Tuesday, September 10, 2019

Property Owner in Name Only Found Not Entitled to Coverage for Fire Loss of Rental Income Property

Porter v. State Farm Fire & Cas. Co.
(WDNY, decided 6/6/2019)

If your name is on the deed and insurance policy but you invested no money in the acquisition,  operation and insuring of rental income property and want nothing to do with its post-loss claim, are you entitled to policy proceeds in the event the property burns down?

Under the facts of this case, the court said no, you (and the real owner) get nothing.

Plaintiff went to a property foreclosure auction in Buffalo, New York, and, as an accommodation to her sister's boyfriend, successfully bid on 254 Strauss Street.  Plaintiff paid the required $500 deposit, but her sister and sister's boyfriend reimbursed her that amount in full and paid the remaining balance of the auction price.  Although the Strauss Street property was placed in plaintiff's name, she did not manage or have any interest in the subject property. Rather, her sister's boyfriend maintained, and leased the subject property, made renovations, paid property taxes on the property and "handled everything" pertaining to evictions.

Plaintiff testified that she had no authority to sell the property, and did not receive any economic benefit from the property. With regard to the property's insurance policy, plaintiff testified that she was not involved in obtaining the policy; rather, her sister's boyfriend obtained the policy providing plaintiff's information as the owner and he paid the premiums on the policy. Plaintiff knew nothing about the basic coverage of the policy insuring the property and only learned of the policy limits when she "started receiving letters after the property was burned down."

As to her receiving any economic benefit from the property, plaintiff explained to the insurance agency salesman, "I told Mike from State Farm I just — they say sign here, I just sign. I don't even read. I don't even know what I be signing, I just sign."  At a second deposition plaintiff testified that any money she would receive from State Farm "will go straight to [her sister's boyfriend] . . . [b]ecause it's his property."  Plaintiff further testified that, although what remained of the subject property was demolished after the fire, she was not aware who paid for the demolition costs.

In GRANTING State Farm's motion for summary judgment, the District Court (Telesca, J.), held:
  • Replacement Cost Coverage Claim:  "Plaintiff has repeatedly disclaimed any interest in the subject property and testified unequivocally that she had no plans to replace the property. Accordingly, the 'equitable considerations' the Court considered in Zaitchick are not present in this instance. The Court therefore adopts Judge Schroeder's recommendation that the Court grant summary judgment to Defendant on Plaintiff's claim for replacement cost coverage."

  • Debris Removal Coverage:  "It is also undisputed that [the sister's boyfriend] used Plaintiff's auction identification number to bid on the subject property. Although the deed to the subject property lists Plaintiff as the owner, she clearly explained that [the boyfriend] managed and received any benefit from the property in all respects. She was at best an accommodating owner benefitting [the boyfriend] for reasons best known to them. In short, the Demolition Invoice does not create a genuine issue of material fact as to Plaintiff's claim for debris removal coverage. Plaintiff made it very clear in her sworn testimony that "I didn't put any money into the property, [and] I shouldn't get anything from it." She further testified that any payment from the insurance policy would go straight to [the boyfriend] "[b]ecause it's his property."  Accordingly, the demolition costs should be the responsibility of the property owner, which Plaintiff has testified unequivocally is [the sister's boyfriend] . Thus, the responsibility, if any, for the payment of demolition costs is left to be resolved between Plaintiff and [the boyfriend]. Accordingly, the Court declines to adopt Judge Schroeder's recommendation that the Court deny Defendant's motion for partial summary judgment on Plaintiff's claim for debris removal coverage.  
In conclusion, Judge Telesca held:
Based on the above-mentioned information, the Court concludes that Plaintiff's complaint must be dismissed in its entirety. The debt created by the loss of the subject property is not remedied through the insurance policy, based on the understanding as to actual ownership which existed between Plaintiff and Mr. Spencer. Therefore, it is undisputed that Plaintiff is unable to recover under the insurance policy. Her complaint, which alleges that she is entitled to reimbursement under that policy, is inconsistent with her testimony and is hereby dismissed. See Wierzbic v. Cnty. of Erie, No. 13-CV-978S, 2018 WL 550521, at *4 (W.D.N.Y. Jan. 25, 2018); Brandon v. Bd. of Educ. Of Guilderland Cent. Sch. Dist., 487 F. Supp. 1219, 1233 (N.D.N.Y. 1980) (the court may search the record on a motion for summary judgment, and grant relief as it deems proper).
In a decision issued the very following day, the District Court DENIED plaintiff's motion for reconsideration, reiterating:
The evidence shows that Plaintiff clearly and unequivocally claimed no interest in the proceeds of the insurance policy as a result of the fire damage to the property by stating that the insurance proceeds belong to Mr. Spencer, and that she did not want any proceeds paid out to her.  Plaintiff was emphatic that she wanted no financial benefit from the policy, even though she is the named insured, by stating, "I didn't put any money in to the property, [and] I shouldn't get anything from it.".  * * * Plaintiff has failed to articulate a valid basis upon which reconsideration is warranted, and the June 6th Decision and Order dismissing the complaint in its entirety stands.
Plaintiff has filed an appeal to the Second Circuit Court of Appeals. If that appeal is perfected, I'll report the outcome. Scott Storm oversaw the litigation of this matter. Questions about this case may be directed to him or me.

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