                                                                                                                           Opinions of the United
2009 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


2-23-2009

Natl Grange Mutl Ins v. CRS Auto Parts Inc
Precedential or Non-Precedential: Non-Precedential

Docket No. 07-4514




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"Natl Grange Mutl Ins v. CRS Auto Parts Inc" (2009). 2009 Decisions. Paper 1836.
http://digitalcommons.law.villanova.edu/thirdcircuit_2009/1836


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                                                                NOT PRECEDENTIAL

                      UNITED STATES COURT OF APPEALS
                           FOR THE THIRD CIRCUIT


                                     No. 07-4514




               NATIONAL GRANGE MUTUAL INSURANCE COMPANY,

                                                 Appellant


                                            v.

                               CRS AUTO PARTS, INC.


                    On Appeal from the United States District Court
                       for the Eastern District of Pennsylvania
                                Civil No. 06-cv-03174
                         (Honorable Ronald L. Buckwalter)


                               Argued February 5, 2009


                       Before: MCKEE, JORDAN and LOURIE *
                                  Circuit Judges.


Andrew E. Greenberg, Esq.
The Chartwell Law Offices, LLP
Valley Forge Corporate Center
970 Rittenhouse Road, Suite 300
Eagleville, PA 19403-2256
       Attorney for Petitioner

      *
        Honorable Alan D. Lourie, Circuit Judge of the United States Court of Appeals
for the Federal Circuit, sitting by designation.
Heather A. Thomas, Esq.
Michael P. Creedon, Esq.
Creedon & Feliciani, P.C.
29 East Marshall Street
Norristown, PA 19401-4818

       Attorneys for Respondent

                                   (Filed: February 23, 2009)


                                   OPINION OF THE COURT




McKEE, Circuit Judge.

       National Grange appeals the verdict that was entered against it following a bench

trial in this declaratory judgment action it filed to determine if it owed a duty to defend or

indemnify CRS Auto Parts pursuant to an insurance policy that it issued to CRS. For the

reasons that follow, we will affirm the district court’s verdict in favor of CRS.

                                              I.

       Inasmuch as we are writing primarily for the parties who are familiar with this

case, we need not reiterate the factual or procedural background except insofar as may be

helpful to our brief discussion.

       After hearing all of the evidence offered at trial, the district court found that there

was no credible evidence that the insurance binder issued to CRS by Turley Insurance

Agency before CRS actually completed the formal application for the policy contained

misrepresentations on the part of CRS or any of its agents. Rather, the court concluded

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that National Grange had all pertinent information when it issued the binder through

Turley on June 30, 2003. Thus, the court found that the binder was in effect on July 10,

2003, the date of the accident underlying this declaratory action. Nat’l Grange Mut. Ins.

v. CRS Auto Parts, Inc., 2007 WL 4078728 (E.D. Pa., Nov. 16, 2007).

       When reviewing findings of fact, we accept the final determination of the

factfinder, unless that determination is either “(1) completely devoid of minimum

evidentiary support displaying some hue of credibility, or (2) bears no rational

relationship to the supportive evidentiary data.” Frett-Smith v. Vanterpool, 511 F.3d 396,

400 (3d Cir. 2008)(citing Krasnov v. Dinan, 465 F.2d 1298, 1302 (3d Cir. 1972)). Our

review of the district court’s application of Pennsylvania law is plenary. See Kowalsky v.

Long Beach Twp., 72 F.3d 385, 388 (3d Cir. 1995).

       National Grange argues that the district court’s conclusion that the insurance

policy was void ab initio, and that the district court’s finding of no material

misrepresentation prior to issuance of the binder was clearly erroneous. We disagree.

                                              II.

       When attempting to void an insurance policy under Pennsylvania law, the insurer

must prove that: (1) the insured made a false representation; (2) the insured knew the

representation was false when it was made or the insured made the representation in bad

faith; and (3) the representation was material to the risk being insured. See Coolspring

Stone Supply, Inc. v. Am. States Life Ins. Co., 10 F.3d 144, 148 (3d Cir. 1993). Moreover,



                                              3
each of these three elements must be established by clear and convincing evidence. Batka

v. Liberty Mut. Fire Ins. Co., 704 F.2d 684, 687 (3d Cir. 1983) (“Pennsylvania requires

that an insurer establish the defense of fraud in the application by ‘clear, precise and

indubitable’ evidence ... [and] that the factfinder be satisfied of the elements of the

defense by clear and convincing evidence.”) (citations omitted).

       National Grange attempted to prove that CRS (or its agent) knowingly failed to

disclose: that Meridian/State Auto refused to renew CRS’s automobile coverage, that

CRS provided inaccurate loss reports, and that CRS was a subsidiary of another company.

       However, the district court heard all of the testimony and found no evidence to

suggest that CRS made any misrepresentations. Nothing on this record justifies rejecting

that finding or overturning the verdict that was rendered pursuant to it. Moreover, even if

misrepresentations had been made by CRS, they were clearly not material to National

Grange’s decision to issue the policy because they could only have occurred after Turley

issued the binder of insurance. Thus the evidence simply did not support National

Grange’s attempt to have the policy declared void ab initio and the court correctly

concluded that National Grange had no right of recision. See Nat’l Grange, 2007 WL

4078728 at *2.

       National Grange did not receive any paperwork from CRS until July 14, 2003.

Therefore, the only representations that could have been made before insurance was

“bound” would have to have been made to Turley Insurance Agency. Yet, Turley



                                              4
testified that he had all necessary information before he issued the binder.

         It is not disputed that the Agency Agreement between Turley Insurance and CRS

was in effect when Turley issued the insurance binder. Thus, despite National Grange’s

protestations to the contrary, the district court correctly found that Turley was acting as

National Grange’s agent.

         National Grange places substantial reliance on Klopp v. Keystone Ins. Co., 595

A.2d 1 (Pa. 1991), in arguing that an insurer can rescind a policy that was procured by

fraudulent misrepresentations that are material to the insured risk. Id. at 8. However, the

misrepresentations in Klopp occurred before the insurance company issued insurance.

         Similarly, the court correctly concluded that any backdating of the signature on the

policy is also irrelevant since neither a timely and contemporaneous signature, nor a

completed insurance application was material to National Grange’s decision to insure

CRS.

                                              III.

         Thus, for the reasons set forth above, we will affirm the judgment of the district

court.




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