931 F.3d 781
8th Cir.2019Background
- Todd and Michele Borchardt owned a home insured by State Farm; policy in force beginning April 28, 2014. A September 13, 2014 fire destroyed the house. A fire investigator concluded the fire was incendiary.
- State Farm denied the Borchardts’ claim, asserting (1) the fire was caused or procured by an insured and (2) there was concealment or misrepresentation of material facts in the submitted claim.
- The Borchardts submitted a sworn proof of loss claiming large values for real property and personal property; State Farm identified numerous discrepancies (overstated jewelry value, inflated counts/values of TVs, DVDs, lawnmowers, electronics, food/liquor, firearm accessories, etc.).
- A jury found the fire was intentionally set (not by Todd, Michele, or daughter Danielle) and that Todd, Michele, and Danielle willfully and with intent to defraud concealed or misrepresented material facts relating to the claim.
- The district court entered judgment awarding no damages to Todd, Michele, and Danielle (policy voided for material misrepresentations) and awarded limited damages to Dillon for his claim; the Borchardts moved for JMOL arguing State Farm failed to prove materiality.
- The Eighth Circuit reviewed denial of JMOL de novo and affirmed, holding the evidence was sufficient for a reasonable jury to find material misrepresentations and intent to defraud, which voided coverage.
Issues
| Issue | Borchardt's Argument | State Farm's Argument | Held |
|---|---|---|---|
| Whether misrepresentations on the proof of loss were "material" to void coverage | Inaccuracies were mistakes, not proof of materiality; materiality not presumed and insurer offered no expert on materiality | Quantity/value of overstatements (thousands of dollars) were per se material because they would matter to a reasonable insurer | Affirmed: jury had sufficient evidence to find misrepresentations were "sufficiently substantial to matter to a reasonable insurer" |
| Whether there was sufficient evidence of intent to defraud | Misstatements were inadvertent errors and recollection-based; retained adjuster used conservative depreciation, undermining claim of fraud | Admissions of numerous specific overstatements and implausible valuations supported willful intent to deceive | Affirmed: jury could reasonably infer intent to defraud based on the pattern/scale of misrepresentations |
| Whether material misrepresentations void the policy and bar recovery | Misrepresentances were not shown material, so coverage should remain | Material misrepresentations about the claim void insurer's obligation under Minnesota law | Affirmed: material misrepresentations relating to personal property voided right to recover under the policy |
Key Cases Cited
- Ryan Data Exchange, Ltd. v. Graco, Inc., 913 F.3d 726 (8th Cir. 2019) (standard of review for JMOL stated)
- Indep. Sch. Dist. No. 197 v. Accident & Cas. Ins. of Winterthur, 525 N.W.2d 600 (Minn. Ct. App. 1995) (insurer may avoid coverage for insured’s material misrepresentation made with intent to deceive)
- Howard v. Aid Ass’n for Lutherans, 272 N.W.2d 910 (Minn. 1978) (misrepresentation increases insurer’s risk of loss where it impairs insurer’s ability to reasonably assume risk)
- Collins v. USAA Prop. & Cas. Ins. Co., 580 N.W.2d 55 (Minn. Ct. App. 1998) (material misrepresentations can void insured’s right to recover under the policy)