Mize v. Harford Ins. Co.
| Decision Date | 02 December 1982 |
| Docket Number | Civ. A. No. 82-0064-D. |
| Citation | 567 F. Supp. 550 |
| Parties | W. Darnelle MIZE, Plaintiff, v. The HARFORD INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — Western District of Virginia |
Charles M. Aaron, Martinsville, Va., for plaintiff.
W. Charles Waddell, III, S.D. Roberts Moore, Roanoke, Va., for defendant.
This is a suit by the Plaintiff, Darnelle Mize ("Mize") against the Defendant, The Harford Mutual Insurance Company ("Company" or "Insurance Company") arising out of a policy of homeowner's insurance issued by the Defendant covering a house owned by Mize which was damaged by fire on August 30, 1981. The suit is in this Court on the basis of diversity of citizenship. Both parties waived trial by jury, and it was tried by the Court without a jury on October 5, 1982, and is now before the Court for decision as to both the facts and the law.
It is undisputed that at the time of the fire on August 30, 1981, the Plaintiff had in effect with the Defendant a homeowner's policy covering the Plaintiff's house, that a fire occurred, and that as a result of the fire, Plaintiff sustained damages in the amount of $49,955.64. It is further undisputed that there was a mortgage lien in the amount of $30,000.00 against the house and that the insurance policy named the Farmer's Home Administration as a beneficiary to the extent of its lien. It was also stipulated by both sides that the fire was of an incendiary nature; that the arsonist was one Steve Wilson; and that the Plaintiff fully complied with the terms of the policy.
Plaintiff claims both compensatory and punitive damages alleging that she is entitled to her compensatory damages under the terms of the policy, and that she is entitled to punitive damages because of the Defendant's willful and malicious act in refusing to pay the claim. The Defendant defends the policy claim on two grounds: (1) that the Plaintiff had complicity in the arson; and (2) that the Plaintiff made certain material misrepresentations during the investigation of the claim. Defendant further denies that Plaintiff is entitled to punitive damages even if it is found to be liable upon the policy.
It is conceded by the Defendant that its defenses to payment of the claim under the policy are affirmative defenses on which it must bear the burden of proof. The Plaintiff contends that the burden which must be borne by the Defendant is to prove the defenses by "clear and convincing evidence". The Defendant, on the other hand, maintains that its burden is only to prove its defenses by a "preponderance of the evidence". Since this is a diversity case I must be guided by the law of the State of Virginia as to which standard of proof the Defendant will be held. Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); Palmer v. Hoffman, 318 U.S. 109, 63 S.Ct. 477, 87 L.Ed. 645 (1943), Fed.R.Evid. 302.
The Plaintiff primarily relies on the case of Virginia Fire & Marine Insurance Co. v. Hogue, 105 Va. 355, 54 S.E. 8 (1906), as enunciating the burden which the Defendant must carry. Virginia Fire involved a suit on a fire insurance policy where the insurance company defended on the ground that the plaintiff had made fraudulent statements during the investigative period subsequent to the fire. The Virginia Supreme Court stated that in proving their defense the insurance company would be held to a "clear and convincing" standard of proof. This obviously would be applicable here to the Defendant's second defense of material misstatements made after the fire, but the Defendant would distinguish this case with regard to the arson defense asserting that Virginia Fire applies only to fraudulent misstatements. In my opinion, the rationale of Virginia Fire does not admit of such a distinction. The whole thrust of the Virginia Fire rationale is that where the defense is one of a criminal act by the insured, the presumption that most people are law-abiding citizens requires that such an assertion be proven by clear and convincing evidence. Arson is one of the defenses which would come within that classification.
The Defendant relies primarily on the case of Kimball Ice Co. v. Hartford Fire Insurance Co., 18 F.2d 563 (4 C.A.1927), as authority for the proposition that its burden is only that of a preponderance, but the case does not support that proposition. The plaintiff in that case tendered to the trial court and the trial court gave an instruction which stated that the defendant's burden was to prove its defenses by a preponderance of the evidence. Thus, there was never any issue before the court as to which was the appropriate standard. The court simply gave the requested instruction and if it was wrong, it was the plaintiff's own fault and he had no ground to complain.
In sum, I find that the burden of proof which the Defendant must carry is to prove its affirmative defenses by "clear and convincing evidence", and that is the standard I have applied to the evidence.
Plaintiff, two or three days prior to the fire on August 30, 1981, went to Myrtle Beach for a short vacation. It was her custom to take this type of vacation several times a year. Before leaving, she put her pets, which consists of two Doberman dogs and two Siamese cats, in a kennel. This was a change from her normal procedure of leaving them at home because prior to this time, her father and mother had been able to take care of them. However, her father had died the preceding December, and her mother could not take care of the pets because she lived some distance from the Plaintiff and had no transportation. (Plaintiff's car had broken down, and she had borrowed her mother's.) When she left, she locked the upstairs portion of the house, but she was unsure about locking the basement. In any event, the basement had a "pet door" in it which would not lock and was large enough to permit the entry of a person. While she was at the beach, she learned of the fire from a phone call from the Henry County Sheriff's Department and came back home on the same day she received the call. Upon returning home, she contacted Deputy Sheriff Stoneman, who accompanied her to her house. Deputy Stoneman was the person who called the Plaintiff and informed her of the fire. He testified that upon learning of the fire, the Plaintiff was upset and crying. He further testified that the Plaintiff had requested him to keep an eye on the house during his routine patrols.
The Insurance Company, through an independent adjuster, conducted an investigation of the facts and circumstances surrounding the fire. During that investigation, the Plaintiff gave a statement to the adjuster who wrote it down in narrative form, and the Plaintiff signed it as her statement. Not being satisfied with that, the Insurance Company then required the Plaintiff to appear before its attorney and submit to interrogation under oath before a stenographer. Not being satisfied with that, the Insurance Company then told the Plaintiff, both orally through its retained adjuster and by letter which emanated directly from the Insurance Company's claims manager, that unless she submitted to a polygraph test and passed it, the company would not pay the claim. The polygraph test was to have been administered by the Virginia State Police polygraph operator. The Plaintiff refused this request and in keeping with its prior statements, the Insurance Company denied the claim. (Ed. note — Defendant never formally denied claim.)
At trial, the Insurance Company maintained the position that it did not really deny the claim because of the Plaintiff's refusal to take the polygraph test, but that it denied the claim because of underlying suspicious circumstances. This rather amazing position is maintained by the Insurance Company in the face of the Plaintiff's testimony and in the face of the Company's own letter which point blank sets forth that the claim would be denied unless the insured took and passed a polygraph test. It appears to me that the Company's position during the trial is an afterthought to shore up its position, and I cannot accept it as the reason for denial. However, since the circumstances the Company deemed to be suspicious are interrelated with the material misrepresentation defense, they bear some examination.
In the testimony of the two company officials, Messrs. Miller and Foley, the Insurance Company ticked off eight facts, the combination of which the Company urges amounts to sufficient circumstantial proof that Plaintiff had complicity in the arson.
First is the circumstance that Plaintiff had been living with Steve Wilson (the arsonist) up until March of 1981. At no time did the Plaintiff attempt to hide this. She readily disclosed that she and Steve Wilson had been living together and that in March of 1981, he walked out on her. The record does not disclose why he walked out nor what the feelings of the parties were at the time of the breach. Plaintiff did testify, however, that because of their relationship, Wilson's wife instituted a divorce proceeding against him and that she (the Plaintiff) was called to testify in the proceedings. She further stated that after the breakup, she had casual meetings with Wilson on two or three occasions. The Insurance Company impeached this statement to some extent by showing that the Plaintiff had been seen in a car with Wilson at times other than she testified to. She flatly denied that she had anything to do with Wilson setting the fire.
The second circumstance was that the Plaintiff was absent at the time of the fire and had taken all of her jewelry with her. Plaintiff explained that she had gone on a short vacation and that she didn't have much jewelry, that what she had was of no great value and that she routinely took it with her when she traveled.
The third circumstance was that she had pets which she had historically left at the house...
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