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Elk City Golf and Country Club Inc. v. Philadelphia Indemnity Insurance Co.

United States District Court, W.D. Oklahoma

December 3, 2019

ELK CITY GOLF AND COUNTRY CLUB, INC., Plaintiff,
v.
PHILADELPHIA INDEMNITY INSURANCE COMPANY, Defendant.

          ORDER

          TIMOTHY D. DeGIUSTI CHIEF UNITED STATES DISTRICT JUDGE

         Before the Court is Plaintiff's Motion in Limine [Doc. No. 82]. Defendant has responded in opposition [Doc. No. 89], and Plaintiff has filed a reply [Doc. No. 92]. The matter is fully briefed and at issue.

         Plaintiff's breach of contract and bad faith claims arise out of an insurance policy issued by Defendant to Plaintiff. Plaintiff alleges that its real and personal property was damaged or destroyed by a tornado on May 16, 2017. The factual and procedural background of the case appears in the Order of October 24, 2019 [Doc. No. 97], denying summary judgment, and will not be repeated here.

         Plaintiff seeks to exclude Defendant from asserting a “fraud defense” at trial that was not asserted at the time of the denial of the claim. Plaintiff also seeks to exclude Defendant from presenting a comparative bad faith argument, and moves to strike witnesses who were not listed on Defendant's Final Witness List [Doc. No. 39], but were added by Defendant to the Final Pretrial Report [Doc. No. 83]. Finally, Plaintiff seeks to exclude from trial evidence of its prior claims with Defendant. Upon consideration of the issues raised by the motion, the Court makes the following determinations.

         (1) Defendant's fraud defense or new denials for the claim

         At this stage of the proceedings, Defendant has answered the Complaint and asserted its affirmative defenses [Doc. No. 5]. Defendant moved the Court for summary judgment, detailing the evidence that it contended supported its denial of Plaintiff's claim [Doc. No. 38]. The Court denied Defendant's Motion for Summary Judgment [Doc. No. 97]. Now, Defendant asserts for the first time a claim of fraud in Plaintiff's presentation of the claim, specifically in connection with the debris removal after the tornado.

         Following the tornado, volunteers from the Elk City community, including country club members, assisted with the clean-up. Brad Gilbert, President of the Elk City Golf and Country Club, was one of the volunteers who assisted. According to Mr. Gilbert's deposition testimony, the golf club had an impending tournament and “needed to get 120 trees off the fairways and the greens, so [they] could proceed with business.” [Doc. No. 82-2 at 2]. Mr. Gilbert advised that Ronald Murchek, Defendant's adjustor, and Darrin Patrick, the insurance agent who sold the policy to Plaintiff, advised him and the members who assisted with debris removal to submit invoices to Defendant for their services.

         Mr. Gilbert (BVG Construction) submitted an invoice on June 2, 2017, for tree and debris removal in the amount of $7, 200.00. [Doc. No. 82-2 at 3]. He wrote a “personal note” at the bottom of the invoice that indicated the invoice was paid on June 5, 2017. [Doc. No. 82-2 at 3-4]. Mr. Gilbert testified in his deposition that the invoice was never paid, and that he “just wrote it off [on] my books as if the club gets money, they'll pay, and if not - I do a lot of pro bono stuff.” [Doc. No. 82-2 at 3].

         Mr. Murchek testified in his deposition that it was his decision to advance $100, 000.00 to Plaintiff because Plaintiff had a large fundraiser at the end of the month and needed to remove debris. [Doc. No. 82-3 at 2]. After looking at the check, Mr. Murchek acknowledged that the check for $100, 000.00 indicated it was an advance payment on the building loss. Id. at 3. There is no evidence of record, to date, that Defendant has made any payment toward debris removal.[1]

         Defendant also asserts that Plaintiff misrepresented the contents of the clubhouse in submitting its claim to Defendant. Alex Alvarez, the golf course manager, testified in his deposition that he prepared, with input from club members, an itemized list of the club contents that were damaged or lost because of the tornado. [Doc. No. 89-2 at 1]. The list totaled $400, 000.00, which is the coverage for the clubhouse contents under the policy. Mr. Alvarez also testified that the contents that were able to be salvaged were being stored in a train container in the club parking lot. Id. at 1-2. Mr. Alvarez testified that he “tried to be as thorough as possible, ” and that the itemized list included asterisks where the item was physically damaged or was not operable. Id. at 3.

         Mr. Gilbert's testimony supports the testimony of Mr. Alvarez. Mr. Gilbert advised that serial numbers were not provided for the items on the contents list because the items blew away in the tornado. [Doc. No. 89-1 at 12].

         Defendant asserts that the fraud defense has been properly raised, and that it was not aware of Plaintiff's alleged misrepresentations until depositions in late March 2019. Defendant included the defense in the Final Pretrial Report [Doc. No. 83], filed on May 14, 2019. Further, Defendant asserts that the fraud defense was contemplated in its Answer, which provided that the affirmative defense of “Conditions precedent and subsequent to an entitlement to certain benefits under the subject insurance contract are not satisfied, by way of which claim is barred.” [Doc. No. 5 at 3].

         A party who alleges fraud “must state with particularity the circumstances surrounding fraud ….” Fed.R.Civ.P. 9(b). “Rule 9(b) applies to all claims of fraud …, including affirmative defenses.” Boardwalk Apartments, L.C. v. State Auto Prop. and Cas. Ins. Co., 2012 WL 3024712, at *1 (D. Kan. July 24, 2012). Further, Rule 8(c) specifically addresses affirmative defenses and imposes the additional requirement that a party “affirmatively state any avoidance or affirmative defense, including fraud.” Fed.R.Civ.P. 8(c)(1). “The policy behind Rule 8(c) is to put plaintiff on notice well in advance of trial that defendant intends to present” an affirmative defense of fraud. Hardin v. Manitowoc-Forsythe Corp., 691 F.2d 449, 458 (10th Cir. 1982) (emphasis added).

         The Court disagrees with Defendant's assertion that its fraud defense was contemplated in its Answer, as described above. It was not pled with particularity in the Answer, and Defendant has not sought leave to amend its Answer. Assertion of the fraud defense at this late stage in the litigation would be unfairly prejudicial to Plaintiff, particularly given the fact that Defendant has known since March 2019 of Plaintiff's alleged misrepresentations, but has never sought leave to amend its Answer, the Court has denied Defendant's motion for summary judgment, and ...


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