Bennett v. Allstate Ins. Co., 90-3704

• Decision Date: 15 January 1992
• Docket Number: No. 90-3704,90-3704
• Citation: 950 F.2d 1102
• Parties: Gus BENNETT, Sr., Plaintiff-Appellant, v. ALLSTATE INSURANCE COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1102

950 F.2d 1102

21 Fed.R.Serv.3d 940

Gus BENNETT, Sr., Plaintiff-Appellant, v. ALLSTATE INSURANCE COMPANY, Defendant-Appellee.

No. 90-3704.

United States Court of Appeals Fifth Circuit.

Jan. 15, 1992.

Nils R. Douglas, New Orleans, La., for plaintiff-appellant.

Michael K. Fitzpatrick, Nancy Cromartie, Porteous, Hainkel, Johnson & Sarpy, New Orleans, La., for defendant-appellee.

Appeals from the United States District Court for the Eastern District of Louisiana.

Before CLARK, Chief Judge, JONES, Circuit Judge, and PARKER, District Judge. ¹

EDITH H. JONES, Circuit Judge:

Plaintiff-appellant Gus Bennett, Sr. sued Allstate Insurance Company to recover under a fire insurance policy after his house was destroyed by fire. The district court entered a judgment voiding the entire policy for contents fraud. Finding no reversible error, we affirm.

I.

On January 17, 1987, at approximately noon, plaintiff's home burned. The fire had five different points of origin and has been classified by the New Orleans Fire Department as arson. Approximately thirty-six hours later, the house burned again. The second fire also had five separate points of origin and was classified as arson.

After reviewing the property loss worksheets submitted by Bennett, Allstate had him sign a non-waiver agreement and continued to investigate the claim. Allstate repeatedly requested a sworn statement in proof of loss, but Bennett did not provide it until December 1987. ² Allstate's investigation then revealed that many of the items listed on Bennett's sworn proof of loss were not in his possession, their ages were understated, and their values were overstated. Allstate resisted Bennett's claim and alleged arson and contents fraud as an affirmative defense against coverage.

The parties' first trial ended in a mistrial. After a second, eight-day trial, the district court, on a jury finding of contents fraud, voided the entire policy. This appeal followed.

II.

Bennett's most significant contention is that the district court erred in concluding as a matter of law that contents fraud voids the entire policy. Plaintiff relies on LSA-R.S. 22:692.1, which provides:

Assertion of a defense of material misrepresentation made by an insured subsequent to loss by fire as to the value of the contents of a residence or business shall not entitle an insurer to void total coverage of the policy based on such misrepresentation, unless a court of competent jurisdiction determines and adjudicates otherwise.

Plainly, however, the statute does not support Bennett's argument that contents fraud may never void a fire insurance policy; the provision states that material misrepresentation of the contents will not void the policy unless a court of competent jurisdiction so declares. What this last clause means is the proper focus of discussion.

LSA-R.S. 22:692.1 operates as an exception to LSA-R.S. 22:691, a standard set of terms incorporated into all fire insurance policies issued in the state of Louisiana. See LSA-R.S. 22:691(A). The standard fire policy provides that contents fraud or material misrepresentation voids the entire policy. LSA-R.S. 22:691(F)(2). LSA-R.S. 22:692.1 was enacted to give the insured his day in court and to prevent him from being dismissed on summary judgment. HOUSE COMM. ON COMMERCE MINUTES, 1985 Regular Session of the State of Louisiana, HOUSE BILL 1610. It allows the court to reduce the loss claimed by policyholders without sacrificing all of their coverage. Id. The House Minutes do not suggest, contrary to the statutory language, that as a matter of law contents fraud or material misrepresentation will never cause the entire policy to be void. ³

The statute, illumined by this legislative history, appears to contemplate a three-step process: (1) a finding of material misrepresentation with regard to the loss of contents; (2) a finding that the misrepresentation was intentional and for the purpose of deceiving the insurer; and (3) a determination by "a court of competent jurisdiction" that the entire policy should be avoided.

Unfortunately, Bennett misspent his energy contending in the trial court that contents fraud could never void a fire policy under this statute. Objections that are not well-taken legally do not preserve any error for review on appeal. Fed.R.Civ.P. 51; Pierce v. Ramsey Winch Co., 753 F.2d 416 (5th Cir.1985). He never requested the court to submit to the jury the issue of whether, if they found material misrepresentation, such misrepresentation should void the entire policy.

The court instructed the jury as follows:

Therefore, ladies and gentlemen, under the terms of the policy itself, material misrepresentations in a proof of loss given to the fire insurer will void coverage. A misrepresentation is material if done knowingly and intentionally and with the intent to deceive the insurer.

However, inadvertent overestimates by the insured of the value of his property is not sufficient to void the policy. Nor is a mere misstatement of the loss, made in good faith, even though erroneous.

Therefore, in order to prevail on this defense, Allstate must establish by a preponderance of the evidence that Gus Bennett, Sr. overestimated the value of his house or listed property that was not even located in his house at the time of the fire or overvalue of the contents that were in the house and that he intentionally made such statements, knowing they were false, with the intent to deceive and defraud Allstate into paying the amounts requested.

Direct evidence of intent to deceive is rare. Such intent, therefore, must often be inferred from circumstances that create a reasonable assumption that the claimant was aware of the falsity of his representations.

If you find that Mr. Bennett made representations to the Defendants that were false and were material to the claim, and he knew them to be false, it is presumed that he intended to defraud the company.

Fraud is a misrepresentation or a suppression of the truth made with the intention either to obtain an unjust advantage for one party or to cause a loss or an inconvenience to the other.

Fraud need only be proved by a preponderance of the evidence and may be established by circumstantial evidence.

Fraud will never be presumed, however, from acts which may be accounted for on the basis of honesty and good faith.

If you find from the evidence that Mr. Bennett caused his home to be burned, he cannot recover any money from Allstate.

In addition, if you find that Mr. Bennett knowingly made material misrepresentations in his proof of loss claim or on his work loss sheet, with the intent to deceive Allstate, he cannot recover.

However, if you find that Mr. Bennett did not cause his home to be burned and that although he made errors or misrepresentations in his proof of loss, those misrepresentations were not made with knowledge and with the intent to defraud the insurance company, then Mr. Bennett can recover. In this regard, ladies and gentlemen, it will be up to you the jury to determine the amount Mr. Bennett should recover for contents that were destroyed by the fire.

(ROA Vol. 12, 1640-1643).

Because Bennett did not make a proper objection to the charge as given, we are confined to reviewing the jury charge for plain error. Pierce, supra. No plain error appears in the trial court proceedings. The court did not receive much help from either party in interpreting LSA-RS. 22:692.1, as insured and insurer were highly antagonistic to each other, and each invoked the most extreme interpretation of the statute in his or its favor. There was no plain error in the court's instructions.

The court treated Allstate's contents fraud assertion as an affirmative defense, which it is, and accordingly placed the burden of proof upon Allstate. The jury were then asked to find whether Bennett materially misrepresented the contents of his home. Material misrepresentation, in turn, was properly defined as embodying both materiality and intentional deception. The jury were guided well enough toward their decision, such that no plain error exists in the charge.

The next question, which we also regard as falling within the realm of an instructional error, is whether because of the jury finding of material misrepresentation, the policy could be or should have been voided. Bennett argues that the trial court misunderstood her responsibility for this ultimate determination. The most likely meaning of the statute based on its wording and history is that when "a court of competent jurisdiction" finds an insured has made a material misrepresentation as to the value of dwelling content lost by fire, that court must determine whether the misrepresentation voids total coverage or only the contents misrepresented. The statute furnishes no help as to the criteria for such a decision or whether the judge or jury should make it. Bennett's singleminded pursuit of the policy-is-never-voided approach did not preserve his right to have the trial court instruct the jury on such criteria nor did he preserve the right to have the jury rather than the court make this determination. See Fed.R.Civ.P. 49(a). The factual support for our decision is stated in the next section.

III.

Bennett's second contention is that there is a complete absence of probative evidence of contents fraud. Plaintiff complains that there was no evidence of overvaluation, but overvaluation is not the only criterion. The evidence was overwhelming that at least 31 items on Bennett's sworn contents list of 146 were shown to have been removed from the home. Bennett's ex-wife and his children testified that they removed these items as they departed from Bennett's household, in some cases, many years ago. Moreover, a number of the items were, by family members' testimony and by proof from old family photos, much older than Bennett claimed. Further, Bennett claimed that these items originally cost over $6,000, as compared to a...