Republic Ins. Co. v. Jernigan, 86SC13

Citation753 P.2d 229
Decision Date11 April 1988
Docket NumberNo. 86SC13,86SC13
PartiesREPUBLIC INSURANCE COMPANY, Petitioner, v. Robert H. JERNIGAN and Gayle S. Jernigan, Respondents.
CourtSupreme Court of Colorado

Henderson and Streelman, Jack D. Henderson, Denver, for petitioner.

Allen, Rogers, Metcalf & Vahrenwald, Donald E. Johnson, Jr., Fort Collins, for respondents.

ERICKSON, Justice.

The petitioner, Republic Insurance Company (Republic), brought a declaratory judgment action against Robert H. Jernigan and Gayle S. Jernigan, pursuant to C.R.C.P. 57 and section 13-51-101, 6 C.R.S. (1982), claiming that they had breached the terms and conditions of their homeowners insurance policy. The declaratory judgment action, based upon a claim of arson, asserted that the insurance policy was void and that the Jernigans' fire insurance coverage for the dwelling, personal property, and additional living expenses should be denied. The trial court found that the policy between Republic and Robert H. Jernigan did not cover the loss arising out of fire and smoke damage to the dwelling on April 26, 1982. The court, however, determined that there was coverage under the policy between Republic and Gayle S. Jernigan. The court of appeals affirmed the district court's judgment with the exception of the damage award, and remanded the case for amendment of the judgment to reduce the amount of damages awarded to Gayle S. Jernigan. We granted certiorari on three issues: (1) Whether there was sufficient evidence to support the trial court's finding that Gayle S. Jernigan did not intentionally misrepresent the costs of repairs to the dwelling; (2) whether Gayle S. Jernigan is entitled to insurance coverage after the court found that her husband, Robert H. Jernigan, intentionally set the fire that destroyed the insured property; and (3) whether, if Gayle S. Jernigan is entitled to coverage, she is limited to one-half of her damages within policy limits. We affirm and return the case to the court of appeals with directions to remand to the district court for further proceedings consistent with this opinion.

I.

On February 11, 1982, Republic issued a homeowners insurance policy to Gayle S. Jernigan and Robert H. Jernigan for their home in Fort Collins. The Jernigans' home sustained substantial smoke and fire damage on April 26, 1982, while the insurance policy was in full force and effect. On June 1, 1982, pursuant to the terms of the policy, Republic requested that the Jernigans submit a signed, sworn statement of loss. Later that month, Republic rejected the Jernigans' sworn statement and proof of loss and sought more specific information on the proof of loss statement. Republic also required the Jernigans, under the terms of the policy, to submit to an examination under oath. The Jernigans submitted to the examination and provided a second sworn statement of loss. Republic denied coverage, claiming that they had breached the terms and conditions of the homeowners insurance policy when Robert H. Jernigan intentionally set fire to the insured home, 1 and that the Jernigans intentionally concealed or misrepresented the extent and value of loss to their dwelling and personal property. The trial court found that Robert H. Jernigan intentionally set fire to the dwelling, but that Gayle S. Jernigan made no intentional, purposeful, or fraudulent misrepresentations as to the cost of repairing the dwelling. The trial court also found Gayle S. Jernigan to be a separate insured who was entitled to coverage under the terms of the insurance policy.

The court of appeals in Republic Ins. Co. v. Jernigan, 719 P.2d 331 (Colo.App.1985), concluded that the trial court's findings that Gayle S. Jernigan did not intentionally misrepresent the costs of repairs to her home and the value of her personal property were not clearly erroneous and were supported by the record. The court also agreed with the trial court's conclusion that under the terms of the homeowners insurance policy, the rights and obligations of the Jernigans were several, and Mrs. Jernigan was entitled to recover. The court of appeals held that Mrs. Jernigan should recover one-half the amount of damages sustained to the dwelling, other structures, and personal property, not to exceed the total policy limits. 2

II.

Republic asserts that there was insufficient evidence to support the trial court's finding that Gayle S. Jernigan did not intentionally misrepresent the costs of repairs to the dwelling. We disagree. The insurance policy entered into between the parties states in relevant part:

Concealment or Fraud. We do not provide coverage for any insured who has intentionally concealed or misrepresented any material fact or circumstance relating to this insurance.

Republic claims that Gayle S. Jernigan, through her agent, Public Adjusters, Inc., misrepresented the loss to her dwelling, by claiming the cost of repairs to be $132,824.00, and breached the concealment or fraud provision rendering the contract void.

In October, 1982, Robert H. Jernigan made a sworn statement in the presence of his wife stating that the $110,000 proof of loss which he initially submitted to Republic was too high and would be amended to a lesser amount. The Jernigans later received an estimate from Kem Homes to build the entire structure for $79,650. A second estimate was submitted by Thomas D. Sharp of Insurance Contractors, Inc., in the amount of $67,883.46. At trial, Sharp testified that the estimate submitted by Public Adjusters was "inflated." A claims manager of Republic estimated the cost of repairs to the damaged or destroyed portion of the house at $66,086.28.

Ralph Symalla, president of Public Adjusters, testified that his estimate was high, that some of the items in the estimate were questionable, and that some contractors could do the work for a lower price. The trial court found that "[t]here was no misrepresentation in regard to the cost of repairs to the dwelling that was intentional, purposeful, or fraudulent."

The record indicates that Public Adjusters included several items in its estimate which were not included in the estimates of the other contractors. Public Adjusters also charged higher prices for many of the items which were included in the estimates of other contractors. The differences between the costs of Public Adjusters' estimate and the estimates of the other contractors may fairly be attributed to differences in the scope of work and the grade of materials included within the respective estimates. Since the record does not disclose that Gayle S. Jernigan, through her agent, Public Adjusters, intentionally, purposefully, or fraudulently misrepresented the cost of repairs to her dwelling, we will not disturb the factual findings of the trial court on appeal. 3 See Martin v. People, 738 P.2d 789 (Colo.1987); Martinez v. Continental Enterprises, 730 P.2d 308 (Colo.1986); Gebhardt v. Gebhardt, 198 Colo. 28, 595 P.2d 1048 (1979).

III.

Republic also contends that Gayle S. Jernigan is not entitled to insurance coverage because the court found that her husband intentionally set the fire that destroyed the insured property. According to Republic, since the Jernigans are named as joint insureds they have a joint responsibility to abide by the policy's conditions. The validity of this argument rests upon the assumption that the Jernigans are joint, as opposed to several, insureds. While some courts have emphasized that the joint obligations of the insureds arise from the nature of the underlying property ownership, and have denied recovery to the innocent insured where the dwelling is jointly owned, 4 courts that have adopted the modern rule focus on the insurance contract to determine whether the rights of the insureds are joint or several. 5

A fire insurance policy is generally viewed as a contract "indemnifying the insured party for loss to his insurable interest and not as providing proceeds on the property itself." Note, Spouse's Fraud as a Bar to Insurance Recovery, 21 Wm. & Mary L.Rev. 543, 547 (1979); see also 5 J. Appleman & J. Appleman, Insurance Law and Practice § 3082, at 293 (1970 & 1987 Supp.). "An insurance policy is a contract and the same rules of construction applicable to other contracts are applicable to insurance policies." Commercial Union Ins. Co. v. State Farm Fire & Casualty, 546 F.Supp. 543 (D.Colo.1982); see Marez v. Dairyland Ins. Co., 638 P.2d 286 (Colo.1981). We must therefore look to the language of the insurance policy to determine whether the rights of the Jernigans are joint or several.

Where an insurance policy is unambiguous a court should not rewrite it to arrive at a strained construction. Urtado v. Allstate Ins. Co., 187 Colo. 24, 528 P.2d 222 (1974). However, where there is ambiguity or uncertainty as to coverage, courts should construe the policy in favor of the insured. Coxen v. Western Empire Life Ins. Co., 168 Colo. 444, 452 P.2d 16 (1969); see United Bank of Pueblo v. Hartford Accident & Indem. Co., 529 F.2d 490 (10th Cir.1976). We agree with the trial court's finding that under the definition of insured in the policy Gayle S. Jernigan is a separate and distinct person. Robert H. Jernigan and Gayle S. Jernigan are listed as the "named insured." The definition section of the insurance policy states: " 'insured' means you and the following residents of your household: a. your relatives; b. any other person under the age of 21 who is in the care of the person named above." In determining whether the obligations of the insureds are joint or several, we are guided by section II, entitled Conditions. Paragraph two states: "Severability of insurance. This insurance applies separately to each insured. This condition shall not increase our limit of liability for any one occurrence." Several, of course, means "[s]eparate; individual; independent; severable. In this sense the word is distinguished from 'joint.' " Black's Law Dictionary 1232 (5th ed. 1979). We conclude...

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