                             UNPUBLISHED

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT


                             No. 03-2452



WAYNE L. SIMMS; TRACEY SIMMS,

                                            Plaintiffs - Appellees,


           versus

MUTUAL BENEFIT INSURANCE COMPANY,

                                             Defendant - Appellant.


Appeal from the United States District Court for the District of
Maryland, at Baltimore.   Alexander Harvey, II, Senior District
Judge. (CA-02-1261-H)


Argued:   February 3, 2005                  Decided:   June 30, 2005


Before WIDENER and KING, Circuit Judges, and Henry F. FLOYD, United
States District Judge for the District of South Carolina, sitting
by designation.


Affirmed by unpublished opinion. Judge Floyd wrote the opinion, in
which Judge Widener and Judge King joined.


ARGUED: G. Stewart Webb, Jr., VENABLE, L.L.P., Baltimore, Maryland,
for Appellant. Irwin Raphael Kramer, KRAMER & CONNOLLY, Owings
Mills, Maryland, for Appellees. ON BRIEF: Randolph Stuart Sergent,
VENABLE, L.L.P., Baltimore, Maryland, for Appellant. Lawrence S.
Greenberg, Baltimore, Maryland, for Appellees.


Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).
FLOYD, District Judge:

      Mutual Benefit Insurance Company (MBIC) brings this appeal,

asserting that the district court erred when it prevented MBIC from

introducing evidence of Wayne and Tracey Simms’ financial condition

and charged the jury that MBIC must prove its affirmative defense

by clear and convincing evidence.

      We disagree and, for the reasons set forth below, affirm the

district court.



                  I.    FACTUAL AND PROCEDURAL HISTORY

      During 1998 and 1999, Wayne and Tracey Simms built a new home

on a tract of land located at 2624 Winters Run Road in Joppa,

Maryland.   Tracey’s father, Robert Spamer, owner of Spamer General

Contracting,   Inc.,     supervised    the   construction   of    the   home.

Tracey’s sister, Bobbie Spamer, owned the parcel of land upon which

the house was built.      Ownership of the land was transferred to the

Simms by deed dated June 27, 2000.

      In March of 1999, MBIC issued a homeowners’ insurance policy,

which insured the Simms’ new home.           The policy contained, inter

alia, limits of $434,000 for repair or replacement of the dwelling

and $303,800 for repair or replacement of personal property.              An

endorsement to the policy increased the coverage for the Simms’

dwelling “to equal the current replacement cost of the dwelling,”

and   increased   the     personal    property   coverage   “by   the   same


                                       2
percentage.”    (J.A. 872.)   The policy was renewed annually.      MBIC

also issued a commercial insurance policy to the Simms with limits

of $100,000.1   Subject to the terms, conditions, and endorsements

of the policies, the Simms were covered for, among other things,

losses or damages sustained as a result of a fire.

     On the afternoon of November 5, 2001, while Wayne and Tracey

Simms were shopping, they received a phone message that their home

had burned to the ground.     They returned home to learn that their

house and all of its contents had been completely destroyed.

     After the Simms notified MBIC of the fire, the insurance

company retained an arson investigator, Lee McAdams, to investigate

the cause and origin of the fire.       McAdams concluded that the cause

of the fire was undetermined.

     MBIC   also   retained   Pat   Bonnani,    an   independent   claims

adjuster, to process the Simms’ claim.       Bonanni met with the Simms

to inform them of what they needed to do to submit their claim

under the policies.    Among other things, he explained to them the

effect of depreciation on the replacement value of their property

and the process for obtaining the actual cash value of their

property should they decide not to replace it.

     Soon after Bonanni’s discussion with the Simms regarding the

procedures for filing a claim, Tracey submitted 1) a personal



     1
     Wayne Simms was self-employed and operated a trucking business
known as RBS Trucking from his home.

                                    3
property inventory, listing 1,689 destroyed items with a total

replacement cost of $446,794.88; 2)invoices from Spamer General

Contracting for demolition and debris removal performed at the home

site,    totaling   $24,810;    and   3)    an    estimate        of   the   costs     of

rebuilding    the   home   destroyed       in    the   fire       in   the   amount    of

$648,000.    Tracey also informed Bonanni that the Simms planned to

stay in a vacant, furnished house owned by her sister.                         Bonanni

authorized the Simms to rent the dwelling for $1,700 per month.

MBIC later determined that the dwelling occupied by the Simms was

a loft apartment attached to a shed owned by Tracey’s father.

        The 69-page personal property inventory contained more than

1500 categories of items.         The inventory set forth the date of

purchase    of   each   item   lost   in    the    fire,      a    description,       the

quantity, and the replacement cost, as determined by the Simms.

The inventory revealed that the Simms claimed to have acquired

roughly $146,000 worth of personal property in 1999, $60,000 -

$65,000 worth of property in 2000, and $50,000 worth of property in

2001.

     After reviewing the personal property inventory, and in light

of his knowledge of the Simms’ limited income, Bonanni became

concerned with its magnitude and the amount of recent purchases.

As a result of his concerns, Bonnani referred the case back to MBIC

for further investigation.




                                       4
     William C. Parler, Jr., Esq., MBIC’s attorney, scheduled

Examinations Under Oath of both Tracey and Wayne for January 17,

2002.    On the date of the examination, the Simms produced a revised

personal property inventory and their 1999 and 2000 tax returns.

Parler    questioned    Wayne      and       Tracey   at     length     regarding

discrepancies between the replacement costs listed by the Simms and

the costs obtained by MBIC as a result of its own investigation.

The examination continued on January 21, 2002, at which time Tracey

submitted a second revised personal property inventory.                        This

inventory provided a total replacement cost of $390,290.73.

     Tracey    was   also    questioned       about   the    original    and   the

replacement    costs   for   the   construction       of    the   Simms’   house.

Tracey’s father, Robert Spamer, supervised much of the construction

of the original house, which cost $286,000.            The cost estimate for

the replacement of the house was $648,000, which was based upon a

5,500 square foot home at $120 per square foot.                    Tracey later

informed her father, who had prepared the estimate, that the

original house was only 4,900 square feet. Accordingly, Mr. Spamer

reduced the replacement cost to $588,900.

     An investigation of the Simms’ financial data revealed that

Wayne and Tracey were deeply in debt.             Wayne’s trucking business

owed in excess of $150,000 in short and long-term debt, and the

Simms owed $265,000 on their home mortgage.                 The Simms also owed

$35,000 in credit card debt, $20,000 to the Internal Revenue


                                         5
Service for past unpaid taxes, and the balance of a $60,000 lien to

Bobbi Spamer for the land upon which the Simms’ built their house.

To service their total debt of $588,394, the Simms were required to

make monthly payments of at least $8,250.               The Simms had an

approximate monthly, pre-tax income, both from Tracey’s salary as

a   claims   representative   at   State   Farm   and   from   the    trucking

business, of between $9,000 and $10,000.2

      The insurance contract between the Simms and MBIC contains a

provision that states that MBIC is not obligated to provide any

coverage for property losses

      if, whether before      or   after    a   loss,   one    or    more
      ‘insureds’ have:

      (1)    Intentionally concealed or misrepresented                any
             material fact or circumstance;
      (2)    Engaged in fraudulent conduct; or
      (3)    Made false statements;

      relating to this insurance.

(J.A. 867.)

      On March 12, 2002, MBIC informed the Simms that their claim

under their homeowner’s policy had been denied.           Counsel for MBIC

informed the Simms that their policy would be considered void

because of their misrepresentations and false statements made in

support of their claim.


      2
     The information regarding the Simms’ financial condition is
based primarily on the report of licensed certified public
accountant Brad Ryden, whom MBIC sought to present as an expert on
this issue. Ryden’s report was not admitted into evidence and he
was not allowed to testify at trial.

                                     6
     Thereafter, the Simms filed suit for breach of contract in

state court against MBIC, seeking recovery of $1,500,000, plus

interests and costs.   MBIC later removed the case to the United

States District Court for the District of Maryland.

     In their complaint, the Simms alleged that MBIC’s refusal to

pay the demand set forth in their claim was a breach of the

homeowners’ and the commercial policy, and that the denial of the

claim was not in good faith.

     MBIC denied that it breached the contract between the parties

and asserted that no coverage was available under the terms,

conditions, and exclusions of the policies because the Simms

intentionally   concealed   or   misrepresented   material   facts   or

circumstances and/or engaged in fraudulent conduct relating to the

insurance.

     At trial, MBIC attempted to present to the jury evidence of

the Simms’ financial circumstances to argue that the Simms must

have falsified their claim because they could not have purchased

all of the property that they claimed, in the amounts that they

claimed, within the few years that they claimed.     MBIC also sought

to introduce this evidence to demonstrate the Simms’ motive for

filing an inflated insurance claim.

     Relying on Federal Rule of Evidence 403, the district court

found that it would be prejudicial to the Simms if MBIC were to

introduce evidence of the Simms’ financial condition and refused to

allow the financial information into evidence.



                                   7
     At the close of the trial, over MBIC’s objection, the district

court instructed the jury that Maryland law requires that an

affirmative defense of fraud be established by clear and convincing

evidence.   The jury returned with a verdict of $1,023,147 in favor

of the Simms.    MBIC timely filed its appeal.



                              II.    DISCUSSION

                       A.    Exclusion of Evidence

   Evidentiary     rulings    are    generally    reviewed   for   abuse    of

discretion.     United States v. D'Anjou, 16 F.3d 604, 610 (4th Cir.

1994).    However, MBIC asserts that this Court should review the

district court’s ruling in this case de novo because the ruling was

based upon an error of law.           See, e.g., H & W Indus., Inc. v.

Occidental Chemical Corp., 911 F.2d 1118, 1121 (5th Cir. 1990)

(“[W]here the admissibility determination necessarily involves a

substantive legal decision, the court should review de novo the

validity of the underlying legal analysis.”).

     We   disagree.     "Rule    403   judgments    are   preeminently     the

province of the trial courts."             United States v. Love, 134 F.3d

595, 603 (4th Cir. 1998).           Thus, we review such decisions with

great deference, and will leave them undisturbed unless the court’s

"discretion has been plainly abused." Id. (citing United States v.

Simpson, 910 F.2d 154, 157 (4th Cir. 1990)).         “Such an abuse occurs

only when it can be said that the trial court acted ‘arbitrarily’


                                       8
or ‘irrationally’ in admitting evidence.” Simpson, 910 F.2d at 157

(citing    United States v. Masters, 622 F.2d 83, 88 (4th Cir. 1980);

Garraghty v. Jordan, 830 F.2d 1295, 1298 (4th Cir. 1987)).

     The district court issued an oral order in which it granted

the Simms’ motion to exclude evidence of their financial condition.

The court found that the probative value of the evidence MBIC

sought    to   introduce       was    substantially   outweighed   by    several

factors. He first noted the danger for unfair prejudice. Included

in the materials MBIC sought to introduce were the Simms tax

returns.       The district court ruled that admission of the tax

returns could result in extreme prejudice if the jury concluded

that the Simms failed to report all of their income.                   The court

also stated that the       Simms’ financial condition was immaterial to

whether they had a motive to inflate their claim.

     Additionally, the trial court observed that introduction of

the financial evidence could create serious confusion among the

jurors about the relevant issues.

     Finally, the court explained its concern that the introduction

of such a voluminous amount of evidence would result in undue delay

of the trial.

     MBIC      claims   that    the    district   court   improperly    excluded

evidence    of   the    Simms’       financial   condition,   which,    in   turn,

unfairly limited its defense. According to MBIC, because there was

no direct evidence that the Simms made false statements, MBIC


                                           9
intended to prove its affirmative defense with circumstantial

evidence.     The insurance company sought to use the financial

statements at trial to elicit from the jury an inference that the

Simms were financially incapable of acquiring all of the property

they claimed to have lost in the fire and, thus, inflated their

inventory either by including items they did not own, increasing

the quantity of items beyond the number they actually owned, or

declaring the items to be of a higher quality than they actually

were.

     In its brief, MBIC cites to various state law cases for the

proposition that evidence of an insured’s income level is relevant

in determining whether the insured made a false claim. Phillips v.

Allstate Indemnity Co., 156 Md. App 729, 745, 848 A.2d 681, 690

(2004);     Pilgrim v. State Farm Fire & Cas. Ins. Co., 950 P.2d 479,

484 (Wash. App. 1997);    Rymsha v. Trust Ins. Co., 746 N.E.2d 561,

564 (Mass. App. Ct. 2001); DiFrancisco v. Chubb Ins. Co., 662 A.2d

1027, 1033 (N.J. App. Div. 1995).        These cases, however, are

distinguishable from the case at hand.    Each of the cases cited by

MBIC deals with the insured’s refusal to produce his or her

financial records to the insurer as a part of the investigation of

a claim, and whether such refusal was a breach of the contract for

insurance, not whether such evidence was admissible for use at

trial.    Phillips, 156 Md. App. at 745, 848 A.2d at 690;   Pilgrim,

950 P.2d at 484;    Rymsha, 746 N.E.2d at 564; DiFrancisco, 662 A.2d


                                  10
at 1033.      Nevertheless, even if the records were relevant to the

case at hand,3 Rule 403 provides for the exclusion of otherwise

relevant evidence on the grounds of prejudice, confusion, or waste

of time.     Fed. R. Evid. 403.   The district court’s exclusion of the

Simms’ financial records was well within the bounds of Rule 403,

and, thus, we find no error.



                           B.   Burden of Proof

        We review de novo MBIC’s claim that the district court failed

to provide the correct burden of proof in his instructions to the

jury.       See Al-Abood v. El-Shamari, 217 F.3d 225, 235 (4th Cir.

2000).      At trial, the district court instructed the jury that MBIC

had to prove its affirmative defense by clear and convincing

evidence. MBIC asserts that its affirmative defense was based upon

the provisions of the insurance contract and not upon common law

fraud, and, thus, preponderance of the evidence is the appropriate

burden.       It further asserts that, by charging the clear and

convincing burden of proof, the court ignored the two circumstances

other than fraud under which the policy can be voided–the insured’s

1) intentional concealment or misrepresentation of any material

fact or circumstance, or 2) assertion of false statements.          We

address each contention in turn.



        3
     Judge Harvey describes the documents as “slightly relevant.”
(J.A. 637.)

                                    11
                                1.   Fraud

     Maryland courts require that litigants establish a claim or

defense of fraud by clear and convincing evidence.              Loyola Fed.

Sav. & Loan Ass’n v. Trenchcraft, Inc., 17 Md. App. 646, 648, 303

A.2d 432, 434 (1973).      However, MBIC argues, its defense of fraud

is not properly equated with common law fraud because the insurance

policy does not require MBIC to establish an intent to deceive or

that it relied on the Simms’ false statements to its detriment.

See Martens Chevrolet, Inc. v. Seney, 292 Md. 328, 333, 439 A.2d

534, 537 (1982)(listing as three of the elements of common law

fraud that 1) the misrepresentation was made for the purpose of

defrauding some other person, 2) the plaintiff relied on the

misrepresentation and had the right to rely on it, and 3) the

plaintiff      suffered   compensable     injury    resulting    from    the

misrepresentation).

     MBIC is correct in its assertion that the insurance policy

does not include the elements of common law fraud.              Indeed, the

policy is silent as to the steps MBIC must take to establish that

the insurer has engaged in fraudulent conduct.            Thus, we turn to

common   law   to   determine   those   steps.     In   Maryland,   a   party

establishes fraud if it can show

     (1) that the representation made is false; (2) that its
     falsity was either known to the speaker, or the
     misrepresentation was made with such a reckless
     indifference to truth as to be equivalent to actual
     knowledge; (3) that it was made for the purpose of
     defrauding the person claiming to be injured thereby; (4)

                                     12
     that   such   person    not   only   relied    upon   the
     misrepresentation, but had a right to rely upon it in the
     full belief of its truth, and that he would not have done
     the thing from which the injury resulted had not such
     misrepresentation been made; and (5) that he actually
     suffered damage directly resulting from such fraudulent
     misrepresentation.

Martens Chevrolet, 292 Md. at 333, 439 A.2d at 537.         However, when

establishing   fraud   in   the   context   of   an   insurance   contract,

application of the last two elements would lead to an absurd

result.   The United States District Court for the District of

Maryland, quoting the Fifth Circuit, provided an explanation of

this absurdity:

     “[i]f, by its own investigation, inspired perhaps by
     suspicions of the assured’s efforts to misrepresent, the
     insurer satisfied itself that a fraud had been attempted
     and declined to pay, such a rule would mean that the
     assured’s claim would then stand as though no dishonest
     acts whatsoever had been practiced. The mendacious
     assured, surveying the possibilities and contemplating
     prospective tactics and strategy in the handling of his
     claim, would sense immediately that vis-a vis himself and
     the underwriter, there would be no risk at all in his
     deceit. If it worked, he would have his money and, at
     worst, could be compelled to disgorge only by affirmative
     suit by the insurer if the fraud were discovered in time
     to be legally or practicably effective. If it didn't
     work-- if, before consummation, fraud was detected-- he
     would suffer no disadvantage whatsoever. It would be an
     everything-to-win, nothing-to-lose proposition.”

Tru-Fit Clothes, Inc. v. Underwriters at Lloyd’s London, 151 F.

Supp. 136, 140 (D. Md. 1957)(quoting Cachou v. American Central

Ins. Co., 241 F.2d 889, 892-893 (5th Cir. 1957)).         To prevent such

a result, the requirement to prove detrimental reliance is dropped




                                    13
for insurers who seek to establish that an insured has submitted a

fraudulent claim.     Id.

     Although   proof   of   the     insured’s   detrimental   reliance    is

unnecessary, proof of the insurer’s intent to deceive remains a

vital element in all claims of fraud.            First Union Nat. Bank v.

Steele Software Systems, Corp.,            154 Md. App. 97, 147, 838 A.2d

404, 433 (Md. 2003).

     MBIC has not provided, nor have we found, any support for its

assertion that the absence of the detrimental reliance element in

insurance fraud cases, without more, is an indication that the

burden of proof should be lessened from clear and convincing

evidence to preponderance of the evidence. Precisely because the

insurance policy lacks a definition of “fraudulent conduct,” the

trial court properly looked to Maryland common law fraud to provide

instructions to the jury on MBIC’s affirmative defense of fraud.

     We    conclude   that   clear    and    convincing   evidence   is   the

appropriate burden of proof for an affirmative defense of fraud,

whether it is asserted as a common law defense or a contractual

defense.

                        2.   Other Circumstances

     We next turn to MBIC’s contention that the trial court ignored

the other two circumstances listed in the policy when it instructed

the jury only on the clear and convincing burden of proof.




                                      14
      MBIC makes much of the fact that the insurance contract lists

separately      from         “fraud”     “intentional     concealment     or

misrepresentation” and “false statements.”           Again, the policy does

not define these terms, and a close look at Maryland case law

reveals that the differences, if any, are inconsequential.

      In Maryland, the terms “fraud” (otherwise known as “deceit”)

and       “intentional        misrepresentation”4       are   often     used

interchangeably,       and     the     elements   necessary   to   establish

intentional misrepresentation are identical to those required for

fraud.     See B.N.A. v. K.K., 312 Md. 135, 149, 538 A.2d 1175, 1182

(1988) (stating “the elements of the cause of action in what is

variously known as fraud, deceit, or intentional misrepresentation

are” and listing the required elements); see also McGraw v. Loyola

Ford, Inc., 124 Md. App. 560, 584-85, 723 A.2d 502, 514-15 (1999)

(using “intentional misrepresentation” and “fraud” interchangeably

and listing the required elements); DeLeon Enterprises, Inc. v.

Zaino, 92 Md. App. 399, 416-17, 608 A.2d 828, 837-38 (1992) (using

“intentional misrepresentation” and “deceit” interchangeably and

listing the required elements).

      The requirements for intentional concealment are essentially

the same as well:




      4
     Because “concealment” and “misrepresentation” are listed
together in the policy provision, we can assume that “intentional”
modifies both.

                                         15
     (1) the defendant owed a duty to the plaintiff to
     disclose a material fact; (2) the defendant failed to
     disclose that fact; (3) the defendant intended to defraud
     or deceive the plaintiff; (4) the plaintiff took action
     in justifiable reliance on the concealment; and (5) the
     plaintiff suffered damages as a result of the defendant’s
     concealment.

Green v. H & R Block, Inc., 355 Md. 488, 525, 735 A.2d 1039, 1059

(1999).    The Maryland Court of Special Appeals has characterized

intentional concealment as “actionable fraud.”     Finch v. Hughes

Aircraft Co., 57 Md. App. 190, 231, 469 A.2d 867, 888 (1984)

(citing Fegeas v. Sherrill, 218 Md. 472, 147 A.2d 223 (1958)).

     The phrase “false statements” does not inherently indicate an

intention to deceive.    See Medical Mut. Liability Ins. Soc. of

Maryland   v. B. Dixon Evander & Associates, Inc., 92 Md. App. 551,

570, 609 A.2d 353, 362 (1992) (“A false statement ‘is one that is

not substantially correct.’”) (quoting Batson v. Shiflett, 325 Md.

684, 726, 602 A.2d 1191, 1212 (1992)).        However, to void an

insurance policy based upon an insured’s “false swearing”5 the

statement must have been knowingly and intentionally stated with

knowledge of its untruthfulness or with reckless disregard for its

truthfulness and with the purpose to defraud.   United States Fire

Ins. Co. v. Merrick, 171 Md. 476,       , 190 A. 335, 342 (1937).

Because the law does not favor forfeitures, Hartford Fire Ins. Co.



     5
      “False swearing” is somewhat different from “false statement”
in that it implies a false statement made under oath. Regardless,
whether the statement was made under oath is inapposite; both
phrases specify an untrue utterance.

                                16
v. Himelfarb, 355 Md. 671, 681, 736 A.2d 295, 301 (1999), such a

definition is necessary so that an insurer cannot avoid a claim

simply   because    an   insured   unintentionally    provided   incorrect

information.       Moreover, it mimics the definition of fraud and

intentional misrepresentation.

     The important similarity among these various terms--“fraud,”

“intentional concealment,” “intentional misrepresentation,” and

“false statements,”--is the scienter requirement, and scienter must

be proven by clear and convincing evidence.          First Union, 154 Md.

App. at 147, 838 A.2d at 433 (Md. 2003) (citing VF Corp. v. Wrexham

Aviation Corp., 850, Md. 693, 704, 715 A.2d 188, 193 (1998)).

     MBIC cites to case law in numerous states that require only a

preponderance of the evidence burden for an insurer’s contractual

claim of misrepresentation, false statement, or concealment.         See,

e.g., Rego v. Connecticut Ins. Placement Facility, 593 A.2d 491,

494 (Conn. 1991) (applying preponderance of the evidence standard);

Horrell V. Utah Farm Bureau Ins. Co., 909 P.2d 1279, 1281 & n.4

(Utah App. 1996) (same); Williams v. United Fire and Casualty Co.,

594 So.2d 455, 458 (La. App. 1991) (same).

     Nonetheless, as long as Maryland remains in the minority of

states that require clear and convincing evidence in a common law

fraud claim, or until the courts of Maryland decide otherwise, we

decline to adopt a preponderance of the evidence standard for an

insurer’s contractual defenses of fraud, intentional concealment or


                                     17
misrepresentation, or false statements.    Accordingly, we hold that

the district court did not err in charging the jury to apply the

clear and convincing burden to MBIC’s affirmative defense.



                         III. CONCLUSION

     Pursuant to the foregoing discussion and analysis, we affirm

the district court’s exclusion of evidence and charge to the jury.



                                                           AFFIRMED




                               18
