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State Automobile Mutual Insurance Co. v. Fireman Fire Protection, Inc.

United States District Court, E.D. Tennessee

March 15, 2017

STATE AUTOMOBILE MUTUAL INSURANCE COMPANY, Plaintiff,
v.
FIREMAN FIRE PROTECTION, INC., JAMES G. STONE III, ROBIN ALETRAS, and AUTO-OWNERS MUTUAL INSURANCE COMPANY, Defendants. And FIREMAN FIRE PROTECTION, INC. and JAMES G. STONE III, JAMES G. STONE, JR., and BETTY STONE, Counter/Cross-Plaintiffs/ Intervening Plaintiffs,
v.
STATE AUTOMOBILE MUTUAL INSURANCE COMPANY and ROBIN ALETRAS, Counter/Cross-Defendants.

          MEMORANDUM OPINION AND ORDER

          THOMAS A. VARLAN CHIEF UNITED STATES DISTRICT JUDGE.

         This civil action is before the Court on defendant Auto-Owners Mutual Insurance Company’s (“Auto-Owners”) Motion for Summary Judgment [Doc. 62] and counter/cross-defendant State Automobile Mutual Insurance Company’s (“State Auto”) Motion for Summary Judgment as to Counter Claim Brought by Fireman Fire Protection, Inc. and James G. Stone III [Doc. 66]. No responses were filed in opposition to these motions, and the time for doing so has elapsed. See E.D. Tenn. L.R. 7.2. For the reasons discussed herein, the Court will grant Auto-Owners’s Motion for Summary Judgment and State Auto’s Motion for Summary Judgment as to the counterclaim.

         I. Background[1]

         Defendant–counter/cross-plaintiff, James G. Stone III (“Stone”), owned property in Sevier County, Tennessee, which is the subject of the current lawsuit (“the property”) [Doc. 69 p. 2]. Stone is the sole owner and shareholder of defendant–counter/cross-plaintiff Fireman Fire Protection, Inc. (“Fireman”) [Doc. 63 p. 2; Doc. 69 p. 2].

         State Auto issued a policy of commercial property insurance to Fireman, with regard to the property (“the State Auto policy”) [Doc. 69 p. 2]. The State Auto policy included the following provision:

This Coverage Part is void in any case of fraud by you as it relates to this Coverage Part at any time. It is also void if you or any other insured, at any time, intentionally conceal or misrepresent a material fact concerning: (1) This Coverage Part; (2) The Covered Property; (3) Your interest in the Covered Property; or (4) A claim under this Coverage Part [Doc. 69-1 p. 99].

         It also stated, “We will not pay for loss or damage caused by or resulting from . . . [d]ishonest or criminal act by you, any of your partners, members, officers, managers, employees . . ., directors, trustees, authorized representatives or anyone to whom you entrust the property for any purpose[,] . . . [a]cting alone or in collusion with others” [Id. at 116–17].

         Defendant–counter/cross-defendant Robin Aletras (“Aletras”) also lived in the property owned by Stone and operated a wood-working business out of the building’s basement [Doc. 63 p. 2; Doc. 69 p. 2]. Auto-Owners issued a policy of property and liability insurance to Aletras (“the Auto-Owners policy”) [Doc. 63 p. 2; Doc. 63-1]. Similar to the State Auto policy, the Auto-Owners policy excluded coverage for intentional or criminal acts. Specifically, the Auto-Owners policy contained the following language: “We will not pay for loss or damage caused by or resulting from . . . [d]ishonest or criminal act by you[,] . . . [a]cting alone or in collusion with others” [Doc. 63-1 p. 34]. Furthermore, the policy stated, “This Coverage Part is void in any case of fraud by you as it relates to this Coverage Part at any time. It is also void if you or any other insured, at any time, intentionally conceal or misrepresent a material fact concerning: [t]he covered property; [or a] claim under this Coverage Part” [Id. at 41]. The policy also excluded “bodily injury or property damage expected or intended from the standpoint of the insured” [Id. at 58]. Finally, the policy stated, “No person or organization has a right under this Coverage Part . . . [t]o join us as a party or otherwise bring us into a ‘suit’ asking for damages from an insured” [Id. at 70].

         A fire occurred at the property on August 3, 2013 [Doc. 69 p. 2], while Aletras was working in the basement and Stone was out of town [Doc. 63 p. 2; Doc. 69 p. 2]. Aletras initially asserted that he accidentally got dust into the pilot light of the gas hot-water heater, which caused the fire [Doc. 63 p. 2]. Fireman made a claim for coverage against State Auto for the loss, and State Auto denied the claim [Id.].

         State Auto brought the current suit on May 9, 2014 [Doc. 1], stating claims against Fireman, Stone, Aletras, and Auto-Owners, seeking monetary damages and a declaratory judgment of the rights and duties of the parties under the insurance policies [Id. ¶¶ 1–2]. Specifically, State Auto asks to the Court to enter an order declaring that its coverage does not apply because Aletras intentionally set the fire, with the direction and knowledge of Stone, that they committed fraud in misrepresenting the circumstances surrounding the fire, and that they materially breached the State Auto policy [Id. ¶¶ 11– 12; Doc. 68 pp. 2–3]. If Aletras did not intentionally burn the property, according to State Auto, then State Auto is entitled to indemnification from Auto-Owners for any amount it is obligated to pay Fireman under the State Auto policy [Doc. 1 ¶ 14]. Stone and Fireman filed a counterclaim against State Auto on April 1, 2015 [Doc. 27], alleging that State Auto breached the policy by not paying on Fireman’s claim stemming from the fire on August 3, 2013.

         On September 14, 2015, the grand jury for Sevier County returned a true bill indictment against Stone and Aletras, including multiple charges arising from the fire on August 3 [Doc. 63 pp. 2–3; Doc. 69 p. 4]. These charges consisted of three counts of insurance fraud, two counts of conspiracy to commit insurance fraud, two counts of arson, and two counts of conspiracy to commit arson [Doc. 63-2; Doc. 69-2]. Aletras entered a guilty plea as to the offenses of arson, insurance fraud, conspiracy to commit arson, and conspiracy to commit insurance fraud on October 6, 2015 [Docs. 63-3, 63-4; 69-3], and Stone entered a guilty plea as to the same offenses on May 16, 2016 [Doc. 69-4].

         State Auto and Auto-Owners now move for summary judgment, pursuant to Federal Rule of Civil Procedure 56 [Docs. 62, 66]. Specifically, Auto-Owners asks that the Court declare that it has no duty to defend Aletras and no duty to indemnify Aletras or State Auto in this action [Doc. 62 p. 2], and State Auto requests that this Court dismiss Stone and Fireman’s counterclaim against it [Doc. 66 p. 3].

         II. Summary Judgment Standard of Review

         Summary judgment under Rule 56 is proper “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). The moving party bears the burden of establishing that no genuine issues of material fact exist. Celotex Corp. v. Catrett, 477 U.S. 317, 330 n.2 (1986); Moore v. Philip Morris Cos., 8 F.3d 335, 339 (6th Cir. 1993). All facts and all inferences to be drawn therefrom must be viewed in the light most favorable to the ...


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