Unencumbered Assets, Trust v. Great American Insurance
817 F. Supp. 2d 1014
S.D. Ohio2011Background
- Excess D&O policy from Great American, follow-form to Gulf policy, with tail coverage option for National Century and its directors/officers.
- Parties seeking coverage: UAT (bankruptcy trustee), Principals Poulsen, Ayers, Faulkenberry, Dierker, Barbara Poulsen, Outside Directors Mendell, Pote, Wilkinson.
- Great American seeks summary judgment to void or deny coverage based on misrepresentations and the dishonesty exclusion; UAT and Principals oppose on grounds including entity coverage and waiver.
- Gulf policy contains a dishonesty exclusion and void-ab-initio language; excess policy follows Gulf terms and incorporates the proposal form and financial statements.
- Court proceedings involved multiple procedural motions (amendment, joinder/intervention, evidentiary/Rule 201) and later motions for summary judgment addressing rescission, dishonesty, and waiver; Ohio law governs contract interpretation.
- Court’s outcome: denied principals’ summary-judgment motions; granted Great American summary judgment on the dishonesty exclusion as applied to the Principals; reserved some issues on void-ab-initio rescission and waiver, with Great American also winning on the dishonesty exclusion as to Poulsen/UAT while allowing remaining parties to complete discovery by year-end 2011.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Rescission void ab initio under Boggs test | Poulsen misrepresented facts; representations are misstatements that void policy. | Policy may be voidable or cancelable; language and incorporation may support void ab initio. | Issue unresolved; court denies summary judgment on void ab initio. |
| Dishonesty exclusion bars Principals’ coverage | Convictions not final; should not trigger exclusion. | Final judgments establish deliberate fraud/dishonesty. | Dishonesty exclusion applies to Poulsen, Ayers, Faulkenberry, Dierker. |
| Dishonesty exclusion imputation to UAT | Adverse-interest/innocent insider exception should shield UAT. | Sole actor rule imputes to principal entities; no valid innocent-insider protection. | Exclude UAT from coverage via imputed conduct. |
| Waiver by accepting tail premiums | Great American waived rescission by accepting tail coverage payments. | Waiver factual issue; knowledge at time of payment crucial. | Genuine issue of material fact; not resolved at summary judgment. |
| Choice of law for contract interpretation | Ohio law should apply due to contract formation/negotiation/place of business. | Agree on Ohio law; no contrary choice-of-law provision. | Ohio law applies. |
Key Cases Cited
- Allstate Ins. Co. v. Boggs, 27 Ohio St.2d 216 (Ohio 1971) (defines Boggs test: warranties vs. representations; void ab initio language.)
- Cross v. Ledford, 161 Ohio St. 469 (Ohio 1954) (settles fraud/pleading requirements for misrepresentation claims.)
- Davidson v. State Farm Fire & Cas. Co., 87 Ohio App.3d 101 (Ohio Ct.App.1993) (declarations/coverage interpretation; incorporation by reference.)
- Griewahn v. United States Fid. & Guar. Co., 160 Ohio App.3d 311 (Ohio Ct.App.2005) (excess-follow-form and control of terms; severability considerations.)
- English v. National Cas. Co., 138 Ohio St. 166 (Ohio 1941) (waiver estoppel when insurer accepts premium after knowledge of grounds to rescind.)
- Dublin Securities, Inc. v. Dublin Securities, 133 F.3d 377 (6th Cir.1997) (sole actor rule; agency/alter ego implications.)
- Rice v. Liberty Surplus Ins. Corp., 118 F.App’x 116 (6th Cir.2004) (finality of judgments within dishonesty-exclusion context.)
- Winston v. Illinois Nat’l Ins. Co., not included (WL) (Ohio) (cited for incorporation language; not included due to lack of official reporter.)