Holzworth v Nationwide Mutual Ins. Co., (04-1062) 08/02/2005

Appeal by plaintiffs from judgment entered 21 January 2004 by Judge Yvonne Mims Evans in Gaston County Superior Court. Heard in the Court of Appeals 24 March 2005.

J. Boyce Garland, Jr., for plaintiffs-appellants.

Golding, Holden & Pope, L.L.P., by C. Bryon Holden and Lindsay M. Peed, for defendant-appellant.

CALABRIA, Judge.

    Dennis Holzworth (“Mr. Holzworth”) and Marlise Holzworth (“Mrs. Holzworth”) (collectively “plaintiffs”) appeal the grant of summary judgment to Nationwide Mutual Fire Insurance Company (“Nationwide”) on their claims of breach of contract and unfair and deceptive trade practices. We affirm.
    On 9 August 2000, Mrs. Holzworth telephoned a Nationwide agent, Marcus C. Seay (“Seay”), and requested a quote for a homeowner's insurance policy. Later that day, Mrs. Holzworth wentto Seay's office and signed a one-page homeowner's insurance application for a Nationwide policy. The application included a listing of the policy coverage, a listing of the dwelling type and property features, and two inquiries. The first inquiry asked, “HAS INSURED OR FAMILY MEMBER BEEN SUED, FILED BANKRUPTCY, HAD REPOSSESSION/JUDGMENT WITHIN THE LAST 5 YEARS?” The second inquiry asked whether the insured suffered any “PAST LOSSES” and for an explanation of any such losses. Mrs. Holzworth's application stated “no” to the first inquiry and “none” to the second inquiry. The final clause of the application stated, “I HEREBY DECLARE THAT THE FACTS STATED IN THE ABOVE APPLICATION ARE TRUE AND REQUEST THE COMPANY ISSUE THE INSURANCE AND ANY RENEWALS THEREOF IN RELIANCE THEREON.” Mrs. Holzworth signed and dated the application in the signature space below this declaration. Her application was approved, and she purchased the homeowner's policy on 11 August 2000.
    On 21 January 2001, a fire damaged plaintiffs' residence. On 22 January 2001, a second fire occurred at plaintiffs' residence causing substantial damage to the residence before being extinguished. Plaintiffs promptly informed Nationwide of each loss. During its investigation of plaintiffs' claims, Nationwide learned that plaintiffs filed for bankruptcy in 1996 and that Mrs. Holzworth made a claim on a homeowner's insurance policy for fire loss in 1998. On 20 August 2001, Nationwide denied plaintiffs' claims and canceled their policy on the basis that Mrs. Holzworthmisrepresented material facts or circumstances in the application regarding the prior bankruptcy and the past losses.
    During discovery, Mrs. Holzworth “[a]dmitted that [plaintiffs] filed for bankruptcy in 1996 in the Southern District of Texas” but denied that her application contained a misrepresentation because Seay “never asked” her about past bankruptcies. Regarding past losses, Mrs. Holzworth “[a]dmitted that Plaintiff made a fire claim on an insurance policy in 1997 or 1998[,] . . . [but] that she told [Seay] this in a phone conference on August 9, 2000.” In a response to one of defendant's requests for admission, which cited the clause where plaintiff declared that the facts stated in the application were true, Mrs. Holzworth “[a]dmitted that the application [did] in fact have this wording at the bottom, but denied that Plaintiff ever reviewed this clause and certified to it because the agent never asked her to review it.” Seay stated that he asked Mrs. Holzworth whether she or any of her family members had filed for bankruptcy within the last five years, did not recall Mrs. Holzworth mentioning prior losses, and advised her to review the application before signing it.
    Plaintiffs filed suit against Nationwide alleging breach of contract and unfair and deceptive trade practices. On 21 January 2004, the trial court denied plaintiffs' motion for partial summary judgment on the issue of whether Nationwide could assert the affirmative defense of misrepresentation of a material fact, and the court entered summary judgment for Nationwide on plaintiffs' claims. Plaintiffs appeal both the trial court's denial of theirmotion for partial summary judgment and grant of Nationwide's motion for summary judgment.
    Summary judgment is properly granted where “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law.” N.C. Gen. Stat. § 1A-1, Rule 56(c) (2003). In making this determination, all evidence must be taken in the light most favorable to the non-moving party. Bruce-Terminix Co. v. Zurich Ins. Co., 130 N.C. App. 729, 733, 504 S.E.2d 574, 577 (1998). A defendant is entitled to summary judgment “when (1) an essential element of the other party's claim or defense is non-existent; (2) the other party cannot produce evidence to support an essential element of its claim or defense; or (3) the other party cannot overcome an affirmative defense which would bar the claim.” Caswell Realty Assocs. I, L.P. v. Andrews Co., 128 N.C. App. 716, 720, 496 S.E.2d 607, 611 (1998). “Once a party moving for summary judgment has made and supported his motion, the burden shifts to the non-movant to introduce evidence of specific facts showing there is a genuine issue for trial.” Westover Products, Inc. v. Gateway Roofing, Inc., 94 N.C. App. 63, 67, 380 S.E.2d 369, 372 (1989). This Court reviews a grant of summary judgment de novo. Falk Integrated Techs., Inc. v. Stack, 132 N.C. App. 807, 809, 513 S.E.2d 572, 574 (1999).
    Plaintiffs assert they forecast sufficient evidence to overcome Nationwide's affirmative defense of misrepresentation ofa material fact. “It is a basic principle of insurance law that the insurer may avoid his obligation under the insurance contract by a showing that the insured made representations in his application that were material and false.” Pittman v. First Protection Life Insurance Co., 72 N.C. App. 428, 433, 325 S.E.2d 287, 291 (1985). For a defendant insurer to prevail on the affirmative defense of misrepresentation of material fact, the insurer “must prove the insured made statements that were: 1) false, 2) material, and 3) knowingly and willfully made.” Bryant v. Nationwide Mut. Fire Ins. Co., 313 N.C. 362, 370, 329 S.E.2d 333, 338 (1985).
    By signing an insurance application, a plaintiff represents that she read the application “and that the information contained therein [is] true.” Goodwin v. Investors Life Ins. Co., 332 N.C. 326, 331, 419 S.E.2d 766, 768 (1992). Indeed, “[t]he law presumes that the [insured] knew the contents of the application she signed . . . .” Id. Accordingly, “[a]ny false statements contained in the application [are] imputed to the insured and not the insurer.” Ward v. Durham Life Ins. Co., 90 N.C. App. 286, 291, 368 S.E.2d 391, 394 (1988). Even where false answers were inserted in the application by the agent through mistake, negligence, or fraud, an insured can avoid responsibility for the false statements “'only if [she] is justifiably ignorant of the untrue answers, has no actual or implied knowledge thereof, and has been guilty of no bad faith or fraud.'” Goodwin, 332 N.C. at 330, 419 S.E.2d at 768(quoting Jones v. Insurance Co., 254 N.C. 407, 413, 119 S.E.2d 215, 219-20 (1961)).
    It is well established “that one who signs a written instrument, without being induced thereto through fraud or deception, cannot avoid its effect on the ground that at the time [she] signed the paper [she] did not read it or know its contents . . . .” Harrison v. Southern R. Co., 229 N.C. 92, 95, 47 S.E.2d 698, 700 (1948). Unless prevented from doing so, a plaintiff has “[t]he duty to read an instrument or to have it read before signing it.” Id. The duty to read “is a positive one, and the failure to do so, in the absence of any mistake, fraud or oppression, is a circumstance against which no relief may be had, either at law or in equity.” Id.
    As an initial matter, we note plaintiffs do not dispute the falsity of the answers to the two inquiries or their materiality. Plaintiffs ostensibly argue Mrs. Holzworth did not make the false statements knowingly and willfully. Specifically, they contend their evidence showed fraud and bad faith on Seay's part and justification for her ignorance in that Seay allegedly (1) did not ask Mrs. Holzworth about past bankruptcies, (2) did not advise her to review the application, and (3) inserted a false answer in response to the inquiry regarding past losses.
    The evidence presented shows Seay presented the application to Mrs. Holzworth to read and sign. Plaintiffs present no evidence that Mrs. Holzworth could not read, that Seay prevented her from reading the application, or that he in any way induced her to signthe application. At most, plaintiffs contend Seay did not advise Mrs. Holzworth to read the application. This in no way constituted inducing her signature through fraud and certainly did not relieve her of the positive duty to read the application and understand its contents prior to signing it. Plaintiffs “cannot invoke [Mrs. Holzworth's] own heedlessness to discredit [her] solemn [declaration], and then call that heedlessness someone else's fraud.” Harrison, 229 N.C. at 95, 47 S.E.2d at 700. Accordingly, we hold Mrs. Holzworth had no justification for her ignorance of the falsity of the answers to the application's two inquiries and her ignorance of the final clause under which she signed declaring all the facts in the application to be true.
    Plaintiffs next assert their evidence of Seay's awareness of plaintiffs' prior loss necessitates imputation of his knowledge to Nationwide; therefore, Nationwide is estopped from invalidating their insurance policy for misrepresenting the absence of a prior loss. Accepting this as true, nothing in the record indicates either Seay or Nationwide had knowledge of plaintiffs' prior bankruptcy when Mrs. Holzworth signed the application and later purchased the insurance. Nationwide was permitted to rely on Mrs. Holzworth's negative answer to the bankruptcy inquiry and could properly invalidate plaintiffs' policy on the basis of that misrepresentation of material fact.
    We have carefully considered plaintiffs' remaining arguments and consider them to be without merit. For the foregoing reasons, we affirm the trial court's denial of plaintiffs' motion forpartial summary judgment and grant of summary judgment to Nationwide.
    Affirmed.
    Judges TIMMONS-GOODSON and GEER concur.
    Report per Rule 30(e).

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