Russell v. Farmers & Merchants Ins. Co., 17750
| Decision Date | 09 June 1992 |
| Docket Number | No. 17750,17750 |
| Citation | 834 S.W.2d 209 |
| Court | Missouri Court of Appeals |
| Parties | Shelia Sturgeon RUSSELL, Plaintiff-Respondent, v. FARMERS & MERCHANTS INSURANCE COMPANY, Defendant-Appellant. |
Michael H. Maguire, Lowes & Drusch, Cape Girardeau, for defendant-appellant.
Jim S. Greene, Sikeston, for plaintiff-respondent.
The plaintiff Shelia Sturgeon Russell sued the defendant Farmers & Merchants Insurance Company claiming she had suffered a personal property loss that was insured under the defendant's homeowners policy issued to her and her former husband. Pursuant to a jury verdict the trial court entered judgment for the plaintiff: $17,157.78 theft loss; $1,550 interest; $2,020.20 penalty for vexatious refusal to pay; $7,500 attorney fees.
The defendant appeals. We reverse the award of attorney fees; in all other respects we affirm the judgment.
In late January 1987, the plaintiff's residence in Sikeston, Missouri, was burglarized, and a large quantity of personal property was taken or destroyed. The defendant's policy, covering the plaintiff's home, included coverage for loss of personal property due to theft and vandalism. The policy was initially effective July 1, 1986, and was in force on the date the loss occurred. The named insureds were the plaintiff and her husband Phillip Sturgeon. 1
In the midst of marital discord, Phillip moved out of the home on November 13, 1986, leaving the plaintiff and their three minor children in possession of the home and its contents. Both Phillip and the plaintiff testified that considerable animosity surrounded their separation and ultimate divorce.
The plaintiff testified that she spent most the day on January 30 "in divorce court." Because she was upset over a postponement of the dissolution, several of her friends offered to take her out for the evening. She left home about dark, took her children to stay with her mother, and did not return home until approximately 1:30 a.m., January 31, at which time she found the home and a shed on the premises had been entered forcibly. Substantial amounts of personal property had been removed from both buildings and some vandalism had occurred. Sikeston police and the defendant were notified; each entity initiated investigations.
Lt. Dan Armour investigated the burglary and theft for the Sikeston police. He provided information, including copies of statements from persons he interviewed, to the defendant's investigator. Armour suspected the plaintiff was involved in the perpetration of the burglary and theft, and he expressed his suspicions to the defendant's investigator. From the exhibits on file and Armour's testimony, it appears his investigation was confined to January and February 1987. At trial Armour said the crime remained unsolved and no arrests were ever made.
On February 13, Patrick Hillman, an employee of General Adjustment Bureau (GAB), an independent adjusting firm hired by the defendant to investigate the plaintiff's claim, provided the plaintiff with inventory forms on which to list missing and damaged items. Because the plaintiff was unsure of what items were missing from the shed and their value, she asked her son to enlist the aid of her estranged husband Phillip in identifying and valuing those items. The plaintiff testified:
And then when it come to the shed, as I said before, I couldn't get along with my ex-husband, so my son called him on the phone, and Phillip told him, because Phillip had come in and took his stuff that he wanted, and what was left was supposed to have been mine. That was our agreement, so he told Phillip what he had left out there, and then Phillip told me and also he listed it. He gave me the prices and everything of what he could remember that it cost. (Emphasis added.)
The son's name also is Phillip. In the above-quoted testimony, we are uncertain to whom the plaintiff refers by some of her references to Phillip and him and he. However, we believe the import of the testimony to be clear from the italicized portion.
As a part of his investigation, on February 19, 1987, Hillman submitted to the defendant his first report (defendant's exhibit E), in which Hillman stated:
As advised we have six pages of inventory completed by Shelia Sturgeon and we will be meeting with Phillip Sturgeon to verify that the items were actually in the home at the time of the alleged burglary.
As soon as that is completed we will be forwarding a blank proof of loss to Shelia Sturgeon.
The six-page inventory completed by the plaintiff contains 96 separate entries of items of personal property. One of the six inventory pages, which has the hand-written designation "Paul-Lisa" at the top, contains nine entries, including a three-wheel vehicle valued at $2827.46. The three-wheeler was recovered February 17. The total value of all items on the six-page inventory, excluding the recovered three-wheeler, is $17,157.10.
After the plaintiff completed the inventory, Hillman met with Phillip who reviewed the six-page list. Phillip questioned the age of numerous listed items, he identified a ring that he said was lost prior to the burglary, and he noted several items (a comforter, a camera, and five household appliances) that he had "never seen" at the house. 2
On March 23, 1987, Hillman submitted to the defendant his second report (defendant's exhibit F) accompanied by four enclosures, two of which are described in the report as "Proof of loss filled out by the insured, Phillip and Shelia Sturgeon" and "Six pages of inventory checked out by Phillip Sturgeon."
The proof of loss form, dated March 5, 1987, names "Phillip & Shelia Sturgeon" as the "insured." The form bears the signatures of the plaintiff and Phillip and an acknowledgement by a notary public. On the proof of loss form, the plaintiff and Phillip claimed a total loss of $17,157.78, an amount sixty-eight cents more than the total value of items on the plaintiff's inventory, excluding the three-wheeler. The proof of loss form included this statement: "The property insured belonged at the time of the loss, to Shelia Sturgeon and no other person or persons had any interest therein except Paul Russell--Lisa Coatney." 3
The defendant, by its claims attorney Richard Carroll, denied the claim in a detailed six-page letter addressed to the plaintiff and Phillip and dated August 14, 1987. A return of premium was tendered with the letter. In the letter, the defendant set out five reasons for its action. First, the defendant charged that the plaintiff and Phillip had engaged in material concealment, specifically, that they had "lied not only on your application for homeowners insurance coverage with this company, but you have continued to perpetrate a fraud on this company by lying on your proof of loss and inventory forms." We quote portions of the denial letter that deal with the application:
Our investigation has revealed several material misrepresentations made by you with respect to prior losses.
For example, on question 18 on page 1 of the application, you left blank the space asking for "Applicant's loss record past three years (on this or any other property)?"
Likewise, question 2 on page 2 of the application asks "How many fire losses has applicant or any member of applicant's household had?" You answered "None." Question 3 on page 2 of the application asks for "Applicant's loss record on other than fire losses for the past three years on this or any other property?" The answer space there is left blank.
In truth and in fact, you had made three prior claims within the three year period covered by the application!
....
In short, you deliberately lied to procure insurance coverage.... Based upon these material misrepresentations, we have elected to declare this policy void from its inception.... (Underscoring in original.)
Before stating the other reasons cited by the defendant in its letter for denying the claim, we set out in greater detail evidence concerning the plaintiff and Phillip's application for the homeowners policy. The application appears in the trial court record in two forms. The version of the application referred to in the denial letter was the agent's copy, which was a part of the defendant's exhibit F, adjustor Hillman's second investigation report to the defendant. The answer spaces for the two questions referred in the denial letter are, indeed, blank. All responses to questions on the application are type-written.
The original application, a part of the defendant's trial exhibit A, was used by the defendant's underwriters prior to issuance of the policy. The original appears identical to the agent's copy, with the addition of several notations in red ink supplied by the defendant's underwriting department and by the hand-written response "None" to the two questions referred to in the denial letter as having no answers. One of the defendant's underwriters testified that she did not know who made the hand-written "None" responses; she assumed it was the agent.
The plaintiff apparently applied for the insurance policy sometime in June 1986. Because she and Phillip previously had sustained a $64,840 fire loss and an $18,986 tornado loss at the premises, their existing coverage with another company had been canceled. In shopping for new coverage, the plaintiff called the Ziegenhorn insurance agency of Sikeston. Portions of the plaintiff's testimony regarding completion of the application follow:
A. (By the plaintiff) ... I talked to a girl over the phone. She asked me a few questions and the price of the insurance was pretty low, so we went ahead ... with Ziegenhorn.
....
Q. What did you do after you decided that that's who you were going to purchase the insurance from?
A. She asked me a few questions on the phone and told me that I could come by later and bring a check in for the insurance, so that's what me and my husband did.
....
Q. And did you sign...
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