Memorial Day usually finds millions of Americans traveling all over our great country. It is important that over this weekend, all of us take time to remember and reflect on the greatest sacrifice many made so we can enjoy our liberties. If your property burns down under suspicious circumstances, you may also want to remember and reflect on where you were and your activities as well because the insurance company claims representatives will be curious.

Daniel Schley’s barn and silo were insured by American Family when a fire that occurred over a Memorial Day weekend, destroyed the structures. The cause of the fire suggested that arson was the cause. The whereabouts of Schley at the time of the fire were inquired about by the claim adjuster. The court noted this:

Ms. Reese-Anderson interviewed Mr. Schley….During this interview, Mr. Schley reiterated that he was in Colorado at the time of the fire. He recalled that the friend that he had been attempting to visit in Grand Junction, Colorado was named ‘Sparky.’

The statements made by Mr. Schley concerning his whereabouts on May 26, 1995, through May 28, 1995, were, for the most part, false. Indeed, the evidence established that Mr. Schley was not in Colorado at the time of the fire on May 28, 1997. Instead, at 3:00 p.m., on Saturday, May 27, 1995, Mr. Schley flew from Grand Junction, Colorado to Minneapolis—via Denver. He arrived in Minneapolis at 9:00 p.m. and, at 9:25 p.m., rented a car from National Car Rental at the Minneapolis airport. He returned the car at 10:52 a.m. the next morning. The odometer revealed that the car had been driven 513 miles during the time Mr. Schley rented it. The round trip distance between the Minneapolis airport and the property in Clintonville is approximately 480 miles.

On October 20, 1995, Mr. Schley told American Family officials that he flew to Minneapolis on Saturday, May 27, 1995, to visit his girlfriend, Kathleen Dean, who was staying with her mother in Winona, Minnesota…Kathleen Dean’s testimony was consistent with Mr. Schley’s representations. However, Ms. Robert Lorenz, Kathleen Dean’s mother, informed Ms. Reese-Anderson that Mr. Schley did not visit them over the Memorial Day weekend.1

Given the circumstances of the fire, the court found that the misstatements about his whereabouts over Memorial Day weekend were material and false. Still, Schley argued that Wisconsin law required reliance upon the misstatements by Americans Family as stated in the policy language. Interestingly, the court found that American Family’s initiation of the investigation showed that reliance because he made misrepresentations about his whereabouts from the initial notice of claim thus starting the insurer’s investigation.

While American Family won the case on that finding, the discussion of overvaluation and the intentional act defense are worthy of study. The actual cash value policy suggested that Schley made a claim for the property value that was far too high and greater than the market value. The court, ruling for Schley on that issue noted that the overvaluation was not clearly intentional:

Overvaluation raises a presumption of fraud in proportion to the excess.” Stebane Nash Co. v. Campbellsport Mut. Ins. Co., 27 Wis.2d 112, 124, 133 N.W.2d 737 (1965). A false statement in a sworn proof of loss must be knowingly and willfully made if it is to serve as the basis for a denial of a claim.

In general, under Wisconsin law, it is unnecessary to show reliance on the part of the insurance company for any misrepresentation in a proof of claim… Nevertheless, in the instant case reliance is an element of American Family’s proof. This is so because American Family’s own contract, the insurance policy, expressly specifies that it must rely on an insured’s misrepresentation before it can deny coverage pursuant to the “Concealment or Fraud” provision of the policy.

It is beyond dispute that the defendant’s proof of loss did not reflect the actual market value of the property that was destroyed by the fire. However, there is evidence in the record which suggests that Mr. Schley’s overvaluation may not have been intentional. Prior to submitting his sworn proof of loss, Mr. Schley consulted an American Family claims specialist, Deborah G. Gehring, and a certified public adjuster for assistance in determining what dollar amount should be placed in the proof of loss form. He testified that Ms. Gehring told him to put in the value he believed the property was worth and that the public adjuster advised him that the proof of loss should be based on what it would cost to replace the barn and silo.

The appraisal was ordered by American Family well before Mr. Schley submitted his sworn proof of loss. This fact also casts doubt on whether the overvaluation in the proof of loss was material or that it actually invoked American Family’s reliance. In view of its high burden of proof (clear, satisfactory and convincing evidence), I find that American Family has not proved that it took action or refrained from taking any action based on Mr. Schley’s misrepresentation in the proof of loss.

While American Family won the case because of the misrepresentations made about Schley’s whereabouts during Memorial Day weekend, it did not convince the court that Schley burnt down his property:

American Family is required to prove by clear, satisfactory and convincing evidence that Mr. Schley intentionally burned his property. City of Madison v. Geier, 27 Wis.2d 687, 691–692, 135 N.W.2d 761 (1965); Ziegler v. Hustisford Farmers Mut. Ins. Co., 238 Wis. 238, 241, 298 N.W. 610 (1941). American Family has not met its burden of proof in this regard.

Mr. Schley’s activities on the evening of May 27, 1995, and the early morning hours of May 28, 1995, may well have caused his insurer to be suspicious. His dismal financial condition and the fact that the insurance coverage on the barn was increased shortly before the fire are also circumstantial factors which contribute to this suspicion. Nevertheless, more than a suspicion or a suggestion of guilt is required to establish arson as a ground for denying coverage under a policy of insurance.

In my opinion, there are a number of facts in the record which, individually and collectively, prevent me from finding by clear, satisfactory and convincing evidence that Mr. Schley committed arson. In the instant case, the investigators were unable to rule out accidental cause as the reason for the fire. Further, none of the investigators found or detected chemicals or any other substance at the site of the fire which could have been used to intentionally start the fire. Although Mr. Schley’s rental car was driven a distance consistent with a round-trip from Minneapolis to Clintonville, the record contains no evidence placing him at or near the scene of the fire at any time over the Memorial Day weekend of 1995. The record also contains evidence suggesting that other persons could have had a role in starting the fire but were not investigated. Specifically, two brothers were suspects in a rash of arsons in the county in which Mr. Schley’s property was located.

This Memorial Day weekend found me at Ft. Myers Beach and now Long Boat Key. We raced my 32 foot sailboat, Chip’s All In!, from Tampa Bay to Ft. Myers. Our family annually goes to Long Boat Key over this weekend. Pretty upbeat getting outside and having fun with others. Hope you are enjoying this weekend.

Thought For The Day

If you are able, save for them a place inside of you and save one backward glance when you are leaving for the places they can no longer go. Be not ashamed to say you loved them, though you may not have always. Take what they have left and what they have taught you with their dying and keep it with your own. And in that time when men decide and feel safe to call the war insane, take one moment to embrace those gentle heroes you left behind.
—Major Michael Davis O’Donnell, January 1, 1970, Dak To, Vietnam
1 Am. Family Mut. Ins. Co. v. Schley, 978 F.Supp. 870 (E.D. Wis. 1997).