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American Family Insurance Co. v. Almassud

United States District Court, N.D. Georgia, Atlanta Division

September 3, 2019

AMERICAN FAMILY INSURANCE COMPANY, Plaintiff,
v.
ABDULMOHSEN ALMASSUD, et al., Defendants.

          ORDER

          RICHARD W. STORY UNITED STATES DISTRICT JUDGE

         In 2012, Defendant Abdulmohsen Almassud was driving near Cumming, Georgia, when his Jeep veered into oncoming traffic and struck a vehicle driven by Luisa Cruz Mezquital. As a result, Cruz's hand was severely injured. She filed a state court personal injury suit against Almassud, which went to trial and resulted in a jury verdict exceeding $30 million. The Georgia Court of Appeals has since overturned that verdict, however, and the case is en route to being re-tried. In the meantime, American Family Insurance Company (“AmFam”), the company that insured Almassud's Jeep, filed this declaratory judgment action seeking clarity about its obligations to Almassud in the underlying case. Broadly, AmFam alleges that Almassud's policy is void or rescindable because he failed to cooperate with AmFam in defending the underlying case and provided AmFam with false and incomplete information during the application process. Presently before the Court are three motions for summary judgment: two filed by Almassud [265 & 267] and one by AmFam [284]. Also before the Court is AmFam's Motion for Sanctions against Almassud [285]. After reviewing the record, the Court enters the following Order.

         Background

         I. Factual Background

         Defendant Abdulmohsen Almassud owns a 1995 Jeep Wrangler that has been modified. The Jeep, for instance, has an after-market lift kit, winch, larger-than-stock tires, and a rebuilt axle. Nearly a decade ago, AmFam sold a policy to Almassud for his Jeep. It provided up to $100, 000 in liability insurance per person for bodily injuries.

         During the application process, an AmFam agent took information from Almassud. Among other things, the application asked how the Jeep would be used. Out of the available options, Almassud selected “to/from work.” Almassud also responded “no” to a question asking whether the Jeep “is customized or altered including alternate fuel.” AmFam's agent ultimately signed the application, recommending that AmFam issue coverage. In doing so, the agent certified, “I personally have seen the vehicle and recommend it.”

         The parties disagree over whether Almassud, himself, ever signed the application. But either way, AmFam issued the policy, and it took effect on September 20, 2009.

         Several years later, Almassud was involved in an accident. According to Almassud, the Jeep's steering failed, causing it to veer across the center line and into oncoming traffic. The Jeep struck a vehicle driven by Defendant Luisa Cruz Mezquital. The accident left Almassud's Jeep totaled and Cruz severely injured.

         Almassud promptly reported the incident to AmFam. Then, AmFam took possession of the Jeep to inspect it and assess the damage. AmFam initially valued the damage to the Jeep at $6, 029.14. But after Almassud submitted receipts for aftermarket items that had been installed, AmFam increased the value.

         AmFam also concluded that Almassud was not responsible for the accident. Instead, AmFam suspected that fault lay with Oh's Auto Center, where Almassud had the steering kit in his Jeep replaced eight days before the accident. Unbeknownst to AmFam, however-and supposedly key to its analysis- Almassud had also taken the Jeep to Sears Auto Center two hours after he left Oh's. And at Sears, Almassud had an alignment performed, as well as a “complete steering, suspension evaluation.” The parties dispute certain details surrounding AmFam's investigation of the accident but agree on the general progression of things. The day after the accident, Almassud gave a recorded statement. AmFam asked Almassud what the “purpose of [his] trip” was and where he was “going” to and “coming from.” Almassud responded, “We went to the mountains and we were coming back.” AmFam also asked Almassud whether “any recent repair work” had been done to the vehicle. Almassud said “yes, ” then explained that he had the steering kit and the drag links “replaced at a shop” and said he would provide those receipts to AmFam. Finally, AmFam gave Almassud an opportunity to state anything not already discussed. Almassud, in response, mentioned that a tow truck driver at the accident scene noticed a pin missing from the steering column, which the driver believed let a bolt come loose and caused Almassud to lose control of the Jeep. AmFam later had an engineer examine the Jeep who agreed with this theory, noting he was “confident that the steering draft coming loose from pitman arm was not a result of the accident but is what caused the insured to loose [sic] steering.” Based on its investigation, AmFam concluded that it was Oh's installation of the steering kit that caused the accident, not Almassud. AmFam therefore rejected three demands for policy limits from Cruz. As a result, Cruz filed suit against Almassud in the State Court of Fulton County.

         Pursuant to the insurance policy, AmFam retained an attorney, Jim Taylor, to defend Almassud. As is common, AmFam also had its own lawyers involved. Early in the litigation, the firm representing AmFam asked Almassud for “Any maintenance records and documents showing any customizations/modifications done on the Jeep.” Almassud responded with a lengthy email that included receipts for parts he had purchased for the Jeep as far back as November 2008.

         Meanwhile, discovery was underway in the underlying litigation. Of note, in one interrogatory, Cruz asked Almassud, “When did you make the last inspection of the [Jeep]?” Almassud responded that he last inspected the Jeep on October 13, 2012, after Oh's performed the steering kit installation. In another interrogatory, Cruz inquired about Almassud's activities leading up to the accident. Almassud said he went to Blairsville “to go off-roading.” Some months later, Almassud sat for a deposition, and Cruz's counsel followed up on these responses. As for the inspection, Almassud explained that he personally looked at Oh's work and “didn't see anything obvious, ” just that the parts were installed and greased but “that's [as] far as [he] went.” Cruz's counsel also asked what Almassud meant when he said he had gone “off-roading.” Almassud testified, among other things, that the terrain he had driven on was “just unpaved” and that he did not have any pictures of the Jeep off-road.

         Eventually, the underlying case went to trial. During her case-in-chief, Cruz called Almassud for purposes of cross-examination. Cruz's counsel elicited testimony from Almassud about his off-roading activities, and his answers largely tracked those from his deposition. Cruz's counsel, however, proceeded to introduce a number of documents in an attempt to impeach Almassud. Those documents showed that Almassud had, in fact, used the Jeep to drive on more rugged terrains than he previously disclosed.

         After the exchange, the trial judge took up the issue outside the jury's presence, and Cruz's counsel accused Almassud of perjury. Ultimately, the judge adjourned the proceedings for the day to allow Almassud to consult a criminal attorney. According to Almassud, both his lawyer, Jim Taylor, and AmFam's lawyer represented criminal defendants.

         The following day, Almassud re-took the stand. But he refused to answer Cruz's questions, instead pleading the Fifth. Also that day, AmFam gave Almassud a letter advising him that AmFam would continue to provide a defense “subject to a full and complete reservation of rights.” According to the letter, AmFam was prejudiced because Almassud had “failed to cooperate” in its investigation and defense.

         Ultimately, the case went to the jury. The jury determined that Almassud was 100% liable for the accident and awarded Cruz $30, 485, 646.29.

         II. Procedural History

         After judgment was entered in Cruz's favor, Almassud's counsel filed a motion for new trial. The trial court heard argument on that motion on December 21, 2016 and denied it. As a result, Almassud appealed the verdict.

         Meanwhile, AmFam brought this declaratory judgment action seeking a determination of its obligation to provide coverage to its insured, Almassud, for the underlying case. AmFam alleges that Almassud's coverage is void due to his failure to cooperate with AmFam in the defense of the underlying case and for providing AmFam with false and incomplete information. In the alternative, AmFam seeks to rescind Almassud's policy to minimum limits based on purported misrepresentations he made during the application and renewal processes. Cruz and Almassud each filed counterclaims against AmFam asserting claims for bad faith failure to settle, among other things. On March 15, 2017, the Court entered an Order [53] dismissing, without prejudice, Almassud's failure to settle claim as premature lacking a final and non-appealable excess judgment.

         On March 15, 2018, the Court of Appeals of Georgia issued an opinion in the underlying case finding that “the trial court erred in failing to instruct the jury on a substantial and vital issue presented by the pleadings and the evidence . . . .” Almassud v. Mezquital, 811 S.E.2d 110, 111 (Ga.Ct.App. 2018), reconsideration denied (Mar. 28, 2018). Cruz then appealed, but the Supreme Court of Georgia denied certiorari. The underlying case is therefore set to be re-tried.

         All the while, this case was progressing and producing a flood of discovery-related issues, as well as allegations of professional misconduct. Because of these hindrances and the posture of the state court action, the Court elected to stay discovery until “the parties have briefed and the Court has considered any potentially dispositive arguments supported by the current record or until a final resolution of the underlying case.” Accepting the Court's invitation, both Almassud and AmFam have moved for summary judgment. AmFam has also filed a motion for sanctions against Almassud.

         Discussion I. Motions for Summary Judgment

          Almassud contends-in two separate motions for summary judgment-that AmFam's declaratory judgment claim and rescission claim fail as a matter of law. AmFam, meanwhile, moves for summary judgment only on its declaratory judgment claim, focusing on Almassud's alleged failure to cooperate in the underlying suit. The Court lays out the applicable legal standard before considering the parties' motions on the merits.

         A. Legal Standard

         Federal Rule of Civil Procedure 56 requires that summary judgment be granted “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” “The moving party bears ‘the initial responsibility of informing the . . . court of the basis for its motion, and identifying those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact.'” Hickson Corp. v. N. Crossarm Co., 357 F.3d 1256, 1259 (11th Cir. 2004) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)). Where the moving party makes such a showing, the burden shifts to the non-movant, who must go beyond the pleadings and present affirmative evidence to show that a genuine issue of material fact does exist. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257 (1986).

         The applicable substantive law identifies which facts are material. Id. at 248. A fact is not material if a dispute over that fact will not affect the outcome of the suit under the governing law. Id. An issue is genuine when the evidence is such that a reasonable jury could return a verdict for the non-moving party. Id. at 249-50.

         In resolving a motion for summary judgment, the court must view all evidence and draw all reasonable inferences in the light most favorable to the non-moving party. Patton v. Triad Guar. Ins. Corp., 277 F.3d 1294, 1296 (11th Cir. 2002). But, the court is bound only to draw those inferences that are reasonable. “Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial.” Allen v. Tyson Foods, Inc., 121 F.3d 642, 646 (11th Cir. 1997) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)). “If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted.” Anderson, 477 U.S. at 249-50 (internal citations omitted); see also Matsushita, 475 U.S. at 586 (once the moving party has met its burden under Rule 56(a), the nonmoving party “must do more than simply show there is some metaphysical doubt as to the material facts”).

         B. Count I - ...


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