FI L ED U.S. COURT OF APPEAL S EL EVENTH CI RCUI T Aug . 12, 2009 THOMAS K. KAH

N CL ERK [DO NOT PUBLISH]

IN THE UN ITED STATES COURT OF APPEALS

FOR THE ELE VENTH CIRCUIT

__ __ __ __ __ __ __ __ __ __ __ __ No. 0 8- 17 08 8 Non -Arg um en t Ca le nd ar

__ __ __ __ __ __ __ __ __ __ __ __ D.C. Dock et No. 0 7- 01 32 9- CV-T-3 0- MAP
SCOTTSDALE INSURANCE COMPANY, a fo rei gn co rp or at io n,
Pl ai nt iff -Co un te r- Defen da nt -Ap pe ll ee,

ve rs us

W AVE TE CHNOLOGIES COMMUNIC ATIONS, INC., a Fl or id a co rp or at io n, RITA A. TODD,

Defen da nt s, RUTH COCHRAN, in di vi du al ly and as t he pe rs on al rep res en ta ti ve of t he Est at e o f Don al d F . Coc hr an , dec eas ed , Defen da nt -Co un te rCl ai m an t-Ap pe ll an t,

VIASY’S NE TW ORK SERVICES, INC ., a fo rei gn co rp or at io n,
Defen da nt -Co un te rCl ai m an t-Ap pe ll an t.__ __ __ __ __ __ __ __ __ __ __ __ App eal s fr om

th e Uni te d S ta te s Di st ric t Co ur t fo r th e Mi dd le Dis tri ct of F lo rid a

__ __ __ __ __ __ __ __ __ __ __ __ (Au gu st 12 , 20 09 )

Befo re BLACK, BARKETT an d C OX, Circ ui t J ud ge s.
PER CURI AM:

I. BACKG ROUND

Sco tt sd al e In su ran ce Co m pa ny (“ Sco tt sd al e”) fil ed a co m pl ai nt fo r de cl arat or y
rel ie f ag ai ns t W av e Tech no lo gi es Co m m u n i cat io ns , In c. (“ W av e”), Ru th Co ch ran , in di vi du al ly an d as th e pe rs on al rep res en t a t iv e of th e es ta te of he r hu sb an d Don al d

Co ch ran (“ Co ch ran ”), Ri ta A. Tod d (“ Tod d” ), an d V i a s ys Netwo rk Serv ic es , In c. (“ Vias y s” ). The la wsu it was in i t i a t e d aft er cl ai m s were fil ed wit h Sco tt sd al e by

Vias y s fo r li ab il i t y c o v e rag e co ve rin g da m ag es cau se d by a W av e su bc on tra ct or ’s

op erat io n of he av y eq ui pm en t in a m an n e r t h a t a ll eg ed ly cau se d a m ot or ve hi cl e
acci de nt on Apr il 21 , 20 07 (“ th e acci de nt ”). Tod d was in jure d i n t he acci de nt an d

Don al d Co ch ran was ki ll ed

. Vias y s was th e pr im e co nt ract or wit h whi ch W av e ha d

co nt ract ed to pe rfo rm

work be in g d on e at th e ti m e o f th e acc id en t.

Sco tt sd al e’s la wsu it so ug ht a de cl arat io n th at it co ul d res ci nd a ge ne ral li ab il it y
in su ran ce po li cy i t ha d is su ed to W av e on th e ba si s th at W av e m ad e m at eri al

2m is rep res en ta ti on s in it s ap pl ic at io n fo r th e po li cy

. Sco tt sd al e al le ge d th at W av e ha d

m is rep res en te d it s bu si n e s s o p e rat io ns as in vo lv in g no di gg in g or us e of he av y

eq ui pm en t an d th at W av e fai le d to di sc lo se th at it ha d a pr io r lo ss un de r an ot he r
in su ran ce po li cy

. Sco tt sd al e al so al le ge d th at , ha d Sco tt sd al e kn own of W ave’s act ua l

bu si ne ss , it wou ld no t ha ve is su ed t h e i n s u r a nc e po li cy or wou ld ha ve ch arg ed a

su bs ta nt ia ll y

hi gh er p rem iu m

for th e co ve rag e.
Neit he r W av e no r Tod d an swe red th e co m pl ai nt , an d de fau lt jud gm en ts were

en te red ag ai ns t th em

. Co ch ran an d V ia sy s (c oll ec tiv el y , “ Defen da nt s” ) an swe red an d pl ead ed , am on g ot he r de fen se s, th at Sco tt sd al e ha d waiv ed i t s r i g h t to res ci nd th e

p o l i c y b y fai li ng to res ci nd it whe n it kn ew, or sh ou ld ha ve kn own , o f

m is rep res en ta ti on s in th e ap pl ic at io n. Defen da nt s al so co un te r-cl ai m ed , se ek in g
li ab il it y co ve rag e fo r th ei r da m ag es cau se d b y th e acc id en t.

Sco tt sd al e m ov ed fo r su m m ary jud gm en t. Defen da nt s op po se d th e m ot io n, in

pa rt ba se d up on an arg um en t th at , in la te Decem be r 20 06 , aro un d th e ti m e Sco tt sd al e

wro te th e ge n e r a l li ab il it y in su ran ce po li cy at is su e in th is cas e, Sco tt sd al e’s ag en t

hi red a co nt ract or to co nd uc t a li ab il it y su rv ey an d t ha t s ur ve y

un co ve red fact s th at

sh ou ld ha ve cau se d Sco tt sd al e to in ve st ig at e th e rep res en ta ti on s on W a v e ’s

ap pl ic at io n. (R.1 -5 4 at 7- 9.) In it s op po si ti on pa pe rs , Vias y s id en ti fie d th e fact s
di sc ov ered by th e su rv ey th at were at od ds wit h W av e’s ap pl ic at io n an d sh ou ld ha ve

3cau se d Sco tt sd al e to co nd uc t fu rth er in qu iry as : (1 ) us e of su b c o n t r a c to rs fo r

$1 00 ,00 0 of wor k pe r y ear (n ot id en ti fie d on th e ap pl ic at io n) ; (2 ) a two -y ear bu si ne ss
hi st or y (as op po se d to th e “ ne w ve nt ur e” d es cri be d on th e ap pl ic at io n) ; an d (3 )

pe rfo rm an ce of so m e “ m in or co ns tru ct io n wor k

. . . us in g a sh ov el to di g and lo cat e

ut il it ie s.” (as op po se d to a p p l i c a ti on st at em en t th at W av e di d “ no di gg in g.” ) ( Id

. at
7, 9, 10 , 18 .) And , Vias y s p r es en te d ev id en ce th at Sco tt sd al e’s ge ne ral ag en t

So ut he rn Cro ss rece iv ed th is in fo rm at io n fro m th e su rv ey co nt ract or an d co ns id ered

th e fir st of th es e is su es si gn ifi can t en ou gh th at So ut he rn Cro ss at te m pt ed to co nd uc t

so m e fo ll ow- up in ve st ig at io n of th at is su e. ( Id

. at 9, 10 , 1 8

. ) B ut , whe n So ut he rn
Cro ss rece iv ed no res po ns e to it s cl ari fy in g in qu iri es , it fai le d to rel ay th e in fo rm at io n

to Sco tt sd al e an d t oo k n o fu rth er ac ti on . ( Id

. at 9 .)

Defen da nt s arg ue d th at , ha d Sco tt sd al e pr op erl y c o n d u ct ed a fu rth er in qu iry

in to th e di sc rep an ci es di sc ov ered b y th e su rv ey , it wou ld ha ve di sc ov ered th at : (1 )

Sco tt sd al e pr ev io us ly ha d writ te n a ge ne ral li ab il it y po li cy fo r W av e’s b u s i n e ss

op erat io ns ; (2 ) in th e ap pl ic at io n fo r th e earl ie r po li cy , W av e h a d be en de sc rib ed

pr op erl y as a cab le co nd ui t co nt ract or en ga ge d in ex cav at io n, tu nn el in g, un de rg ro un d

wor k, an d eart h m ov in g wh o re li ed on si gn ifi can t wor k by s ub -co nt ract or s; an d (3 )

Sco tt sd al e ha d rece iv ed a cl ai m un de r th at e a r li er po li cy

. (R.1 -5 4 at 11 -1 4.)

Defen da nt s fu rth er arg ue d t ha t Sco tt sd al e’s fai lu re to co nd uc t an in ve st ig at io n in a

4man n er th at di sc ov ered th es e fact s res ul te d in Sco tt sd al e’s waiv er of it s rig ht t o

res ci nd th e p ol ic y

. The di st ric t co ur t gr an te d Sco tt sd al e’s m ot io n fo r su m m ary jud gm en t. In do in g

so , th e co ur t rel ie d on th e ru le th at “ an in su rer is en ti tl ed to rel y on th e rep res en ta ti on s
of th e in su red ev en wit ho ut ch eck in g it s own fil es un le ss so m e ci rcu m st an ce ari se s
th at wou ld cal l at te nt io n to th e fal se st at eme n t s

. ” (R.1 -6 0 at 7 (ci ti ng Sc hr ad er v.
Pru de nt ia l Ins

. Co

. of Am. , 28 0 F.2d 35 5, 36 2 (5t h C ir. 1 96 0) .) Howev er, the co ur t

di d no t ad dr es s Defen da nt s’ arg um en t th at th e fact s rai se d in th e li ab il it y su rv ey
sh ou ld ha ve sp ur red Sco tt sd al e to in ve st ig at e fu rth er. The co ur t en te red jud gm en t fo r
Sco tt sd al e.
Defen da nt s br ou gh t ti m el y m ot io ns to al te r or am en d th e jud gm en t pu rs ua nt to

Fed e r a l R u l e of Ci vi l Pro ced ur e 59 (e), arg ui ng th at th e co ur t ha d erre d so as to

co m m it a m an ife st in

jus ti ce. In th es e m ot io ns , Defen da nt s ag ai n pr es en te d th e

arg um en t th a t a jury qu es ti on ex is te d as to whe th er, whe n Sco tt sd al e’s co nt ract or
di sc ov ered t h at W av e ha d be en in bu si ne ss fo r two y ears , pe rfo rm ed co ns tru ct io n

wor k, an d us ed su b- co nt ract or s to pe rfo rm si gn ifi can t wor k, Sco tt sd al e was on no ti ce

t h a t Wa ve m ay ha ve m ad e m is rep res en ta ti on s in it s ap pl ic at io n an d th at fu rth er
in ve st ig at io n was du e. (R.1 -6 2 at 3 ¶5 , an d 6 ¶¶1 5 an d 17 .) Defen da nt s arg ue d th at

su m m ary jud gm en t fo r Sco tt sd al e was in ap pr op ria te be cau se th es e fact s rai se d a jury

5qu es ti on as to whe th er “ ci rcu m st an ces

. . . wh i c h cal le d at te nt io n to th e fal se

st at em en ts ” ex is te d. (

Id

. at 6 ¶1 7.) The co ur t de ni ed th e m ot io n, ad dr es si ng on ly th e
di sc rep an cy in th e am ou nt of su bc on tra ct or wor k an d fin di ng th at di sc rep an cy di d no t

c a l l Sco tt sd al e’s at te nt io n to th e fact th at W av e m ay ha ve m ad e m is rep res en ta ti on s

on it s ap pl ic at io n. (R .1-6 6 a t 6 .)

Defen da nt s ap pe al th e jud gm en t, m ak in g th e arg um en ts (as th ey di d in th ei r

su m m ary jud gm en t op po si ti on an d Ru le 59 pa pe rs ) th at th e fact s di s c o v e r e d by

Sco tt sd al e’s su rv ey co nt ract or rai se jury q ue st io ns as to whe th er Sco tt sd a l e w a s on

no ti ce th at it sh ou ld fu rth er in ve st ig at e whe th er W av e m ad e m is rep res en ta ti on s an d

as to whe th er th e in ve st ig at io n th at was do ne by Sco tt sd al e’s ge ne ral ag en t So ut he rn
Cro ss was re as on ab le

.
II . STANDARD OF REVIEW

Th i s c o u rt rev ie ws a gr an t of su m m ary jud gm en t by ap pl y in g th e sa m e le ga l

st an da rd s us ed by th e di st ric t co ur t. Se e, e.g

. , Hil bu rn v. Mur at a Elec s. N. Am., In c. , 18 1 F.3 d 12 20 , 12 25 (1 1t h Ci r. 19 99 ) (ci ta ti on om it te d)

. Su m m ary jud gm en t is

ap pr op ria te whe re “ ‘the re is no ge nu in e is su e as to an y m at eri al fact an d th e m ov in g

pa rty is en ti tl ed to a jud gm en t as a m at te r of la w.’ ” W oo de n v. Bd. of Reg en ts of th e
Uni v. Sy s. of Ga. , 24 7 F.3 d 12 62 , 12 71 (1 1t h Ci r. 2 0 0 1 ) ( q u o ti ng Fed

. R. Ci v. P.

56 (c))

.

6II I. DI SCUSSI ON

The pa rti es do no t di sa gr ee ov er th e ap pl ic ab le la w. The re is no di sp ut e th at

an in te nt io na l m is rep res en ta ti on by an ap pl ic an t o f a m at eri al fact , rel ie d o n b y th e
in su rer, al lo ws th e in su rer to vo id a po li cy

. Se e New Y or k Li fe In s. Co

. v. St ru de l , 24 3

F.2 d 90 , 93 (5 th Ci r. 19 57 ). Howev er, if th e in su rer ei th er di d no t rel y on th e

m is rep res en ta ti on or sh ou ld no t hav e rel ie d on th e m is rep res en ta ti on , th en it can no t

vo id th e po li cy

. Id

. Thu s, if th e in su rer “ ha s s uf fic ie nt in di cat io ns th at wou ld ha ve

pu t a pr ud en t m an on no ti ce an d wou ld ha ve cau se d hi m to st art an in qu iry whi ch , if

carr ie d ou t wit h reas on ab le th or ou gh ne ss , wou ld rev eal th e tru th , he can no t bl in d

hi m se lf to th e tru e fact s an d ch oo se to ‘rely ’ on th e m is rep res en ta ti on .” Id

. (ci ta ti on

om it te d.) And , “ if th e in su rer ch oo se s to m ak e an in de pe nd en t in qu iry an d th e su bjec t

m at te r an d th e ci rcu m st an ces are su ch th at he is in a po si ti on to as cert ai n th e fact s by

a reas on ab le se arch , th en he can no t pl ead rel ia nc e ev en if hi s in ve st ig at io n is as a

m at te r of fact cu rs or y

an d d id no t re ve al th e tr ue fact s . . . .” Id

. App lying th is la w, we co nc lu de th at su mm a r y ju dg m en t was in ap pr op ria te

. Defen da nt s’ br ie fs an d th e ev id en ce su bm it te d at th e su m m ary jud gm en t st ag e
de m on st rat e th at th ere is a qu es ti on o f f a c t a s to whe th er th e th ree di sc rep an ci es
di sc ov ered du rin g th e li ab il it y su rv ey sh ou ld ha ve caused Sc ott sda le to in qu ire fu rth er
in to th e tru e fact s of W av e’s bu si ne ss

. W hi le a reas on ab le jury co ul d con cl ud e th at

7th es e di sc rep an ci es were no t si gn ifi can t en ou gh to warra nt fu rth e r i n ve st ig at io n by

Sco t t s d a l e a n d th us cau se Sco tt sd al e to real iz e th at it ha d, in it s po ss es si on , do cu m en ts th at de m on st rat ed th e m is rep res en ta ti on s o n Wave ’s sec on d a pp li cat io n
fo r in su ran ce, a reas on ab le jury a l s o co ul d fin d ot he rwis e. And , a reas on ab le jury

co ul d co nc lu de th at th e in ve st ig at io n Sco tt sd al e un de rto ok (th ro ug h it s ge ne ral ag en t

So ut he rn Cro ss ) w a s p e r f or m ed in su ch a m an ne r as to waiv e rel ia nc e on th e

m is rep res en ta ti on s th at Sco tt sd al e wou ld ha ve di sc ov ered if it ha d pe rfo rme d th e
in ve st ig at io n i n a m or e d il ig en t m an ne r.
IV. CONCLUSI ON

Fo r th e fo reg oi ng reas on s, th e su m m ary jud gm en t fo r Sco tt sd al e is va cat ed an d

th e cas e is rem an de d fo r fu rth er p ro ceed in gs

. JUDGMENT VACATED AND CASE REMANDED.

8