749 F.

2d 1493

James B. WOODS, Sr., Plaintiff-Appellant,

v.
INDEPENDENT FIRE INSURANCE COMPANY, DefendantAppellee.
No. 83-8656.

United States Court of Appeals,

Eleventh Circuit.
Jan. 8, 1985.

Susan W. Cox, Francis W. Allen, Statesboro, Ga., for plaintiff-appellant.

Bobby Jones, Metter, Ga., for defendant-appellee.
Appeal from the United States District Court for the Southern District of
Georgia.
Before GODBOLD, Chief Judge, CLARK, Circuit Judge, and
THOMAS * , District Judge.
GODBOLD, Chief Judge:

This is a suit over fire insurance coverage. The district court granted summary
judgment for the insurer, holding that coverage was voided because of a
material misrepresentation by the insured in a sworn proof of loss. We affirm.

On January 17, 1980, plaintiff secured a policy of insurance covering his

single-family dwelling in Brooklet, Georgia. On July 9, 1980, he conveyed the
property to his mother in fee simple, because he was having marital difficulties
and wanted to prevent his wife from making any claim against the house in
possible divorce proceedings. Woods continued to live in the house and
continued to pay taxes on it and to pay the insurance premiums. His furniture
and personal belongings remained in the house. The mother never lived in the
house. The policy was renewed February 20, 1981, without Woods disclosing
the transfer of title. On January 15, 1982, two days before the policy was to
expire, the house was destroyed by fire.

The policy itself required Woods, after a loss, to set forth the interest of himself
and all others in the property, as well as any changes in title or occupancy
during the term of the policy.

Woods completed a sworn proof of loss form. Under the heading "Title and
Interest" he stated that his interest in the property at the time of loss was 100%.
He stated that no other person had any interest in the property or encumbrance
thereon and since the policy had been issued there had been no assignment of
the property or change in the interest, use, occupancy, location, or exposure.

After receiving the proof of loss, the insurer conducted an investigation and
found that the property had been conveyed in fee simple to the mother. The
insurer denied coverage on the grounds that Woods had no insurable interest in
the property and that he had violated the condition of the policy providing: "We
do not provide coverage for any insured who has intentionally concealed or
misrepresented any material fact or circumstance relating to this insurance."

The district court granted summary judgment to the insurer, holding that the
misrepresentation was material as a matter of law and that it voided the
coverage. The court did not decide whether Woods did or did not have an
insurable interest.

Under Georgia law "[i]t is only fraudulent false swearing, in furnishing the
preliminary proof or in the examinations which the insurers have a right to
require, that avoids the policies." American Alliance Insurance Co. v. Pyle, 62
Ga.App. 156, 165, 8 S.E.2d 154, 160 (1940). American Alliance cited and
relied upon Claflin v. Commonwealth Insurance Co., 110 U.S. 81, 3 S.Ct. 507,
28 L.Ed. 76 (1884). In that case a merchant represented that he owned certain
goods when in fact he did not. The Court first discussed the object of the proof
of loss:

The object of the provisions in the policies of insurance, requiring the assured
to submit himself to an examination under oath, to be reduced to writing, was to
enable the company to possess itself of all knowledge, and all information as to
other sources and means of knowledge, in regard to the facts; material to their
rights, to enable them to decide upon their obligations, and to protect them
against false claims. And every interrogatory that was relevant and pertinent in
such an examination was material, in the sense that a true answer to it was of
the substance of the obligation of the assured. A false answer as to any matter
of fact material to the inquiry, knowingly and wilfully made, with intent to
deceive the insurer, would be fraudulent. If it accomplished its result, it would

be a fraud effected; if it failed, it would be a fraud attempted. And if the matter

were material and the statement false, to the knowledge of the party making it,
and wilfully made, the intention to deceive the insurer would be necessarily
implied, for the law presumes every man to intend the natural consequences of
his acts. No one can be permitted to say, in respect to his own statements upon a
material matter, that he did not expect to be believed; and if they are knowingly
false, and wilfully made, the fact that they are material is proof of an attempted
fraud, because their materiality, in the eye of the law, consists in their tendency
to influence the conduct of the party who has an interest in them, and to whom
they are addressed.
9

Id. at 94-95, 3 S.Ct. at 515.

10

The Court further held that it was obvious that "it was material to show what
title and interest Murphy had at the time of the loss in the property insured. If
he had no insurable interest, that certainly would have been a defence [sic]." Id.
at 94, 3 S.Ct. at 514.

11

The fact whether Murphy had an insurable interest in the merchandise covered
by the policy was directly in issue between the parties. By the terms of the
contract he was bound to answer truly every question put to him that was
relevant to that inquiry. His answer to every question pertinent to that point was
material, and made so by contract, and because it was material as evidence; so
that every false statement on that subject, knowingly made, was intended to
deceive and was fraudulent.

12

Id. at 96, 3 S.Ct. at 516.

13

In Pooser v. Norwich Union Fire Insurance Soc'y, 51 Ga.App. 962, 182 S.E. 44
(1935), the insured made a false statement on the proof of loss indicating that
she had conveyed the property away and had no interest in it. The insurer
asserted that this false statement voided the policy under the false swearing
provisions. The court held that this type of false statement against the insured's
interest would not void the policy.

14is important to note that the misstatement in the proof of loss was against Mrs.
It
Pooser's interest. She made a statement which, if true, avoided the policy. The
situation is quite different from what it would have been had she failed to make a
statement of fact, which, existing, barred her right to recovery. That would have been
an error in her interest (instead of against it), and presumably would have been made
with fraudulent intent.

15

51 Ga.App. at 969, 182 S.E. at 48.

16

In the present case the false statement of Woods was in his interest. If not
discovered it would have induced the insurer to pay the policy proceeds to him
as owner. If discovered, and assuming coverage remained in effect, the
insurance company could at least have interpleaded the proceeds or otherwise
protected itself from possible claims by competing claimants. Moreover, the
concealed transfer went directly to the issue of insurable interest. Absent an
insurable interest Woods would not be covered. The conveyance to the mother
was a crucial factor to the insurer in determining its rights and responsibilities
under the policy as the Supreme Court pointed out in Claflin.

17

Woods concedes that the representation was false and that he knew it was. His
contention to us is that the materiality of the misrepresentation was a question
for the jury that could not be decided as a matter of law by the court on
summary judgment. The district court properly determined materiality as a
matter of law. "[M]ateriality is a mixed question of law and fact that can be
decided as a matter of law if reasonable minds could not differ on the
question." Long v. Insurance Co. of North Am., 670 F.2d 930, 934 (10th
Cir.1982). Reasonable minds cannot differ on the materiality of the
misrepresentation made here because it went to the core factor of insurable
interest, which is not a mere nicety or a matter of administrative convenience.
Insurable interest is a keystone of the concept of insurance, safeguarding the
insurer against the risk that arises if one who will receive the monetary benefit
from loss of the insured property (or life, as it may be) has no interest in the
property not being destroyed. Woods's misrepresentation concealed from the
insurer the existence of a possible defense of lack of insurable interest.
Moreover, an insurer that negligently issues a policy to one without an
insurable interest may, in some circumstances, be liable in tort for the
proximate consequence of its negligence. E.g., Liberty National Life Insurance
Co. v. Weldon, 267 Ala. 171, 100 So.2d 696 (1957). The district court did not
decide, and we do not need to decide, whether under some theory of equity
Woods had such an interest that he might slip by the insurable interest
requirement. The insurer was entitled to raise insurable interest as a defense to
coverage, and Woods's misrepresentation concealed the defense from the
company. At a minimum the insurance company was entitled to be told the
facts by Woods and to investigate before it paid the proceeds to one of two
possible claimants.

18

Woods contends that he did not intend to defraud the insurer because his motive
was to put the property beyond reach of his wife in divorce proceedings. Claflin
rejects this argument. The Court held that the fraud was "not lessened because

the motive that induced it was something in addition to the possible injury to
them that it might work." Claflin, 110 U.S. at 97, 3 S.Ct. at 516.
19

Woods relies upon several Georgia cases that concern misrepresentations made
in applications for insurance. They arise under O.C.G.A. Sec. 33-24-7 (1982)
(previously codified at Ga.Code Ann. Sec. 56-2409 (1977)) which provides in
part that "[m]isrepresentations ... [made in an application for insurance] shall
not prevent a recovery under the policy or contract unless ... material either to
the acceptance of the risk or to the hazard assumed by the insurer...." This
section represents the most recent codification of the Georgia legislature's longstanding concern that insurance contracts not be rendered void because of
minor discrepancies made by the insured in his application for insurance. See
generally Note, Misrepresentations and Nondisclosures in the Insurance
Application, 13 Ga.L.Rev. 876, 921-33 (1979).

20

Judicial response to the legislative concern is reflected in the Georgia courts'

construction of the materiality requirement. Rather than inquire into what a
particular insurer would have done had it known of the insured's
misrepresentation--an inquiry easily resolved in the insurer's favor--Georgia
courts employ a reasonableness test, an objective standard of conduct against
which to measure the effect of the insured's false declarations. See, e.g., Sentry
Indemnity Co. v. Brady, 153 Ga.App. 168, 264 S.E.2d 702 (1980) (material
misrepresentation is one that would influence a prudent insurer in deciding
whether to accept risk); see also Lee v. Metropolitan Life Insurance Co., 158
Ga. 517, 123 S.E. 737 (1924) (objective standard expressly adopted).
Moreover, whether a misrepresentation is material because it would influence a
prudent insurer's decision to insure is usually a jury question. See, e.g., United
Family Life Insurance Co. v. Shirley, 242 Ga. 235, 248 S.E.2d 635 (1978);
Fidelity Bankers Life Insurance Co. v. Renew, 121 Ga.App. 883, 176 S.E.2d
103 (1970).

21

O.C.G.A. Sec. 33-24-7 (1982) and the caselaw construing it expressly refer to
insurance applications. The statute represents the legislature's decision to
extend a measure of protection to those who apply for insurance. The adoption
of an objective standard--a type of standard traditionally applied by a jury to
facts found by it--to define the prudent insurer and materiality is a judicial
response to that legislative policy. Woods points us to no similar legislative or
judicial recognition on behalf of insureds who file sworn proofs of loss.
Moreover, Georgia caselaw stresses the insurer's compelling interest in and
right to accuracy in the proof of loss. See, e.g., American Alliance, supra.

22

The district court properly held that Woods's misrepresentation was material as

22

23

a matter of law and granted summary judgment for the insurer.

AFFIRMED.
CLARK, Circuit Judge, dissenting:

24

In deciding this case the majority has committed two errors. First, it has failed
to recognize that: (1) only a false misrepresentation with the intent to defraud
will void coverage; and (2) this issue should have been decided by a jury.
Second, by placing undue emphasis on Woods' statements in his proof of loss,
it has allowed it to outweigh an interrogation of Woods by the insurance
company, while Woods was under oath. Because summary judgment was
inappropriate under these circumstances, I must dissent.

25

The majority relies on Claflin v. Commonwealth Ins. Co., 110 U.S. 81, 3 S.Ct.
507, 28 L.Ed. 76 (1884), and quotes the following statement: "The fact whether
Murphy had an insurable interest in the merchandise covered by the policy was
directly in issue between the parties." Majority Opinion at 1495. In Claflin the
jury was allowed to decide this crucial issue after it had been fully litigated at
trial. See Claflin v. Commonwealth Ins. Co., 110 U.S. at 85, 3 S.Ct. at 513.
Because the majority has permitted summary judgment to stand, Woods has not
been given an adequate opportunity to develop the issue just quoted. As I shall
demonstrate, the facts of this case disclose that Woods probably did have an
insurable interest in the house, since the evidence indicated that he owned it at
the time of the fire.1 Foreclosing Woods' opportunity to litigate the issue merely
because of a misstatement in a proof of loss is summary injustice at its worst.

26

In Insurance Companies v. Weides, 81 U.S. (14 Wall.) 375, 20 L.Ed. 894

(1871) the Supreme Court indicated that the issue of whether statements made
by an insured are false and fraudulent misrepresentations are questions of fact
upon which a jury should decide. The Court mentioned:

27is true the policies stipulated that fraud or false swearing on the part of the assured
It
should work a forfeiture of all claim under them. The false swearing referred to is
such as may be in the submission of preliminary proofs of loss, or in the examination
to which the assured agreed to submit. But it does not inevitably follow from the fact
that there was a material discrepancy between the statements made by the plaintiffs
under oath in their proofs of loss, and their statements when testifying at the trial that
the former were false, so as to justify the court in assuming it, and directing verdicts
for the defendants. It is only fraudulent false swearing in furnishing the preliminary
proofs, or in the examinations which the insurers have a right to require, that avoids

the policies, and it was for the jury to determine whether that swearing was false and
fraudulent.
28

Id. at 382-83 (emphasis added).

29

Similarly, in American Ins. Co. v. Jass, 22 F.2d 793 (5th Cir.1927), a fire had
destroyed a warehouse located in Georgia. Claiming that the policy was void
due to the submission of a false affidavit, the insurer declined to pay. The court
stated:

30
Regarding
the affidavit of [the plaintiff], while it was in fact inaccurate, there was
other evidence tending to show that he was simply mistaken and did not willfully
swear falsely. Under the circumstances ... it was not error to submit the case to the
jury under proper instructions.
31

Id. at 794 (emphasis added). See also Camden Fire Ins. Ass'n v. Penick, 2 F.2d
964 (5th Cir.1924) ("We are of opinion that whether the claim was fraudulently
or innocently made was a question peculiarly within the province of the jury.").

32

Thus, under our cases, the issue of whether the proof of loss was false and
fraudulent should have been resolved by the jury. Cases interpreting Georgia
law require a similar result. In Casey Enterprises, Inc. v. American Hardware
Mutual Insurance Co., 655 F.2d 598 (5th Cir.1981) the court discussed
Georgia's law respecting misstatements in proofs of loss. The court stated:

33
Under
Georgia law misstatements in a proof of loss will not form the basis for a
defense against the insured unless the insurer shows that the misstatements were
made fraudulently. The district court found no evidence in the record that any of the
misstatements in the proof of loss were fraudulent .... Since ... there is no evidence
that it contained fraudulent misstatements, the errors in the proof of loss cannot be a
basis for voiding the policy.
34

Id. at 603. Similarly, in American Alliance Ins. Co. v. Pyle, 62 Ga.App. 156, 8
S.E.2d 154 (1940), which is a case cited by the majority, the court commented
on misstatements in proofs of loss:

35must appear that these false statements were made willfully and intentionally for
It
the purpose of defrauding the insurer. Such a clause in the policy would not cover
misstatements or exaggerated claims of loss or perjury in connection therewith
committed by the insured during the trial. Neither would the misstatement by the
insured in his sworn statement to the company made shortly after the fire as to the
value of some of the property destroyed be covered by such a condition unless it was

shown that these misstatements were willfully and intentionally made for the
purpose of defrauding the insurer.
36

Id. 8 S.E.2d at 160. See also Superior Fire Ins. Co. v. Peters, 62 Ga.App. 823,
10 S.E.2d 94, 98 (1940) ("The evidence shows that the plaintiff did not
intentionally falsely swear in the proof furnished so as to work a forfeiture of
the policy.").

37

Even if the statement in the proof of loss was incorrect, the plaintiff had a right
to correct the statement before the trial. As pointed out in note one, the insured
answered all questions about the transaction between himself and his mother at
the deposition. He indicated he had deeded the property to his mother and that
there had been no re-conveyance. Thus, assuming that his statement in the
proof of loss was inaccurate, he adequately corrected it at the deposition. The
Supreme Court has found that an insured may correct a statement made in his
proof of loss. See Connecticut Mutual Life Insurance Company v. Schwenk, 94
U.S. (4 Otto) 593, 596, 24 L.Ed. 294 (1876) ("He [the assured] may correct it,
[the statement in the proof of loss] though not first at the trial."); Insurance
Company v. Newton, 89 U.S. (22 Wall) 32, 36, 22 L.Ed. 793 (1874); see also
Southern States Life Insurance Co. v. Warnock, 145 Ga. 791, 89 S.E. 843
(1916).

38

It is possible that Woods was not the owner of the property and that his
statement in the proof of loss was material, false, and fraudulent. However, the
cases instruct us that the jury, not the court, should have been permitted to
decide these crucial issues. "Summary judgment should be entered only if 'there
is no genuine issue as to any material fact and ... the moving party is entitled to
judgment as a matter of law.' " Impossible Electronics Techniques, Inc. v.
Wackenhut Protective Systems, Inc., 669 F.2d 1026, 1030 (5th Cir. Unit B
1982) (emphasis added). The court must not decide any factual issues in the
record. Rather, where factual issues are present "the court must deny the motion
and proceed to trial." Id. at 1031.

39

Because there were material factual issues that should have been fully
developed at trial and decided by the jury, I must respectfully dissent.

Honorable Daniel Holcombe Thomas, U.S. District Judge for the Southern
District of Alabama, sitting by designation

In this respect, a closer review of the facts is warranted. Mrs. Clydie Woods,

the mother of the plaintiff, stated that her son executed a deed conveying title to
his home to her in July, 1980. She further stated:
Although I am the titular owner of Jim's house, I still consider Jim to be the true
owner of the home. Jim has always lived in the home since he built it
approximately twelve years ago. At the time of the fire, Jim was living in the
house. Jim has the right to live in the house for as long as he wants to live there.
I am willing to deed the house back to Jim whenever he asks for it. The house
contained Jim's furniture and belongings. Jim paid the taxes and the insurance
on the house. I have never lived in the house, nor do I ever plan to live in the
house. I own my own home, along with my husband, close to where Jim lived. I
have never had any of my furniture or belongings in the house. I have always
considered the house to be Jim's house. When the house burned, Jim was the
one who suffered a loss, not me.
Affidavit of Mrs. Clydie Woods, Record at 00167-00169 (emphasis added).
The plaintiff, Mr. Woods made similar comments. He stated:
I had had such a horrible experience with my first divorce about property
settlement, and the second wife, when she indicated that she wanted a divorce,
the first thought in my mind was to transfer the property to somebody's name
that would transfer it right back to me on request--would deed it back to me at
my request --and that would be my mother, and would deter any efforts on her
part or anybody else's part to try to claim any property settlement.
Deposition of James B. Woods, at 44 (emphasis added). He further stated:
Q. Okay. Now, was the property in your mother's name for a year, a year and a
half, or do you have any idea?
A. Still is.
Q. So, she's never deeded it back to you?
A. I haven't requested it, and she hasn't deeded it.
Q. So, the property has been deeded to her since whatever date it was, and no
other conveyances have been made?
A. No, sir.
Q. Has anybody else had any ownership rights in the property since it was
conveyed to her?

A. No, sir.
Id. at 47.
It is clear from the comments of the plaintiff and his mother that a jury could
have found that the plaintiff held the sole interest in the property due to either
an ineffective delivery or acceptance. Morris v. Johnson, 219 Ga. 81, 132
S.E.2d 45, 52 (1963) ("[Here] the grantor had no intent to irretrievably
surrender dominion of this deed and therefore an absolute delivery is
negatived."); Smith v. Smith, 202 Ga. 759, 44 S.E.2d 486 (1947) ("delivery of a
deed conveying real property is essential to its validity, and is complete only
when the deed is accepted."); Dobbs v. First Nat. Bank of Atlanta, 65 Ga.App.
796, 16 S.E.2d 485, 487 (Ga.Ct.App.1941) ("Neither the manual possession of
the deed nor the physical possession of the property--and in some cases no
doubt the possession of both, is not conclusive as to delivery or vice versa.").
Under Georgia law the jury is authorized to determine whether there has been a
valid acceptance as well as a valid delivery. See Smith v. Smith, 202 Ga. 759,
44 S.E.2d 486, 487 (1947). Moreover, under Georgia law the question of
whether there has been a valid delivery is a question of fact for the jury. See
Allen v. Bemis, 193 Ga. 556, 19 S.E.2d 516, 520 (1942).