Wheeler v. American Family Home Insurance Company

Background

James Wheeler claimed coverage under his Collector Vehicle Insurance Policy for damage to his Lamborghini after a March 18, 2019 collision. American Family Home Insurance Company (AFH) denied the claim, concluding that the vehicle was being used for a commercial purpose and that the policy limited collision coverage to occasional pleasure use.

Wheeler asserted claims for breach of written contract, breach of the implied covenant of good faith and fair dealing, fraud, and negligent misrepresentation. AFH also sought declaratory relief regarding the absence of coverage and other policy exclusions. AFH moved for summary judgment, which is judgment without a trial when no genuine dispute of material fact exists and the moving party is entitled to judgment as a matter of law.

Contract Coverage

AFH argued that the policy did not cover the loss because Henry Gasparian possessed the Lamborghini and was not a named insured or a listed operator. The court held that the policy’s property-damage coverage defined the covered vehicle by the vehicle listed in the policy and how it was used, rather than by the identity of the driver. The court also noted that collision coverage generally attaches to the insured vehicle rather than the driver.

The court rejected AFH’s reliance on an exclusion for loss while the vehicle was driven by an unnamed family member because Gasparian was not a family member as defined by the policy. The court also found ambiguity in the policy overview’s language about notifying AFH of regular operators. Because the insurer had not shown that the exclusion clearly applied, the court denied, in part, AFH’s motion for summary judgment on Wheeler’s breach-of-contract claim.

Policy Voidance and Unclean Hands

AFH argued that Wheeler’s alleged inconsistent statements about who possessed the Lamborghini during an earlier claim made the policy void. AFH also argued that Wheeler misrepresented or concealed whether he loaned the vehicles to others during renewal. The court concluded that AFH had not shown, as a matter of law, that the alleged statements were material or that the policy was void. The court therefore denied, in part, AFH’s motion on that basis.

AFH further relied on the unclean-hands defense, which can bar relief when a plaintiff’s misconduct is connected to the dispute. The court concluded that AFH had not shown that it was entitled to judgment as a matter of law based on that defense.

Bad-Faith Claim

The court granted AFH’s motion for judgment on Wheeler’s claim for breach of the implied covenant of good faith and fair dealing. The court concluded that AFH reasonably believed the Lamborghini was being used for business or commercial purposes when the accident occurred. The policy covered only occasional pleasure use and stated that commercial use was not covered without prior written consent.

The court relied on evidence concerning Wheeler’s entertainment business and Gasparian’s testimony that he drove Wheeler’s cars for promotional purposes. It held that no reasonable jury could find AFH acted unreasonably when it denied the claim based on its conclusion that the Lamborghini was being used for commercial purposes.

Fraud and Negligent Misrepresentation

Wheeler’s fraud and negligent-misrepresentation claims were based on his assertion that AFH adjuster Marc McQuitty told him that using the vehicles as music-video props was acceptable. The court granted AFH’s motion on both claims because Wheeler had not produced evidence creating a genuine dispute about what McQuitty knew when he allegedly made those statements. The court noted that the information about Wheeler’s commercial use emerged during AFH’s investigation of the disputed claim.

Disposition

The court granted, in part, and denied, in part AFH’s motion for summary judgment. The ruling left Wheeler’s breach-of-contract claim unresolved in AFH’s favor while granting AFH judgment on the bad-faith, fraud, and negligent-misrepresentation claims and rejecting AFH’s arguments for judgment based on policy coverage, policy voidance, and unclean hands. A footnote also states that, in light of the rulings, Wheeler would not be entitled to punitive damages and that the court granted, in part, AFH’s motion concerning punitive damages; the provided text cuts off the remainder of that sentence. The court ordered the parties to appear for a case-management conference on October 28, 2022.