Opinion ID: 2231771
Heading Depth: 4
Heading Rank: 1

Heading: A & A & Passero

Text: Barth argues that the jury instructions were insufficient to convey the correct law to the jury. Although jury instructions are generally reviewed for an abuse of discretion, our standard of review is de novo when the question is whether the applicable law was accurately conveyed. People v. Pierce, 226 Ill.2d 470, 475, 315 Ill.Dec. 656, 877 N.E.2d 408 (2007). The primary instruction at issue here is State Farm's instruction no. 9, explaining the materiality requirement. The explanation of the law stated in that instruction is derived in large part from Passero v. Allstate Insurance Co., 196 Ill. App.3d 602, 608, 143 Ill.Dec. 449, 554 N.E.2d 384 (1990). In turn, Passero relied on a federal appellate case, Fine v. Bellefonte Underwriters Insurance Co., 725 F.2d 179 (2d Cir.1984). Barth contends that Passero and Fine are distinguishable and fail to support State Farm's argument. He asserts that Passero is distinguishable because it involved the homeowners' uncorrected proof of loss statement in a property theft claim and addressed materiality rather than reasonable reliance. Although Fine was a false-swearing case, as here, it did not involve reasonable reliance because the insured did not correct the misstatement before the insurer relied on it to its detriment. Here, the misstatements were corrected at or before the examination under oath. For this reason, Barth argues that this court should rely on A & A, Inc. v. Great Central Insurance Co., 259 Ill. App.3d 73, 196 Ill.Dec. 837, 630 N.E.2d 1002 (1994), a false-swearing case where the trial court rejected the insured's instruction defining fraudulent misrepresentation. In A & A, the policy provision voided the policy `if the Insured has concealed or misrepresented    any material facts or circumstances concerning this insurance    or if the Insured shall make any attempt to defraud Great Central either before or after the loss.' (Emphasis added.) A & A, 259 Ill.App.3d at 76, 196 Ill.Dec. 837, 630 N.E.2d 1002. The insurer's second affirmative defense alleged that the plaintiff's recovery was barred due to its `misrepresentation of the subject matter of the insurance, and other conduct by which the insured attempted to defraud the Defendant. ' (Emphases added.) A & A, 259 Ill.App.3d at 76, 196 Ill.Dec. 837, 630 N.E.2d 1002. The jury affirmatively answered the special interrogatory on the insurer's defense, finding the plaintiff had committed fraud in presenting the insurance claim. A & A, 259 Ill.App.3d at 78, 196 Ill.Dec. 837, 630 N.E.2d 1002. Moreover, throughout the discussion of the jury instructions on the second affirmative defense, the court referred to fraud, defraud, and fraudulent misrepresentation. A & A, 259 Ill. App.3d at 81-83, 196 Ill.Dec. 837, 630 N.E.2d 1002. The presence of an express fraud defense intermingled with the simple concealment and misrepresentation defense creates a distinctly different situation than the case before us. The insurer's allegation of fraud in A & A was an integral and necessary part of the court's reasoning. Here, the policy exclusion and State Farm's second affirmative defense do not include express references to fraud. The exclusion mentions fraud only in its heading, not in any of its substantive paragraphs. The text of the policy provision here is limited only to the first part of the provision in A & A, addressing concealment and misrepresentation. The reasoning in A & A provides little guidance in this case. In Passero, however, the policy stated: `Concealment or Fraud. This policy is void if you intentionally conceal or misrepresent any material fact or circumstance, before or after loss.' Passero, 196 Ill.App.3d at 604, 143 Ill.Dec. 449, 554 N.E.2d 384. Here, the essence of the policy exclusion is nearly identical: Concealment or Fraud: This policy is void as to you   , if you    intentionally concealed or misrepresented any material fact or circumstance relating to this insurance, whether before or after a loss. Moreover, in both Passero and the instant case, the insurer discovered the misrepresentations before paying the filed claims in reliance on the misstatements. On appeal, the Passeros argued that the misrepresentations were not material because they did not alter the insurer's conduct. This argument is similar to the one advanced by Barth, although the latter is couched in the common law fraud terms of reasonable reliance and injury. The Passero court noted that the definition of material misrepresentations is quite different in the realm of insurance law, with materiality being broadly defined in false-swearing cases since the United States Supreme Court's decision in Claflin v. Commonwealth Insurance Co., 110 U.S. 81, 3 S.Ct. 507, 28 L.Ed. 76 (1884). In Claflin, the Court stated that the insured had an affirmative obligation under the policy to answer accurately every question relevant to the insurer's investigation. Thus, willfully making a false statement, intended to deceive the insurer, was a breach of the policy conditions and barred the insured's recovery. Claflin, 110 U.S. at 96-97, 3 S.Ct. at 516, 28 L.Ed. at 82. The Court refused to consider the insured's personal reason for making the false statements, stating that the insured's lack of any intent to prejudice the insurer with its deception was no palliation of the fraud. Claflin, 110 U.S. at 96-97, 3 S.Ct. at 516, 28 L.Ed. at 82. Similarly, in Fine, 725 F.2d at 183-84, the court reversed the trial court's finding that the plaintiff's false statements under oath were not material, reasoning that insureds are obliged to be truthful during claims investigations and holding that false misrepresentations are material if they were designed to discourage, mislead, or deflect the insurer's investigation at that time, regardless of whether the investigation revealed the actual facts. See also Passero, 196 Ill.App.3d at 608-09, 143 Ill.Dec. 449, 554 N.E.2d 384. Here, the materiality instruction offered by State Farm and given to the jury incorporates that reasoning: A concealment, misrepresentation, or false statement is material if a reasonable insurer would attach importance to it at the time it was made. A reasonable insurer would attach importance to any fact or statement that would affect the insurer's action or attitude regarding a claim by an insured. A concealment, misrepresentation, or false statement is material if it is calculated to discourage, mislead or deflect an insurer's investigation in any area that could be relevant to the insurer at the time of the investigation. Whether a concealment, misrepresentation, or false statement is material does not depend on whether it relates to a matter that ultimately proves to be significant in the insurer's final disposition of the claim. We hold that this materiality instruction is sufficient in the context of a policy provision voiding coverage if the insured intentionally concealed or misrepresented any material fact or circumstance, before or after the loss. As Barth concedes in another portion of his brief, the materiality requirement necessarily implies an element of prejudice. Moreover, the requirement implicates a reasonable connection between the insured's concealment, misrepresentation, or false statement and the insurer's actions or attitude in investigating the claim. Thus, the instruction adequately covers the fundamental concerns raised by Barth's argument about the need for a showing of reasonable reliance and injury to preclude any potential mischief by unscrupulous insurers. The exclusion at issue is not based on common law fraud and, thus, need not require all the elements of that tort to avoid injustice to insureds. The appellate majority properly affirmed the trial court's use of State Farm's materiality instruction.