Douglas Ramsey v. Allstate Insurance Company

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 11a0174n.06
No. 10-3101 FILED
Mar 23, 2011
UNITED STATES COURT OF APPEALS LEONARD GREEN, Clerk
FOR THE SIXTH CIRCUIT
DOUGLAS C. RAMSEY,
Plaintiff-Appellant,
v. ON APPEAL FROM THE
UNITED STATES DISTRICT
ALLSTATE INSURANCE CO., COURT FOR THE SOUTHERN
DISTRICT OF OHIO
Defendant-Appellee.
/
Before: KEITH, MERRITT, and MARTIN, Circuit Judges.
BOYCE F. MARTIN, JR., Circuit Judge. Allstate Insurance Company denied Douglas
Ramsey’s claim after a fire seriously damaged the house that he had inherited from his father.
Although the district court correctly found that Douglas did not have an express insurance contract
with Allstate, we REVERSE and REMAND for the district court to consider in the first instance
whether Allstate received constructive notice of Douglas’s father’s death and is estopped from
denying coverage, and whether the parties’ conduct established an implied-in-fact contract between
Douglas and Allstate.
I.
Douglas’s father, Ralph Ramsey, purchased homeowner’s insurance from Allstate in
September of 1993 and renewed the policy annually until his death in August of 2002. Bank of
America had a mortgage on the house and paid the insurance premiums from Ralph’s account. After
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Ralph died, Bank of America continued to pay the insurance premiums, but did so from Douglas’s
account. Allstate continued to renew the insurance coverage but never named Douglas on the policy.
The policy states in pertinent part:
Policy Transfer
You may not transfer this policy to another person without our written consent.
Continued Coverage After Your Death
If you die, coverage will continue until the end of the premium period for:
1) your legal representative while acting as such, but only with respect to the
residence premises and property covered under this policy on the date of your death.
2) an insured person, and any person having proper temporary custody of your
property until a legal representative is appointed and qualified.
There is no evidence that Douglas ever directly notified Allstate of Ralph’s passing. Douglas
alleges that he informed Bank of America and Bank of America continued to pay the insurance
premiums, renewing the policy in Ralph’s name.
After the fire on June 26, 2008, Allstate took possession of the home, inspected it, and
boarded it up. Allstate put Douglas’s salvageable property in storage and paid him $500 to cover
initial expenses. However, on July 20, Allstate sent Douglas a letter stating that it would not cover
the loss from the fire. There are no allegations of any improprieties, but Allstate discovered that the
policy was still only in Ralph’s name. Therefore, Allstate determined that it had no obligation to
cover the loss to what was now Douglas’s house.
After Allstate denied coverage, the policy automatically renewed once again in September
of 2008. However, Allstate argues that this renewal, after it had learned of Ralph’s death, was
inadvertent. Allstate canceled the policy when it discovered the error.
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The district court granted Allstate’s motion for summary judgment holding that under the
terms of the insurance contract, coverage ceased at the end of the premium period following Ralph’s
death. The district court found that Douglas did not notify Allstate of Ralph’s death before the fire
and, even if he had provided notice, the loss is still not covered because the policy is not
transferrable.
II.
A. Summary Judgment Standard.
“The Sixth Circuit reviews de novo a district court’s grant of summary judgment.” Hamilton
v. Starcom Mediavest Group, Inc., 522 F.3d 623, 627 (6th Cir. 2008). Summary judgment is proper
where “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); see Hamilton, 522 F.3d at 627. “The moving party has the
initial burden of proving that no genuine issue of material fact exists,” and the court must draw all
reasonable inferences in the light most favorable to the nonmoving party. Vaughn v. Lawrenceburg
Power Sys., 269 F.3d 703, 710 (6th Cir. 2001). When a motion for summary judgment is properly
made and supported and the nonmoving party fails to respond with a showing sufficient to establish
an essential element of its case, summary judgment is appropriate. See Celotex Corp. v. Catrett, 477
U.S. 317, 322-23 (1986). Because jurisdiction is based on diversity of citizenship, the substantive
law of Ohio applies.
B. Whether There is an Express Insurance Contract Between Douglas and Allstate.
According to the terms of the policy, Ralph’s express insurance contract with Allstate
terminated at the end of the first premium period following his death. Douglas could not renew the
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policy on behalf of Ralph, the named insured, because Ralph had passed away. Additionally,
Douglas could not assume the policy because the contract contained an anti-assignment clause, and
provisions prohibiting assignment are valid and enforceable, see Pilkington N. Am., Inc. v. Travelers
Cas. & Sur. Co., 2006-Ohio-6551, 861 N.E.2d 121, at ¶¶ 36-39 (noting that an assignment could
dramatically alter the insurer’s exposure). Therefore, the district court correctly held that Douglas
does not have any viable claim under the express terms of Ralph’s policy.
Douglas argues that he became an insured person under Ralph’s policy when he moved into
the house before Ralph died. While Douglas did meet the policy’s definition of an insured person,
the express insurance contract terminated at the end of the premium period following Ralph’s death.
Therefore, the district court correctly concluded that this is not a basis for finding Douglas covered.
Douglas ceased to be an insured person under Ralph’s policy when the policy terminated at the end
of the premium period following Ralph’s death.
C. Whether Allstate Received Constructive Notice of Ralph’s Death.
The district court correctly found that there is no evidence to suggest that Douglas directly
notified Allstate of Ralph’s passing. However, the district court failed to consider whether Allstate
is estopped from denying coverage because it received constructive notice of Ralph’s death. The
doctrine of equitable estoppel is not directly applicable but generally prevents a party who made a
representation from later denying it if the other party relied on the representation. Hortman v.
Miamisburg, 2006-Ohio-4251, 852 N.E.2d 716, at ¶ 20 (Ohio 2006).
Although Douglas notified the mortgage holder, the district court appears to have correctly
concluded that there is no evidence in the record from which it may conclude that he directly notified
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Allstate. However, Ralph’s estate went through probate proceedings and Douglas took title to the
home, which may have provided Allstate with constructive notice of Ralph’s death. Therefore, we
remand for the district court to consider whether Allstate received constructive notice of Ralph’s
death and, if it did, whether it is estopped from denying coverage to Douglas.
D. The Terms of the Policy Do Not Explicitly End All Liability After the Named Insured
Dies.
The Ohio Court of Appeals recently provided an informative summary of the procedure to
follow when interpreting insurance policies in Allstate Insurance Co. v. Eyster, 2010-Ohio-3673, 939
N.E.2d 1274, at ¶¶ 17-20 (Ohio Ct. App. 2010). Insurance policies are contracts, the proper
interpretation of which is a question of law for the court. Id. at ¶ 17 (citing Sharonville v. Am. Emp.
Ins. Co., 2006-Ohio-2180, 846 N.E.2d 833, at ¶ 6 (Ohio 2006)). The scope of coverage is
determined by construing the contract “in conformity with the intention of the parties as gathered
from the ordinary and commonly understood meaning of the language employed.” Id. (quoting King
v. Nationwide Ins. Co., 519 N.E.2d 1380, 1383 (Ohio 1988)) (internal quotation marks omitted).
When the contract “is reasonably susceptible of more than one interpretation, it will be strictly
construed against the insurer and in favor of the insured.” Id. at ¶ 18.
Initially, the insured bears the burden of proving that the policy covers the claimed loss. Id.
at ¶ 20 (citing Chicago Title Ins. Co. v. Huntington Nat’l Bank, 719 N.E.2d 955, 959 (Ohio 1999)).
However, if an insurer denies coverage based on a policy exclusion, the insurer bears the burden of
demonstrating that the exclusion applies. Id. Ohio courts presume that coverage applies unless it
is clearly excluded. Id. at ¶ 19.
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Allstate argues that the policy’s provision describing coverage after the death of the named
insured precludes it from any liability in this case. Although the policy specifically describes what
happens when the policyholder dies, that provision is for the benefit of the insured. Contrary to
Allstate’s position in this case, this provision appears to be designed to clarify that the policy does
not automatically terminate on the policy holder’s death. Without this provision, if the insured’s
property was damaged shortly after the policyholder died, the insurance company might not be
required to cover the loss. However, this term clarifies that the policy continues for as long as it
can—the end of the premium period.
We agree that this provision terminated Ralph’s express insurance contract with Allstate at
the end of the first premium period following his death. However, in light of Ohio’s policy of
construing insurance contracts against the insurance company and placing the burden on the
insurance company to demonstrate that an exception applies, see, e.g., Anderson v. Highland House
Co., 757 N.E.2d 329, 332-33 (Ohio 2001), we cannot conclude that this clause excludes any
possibility of Allstate being responsible for coverage on an estoppel or implied contract theory after
Ralph’s death.
E. Whether There Is an Implied Contract Between Douglas and Allstate.
The district court did not consider whether the parties’ conduct entitled Douglas to relief
based on an implied contract theory. While Douglas has not specifically pled a cause of action based
on an implied contract, the complaint appears to sufficiently set forth the basis for and the facts
underlying such a claim. Cf. Randleman v. Fid. Nat’l Title Ins. Co., 465 F. Supp. 2d 812, 818 (N.D.
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Ohio 2006) (considering cause of action based on an implied contract even though not expressly pled
in the complaint).
Ohio recognizes implied-in-fact contracts. Legros v. Tarr, 540 N.E.2d 257, 263 (Ohio 1989).
In order to find a contract implied in fact, the surrounding circumstances must be such that the court
can infer a contract exists as a matter of tacit understanding between the parties. Id. Whether there
is an implied contract turns on the facts of the particular case. See Reali, Giampetro & Scott v. Soc.
Nat’l Bank, 729 N.E.2d 1259, 1264 (Ohio Ct. App. 1999). The Ohio Court of Appeals has noted that
“[b]ecause the existence of an implied in fact contract requires crucial factual determinations
regarding the intent and thought process of the parties, deference must be paid by a reviewing court
to the trial court’s determinations.” Fouty v. Ohio Dep’t Youth Servs., 2006-Ohio-2957, 855 N.E.2d
909, at ¶ 57 (Ohio Ct. App. 2006).
We remand this matter for the district court to consider whether the facts of this
case—particularly Douglas’s continued payment of the insurance premiums, and Allstate’s issuance
of renewed insurance policies—created an implied contract between Douglas and Allstate to insure
the house. If the facts warrant, finding an implied contract in this case would not be inconsistent
with Ohio cases, which have found implied contracts to exist between parties other than those named
on an express contract. Cf. Randleman, 465 F. Supp. 2d at 816 (holding that the complaint stated
a claim for breach of an implied contract where the plaintiffs were not named insureds and could not
recover under the express title insurance policy); Capella III, L.L.C. v. Wilcox, 2010-Ohio-4746, 940
N.E.2d 1026, at ¶ 18 (Ohio Ct. App. 2010) (implying contract between a holdover tenant and
landlord when original lease had multiple tenants). Here, Douglas paid the annual insurance
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premiums through Bank of America, and Allstate issued renewed policies. After the fire, Allstate
appears to have acted as if the house were insured by taking possession, boarding it up, and writing
Douglas a check to cover initial expenses. Therefore, we remand the matter for the district court to
determine whether there is a contract implied in fact between Douglas and Allstate.
While Ralph’s express insurance contract prohibits assignment, finding that there is an
implied contract between Douglas and Allstate is not an assignment but an entirely new contract.
III.
Although Douglas does not have a claim based on an express contract theory, the district
court failed to consider fully whether Allstate received constructive notice of Ralph’s death and
whether there is an implied in fact contract between Douglas and Allstate. Therefore, we
REVERSE the district court’s order dismissing the case with prejudice and REMAND the matter
for the district court to consider in the first instance whether Allstate received constructive notice
of Ralph’s death estopping it from denying coverage, and whether there is an implied-in-fact contract
to provide insurance coverage between the parties.