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Jeb Stuart Auction Services LLC v. West American Insurance Co.

United States District Court, W.D. Virginia, Danville Division

August 13, 2015


          For Jeb Stuart Auction Services, LLC, Plaintiff, Counter Defendant: Catherine Jackson Huff, Daniel Robert Sullivan, Guy M. Harbert, III, LEAD ATTORNEYS, GENTRY LOCKE RAKES & MOORE, ROANOKE, VA; Philip G. Gardner, LEAD ATTORNEY, GARDNER, GARDNER, BARROW & SHARPE, MARTINSVILLE, VA.

         For West American Insurance Company, Defendant, Counter Claimant: Edwin Ford Stephens, LEAD ATTORNEY, CHRISTIAN AND BARTON, RICHMOND, VA; Harrison Mann Gates, Roman Lifson, LEAD ATTORNEYS, Christian & Barton, LLP Richmond, VA.

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         This matter is before the Court on cross-motions for summary judgment. I heard oral arguments on the motions on August 6, 2015. For the reasons stated herein, I will grant in part Plaintiff's motion for partial summary judgment [ECF No. 23] and deny Defendant's motion for summary judgment [ECF No. 27]. This matter will proceed to trial on the questions of (1) damages and (2) bad-faith denial of Plaintiff's claim, see Va. Code Ann. § 38.2-209.


         Plaintiff Jeb Stuart Auction Services LLC (" Jeb Stuart" ) is a Virginia-based limited liability company. Its manager and sole-member is Robin Hiatt (" Hiatt" ). Jeb Stuart's principle place of business is in Stuart, Virginia.

         Defendant West American Insurance Company (" West American" ) in an Indiana-based insurance provider. Burch-Hodges-Stone, Inc. (" BHS" ) is a Virginia-based insurance agency which sells, among other things, commercial insurance policies provided by West American. Dianne Via-Fulcher (" Via-Fulcher" ) is an agent with BHS, and her office is located in Martinsville, Virginia.

         On July 14, 2009, Hiatt pleaded guilty to three counts of obtaining money by false pretenses in violation of Va. Code Ann. § 18.2-178. Hiatt entered an Alford plea on the charge that he " [paid] three individuals to wreck cars as part of a fraudulent scheme to receive insurance proceeds" . (Dep. of Robin Hiatt 32:6-8, June 10, 2015.)

         In 2010, Hiatt formed Jeb Stuart. On or about February 11, 2014, Jeb Stuart purchased property located at 219-221 Aaron Street, Martinsville, Virginia, from C& S Property Management, Inc. (" C& S" ).

         During the month of January 2014, Hiatt met with Via-Fulcher regarding purchasing a commercial insurance policy on Jeb Stuart's property in Martinsville. As a result of those meetings, BHS submitted an unsigned application for insurance to West American on January 13, 2014, and a signed application on January 22, 2014. Hiatt signed the second application (" the Application" ).

         On the Application, under the section titled " Applicant Information," " Jeb Stuart Auctions Services LLC" and C& S are listed under " Name." In that same section, the box next to " LLC" is checked (as opposed to " Individual" ). Hiatt is listed under " Mailing Address." Hiatt is also listed as " Inspection Contact" and " Accounting

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Records Contact." Under the section asking for the date the business was started, Hiatt answered, " 01/01/93."

         On Page Two of the Application, several questions are propounded. Specifically, Question Eight asks:

During the last five years (ten in RI), has any applicant been indicted for or convicted of any degree of the crime of fraud, bribery, arson or any other arson-related crime in connection with this or any other property?

Hiatt answered " No" to Question Eight. The Application does not expressly define " Applicant" as it relates to Question Eight.

         A few days after he signed the Application, Hiatt returned to Via-Fulcher's office to discuss whether his 2009 convictions were responsive to Question Eight. According to Hiatt, he told Ms. Via-Fulcher that he had some felony convictions in the past and he did not know what he needed to do. (Hiatt Dep. 45:6-8, June 10, 2015.) He brought a folder containing his criminal documentation and offered it to her. (Id. 45:8-9.) Via-Fulcher asked, " Is any of these charges to Jeb Stuart Auction Services" ? (Id. 45:12-13.) Hiatt told her they were not, and she responded: " Well, this is the insurance for Jeb Stuart Auction, not you." (Id. 45:15-16.) Via-Fulcher denies that this conversation ever took place and counters that Hiatt only stated that he had " financial problems" in the past. (See Dep. of Dianne Via-Fulcher 87:12-15, 106:11-16, May 14, 2015.)

         Hiatt signed the Application on January 22, 2014, under the section titled " Applicant Signature." Two lines above the signature, however, the Application states: " The undersigned is an authorized representative of the applicant and represents that reasonable inquiry has been made to obtain the answers to questions on this application. He/she represents that answers are true, correct and complete to the best of his/her knowledge." Hiatt signed the Application within five years of his conviction for a crime of fraud. In response to the Application (which did not relay information regarding Hiatt's convictions), West American issued a commercial property insurance policy to Jeb Stuart (" the Policy" ).

         Hiatt concedes that his Alford plea on his 2009 charges resulted in a conviction was for a " crime of ...

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