Insurance Co. of State of Pennsylvania v. Hoffman

814 F. Supp. 782

The INSURANCE COMPANY OF the STATE OF PENNSYLVANIA, Plaintiff, v. Jan HOFFMAN, as Special Administrator of the Estate of Patrick K. Quaschnick, deceased; the Estate of Craig S. Enerson, deceased; Donald R. Harris, as Trustee for the Heirs of Jon D. Quist, deceased; Raymond Hostager, as Trustee for the Heirs of Curt A. Hostager, deceased; Douglas A. Teigen, as Trustee for the Heirs of Kristi Elaine Teigen-Hoffman, deceased; Harold M. Hoffman, as Trustee for the Heirs of Gary Duane Hoffman, deceased; John A. Schmeckpeper, as Trustee for the Heirs of Timothy Francis Schmeckpeper, deceased, and June Schaeffer, Defendants.

Civ. No. 4-91-297.

United States District Court, D. Minnesota, Fourth Division.

February 22, 1993.

John S. Hoff, Tamara L. Warn, and The Law Offices of John Scott Hoff, P.C., Chicago, IL, and Frederick Morris, and Leonard, Street and Deinard, Minneapolis, MN, for plaintiff.

Scott W. Johnson, and Faegre & Benson, Minneapolis, MN, for defendant Jan Hoffman as Trustee for the Estate of Patrick Quaschnick.

Paul T. Eidsness, and Moss & Barnett, Minneapolis, MN, for defendant Donald R. Harris, as Trustee for the Heirs of Jon D. Quist.

Robert Bennett, and Bennett, Ingvaldson, McInerny & Simons, P.A., Minneapolis, MN, for defendants Douglas A. Teigen, as Trustee for the Heirs of Kristi Elaine Teigen-Hoffman, and Harold M. Hoffman, as Trustee for the Heirs of Gary Duane Hoffman.

James R. Schwebel, Mary C. Cade, and Schwebel, Goetz, Sieben & Moskal, P.A., Minneapolis, MN, for defendant Raymond Hostager, as Trustee for the Heirs of Curt A. Hostager.

ORDER

DOTY, District Judge.

This matter is before the court on crossmotions for summary judgment brought by plaintiff and defendant Jan Hoffman. Based on a review of the file, record and proceedings herein, the court denies plaintiff's motion and grants defendant Jan Hoffman's motion.

BACKGROUND

The present action was commenced by the Insurance Company of the State of Pennsylvania ("ISOP") seeking a declaration of non-coverage under an aviation insurance policy issued to Patrick K. Quaschnick ("Quaschnick"), defendant Jan Hoffman's decedent and brother. On February 3, 1991, as Quaschnick was piloting the insured aircraft, it collided in mid-air with another airplane, killing all occupants of both planes. The trustees for the heirs of the passengers of the Quaschnick aircraft subsequently brought wrongful death actions against Quaschnick in state court.

After ISOP brought the present action, the parties settled all of the underlying wrongful death claims for $400,000, which ISOP has paid. In this action, ISOP contends that it was not obligated to pay the settlements on behalf of the Quaschnick estate, and thus seeks to recover its payments.¹ ISOP specifically alleges that Quaschnick's aviation policy is void ab initio as a result of two alleged material misrepresentations made by Quaschnick in his underwriting application: (1) that Quaschnick's aircraft was newly purchased, when in fact Quaschnick had owned the subject aircraft since 1986; and (2) that the aircraft had four seats, when it had been modified to hold five seats.²

The ISOP policy lists the total number of seats in the aircraft as four, with a "per passenger" sublimit for third-party liability of $100,000 per seat. ISOP issued the policy for a premium of $518.00. ISOP alleges that if it had known that the plane had five seats rather than four, it would have charged additional premium of approximately $182.00.³

Hoffman initially moved for summary judgment or to dismiss ISOP's complaint based on the terms of a settlement agreement executed in the underlying wrongful death actions. The court denied Hoffman's motion in its order of June 23, 1992, as a result of its determination that material fact disputes existed concerning the scope and meaning of the settlement agreement.⁴ Insurance Company of the State of Pennsylvania v. Hoffman, Civ. No. 4-91-297, slip op. at 11-12 (D.Minn. June 23, 1992).

ISOP also moved for summary judgment, arguing that Quaschnick's policy was void and seeking reimbursement for its various settlement payments. In its previous order, the court denied ISOP's motion based on its conclusion that a material fact dispute existed concerning the coverage issue. Id. at 13.

Hoffman again moves for summary judgment, arguing that ISOP's attempt to void the policy fails under Minnesota law.⁵ ISOP also moves for summary judgment on the issue, asking the court to find that Quaschnick's alleged misrepresentations were material and increased the risk of loss, thus rendering the policy void ab initio.⁶ Based on its contention that the policy is void, ISOP further argues that it had no duty to defend or indemnify Quaschnick, and thus seeks reimbursement for the contractual breach of warranty payment for hull loss made to the mortgagee of the aircraft, for repayment of $400,000 paid to settle Quaschnick's third-party liability cases, for repayment of Quaschnick's attorney's fees in the wrongful death actions and a declaration that ISOP is not required to pay Quaschnick's attorneys' fees in the present action.

DISCUSSION

Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." This standard mirrors the standard for a directed verdict under Federal Rule of Civil Procedure 50(a), which requires the trial judge to direct a verdict if, under the governing law, there can be but one reasonable conclusion as to the verdict. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). Stated in the negative, summary judgment will not lie if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Id. at 248, 106 S.Ct. at 2510. In order for the moving party to prevail, it must demonstrate to the court that "there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986); Fed.R.Civ.P. 56(c). A fact is material only when its resolution affects the outcome of the case. Anderson, 477 U.S. at 248, 106 S.Ct. at 2510. On a motion for summary judgment, all evidence and inferences are to be viewed in a light most favorable to the nonmoving party. Id. at 250, 106 S.Ct. at 2511. The nonmoving party, however, may not rest upon mere denials or allegations in the pleadings, but must set forth specific facts sufficient to raise a genuine issue for trial. Celotex, 477 U.S. at 324, 106 S.Ct. at 2553. Moreover, if a plaintiff cannot support each essential element of its claim, summary judgment must be granted because a complete failure of proof regarding an essential element necessarily renders all other facts immaterial. Id. at 322-23, 106 S.Ct. at 2552. With this standard at hand, the court will consider the cross-motions for summary judgment.

Under Minnesota law:

No oral or written misrepresentation made by the assured, or in the assured's behalf, in the negotiation of insurance, shall be deemed material, or defeat or avoid the policy, or prevent its attaching, unless made with intent to deceive and defraud, or unless the matter misrepresented increases the risk of loss.

Minn.Stat. § 60A.08 subd. 9.⁷

The burden of proving the intent to deceive or defraud or that the misrepresentation increased the risk of loss is on the insurer.

Quintana v. Allstate Ins. Co., 378 N.W.2d 40, 45 (Minn.Ct.App.1985) (citing Craigmile v. Sorenson, 248 Minn. 286, 80 N.W.2d 45, 51 (1956)).

In its amended complaint, ISOP alleges that Quaschnick misrepresented that his aircraft was newly purchased, but fails to explain why that alleged misrepresentation should be deemed material under Minnesota law.⁸ ISOP further alleges that Quaschnick's representation concerning the number of seats in the aircraft constitutes a material misrepresentation⁹ because it increased ISOP's potential liability exposure under the per passenger sublimit from $400,000 to $500,000, and that ISOP would have charged an additional premium of $182.00 if it had been aware of that increased exposure. (See Pl.'s Amended Compl. ¶¶ 6, 25-27.)¹⁰ Based on the increased exposure, ISOP argues that Quaschnick's alleged misrepresentation regarding the number of seats increased the risk of loss for purposes of Minn.Stat. § 60A.08 subd. 9.

The court, however, rejects ISOP's construction of the phrase "increases the risk of loss" for purposes of determining whether a misrepresentation is material under Minnesota law. In Preferred Risk Mutual Insurance Co. v. Anderson, the Supreme Court held that for purposes of determining materiality:

In this context, the concept "risk of loss" refers to the likelihood of future liability on the insurance company for loss....

277 Minn. 342, 152 N.W.2d 476, 483 (1967) (emphasis added). The Minnesota Court of Appeals has similarly held that:

The concept of "risk of loss" refers to the likelihood that the insurance company will be liable in the future for the insured's negligent conduct.

Proprietors Ins. Co. v. Northwestern Nat'l Bank, 374 N.W.2d 772, 777 (Minn.Ct.App. 1985) (citing Preferred Risk, 152 N.W.2d at 483). Applying that definition, ISOP does not contend that the alleged misrepresentations increased the likelihood of either a mid-air collision or any other type of accident which would give rise to ISOP's liability under Quaschnick's policy. Moreover, it fails to proffer any evidence to support such a contention. The court thus concludes that ISOP's claim that the policy is void fails under Minn.Stat. § 60A.08 subd. 9.

Even if ISOP were to make such an allegation, the court nonetheless...