Great Lakes Insurance Se v. Tamara Smith

• Court: Court of Appeals for the Ninth Circuit
• Decided: August 22, 2022
• Docket: 21-56231
• Status: Unpublished

Opinion

FILED NOT FOR PUBLICATION AUG 22 2022 UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS

FOR THE NINTH CIRCUIT

GREAT LAKES INSURANCE SE, No. 21-56231

Plaintiff-Appellee, DC No. 5:20-cv-00586-AB

v. MEMORANDUM* TAMARA LEE SMITH,

Defendant-Appellant.

Appeal from the United States District Court for the Central District of California Andre Birotte, Jr., District Judge, Presiding

Argued and Submitted July 25, 2022 Pasadena, California

Before: TASHIMA, WATFORD, and FRIEDLAND, Circuit Judges.

Tamara Lee Smith appeals from the judgment entered after the district court

granted summary judgment in favor of Great Lakes Insurance SE. We have

jurisdiction pursuant to 28 U.S.C. § 1291, and we vacate the judgment and remand

for further proceedings.

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. The doctrine of uberrimae fidei “‘imposes a duty of utmost good faith,’ so

‘an applicant for a marine insurance policy is bound to reveal every fact within his

[or her] knowledge that is material to the risk.’” N.H. Ins. Co. v. C’Est Moi, Inc.,

519 F.3d 937, 938 (9th Cir. 2008) (first quoting, Certain Underwriters at Lloyds,

London v. Inlet Fisheries Inc., 518 F.3d 645, 648 (9th Cir. 2008); and then quoting

Cigna Prop. & Cas. Ins. Co. v. Polaris Pictures Corp., 159 F.3d 412, 420 (9th Cir.

1998)). It is undisputed that Smith’s failure to disclose material information on the

insurance application – John Jay Kerchelich’s criminal conviction – was innocent

because, when Smith asked him if he had any convictions, he said that he did not.1

We have found no caselaw, and Great Lakes has pointed us to none, holding that

1 We do not recite all the facts, which are undisputed and familiar to the parties. 2 the doctrine of uberrimae fidei applies to void an insurance policy where the

applicant did not know the material information despite her attempt to obtain it.2

Great Lakes relies on out-of-circuit cases to argue that the duty of good faith

requires the disclosure of material facts that the applicant ought to have known.

See Quintero v. Geico Marine Ins. Co., 983 F.3d 1264, 1271 (11th Cir. 2020)

(stating that uberrimae fidei requires the disclosure of “all material facts that are

‘within or ought to be within, the knowledge of one party, and of which the other

party has no actual or presumptive knowledge’” (quoting Steelmet, Inc. v. Caribe

Towing Corp., 747 F.2d 689, 695 (11th Cir. 1984), reh’g granted in part, denied in

part, 779 F.2d 1485 (11th Cir. 1986))). Smith does not expressly challenge

2 Great Lakes argues that C.N.R. Atkin v. Smith, 137 F.3d 1169 (9th Cir. 1998), controls, but it is distinguishable. There, we held that the insured was “responsible for the misrepresentations of his agent in obtaining the insurance policy,” relying on the undisputed facts showing that this person acted as the insured’s agent in the vessel’s business, including applying for and obtaining the insurance. Id. at 1171. The agent was the one who filled out the insurance application, and he failed to disclose his own criminal convictions. Thus, in contrast to Smith, the person who completed the application had knowledge of the information that was omitted. There was no evidence in C.N.R. Atkin that the insured attempted to obtain the proper information. Moreover, there was substantial undisputed evidence of agency in C.N.R. Atkin: the insured and the agent held the agent out as co-captain of the vessel; the agent “oversaw the vessel’s business, including acquiring insurance and overseeing major repairs,” and; the agent “lived on the boat for several years, often in [the insured’s] absence for weeks and months at a time.” Id. Great Lakes has not argued that there is comparable evidence here that Kerchelich was acting as Smith’s agent for purposes of the insurance application. 3 Quintero’s “ought to know” standard, but argues only that, on this record, Great

Lakes has not established that Smith ought to have known of Kerchelich’s

conviction.3 We agree that Great Lakes has not made such a showing.

The unpublished district court cases cited by Great Lakes do not support its

assertion that Smith ought to have known merely because of her relationship with

Kerchelich. None of the cases involved an insurance applicant who was innocent

of the misrepresentation or held that it was appropriate to impute knowledge

possessed by an individual to his or her romantic partner. In Great Lakes

Reinsurance PLC v. Arbos, No. 08-20439-CIV, 2009 WL 8642003 (S.D. Fla. Jan.

6, 2009), the insured defendants, Arbos and Quevedo, falsely told the insurance

broker who filled out the insurance application that Arbos had extensive boating

experience and that neither Arbos nor Quevedo had been involved in a prior loss.

The insurer sought to void the policy based on these misrepresentations. Arbos

and Quevedo argued that they were never shown the insurance application, never

provided information for the insurance application, and even that they did not

know an insurance application existed. The district court found it “difficult to

believe that Defendants were completely unaware of the filing of an application for

3 Great Lakes asserted at oral argument that the question of what an insured applicant ought to know is a legal question, but did not provide any precedent to support this assertion. 4 insurance on their behalf,” pointing out that Quevedo paid the insurance premium,

Arbos filed a claim under the policy, and Quevedo “had had at least one marine

insurance policy in the past.” Id. at *6 n.6. Unlike here, the evidence belied the

assertions that the insurance applicants did not know about the misrepresentations.

Nor is Great Lakes Reinsurance (UK) PLC v. S. Marine Concepts Inc., No.

CIV. G-07-276, 2008 WL 6523861 (S.D. Tex. Oct. 21, 2008), applicable. There,

the captain of the vessel who filled out the insurance application “intentionally

failed to list his previous loss history.” Id. at *3.

In Great Lakes Reinsurance (UK) PLC v. Kranig, No. Civil 2011-122, 2013

WL 2631861 (D.V.I. June 12, 2013), which Great Lakes first cited at oral

argument, the insurance applicant failed to disclose his own conviction for

domestic violence and his partner’s driving and criminal background, despite

specific questions on the application. Unlike here, there was no indication that the

applicant acted in good faith when he filled out the application. Moreover,

although the district court noted that the applicant’s response about his partner was

based on her representations, id. at *5, the court did not impute knowledge of her

background based on their relationship. Nor did it address whether the applicant

knew or ought to have known about his partner’s background. Kranig accordingly

does not support Great Lakes’ position.

5 In contrast to the above cases, there was no evidence here that the insurance

applicant knew the material information and failed to disclose it. And there has

thus far been no factfinding by the district court as to whether Smith ought to have

known about the information, or whether she failed to make a reasonable inquiry

into whether Kerchelich was telling the truth. In the absence of such factfinding or

further development of the record, we cannot say that Smith violated the duty of

utmost good faith in completing the insurance application. We therefore vacate the

grant of summary judgment and remand for further proceedings consistent with

this disposition.

VACATED and REMANDED. Each side shall bear its own costs.