Insured May Not Lie to Avoid Summary Judgment
No one likes to have an insurance claim denied even if the insurer has a a good reason for denying the claim. In litigation, as in every aspect of insurance, both parties to the insurance contract owe an obligation to deal fairly and in good faith with each other and do nothing to deprive the other of the rights available under the policy.
In Joseph Jugan; Robin Jugan v. Economy Premier Assurance Company, No. 17-2410, United States Court of Appeals For The Third Circuit (March 22, 2018) the insureds, Joseph and Robin Jugan own a home in Fleetwood, Pennsylvania, which they insured under a homeowners insurance policy (the “Policy”) issued by MetLife. Their homeowers policy excluded from any coverage losses or damage resulting directly or indirectly from “freezing of a plumbing, heating, air conditioning, or automatic fire protective sprinkler system, or of a domestic appliance, or by discharge, leakage or overflow from within the system or appliance caused by freezing.” That “Absolute Freezing Exclusion” stated that it did “not apply if you have used reasonable care to maintain heat in the building or if you shut off the water supply and drained the plumbing and appliance of water.”
Sometime between February 1, 2015, and March 13, 2015, while the Jugans were away, water leaked from their dishwasher, causing damage to their home and its contents. MetLife hired an expert, a certified engineer, to investigate the loss. He did so and issued a report stating that the water damage was due to a frozen dishwasher solenoid valve that fractured due to freezing in the water supply line to the dishwasher. He further concluded that the water froze because of insufficient heat within the home, which he “attributed to the thermostat for the hot water baseboard heat [having been] set too low[.]”
Since 2009, the Jugans had frequently left the home empty, sometimes for weeks at a time.
Mr. Jugan suffers from a brain tumor that requires him to take prescription narcotics. The tumor and the medications have led to forgetfulness, including a failure to recall events. He did not remember adjusting the digital thermostat on the main floor, and he could not definitively state whether the thermostat was set at 62°F before he left. He also did not remember adjusting the analog thermostat in the basement, and he could not remember the temperature it was set at when he left that day. But Mr. Jugan testified that he kept a thermometer on an interior wall of the basement, and that it generally read 54°F year round.
The Jugans sued MetLife for breaching the Policy after MetLife denied coverage. MetLife moved for summary judgment on that claim. When it did so, Mr. Jugan filed an affidavit containing averments that he said raised genuine issues of material fact barring summary judgment. The District Court applied the sham affidavit doctrine, striking certain averments that contradicted Mr. Jugan’s earlier testimony without sufficient explanation, while crediting other averments that did not contradict other evidence in the record.
The District Court granted summary judgment in favor of MetLife with respect to the Jugans’ claim under Coverage A of the Policy, after deciding that no reasonable jury could find that the Jugans had used reasonable care to maintain heat in their home. The Jugans timely appealed.
Pennsylvania law provides that “[t]he interpretation of an insurance policy is a question of law.” Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Commercial Union Ins., 908 A.2d 888, 897 (Pa. 2006). The primary goal in interpreting a policy is to determine the parties’ intentions as manifested by the policy’s terms.
Pennsylvania law places the initial burden of establishing the existence of insurance coverage on the insured. After the insured has met that burden, the burden shifts to the insurer to prove the applicability of an exclusion in the insurance policy. If the insurer demonstrates that an exclusion applies, the burden shifts back to the insured to prove an exception to the exclusion, such that the damages claimed are covered notwithstanding the exclusion.
It is undisputed that the Jugans met their burden of establishing that the loss they suffered falls within the Policy’s affirmative grant of coverage – specifically, Coverage A. Furthermore, the District Court’s conclusion was also correct that MetLife met its burden of proving the applicability of the Policy’s Absolute Freezing Exclusion. The Jugans did not provide any evidence to rebut that expert’s determination that the water leakage was due to freezing.
The Jugans pointed to no evidence showing that they used reasonable care to maintain heat in their home. They argue that, because Mr. Jugan testified that he only asked his neighbors to check on the home if he thought he had forgotten to do something, the District Court erred by relying on Mr. Jugan’s testimony that his neighbors had access to the home, had previously been asked to check on the home at other times, and were never asked to check on the home before the loss that occurred here. But establishing a reason for failing to ask a neighbor to check on the home is not in itself evidence of reasonable care.
A reasonable homeowner would have wanted to check to make sure that the radiators worked before he went away in the winter, even if that homeowner, like Mr. Jugan, had never experienced any problems in past. It does not matter that the Jugans had a thermometer in the basement generally observed over two decades to stay at 54°F and that the basement heat was almost always set at its low setting of 40°F, because other evidence suggests Mr. Jugan never tested the basement radiators after they were shut off for repairs the previous summer. That was a material change that rendered reliance on past experience unreasonable. In fact, Mr. Jugan testified that there was no way to know whether the radiators worked at all while he was absent from the home in early 2015.
The Third Circuit concluded that the District Court did not misapply the sham affidavit doctrine when it struck several averments from Mr. Jugan’s affidavit. The sham affidavit doctrine provides that “[w]hen a nonmovant’s affidavit contradicts earlier deposition testimony without a satisfactory or plausible explanation, a district court may disregard it at summary judgment in deciding if a genuine, material factual dispute exists.” Daubert v. NRA Grp., LLC, 861 F.3d 382, 391 (3d Cir. 2017).
Averments that are “entirely unsupported by the record and directly contrary to … testimony,” or that are “offered ‘solely’ to defeat summary judgment,” may properly be disregarded. Mr. Jugan’s earlier deposition testimony that he could not say whether the main level thermostat was set to 62°F and that he does not remember the temperature at which the basement thermostat was set at the time of the loss. The Jugans were not free to defeat summary judgment by making last-ditch averments directly contrary to the established record.
The District Court properly decided the question of reasonable care at summary judgment because there was insufficient evidence upon which a reasonable jury could find that the Jugans exercised reasonable care to maintain heat in their home, given the unrebutted expert testimony and Mr. Jugan’s admissions during discovery.
It is not nice to lie to a judge. In many ways it can be criminal conduct. When an affidavit is submitted in opposition to a motion for summary judgment that is directly contradictory to earlier testimony at deposition without a reasonable excuse for the changed or different testimony, the court must ignore it and, in my opinion, punish the person for the false testimony. In this case the case was dismissed as an appropriate punishment.
© 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 email@example.com.
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/
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