Nationwide Property & Casualty Insurance Co. v. Faircloth
2016 U.S. App. LEXIS 23325
| 8th Cir. | 2016Background
- In May 2013 Donald Faircloth purchased auto insurance from Nationwide via an online application that asked the vehicle’s “primary use” with choices (parentheticals): Work/School, Pleasure, Business. Faircloth selected “Work.”
- Nationwide issued the policy; Faircloth wrecked the car on June 30, 2013. Nationwide later rescinded the policy, tendered premiums (which Faircloth did not accept), and sought declaratory judgment of no duty to indemnify or defend based on alleged material misrepresentations in the application.
- During discovery Nationwide learned Faircloth was using the vehicle full-time for delivery work, logging over 1,200 business miles per week, and argued he misrepresented primary use (should have selected “Business”).
- The district court granted summary judgment for Nationwide, finding (1) the online application included the explanatory parentheticals and was not ambiguous, and (2) a reasonable person using the car for heavy deliveries would have selected “Business,” so the misrepresentation was material.
- Faircloth challenged the ruling on multiple grounds: the district court did not address materiality adequately; the application was ambiguous (Nationwide induced any confusion); rescission procedures under Arkansas law were improper; estoppel; and that third-party coverage claim was not moot.
- The Eighth Circuit affirmed, holding Nationwide met its burden to show materiality (via an underwriter affidavit that the same policy would not have been issued had Faircloth selected “Business”) and that no genuine fact issue existed about the application’s appearance or ambiguity.
Issues
| Issue | Faircloth's Argument | Nationwide's Argument | Held |
|---|---|---|---|
| Whether Faircloth’s selection of “Work” (vs. “Business”) was a material misrepresentation permitting rescission | He denied materiality and said the application was ambiguous or induced by Nationwide, so rescission is improper | The misstatement was material because Nationwide would not have issued the same online policy for a business-use vehicle | Held for Nationwide: misrepresentation was material; Nationwide showed it would have referred him to purchase a business policy instead |
| Whether ambiguity in the online application precludes rescission | The application was ambiguous (parentheticals unclear or caused by insurer) so Nationwide cannot rescind based on induced misrepresentation | The application included clear parentheticals; no factual dispute about how the screen appeared | Held for Nationwide: no ambiguity as a matter of law; Faircloth failed to raise a fact question |
| Whether Nationwide carried its burden to prove it would not have issued the same coverage | Faircloth argued underwriter testimony was inconsistent/insufficient to prove materiality | Nationwide produced an underwriter affidavit stating the policy would not have been available and referral to call center would occur for business use | Held for Nationwide: affidavit sufficed and Faircloth did not present contrary evidence to undermine it |
| Procedural/other defenses (improper rescission, estoppel, mootness of third-party claim) | Faircloth raised rescission technicalities, estoppel, and that third‑party-liability remained live | Nationwide relied on rescission and tender of premiums, and pursued declaratory judgment | Held: Court affirmed on materiality and application clarity and declined to address alternative arguments; those were considered but found without merit |
Key Cases Cited
- Hohn v. BNSF Ry. Co., 707 F.3d 995 (8th Cir.) (appellate standard to affirm on any record-supported basis)
- Chew v. Am. Greetings Corp., 754 F.3d 632 (8th Cir.) (summary judgment standard)
- 3234 Washington Ave. N. v. United States, 480 F.3d 841 (8th Cir.) (evidence/credibility standards when party with burden moves for summary judgment)
- U.S. Commodity Futures Trading Comm’n v. Kratville, 796 F.3d 873 (8th Cir.) (creditability of movant’s witness in summary judgment context)
- Rohr v. Reliance Bank, 826 F.3d 1046 (8th Cir.) (nonmovant must present specific facts to raise genuine fact issue)
- Alexander v. Old Republic Ins. Co., 436 S.W.2d 829 (Ark.) (materiality is fact question unless so obvious no contrary inference permissible)
- S. Farm Bureau Life Ins. Co. v. Cowger, 748 S.W.2d 332 (Ark.) (insurer may rescind for any material misrepresentation)
- Brooks v. Town & Country Mut. Ins. Co., 741 S.W.2d 264 (Ark.) (insurer must show it would not have issued coverage had it known true facts)
- Smith v. Prudential Prop. & Cas. Ins. Co., 10 S.W.3d 846 (Ark.) (existence of ambiguity is a question of law)