up to our limit of liability for the damages for which the "insured" is legally liable. Damages include prejudgment interest awarded against the "insured"; and
2. Provide a defense at our expense by counsel of our choice, even if the suit is groundless, false or fraudulent. We may investigate and settle any claim or suit that we decide is appropriate. Our duty to settle or defend ends when the amount we pay for damages resulting from the "occurrence" equals our limit of liability.
(Doc. 1, Exhibit 1, p. 26). The section discussing exclusions states that "Coverage E — Personal Liability and Coverage F — Medical Payments to Others do not apply to `bodily injury' or `property damage' [wihich is expected or intended by the `insured' (Doc. 1, exhibit 1, p. 27). An occurrence is defined in the policy as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions, which results, during the policy period, in `[b]odily injury' or `[p]roperty damage' (Doc. 1, Exhibit 1, p. 2). Bodily injury is defined in the policy as "bodily harm, sickness or disease, including required care, loss of services and death that results" (Doc. 1, Exhibit 1, p. 1). Property damage is defined in the policy as "physical injury to, destruction of, or loss of use of tangible property" (Doc. 1, Exhibit 1, p. 2).
The Court's task is to determine if these insurance contract provisions provide or exclude coverage for the Salvas. For the Salvas to avail themselves of Liberty's protection, the policy requires them, essentially, to demonstrate an accident resulting in bodily injury or property damage during the policy period ( see Doc. 1, Exhibit 1, p. 2 [Occurrence]).
The Court notes that the complaint in the underlying lawsuit asserts several claims sounding in fraud and negligence ( see Doc. 1, Exhibit 4). Under the terms of the policy, to the extent that any claim contemplates an intentional act, coverage is excluded ( see Doc. 1, Exhibit 1, p. 27 [Section II — Exclusions)). The Court notes, though, that at a minimum, the Sahawnehs' claim for negligence alleges culpability that fails to rise to the level of an intentional act.
Jehad Sahawneh has indicated, by deposition testimony, that he did not learn that his newly-purchased property was subject to flooding until after he had taken possession and neighbors told him of it (Doc. 28, Jehad Sahawneh Depo., pp. 114-15, 260). The Sahawnehs experienced the flooding first-hand on three separate occasions, the. first time which occurred on July 7, 1999 (Doc. 28, Jehad Sahawneh Depo., pp. 291-292; Kemberlie Sahawneh Depo., pp. 67-69). Testimony from the Sahawnehs indicates that they were neither aware of nor had experienced the flooding on their property until after they had taken possession of the property; this clearly post-dates the cancellation of the insurance coverage by the Salvas ( see Doc. 1, ¶ 5; Doc. 23, p. 3).
The Salvas have argued that the injury/damage occurred before the insurance policy was canceled when they, at the direction of their real estate agent, falsely answered a question on a disclosure statement concerning property flooding (Doc. 23, p. 2-3). However, Alabama law holds that "the time of an "occurrence' of an accident within the meaning of an indemnity policy is not the time the wrongful act was committed but the time the complaining party was actually damaged." United States Fidelity Guaranty Co. v. Warwick Development Co., 446 So.2d 1021, 1024 (Ala. 1984) ( quoting Muller Fuel Oil Co. v. Insurance Co. of North America, 95 N.J. Super. 564, 232 A.2d 168 (1967)). This same language has been quoted in subsequent Alabama Supreme Court cases: State Farm Fire and Casualty Co. v. Gwin, 658 So.2d 426, 428 (Ala. 1995); American States Insurance Co. v. Martin, 662 So.2d 245, 250 (Ala. 1995). The Salvas have not pointed to anything which contradicts — or even calls into question — these Alabama cases.
in this action, Alabama law controls. Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938).
The Salvas' reliance on Universal Underwriters Insurance Co. v. Stokes Chevrolet, Inc., 990 F.2d 598 (11th Cir. 1993), is misplaced in that there is no lapsing of the insurance coverage in that case as there is here. Likewise, the Salvas' discounting of Gwin is incorrect; the proper focus in Gwin is not that fraud claims were alleged, but that the insurance policy had lapsed at the time of the occurrence.
After reviewing all evidence of record, the Court finds that the Salvas have not shown that there is a genuine issue for trial. The Salvas have not shown that there is sufficient evidence favoring them so that a jury could return a verdict for them. Therefore, the Motion for Summary Judgment filed by Liberty Mutual Fire Insurance Co. is GRANTED and, there being no further issues to be resolved, this action is DISMISSED. Judgment will be entered by separate order.