Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-90-03079/USCOURTS-ca10-90-03079-0/pdf.json

Parties Involved:
State Farm Mutual Automobile Insurance Company
Appellant
George Turley
Appellee

Document Text:

PUBLISH 

FILED 

United States Court ol'Ap~Js Tent.'l Cireuit 

UNITED STATES COURT OF APPEALS SEP 0 4 1991 

ROBERT L. HOECKER 

Clerk 

GEORGE TURLEY, 

Plaintiff-Appellee, 

v. 

STATE FARM MUTUAL 

AUTOMOBILE INSURANCE CO. 

Defendant-Appellant. 

TENTH CIRCUIT 

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) 

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No. 90-3079 

Appeal from the United States District Court 

for the District of Kansas 

(D.C. No. 88-2095-V) 

Jeffrey L. Lauersdorf (James L. Sanders of Wallace, Saunders, 

Austin, Brown & Enochs, Chartered, with him on the brief), 

Overland Park, Kansas, for Defendant-Appellant. 

Gordon M. Rock, Jr. of Grimshaw & Rock, Chartered, Olathe, Kansas, 

for Plaintiff-Appellee. 

Before EBEL and McWILLIAMS, Circuit Judges, and ALLEY, District 

Judge.* 

McWILLIAMS, Circuit Judge. 

* Honorable Wayne E. Alley, u.s. District Judge for the Western 

District of Oklahoma, sitting by designation. 

Appellate Case: 90-3079 Document: 01019294832 Date Filed: 09/04/1991 Page: 1 
An insured brought suit against his insurer for damage to his 

automobile which allegedly had been stolen and stripped. Upon 

recovery of the vehicle, the parties agreed that it was damaged 

in the amount of $9,756.42. However, the insurer denied policy 

coverage. A jury trial resulted in a verdict for the insured 

against his insurer in the stipulated amount. The insurer 

appeals. 

On February 27, 1986, James Brigman and his daughter, 

Michelle Brigman, leased a 1984 Chevrolet Corvette from one George 

Turley. The terms of the lease were that James Brigman would make 

monthly payments to Turley in the amount of $350 and that he 

(Brigman) would be responsible for maintenance and automobile 

insurance. 

On February 28, 1986, James Brigman made application for 

automobile insurance on the Corvette with one Vernon Killian, an 

agent for State Farm Mutual Automobile Insurance Company ("State 

Farm"), with whom James Brigman had dealt for several years. In 

the application James Brigman listed his daughter, Michelle, as 

the primary driver. State Farm issued a policy of insurance to 

James and Michelle for coverage on the Corvette on February 28, 

1986, effective at 1:00 p.m. Later that same day, George Turley 

was identified as the owner of the Corvette and was added as an 

additional insured. The policy issued by State Farm included 

comprehensive coverage for theft. 

On March 3, 1986, Michelle Brigman contacted the Kansas City, 

Missouri Police Department and reported that the Corvette had been 

stolen on that date from the east side of the Bannister Shopping 

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Appellate Case: 90-3079 Document: 01019294832 Date Filed: 09/04/1991 Page: 2 
Mall sometime between 11:15 a.m. and 12:15 p.m. while she was 

shopping. As a matter of fact, however, the Kansas City, Missouri 

Police Department had recovered the Corvette on March 1, 1986, at 

1 about 3:30 p.m. , one day after the effective date of the 

insurance policy and two days before the date given by Michelle 

Brigman as the date of the theft. 2 

Subsequent to the reported theft of the vehicle by Michelle 

Brigman to the police, the loss was reported to State Farm. The 

claims office of State Farm then contacted the named insureds, 

James and Michelle Brigman, and requested further information 

concerning the loss of the vehicle. On April 17, 1986, James and 

Michelle Brigman submitted claim documents to State Farm which 

included two affidavits, one from each of them, wherein they 

stated that the theft occurred on March 3, 1986, at the Bannister 

Shopping Mall. 3 

State Farm denied Turley's claim that he, as the owner of the 

1 The police discovered Turley's Corvette, 

and damaged, in response to a telephone 

abandoned car. The vehicle was found "in the 

miles" from the Bannister Mall. 

partially stripped 

call regarding an 

woods" about "two 

2 In a deposition, Michelle Brigman later stated that the 

Corvette was actually stolen from an outside parking area adjacent 

to her mother's apartment complex in the early morning of March 1, 

1986. She further testified in her deposition that she 

immediately attempted to contact her father, but that he was "out 

driving one of his trucks . on his way [from Kansas] to 

California or on his way back." Being "nervous and upset," she 

stated that she notified the police on March 3, 1986, and gave 

them an incorrect report of theft as such related to the date, 

time and place of the theft. 

3 In the affidavits submitted to State Farm, James and Michelle 

both stated that the theft was discovered and reported to the 

police on "4/3/86" (April 3, 1986). They later testified 

(Michelle in a deposition and James at trial) that such was a 

mistake. 

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Corvette, be paid for the loss sustained by him. The reason given 

Turley by State Farm for its denial of coverage was as follows: 

"[D]ue to the material misrepresentation made 

to [State Farm] and the falsified Kansas City, 

Missouri auto theft report, any and all claims 

for the theft or damage of the 1984 Corvette 

are hereby denied." 

It was in this general setting that Turley (not James or 

Michelle Brigman), a citizen of Kansas, brought the present action 

against State Farm, a company incorporated under the laws of 

Illinois, in the district court for Wyandotte County, Kansas. 

State Farm thereafter removed the case to the United States 

District Court for the District of Kansas on the grounds of 

diversity, pursuant to 28 u.s.c. § 1441. 

In the complaint, Turley alleged that he was the owner of the 

Corvette which State Farm had insured and that he was an 

additional insured in the policy which State Farm issued. He went 

on to allege that the vehicle was stolen on March 3, 1986, and not 

recovered by the Kansas City, Missouri Police Department until 

April 28, 1986, 4 with parts of the vehicle having been stripped 

and damaged. He then alleged that he had requested State Farm to 

pay for the property damage done to his vehicle and that State 

Farm had refused payment. Turley sought judgment in an amount in 

excess of $10,000.00. 

By answer, State Farm denied liability, alleging that Turley 

was barred and estopped from any recovery because of his failure 

4 Where this date came from is unknown from the record 

us. It is agreed by all that the Corvette was recovered 

Kansas City, Missouri Police Department on March 1, 1986. 

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before 

by the 

Appellate Case: 90-3079 Document: 01019294832 Date Filed: 09/04/1991 Page: 4 
to cooperate with State Farm by materially misrepresenting facts 

relating to the "cause, origin and extent of the subject loss." 

State Farm also alleged that Turley was not entitled to recover 

any money because of "a breach of the policy conditions precedent 

to coverage." As a further defense, State Farm alleged that "no 

loss occurred which is covered under the terms and conditions of 

the policy." As a final defense, State Farm alleged that Turley 

should be denied recovery based on "the illegality of the actions 

of the named insureds." 

After discovery, State Farm filed a motion for summary 

judgment with a supporting memorandum. It was State Farm's 

position that although it had no communications whatsoever with 

Turley, he was nonetheless bound by the material misstatements 

made to it by James and Michelle Brigman and that he, Turley, was 

barred from any recovery on the policy because of the Brigmans' 

failure to cooperate with State Farm's investigation. Turley 

filed a memorandum in opposition to State Farm's motion, arguing 

that under Kansas law any misrepresentations made by the Brigmans 

to State Farm did not bind him, an "innocent owner" of the stolen 

vehicle. 

The district court denied State Farm's motion for summary 

judgment. 5 In so doing, the district court agreed with the 

parties that there was no Kansas law as to whether a failure to 

cooperate by a named insured could be vicariously attributed to a 

so-called "innocent" co-insured, and also that outside of Kansas 

5 The district judge who ruled on State Farm's motion for 

summary judgment was a different judge than the one who presided 

at trial. 

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there was a split of authority on that particular matter. 

However, the district court felt it did not have to decide that 

question, at least in a summary judgment setting, since it was of 

the view that before there could be any imputation of the 

Brigmans' conduct to Turley, it had to be first determined whether 

the Brigmans' misstatements were material and detrimental to State 

Farm and whether such statements were made with an intent to 

defraud State Farm, all of which presented genuine issues of 

material fact which could not be resolved on summary judgment. In 

this connection, the district court noted, inter alia, that based 

on the evidentiary matter before it, any statements submitted by 

James Brigman to State Farm were based on information given him by 

his daughter, Michelle, i.e., he had no personal knowledge of any 

facts surrounding the date, time and location of the alleged theft 

since he was in California at the time, and that Michelle Brigman, 

age 19, "had initially provided incorrect information because she 

was nervous and upset." 

State Farm's initial argument in this court is that the 

district court erred in denying its motion for summary judgment 

and that we should reverse the present judgment in favor of Turley 

and remand with directions that the district court enter judgment 

in favor of State Farm. With this we do not agree. 

This is not a case where the insured made false statements in 

his application for insurance. Rather, it is State Farm's 

position that Michelle Brigman made a false statement to State 

Farm concerning the date, time and location of the theft of the 

Corvette, to which James Brigman later subscribed, and that such 

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conduct was not in accord with the policy requirement that the 

insureds "cooperate" with State Farm in its investigation of any 

claim of loss under the policy. In connection with this argument, 

it is State Farm's further position that the misconduct of the 

Brigmans is vicariously imputed to Turley to the end that he too 

is barred from any recovery under the terms of the policy. 

As indicated, the district court was of the view that it did 

not have to rule on the imputability issue since the initial 

question of whether the Brigmans' conduct itself violated the 

terms of the policy presented issues of fact which could not be 

resolved on summary judgment. The district court noted that not 

every incorrect statement given by an insured to his insurer 

concerning loss would bar recovery under the terms of the policy. 

Whether the statements of the Brigmans were made with an intent to 

defraud State Farm, and whether such were material and prejudicial 

to State Farm's defense in the present proceeding, were enumerated 

by the district court as issues which should be explored at trial, 

and not resolved on summary judgment. Under the described 

circumstances, we are in accord with the district court's denial 

of State Farm's motion for summary judgment. See Elliott v. 

Metropolitan Casualty Ins. Co. of N.Y., 250 F.2d 680, 683 (lOth 

Cir. 1957), cert. denied, 356 u.s. 932 (1958) (applying Kansas 

law, the court stated that "[w]hen reasonable minds might differ 

as to the intent of the insured in furnishing false information to 

the insurer, the question of cooperation should be submitted to 

the trier of fact"); American States Ins. Co. v. Ehrlich, 237 Kan. 

449, 701 P.2d 676, 679 (1985) (under Kansas law, the existence of 

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fraud to justify recision of an insurance contract is never 

presumed and is ordinarily a question of fact); and Hustead v. 

Bendix Corp., 233 Kan. 870, 666 P.2d 1175, 1176 (1983). 

Prior to trial, Turley filed a motion in limine in which he 

sought, inter alia, to preclude counsel for State Farm from 

mentioning in either voir dire or in his opening statement the 

fact that both Turley and Brigman had suffered felony convictions 

within the preceding ten years and that Turley had previously 

submitted false claims to other insurance companies, including a 

claim in which he conspired with James Brigman. As we understand 

it, counsel for State Farm did not have any particular objection 

to the request that he refrain from mentioning such in voir dire 

and during his opening statement, but he clearly indicated that if 

during the course of the trial such evidence became relevant, he 

intended to seek the admission of this type of evidence. In any 

event, the district court ordered counsel to refrain from 

mentioning any prior convictions or "prior bad acts" of either 

Turley or Brigman in voir dire and in opening statement, and the 

question of whether such might somehow become admissible during 

the course of the trial was left open. We perceive no error in 

this limiting order. The better practice would seem to be that 

evidence of this nature, which may or may not be admitted at 

trial, should not be alluded to in voir dire or during opening 

statement and should await development of the trial itself. 

Although State Farm, on appeal, does not challenge the 

district court's order in limine, it does challenge the district 

court's subsequent denial of its proffer to show prior "bad acts" 

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Appellate Case: 90-3079 Document: 01019294832 Date Filed: 09/04/1991 Page: 8 
of Turley and James Brigman. 

the named plaintiff, did not 

In this general connection, Turley, 

himself testify, so counsel was 

effectively precluded from attacking his credibility by showing 

his prior felony conviction, or convictions, within the preceding 

ten years. 

However, James Brigman did testify, and on direct examination 

he admitted to a felony conviction occurring in 1984 for being an 

accessory to mail fraud against an insurance company. During 

cross-examination, counsel for State Farm proposed to question 

James Brigman concerning a spurious insurance claim which he 

helped Turley make in 1983. In connection with its explanation as 

to just what this line of inquiry of James Brigman would develop, 

State Farm indicated that it also intended to call Turley's exwife as a witness to testify regarding the 1983 insurance claim 

arranged by Turley and Brigman, as well as numerous other 

fraudulent insurance claims which Turley had filed over the years. 

Objection was made, and after a hearing outside the presence of 

the jury, the objection was sustained. State Farm argues that 

this ruling constitutes reversible error. 

In view of the district court's ruling that it would not 

allow evidence of any prior insurance claim made by Turley, State 

Farm proffered the deposition of Turley's ex-wife given in the 

court proceeding commenced by Turley in relation to the 

aforementioned 1983 insurance claim. Although refusing to admit 

the deposition into evidence, the court accepted it as a proffer. 

In that deposition, Turley's ex-wife testified that James Brigman 

and Turley in 1983 conspired to fake a "slip and fall," wherein 

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Turley would claim he suffered a back injury as the result of such 

"slip and fall" and Brigman would testify that he witnessed 

Turley's non-existent "slip and fall." In this connection, the 

ex-wife stated that Turley had multiple health and accident 

policies, and that he collected on many of these policies for nonexistent injuries to the end that he was receiving approximately 

$4,000 per month in 1983. The ex-wife also testified as to other 

spurious insurance claims made by Turley, but we are here 

primarily concerned with the prior "bad act" involving both Turley 

and Brigman. 

We think the district court erred in rejecting State Farm's 

request that it be allowed to cross-examine James Brigman 

concerning his conspiring with Turley to stage a fake "slip and 

fall," as well as in disallowing State Farm the opportunity to 

call Turley's ex-wife as its witness and eliciting evidence from 

her concerning the staged accident, or using her deposition in 

lieu thereof. We think a fair reading of Fed. R. Evid. 404(b) 

requires the admission of this type of inquiry and evidence. In 

our view, such was relevant to the issues in the instant case, and 

though quite possibly prejudicial, at the same time was highly 

probative. Certainly it bore on the questions of whether James 

Brigman had an intent to defraud State Farm and whether there was 

collusion on the part of Turley. 6 

6 In its order denying State Farm's motion for summary judgment, 

the district court noted that State Farm had raised inferences of 

collusion with intent to fraudulently deceive on the part of James 

and Michelle Brigman, as well as on the part of Turley. According 

to the court, such inferences presented material issues for the 

finder of fact to resolve. 

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At trial one of State Farm's theories of defense was that the 

Corvette was actually stolen before the effective date of the 

insurance policy. In this regard, it was admitted that the 

Brigmans had the Corvette in their possession since December, 

1985, when James Brigman gave it to his daughter as a Christmas 

present, and that Michelle Brigman was "testing" the vehicle to 

see if she wanted to keep it. Thereafter, for that entire period 

of time, from the latter part of December, 1985, until February 

28, 1986, there was apparently no insurance on the vehicle. Then, 

on February 28, 1986, one day after Turley leased his Corvette to 

the Brigmans, insurance was obtained, and the vehicle was 

reportedly stolen during the early morning hours of the following 

day, March 1, 1986, according to the testimony of Michelle Brigman 

in her deposition, as well as the testimony of her mother and her 

boyfriend at trial. And then, some two days after the theft, 

Michelle Brigman gave false information to the police and later to 

State Farm concerning the date, time and location of the alleged 

theft, all of which, State Farm maintained, was in furtherance of 

a scheme to make it appear that the vehicle was stolen after the 

effective date of the policy. 7 Counsel suggests that all of this 

has the "earmarks" of insurance fraud and that evidence of a prior 

insurance fraud became germane to prove intent, knowledge, and 

absence of mistake or accident on the part of the Brigmans, and 

7 The State Farm claim specialist assigned to investigate the 

claim in question admitted on cross-examination that after State 

Farm denied Turley's claim, an individual, imprisoned at the time 

of trial for a separate offense, was suspected of stealing 

Turley's Corvette. However, insofar as our review of the record 

has revealed, no one was ever prosecuted or convicted for stealing 

Turley's car. 

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that Turley, under the circumstances, was involved therein. We 

agree. 

Fed. R. Civ. P. 61 provides that any trial error in 

connection with either the admission or exclusion of evidence is 

not grounds for disturbing a verdict or judgment unless such 

admission or exclusion is "inconsistent with substantial justice." 

Fed. R. Evid. 403 provides that even relevant evidence may be 

excluded if its probative value is "substantially outweighed by 

the danger of unfair prejudice." Rule 404(b) provides that 

evidence of other crimes, wrongs or acts is inadmissible to prove 

the character of a person "in order to show action in conformity 

therewith," but that such evidence may be admissible for other 

purposes, such as proof of intent, knowledge or absence of mistake 

or accident. We think that evidence that James Brigman and Turley 

conspired in a prior insurance scam was relevant to the Brigmans' 

intent, knowledge, and absence of mistake or accident in the 

present proceeding as well as to Turley's involvement in 

connection therewith, and that the exclusion of such evidence was 

"inconsistent with substantial justice." Indeed, the excluded 

evidence was conceivably of devastating proportions. 

Our attention has not been drawn to Tenth Circuit cases 

concerned with prior bad acts in the context of insurance fraud. 

For cases from other circuits involving prior acts of insurance 

fraud which were deemed admissible, see United States v. Radsek, 

718 F.2d 233, 236-37 (7th Cir. 1983), cert. denied, 465 u.s. 1029 

(1984); United States v. Wormick, 709 F.2d 454, 459 (7th Cir. 

1983); United States v. Smith, 685 F.2d 1293, 1296 (11th Cir. 

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1982); United States v. Lebovitz, 669 F.2d 894, 902 (3d Cir. 

1981), cert. denied, 456 u.s. 929 (1982); and United States v. 

Fuel, 583 F.2d 978, 989 (8th Cir. 1978), cert. denied, 439 u.s. 

1127 (1979). 

In refusing to admit the evidence in question, the district 

court, relying on United States v. Kendall, 766 F.2d 1426, 1436 

(lOth Cir. 1983), cert. denied, 474 U.S. 1081 (1986), was of the 

view that counsel had not sufficiently articulated the "fact of 

consequence" that would be established in the present proceeding 

by evidence of the insurance scam between Turley and James Brigman 

in 1983. We disagree. We think that counsel properly stated the 

"fact of consequence" he intended to establish by introducing such 

evidence. We note that in Kendall the evidence of prior acts was 

admitted, and on appeal we affirmed. Further, as we recently 

indicated in United States v. Porter, 881 F.2d 878 (lOth Cir. 

1989), cert. denied, U.S. _, 110 S. Ct. 348 (1989), "the 

Kendall requirements are not indispensable." Id. at 884-85 

(citing United States v. Record, 873 F.2d 1363, 1372-75 (lOth Cir. 

1989). Be all that as it may, we reject any suggestion by Turley 

that this matter was not properly before the district court. 

Certainly Turley knew what State Farm was trying to establish by 

this line of inquiry, and accordingly, before trial, filed a 

motion in limine to exclude evidence of prior criminal convictions 

of both Turley and James Brigman and prior bad acts involving 

either or both. 

We believe Huddleston v. United States, 485 U.S. 681 (1988), 

has present pertinency. In Huddleston, the Supreme Court held 

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that a district court need not make a preliminary finding that the 

government has proved the "other act" by a preponderance of the 

evidence before it submits "similar acts" and other Rule 404(b) 

evidence to the jury. In support of its holding, the Supreme 

Court concluded that as concerns Rule 404(b), "Congress was not 

nearly so concerned with the potential prejudicial effect of Rule 

404(b) evidence as it was with ensuring that restrictions would 

not be placed on the admission of such evidence." Id. at 688-89. 

The Supreme Court then went on to state that the "protection" 

against unfair prejudicial evidence emanates from the following 

sources: (1) from Rule 404(b) itself which requires that the 

evidence be offered for a proper purpose; (2) from the relevancy 

requirement of Rule 402; (3) from the trial court's assessment 

under Rule 403 that the probative value of the similar acts 

evidence is not substantially outweighed by its potential for 

unfair prejudice; and (4) from Rule 105, which provides that, if 

the evidence be admitted, the district court, on request, should 

instruct the jury on the limited purpose for which such evidence 

is received. 

In United States v. Record, 873 F.2d 1363, 1372-75 (lOth Cir. 

1989), we held that the district court's admission of prior acts 

was proper under the result and rationale of Huddleston. For a 

review of Tenth Circuit cases bearing on the present case, see 

Record. In Record we quoted the observation made in Huddleston 

that the real thrust of Rule 404(b) was that evidence of other 

acts ~ admissible and that Congress in enacting 404(b) was "not 

nearly so concerned with the prejudicial effect of Rule 404(b) 

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evidence as it was with ensuring that restrictions would not be 

placed on the admission of such evidence." 

In sum, evidence that Turley and James Brigman engaged in an 

insurance scam in 1983 should have been admitted by the trial 

court in the present proceeding under Rule 404(b). This evidence 

bore on one of State Farm's theories of defense, i.e., that there 

was insurance fraud and that the Corvette was actually stolen 

before the effective date of the insurance policy. In addition, 

such bore on James Brigman's knowledge, intent, and absence of 

accident or mistake in his dealings with State Farm, and on 

Turley's knowledge of the same. The potential prejudice of such 

evidence did not "substantially outweigh" its highly probative 

value. 8 

Although our determination that the district court erred in 

excluding inquiry of James Brigman on cross-examination concerning 

his conspiring with Turley in 1983 to submit a spurious insurance 

claim and that it further erred in denying State Farm the 

opportunity to establish through the testimony of Turley's ex-wife 

that such was in fact the case, requires a new trial, we elect to 

comment briefly on State Farm's third and final argument in this 

court. That argument concerns the instructions given by the 

district court to the jury. Specifically, State Farm contends 

8 The proffered evidence showed an act quite "similar" in 

nature to the acts relied on by State Farm in defending Turley's 

claim. No contention was made in the district court or here that 

the time interval between the prior acts and the present acts 

barred admission. Although we are here primarily concerned with 

the conspiracy between Turley and James Brigman in 1983, counsel 

suggests that there are other acts of insurance fraud by Turley 

that should have been presented to the jury. Whether such be the 

case, should be first determined by the district court on remand. 

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that the district court erred in giving, over objection, 

Instructions numbered 12 and 14 and in refusing an instruction 

tendered by State Farm. 

Instruction number 12 instructed the jury on the essential 

elements of Turley's claim, and failed to mention, as State Farm 

argues it should have mentioned, that one essential element was 

that Turley, before he could recover, was required to show that he 

complied with all of the policy's "conditions precedent." The 

specific "condition precedent" State Farm was concerned with at 

trial was the insureds' duty to cooperate with State Farm's 

investigation of any claim made under the policy. In this 

connection, we find no evidence that Turley, as opposed to the 

Brigmans, failed to comply with any of the "conditions precedent" 

of the insurance policy, including the duty to cooperate, unless 

the Brigmans' misconduct be imputed to Turley. Be that as it may, 

it would appear that this particular matter was covered, though 

inadequately, by Instruction number 14. 

Instruction number 14 reads as follows: 

Under the terms of the insurance contract in 

question, the insureds have a duty to cooperate fully 

with the defendant in the investigation of their claims. 

A failure to cooperate may be evidenced by the lack 

of truthfulness on the part of an insured in the 

investigation and/or reporting of a claim. Insurance 

coverage under an insurance contract may be.forfeited by 

an insured's failure to cooperate. Insurance coverage 

under an insurance contract may be forfeited by the 

insured's failure to cooperate if such failure causes 

substantial prejudice to the defendant's ability to 

defend itself. 

If you find the plaintiff, George Turley, failed to 

cooperate by having knowledge of, and assenting to, 

other insureds' failure to cooperate, and that the lack 

of cooperation caused substantial prejudice to the 

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defendant's ability to defend itself, you must find for 

the defendant, State Farm Mutual Automobile Insurance 

Company. 

State Farm objected to Instruction number 14, arguing, inter 

alia, that it failed to instruct the jury that Turley was bound by 

the misstatements of the Brigmans. In this regard, the 

instruction, as indicated, did advise the jury that if Turley had 

knowledge of and assented to the Brigmans' "failure to cooperate," 

and such caused "substantial prejudice" to State Farm's ability to 

defend itself, they must find for State Farm. However, we find no 

evidence in the record before us that Turley knew and assented to 

the Brigmans' false statements to State Farm. Be that as it may, 

it would appear to us that, on remand, the jury is going to have 

to be instructed that as a matter of law the Brigmans' misconduct 

either is, or is not, attributable to Turley. 

In this court, State Farm also argues that it was error for 

the district court to instruct the jury that misconduct, be it by 

the Brigmans or Turley, had to result in "substantial prejudice" 

to State Farm's ability to defend itself before it could bar 

recovery. In this connection, it is State Farm's position that 

although "substantial prejudice" is required where a third party 

is suing the insured, such is not the case where the insured, as a 

first party, is suing his insurer. We note that in State Farm's 

tendered instruction, which was rejected, State Farm itself used 

the phrase "substantial prejudice." Further, as far as we can 

tell, this particular argument was never made in the district 

court. The argument may now be made on remand. 

Judgment reversed. 

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