53 F.4th 437
8th Cir.2022Background
- Taylor applied for home insurance on an industry-standard ACORD form that asked if the applicant "had a foreclosure, repossession, bankruptcy or filed for bankruptcy during the past five (5) years." She answered "no."
- Six days before she applied, Taylor's mortgagee filed a Notice of Default and Intention to Sell (initiation of foreclosure proceedings); Taylor's attorney had communicated with the mortgagee; she later resolved the matter and the home was not sold.
- Hiscox (a capital provider in the Lloyd's market) issued the policy after receiving the ACORD application through an agent. About six months later Taylor's home burned down and she filed a claim.
- During investigation Hiscox discovered the undisclosed foreclosure proceedings and rescinded the policy ab initio, then sued for a declaratory judgment that rescission was proper; Taylor counterclaimed for breach, bad faith, and improper rescission.
- The district court granted summary judgment for Hiscox, finding Taylor materially misrepresented by answering "no" to the foreclosure question because a foreclosure had been commenced; Taylor appealed.
- The Eighth Circuit reversed and remanded, holding the application question was ambiguous and must be construed for the insured; it left other alleged misrepresentations for the district court to address on remand.
Issues
| Issue | Taylor's Argument | Hiscox's Argument | Held |
|---|---|---|---|
| Meaning of "had a foreclosure" in the ACORD question | Means a completed foreclosure sale (or is at least ambiguous) | Means the commencement of foreclosure proceedings (unambiguous) | Ambiguous; can reasonably mean sale or the process, so construed for insured |
| Whether Taylor's "no" answer was a material misrepresentation entitling rescission | Not a misrepresentation because question ambiguous; no clear requirement to disclose commencement | Material because commencement indicates financial distress and risk | Not decided on materiality because ambiguity resolves the dispositive issue in Taylor's favor |
| Whether ambiguity rule applies when form is industry-standard (not insurer-drafted) | Ambiguities still construed against insurer when insurer selects/uses the form | Insurer argues it didn’t draft the form so rule shouldn’t apply | Rule applies if insurer chose/required the form; Hiscox regularly used and relied on the ACORD form, so ambiguity resolves for insured |
| Whether other alleged misrepresentations justify affirming rescission | Taylor: other alleged misstatements were not decided/adjudicated below | Hiscox: alternative misrepresentations may support rescission | Court did not decide; remanded to district court to sort out other alleged misrepresentations |
Key Cases Cited
- Grinnell Mut. Reinsurance Co. v. Dingmann Bros. Constr. of Richmond, Inc., 34 F.4th 649 (8th Cir. 2022) (de novo review of cross-motions for summary judgment)
- Allstate Ins. Co. v. Burrough, 120 F.3d 834 (8th Cir. 1997) (insurance policies construed for insured and against insurer)
- Nationwide Prop. & Cas. Ins. Co. v. Faircloth, 845 F.3d 378 (8th Cir. 2016) (insurer may rescind for material misrepresentation even if unrelated to loss)
- Phelps v. U.S. Life Credit Life Ins. Co., 984 S.W.2d 425 (Ark. 1999) (application language construed like policy language in insured's favor)
- U.S. Fid. & Guar. Co. v. Cont'l Cas. Co., 120 S.W.3d 556 (Ark. 2003) (ambiguities in insurance contracts resolved for insured)
- ProAssurance Indem. Co. v. Metheny, 425 S.W.3d 689 (Ark. 2012) (contract terms given plain, ordinary, popular sense)