Transportation Insurance Company v. Hamilton, 7083.

• Decision Date: 21 May 1963
• Docket Number: No. 7083.,7083.
• Citation: Transportation Insurance Company v. Hamilton, 316 F.2d 294 (10th Cir. 1963)
• Parties: TRANSPORTATION INSURANCE COMPANY, a foreign corporation, Appellant, v. Opal M. HAMILTON, doing business as Opal M. Hamilton Fashions, Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

316 F.2d 294 (1963)

TRANSPORTATION INSURANCE COMPANY, a foreign corporation, Appellant, v.Opal M. HAMILTON, doing business as Opal M. Hamilton Fashions, Appellee.

No. 7083.

United States Court of Appeals Tenth Circuit.

April 9, 1963.

Rehearing Denied May 21, 1963.

Walter D. Hanson, Oklahoma City, Okl. (William L. Peterson, Jr., Oklahoma City, Okl., was with him on the brief), for appellant.

John Chiaf of Cargill, Cargill & Chiaf, Oklahoma City, Okl. (John Embry of Miskovsky, Sullivan & Embry, Oklahoma City, Okl., was with him on the brief), for appellee.

Before BRATTON, LEWIS and HILL, Circuit Judges.

HILL, Circuit Judge.

This diversity action was commenced below by appellee, Opal M. Hamilton, against appellant, Transportation Insurance Company, to recover upon a fire insurance policy covering a stock of merchandise and the furnishings and fixtures used in connection therewith.After issue, the trial court appointed a Special Master to take the evidence and make findings of fact and conclusions of law.A lengthy hearing was had before the Special Master and he made and filed his report to the court, finding generally in favor of Hamilton.After hearing appellant's objections to the report, the lower court overruled the objections and entered its order confirming, ratifying and adopting the findings of fact, conclusions and recommendations of the Special Master and entered a judgment in favor of appellee accordingly.The appeal is from that judgment.

It is agreed by the parties that the fire insurance policy sued upon was in full force and effect on the date of the fire, that a fire occurred and that appellee suffered a loss to her stock of merchandise and store furnishings and fixtures from fire, smoke and water.

Appellant urges 11 points for reversal of the judgment below, but actually all of such points concern the sufficiency of the evidence to support the findings of fact made by the Special Master.Therefore, it is not necessary to treat each of appellant's points separately.We will consider the sufficiency of the evidence generally to support the findings of fact and judgment.

The undisputed facts reveal that, immediately after the fire, appellant, with the consent of appellee, employed Underwriters Salvage Company to make an inventory of the stock of merchandise, as it existed prior to the fire.An inventory of the furnishings and fixtures was made by the insurance adjuster for appellant.Most of appellee's books and records, including the original invoices, had been destroyed by the fire.The merchandise was divided into lots or categories for listing on the inventory.The identity of the various items was established by the price tags upon the identifiable items and price tags recovered from the debris.In the end, an accurate listing of the merchandise must have been made, as neither party questions the accuracy of the inventory, insofar as the items are shown thereon.From the same price tags the retail price of each item was determined and shown upon the inventory.Neither party makes any complaint about the correctness of this portion of the inventory.The aggregate retail sales price of all items shown upon the inventory of merchandise was $31,377.20.An inventory of furnishings and fixtures was also made and there appears to be no controversy concerning the specific items shown thereon.

We have carefully read and considered the voluminous record and all of the many exhibits admitted into evidence by the Special Master.It is purely a fact case, with the greater weight of the evidence in favor of the appellee, and we find little merit to any of the many contentions made by appellant.

The trial court's findings of fact are presumptively correct and should not be set aside, unless clearly erroneous.Rule 52, F.R.Civ.P.,28 U.S.C.A.This rule applies to findings of fact made by a Special Master and adopted by the trial court.¹At the outset, the burden of proof was upon the insured to establish the reasonable value of the property in question.²

The Oklahoma statute, relating to standard fire insurance policy forms, requires that the policy contain a fraud and false swearing provision.³A willful and intentional breach of this provision by the insured, as to a material matter, in the proof of loss will avoid the policy or vitiate the insurance contract.⁴The claimed breach of the fraud provision of the policy is an affirmative defense, and it is incumbent upon an insurer to prove by a fair preponderance of the evidence that the policy in question has been voided by the insured's misconduct in breaching the fraud or false swearing provision of the policy.⁵In order to work a forfeiture of, or avoid, the insurance policy, the alleged concealment, fraud, misrepresentation or false swearing must be willful and with the intent to deceive or defraud the insurer.⁶Where an insured knowingly and willfully over-estimates the value of the property destroyed in his proof of loss, with the intention to deceive the insurer, the policy is voided and the insured's right to recover thereon is defeated.⁷However, mere mistake, inadvertence or a good faith belief as to the value of the insured property will not sustain a charge of fraud or false swearing.⁸As the Supreme Court said in Jose Rivera Soler & Co. v. United Firemen's Ins. Co., supra, 299 U.S. at page 50, 57 S.Ct. at page 56:

"* * * Policy holders may present inaccurate proofs of loss without conscious dishonesty or intent to defraud; different views of values are common; memory is faulty; insurance company and assured often entertain widely different views concerning the policy; and evidence cannot always be produced to establish something declared to be true in entire good faith."

And, in a case where there is evidence to support a finding of fraud and false swearing and, also, evidence justifying a finding to the contrary, the issue is one for determination by the trier of fact.⁹

The fire occurred on July 11, 1959, and immediately thereafter, appellant had the inventory taken.There is no question about the quantity of merchandise involved or the existence of the furnishings and fixtures as claimed by appellee.At the time of the taking of the inventory, upon the giving of her sworn statement and in her testimony before the Master, appellee stated the percentage markup above cost for each category of merchandise.

In the preparation of her proof of loss, appellee adopted the inventory made by appellant's agent, applied her claimed percentage markups to the various items of merchandise and thus arrived at her cost price.The total cost of the merchandise, so arrived at, amounted to $17,983.21, which amount, less any salvage value, appellee claimed on her proof of loss to be the actual or reasonable value of the merchandise lost by reason of the fire.In computing the amount of her loss, as to the furnishings and fixtures, appellee used the inventory of those items, which was prepared by appellant's claims adjuster.To this list of items, she applied her cost price and deducted what she considered to be their value after the fire.The result was the amount of $11,294.06, which was her claimed loss as to the furnishings and fixtures.Her testimony was that the current replacement cost of these items was higher than her actual cost because of an increase in the retail price, and therefore her estimate of the actual or reasonable value before the fire was her cost.Her after fire value of furnishings and fixtures was $493.00, which was in accord with the testimony of her expert witness.With her books and records destroyed, appellee relied upon information she had obtained from the original...