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Cincinnati Insurance Co. v. Wilkerson

United States District Court, W.D. Kentucky, Bowling Green Division

April 1, 2014

CINCINNATI INSURANCE COMPANY, Plaintiff,
v.
HAROLD WILKERSON, et al., Defendants.

MEMORANDUM OPINION

THOMAS B. RUSSELL, District Judge.

This matter is before the Court upon Plaintiff Cincinnati Insurance Company's Motion for Summary Judgment. (Docket No. 26.) Defendant Harold Wilkerson has responded, (Docket No. 30), and Plaintiff has replied, (Docket No. 32). This matter now is ripe for adjudication. For the following reasons, Plaintiff's Motion for Summary Judgment, (Docket No. 26), will be GRANTED.

BACKGROUND

This declaratory judgment action arises out of a fall sustained by a minor in October 2010 at a vacant hotel situated on premises owned by Defendant Harold Wilkerson at 221 W. Main Street in Campbellsville, Kentucky. The minor's guardian, Angela Graham, filed suit against Wilkerson in Taylor Circuit Court on March 4, 2013.

Wilkerson purchased the property at 221 W. Main Street in 1997. The plat for 221 W. Main Street shows that the property was divided into three lots. An active hotel complex was located on Lot 1, an abandoned motel was located on Lot 2, and Lot 3 was vacant and undeveloped. At the time of purchase, the hotel on Lot 1 was operated as an apartment complex with a restaurant located in the basement. The hotel remained in operation until a fire in the restaurant occurred sometime on 2003 or 2004. The hotel was closed after the restaurant fire pending a fire marshal's investigation, during which time the building was ransacked by vandals, thereafter making it impractical to repair. The hotel has remained vacant since the time of the fire.

When Wilkerson purchased the property, the hotel was insured under a policy issued by Ohio Casualty. At the end of the policy period, however, the Ohio Casualty policy was not renewed because of a change in Ohio Casualty's underwriting standards concerning the number of units in the hotel. According to Wilkerson, Taylor County Bank thereafter procured liability and property insurance for the hotel to cover its mortgage interest in the property. Wilkerson maintained no other coverage on the hotel following the nonrenewal of the Ohio Casualty policy. (Docket No. 26-2, at 6-8.) The policy procured by Taylor County Bank covered the bank's interest following the fire to the hotel. Wilkerson made no claims on any insurance policy as a result of that fire. The property at 221 W. Main Street thereafter remained uninsured until late 2007.

Wilkerson contacted his agent, Scott Jessie, in November 2007 to obtain insurance coverage for property Wilkerson owned at 2028 Campbellsville Road in Greensburg, Kentucky, on which a rental house and warehouse are located. A "Commercial Insurance Application" was submitted by the Jessie Insurance Agency to Cincinnati Insurance Company on November 28, 2007, requesting liability and property coverage for the two structures located on the Greensburg property. Cincinnati Insurance Company issued Commercial Policy No. CPP 365 11 40 (the "Policy") to Wilkerson for the policy period of November 28, 2007, through November 28, 2010. ( See Docket No. 1-1.) The Policy contained a "Schedule of Locations" endorsement listing the insured location as the property at 2028 Campbellsville Road in Greensburg. (Docket No. 1-1, at 35.) The Policy also contained a "Limitation of Coverage to Designated Premises or Project" endorsement providing that the Policy's commercial general liability coverage applied only to bodily injury arising out of "[t]he ownership, maintenance, or use of the premises shown in the Schedule [of Locations endorsement]." (Docket No. 1-1, at 37.)

After the issuance of the Policy, Wilkerson contacted Jessie to request that a renovated structure on the property at 221 W. Main Street in Campbellsville be added to the Policy. Wilkerson advised Jessie that he had renovated a structure on the 221 W. Main Street property into nine one-bedroom rental units and that he needed to insure the renovated structure as a condition of the loan he had taken to finance the renovations. A "Commercial Policy Change Request" was submitted to Cincinnati Insurance Company in January 2008, which listed a single-story structure built in 1956 with improvements to the plumbing, heating, roofing, and wiring in 2007. (Docket No. 1-4, at 1-2.) The Commercial Policy Change Request also identified Taylor County Bank as a mortgagee with an additional interest in the property. (Docket No. 1-4, at 2.) Jessie testified in his deposition that Wilkerson did not request coverage for the vacant hotel on Lot 1 at that time or any time since. ( See Docket No. 26-11, at 6, 11.) Jessie further testified that had Wilkerson requested coverage for the vacant hotel, Cincinnati Insurance Company would not have issued a policy providing such coverage, and that Jessie would have had to contact a specialty market insurer to locate coverage. (Docket No. 26-11, at 12.)

Jessie visited the premises at 221 W. Main Street to confirm that the building was being remodeled as Wilkerson had indicated and determined that the building being renovated was the formerly abandoned motel located on Lot 2. Jessie testified that when he inspected the property, he observed that improvements had been made converting the formerly abandoned motel on Lot 2 into one-bedroom apartments. (Docket No. 26-11, at 10.) Jessie further testified that he observed no improvements to the vacant hotel and that there was no discussion of any such improvements having been made. (Docket No. 26-11, at 10.) Jessie was unaware that the renovated apartment building shared a physical address with the vacant hotel on Lot 1. Jessie knew that Wilkerson owned the vacant hotel because the Jessie Agency had insured the restaurant operated in the hotel (through a different carrier) until the restaurant closed as a result of the fire. (Docket No. 26-11, at 9.) Jessie assumed, however, that the vacant hotel had a separate address because of the layout of the property. ( See Docket No. 26-11, at 7-8.)

Pursuant to the policy change request, Cincinnati Insurance Company issued a "General Change Endorsement" effective January 2, 2008, which amended the Schedule of Locations to include 221 W. Main Street. (Docket No. 1-1, at 32.) That endorsement shows that one building was added to the commercial property form and that nine single-family dwellings were added to the commercial general liability form. (Docket No. 1-1, at 32.) The Limitation of Coverage to Designated Premises or Project endorsement also was amended to include the specified property at 221 W. Main Street location. (Docket No. 1-1, at 32.)

STANDARD

Summary judgment is appropriate where "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). "[N]ot every issue of fact or conflicting inference presents a genuine issue of material fact." Street v. J.C. Bradford & Co., 886 F.2d 1472, 1477 (6th Cir. 1989). The test is whether the party bearing the burden of proof has presented a jury question as to each element in the case. Hartsel v. Keys, 87 F.3d 795, 799 (6th Cir. 1996). The plaintiff must present more than a mere scintilla of evidence in support of his position; he must present evidence on which the trier of fact could reasonably find for him. Id. (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986)). "[T]he mere existence of a colorable factual dispute will not defeat a properly supported motion for summary judgment. A genuine dispute between the parties on an issue of material fact must exist to render summary judgment inappropriate." Monette v. Elec. Data Sys. Corp., 90 F.3d 1173, 1177 (6th Cir. 1996), abrogated on other grounds by Lewis v. Humboldt Acquisition Corp., Inc., 681 F.3d 312 (6th Cir. 2012).

In determining whether summary judgment is appropriate, a court must resolve all ambiguities and draw all reasonable inferences against the moving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). Still, "[a] party asserting that a fact cannot be or is genuinely disputed must support the assertion by... citing to particular parts of materials in the record... or showing that the materials cited do not establish the absence or presence of a genuine dispute." Fed.R.Civ.P. 56(c)(1). Finally, while the substantive law of Kentucky is applicable here pursuant to Erie R. Co. v. Tompkins, 304 U.S. 64 (1938), a federal court sitting in diversity applies the standards of Fed.R.Civ.P. 56, not "Kentucky's summary judgment standard as expressed in Steelvest, ...


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