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Hayes v. Allstate Property and Casualty Insurance Co.

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

July 10, 2019




         Plaintiff Lakesha Hayes and defendant Allstate Property and Casualty Insurance Company (Allstate) have filed motions for partial summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. The court, having considered the memoranda of authorities, together with attachments, submitted by the parties, concludes for reasons which follow that plaintiff's motion should be denied and Allstate's motion should be granted in part and denied in part.


         On July 12, 2016, a fire destroyed Hayes' home. At the time of the loss, the home was covered by an Allstate policy, which provided coverage of $218, 240 for the dwelling (structure); $160, 000 for personal property (contents); and coverage for up to twelve months of additional living expenses in an amount determined by Allstate. The home was a total loss. On September 16, 2016, in connection with her claim for benefits under her homeowner's policy, Hayes submitted to Allstate a sworn proof of loss, claiming contents loss at a replacement cost value of $160, 000 and actual cash value of $130, 000. In support of her claim, Hayes submitted personal property inventory loss forms in which she listed and provided an estimated value of the items of personal property she claimed were lost in the fire. Based on the information Hayes provided as to the age, value and condition of the listed items, Allstate estimated the contents loss at a replacement value of $127, 855 and actual cash value of $101, 381.66. However, based on (1) purported discrepancies in the testimonies of Hayes and her husband in their subsequent examinations under oath as to the quantity, cost and age of a number of items listed in the inventory forms, and (2) the conclusion of Allstate's retained forensic accountant that Hayes' claimed contents loss was not “reasonable or accurate” and was not “adequately supported by records of actual expenditures”, [1]Allstate concluded that Hayes had made material misrepresentations in overvaluing the contents. By letter dated June 7, 2017, Allstate, citing the policy's misrepresentation and concealment clause, [2] denied Hayes' claim for benefits under the policy, including not only for her contents loss, but also for the loss of the dwelling and for additional living expenses. In its denial letter, Allstate wrote:

Our investigation into your claim indicates that you concealed and/or misrepresented material facts and circumstances. Based upon our investigation of your claim, we concluded that yoyu (sic) made misrepresentations regarding your financial condition and regardin (sic) material aspects of your claim. Allstate concluded that you made misrepresentations relating to the contents claim you submitted under Section I - Coverage C Personal Property Protection. We have concluded that you intentionally overstated the value of the personal property damaged by the fire. Allstate concluded that you made additional misrepresentations during the investigation of the claim. Additionally, there have been discrepancies in the information you have provided to us regarding your claim. The information you provided to us regardin (sic) the events on the evening when the fire occurred is contradicted by other evidence that was obtained during the investigation. There were additional misrepresentations made by you during the investigation and discrepancies within the information you provided to us. For these reasons, Allstate denies your claim based upon your breach of the foregoing provision in your policy.
The denial of your claim includes any coverages which would be available under Section 1 - Coverage A Dwelling Protection, Section I - Coverage B Other Structures Protection, Section I - Coverage C Personal Property Protection, and Section I - Additional Protection for Additional Living Expense.
Due to the concealment and misrepresentations which were made during the investigation into your claim, we have been unable to fully investigate the claim. For that reason, Allstate reserves the right to deny your claim for additional reasons which may become known based upon new information.

         On August 18, 2017, Hayes filed the present action asserting various causes of action based on allegations that Allstate has “in bad faith refused to pay” her claim for benefits under the subject policy “with no arguable reason for doing so.” As relief, she demanded payment for her covered losses;[3] emotional distress damages and attorney's fees (extra-contractual damages); and punitive damages.

         Summary Judgment Motions

         Hayes has moved for partial summary judgment as to her entitlement to benefits under the policy for her remaining dwelling loss and additional living expenses.[4] In support of her motion, Hayes argues that the subject policy is divisible, providing separate coverages for the dwelling, personal property and living expenses. She thus contends that even if Allstate could properly have denied her contents claim based on alleged misrepresentations as to the extent of her personal property loss (which she denies[5]), nevertheless, as a matter of law, she is still entitled to recover benefits for the loss of the dwelling and for her additional living expenses as Allstate had and has no basis for denial of benefits under these coverages. In other words, she maintains that since the policy is divisible, then any misrepresentation or concealment as to her contents loss could only preclude recovery under her contents coverage and does not affect her entitlement to benefits under her separate dwelling and additional living expenses coverages.

         Allstate has filed its own motion for summary judgment, or in the alternative, for partial summary judgment, asserting that any claim by Hayes for policy benefits - including for contents, dwelling and additional living expenses - fails as a matter of law based on undisputed evidence of Hayes' material misrepresentations and concealment. It argues, in the alternative, that it is entitled to summary judgment on Hayes' claim for punitive damages because, as a matter of law, the undisputed evidence of her misrepresentations and concealment at least demonstrates that Allstate's denial was made in good faith, supported by legitimate and arguable bases, so as to preclude recovery for extra-contractual or punitive damages.[6]

         The Policy is Divisible

         Under applicable Mississippi law, [7] Allstate's policy is clearly divisible. Consequently, any alleged misrepresentation or concealment by Hayes as to her contents loss would not affect her entitlement to coverage for loss of the dwelling or to covered living expenses.

         In Claxton v. Fidelity & Guaranty Fire Corp., 179 Miss. 556, 175 So. 210, 211 (1937), the policy at issue was “a standard schedule policy; the premium paid therefor by the insured was named as an entirety at $19.50, $2, 000 was stipulated as the amount of insurance on the dwelling house and $1, 000, listed separately, on household and kitchen furniture and personal property.” 19 Miss. 556, 175 So. 210, 211 (1937). The lower court found the policy was indivisible and was avoided in its entirety because of the insured's false swearing. Id. The Mississippi Supreme Court reversed, however, concluding that the policy was divisible so that the insured's misrepresentations regarding the value of personal propery damaged in the fire did not void the coverage for the dwelling, notwithstanding a provision in the policy stating that the “entire policy” would be void if the insured “concealed or misrepresented ... any material fact or circumstance concerning this insurance or the subject thereof ... or ... in case of any fraud or false swearing by the insured touching any matter relating to this insurance or the subject thereof, whether before or after a loss.” Id. at 213.

         Addressing the issue, the court wrote:

Was the contract of insurance indivisible? Numerous authorities from other jurisdictions hold that where the premium on different articles, separately named for a specific amount of insurance, is fixed and paid as an entirety, then the policy is indivisible. ... In those cases it was held that fraud and false swearing as to valuations of property avoids the entire policy, but these decisions are from states which have held that the contract is indivisible when made. This court is not in agreement with that line of reasoning and has repeatedly held that a schedule policy, [8] such as we have before us, insuring various items and fixing the amount of insurance to be paid on each, is separable, although the premium is fixed as an entirety; and that because the policy is void as to one item, that fact does not render it unenforceable as to the others. Phoenix Ins. Co. v. Summerfield, supra; Mitchell v. Mississippi Home Ins. Co., 72 Miss. 53, 18 So. 86, 48 Am.St.Rep. 535; Da ...

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