Court Opinion

ID: 9477819
Source: CourtListenerOpinion
Date Created: 2023-08-05 06:32:10.627101+00
Date Added: 2024-06-11T17:46:04.125170
License: Public Domain

CLARK, Circuit Judge,
dissenting:
I respectfully dissent from the majority opinion. In my view, Georgia law dictates that (1) Mrs. Sales was entitled to recover if she played no role in the destruction of the Sales’ property, (2) the misrepresentation provision applies only to misrepresentations in the Sales’ application for insurance, and (3) State Farm waived its right to rely on the policy’s misrepresentation provision. Accordingly, I would reverse the judgment against Mr. Sales and remand his case for retrial,1 and affirm the judgment in favor of Mrs. Sales.
I.
I agree with the district court that this case is controlled by Richards v. Hanover Insurance Co., 250 Ga. 613, 299 S.E.2d 561 (1983). At various points in its opinion, the Richards court stated:
1. The question is whether, in an action for fire insurance proceeds, the fraud of a co-insured spouse bars recovery by the innocent co-insured spouse.
299 S.E.2d at 562-63.
To adopt a contrary rule would be tantamount to attributing Mr. Richards’ wrongdoing to Mrs. Richards solely on the basis of their marital relationship, a result which we have steadfastly rejected in other areas, ... and which we decline to reach in the present case. We therefore hold that Mrs. Richards is not automatically barred from recovery under her homeowners policy by her husband’s alleged act of arson. If, on retrial, the insurance company again asserts the “neglect provision” exclusion, it has the initial burden of proving that one of the co-insureds breached that provision by intentionally setting fire to the dwelling.... Once this is shown, however, the burden shifts to Mrs. Richards (as the co-insured claiming coverage under the policy) to prove her non-participation in the alleged wrongful conduct.
*1388Id. at 564. I read these passages as a policy or philosophical statement by the Georgia Supreme Court that where an insurance company has evidence that one spouse intentionally set fire to jointly owned property, the company has the burden of proving that fact. The co-insured spouse who asserts innocence then has the burden of proving that he or she did not participate in the alleged wrongful conduct. This policy is a sound one. For there will certainly be cases where an innocent spouse has contributed greatly to the purchase of the property, yet the other spouse desires money and commits the arson in order to receive one-half of the payment after the fire. The purpose of the Georgia Supreme Court’s opinion is to strike a protective compromise: allowing innocent spouses to recover provided they can prove that they did not participate in the misconduct.
II.
Even assuming that State Farm was entitled to rely on the concealment or fraud provision of the policy, I cannot agree with the majority’s construction of the policy language. The misrepresentation provision reads: “This entire policy shall be void if any insured has intentionally concealed or misrepresented any material fact or circumstance relating to this insurance.” (Emphasis added.) The use of the present perfect tense makes it clear that this part of the policy is directed at misrepresentations in the insured's application.
In Part 11(2) of its opinion, the majority asserts that the Georgia courts have held that similar misrepresentation provisions including the word “has” are applicable to concealment or misrepresentations in proofs of loss and other post-application statements. However, both of the cases on which the majority relies involved policies with additional, express language indicating that misrepresentations subsequent to the application would be sufficient to forfeit the policy. In Goldberg v. Provident Washington Insurance Co., 144 Ga. 783, 87 S.E. 1077 (1916), the policy read:
This entire policy shall be void if the insured has concealed or misrepresented, in writing or otherwise, any material fact or circumstance concerning this insurance or the subject thereof; or if the interest of the insured in the property be not truly stated herein; or in case of any fraud or false swearing by the insured touching any matter relating to this insurance or the subject thereof, whether before or after a loss.
Id. at 785, 87 S.E. 1077 (emphasis added). Similarly, in State Farm Fire & Casualty Co. v. Jenkins, 167 Ga.App. 4, 305 S.E.2d 801 (1983), the policy read: “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.” 305 S.E.2d at 802 (emphasis added). In contrast, the policy here includes no direct references to make the reader think misrepresentations after the policy goes into effect are covered by the misrepresentation provision.
In view of the policy’s unambiguous language, I cannot agree with the majority’s reliance on the misrepresentation provision to the extent it holds that both Mr. and Mrs. Sales must be denied recovery because the jury’s verdict reflects its finding that Mr. Sales lied when he swore that he was not responsible for the fire.2 If there is any subject upon which property insurers have great experience, it is the reality that arson occurs. If State Farm intended to include concealment of arson within the misrepresentation provision, it should have used language similar to that used in the Goldberg and Jenkins cases.
III.
The Sales argue that State Farm waived its right to rely on the misrepresentation *1389defense when it sent a bill for the renewal premium after Sales allegedly committed the misrepresentation. They cite State Farm Fire & Casualty Co. v. Jenkins, 167 Ga.App. 4, 305 S.E.2d 801, 802-03 (1983), and Loeb v. Nationwide Mutual Fire Insurance Co., 162 Ga.App. 561, 292 S.E.2d 409, 410-11 (1982), in support of this theory. The majority concludes that those cases are not binding, as they are only Georgia Court of Appeals cases, and an 1897 Georgia Supreme Court case, Sullivan v. Connecticut Indemnity Association, 101 Ga. 809, 29 S.E. 41, 42 (1897), dictates the opposite result.
In Jenkins, the insurance policy included a misrepresentation provision similar to the one here. The insurer alleged that the insured had represented in his proof of loss that certain items were in the house when it burned even though they had been removed. 305 S.E.2d at 802. The Court of Appeals found that the insurer had waived its misrepresentation defense when it sent the insured a bill for a renewal premium after the proof of loss had been filed. See id. at 803, 29 S.E. 41. The court stated specifically that it did not matter if the bill was paid: “it is of no consequence ... that the insured did not actually pay the renewal premiums, as a demand for payment in full for premiums due acted as a waiver.” Id. Loeb, the other Court of Appeals case, is to the same effect, but the insured there based his waiver claim not only on the demand, but on the fact that the insurer had actually received the premiums, a claim somewhat more compelling than this one.
In Sullivan, the life insurance policy included provisions (1) that the insurance would not take effect until the first payment was made during the insured’s lifetime, and (2) that if notes given for payment were not paid at their maturity, the policy would lapse. The insured, during his lifetime, gave notes for his first premium, but he did not pay the notes at their maturity. The insurer then made a demand on the notes, which the insured did not satisfy. The Supreme Court held that the demand alone, without payment, was not a waiver of the maturity provision: “[t]o hold otherwise, ... would be going contrary to the plainest principles of right and justice.” 29 S.E. at 42.
As these summaries indicate, the factual scenario in Jenkins, one of the Court of Appeals cases, is virtually identical to that here. Sullivan, on the other hand, presents a very different situation. The insured in Sullivan was arguing that a demand for payment was a waiver of a payment provision. It is thus easy to understand why the court was unwilling to find a waiver: it would be anomalous to say that by expressing its concern over getting paid, the insurer was waiving its right to get paid. If the court had found a waiver, coverage would have extended indefinitely without the premiums’ ever being paid. Hence, Jenkins and Sullivan are not really in conflict, and Jenkins, because it is direct, on-point authority, should be applied.

. A retrial would be necessary because it is impossible to determine from the district court’s instructions whether the jury found against Mr. Sales because it believed that he set the fire or caused it to be set, a theory on which State Farm was entitled to rely, or because it believed that he misrepresented the Sales’ prior fire history, a theory on which, in my view, State Farm is not entitled to rely.

. Due to its broad construction of the misrepresentation provision, the majority does not distinguish State Farm’s allegation that Mr. Sales misrepresented the Sales’ prior fire history during the application process from the insurer’s allegation that Mr. Sales misrepresented his conduct when he filed the proof of loss. I would draw this distinction — and would be willing to apply the misrepresentation provision to the former allegation — if there were not reason to conclude that State Farm waived reliance on the misrepresentation provision altogether.