A Fire, or Two: Insureds’ Material Misrepresentations Voided Policy

The U.S. Court of Appeals for the Eighth Circuit has affirmed a district court’s decision concluding that a homeowners’ insurance policy was void under its terms because the insured homeowners had made material misrepresentations during the claims process.

The Case

On October 10, 2012, either one or two fires occurred at the home owned by the plaintiffs. The plaintiffs claimed that their house and garage had suffered a total loss, and they filed a proof of loss with their homeowners’ insurance company. They then sued their insurer, seeking the policy limits: $375,000 in damage to their house and garage, and $262,500 in damage to their personal property.

The insurer moved for summary judgment. It argued that the policy was void under its “concealment or fraud” provision because the plaintiffs had misrepresented the value of their personal property in their proof of loss. The insurer pointed out that about a year before their loss, the plaintiffs had entered bankruptcy and had declared – under penalty of perjury – that they jointly owned only $7,000 worth of household goods and furnishings, clothing, furs, jewelry, firearms, hobby equipment, and other personal property.

A federal district court in Missouri concluded that no reasonable jury would be able to reconcile the difference between the value of the personal property the plaintiffs had reported as lost in the fire and the value of personal property they had reported in their bankruptcy case a year earlier. Accordingly, the district court determined that the insurance policy was void as a matter of law, and the plaintiffs appealed to the Eighth Circuit.

The Eighth Circuit’s Decision

The circuit court affirmed.

In its decision, the circuit court found that the “only reasonable inference” from the $255,500 discrepancy between the plaintiffs’ proof of loss and the valuation they had provided to the bankruptcy court was that they had “intentionally made material misrepresentations” in their proof of loss.

The Eighth Circuit was not persuaded by the plaintiffs’ argument that the difference was attributable to their use of “garage sale value” in their bankruptcy and “fair market value” for their proof of loss. It also rejected their contention that because their property had suffered a total loss, they were entitled to seek coverage up to the policy limits, regardless of their property’s true value. Rather, the circuit court said, under applicable Missouri law, where an insured’s personal property was totally destroyed, the measure of damages was the “value fixed at the date of the policy, less depreciation from that date to time of the fire.”

Concluding that the plaintiffs’ misrepresentations on their proof of loss were “material” because an accurate inventory of the property destroyed by the fire was necessary for their insurer to make a coverage determination, the circuit court upheld the district court’s decision that the policy was void in its entirety.

The case is Neidenbach v. Amica Mut. Ins. Co., No. 16-1400 (8th Cir. Nov. 16, 2016).