Lie on Application & Lose Coverage

Taking an Assignment from Tortfeasor to Sue Insurer Not Always Profitable

Mark A. Link and Susan Link (collectively referred to as “the Links”) appeal the Allen County Common Pleas Court’s ruling granting summary judgment in favor of Wayne Insurance Group (“Wayne Insurance”) because their assignor, Patience Jackson, lied when she acquired a policy from Wayne. In Mark Link, Et Al. v. Wayne Insurance Group, Et Al., Case No. 1-18-13, 2018 Ohio 3529, Court Of Appeals Of Ohio Third Appellate District Allen County (September 4, 2018) the Ohio Court of Appeals was asked to reverse the trial court and allow the injured persons, the Links.

FACTUAL BACKGROUND

On June 4, 2015, Patience Jackson (“Patience”) filled out an application for homeowner’s insurance with Wayne Insurance. Thereafter, a policy of insurance was issued to Patience on June 8, 2015. The policy contained a clause that stated, in part, “I, or we, also understand that any misrepresentation or concealment of information in the application voids the insurance coverage under the policy for which it was submitted as if it were never bound or issued.”  On the application, Patience listed that she did not have any dogs on the premises, a false statement.

On October 19, 2015, Mark Link was attacked by two dogs that resided with Patience and Douglas Jackson (collectively referred to as “the Jacksons.”)  Upon learning of the dog attacks, Wayne Insurance sent Patience a “Cancellation Notice” on November 18, 2015, on the basis that Patience made a material misrepresentation on her insurance application, thereby voiding the policy issued June 8, 2015.

The Links sued the Jacksons to recover medical expenses related to the injuries Mark Link sustained from the dog attack. While not on appeal, it appears from the limited record before the court that the Links and the Jacksons entered into a consent judgment. In that agreement, the Jacksons agreed that the Links should be awarded damages arising from the dog bite incident in the amount of $100,000. The Jacksons further agreed that the Links be granted the Jacksons’ “chose in action” to pursue any and all claims between the Jacksons and the Wayne Insurance Group on the Jacksons’ behalf.

PROCEDURAL HISTORY

Patience and Douglas Jackson sought to recover damages against the insurer on breach of contract, refusal to defend, and bad faith claims.

Wayne Insurance filed a third party complaint (for a declaratory judgment against the Jacksons) that asserted that Wayne Insurance had no duty to defend or indemnify the Jacksons or the Links because Patience made a material misrepresentation on her application for insurance, which thereby voided her policy. The Jacksons failed to plead or defend the action after being duly served.

As a result of the Jackson’s failure to plead or defend the action, Wayne Insurance filed a motion for default judgment which was granted by the trial court. The trial court found that Wayne Insurance owed no duty to defend or indemnify the Jacksons. The trial court further ordered that the Jacksons were not entitled to coverage under the terms of the insurance policy issued by Wayne Insurance.

ANALYSIS

ASSIGNMENT OF ERROR NO. I – THE TRIAL COURT ABUSED ITS DISCRETION WHEN IT DENIED PLAINTIFFS’ MOTION TO RECONSIDER.

Before a court can consider the merits of a legal claim, the person or entity seeking relief must establish standing to sue. Standing refers to whether a party has a sufficient stake in an otherwise justiciable controversy to obtain judicial resolution of that controversy. To have standing, the general rule is that ‘a litigant must assert its own rights, not the claims of third parties.

The appellate court found that the Links failed to establish third-party standing. Specifically, they failed to establish that they possessed a sufficiently close relationship with the Jacksons. Moreover, the Links have shown no hindrance in the way of the Jacksons, the proper party to the counterclaim, to request relief from the default judgment granted by the trial court. Accordingly, it found the Links’ failure to establish standing is fatal because competent and credible evidence exists in the record supporting that the trial court did not abuse its discretion when it denied the Links’ motion to reconsider.

ASSIGNMENT OF ERROR NO. II – THE TRIAL COURT ERRED BY GRANTING SUMMARY JUDGMENT IN FAVOR OF DEFENDANT WAYNE INSURANCE GROUP.

In their second assignment of error, the Links argue that the trial court erred by granting summary judgment in favor of Wayne Insurance. Specifically, the Links assert that the trial court erred in determining that the Links’ lacked privity of contract with Wayne Insurance by virtue of a valid assignment. Further, the Links’ argue that the trial court erred when it granted Wayne Insurance’s motion for summary judgment on the bad faith and failure to defend claims. For the reasons that follow, we affirm the trial court’s grant of summary judgment.

To support their motion for summary judgment, Wayne Insurance directed the trial court to its November 30, 2017 order declaring Patience Jackson’s insurance policy #SH02742571 null and void as a matter of law. Specifically, the trial court’s order stated that the policy was null and void as a matter of law.

Additionally, the trial court found and ordered that Wayne Insurance did not have a “duty to defend or indemnify the Jacksons nor were they entitled to indemnity under the policy.

The Links question whether Patience had a dog on the premises at the time she completed her application for insurance in an attempt to establish a genuine issue of material fact with regard to the breach of contract claim. However, the court found this allegation contradicts the facts pled by the Links in their initial complaint.

Since the trial court declared that Patience’s insurance policy null and void as a matter of law, and because there were no specific facts provided (to the trial court) to demonstrate the existence of a genuine triable issue, the Links’ failed to meet their reciprocal burden showing the existence of a genuine issue of material fact.

Having found no error prejudicial to the Links here in the particulars assigned and argued, the court overruled the Links’ first and second assignments of error and affirm the judgment of the trial court.

ZALMA OPINION

It doesn’t pay to lie to your insurance company. The Jacksons lie voided the insurance. They sold the Links on a non-collectable judgment by agreeing to a $100,000 judgment only collected from their insurer who owed them nothing. The Links lost out and gave up their right to collect from the Jacksons’ – the tortfeasors – by seeking to obtain a large judgment from the insurer. The gamble was lost.


© 2018 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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