Clark v. Aetna Cas. & Sur. Co.

• Decision Date: 13 December 1985
• Docket Number: No. 85-4183,85-4183
• Citation: 778 F.2d 242
• Parties: Jim CLARK, Plaintiff-Appellant, v. AETNA CASUALTY & SURETY COMPANY, Defendant-Appellee. Summary Calendar.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 242

778 F.2d 242

Jim CLARK, Plaintiff-Appellant, v. AETNA CASUALTY & SURETY COMPANY, Defendant-Appellee.

No. 85-4183

Summary Calendar.

United States Court of Appeals Fifth Circuit.

Dec. 13, 1985.

Smith, Ross and Trapp, Orma R. Smith, Jr., Corinth, Miss., Laurel G. Weir, Philadelphia, Miss., for plaintiff-appellant.

Watkins & Eager, Richard T. Lawrence, Jackson, Miss., for defendant-appellee.

Appeal from the United States District Court for the Southern District of Mississippi.

Before POLITZ, GARWOOD, and E. GRADY JOLLY, Circuit Judges.

OPINION

GARWOOD, Circuit Judge:

In this Mississippi diversity case, appellant-plaintiff Jim Clark appeals the district court's judgment, 607 F.Supp. 63, following a bench trial, that Clark recover nothing from appellee-defendant Aetna Casualty & Surety Company on its insurance policy issued to Clark, because he had made material misrepresentations to Aetna during its investigation subsequent to the fire that destroyed Clark's insured farm equipment. Clark claims the district court erred in finding that (1) he had made such misrepresentations, and (2) his insurance policy with Aetna was not "valued." Clark also asserts that the policy is divisible, a matter the district court did not rule on as it was not raised below. We affirm.

Facts and Proceedings Below

On June 22, 1981, Aetna issued a fire insurance policy to Clark covering seventeen specified pieces of farm equipment. The declarations page of the insurance policy lists these items separately, and then declares the total insured amount to be $38,470. As reflected by the policy, the premium charged was eighty cents per one hundred dollars or, here, $308, which Clark duly paid. The "Basic Policy Provisions" provided that if an insured event occurred, recovery would be limited to the lesser of the cash value of the equipment at the time of the event or the separate "Amount of Insurance" listed for each item on the declarations page of the policy, such amounts totaling $38,470.

On August 22, 1981, exactly two months after Clark procured this insurance, all the insured equipment was destroyed in a fire. At the time of the fire, all seventeen insured items were bunched together under the same open shed. Clark reported the loss to Aetna the following day. On August 25, Aetna sent Roger Riddick, a claims representative, to investigate the fire. Clark did not give a statement to Riddick on the day of Riddick's arrival, however, because one of Clark's children was visiting him.

A telephone interview of Clark by Riddick was subsequently conducted on August 27, 1981, during which Clark maintained that he could not find any of his records of the burned equipment. He did not, however, ask Riddick to stop the interview. Riddick posed various questions to Clark about his acquisition of the equipment, and Clark replied that he could not recall from whom he had purchased the equipment. For instance, when Riddick asked Clark when he had acquired a particular trailer, Clark vaguely asserted that he had purchased it from a resident of Arkansas whose name he could not recall. In that same vein, when asked whether he had obtained an appraisal for his original valuation of the equipment for the insurance policy, i.e., $38,000, Clark stated that he had indeed received an appraisal from an employee of the Mooney Tractor Company, but that, again, he could not now recall that person's name or find the original appraisal.

After this interview, Clark was told by Riddick that he needed a bill of sale for each item of the destroyed equipment before Clark would be reimbursed. Clark subsequently produced the needed bills of sale, most of them from family members and friends. Thus, Clark maintained that he obtained a single axle trailer from his stepfather, despite having previously stated that he could not remember the name of the person in Arkansas who sold him this equipment. Clark further said that he bought a Massey-Ferguson tractor, also insured, from Okla Bozeman for $7,900. However, Bozeman later stated that the total consideration for this tractor was $3,000. Clark claimed that this difference lay in repairs he made to the tractor. Additionally, Clark, despite having earlier said that he could not remember from whom he had purchased various hay cutting and baling equipment, produced a bill of sale for this equipment from Ovett Gipson for $16,000. This bill was dated May 12, 1981, just three months before the fire. However, the numeral "1" in the $16,000 figure is in blue ink, while the "6,000" is in black ink. At trial, Clark explained that he paid Gipson $10,000 in cash and signed a note for $6,000, but denied having marked on the bill of sale. Another bill of sale purportedly shows that Clark purchased various items of farm equipment from Billy Irons, his next door neighbor.

Continuing his investigation, Riddick conversed with a representative of Mooney Tractor Company, the company that Clark said had prepared the original valuation for his insurance policy. The Mooney representative stated that Clark's first request for an appraisal came after the fire. Clark now claims the Mooney employee that he had used for the appraisal is working offshore. Riddick did procure a new estimate from this representative, based on a current description of the equipment, that estimated the cash value of the destroyed equipment to be approximately $16,000. Riddick also contacted the Pedigo Equipment Company to obtain values of the insured equipment from the official guide to tractor and farm equipment, and Pedigo came up with an estimate of approximately $17,000. Clark, however, told Riddick that he had had the equipment appraised at Saxon Motor Supply for over $28,000 and offered to settle for that amount. Subsequent investigation revealed, however, that Mark Saxon of Saxon Motor Supply had based the $28,000 estimate on the values of both new and used replacement equipment, depending on availability. Saxon's estimate of the immediate cash value for Clark's equipment was $20,000. Riddick offered to settle for this amount, but was rebuffed by Clark, who counteroffered for $26,000.

On December 11, 1981, Aetna, in a letter to Clark, elected to invoke its right under the policy to take Clark's sworn statement. Clark gave this statement on December 29, 1981, and revealed that he had secured the needed bills of sale following the fire, which, he asserted, had destroyed the originals, along with most of his other records. One record that did survive the fire was the original of his insurance policy, which Clark did not keep in the shed. During his sworn statement, Clark stated that his income tax for 1981 would show profits of approximately $5,000 to $6,000 from selling cattle, $3,500 to $3,800 from hauling hay, and $4,000 to $5,000 from hauling pulp wood. Clark's federal tax return for that year, however, reflects no income from hauling hay or pulp wood, and shows a substantial loss in cattle farming operations.

After both Clark's statement and Aetna's offer to settle, a deputy fire marshal informed Aetna that the bill of sale submitted by Billy Irons was not an original and that Irons had in fact not sold any equipment to Clark. When Riddick questioned Clark about this bill of sale, Clark maintained that it was legitimate. Further investigation by Aetna revealed that the bill of sale signed by Okla Bozeman was also inaccurate, for the stated price exceeded the actual sales price by $5,000. Consequently, Aetna considered the policy void and refused to pay. Clark then brought this suit to enforce his policy rights.

Following a bench trial, the district court held that Aetna need not pay Clark under the policy because Clark had made material misrepresentations to Aetna during the course of its investigation following the fire. Clark appeals, claiming three errors: (1) that any misrepresentations made were not material or knowing and could not have been relied on by Aetna; (2) that the policy is a "valued policy" and thus any misrepresentations made thereunder are irrelevant since Aetna is bound to pay a stated contract value; and (3) that the policy is divisible and thus a misrepresentation as to one part does not thereby serve to void the whole.

Discussion

Misrepresentations

Clark claims that the district court's finding that he made material misrepresentations to Aetna during its investigation are clearly erroneous. Clark does not now contend that the information he gave to Aetna was entirely accurate, but instead maintains that any inaccuracies were either innocent or immaterial. Clark thus concludes that the clause in his policy providing that a misrepresentation of a material matter voids the policy should not have been triggered. ¹

Mississippi law, which concededly governs in this diversity case, demands that the insured help an insurance company investigate the cause of an accident or fire. See Edmiston v. Schellenger, 343 So.2d 465, 466-67 (Miss.1977). To this end, the Mississippi Supreme Court has noted that "[i]t is well established that such [concealment] clauses in fire insurance policies are reasonable and valid, and are to be given a reasonable interpretation." Taylor v. Firemen's Fund Insurance Co., 306 So.2d 638, 644 (Miss.1975) (quoting Southern Guaranty Insurance Co. v. Dean, 252 Miss. 69, 172 So.2d 553 (1965)). In Mississippi, for an insurance company to defeat a policy on the basis of a "concealment" clause, it must establish that statements by the insured were (1) false and (2) material and (3) knowingly and wilfully made. Watkins v. Continental Insurance Companies, 690 F.2d 449 (5th Cir.1982). As the evidence clearly shows, and Clark does not really dispute, that misrepresentations were made, our inquiry proceeds to the second and third requirements. ²

Mississippi courts take a "broad view of materiality," Edmiston, supra, at 446, as applied to misrepresentations made during an insurance investigation. Since...