The U.S. Court of Appeals for the Eighth Circuit, affirming a decision by a federal district court in Missouri, has ruled that a homeowners' insurance policy was void where the insureds had valued their personal property at $7,000 in bankruptcy court but a year later valued it at $262,500 in a proof of loss they submitted to their insurer following a fire at their home.
The Case
When Dale and Kim Neidenbach filed for protection under Chapter 13 of the federal Bankruptcy Code, they declared – under penalty of perjury – that they jointly owned only $7,000 worth of household goods and furnishings, clothing, furs, jewelry, firearms, hobby equipment, and other personal property.
About a year later, one or two fires occurred at their home, substantially damaging the building and the personal property inside.
The Neidenbachs claimed coverage for the damage under a homeowners' insurance policy issued by Amica Mutual Insurance Company. The Neidenbachs submitted a “Sworn Statement in Proof of Loss” to Amica in which they claimed that their house and garage had suffered a total loss.
They sought the limits of their policy: $375,000 in damage to their house and garage, and $262,500 in damage to their personal property. Attached to the proof of loss was an inventory of the Neidenbachs' personal property, which assigned a value to each item allegedly lost in the fire. According to the inventory, the total value of the personal property lost in the fire was over $300,000, exceeding the policy limit.
Before Amica made a final coverage determination, the Neidenbachs filed a lawsuit against the insurer, seeking reimbursement for the fire loss.
Amica moved for summary judgment, arguing that the insurance policy was void under its “Concealment or Fraud” provision because the Neidenbachs had misrepresented the value of their personal property in their proof of loss.
The U.S. District Court for the Eastern District of Missouri concluded that no reasonable jury would be able to reconcile the difference between the value of the personal property the Neidenbachs had reported as lost in the fire and the value of the personal property they had reported in their bankruptcy petition a year earlier. Accordingly, the district court determined that the insurance policy was void as a matter of law, and granted summary judgment to Amica on the Neidenbachs' claims.
The Neidenbachs appealed to the Eighth Circuit, arguing that they had used different methods of valuing their property in the proof of loss and the bankruptcy petition. The Neidenbachs contended that their bankruptcy attorney had instructed them to use the “garage sale value” of their personal property in their bankruptcy petition but that they had used the “fair market value” of their personal property in the proof of loss. The Neidenbachs contended that this explanation was sufficient to create a genuine issue of material fact as to whether they intentionally had overstated the value of their personal property on the Proof of Loss.
The Amica Policy
The Amica policy provided:
R. Concealment or FraudThe Eighth Circuit's DecisionWe provide coverage to no insureds under this policy if, whether before or after a loss, an insured has:
1. Intentionally concealed or misrepresented any material fact or circumstance;
2. Engaged in fraudulent conduct; or
3. Made false statements;
relating to this insurance.
The circuit court affirmed.
In its decision, the circuit court first ruled that “no reasonable jury could conclude” that the difference between garage sale value and fair market value accounted for the $255,500 discrepancy between the proof of loss and the bankruptcy petition.
The Eighth Circuit observed that the Neidenbachs had produced no evidence that they had computed the value of their personal property incorrectly on their bankruptcy petition, or that they had excluded personal property from the petition because they believed it had no resale value.
Similarly, the circuit court continued, the Neidenbachs had produced no evidence that they had made mistakes on their proof of loss.
Rather, the circuit court concluded, the “only reasonable inference” was that they had “intentionally made material misrepresentations” in their proof of loss.
The circuit court found that the Neidenbachs' misrepresentations on the proof of loss were “material” because an accurate inventory of the property destroyed by the fire was necessary for Amica to make a coverage determination.
It then concluded that because the Neidenbachs had intentionally made material misrepresentations on the proof of loss, their entire insurance policy was void.
The case is Neidenbach v. Amica Mutual Ins. Co., No. 16-1400 (8th Cir. Nov. 16, 2016). Attorneys involved include: Counsel who presented argument on behalf of the appellant was David C. Knieriem, of Saint Louis, MO; Counsel who presented argument on behalf of the appellee was Robert W. Cockerham, of Saint Louis, MO.
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].