United States District Court, E.D. Tennessee
MEMORANDUM OPINION AND ORDER
A. VARLAN CHIEF UNITED STATES DISTRICT JUDGE.
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
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].
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].
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].
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].
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.].
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.
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].
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].
Summary Judgment Standard of Review
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