Mutual of Enumclaw Ins. Co. v. Cox
| Decision Date | 09 June 1988 |
| Docket Number | No. 53003-3,53003-3 |
| Citation | 757 P.2d 499,110 Wn.2d 643 |
| Parties | MUTUAL OF ENUMCLAW INSURANCE COMPANY, Respondent, v. Clinton C. COX, Appellant. |
| Court | Washington Supreme Court |
Delay, Curran, Thompson & Pontarolo, P.S., Joseph P. Delay, Spokane, for appellant.
Huppin, Ewing & Anderson, P.S., Robert F. Ewing, Spokane, for respondent.
William Smart, Pamela Okano, Seattle, for respondent on behalf of Washington Defense Trial Lawyers Ass'n, amicus curiae.
The defendant, Dr. Clinton C. Cox, appeals a judgment n.o.v. in favor of the plaintiff, Mutual of Enumclaw Insurance Company (MOE). The trial judge ruled that Cox's fraud voided his insurance policy regardless of MOE's bad faith in processing the claim. We affirm.
Cox purchased from MOE a homeowner's insurance policy covering his Clear Lake, Washington house. The policy provided coverage for $137,000 worth of unscheduled personal property in addition to coverage for the dwelling, appurtenant structures, scheduled personal property, and living expenses.
On December 7, 1984, fire destroyed Cox's Clear Lake house and all property therein. On the same day, Cox met with MOE adjuster John Scrivener. Scrivener recommended to Cox that he employ Loree Claassen to assist him in preparing an itemized inventory of his unscheduled personal property. On January 31, 1985, Cox submitted to MOE a proof of loss form on his policy including a 143-page inventory list. The claim for unscheduled personal property and for personal property moved to Clear Lake prior to the fire from other Cox properties totaled $324,420.
This amount greatly exceeded the $137,000 of unscheduled personal property coverage.
On February 25-28, 1985, Homestake Salvors sifted the debris left by the fire. On March 8, 1985, MOE received Homestake's report which contained information that Homestake found no trace of certain items claimed lost, valued at approximately $35,000-$40,000, including items such as jewelry, a television, a video cassette recorder, and eight bronze sculptures. On March 11 and 20, 1985, MOE deposed Cox to discuss the missing items. Cox denied that he tried to defraud MOE, but admitted to making numerous mistakes on the inventory list. Meanwhile, MOE had made partial payments on the policy, including the following:
December 7, 1984 $ 5,000 for personal property
January 15, 1985 $ 10,000 for personal property
February 27, 1985 $ 5,000 advance on fire loss
March 12, 1985 $140,500 payment to lienholders on Clear Lake house
March 27, 1985 $ 3,291.77 additional living expenses
On April 2, 1985, MOE commenced a declaratory judgment action against Cox on the Clear Lake policy. MOE claimed that the entire policy was void because Cox violated the policy's anti-fraud provision. The anti-fraud provision reads as follows:
Misrepresentation, Concealment or Fraud --This entire policy is void if, whether before or after a loss:
a. An insured has willfully concealed or misrepresented:
1) any material fact or circumstance concerning this insurance; or
2) an insured's interest herein.
b. There has been fraud or false swearing by an insured regarding any matter relating to this insurance or the subject thereof.
Clerk's Papers, at 7. Cox denied the charge and counterclaimed that MOE, in processing his claim, dealt in bad On August 22, 1985, the Spokane County Superior Court entered the following rulings on Cox's motion for partial summary judgment that: (1) even where the actual loss exceeds the policy limits, fraud is material and voids the policy; (2) as a matter of law the insurance policy was not severable and, therefore, fraud would void the entire policy; and (3) as a matter of law there was no waiver or estoppel resulting from interim payments by MOE to Cox.
faith and committed numerous unfair and deceptive practices and violations of RCW 48.01.030, RCW 48.30.010, WAC 284-30-300, et seq., and RCW 19.86.020.
The case proceeded to trial. During voir dire, counsel for Cox read a list of witnesses' names and asked the jurors to respond if they knew any of the witnesses. Juror Kathy Rohrback knew of but did not personally know defense witness Mark Vovos, so she did not respond. Other jurors, in post-trial affidavits, claimed that Rohrback showed a definite bias against Vovos and that she tried to persuade the other jurors to deny Cox recovery. Rohrback, in her own post-trial affidavit, disputed these statements and claimed that she was not biased against Vovos.
At the conclusion of the trial, the jury returned a verdict for Cox, answering the relevant special interrogatories as follows:
* * *
(3) Unscheduled personal property less the amount heretofore advanced on unscheduled personal property of $20,000.00 and not to exceed $117,000.00; plus prejudgment interest at 12% per annum[:] $50,000.00 + 12%
* * *
Clerk's Papers, at 1721-22. The interrogatories did not list the specific Washington Administrative Code provisions that the jury found MOE had violated.
On MOE's post-trial motion, the trial court granted a judgment n.o.v. to MOE. The court held that Cox's fraud precluded his use of estoppel. Cox appealed the trial court's decision to this court. We accepted direct review.
There is ample evidence from the trial record that Cox committed fraud by including numerous items on his inventory list which were not at his Clear Lake house when the fire occurred. Some of these items claimed lost, such as jewelry and the bronze sculptures, should have been found during the sifting. Cox attempted to defraud MOE.
Although Cox's actual personal property loss exceeded the unscheduled personal property policy limits, we hold that Cox's fraud was material. See Henricksen v. Home Ins. Co., 237 Or. 539, 392 P.2d 324 (1964); Mazzella v. Hanover Fire Ins. Co., 114 W.Va. 728, 174 S.E. 521 (1934); Saidel v. Union Assur. Soc'y, 84 N.H. 232, 149 A. 78 Cox contends that the fraud was immaterial because his fraud did not prejudice MOE since it bore no risk of additional loss. See Jensen v. Palatine Ins. Co., 81 Neb. 523, 116 N.W. 286 (1908). We do not find this argument persuasive. Insurance companies rely on insureds honestly filling out inventory lists of destroyed property. Dishonesty by insureds cannot be ignored.
(1930); Beyer v. St. Paul Fire & Marine Ins. Co., 112 Wis. 138, 88 N.W. 57 (1901); Capital Fire Ins. Co. v. Beverly, 14 Ohio C.C. 468, 8 Ohio Cir. Dec. 37 (1897); Dolloff v. Phoenix Ins. Co., 82 Me. 266, 19 A. 396 (1890). The rationale behind these decisions is that "the insured should be penalized for the wilfulness of his conduct regardless of the fact that the insurer would not have been required to pay any greater amount had the falsity not been demonstrated." Annot., 16 A.L.R.3d 781 (1967)
Cox contends that his fraud should only void that part of his policy dealing with unscheduled personal property. He asserts that contracts are severable when performance by each party can be divided into equivalent parts. See Baffin Land Corp. v. Monticello Motor Inn, Inc., 70 Wash.2d 893, 425 P.2d 623 (1967). Whether a contract is entirely divisible depends largely on its terms and on the intention of the parties disclosed by its terms. Saletic v. Stamnes, 51 Wash.2d 696, 321 P.2d 547 (1958).
The court, on pretrial motion, ruled that as a matter of law the policy was not severable. This reasoning seems to be based on the language of the policy. Section 6 of the policy contained the following language:
This entire policy is void if ...
* * *
b. There has been fraud or false swearing ...
Clerk's Papers, at 7. Many courts have upheld the same or similar provisions. St. Paul Mercury Ins. Co. v. Salovich, 41 Wash.App. 652, 705 P.2d 812, petition for review denied, 104 Wash.2d 1029 (1985); Farm Bur. Town & Country Ins. Co. of Mo. v. Crain, 731 S.W.2d 866 (Mo.App.1987); Chaachou v. American Central Ins. Co., 241 F.2d 889 (5th Cir.1957); Claflin v Cox contends that MOE induced his fraud because MOE did not aid Cox in filling out his inventory list of unscheduled personal property. Although the jury's special interrogatories did not designate the specific Washington Administrative Code provisions that MOE violated, Cox claims that MOE violated WAC 284-30-360(4), which reads, in part:
Commonwealth Ins. Co., 110 U.S. 81, 3 S.Ct. 507, 28 L.Ed. 76 (1884). The clear language of Cox's policy provided that it was not severable. Cox's material fraud voided the entire Clear Lake policy, and he is not entitled to any recovery
Every insurer ... shall promptly provide necessary claim forms, instructions, and reasonable assistance so that first party claimants can comply with the policy conditions and the insurer's reasonable requirements.
While MOE did not assist Cox with compiling his inventory list, MOE did recommend that he hire Loree Claassen for assistance.
If Cox's misstatements had simply been errors in remembering what property was at Clear Lake, then clearly no fraud would have occurred. However,...
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