Wagnon v. State Farm Fire

UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

CHARLES WAGNON and LORALEE
WAGNON, husband and wife,

Plaintiffs-Appellees-
Cross-Appellants,

v. Nos. 96-5012, 96-5013, 96-5213

STATE FARM FIRE AND
CASUALTY COMPANY,

Defendant-Appellant-
Cross-Appellee.

ORDER
Filed June 19, 1998

Before TACHA, EBEL, and BRISCOE, Circuit Judges.

Appellant-cross-appellee’s motion to publish the order and judgment filed

on April 24, 1998, is granted. The published opinion is attached to this order.

Entered for the Court

Patrick Fisher
Clerk
 F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
APR 24 1998
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT

CHARLES WAGNON and LORALEE
WAGNON, husband and wife,

Plaintiffs-Appellees-
Cross-Appellants,

v. Nos. 96-5012, 96-5013, 96-5213

STATE FARM FIRE AND
CASUALTY COMPANY,

Defendant-Appellant-
Cross-Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF OKLAHOMA
(D.C. No. 94-C-972-B)

Submitted on the briefs:

Steven L. Sessinghaus, Tulsa, Oklahoma, for Plaintiffs-Appellees-Cross-
Appellants.

Neal E. Stauffer, Kent B. Rainey, Paul B. Harmon, Valery Bedingfield-Christmas,
of Stauffer, Rainey, Gudgel & Harmon, P.C., Tulsa, Oklahoma, for Defendant-
Appellant-Cross-Appellee.

Before TACHA, EBEL, and BRISCOE, Circuit Judges.

EBEL, Circuit Judge.
 In appeal No. 96-5012, defendant-appellant State Farm Fire & Casualty

Company (State Farm) appeals the district court’s judgment in favor of plaintiffs-

appellees Charles and Loralee Wagnon on their breach of contract claim. State

Farm also appeals the district court’s denial of its motion for summary judgment

based on the statute of limitations. In appeal No. 96-5013, plaintiffs-cross-

appellants Charles and Loralee Wagnon appeal the district court’s limitation of

their recovery to actual cash value instead of the replacement cost of the stolen

items. In appeal No. 96-5213, defendant-appellant State Farm appeals the award

of costs and attorneys fees to plaintiffs. Because we conclude that Mr. Wagnon’s

misrepresentations to State Farm were material and intentional as a matter of law,

voiding the insurance policy, we reverse the district court’s judgment in favor of

plaintiffs and the resulting award of fees and costs. 1

I. Background

On January 3, 1992, State Farm issued a one-year renters’ insurance policy

to plaintiffs, insuring their property against fire and other perils, including theft.

1
After examining the briefs and appellate record, this panel has
determined unanimously that oral argument would not materially assist the
determination of these appeals. See Fed. R. App. P. 34(a); 10th Cir. R. 34.1.9.
The cases are therefore ordered submitted without oral argument.

-2-
The policy contained a provision voiding coverage if any insured “intentionally

concealed or misrepresented any material fact or circumstance relating to this

insurance, whether before or after a loss.” Appellant’s App. II, doc. 22, p. 379.

On April 4, 1992, plaintiffs’ home was burglarized. On April 10, 1992,

they filed a proof of loss with State Farm, claiming the loss of personal property

in the amount of $21,176.84, including the loss of tools worth approximately

$4,300. In the proof of loss, Mr. Wagnon made a claim for eighty-five tools or

sets of tools (totaling 527 individual pieces), and indicated he had acquired sixty

of these tools or sets four years earlier. Mr. Wagnon did not submit any receipts,

canceled checks, or pictures to support his claim of ownership.

During State Farm’s initial interview of Mr. Wagnon on April 20, 1992, he

again stated that he acquired the tools approximately four years earlier, and that a

“lot of em my dad and I had when I was living at home and ah I just collect em,

you know, like that and then on I just kept gradually getting um.” Id., doc. 25, at

391. Later, when asked whether his father bought the tools for him, Mr. Wagnon

replied “Yes, ah he acquired them you know, and he had so many of them I just

kind of picked and choose and he just let me take whatever . . . .” Id. at 396.

During Mr. Wagnon’s first examination under oath on June 8, 1992, State

Farm asked whether Mr. Wagnon purchased a ten-drawer tool chest, to which he

replied, “No, my dad had it, my dad had had it, and he just gave it to me.” Id.,

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doc. 28, at 458. State Farm then asked him whether he acquired all of the tools

listed on the proof of loss from his father, to which Mr. Wagnon replied, “Not all

of them; I bought a few of them here and there. I can’t remember exactly which

ones I bought and which ones he gave me though.” Id. at 460. Mr. Wagnon went

on to identify more than sixty-six tools or sets of tools which he received from his

father, including multiple power saws, drills, wrecking and extension bars, a tool

cart and chest, an air compressor and assorted components. See id. at 460-77. He

testified that most of the tools were given to him at one time in a large tool box.

He also identified fifteen items or sets which he purchased himself, and indicated

he could not remember whether he obtained one other item from his father.

Toward the end of the examination, Mr. Wagnon testified he did not know his

father’s address and that he would not give State Farm his father’s phone number,

even after being reminded that his claim could be denied for failure to give

material information. Although Mr. Wagnon later made several changes to his

sworn testimony, he did not change his statements that most of the tools were

given to him by his father.

On August 17, 1992, Mr. Wagnon’s father, Olen Wagnon, wrote a

statement that he had given his son “some tools,” including an open end wrench

set and a box end wrench set. He denied giving his son a tool cart, a socket set,

or an adjustable wrench set. See id., doc. 33, at 517. On October 14, 1992,

-4-
plaintiff Wagnon underwent a second examination under oath, in which he

initially affirmed his earlier statements regarding the tools. State Farm then asked

him if he was aware that his father had said he did not give his son the majority of

the tools, and didn’t know where his son had acquired them. Mr. Wagnon replied:

I was going to, after we got done with going over all them tools, say
the reason that I told you that my father gave them to me just the
simple fact is that I didn’t want to complicate, I couldn’t remember
exactly where I got them from. I went to, like, flea markets, garage
sales, and acquired the tools from there, but I can’t tell you where I
got them from exactly.

Id., doc. 35, at 572. When State Farm asked whether Mr. Wagnon was testifying

that he lied in the first examination, he replied, “Yes, you can say I lied, yes. I

was just trying --- ” before his sentence was interrupted by State Farm’s attorney.

Id. at 573.

In a subsequent deposition, Mr. Wagnon’s father specifically denied giving

his son more than fifty of the tools attributed to him. See Appellant’s App. I, doc.

13, at 227-36, 239-44. His wife, Mr. Wagnon’s stepmother, also testified that she

and her husband had not given Mr. Wagnon more than a few tools in the previous

nine years, and expressly denied giving him a tool chest. See id. at 281-82.

In addition to Mr. Wagnon’s misstatements, State Farm knew the following

information: Plaintiffs’ renters’ insurance policy was a new one, the loss was

large, and plaintiffs were young (early twenties), with two children, working at

low income jobs, with inconsistent job histories. Except for a few items, the

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Wagnons were unable to produce any receipts or proof that they owned the

allegedly stolen items, claiming instead that such receipts had been taken in the

burglary. Plaintiffs also changed the source of the items between their first proof

of loss, which stated they purchased most items at stores, and their second proof

of loss, which stated they received many of the items as gifts from family

members. Further, there was a “considerabl[e]” discrepancy between the dollar

amounts listed by insureds for firearms, tools, and stereo equipment in their

insurance application and the amounts claimed as stolen three months later. See

Tr. at 58.

During a visit to plaintiffs’ home several days after the burglary, State

Farm’s agent noticed high priority items such as a stereo and television were not

taken, whereas heavier, bulkier items such as a file cabinet containing plaintiffs’

receipts and some jewelry, were claimed to have been stolen. He also noted there

was no electrical outlet near where the air compressor was allegedly used.

In August 1992, Mrs. Wagnon’s former brother-in-law notified State Farm

that plaintiffs’ claim was fraudulent. He informed State Farm that the burglary

had been staged by Mrs. Wagnon and her sister; that they were upset with Mr.

Wagnon for getting carried away on his claim for the tools; and that they were

upset by the home investigation because the agent had noticed there was no place

to plug something in when inspecting the garage. He also predicted that plaintiffs

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planned to set fire to their home, and, in fact, the Wagnons’ home burned in

December 1992. Although trial testimony disclosed that the brother-in-law had a

strong motive to retaliate against Mrs. Wagnon for her testimony against him in a

sexual abuse case, the insurance company was entitled to look carefully at

plaintiffs’ claim in light of this reported fraud. State Farm also knew that Mrs.

Wagnon had two juvenile felony convictions for obtaining merchandise by bogus

check, and one misdemeanor conviction for larceny of merchandise from a

retailer.

State Farm denied plaintiffs’ claim in December 1992, on the ground that

both Mr. and Mrs. Wagnon misrepresented certain facts regarding the items stolen

and the existence of lawsuits against Mrs. Wagnon. On April 4, 1994, plaintiffs

filed this lawsuit. State Farm filed two summary judgment motions, the first

seeking judgment on statute of limitations grounds, and the second arguing that

plaintiffs’ false statements voided the policy as a matter of law. The district court

denied both motions, finding the one-year property insurance statute of limitation

inapplicable because plaintiffs’ claim was a casualty claim, and finding material

issues of fact remaining as to whether the insurance contract was voided by

plaintiffs’ false statements.

At trial, Mr. Wagnon testified that he must have made a mistake when he

said the tools came from his father. See Tr. I at 104. He acknowledged, however,

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that during his examination under oath he intended State Farm to believe the tools

came from his father. See id. at 126. On cross-examination, Mr. Wagnon

admitted one of the reasons he withheld his father’s phone number was to conceal

his father’s whereabouts from State Farm because he knew they would find out

the truth about the tools. See id. at 129-30.

After the close of evidence, the district court denied State Farm’s motion

for judgment as a matter of law. Thereafter, the court found in favor of plaintiffs

on the breach of contract claim, concluding that although Mr. Wagnon

misrepresented the source of the tools to State Farm, his misstatements did not

vitiate coverage under the policy. It is unclear whether the court’s conclusion

rested on a finding that the misrepresentations were not material, or on a finding

that they were not intentional. The court limited plaintiffs’ recovery to the actual

cash value of their loss, however, because they had not replaced the stolen items

within a year as required by the policy. The court’s judgment, entered on

November 3, 1995, noted plaintiffs’ entitlement to costs and attorneys fees upon

timely application pursuant to Local Rules 54.1 and 54.2, which required them to

file for costs and fees within fourteen days after entry of judgment.

On November 13, 1995, plaintiffs filed a motion to amend the judgment

pursuant to Fed. R. Civ. P. 59(e), raising the recent decision in Coblentz v.

Oklahoma Farm Bureau Mutual Insurance Co., 915 P.2d 938, 939-40 (Okla. Ct.

-8-
App. 1995), which held unconscionable a policy provision limiting insureds’

recovery to actual cash value unless the property had been replaced. On

November 20, 1995, seventeen days after entry of judgment, plaintiffs filed their

bill of costs and motion for attorneys fees. State Farm moved to strike, claiming

plaintiffs had waived their right to recovery by filing after the fourteen-day

deadline.

On December 7, 1995, the court denied plaintiffs’ motion to amend. On

December 14, 1995, plaintiffs moved for a retroactive extension of time until

November 20, 1995, for filing their bill of costs and motion for fees. The district

court granted the motion and granted costs and fees, holding plaintiffs’ motion to

amend tolled the time in which to file their bill of cost/motion for attorneys fees

until fourteen days after entry of the order disposing of the post-trial motion.

On appeal, State Farm argues that plaintiffs’ cause of action should have

been barred by the statute of limitations. It also argues that Mr. Wagnon’s

misrepresentations were material and intentional as a matter of law, vitiating

coverage. Lastly, State Farm argues that costs and attorneys fees should not have

been granted because plaintiffs’ application was untimely. Plaintiffs argue they

should have been awarded the replacement cost of the stolen items, based on the

Coblentz decision.

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 II. Statute of Limitations

On March 4, 1997, we certified to the Oklahoma Supreme Court the

question whether plaintiffs’ policy should be deemed “property” insurance, with a

one-year statute of limitations, or “casualty” insurance, with a two-year statute of

limitations. On December 23, 1997, the Oklahoma Supreme Court determined

that plaintiffs’ theft claim was subject to the two-year statute of limitations

prescribed for casualty insurance, see 36 Okla. Stat. § 3617. Because plaintiffs

filed their lawsuit within two years after the date of their theft loss, the district

court did not err in denying State Farms’ motion for summary judgment based on

the statute of limitations.

III. Materiality of Misrepresentations and Concealments

The materiality of a misrepresentation is a mixed question of law and fact

that under most circumstances should be determined by the trier of fact. See

Turley v. State Farm Mut. Auto. Ins. Co., 944 F.2d 669, 672 (10th Cir. 1991);

Long v. Insurance Co. of N. Am., 670 F.2d 930, 934 (10th Cir. 1982). However,

materiality “can be decided as a matter of law if reasonable minds could not differ

on the question.” Long, 670 F.2d at 934; see also Claborn v. Washington Nat’l

Ins. Co., 910 P.2d 1046, 1049 (Okla. 1996) (holding court should have directed

verdict in light of undisputed evidence of material misrepresentation to insurer).

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Here, then, the question is whether reasonable minds could have differed as to the

materiality of Mr. Wagnon’s misrepresentations.

In Long, we held “a misrepresentation will be considered material if a

reasonable insurance company, in determining its course of action, would attach

importance to the fact misrepresented.” 670 F.2d at 934. Most courts have

construed materiality broadly, emphasizing that the subject of the

misrepresentation need not ultimately prove to be significant to the disposition of

the claim, so long as it was reasonably relevant to the insurer’s investigation at

the time. See Fine v. Bellefonte Underwriters Ins. Co, 725 F.2d 179, 182-84 (2d

Cir. 1984) (holding materiality not judged by what facts later turn out to be, but

whether a false statement “concerns a subject relevant and germane to the

insurer’s investigation as it was then proceeding,” and holding false sworn answer

material if it “may be said to have been calculated either to discourage, mislead or

deflect the company’s investigation in any area that might seem to the company,

at that time, a relevant or productive area to investigate”); Dadurian v.

Underwriters at Lloyd’s, London, 787 F.2d 756, 759-60 (1st Cir. 1986); Clark v.

Aetna Cas. & Sur. Co., 778 F.2d 242, 246 (5th Cir. 1985); Passero v. Allstate Ins.

Co., 554 N.E.2d 384, 389 (Ill. Ct. App. 1990); Longobardi v. Chubb Ins. Co., 582

A.2d 1257, 1262-63 (N.J. 1990).

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 Here, the facts known to State Farm were sufficient to place it on notice

that the claimed loss might be fraudulent, rendering information about plaintiffs’

ownership of the stolen items material to the investigation. State Farm’s

questions to Mr. Wagnon regarding the source of the tools were calculated to

verify ownership of the allegedly stolen items, especially in the absence of any

receipts, canceled checks, warranty cards, or photographs otherwise establishing

ownership. Further, as the policy provided for either replacement or actual cash

value of the items, State Farm was entitled to investigate the age and source of

the items to determine their value when stolen. See Clark, 778 F.2d at 246

(“[S]tatements about the previous owner of property and how much consideration

was paid are clearly material in a cash value policy, for these policies, dependent

on market values, are necessarily concerned with recent purchases as indicative of

such value.”).

Several courts have held that false statements about the acquisition of

insured property are material as a matter of law, when the existence of an

insurable interest or ownership is at issue. In Claflin v. Commonwealth Ins. Co.,

110 U.S. 81 (1884), the trial court instructed the jury that the insured’s answers

concerning the manner in which he paid for the insured goods was material as a

matter of law. The Supreme Court affirmed, holding:

It is quite obvious that . . . it was material to show what title and
interest [insured] had at the time of the loss in the property insured.

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 . . . The object of . . . requiring the assured to submit himself to an
examination under oath . . . 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, would be
fraudulent.

....

The fact whether [insured] 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 the contract . . . . By that contract the companies were
entitled to know from him all the circumstances of his purchase of
the property insured, including the amount of the price paid and in
what manner payment was made; and false statements, willfully made
under oath, intended to conceal the truth on these points, constituted
an attempted fraud by false swearing which was a breach of the
conditions of the policy, and constituted a bar to the recovery of the
insurance.

Id. at 94-97; see Dadurian, 787 F.2d at 759-60 (holding material, as a matter of

law, statements regarding source of funds used to purchase allegedly stolen

jewelry, because they were reasonably relevant to the insurer’s investigation of

insured’s ownership); Passero, 554 N.E.2d at 389 (holding misrepresentations

regarding how much insureds paid for stereo system and who purchased certain

video equipment were material as a matter of law because they called into

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question insureds’ ownership of the allegedly stolen items, noting that price and

identity of purchaser are relevant to ownership).

Based on the case law and the facts, Mr. Wagnon’s misstatements regarding

the source of the tools, and his concealment of the means to verify his statements,

were material as a matter of law. State Farm had every right to investigate

whether plaintiffs truly owned the items they claimed were stolen, and questions

regarding the source of the items were germane and relevant to this ownership

inquiry. On this basis, no reasonable fact-finder could conclude Mr. Wagnon’s

misstatements and concealments were not material to State Farm’s investigation

as it was then proceeding.

We note that the district court’s materiality determination may have rested,

in part, on an incorrect finding that State Farm did not dispute “that the burglary

occurred or take issue with any of the personalty claimed to be lost or stolen.”

Appellant’s App. II, doc. 19, at 362. This finding is contradicted by the record.

In its answer, State Farm denied that insureds suffered a theft loss, and raised the

affirmative defenses that insureds misrepresented material facts concerning the

subject of the insurance and their interests therein, that they committed fraud or

false swearing in the presentment of their claim, and that they caused or procured

the theft loss. See Appellant’s App. I, doc. 2, at 7-10. In the pretrial order

signed on the day of trial, State Farm identified as disputed the factual issues

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whether the theft loss occurred, whether insureds procured the loss, and whether

the loss encompassed all the items that insureds’ claimed were stolen. See

Appellant’s App. II, doc. 18, at 337-38. At trial, claim investigator Tom Abbott

testified that State Farm questioned whether Mr. Wagnon really had all the tools

he reported stolen. See Tr. I at 51. Although it is true that State Farm did not

deny coverage on this ground, relying instead on plaintiffs’ misrepresentations,

this does not affect the materiality inquiry, which focuses on the time the

misrepresentations were made. See, e.g., Edmiston v. Schellenger, 343 So. 2d

465, 467 (Miss. 1977) (holding insurer’s failure to raise arson defense at trial did

not affect materiality of misstatements when made).

IV. Intentional Misrepresentation

Similarly, no reasonable factfinder could question whether Mr. Wagnon’s

misrepresentations were made intentionally with the intent to deceive State Farm.

Mr. Wagnon was the first to suggest that most of the claimed tools were given to

him by his father, and, in fact, he corrected State Farm’s initial assumption that

Mr. Wagnon had purchased them himself. Although Mr. Wagnon disclaimed

knowing exactly which tools his father had given him, he consistently maintained

his father had given him the vast majority of tools, testifying specifically that

most of the tools were given at one time in a large tool chest. In his sworn

testimony, Mr. Wagnon unequivocally identified sixty-six tools or sets of tools

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given to him by his father, expressing uncertainty only as to a single tool. Even if

Mr. Wagnon were mistaken as to the origin of ten or twenty of the tools, it is

unreasonable to believe he could have been mistaken as to more than fifty tools or

sets, including such large and expensive items as a ten-drawer tool chest, a

fifteen-drawer tool cart, multiple power tools, and an air compressor.

Further, Mr. Wagnon appears to have admitted that his misstatements were

made knowing that they were false. During the second examination under oath,

when confronted with his father’s statement regarding the tools, Mr. Wagnon

seems to acknowledge he knew his statements were false when made, explaining

that he gave such information to make things less complicated, and conceding that

he might have lied. Mr. Wagnon also admitted at trial that he concealed his

father’s phone number, in part, to prevent State Farm from contacting him and

learning the truth about the tools.

Certain cases indicate that Mr. Wagnon’s misrepresentations should be

found intentional as a matter of law. For example, in Tenore v. American &

Foreign Insurance Co., 256 F.2d 791 (7th Cir. 1958), the court found that an

incorrect new gun valuation of seventy-six guns, despite their poor condition,

demonstrated intentional false swearing as a matter of law, stating

Had [insured] valued five, ten or possibly twenty guns at an
excessive price, and had displayed some effort to make an honest
valuation as to the other guns, although we might disagree, we would
feel bound by the decision on valuation made by the trier of the facts.

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 But here, plaintiffs gave a new-gun valuation to every one of the
sixty-six Winchesters and the ten Ithacas [despite their poor
condition].

Id. at 794. So too, in Lykos v. American Home Insurance Co., 609 F.2d 314, 316

(7th Cir. 1979), the court held a consistent pattern of inordinately excessive

claims showed they were deliberately false as a matter of law, as no reasonable

jury could find they were the product of an innocent mistake. In Dadurian, 787

F.2d at 761-62, the First Circuit reversed a jury verdict in favor of an insured,

holding the weight of the evidence overwhelmingly showed the insured knew he

was giving false testimony in his sworn examination. The court noted insured

was the first to originate the story that his cash had come from specific bank

loans, and that he had not qualified his testimony, but couched it in terms of

misleading certainty.

Further, so long as Mr. Wagnon’s misrepresentations were made knowingly

and deliberately, the intent to deceive the insurer will be implied. See Claflin,

110 U.S. at 95 (“And if the matter were material and the statement false, to the

knowledge of the party making it, and willfully 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.”); Tenore, 256 F.2d at 795 (noting intent to

defraud will be inferred when false statement is knowingly made by insured with

regard to a material matter); Royal Ins. Co. v. Scritchfield, 152 P. 97, 98 (Okla.

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1915) (holding intent to deceive may be implied from willful making of material

statement that insured knows is false).

This is true even if the misrepresentations were made for a purpose other

than defrauding the insurer. See Claflin, 110 U.S. at 96-97 (holding it did not

matter that insured made misstatements for a reason other than deceiving insurer,

noting the fraud “is not lessened because the motive that induced it was

something in addition to the possible injury to [insurers] that it might work”);

Woods v. Independent Fire Ins. Co., 749 F.2d 1493, 1496 (11th Cir. 1985)

(same); Longobardi, 582 A.2d at 1262 (“The insured’s motive for lying . . . is

irrelevant. Forfeiture does not depend on proof that an insured harbored an intent

to recover proceeds to which he or she was not entitled.”).

In light of our conclusion that Mr. Wagnon’s misrepresentations were

material and intentionally made, State Farm was entitled to declare the policy

void. Therefore, the judgment in favor of plaintiffs must be reversed. Because

plaintiffs are not entitled to recover on their claim, we need not determine

whether the policy’s replacement requirement is unconscionable. We also need

not address the timeliness of plaintiffs’ application for costs and fees as plaintiffs

are no longer prevailing parties.

The judgment of the United States District Court for the Northern District

of Oklahoma, and its order awarding costs and fees, are REVERSED.

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-19-
 F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
APR 24 1998
FOR THE TENTH CIRCUIT
PATRICK FISHER
Clerk

CHARLES WAGNON and LORALEE
WAGNON, husband and wife,

Plaintiffs-Appellees-
Cross-Appellants, Nos. 96-5012, 96-5013 &
96-5213
v. (D.C. No. 94-C-972-B)
(N.D. Okla.)
STATE FARM FIRE AND
CASUALTY COMPANY,

Defendant-Appellant-
Cross-Appellee.

ORDER AND JUDGMENT **

Before TACHA, EBEL, and BRISCOE, Circuit Judges.

After examining the briefs and appellate record, this panel has determined

unanimously that oral argument would not materially assist the determination of

**
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
these appeals. See Fed. R. App. P. 34(a); 10th Cir. R. 34.1.9. The cases are

therefore ordered submitted without oral argument.

In appeal No. 96-5012, defendant-appellant State Farm Fire & Casualty

Company (State Farm) appeals the district court’s judgment in favor of plaintiffs-

appellees Charles and Loralee Wagnon on their breach of contract claim. State

Farm also appeals the district court’s denial of its motion for summary judgment

based on the statute of limitations. In appeal No. 96-5013, plaintiffs-cross-

appellants Charles and Loralee Wagnon appeal the district court’s limitation of

their recovery to actual cash value instead of the replacement cost of the stolen

items. In appeal No. 96-5213, defendant-appellant State Farm appeals the award

of costs and attorneys fees to plaintiffs. Because we conclude that Mr. Wagnon’s

misrepresentations to State Farm were material and intentional as a matter of law,

voiding the insurance policy, we reverse the district court’s judgment in favor of

plaintiffs and the resulting award of fees and costs.

I. Background

On January 3, 1992, State Farm issued a one-year renters’ insurance policy

to plaintiffs, insuring their property against fire and other perils, including theft.

The policy contained a provision voiding coverage if any insured “intentionally

concealed or misrepresented any material fact or circumstance relating to this

insurance, whether before or after a loss.” Appellant’s App. II, doc. 22, p. 379.

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 On April 4, 1992, plaintiffs’ home was burglarized. On April 10, 1992,

they filed a proof of loss with State Farm, claiming the loss of personal property

in the amount of $21,176.84, including the loss of tools worth approximately

$4,300. In the proof of loss, Mr. Wagnon made a claim for eighty-five tools or

sets of tools (totaling 527 individual pieces), and indicated he had acquired sixty

of these tools or sets four years earlier. Mr. Wagnon did not submit any receipts,

canceled checks, or pictures to support his claim of ownership.

During State Farm’s initial interview of Mr. Wagnon on April 20, 1992, he

again stated that he acquired the tools approximately four years earlier, and that a

“lot of em my dad and I had when I was living at home and ah I just collect em,

you know, like that and then on I just kept gradually getting um.” Id., doc. 25, at

391. Later, when asked whether his father bought the tools for him, Mr. Wagnon

replied “Yes, ah he acquired them you know, and he had so many of them I just

kind of picked and choose and he just let me take whatever . . . .” Id. at 396.

During Mr. Wagnon’s first examination under oath on June 8, 1992, State

Farm asked whether Mr. Wagnon purchased a ten-drawer tool chest, to which he

replied, “No, my dad had it, my dad had had it, and he just gave it to me.” Id.,

doc. 28, at 458. State Farm then asked him whether he acquired all of the tools

listed on the proof of loss from his father, to which Mr. Wagnon replied, “Not all

of them; I bought a few of them here and there. I can’t remember exactly which

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ones I bought and which ones he gave me though.” Id. at 460. Mr. Wagnon went

on to identify more than sixty-six tools or sets of tools which he received from his

father, including multiple power saws, drills, wrecking and extension bars, a tool

cart and chest, an air compressor and assorted components. See id. at 460-77. He

testified that most of the tools were given to him at one time in a large tool box.

He also identified fifteen items or sets which he purchased himself, and indicated

he could not remember whether he obtained one other item from his father.

Toward the end of the examination, Mr. Wagnon testified he did not know his

father’s address and that he would not give State Farm his father’s phone number,

even after being reminded that his claim could be denied for failure to give

material information. Although Mr. Wagnon later made several changes to his

sworn testimony, he did not change his statements that most of the tools were

given to him by his father.

On August 17, 1992, Mr. Wagnon’s father, Olen Wagnon, wrote a

statement that he had given his son “some tools,” including an open end wrench

set and a box end wrench set. He denied giving his son a tool cart, a socket set,

or an adjustable wrench set. See id., doc. 33, at 517. On October 14, 1992,

plaintiff Wagnon underwent a second examination under oath, in which he

initially affirmed his earlier statements regarding the tools. State Farm then asked

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him if he was aware that his father had said he did not give his son the majority of

the tools, and didn’t know where his son had acquired them. Mr. Wagnon replied:

I was going to, after we got done with going over all them tools, say
the reason that I told you that my father gave them to me just the
simple fact is that I didn’t want to complicate, I couldn’t remember
exactly where I got them from. I went to, like, flea markets, garage
sales, and acquired the tools from there, but I can’t tell you where I
got them from exactly.

Id., doc. 35, at 572. When State Farm asked whether Mr. Wagnon was testifying

that he lied in the first examination, he replied, “Yes, you can say I lied, yes. I

was just trying --- ” before his sentence was interrupted by State Farm’s attorney.

Id. at 573.

In a subsequent deposition, Mr. Wagnon’s father specifically denied giving

his son more than fifty of the tools attributed to him. See Appellant’s App. I, doc.

13, at 227-36, 239-44. His wife, Mr. Wagnon’s stepmother, also testified that she

and her husband had not given Mr. Wagnon more than a few tools in the previous

nine years, and expressly denied giving him a tool chest. See id. at 281-82.

In addition to Mr. Wagnon’s misstatements, State Farm knew the following

information: Plaintiffs’ renters’ insurance policy was a new one, the loss was

large, and plaintiffs were young (early twenties), with two children, working at

low income jobs, with inconsistent job histories. Except for a few items, the

Wagnons were unable to produce any receipts or proof that they owned the

allegedly stolen items, claiming instead that such receipts had been taken in the

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burglary. Plaintiffs also changed the source of the items between their first proof

of loss, which stated they purchased most items at stores, and their second proof

of loss, which stated they received many of the items as gifts from family

members. Further, there was a “considerabl[e]” discrepancy between the dollar

amounts listed by insureds for firearms, tools, and stereo equipment in their

insurance application and the amounts claimed as stolen three months later. See

Tr. at 58.

During a visit to plaintiffs’ home several days after the burglary, State

Farm’s agent noticed high priority items such as a stereo and television were not

taken, whereas heavier, bulkier items such as a file cabinet containing plaintiffs’

receipts and some jewelry, were claimed to have been stolen. He also noted there

was no electrical outlet near where the air compressor was allegedly used.

In August 1992, Mrs. Wagnon’s former brother-in-law notified State Farm

that plaintiffs’ claim was fraudulent. He informed State Farm that the burglary

had been staged by Mrs. Wagnon and her sister; that they were upset with Mr.

Wagnon for getting carried away on his claim for the tools; and that they were

upset by the home investigation because the agent had noticed there was no place

to plug something in when inspecting the garage. He also predicted that plaintiffs

planned to set fire to their home, and, in fact, the Wagnons’ home burned in

December 1992. Although trial testimony disclosed that the brother-in-law had a

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strong motive to retaliate against Mrs. Wagnon for her testimony against him in a

sexual abuse case, the insurance company was entitled to look carefully at

plaintiffs’ claim in light of this reported fraud. State Farm also knew that Mrs.

Wagnon had two juvenile felony convictions for obtaining merchandise by bogus

check, and one misdemeanor conviction for larceny of merchandise from a

retailer.

State Farm denied plaintiffs’ claim in December 1992, on the ground that

both Mr. and Mrs. Wagnon misrepresented certain facts regarding the items stolen

and the existence of lawsuits against Mrs. Wagnon. On April 4, 1994, plaintiffs

filed this lawsuit. State Farm filed two summary judgment motions, the first

seeking judgment on statute of limitations grounds, and the second arguing that

plaintiffs’ false statements voided the policy as a matter of law. The district court

denied both motions, finding the one-year property insurance statute of limitation

inapplicable because plaintiffs’ claim was a casualty claim, and finding material

issues of fact remaining as to whether the insurance contract was voided by

plaintiffs’ false statements.

At trial, Mr. Wagnon testified that he must have made a mistake when he

said the tools came from his father. See Tr. I at 104. He acknowledged, however,

that during his examination under oath he intended State Farm to believe the tools

came from his father. See id. at 126. On cross-examination, Mr. Wagnon

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admitted one of the reasons he withheld his father’s phone number was to conceal

his father’s whereabouts from State Farm because he knew they would find out

the truth about the tools. See id. at 129-30.

After the close of evidence, the district court denied State Farm’s motion

for judgment as a matter of law. Thereafter, the court found in favor of plaintiffs

on the breach of contract claim, concluding that although Mr. Wagnon

misrepresented the source of the tools to State Farm, his misstatements did not

vitiate coverage under the policy. It is unclear whether the court’s conclusion

rested on a finding that the misrepresentations were not material, or on a finding

that they were not intentional. The court limited plaintiffs’ recovery to the actual

cash value of their loss, however, because they had not replaced the stolen items

within a year as required by the policy. The court’s judgment, entered on

November 3, 1995, noted plaintiffs’ entitlement to costs and attorneys fees upon

timely application pursuant to Local Rules 54.1 and 54.2, which required them to

file for costs and fees within fourteen days after entry of judgment.

On November 13, 1995, plaintiffs filed a motion to amend the judgment

pursuant to Fed. R. Civ. P. 59(e), raising the recent decision in Coblentz v.

Oklahoma Farm Bureau Mutual Insurance Co., 915 P.2d 938, 939-40 (Okla. Ct.

App. 1995), which held unconscionable a policy provision limiting insureds’

recovery to actual cash value unless the property had been replaced. On

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November 20, 1995, seventeen days after entry of judgment, plaintiffs filed their

bill of costs and motion for attorneys fees. State Farm moved to strike, claiming

plaintiffs had waived their right to recovery by filing after the fourteen-day

deadline.

On December 7, 1995, the court denied plaintiffs’ motion to amend. On

December 14, 1995, plaintiffs moved for a retroactive extension of time until

November 20, 1995, for filing their bill of costs and motion for fees. The district

court granted the motion and granted costs and fees, holding plaintiffs’ motion to

amend tolled the time in which to file their bill of cost/motion for attorneys fees

until fourteen days after entry of the order disposing of the post-trial motion.

On appeal, State Farm argues that plaintiffs’ cause of action should have

been barred by the statute of limitations. It also argues that Mr. Wagnon’s

misrepresentations were material and intentional as a matter of law, vitiating

coverage. Lastly, State Farm argues that costs and attorneys fees should not have

been granted because plaintiffs’ application was untimely. Plaintiffs argue they

should have been awarded the replacement cost of the stolen items, based on the

Coblentz decision.

II. Statute of Limitations

On March 4, 1997, we certified to the Oklahoma Supreme Court the

question whether plaintiffs’ policy should be deemed “property” insurance, with a

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one-year statute of limitations, or “casualty” insurance, with a two-year statute of

limitations. On December 23, 1997, the Oklahoma Supreme Court determined

that plaintiffs’ theft claim was subject to the two-year statute of limitations

prescribed for casualty insurance, see 36 Okla. Stat. § 3617. Because plaintiffs

filed their lawsuit within two years after the date of their theft loss, the district

court did not err in denying State Farms’ motion for summary judgment based on

the statute of limitations.

III. Materiality of Misrepresentations and Concealments

The materiality of a misrepresentation is a mixed question of law and fact

that under most circumstances should be determined by the trier of fact. See

Turley v. State Farm Mut. Auto. Ins. Co., 944 F.2d 669, 672 (10th Cir. 1991);

Long v. Insurance Co. of N. Am., 670 F.2d 930, 934 (10th Cir. 1982). However,

materiality “can be decided as a matter of law if reasonable minds could not differ

on the question.” Long, 670 F.2d at 934; see also Claborn v. Washington Nat’l

Ins. Co., 910 P.2d 1046, 1049 (Okla. 1996) (holding court should have directed

verdict in light of undisputed evidence of material misrepresentation to insurer).

Here, then, the question is whether reasonable minds could have differed as to the

materiality of Mr. Wagnon’s misrepresentations.

In Long, we held “a misrepresentation will be considered material if a

reasonable insurance company, in determining its course of action, would attach

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importance to the fact misrepresented.” 670 F.2d at 934. Most courts have

construed materiality broadly, emphasizing that the subject of the

misrepresentation need not ultimately prove to be significant to the disposition of

the claim, so long as it was reasonably relevant to the insurer’s investigation at

the time. See Fine v. Bellefonte Underwriters Ins. Co, 725 F.2d 179, 182-84 (2d

Cir. 1984) (holding materiality not judged by what facts later turn out to be, but

whether a false statement “concerns a subject relevant and germane to the

insurer’s investigation as it was then proceeding,” and holding false sworn answer

material if it “may be said to have been calculated either to discourage, mislead or

deflect the company’s investigation in any area that might seem to the company,

at that time, a relevant or productive area to investigate”); Dadurian v.

Underwriters at Lloyd’s, London, 787 F.2d 756, 759-60 (1st Cir. 1986); Clark v.

Aetna Cas. & Sur. Co., 778 F.2d 242, 246 (5th Cir. 1985); Passero v. Allstate Ins.

Co., 554 N.E.2d 384, 389 (Ill. Ct. App. 1990); Longobardi v. Chubb Ins. Co., 582

A.2d 1257, 1262-63 (N.J. 1990).

Here, the facts known to State Farm were sufficient to place it on notice

that the claimed loss might be fraudulent, rendering information about plaintiffs’

ownership of the stolen items material to the investigation. State Farm’s

questions to Mr. Wagnon regarding the source of the tools were calculated to

verify ownership of the allegedly stolen items, especially in the absence of any

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receipts, canceled checks, warranty cards, or photographs otherwise establishing

ownership. Further, as the policy provided for either replacement or actual cash

value of the items, State Farm was entitled to investigate the age and source of

the items to determine their value when stolen. See Clark, 778 F.2d at 246

(“[S]tatements about the previous owner of property and how much consideration

was paid are clearly material in a cash value policy, for these policies, dependent

on market values, are necessarily concerned with recent purchases as indicative of

such value.”).

Several courts have held that false statements about the acquisition of

insured property are material as a matter of law, when the existence of an

insurable interest or ownership is at issue. In Claflin v. Commonwealth Ins. Co.,

110 U.S. 81 (1884), the trial court instructed the jury that the insured’s answers

concerning the manner in which he paid for the insured goods was material as a

matter of law. The Supreme Court affirmed, holding:

It is quite obvious that . . . it was material to show what title and
interest [insured] had at the time of the loss in the property insured.
. . . The object of . . . requiring the assured to submit himself to an
examination under oath . . . 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, would be
fraudulent.

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 ....

The fact whether [insured] 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 the contract . . . . By that contract the companies were
entitled to know from him all the circumstances of his purchase of
the property insured, including the amount of the price paid and in
what manner payment was made; and false statements, willfully made
under oath, intended to conceal the truth on these points, constituted
an attempted fraud by false swearing which was a breach of the
conditions of the policy, and constituted a bar to the recovery of the
insurance.

Id. at 94-97; see Dadurian, 787 F.2d at 759-60 (holding material, as a matter of

law, statements regarding source of funds used to purchase allegedly stolen

jewelry, because they were reasonably relevant to the insurer’s investigation of

insured’s ownership); Passero, 554 N.E.2d at 389 (holding misrepresentations

regarding how much insureds paid for stereo system and who purchased certain

video equipment were material as a matter of law because they called into

question insureds’ ownership of the allegedly stolen items, noting that price and

identity of purchaser are relevant to ownership).

Based on the case law and the facts, Mr. Wagnon’s misstatements regarding

the source of the tools, and his concealment of the means to verify his statements,

were material as a matter of law. State Farm had every right to investigate

whether plaintiffs truly owned the items they claimed were stolen, and questions

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regarding the source of the items were germane and relevant to this ownership

inquiry. On this basis, no reasonable fact-finder could conclude Mr. Wagnon’s

misstatements and concealments were not material to State Farm’s investigation

as it was then proceeding.

We note that the district court’s materiality determination may have rested,

in part, on an incorrect finding that State Farm did not dispute “that the burglary

occurred or take issue with any of the personalty claimed to be lost or stolen.”

Appellant’s App. II, doc. 19, at 362. This finding is contradicted by the record.

In its answer, State Farm denied that insureds suffered a theft loss, and raised the

affirmative defenses that insureds misrepresented material facts concerning the

subject of the insurance and their interests therein, that they committed fraud or

false swearing in the presentment of their claim, and that they caused or procured

the theft loss. See Appellant’s App. I, doc. 2, at 7-10. In the pretrial order

signed on the day of trial, State Farm identified as disputed the factual issues

whether the theft loss occurred, whether insureds procured the loss, and whether

the loss encompassed all the items that insureds’ claimed were stolen. See

Appellant’s App. II, doc. 18, at 337-38. At trial, claim investigator Tom Abbott

testified that State Farm questioned whether Mr. Wagnon really had all the tools

he reported stolen. See Tr. I at 51. Although it is true that State Farm did not

deny coverage on this ground, relying instead on plaintiffs’ misrepresentations,

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this does not affect the materiality inquiry, which focuses on the time the

misrepresentations were made. See, e.g., Edmiston v. Schellenger, 343 So. 2d

465, 467 (Miss. 1977) (holding insurer’s failure to raise arson defense at trial did

not affect materiality of misstatements when made).

IV. Intentional Misrepresentation

Similarly, no reasonable factfinder could question whether Mr. Wagnon’s

misrepresentations were made intentionally with the intent to deceive State Farm.

Mr. Wagnon was the first to suggest that most of the claimed tools were given to

him by his father, and, in fact, he corrected State Farm’s initial assumption that

Mr. Wagnon had purchased them himself. Although Mr. Wagnon disclaimed

knowing exactly which tools his father had given him, he consistently maintained

his father had given him the vast majority of tools, testifying specifically that

most of the tools were given at one time in a large tool chest. In his sworn

testimony, Mr. Wagnon unequivocally identified sixty-six tools or sets of tools

given to him by his father, expressing uncertainty only as to a single tool. Even if

Mr. Wagnon were mistaken as to the origin of ten or twenty of the tools, it is

unreasonable to believe he could have been mistaken as to more than fifty tools or

sets, including such large and expensive items as a ten-drawer tool chest, a

fifteen-drawer tool cart, multiple power tools, and an air compressor.

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 Further, Mr. Wagnon appears to have admitted that his misstatements were

made knowing that they were false. During the second examination under oath,

when confronted with his father’s statement regarding the tools, Mr. Wagnon

seems to acknowledge he knew his statements were false when made, explaining

that he gave such information to make things less complicated, and conceding that

he might have lied. Mr. Wagnon also admitted at trial that he concealed his

father’s phone number, in part, to prevent State Farm from contacting him and

learning the truth about the tools.

Certain cases indicate that Mr. Wagnon’s misrepresentations should be

found intentional as a matter of law. For example, in Tenore v. American &

Foreign Insurance Co., 256 F.2d 791 (7th Cir. 1958), the court found that an

incorrect new gun valuation of seventy-six guns, despite their poor condition,

demonstrated intentional false swearing as a matter of law, stating

Had [insured] valued five, ten or possibly twenty guns at an
excessive price, and had displayed some effort to make an honest
valuation as to the other guns, although we might disagree, we would
feel bound by the decision on valuation made by the trier of the facts.
But here, plaintiffs gave a new-gun valuation to every one of the
sixty-six Winchesters and the ten Ithacas [despite their poor
condition].

Id. at 794. So too, in Lykos v. American Home Insurance Co., 609 F.2d 314, 316

(7th Cir. 1979), the court held a consistent pattern of inordinately excessive

claims showed they were deliberately false as a matter of law, as no reasonable

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jury could find they were the product of an innocent mistake. In Dadurian, 787

F.2d at 761-62, the First Circuit reversed a jury verdict in favor of an insured,

holding the weight of the evidence overwhelmingly showed the insured knew he

was giving false testimony in his sworn examination. The court noted insured

was the first to originate the story that his cash had come from specific bank

loans, and that he had not qualified his testimony, but couched it in terms of

misleading certainty.

Further, so long as Mr. Wagnon’s misrepresentations were made knowingly

and deliberately, the intent to deceive the insurer will be implied. See Claflin,

110 U.S. at 95 (“And if the matter were material and the statement false, to the

knowledge of the party making it, and willfully 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.”); Tenore, 256 F.2d at 795 (noting intent to

defraud will be inferred when false statement is knowingly made by insured with

regard to a material matter); Royal Ins. Co. v. Scritchfield, 152 P. 97, 98 (Okla.

1915) (holding intent to deceive may be implied from willful making of material

statement that insured knows is false).

This is true even if the misrepresentations were made for a purpose other

than defrauding the insurer. See Claflin, 110 U.S. at 96-97 (holding it did not

matter that insured made misstatements for a reason other than deceiving insurer,

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noting the fraud “is not lessened because the motive that induced it was

something in addition to the possible injury to [insurers] that it might work”);

Woods v. Independent Fire Ins. Co., 749 F.2d 1493, 1496 (11th Cir. 1985)

(same); Longobardi, 582 A.2d at 1262 (“The insured’s motive for lying . . . is

irrelevant. Forfeiture does not depend on proof that an insured harbored an intent

to recover proceeds to which he or she was not entitled.”).

In light of our conclusion that Mr. Wagnon’s misrepresentations were

material and intentionally made, State Farm was entitled to declare the policy

void. Therefore, the judgment in favor of plaintiffs must be reversed. Because

plaintiffs are not entitled to recover on their claim, we need not determine

whether the policy’s replacement requirement is unconscionable. We also need

not address the timeliness of plaintiffs’ application for costs and fees as plaintiffs

are no longer prevailing parties.

The judgment of the United States District Court for the Northern District

of Oklahoma, and its order awarding costs and fees, are REVERSED.

Entered for the Court

David Ebel
Circuit Judge

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