General Casualty v. Holst Radiator Co. ( 1996 )

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No. 95-2547
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General Casualty Insurance *
Companies, *
*
Appellee, *
* Appeal from the United States
v. * District Court for the
* Eastern District of Missouri.
Holst Radiator Co.; Roy Holst, *
doing business as Holst *
Radiator Co., *
*
Appellant *
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Submitted: April 11, 1996
Filed: July 10, 1996
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Before RICHARD S. ARNOLD, Chief Judge, and BOWMAN and WOLLMAN, Circuit
Judges.
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BOWMAN, Circuit Judge.
Roy Holst filed a $215,000 claim with his insurer, General Casualty
Insurance Companies, after his place of business, Holst Radiator Co., was
damaged by a fire on December 28, 1992. On March 8, 1993, General Casualty
paid $70,000 on the portions of Holst's claim that were not in dispute at
that time. Later, however, General Casualty decided to deny Holst's claim
in its entirety because, inter alia, General Casualty believed that Holst
failed to cooperate in the investigation of the loss and violated the
concealment, misrepresentation, or fraud conditions of the insurance
policy. General Casualty then filed this declaratory judgment action,
seeking to recover the $70,000 it had paid to Holst. General Casualty
alleged that "the cause and origin of the fire was not how and where
defendant Holst had claimed it to be."
Complaint at ¶ 12. In other words, General Casualty had reason to believe
that arson may have been the cause of the fire but was prevented from
conducting a complete investigation by Holst's failure to cooperate. Holst
then filed a counterclaim, alleging that General Casualty breached the
insurance contract, committed fraud, and vexatiously refused to pay on the
insurance policy. Holst sought punitive damages. The District Court1
dismissed the fraud count of Holst's counterclaim as well as the claim for
punitive damages. The other issues were submitted to a jury, which
returned a verdict in favor of General Casualty. The District Court
entered judgment on the verdict, awarding General Casualty $70,000 plus
interest.
The main issue in this appeal relates to the nature of the fraud that
General Casualty was required to prove. Holst argues that General Casualty
was required to prove all of the elements of common-law fraud, as set out
in state-approved jury instructions, in order to recover the $70,000 it had
paid on the insurance contract with Holst. In particular, Holst claims
that General Casualty failed to prove that it relied on any of Holst's
allegedly fraudulent statements. Reliance is an element of common-law
fraud under Missouri law. General Casualty, on the other hand, contends
that it only had to prove that Holst breached a provision of the insurance
contract. According to General Casualty, the provision in question--the
concealment, misrepresentation, and fraud provision--was violated, thus
voiding the policy, even if General Casualty did not rely on Holst's
statements.
The interpretation of the terms of an insurance contract is a matter
of state law, which we review de novo. See Pace Constr. Co. v. U.S.
Fidelity & Guar. Ins. Co., 934 F.2d 177, 179 (8th Cir. 1991). Holst argues
that the District Court's erroneous
1
The Honorable Donald J. Stohr, United States District Judge
for the Eastern District of Missouri.
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interpretation of the insurance contract led it to improperly submit the
issue of fraud to the jury and to misinstruct the jury on the issue of
fraud.
The provision of the insurance contract at issue in this case reads
as follows:
A. CONCEALMENT, MISREPRESENTATION OR FRAUD
This Coverage Part is void in any case of fraud by you as it
relates to this Coverage Part at any time. It is also void if
you or any other insured, at any time, intentionally conceal or
misrepresent a material fact concerning:
1. This Coverage Part;
2. The Covered Property;
3. Your interest in the Covered Property; or
4. A claim under this Coverage Part.
General Casualty Ins. Policy CCI 0126591, Commercial Property Conditions
at 1. The District Court, by refusing Holst's proposed instruction, held
that the meaning of the word fraud in the insurance contract is not the
same as common-law fraud. We agree.
In Vitale v. Aetna Casualty & Surety Company, this Court noted the
distinction between fraud in the inducement and a fraudulent proof of loss.
814 F.2d 1242, 1251 (8th Cir. 1987). We specifically stated that "a charge
of a fraudulent proof of loss differs from one of fraud in the inducement,
which requires, among other elements, reliance." Id. We held that
Missouri Approved Instruction (MAI) 25.03 was inapplicable in cases
involving a charge of fraudulent proof of loss because that instruction was
designed for cases in which an insured is charged with fraud at the time
the insured obtained coverage. Id.
The jury instruction that Holst proposed was modeled after MAI 32.19
(1991), which is substantially similar to the instruction we
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rejected in Vitale. "Litigants are entitled to have the jury instructed
on their claims and theories if," inter alia, "the proposed instructions
are correct statements of the law" applicable to the case. Hoselton v.
Metz Baking Co., 48 F.3d 1056, 1063 (8th Cir. 1995). Like Vitale, however,
this case involves a fraudulent proof-of-loss charge rather than a charge
of fraud in an application for insurance coverage. To our knowledge, the
Missouri state courts have not decided whether reliance is a necessary
element of the fraudulent proof of loss required to void an insurance
policy. Thus our decision in Vitale, which applies Missouri law, is
authoritative, and the instruction proposed by Holst is not a correct
statement of the law applicable to this case. In these circumstances, the
District Court properly submitted the issue of fraud to the jury, despite
the alleged absence of evidence of General Casualty's reliance on Holst's
statements, and properly instructed the jury on the issue of fraud.
In addition to the arguments on the issue of fraud, Holst contends
that the District Court improperly admitted evidence that tended to prove
that the insured property was overvalued. The admissibility of evidence
is an issue that is committed to the sound discretion of the trial court,
and "we will not disturb a district court's evidentiary ruling absent a
clear and prejudicial abuse of that discretion." Laubach v. Otis Elevator
Co., 37 F.3d 427, 428-29 (8th Cir. 1994).
Holst claims that evidence relating to the overvaluing of his
property should not have been admitted for two reasons: (1) Missouri
Revised Statutes § 379.140 (1994) specifically bars an insurer from denying
that the insured property was worth the full amount for which it was
insured; and (2) General Casualty did not raise the valuation issue in its
letter denying Holst's claim under the policy. These arguments totally
miss the mark. The rules of law cited by Holst are directed toward
insurance companies who accept large premiums on overvalued property and
then, when a claim
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made, either pay only the actual value or deny the claim in its entiret
because See ,
667 700, 707-08 (Mo. 1984) (en banc) (analyzing Mo. Rev. Stat.
State ex rel. Shelter Mut. Ins. Co. v. Crouch
828 (Mo. Ct. App. 1986) (stating that defenses to claims should be raised
claim is first denied). General Casualty did not introduce the
ence at issue to prove that it claimed that it only had to pay th
actual value of the property or to prove that it had denied Holst's claim
he had overvalued the property. The evidence was introduced as
ntial proof that Holst had a motive to commit arson. In thes
circumstances, the evidence was obviously relevant and wholly admissible.
Thomure v. Truck Ins. Exch. 781 F.2d 141, 142 (8th Cir. 1986). The
District Court did not abuse its discretion by a
that the insured property was overvalued.
Holst has raised several other issues in this appeal, and we have
reviewed his arguments. We find them to be without merit, and
to set aside the jury's verdict in favor of General
Casualty. the judgment of the District Court is
affirmed.
Attest:
CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.
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