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Sua Insurance Co. v. Silver Oak Construction

February 3, 2009

SUA INSURANCE CO., PLAINTIFF,
v.
SILVER OAK CONSTRUCTION, INC., DEFENDANT.



The opinion of the court was delivered by: Dennis L. Beck United States Magistrate Judge

ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

(Document 23)

On October 14, 2008, Defendant Silver Oak Construction, Inc. ("Silver Oak") filed the instant motion for summary judgment. The motion was heard on January 9, 2009, before the Honorable Dennis L. Beck, United States Magistrate Judge.*fn1 Patrick Gorman appeared on behalf of Silver Oak. Michael Frey appeared on behalf of Plaintiff SUA Insurance, Co. ("SUA").

BACKGROUND

SUA filed the instant action for declaratory relief and recision of an insurance contract on January 28, 2008. The action was filed against Silver Oak and its president, Karl Wolf.*fn2

According to the Complaint, SUA is a corporation organized in Illinois and authorized to conduct insurance business in California. Its causes of action are based on its belief that Silver Oak provided material misrepresentations and/or concealed material facts, on the December 20, 2005, applications for workers' compensation insurance, and on the December 6, 2006, applications to extend coverage. Specifically, SUA contends that Silver Oak's answer of "No" to the question asking if there were any tax liens or bankruptcies within the last five years was false. SUA did not discover the misrepresentation/concealment until it undertook an investigation in connection with the November 2007 workers' compensation claim of Oberlin Sanchez ("Sanchez"), who was injured when he fell off a roof in the course and scope of employment on or about November 1, 2007.

The first cause of action seeks a declaration that the workers' compensation policy issued by SUA to Silver Oak for the period December 20, 2006, to December 20, 2007, provides no coverage and gives rise to no obligation on the part of SUA to either defend, indemnify or otherwise extend benefits on behalf of Silver Oak for claims arising from Sanchez' bodily injuries. SUA contends that the policies were void because of the material misrepresentations on the applications.

The second cause of action seeks to rescind the insurance contract based on the above misrepresentations and/or concealment of facts. Complaint, ¶ 14. SUA contends that had it known the true facts, it would not have issued either policy. SUA offers to return all consideration paid by Silver Oak and demands a return of all money paid by SUA for a defense of Sanchez' claim and in connection with his claim for benefits.

On October 14, 2008, Silver Oak filed the instant motion for summary judgment based on its belief that the answers provided were truthful as of the date of the applications and insofar as they pertained to Silver Oak.

SUA opposed the motion on December 24, 2008, arguing that the questions also pertained to Wolf, as the president and sole owner of Silver Oak.

Silver Oak filed its reply on January 2, 2009.

UNDISPUTED FACTS

Silver Oak Construction, Inc., is a California corporation incorporated on May 11, 2004, but inactive until 2006. Exhibit A, attached to Declaration of Karl Wolf ("Wolf Dec."); Deposition of Karl Wolf ("Wolf Dep.), p. 148. Wolf has always been the 100 percent owner and president of Silver Oak. Wolf Dec., ¶ 1; Wolf Dep., pp. 70, 97, 149.

In December 2005, Silver Oak submitted an application and supplemental application for workers' compensation insurance to SUA. Exhibit A, attached to Declaration of Patrick Gorman ("Gorman Dec."). "Silver Oak Construction, Inc." is listed as the applicant. Exhibit A, attached to Gorman Dec. Contact information is listed for Karl Wolf. The questionnaire included a question as to whether the applicant had "Any tax liens or bankruptcy within the last five years." Silver Oak answered, "no." Based on the representations in the application, SUA issued a workers' compensation insurance policy to Silver Oak ...


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