We’ve all heard that ‘crime doesn’t pay’ but plaintiffs in Akers v. Auto-Owners1 clearly forgot this adage, as they attempted to defraud the insurance company out of millions of dollars. As we at Merlin Law Group always tell our clients, be honest.

In this case, the insureds built a 20,000 square foot home and shortly after construction was completed, a fire occurred and damaged the house. The home was insured by Auto-Owners. It contained a “Concealment or Fraud” provision as follows:

This entire policy is void if, whether before, during or after a loss, any insured has:

a. intentionally concealed or misrepresented any material fact or circumstance;
b. engaged in fraudulent conduct; or
c. made false statements;

relating to this insurance.

Auto–Owners made several large payments under the policy to the homeowners. It paid the policy limit under the “dwelling” endorsement, paid for debris removal, damage to the pool house, personal property, and additional living expenses.

The homeowners sent a letter to the insurance company requesting payment for monies paid for landscaping, construction and electrical work relating to pool damage. It stated that they had paid more than the insured value of the home. Fake invoices were attached to the letter bearing forged signatures, along with five cancelled checks from the insured’s construction company. The payees did not own the companies referenced in the invoices. The insureds had them endorse blank checks and later filled out the front of the checks and deposited them into their own account as part of a scheme to defraud the insurance company. Also included were fifteen invoices for subcontract work allegedly completed on the house. All invoices were marked “paid” and signed by the insured. There were three pages of photocopied cancelled checks showing the invoices were paid to a company that the insured’s daughter formed after the fire.

In response to the invoices, the insurance company sought additional information. The insureds provided an estimate from their construction company and stated that they were serving as the general contractor on the home repair project.

Eventually, the insureds filed suit against the insurance company for breach of contract and vexatious refusal to pay. The insurance company hired a forensic accountant to analyze the information provided as well as deposition testimony. The accountant found that $4,318,000 plaintiffs claimed was used to repair their home was fictitious, that the 20% general contractor fee was never paid to the plaintiffs’ construction company, that invoices did not represent actual services, that checks issued to workers on the house were actually deposited in plaintiffs’ account and that the most spent on the reconstruction of the home was approximately $1,700,000. The court found the testimony of the accountant credible and adopted his findings.

The court weighed the credibility of all witnesses and considered all evidence. It found some witnesses to be very credible, some to be somewhat credible and the plaintiffs to be not credible. Their testimony was found to be inconsistent with other witnesses and records produced. Adverse inferences were drawn by the court from plaintiffs invoking their Fifth Amendment right not to testify in response to questions regarding false invoices.

The court found that plaintiffs violated the “Fraud and Concealment” provision of the policy. In Missouri, where a policy states that a misrepresentation voids coverage, that provision is enforceable.2 They were found to have violated the provision “in every way possible” by intentionally concealing, misrepresenting material facts and making false statements about the damage to the house, who performed the work, costs of repair and who received payments. Further, they created fraudulent invoices to hide who actually received payments for repair work.

As a result, plaintiffs were barred from all coverage under the insurance policy and the insurance company was entitled to recover all amounts previously paid: $3,929,887.40.3

In Missouri, if “special circumstances” exist a court may award attorneys’ fees in a declaratory judgment action.4 This includes where an insured commits fraud. The court found that plaintiffs “blatant fraud and bad-faith prosecution of Auto-Owners for vexatious refusal to pay is a special circumstance that justified awarding Auto–Owners its reasonable attorneys’ fees and costs incurred in defending against the Akers’ claim and prosecuting its counterclaim.” Auto-Owners requested fees and costs in the amount of $146,919.21 and the court found them to be reasonable. The court awarded $4,076,806.61 to Auto-Owners representing the amounts previously paid to plaintiffs plus costs and attorney fees.

As you can see, no good can come from exaggerating or inventing facts in an attempt to help your claim. Be honest and put forth the facts and circumstances of your loss. Pretend that you are Fletcher Reede in the movie, “Liar Liar.” Please enjoy this movie clip:


1 Akers v. Auto-Owners (Mutual) Insurance Co., No. 4:13-CV-00794, 2015 WL 3714595 (W.D. Mo. June 15, 2015).
2 Sentry Ins. v. Whitaker, No. 4:12-CV-241, 2013 WL 4548014, at *3 (E.D.Mo. Aug. 28, 2013).
3 See Gen. Cas. Ins. Cos. v. Holst Radiator Co., 88 F.3d 670, 670–71 (8th Cir.1996) (observing that under Missouri law the insurer may recover amounts paid to the insured that were paid before the insurer learned the Fraud and Concealment provision had been violated).
4 Allstate Ins. Co. v. Estes, 118 F.Supp.2d 968, 974 (E.D.Mo.2000).