Opinion ID: 900685
Heading Depth: 1
Heading Rank: 9

Heading: Intentional Misrepresentation of Loss

Text: [¶ 32.] Auto-Owners argues that Hansen Housing's proof of loss for repairs and replacement of water lines, asbestos removal, water storage tanks, compliance with code requirements, repairing air-handling units, and repairing the heating system were overstated. One contractor testified at trial that he felt Hansen was pushing him to submit a bid based on the cost for replacing the entire heating system, rather than for its repair. [3] The contractor also agreed with the statement by the adjuster that Hansen was trying to get [the contractor] to give him an inflated estimate. When the contractor would not give Hansen a locked-in price on a replacement heating system, another contractor was found. [¶ 33.] Auto-Owners also asserts that Hansen Housing claimed property losses for a number of items that are not personal property used in the insured's trade or business. The policy states that covered property consists of: Business Personal Property located in or on the buildings at the described premises or in the open (or in a vehicle) within 100 feet of the described premises, including: (1) property you own that is used in your business[.] Hansen Housing submitted a claim for damaged hospital equipment such as a super nebulizer pump and a fetal monitor. Hansen testified that he had not used the items in his business and did not know what many of them were. [¶ 34.] Evidence was also provided, however, illustrating that the difference between the insured's and the insurer's estimates for the repair of the building may have been the result of legitimate divergence in opinion between contractors and others. There was further testimony which tended to show that there was some honest confusion over what personal property was in the building at the time of the theft loss, and who the owner of that property was. [¶ 35.] In its findings, the trial court concluded that there was no intentional misrepresentations that were made by the insureds or material misrepresentations of fact. The trial judge continued, stating: Obviously, there were some statements that turned out to be not true, but I don't think that they're of the fraud variety. [¶ 36.] Auto-Owners had the burden to show, by clear and convincing evidence, that Hansen Housing's loss claims were fraudulent. Flockhart v. Wyant, 467 N.W.2d 473, 477 (S.D.1991) (explaining that one typical use of the standard is in civil cases involving allegations of fraud or some other quasi-criminal wrongdoing). In Alderman v. New York Underwriters' Insurance Co., 61 S.D. 284, 248 N.W. 261 (1933), we ruled that to find fraud or false swearing on the part of the insured, there must be [a]n intent ... and the general rule seems to be that the statement must be a willfully false one concerning some material matter, and made with the intent to deceive the insurer, in order to work a forfeiture. Id. at 267. Exaggerated claims for the purpose of gaining an advantage in settlement negotiations are considered attempts to defraud, even if insureds do not expect to ultimately obtain more than their actual loss. Lykos v. American Home Ins. Co., 609 F.2d 314, 316 (7thCir.1979) (the penalty is one way of stopping the presentation of false, fictitious or inflated claims.) cert. denied, 444 U.S. 1079, 100 S.Ct. 1030, 62 L.Ed.2d 762 (1980) (citing Tenore v. American & Foreign Ins. Co., 256 F.2d 791, 794 (7thCir.), cert. denied, 358 U.S. 880, 79 S.Ct. 119, 3 L.Ed.2d 110 (1958)). There may, however, be an honest misstatement of some fact, and while, as a general rule, fraud and false swearing will avoid the policy, mere mistakes in stating facts which do not in themselves annul its conditions and do not appear to be wilful misrepresentations will not defeat the action. Alderman, 248 N.W. at 267 (citation omitted). [¶ 37.] We review the trial court's findings of fact under the clearly erroneous standard. Muhlenkort, 530 N.W.2d at 660. Findings cannot be disturbed unless we are firmly and definitely convinced a mistake has been made. Wood, 1999 SD 8, ¶ 9, 588 N.W.2d at 229 (citation omitted). In deference to the court's findings, Hansen Housing's representations can be viewed as innocuous misstatements. See Lykos, 609 F.2d at 315. We cannot say that the trial court was clearly erroneous.