Opinion ID: 2723941
Heading Depth: 2
Heading Rank: 2

Heading: the fraud clause

Text: The district court did not address the merits of the parties’ contractual dispute. But “as long as the parties were given a full and fair opportunity to address” this issue, we may reach it on appeal. Smith v. Jefferson County Bd. of Sch. Comm’rs, 641 F.3d 197, 205 (6th Cir. 2011). Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). We “must view all the facts and the inferences drawn therefrom in the light most favorable to the -5- No. 13-2587 nonmoving party.” Birch v. Cuyahoga County Probate Ct., 392 F.3d 151, 157 (6th Cir. 2004). Under this standard, Defendant was entitled to summary judgment. The fraud clause in Plaintiff’s policy is simply a version of the fraud clause found in Michigan’s now-repealed statutory fire insurance form. See Mich. Comp. Laws § 500.2832 (1989 ed.); see also Mich. Comp. Laws § 500.2833(1)(c). This standard clause allows an insurer to raise a fraud defense (also called “false swearing”) to an insured’s claim for breach of contract. As Michigan courts have construed this defense: To void a policy because the insured has wilfully misrepresented a material fact it must be shown that (1) the misrepresentation was material, (2) that it was false, (3) that the insured knew that it was false at the time he made the representation or that it was made recklessly, without any knowledge of its truth, and (4) that the insured made the material misrepresentation with the intention that the insurer would act upon it. Rayis v. Shelby Mut. Ins. Co. of Shelby, Ohio, 264 N.W.2d 5, 8 (Mich. Ct. App. 1978) (internal quotation marks omitted). The insurer must prove these elements by a preponderance of the evidence. See Stein v. Home-Owners Ins. Co., 843 N.W.2d 780, 784 (Mich. Ct. App. 2013). As a general matter, “[w]hether misrepresentations or false statements void an insurance policy depends upon the intent to defraud and this is a question of fact for the jury.” West v. Farm Bureau Mut. Ins. Co. of Mich., 259 N.W.2d 556, 557 (Mich. 1977) (per curiam) (quotation marks omitted). When the alleged misrepresentation comes down to a disparity between the true value of the damaged property and the value claimed by the insured, Michigan courts will submit these cases to a jury so long as the claimant has a “plausible non-fraudulent explanation” for the disparity—even if the disparity is rather large. Id. at 558. However, we can rule on this defense as a matter of law if the difference between the actual value of the property and the claimed value of the property is “extreme.” Rayis, 264 N.W.2d at 7 n.3; accord J.C. Wyckoff & Assocs. v. Standard Fire Ins. Co., 936 F.2d 1474, 1486 (6th Cir. 1991). -6- No. 13-2587 This case falls into the narrow category of matters where we can rule on the fraud defense as a matter of law. According to Plaintiff, her home appreciated in value from $27,000 to at least $143,000 over the space of just fourteen months. Plaintiff has provided no explanation for this dramatic change of fortunes. Also, according to Plaintiff, she acquired about $159,000 worth of personal property between April 2011 and June 2012. (This figure represents the $170,000 she wants Defendant to pay, minus the $7000 of gifts she allegedly received, and minus the $4000 worth of personal property she declared in bankruptcy.) Even if we accept Plaintiff’s statement that she makes three times more than what she discloses to the IRS, and then further assume that Plaintiff plowed every cent of her earnings into buying furniture, clothing, jewelry, and the like, Plaintiff still cannot explain where she got more than $100,000 worth of personal property. In short, the dollar disparities in this case are too extreme for a rational jury to find for Plaintiff. There are no reasonable inferences that could explain the dramatic increase in the value of Plaintiff’s real and personal property other than the one Defendant suggests—that Plaintiff’s valuation of her property was false. Because Plaintiff knew it was false, because it was material, and because Plaintiff made this representation with the intent to defraud Defendant, Defendant was entitled to summary judgment on the basis of the policy’s fraud clause.