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American Zurich Insurance Co. v. Gilbeaux

United States District Court, S.D. Mississippi, Southern Division

April 5, 2018

AMERICAN ZURICH INSURANCE COMPANY PLAINTIFF
v.
CURTIS GUILBEAUX DEFENDANT/COUNTER-CLAIMANT
v.
SOUTHWEST BUSINESS CORPORATION, d/b/a/ INSURANCE PARTNERS, USAA INSURANCE AGENCY, INC., and AMERICAN ZURICH INSURANCE COMPANY COUNTER-DEFENDANTS

          MEMORANDUM OPINION AND ORDER REGARDING MOTIONS FOR SUMMARY JUDGMENT

          LOUIS GUIROLA, JR. UNITED STATES DISTRICT JUDGE.

         BEFORE THE COURT are the [83] Motion for Summary Judgment filed by USAA Insurance Agency, Inc., and the [85] Motion for Summary Judgment filed by Southwest Business Corporation, d/b/a Insurance Partners. Both Motions seek dismissal of Defendant Curtis Guilbeaux's counterclaims and have been fully briefed. After due consideration of the parties' submissions and the relevant law, it is the Court's opinion that there are questions of material fact for the jury regarding certain of Guilbeaux's numerous counterclaims against Insurance Partners. However, USAA has shown there is no question of material fact for the jury regarding Guilbeaux's counterclaims against it. Accordingly, USAA's Motion will be granted, and Insurance Partners' Motion will be granted in part and denied in part.

         Background

         This case originated as a Complaint for Declaratory Judgment filed by American Zurich Insurance Company against its insured, Curtis Guilbeaux. (Compl. 1, ECF No. 1). Guilbeaux obtained builder's risk insurance from Zurich on his property, and two months later the property was destroyed by fire. Zurich denied the claim, contending material misrepresentation on the application form as to the stage of completion of the property. Zurich alleges that Guilbeaux's application asserted 30 percent completion, but “had it been properly informed that the Property had been under construction for two (2) years without being insured and that it was 80-90% completed at the time the insurance application was submitted, it would not have agreed to write the risk.” (Id. at 4). Zurich alleges that Guilbeaux made material misrepresentations that justify rescission of the policy, and requests that the Court declare the policy void under Mississippi law.

         Guilbeaux answered the complaint and counterclaimed against Zurich, USAA Insurance Agency, Inc., and Southwest Business Corporation d/b/a Insurance Partners. (Guilbeaux Answer 5, ECF No. 10). In his counterclaims, Guilbeaux alleges that he began construction on his log home in early 2015, and in May 2016 called USAA to purchase a builder's risk policy for the property. (Id. at 7-8). USAA transferred the call to its “partner, ” Insurance Partners, who could handle the request. The agent at Insurance Partners asked Guilbeaux questions to fill out the builder's risk insurance application, and the electronic application was sent to Guilbeaux to review and sign. Guilbeaux alleges that the Insurance Partners agent failed to fill out the application form correctly, (id. at 10), and that he did not sign the application. (Id. at 12).

         Guilbeaux's counterclaims against Insurance Partners are for bad faith, negligent failure to procure insurance coverage, breach of contract/tortious breach of contract, breach of fiduciary duty, gross negligence, negligent misrepresentation, conversion, civil conspiracy, intentional or fraudulent misrepresentation, infliction of emotional distress, breach of the duty of good faith and fair dealing, and respondeat superior/vicarious liability. Guilbeaux's counterclaims against USAA are all of these plus negligence, waiver and estoppel, and negligent supervision. Both Insurance Partners and USAA move for summary judgment as to all of Guilbeaux's counterclaims against them.

         Discussion

         A motion for summary judgment may be filed by any party asserting that there is no genuine issue of material fact and that the movant is entitled to prevail as a matter of law on any claim. Fed.R.Civ.P. 56. The movant bears the initial burden of identifying those portions of the pleadings and discovery on file, together with any affidavits, which it believes demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). Once the movant carries its burden, the burden shifts to the non-movant to show that summary judgment should not be granted. Id. at 324-25. The non-movant may not rest upon mere allegations or denials in its pleadings but must set forth specific facts showing the existence of a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256-57 (1986). Because this case arises under the Court's diversity jurisdiction, the substantive law of Mississippi applies. Cox v. Wal-Mart Stores E., L.P., 755 F.3d 231, 233 (5th Cir. 2014).

         1. Breach of Contract/Tortious Breach of Contract, Breach of the Duty of Good Faith and Fair Dealing

         USAA and Insurance Partners argue that Guilbeaux cannot maintain a breach of contract claim against them because they had no contract with Guilbeaux. The contract of insurance at issue in this case was issued by Zurich, and neither USAA nor Insurance Partners is a party to it. Guilbeaux argues in response that he had separate contracts with USAA and Insurance Partners to properly procure an insurance policy. Specifically, Guilbeaux alleges that he paid premiums to Insurance Partners for the insurance policy, and “Insurance Partners breached its contracts with Guilbeaux through its actions.” (Guilbeaux Answer 29, ECF No. 10). He also alleges that “USAA undertook on behalf of Guilbeaux to secure insurance coverage for him and breached its contracts with Guilbeaux through its actions.” (Id. at 22).

         These allegations describe possible negligence claims against USAA and Insurance Partners, but they do not show that Guilbeaux's interactions with USAA or Insurance Partners somehow created a contract and that the contract was breached.[1] The lack of evidence of a contract with USAA or Insurance Partners is also fatal to Guilbeaux's good faith and fair dealing claim. The covenant of good faith and fair dealing applies to performance and enforcement of a contract, and none has been shown between Guilbeaux and USAA or Insurance Partners. Limbert v. Miss. Univ. for Women Alumnae Ass'n, 998 So.2d 993, 998 (¶11) (Miss. 2008). As a result, Guilbeaux's breach of contract, tortious breach of contract, and breach of duty of good faith and fair dealing must be dismissed.

         2. Bad Faith

         Mississippi courts “have come to term an insurance carrier which refuses to pay a claim when there is no reasonably arguable basis to deny it as acting in ‘bad faith, ' and a lawsuit based upon such an arbitrary refusal as a ‘bad faith' cause of action.” Blue Cross & Blue Shield of Miss., Inc. v. Campbell, 466 So.2d 833, 842 (Miss. 1984). Guilbeaux bears a higher burden of proof on his claim of bad faith than on his breach of contract claim. Reece v. State Farm Fire & Cas. Co., 684 F.Supp. 140, 146 (N.D. Miss. 1987) (citing Vicksburg Furniture Mfr., Ltd. v. Aetna Cas. & Sur. Co., 625 F.2d 1167 (5th Cir. 1980)). “[A] bad faith refusal claim is an ‘independent tort' separable in both law and fact from the contract claim asserted by an insured under the terms of the policy.” Hartford Underwriters Ins. Co. v. Williams, 936 So.2d 888, 895 (Miss. 2006).

         The basis of Guilbeaux's bad faith claim against USAA is his allegation that USAA denied his insurance claim “with knowledge that no grounds for denial existed.” (Guilbeaux Answer 20, ECF No. 10). He also alleges that both USAA and Insurance Partners “are sophisticated insurance people who drafted, filled out and then presented Guilbeaux with application information containing confusing, misleading, self-serving and self-saving language, meant to confuse, entrap, and mislead an unsuspecting reader.” (Id. at 20, 28). He alleges that Insurance Partners' actions in filling out the application and assisting in the denial of the claim were committed in bad faith.

         a. Bad Faith Denial of Claim

         Both USAA and Insurance Partners argue that they cannot be liable for bad faith denial of benefits because neither of them denied benefits. The letter informing Guilbeaux that benefits would be denied and the policy rescinded is from Zurich, and references a Zurich “‘One-Shot' Builders Risk Policy number BR09227689.” (Guilbeaux Responses, Ex. B, ECF Nos. 100-2, 101-2). Guilbeaux argues only that USAA and Insurance Partners acted as Zurich's agent in procuring the insurance. (See Guilbeaux Ins. Ptnrs. Resp. Mem. 33, ECF No. 106; Guilbeaux USAA Resp. Mem. 8, ECF No. 108). There is no allegation or evidence that USAA or Insurance Partners was a party to the Zurich insurance contract or that either had a role in the decision to deny benefits. The Court finds an insufficient basis for holding USAA or Insurance Partners liable for Zurich's refusal to pay benefits. See Rogers v. Nationwide Prop. & Cas. Ins. Co., 433 F.Supp.2d 772, 776 (S.D.Miss. 2006) (citations omitted) (agent, as a non-party to the contract cannot be liable under a bad-faith theory of recovery). Therefore, USAA and Insurance Partners are entitled to summary judgment in regard to the bad faith denial of benefits claim.

         b. Bad Faith in Application Process

         Guilbeaux alleges that Insurance Partners “filled out and then presented Guilbeaux with application information containing confusing, misleading, self-serving and self-saving language, meant to confuse, entrap, and mislead an unsuspecting reader.” (Guilbeaux Answer 28, ECF No. 10). He alleges that USAA is legally responsible for Insurance Partners' actions. (Id. at 20).

         Guilbeaux does not cite any case law indicating that a “bad faith” claim exists under these circumstances. (See Guilbeaux Ins. Ptnrs. Resp. Mem. 33, ECF No. 106). However, somewhat similar allegations against an insurance agent for intentionally and knowingly incorrectly completing an application for insurance have been construed simply as a fraud claim. Wildmon v. EMC Nat. Life Co., No. 1:08CV173-SA-JAD, 2009 WL 691226, at *3 (N.D. Miss. Mar. 11, 2009). The elements of a fraud claim are (1) a representation; (2) its falsity; (3) its materiality; (4) the speaker's knowledge of its falsity or ignorance of the truth; (5) his intent that it should be acted on by the person and in the matter reasonably contemplated; (6) the hearer's ignorance of its falsity; (7) his reliance upon its truth; (8) his right to rely thereon; and (9) his consequent and proximate injury. Id. (citing Great S. Nat'l Bank v. McCullough Env't Servs., 595 So.2d 1282, 1289 (Miss. 1992)).

         If the bad faith claim is construed as a fraud claim, Guilbeaux's allegations and evidence do not show that he was ignorant of the falsity of the misrepresentation, or that he had the right to rely on the misrepresentation that his house was thirty percent completed. He testified that Ms. Trigg, the Insurance Partners agent, asked him if the house “was almost 30 percent complete or more than 30 percent complete.” (Ins. Ptnrs. Mot. Ex. 1, at 24-25, ECF No. 85-1). He responded, “I'm much more than 30 percent complete.” (Id. at 25). He further testified that he reviewed the application before electronically signing it, and he saw the part of the application that stated the house was thirty percent complete. (Id. at 29). Nevertheless, he did not inform Insurance Partners that the percent complete information was incorrect.[2] (Id). He signed the application without changes. (Id. at 30-31, 88). Guilbeaux's testimony shows that he will be unable to establish a claim of fraud or bad faith in the application process against Insurance Partners.

         Guilbeaux argues that USAA is liable for bad faith in the application process because 1) he called USAA asking for a builder's risk policy; 2) USAA did not tell him that homeowner's, rather than builder's risk, insurance was appropriate for his circumstances; and 3) USAA transferred his call to its partner, Insurance Partners, to complete the transaction. (Guilbeaux USAA Resp. Mem. 8, ECF No. 108). Guilbreaux does not cite any case law indicating that Mississippi recognizes a bad faith claim arising from actions like these, and the Court has found none. Accordingly, USAA is entitled to summary judgment in regard to the bad faith in application process claim.

         2. Breach of ...


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