Allstate Indemnity Company v. Joseph Dixon

United States Court of Appeals
For the Eighth Circuit
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No. 18-1948
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Allstate Indemnity Company
lllllllllllllllllllllPlaintiff - Appellee
v.
Joseph Dixon; Casey Dixon
lllllllllllllllllllllDefendants - Appellants
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Appeal from United States District Court
for the Western District of Missouri - Springfield
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Submitted: April 17, 2019
Filed: August 1, 2019
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Before COLLOTON, GRUENDER, and ERICKSON, Circuit Judges.
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ERICKSON, Circuit Judge.
On February 14, 2014, Joseph and Casey Dixon purchased a former resort hotel
in West Plains, Missouri, for $120,000 with the intention of turning it into a bed and
breakfast (B&B) and marriage retreat. The property contained a 15-bedroom,
12-bathroom structure. The structure was insured for $479,857 actual cash value—an
amount far in excess of the $120,000 purchase price. On April 12, 2014, the property
caught fire and burned to the ground in a little over an hour.
Allstate investigated the fire and concluded that it was set by or at the direction
of Joseph Dixon. Allstate paid the mortagees $107,526.29 under the terms of the
policy. It then commenced an action seeking a declaratory judgment that the Dixons
had violated the intentional acts exclusion of the policy and that Allstate was entitled
to recover its payment to the mortagees. The Dixons filed a counterclaim for breach
of the insurance contract. The district court1 denied the Dixons’ motion for summary
judgment. Allstate ultimately prevailed at trial. The Dixons appeal several
evidentiary decisions and the denial of their motions for summary judgment, for
judgment as a matter of law, and for a new trial. We affirm.
I. Background
The Dixons purchased the subject property located at 791 State Hwy T, West
Plains, Missouri, for $120,000. At the time of purchase, they owned an uninsured
property in Willow Springs, Missouri, that they ran as a location for marriage retreats.
The Dixons’ stated purpose for purchasing the West Plains property was to run a
B&B and to also use it as another location for wedding retreats. Between the time of
purchase and the blaze, no material steps were taken to convert the property into its
intended use as a B&B or a wedding retreat location, and the structure sat mostly
dormant.
When the Dixons were looking to purchase insurance for the property, they
rejected two proposals to insure the property for $120,000 and $300,000 before
accepting a proposal to insure the property for $479,857 actual cash value and
1
The Honorable M. Douglas Harpool, United States District Judge for the
Western District of Missouri.
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$60,000 for personal property. The property was insured for nearly four times the
$120,000 purchase price. One month after the insurance policy went into effect, the
building burned to the ground. The Dixons filed a sworn statement in proof of loss.
Shortly thereafter, Allstate began investigating the claim.
At the beginning of the investigation, Allstate retained Terry Decker, a certified
fire investigator, to collect data about the incident and the fire scene. Decker was
certified as a fire and explosion investigator by the National Association of Fire
Investigators in 1997 and as a fire investigator by the International Association of
Arson Investigators in 2001. He also was a certified fire investigator through the
Missouri Department of Public Safety. As part of maintaining his certifications,
Decker was required to engage in ongoing education and training.
Decker investigated and photographed the scene, and reviewed photographs
of the house prior to the fire. He interviewed the Dixons, their neighbors, and public
fire officials, and also reviewed the local fire department report, 911 logs, and
weather history data. Based on that information, Decker created a timeline of events.
Joseph Dixon indicated he left the property with a man named Donald Hitch
sometime between 7:30 p.m. and 8:00 p.m. Dixon described the sky as getting dark
when he left. When the fire was discovered at 9:11 p.m., it was “totally involved”
and caused the complete destruction of the building. Decker came up with a number
of hypotheses to explain the blaze, including the possibility of accidental, undetected
fires burning prior to when Dixon left and the possibility that the fire was burning at
or shortly after Dixon left the property. After weighing those hypotheses against the
collected evidence, Decker concluded that the fire must have been burning when or
shortly after Dixon left the property. As part of his determination, Decker considered
weather data that showed that twilight set at 8:06 p.m. on the night in question.
Given Dixon’s statement that it was getting dark when he left, Decker concluded that
Dixon left the property at or slightly after 8:00 p.m. The destruction of the building
meant that Decker was unable to come to a conclusive opinion as to the cause or
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origin of the fire, but that he could not rule out that it was an intentionally-set fire.
Decker opined that the fire developed rapidly and progressed at an abnormal rate.
Allstate retained a second certified fire investigator, Robert Wysong, to review
the fire given the tight timeline that Decker identified. Wysong was the owner and
president of ACS Investigative Services, a fire investigation company in operation
since 1991. Wysong was certified as a fire and explosion investigator by the National
Association of Fire Investigators. Wysong reviewed Decker’s report as well as the
sworn statements of the Dixons and Donald Hitch and photographs of the property.
Wysong considered a number of hypotheses regarding the blaze, including the
possibility of a fire caused by lightning, a fire caused by candle, a fire set in more
than one location, and a fire that had been burning more than an hour. Wysong
ultimately concluded that the fire must have been burning for more than an hour
before discovery or that the area of origin was not a single location.
Allstate’s interviews with the Dixons and Donald Hitch did not suggest any
alternative issues with electrical appliances that might have led to the blaze. During
Casey Dixon’s examination under oath, she testified that she thought somebody
started the fire. Allstate, relying on the fire expert reports and the Dixons’ sizable
financial motive to commit arson, determined that the loss was not covered because
the fire was intentionally set by or at the direction of Mr. Dixon. Pursuant to the
policy, Allstate issued a payment to the mortgagees in the amount of $107,526.29.
Allstate filed a complaint for declaratory judgment on November 20, 2014. On
February 26, 2015, Allstate amended its complaint and sought a judgment that the
intentional acts exclusion barred coverage for the loss and that Allstate was entitled
to recover its payment to the mortgagees of $107,526.29. The Dixons filed a
counterclaim alleging that Allstate breached the insurance contract. The district court
denied the Dixons’ motion for summary judgment on both the complaint and the
counterclaim.
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Before and during trial, the Dixons objected to the admission of testimony from
Allstate’s fire experts. Their objections were based in part on whether the fire experts
had followed NFPA 921, an authoritative guideline in the field of fire investigation.
Neither expert purported to have exhaustively applied NFPA 921. Instead, each
suggested that they had used the scientific method and deductive reasoning, as
explicitly referenced by NFPA 921. The Dixons argued that NFPA 921 required
physical testing that neither fire expert had conducted and that therefore neither
expert had used a reliable method. The district court overruled the objections and
allowed the experts to testify. In addition to testifying to their certifications and
training experience, Decker testified that he had conducted over 2,000 fire
investigations, and Wysong testified that he had conducted over 3,000 fire
investigations. Each also testified to previous cases in which he had served as an
expert fire witness.
The Dixons offered testimony from their own fire expert, Phillip Noah. Noah
criticized the opinions offered by Decker and Wysong after conducting a “desktop
review” of their work. Noah did not conduct physical testing or visit the scene of the
fire itself.
The Dixons filed motions for judgment as a matter of law at the close of
Allstate’s evidence and at the close of all evidence. Each motion was denied. The
jury returned a general verdict in favor of Allstate. In response, the Dixons filed a
renewed motion for judgment as a matter of law and for a new trial, each of which
was denied. Allstate filed a post-trial motion to recover the $107,526.29 payment to
the mortgagees. The district court entered an order granting the motion and entered
a judgment against the Dixons for $107,526.29. The Dixons now appeal.
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II. Discussion
A. Expert Testimony Regarding the Cause of the Fire
We review the district court’s decision to admit expert testimony for abuse of
discretion. Peitzmeier v. Hennessy Indus., Inc., 97 F.3d 293, 296 (8th Cir. 1996)
(citing Westcott v. Crinklaw, 68 F.3d 1073, 1075 (8th Cir. 1995)). In order for a
court’s decision to admit evidence to amount to an abuse of discretion, any error must
be “clear and prejudicial to the outcome of the proceeding.” Torbit v. Ryder Sys.,
Inc., 416 F.3d 898, 903 (8th Cir. 2005) (citation omitted).
The admission of expert testimony is governed by Federal Rule of Evidence
702 and Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579 (1993). “The inquiry
envisioned by Rule 702 is . . . a flexible one.” Daubert, 509 U.S. at 594. “Its
overarching subject is the scientific validity—and thus the evidentiary relevance and
reliability—of the principles that underlie a proposed submission.” Id. To properly
admit evidence under the rule, district courts must determine “whether the expert is
proposing to testify to (1) scientific knowledge that (2) will assist the trier of fact to
understand or determine a fact in issue.” Id. at 592.
The Dixons challenge the admission of Allstate’s fire experts’ testimony
because the experts did not precisely follow the industry guide NFPA 921, in
particular due to a lack of a physical testing. The Dixons’ claims related to testing
conflate the testing of various hypotheses using the scientific method with physical
tests. Where physical testing is not feasible, “observations coupled with expertise
generally may form the basis of an admissible expert opinion.” Shuck v. CNH Am.,
LLC, 498 F.3d 868, 875 (8th Cir. 2007). A hypothesis is appropriately tested under
the scientific method by comparing all known facts, acquired data (of which physical
test results is but a part), and the developed body of scientific knowledge to the
hypothesis. Allstate’s well-qualified fire experts thoroughly explained their
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methodologies to the district court and explained why their methods had scientific
reliability, even absent physical testing.
The “flexible inquiry” that district courts must conduct under Rule 702 and the
different explanations that fire experts might give for their choice of methodologies
may lead to differing decisions as to whether to admit different experts’ testimonies.
For example, in Hickerson v. Pride Mobility Prod. Corp., 470 F.3d 1252, 1257 (8th
Cir. 2006), we upheld a district court’s decision to admit an expert’s testimony where
the expert:
examined burn patterns, examined heat, fire, and smoke damage,
considered this evidence in light of testimony regarding the fire, and
identified a point of origin . . . considered as possible causes of the fire
those devices that contained or were connected to a power source and
that were located at the identified point of origin . . . [and] eliminated as
possible sources those devices that were not in the area of origin or that
were not connected to a power source and contained no internal power
source.
In a case involving similar scientific theories, Fireman’s Fund Ins. Co. v. Canon
U.S.A., Inc., 394 F.3d 1054, 1058–60 (8th Cir. 2005), we affirmed a district court’s
decision to exclude fire expert testimony where the experts could not show they
reliably applied the methodology they articulated and where their interpretations of
the meaning of burn pattern evidence dramatically changed between initial report and
rebuttal report.
In this case, Allstates’ experts “observed the relevant evidence, applied their
specialized knowledge, and systematically included and excluded possible theories
of causation.” See Shuck, 498 F.3d at 875 (allowing opinion of experts who used that
approach). Accordingly, the district court did not make a “clear and prejudicial” error
affecting the outcome of the proceeding by admitting the opinions.
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B. Denial of Motion for Judgment as a Matter of Law
We review the district court’s denial of a motion for judgment as a matter of
law de novo. McKnight v. Johnson Controls, Inc., 36 F.3d 1396, 1400 (8th Cir. 1994)
(citation omitted). We apply the same standards as the district court and ask “whether
there is sufficient evidence to support a jury verdict.” Id. (quoting White v. Pence,
961 F.2d 776, 779 (8th Cir. 1992)). “Judgment as a matter of law is appropriate only
when all of the evidence points one way and is ‘susceptible of no reasonable
inference sustaining the position of the nonmoving party.’” Id. (quoting White, 961
F.2d at 779).
Under Missouri law, “[s]o long as the evidence and the reasonable inferences
to be drawn therefrom tend more toward the probability that the fire was brought
about by the procurement” of the Dixons, Allstate’s “burden of submissibility has
been sustained.” Farm Bureau Town & Country Ins. Co. of Missouri v. Shipman, 436
S.W.3d 683, 685 (Mo. Ct. App. 2014) (quoting Bateman v. State Farm Fire & Cas.
Co., 814 S.W.2d 684, 685 (Mo. Ct. App. 1991)). The combination of Allstates’
expert testimony regarding the possible causes of the fire, the rapid nature of the
blaze, evidence of the Dixons’ financial incentives, and potential negative credibility
determinations by the jury against the Dixons suffices to meet that burden of
submissibility. The district court did not err in denying the Dixons’ motion for
judgment as a matter of law.2
2
The Dixons also seek to appeal the district court’s denial of summary
judgment pre-trial. However, the vehicle for examining whether or not the evidence
supports the verdict post-trial is a motion for judgment as a matter of law under Rule
50(b), not an appeal of the initial denial of summary judgment. See Ortiz v. Jordan,
562 U.S. 180, 184 (2011) (explaining that a party may not “appeal an order denying
summary judgment after a full trial on the merits”).
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C. Denial of Motion for a New Trial
We will not reverse a district court’s denial of a motion for a new trial under
Federal Rule of Civil Procedure 59(a) absent an abuse of discretion amounting to a
miscarriage of justice. See PFS Distribution Co. v. Raduechel, 574 F.3d 580, 589
(8th Cir. 2009) (citations omitted). The jury was presented with substantial
circumstantial evidence concerning the Dixons’ financial incentives and the nature
of the blaze. The district court’s denial of the Dixons’ motion for a new trial was not
a miscarriage of justice in light of that evidence.
D. Entry of Judgment Against the Dixons for $107,526.29
The district court ordered the Dixons to repay Allstate the $107,526.29 it
advanced to the mortgagees following the fire, holding that Missouri law would allow
for recoupment of that amount by Allstate. See Allstate Ins. Co. v. Estes, 118 F.
Supp. 2d 968, 974 (E.D. Mo. 2000), aff’d, 16 F. App’x 534 (8th Cir. 2001) (per
curiam) (“[U]nder Missouri law, when an insurer pays a mortgagee for loss from an
insured's arson, the property insurer is entitled to recoupment and restitution of that
amount from the insured.”). But see Schroeder v. Prince Charles, Inc., 427 S.W.2d
414, 419 (Mo. 1968) (“[R]ecoupment is a purely defensive matter . . . and is available
only to reduce or satisfy a plaintiff’s claim.”). We may affirm the district court’s
ruling as a valid exercise of its authority to fashion a “remedy under § 2202 of the
Declaratory Judgment Act.” See Cedar Hill Hardware & Const. Supply, Inc. v. Ins.
Corp. of Hannover, 563 F.3d 329, 356 (8th Cir. 2009) (noting the discrepancy
between state and federal cases on Missouri recoupment law and upholding a district
court’s imposition of a damages award in a declaratory judgment action). “District
courts have broad power under 28 U.S.C. § 2202 to craft damages awards in
declaratory judgment actions to effectuate their judgment.” BancInsure, Inc. v. BNC
Nat. Bank, N.A., 263 F.3d 766, 772 (8th Cir. 2001). Allstate was entitled to the
payment it made to the mortgagees once it validly denied coverage under the policy
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to the mortgagor. On this verdict, in favor of Allstate and against the Dixons, the
district court was entitled to order restitution of the amount paid the mortgagees as
a means of effectuating the verdict in favor of Allstate in a declaratory judgment
action.
E. Judgment Against Casey Dixon
Joseph and Casey Dixon were issued a joint insurance policy on which they
were both listed as named insureds. The policy notes that “the responsibilities, acts
and failures to act of a person defined as an insured person will be binding upon
every other person defined as an insured person.” “[A]n innocent co-insured is barred
by a co-insured’s violation of a provision of the policy if the policy so provides.”
Employers Mut. Cas. Co. v. Tavernaro, 4 F. Supp. 2d 868, 870 (E.D. Mo. 1998)
(discussing Amick v. State Farm Fire and Cas. Co., 862 F.2d 704 (8th Cir. 1988), and
Haynes v. Hanover Ins. Companies, 783 F.2d 136 (8th Cir. 1986)). Judgment was
therefore properly entered against Casey Dixon as a co-insured, even where the
verdict director focused on Joseph Dixon.
III. Conclusion
We affirm.
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