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No. 95-2547

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General Casualty Insurance *

Companies, *

*

Appellee, *

* Appeal from the United States

v. * District Court for the

* Eastern District of Missouri.

Holst Radiator Co.; Roy Holst, *

doing business as Holst *

Radiator Co., *

*

Appellant *

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 Submitted: April 11, 1996

 Filed: July 10, 1996

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Before RICHARD S. ARNOLD, Chief Judge, and BOWMAN and WOLLMAN, Circuit

Judges.

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BOWMAN, Circuit Judge.

Roy Holst filed a $215,000 claim with his insurer, General Casualty

Insurance Companies, after his place of business, Holst Radiator Co., was

damaged by a fire on December 28, 1992. On March 8, 1993, General Casualty

paid $70,000 on the portions of Holst's claim that were not in dispute at

that time. Later, however, General Casualty decided to deny Holst's claim

in its entirety because, inter alia, General Casualty believed that Holst

failed to cooperate in the investigation of the loss and violated the

concealment, misrepresentation, or fraud conditions of the insurance

policy. General Casualty then filed this declaratory judgment action,

seeking to recover the $70,000 it had paid to Holst. General Casualty

alleged that "the cause and origin of the fire was not how and where

defendant Holst had claimed it to be." 
 The Honorable Donald J. Stohr, United States District Judge 1

for the Eastern District of Missouri.

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Complaint at ¶ 12. In other words, General Casualty had reason to believe

that arson may have been the cause of the fire but was prevented from

conducting a complete investigation by Holst's failure to cooperate. Holst

then filed a counterclaim, alleging that General Casualty breached the

insurance contract, committed fraud, and vexatiously refused to pay on the

insurance policy. Holst sought punitive damages. The District Court1

dismissed the fraud count of Holst's counterclaim as well as the claim for

punitive damages. The other issues were submitted to a jury, which

returned a verdict in favor of General Casualty. The District Court

entered judgment on the verdict, awarding General Casualty $70,000 plus

interest.

The main issue in this appeal relates to the nature of the fraud that

General Casualty was required to prove. Holst argues that General Casualty

was required to prove all of the elements of common-law fraud, as set out

in state-approved jury instructions, in order to recover the $70,000 it had

paid on the insurance contract with Holst. In particular, Holst claims

that General Casualty failed to prove that it relied on any of Holst's

allegedly fraudulent statements. Reliance is an element of common-law

fraud under Missouri law. General Casualty, on the other hand, contends

that it only had to prove that Holst breached a provision of the insurance

contract. According to General Casualty, the provision in question--the

concealment, misrepresentation, and fraud provision--was violated, thus

voiding the policy, even if General Casualty did not rely on Holst's

statements.

The interpretation of the terms of an insurance contract is a matter

of state law, which we review de novo. See Pace Constr. Co. v. U.S.

Fidelity & Guar. Ins. Co., 934 F.2d 177, 179 (8th Cir. 1991). Holst argues

that the District Court's erroneous 
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interpretation of the insurance contract led it to improperly submit the

issue of fraud to the jury and to misinstruct the jury on the issue of

fraud.

The provision of the insurance contract at issue in this case reads

as follows:

A. CONCEALMENT, MISREPRESENTATION OR FRAUD

This Coverage Part is void in any case of fraud by you as it

relates to this Coverage Part at any time. It is also void if

you or any other insured, at any time, intentionally conceal or

misrepresent a material fact concerning:

1. This Coverage Part;

2. The Covered Property;

3. Your interest in the Covered Property; or

4. A claim under this Coverage Part.

General Casualty Ins. Policy CCI 0126591, Commercial Property Conditions

at 1. The District Court, by refusing Holst's proposed instruction, held

that the meaning of the word fraud in the insurance contract is not the

same as common-law fraud. We agree.

In Vitale v. Aetna Casualty & Surety Company, this Court noted the

distinction between fraud in the inducement and a fraudulent proof of loss.

814 F.2d 1242, 1251 (8th Cir. 1987). We specifically stated that "a charge

of a fraudulent proof of loss differs from one of fraud in the inducement,

which requires, among other elements, reliance." Id. We held that

Missouri Approved Instruction (MAI) 25.03 was inapplicable in cases

involving a charge of fraudulent proof of loss because that instruction was

designed for cases in which an insured is charged with fraud at the time

the insured obtained coverage. Id. 

The jury instruction that Holst proposed was modeled after MAI 32.19

(1991), which is substantially similar to the instruction we 
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rejected in Vitale. "Litigants are entitled to have the jury instructed

on their claims and theories if," inter alia, "the proposed instructions

are correct statements of the law" applicable to the case. Hoselton v.

Metz Baking Co., 48 F.3d 1056, 1063 (8th Cir. 1995). Like Vitale, however,

this case involves a fraudulent proof-of-loss charge rather than a charge

of fraud in an application for insurance coverage. To our knowledge, the

Missouri state courts have not decided whether reliance is a necessary

element of the fraudulent proof of loss required to void an insurance

policy. Thus our decision in Vitale, which applies Missouri law, is

authoritative, and the instruction proposed by Holst is not a correct

statement of the law applicable to this case. In these circumstances, the

District Court properly submitted the issue of fraud to the jury, despite

the alleged absence of evidence of General Casualty's reliance on Holst's

statements, and properly instructed the jury on the issue of fraud.

In addition to the arguments on the issue of fraud, Holst contends

that the District Court improperly admitted evidence that tended to prove

that the insured property was overvalued. The admissibility of evidence

is an issue that is committed to the sound discretion of the trial court,

and "we will not disturb a district court's evidentiary ruling absent a

clear and prejudicial abuse of that discretion." Laubach v. Otis Elevator

Co., 37 F.3d 427, 428-29 (8th Cir. 1994).

Holst claims that evidence relating to the overvaluing of his

property should not have been admitted for two reasons: (1) Missouri

Revised Statutes § 379.140 (1994) specifically bars an insurer from denying

that the insured property was worth the full amount for which it was

insured; and (2) General Casualty did not raise the valuation issue in its

letter denying Holst's claim under the policy. These arguments totally

miss the mark. The rules of law cited by Holst are directed toward

insurance companies who accept large premiums on overvalued property and

then, when a claim
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made, either pay only the actual value or deny the claim in its entiret

because See ,

667 700, 707-08 (Mo. 1984) (en banc) (analyzing Mo. Rev. Stat.

State ex rel. Shelter Mut. Ins. Co. v. Crouch

828 (Mo. Ct. App. 1986) (stating that defenses to claims should be raised

 claim is first denied). General Casualty did not introduce the

ence at issue to prove that it claimed that it only had to pay th

actual value of the property or to prove that it had denied Holst's claim

 he had overvalued the property. The evidence was introduced as

ntial proof that Holst had a motive to commit arson. In thes

circumstances, the evidence was obviously relevant and wholly admissible.

Thomure v. Truck Ins. Exch. 781 F.2d 141, 142 (8th Cir. 1986). The

District Court did not abuse its discretion by a

that the insured property was overvalued.

Holst has raised several other issues in this appeal, and we have

 reviewed his arguments. We find them to be without merit, and

 to set aside the jury's verdict in favor of General

Casualty. the judgment of the District Court is

affirmed.

Attest:

CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.