United States District Court, D. Connecticut
Republic Franklin Ins. Co., Plaintiff,
Rafael Quiroz, New Penn Financial, LLC d/b/a Shellpoint Mortgage Servicing, Defendants.
RULING AND ORDER
N. Chatigny United States District Judge.
Republic Franklin Insurance Company (“Republic
Franklin”) brings this diversity case seeking a
declaration that it owes no coverage to defendants Raphael
Quiroz and his mortgagee, New Penn Financial, LLC, d/b/a
Shellpoint Mortgage Servicing (“Shellpoint”),
under a homeowner's policy covering residential property
owned by Mr. Quiroz in East Hartford (“the
property”), which has been damaged by fire. Republic
Franklin contends that the policy has been properly rescinded
based on a material misrepresentation in the policy
application attributable to either Mr. Quiros or his agent,
and that language in an endorsement to the policy is properly
construed as an open mortgage clause such that Shellpoint has
no greater right to coverage than the insured. In response to
the complaint, Mr. Quiroz has filed counterclaims for breach
of contract, reformation and negligence. Plaintiff and
Shellpoint have moved for summary judgment (ECF Nos. 53, 55).
After considering the parties' submissions, I conclude
that genuine issues of material fact are presented with
regard to whether the misrepresentation in the policy
application was knowingly made. I also conclude that
Shellpoint has failed to demonstrate that it is entitled to
judgment as a matter of law. Accordingly, both motions are
materials submitted by the parties establish the following
facts for purposes of deciding the motions for summary
judgment. Mr. Quiroz bought the property some time prior to
2010. At various times prior to 2014, he obtained
homeowner's insurance policies for the property using
Antonio Jimenez as his insurance agent. Mr. Jiminez used
other agents who had binding authority with insurance
companies to assist him in placing coverage for his
October 2014, Mr. Quiroz approached Mr. Jimenez about
applying for a policy for the property. Mr. Jimenez contacted
Angel Rivera, who had an agency relationship with the
plaintiff. Mr. Jimenez prepared an application for Mr. Quiroz
to obtain coverage for the property through the plaintiff and
forwarded it to Mr. Rivera. The application was not signed.
insurance policy application was uploaded to the
plaintiff's server, which checks information in an
application to determine whether a risk meets underwriting
guidelines. The application submitted by Mr. Jiminez on
behalf of Mr. Quiroz stated that the property was owner
occupied. In fact, Mr. Quiroz did not reside at the property
and rented the property to a tenant.
application made it appear that the property qualified for
homeowner's insurance coverage as an owner-occupied
residence and plaintiff issued the policy on that basis.
Plaintiff was unaware that the property was not owner
occupied. Had it known, it would not have issued the policy.
After the fire loss occurred at the property, Mr. Jiminez
prevailed upon Mr. Quiroz to sign the policy application.
Following an investigation, plaintiff rescinded the policy
based on the misrepresentation in the application regarding
Connecticut, to rescind an insurance policy on the basis of a
misrepresentation, an insurer must prove: “(1) a
misrepresentation (or untrue statement) by the plaintiff
which was (2) knowingly made and (3) material to
defendant's decision whether to insure.”
Pinette v. Assurance Co. of Am., 52 F.3d 407, 409
(2d Cir. 1995) (citing State Bank & Trust Co. v.
Connecticut Gen. Life Ins. Co., 145 A. 565, 567 (Conn.
1929)). Here, all three elements are contested by
Quiroz and Shellpoint. I think only the second is subject to
a genuine dispute.
argues that Republic Franklin's failure to obtain the
insured's signature on the application before issuing
coverage precludes it from rescinding on the basis of the
alleged misrepresentation. In the absence of a signature,
Shellpoint argues, there was no misrepresentation. That
Quiroz did not sign the application before coverage issued
might bar Republic Franklin from claiming reliance on the
form. See 6 Couch on Ins. § 85:60
(“False answers stated without the insured's
knowledge or consent, in an unsigned application filled out
by the insurer's agent, do not bind the insured unless he
or she is charged with knowledge thereof.”). In
Bristol v. Comm. Union Life Ins. Co. of America, the
Connecticut Supreme Court held that an insurer could not
rescind a policy based on a misrepresentation in an
application form that was filled out by the insurer's
agent, where the insured “never independently ratified
or adopted” the statements in the form. 560 A.2d 460,
464 (Conn. 1989). Here, unlike in Bristol, Mr.
Quiroz can be said to have made a misrepresentation because
his agent submitted the application.
undisputed that Mr. Quiroz was “using the
services” of Mr. Jimenez to “procure
insurance” for the insured property. Quiroz's R.
56(a)(2) Statement ¶ A3, ECF No. 58. Jimenez contacted
Rivera, who “had an agency relationship with”
Republic Franklin. Id. at ¶ A10. Under these
facts, Jimenez was Quiroz's agent. In Georgia Cas.
& Sur. Co. v. Valley Wood, Inc., a Georgia appellate
court held that when an agent is “authorized to procure
insurance on behalf” of the insured, the insured can be
bound by misrepresentations contained in an unsigned
application form. 783 S.E.2d 441, 443 (Ga.Ct.App. 2016),
reconsideration denied (Apr. 14, 2016), cert.
denied (Oct. 31, 2016). This is consistent with
Connecticut law. Cf. New York Life Ins. Co. v.
Rigas, 168 A. 22, 23 (Conn. 1933) (holding that, under
New York law, insured was estopped from claiming he never
signed insurance application when he accepted policy, paid
premiums and application was “attached to and made a
part of the policy”). Quiroz's agent submitted an
application on his behalf, Republic Franklin accepted the
application and Quiroz (presumably) began paying premiums.
See Quiroz's R. 56(a)(2) Statement ¶¶
A11, A14, A15, ECF No. 58. Under these facts, Quiroz
“independently ratified or adopted” the
application form through his agent.
Quiroz can be said to have “made” a
misrepresentation, Republic Franklin can validly rescind on
that basis but only if the misrepresentation was “known
by the assured [or his agent] to be untrue when made.”
Middlesex Mut. Assurance Co., 52 F.3d at 691. In
Connecticut, “‘[i]nnocent' misrepresentations
- those made because of ignorance, mistake, or negligence -
are not sufficient grounds for rescission.”
Pinette, 52 F.3d at 408 (citing Middlesex Mut.
Assurance Co., 590 A.2d at 963). An individual's
misrepresentation can be “innocent” when he
“does not know that the information he is providing is
false” or he is “justifiably unaware of the
answer's falsity and had no actual or implied knowledge
of its existence.” Cont'l Cas. Co. v. Morris I.
Olmer, LLC, No. 3:08-CV-805 CFD, 2010 WL 3257673, at *4
(D. Conn. Aug. 10, 2010) (citations omitted).
is imputed when an insured signs the application form.
See Pinette, 52 F.3d at 410 (“[A] person may
not claim that a misrepresentation is ‘innocent'
solely because the person failed to read the application
before signing it.”). But in this case, the application
form was not signed. Republic Franklin's Rule 56(a)(2)
Statement ¶ A18, ECF No. 62. Republic Franklin must
therefore show that ...