Opinion ID: 1102044
Heading Depth: 1
Heading Rank: 1

Heading: the policy of state farm fire & casualty company

Text: State Farm contends that its policy was void ab initio because of false and fraudulent representations made at the time the application was taken and the policy binder issued. The policy which was issued subsequent to the fire had the standard provision, towit: 1. Declarations: By acceptance of this policy the named insured agrees that the statements in the declarations are his agreements and representations, that this policy is issued in reliance upon the truth of such representations, and that this policy embodies all agreement existing between himself and this company or any of its agents relating to this insurance. This entire policy shall be void, if, whether before or after a loss, the insured has willfully concealed or misrepresented any material fact or circumstance concerning this insurance or the subject thereof, or the interest of the insured therein, or in case of any fraud or false swearing by the insured relating thereto. There can be no question but that if the Tolars induced Harrison to accept the application and issue the policy binder by fraudulent representations, the policy may be declared void by the insurer. 43 Am.Jur.2d, Insurance § 734 (1969); Casualty Reciprocal Exchange v. Wooley, 217 So.2d 632 (Miss. 1969); Coffey v. Standard Life Insurance Co., 238 Miss. 695, 120 So.2d 143 (1960). The application to the State Farm agent was made on August 14, 1974, after the house had been flooded in April of that year. During the intervening time the Tolar family had not lived in the residence as a family unit. Admittedly an application had been made by Mr. and Mrs. Tolar for a disaster loan with Small Business Administration with the application stating that the building was a total loss because of the flood. No repairs of any kind had been made. All personal property that was in the house at the time of the flood was listed as destroyed. Even though it might be said that the Tolars were only attempting to defraud the disaster area lender, it is elemental that no insurance company having that information would have written a policy of fire insurance on the house. Even Mrs. Tolar admitted knowing that the policy would not have been written had Harrison been advised of the situation regarding the flooded home and the application for a loan alleging the total destruction of the house. We hold, therefore, that because of the fraudulent representations and concealments by Mr. and Mrs. Tolar, State Farm's policy was void as to them. A different situation existed as to the mortgagee under the loss payable clause of State Farm's policy. As we hereinbefore stated, Harrison called Cavin on the same day the insurance policy binder was issued and verified that Bankers Trust Savings & Loan Association had an outstanding deed of trust on the property. Harrison agreed to place the mortgagee's name in the loss payable clause of the policy, and this was done. The policy was not issued or cancelled until after the fire occurred and after the check for the first annual premium had been received and cashed. The local agent made no inspection of the insured property. The mortgage clause of the policy, pursuant to Mississippi Code Annotated section 83-13-9 (1972), provided that the coverage for the mortgagee shall not be invalidated by any act or neglect of the mortgagor or owner of the within described property... . At the beginning of the trial in the lower court, appellant, State Farm, recognized its exposure under the mortgage clause and tendered into court the sum of $10,937.61 as a pro-rata share of the mortgagee's claim at that time. Furthermore, at the time the policy binder was issued, the agent recognized that his policy probably would be substituted for an existing policy of another company. This was brought out by the Harrison-Cavin conversation the day the binder was issued. Code section 83-13-9 further provides that the mortgage clause include the following: Whenever this company shall pay the mortgagee (or trustee) any sum for loss or damage under this policy and shall claim that, as to the mortgagor or owner, no liability therefor existed, this company shall, to the extent of such payment, be thereupon legally subrogated to all the rights of the party to whom such payment shall be made, under all security held as collateral to the mortgage debt, or may, at its option, pay to the mortgagee (or trustee) the whole principal due or to grow due on the mortgage with interest, and shall thereupon receive a full assignment and transfer of the mortgagee and of all such other securities. We hold that State Farm is liable under the mortgage clause of its policy to the mortgagee, the only question remaining being whether the obligation is for the full amount of the policy or on a pro-rata basis with another company.