                     United States Court of Appeals
                            FOR THE EIGHTH CIRCUIT
                                     ___________

                                     No. 99-4208
                                     ___________

George and Retta Willis,                  *
                                          *
             Appellees,                   *
                                          *
      v.                                  *    Appeal from the United States
                                          *    District Court for the Western
State Farm Fire                           *    District of Arkansas.
and Casualty Company,                     *
                                          *
             Appellant.                   *
                                     ___________

                              Submitted: June 14, 2000

                                   Filed: August 14, 2000
                                    ___________

Before BOWMAN, FLOYD R. GIBSON,1 and MORRIS SHEPPARD ARNOLD,
      Circuit Judges.
                         ___________

MORRIS SHEPPARD ARNOLD, Circuit Judge.

       State Farm sold a fire insurance policy to George and Retta Willis that covered
their home and its contents, and when the Willises' home burned down they filed a
claim of loss. State Farm refused to pay the Willises' claim, asserting that the fire was
the result of arson to which one or both of the Willises were a party, and also that one


      1
       Complications from an automobile accident have prevented Judge Gibson from
reviewing this opinion prior to its being filed.
or both of the Willises knowingly misrepresented material facts on their claim of loss
and during State Farm's investigation of the fire.

       The Willises sued State Farm and the case went to trial, with State Farm
continuing to assert the separate defenses of arson and misrepresentation. The jury was
unable to decide whether State Farm's defense of arson was meritorious, but found that
the Willises had knowingly misrepresented material facts with the intent of deceiving
or perpetrating a fraud on State Farm. The trial court entered judgment in favor of State
Farm on this ground.

       The Willises then moved for judgment as a matter of law, see
Fed. R. Civ. P. 50(a), and, in the alternative, for a new trial, see Fed. R. Civ. P. 50(b),
Fed. R. Civ. P. 59(a), on the ground that State Farm had failed to present sufficient
evidence that the Willises had made any material misrepresentations. The trial court
agreed, finding that, in light of the jury's inability to conclude that the Willises or their
agents had committed arson, the jury could not reasonably have concluded that any of
the statements that State Farm cited were both false and material. The trial court
granted the Willises' motion for judgment as a matter of law, but, rather than enter
judgment for the Willises, ordered a new trial to give State Farm the opportunity to
correct the defects in its proof, see Fed. R. Civ. P. 50(c)(1), Fed. R. Civ. P. 59(a). The
court also conditionally granted the Willises' motion for a new trial for the same
reasons, see Fed. R. Civ. P. 50(c)(1), Fed. R. Civ. P. 59(a). State Farm appeals and we
reverse.

                                           I.
       We review the trial court's grant of judgment as a matter of law de novo. See
Butler v. French, 83 F.3d 942, 943 (8th Cir. 1996). In ruling upon a motion for
judgment as a matter of law, we view the evidence in the light most favorable to the
jury's verdict, meaning that all factual conflicts are resolved, and all reasonable
inferences are drawn, in a manner that supports the verdict. See Askew v. Millerd, 191

                                            -2-
F.3d 953, 957 (8th Cir. 1999). A post-trial motion such as the one in this case should
be denied if the evidence so viewed would allow reasonable jurors to reach the same
conclusion that the jury in fact came to.

        The Willises' insurance policy provided that their coverage was void if they
"intentionally concealed or misrepresented any material fact or circumstance relating
to [the] insurance, whether before or after a loss." State Farm presented evidence of
a number of misstatements that the Willises made during the course of its investigation
of the fire. First, there was testimony that Mr. Willis told its investigator that he did not
think that Ms. Willis played any role in setting the fire, but Karen Cravens, a friend of
Mr. Willis, testified that Mr. Willis had told her that he thought that Ms. Willis had
started the fire because he had seen Ms. Willis moving personal items out of the house
shortly before the fire started. State Farm contends that Mr. Willis lied to its
investigator about a material fact when he denied any belief that Ms. Willis had started
the fire, and also that he had concealed an obviously important fact, namely, that he had
seen Ms. Willis moving personal items out of the home prior to the fire.

       The trial court found that Ms. Cravens's testimony was inadequate to prove
material misstatements by Mr. Willis because it was "too vague." When asked whether
Mr. Willis told her that his wife burned the house, however, Ms. Cravens responded
with an unambiguous "yes." Ms. Cravens also explicitly testified that Mr. Willis told
her that he thought that his wife burned the house because he saw Ms. Willis moving
a few personal items out of the house. We think that this testimony is sufficiently
specific to allow the jury to find both that Mr. Willis was lying when he told State Farm
that he did not suspect that his wife was involved in the fire, and that he was concealing
the fact that he had seen her moving personal items from the home prior to the fire.

       The trial court emphasized that Ms. Cravens never specifically identified any
items that Ms. Willis had allegedly removed prior to the fire that were later claimed by
the Willises to have been destroyed in the fire, and thus found that "there was no means

                                            -3-
to connect George Willis's statement with the plaintiffs' ... sworn proof of loss." We
believe that this conclusion is based on a misconception of the law. The jury was
instructed correctly, and without objection, that a fact or circumstance is material if "it
pertains to facts that are relevant to the company's rights to enable the company to
decide upon its obligations and to protect itself against false claims." A
misrepresentation may thus be material even if it does "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," Wagnon v. State Farm Fire and Casualty Co., 146
F.3d 764, 768 (10th Cir. 1998).

       We think, therefore, that the alleged admissions that Mr. Willis made to
Ms. Cravens are material ones even though they do not explicitly relate to the items
included on the claim of loss that the Willises submitted. A jury could reasonably find
that Mr. Willis's suspicion that his wife started the fire, and his observation of her
removing property from the home shortly before the fire, were relevant to the insurance
company's investigation of the fire, and to its ability to protect itself against false
claims. If such information had come to light at an earlier point in the investigation, the
direction of the investigation and the resources allocated by State Farm to conduct it
might very well have been different and more effective.

       The Willises also contend that Mr. Willis's alleged admissions could not be
material on the ground that they related to a possible arson by his wife because the jury
was ultimately unable to conclude that either of the Willises committed arson. All of
the courts that have considered this issue, however, have held (we think correctly) that
the materiality of a statement is to be evaluated as of the time that the statement was
made, not in light of the facts as they are later revealed to be. See, e.g., id. and Fine
v. Bellefonte Underwriters Insurance Co., 725 F.2d 179, 183 (2d Cir. 1984), cert.
denied, 469 U.S. 874 (1984).




                                           -4-
      In this case, the suggestion that arson was the cause of the fire, and that
Ms. Willis was the perpetrator, would unquestionably have been material at the time
that Mr. Willis disavowed any suspicion of his wife to the investigator. We agree with
the Mississippi Supreme Court that "[i]t would be unjust to allow a claimant to
misrepresent facts which might lead to a valid defense and then to allow him to escape
the consequences of the falsehood simply because he had succeeded so well that the
company was unable to establish the defense," Edmiston v. Schellenger, 343 So. 2d
465, 467 (Miss. 1977), cited with approval in Duke v. Hartford Fire Insurance Co.,
617 F.2d 509, 510 (8th Cir. 1980) (per curiam) (applying Arkansas law).

       The Willises also argue that State Farm made no showing that it had actually
relied on Mr. Willis's misstatements, or that it would have done anything different had
Mr. Willis told the truth. The jury was not instructed, however, that a showing of
reliance was necessary, and the Willises did not object to the jury instruction. We
think, moreover, that the instruction was correct: Although reliance must be shown in
a claim for fraud in the inducement, see General Casualty Insurance Cos. v. Holst
Radiator Co., 88 F.3d 670, 671 (8th Cir. 1996) (applying Missouri law), courts have
generally held that reliance is not an element of an insurer's defense of fraud or false
swearing. See, e.g., Michigan Millers Mutual Insurance Corp. v. Benfield, 140 F.3d
915, 923 (11th Cir. 1988) (applying Florida law); Patterson v. State Automobile
Mutual Insurance Co., 105 F.3d 1251, 1253 (8th Cir. 1997) (applying Missouri law);
and Pink Cadillac Bar and Grill v. United States Fidelity and Guaranty Co., 925 P.2d
452, 461 (Kan. Ct. App. 1996) (applying Kansas law). An exception to this general
rule exists, of course, if a statutory provision specifically makes a party's reliance an
element of the defense of fraud or false swearing, see, e.g., McCullough v. State Farm
Fire and Casualty Co., 80 F.3d 269, 272 (8th Cir. 1996) (applying a Nebraska statute),
but no such statutory provision currently exists in Arkansas.

       We do not think that the recent Arkansas Supreme Court case that the Willises
point to, Farm Bureau Mutual Insurance Co. v. Foote, 14 S.W.3d 512 (Ark. 2000),

                                          -5-
is to the contrary. Although the Arkansas court interpreted the language of the
insurance contract in Foote, 14 S.W.3d at 522-23, to require a misstatement to be
"material" before an insured's claim could be denied, the court did not consider the
matter of reliance at all. Nor do we think that Ark. Code Ann. § 23-79-107, mentioned
in passing in Foote, 14 S.W.3d at 523, has any application to our case. That statute
describes only the conditions under which an insurer may avoid liability due to
misstatements made in the application for insurance. As is typically the case with the
defense of fraud in the inducement, § 23-79-107(c) suggests that some showing of
reliance is necessary. As we have said, however, our case does not involve fraud in the
inducement, but rather the insurer's defense of fraud or false swearing.

       The Willises argue finally that State Farm failed to introduce any evidence that
would allow a jury to find that Mr. Willis's misstatements were made with the intent of
deceiving and perpetrating a fraud on State Farm. It is well known, however, that an
actor's intent "is rarely capable of proof by direct evidence and must usually be inferred
from the circumstances" in which the relevant act occurs, Gregory v. State, 15 S.W.3d
690, 693 (Ark. 2000). We think, therefore, that although State Farm did not introduce
direct evidence of Mr. Willis's intentions, the jury could reasonably infer that Mr. Willis
intended the ordinary and probable consequences of his actions. See Bennett v. State,
36 S.W. 947, 948 (Ark. 1896). In this case, the jury could reasonably have found that
Mr. Willis was lying when he told the State Farm investigator that he did not suspect
his wife's involvement with the fire, and the jury could reasonably have inferred as well
that the reason for the lie was to perpetrate a fraud.

                                             II.
       State Farm also questioned Ms. Willis's contention that $10,000 in cash, which
she said was stored in a cabinet in the same room in which she was sleeping, was
destroyed during the fire. State Farm argues that Ms. Willis's assertion that she did not
have time to retrieve the cash is particularly hard to believe in light of the evidence that
she had found time to retrieve her fire insurance policy.

                                            -6-
       The trial court did not explicitly address the question of whether Ms. Willis lied
when she stated that $10,000 in cash had burned in the fire. The Willises point out,
however, that under their insurance policy no more than $200 in lost or burned cash
was recoverable. The Willises note, moreover, that they were underinsured and that
their declared losses substantially exceeded the policy limit even if none of the $10,000
was included in the claim of loss. The Willises argue, therefore, that any statement
regarding the $10,000 in cash, even if untrue, could not be considered material.

       We think, however, that a reasonable jury could have believed that Ms. Willis's
assertion that she lost $10,000 in the fire was a material misstatement of her financial
condition, as well as an attempt to quiet any suspicion that she set the fire, because no
one would deliberately burn $10,000 in uninsured cash. A jury could thus have found
that her statement was an attempt to deceive the insurer with respect to material facts
even if the insurer was unable to prove arson or, indeed, never even asserted it as a
defense. See Edmiston, 343 So. 2d at 467.

       The Willises cite Security Insurance Co. v. Smith, 35 S.W.2d 581 (Ark. 1931),
and two Missouri cases that were designated as not to be officially published, see
Miller v. Great American Insurance Co., 61 S.W.2d 205 (Mo. Ct. App. 1933), and
Wittels Loan and Mercantile Co. v. Liberty Fire Insurance Co., 273 S.W. 192
(Mo. Ct. App. 1925), for the proposition that an exaggerated claim is not material
unless it leads to an increase in the insurer's liability. We think, however, that these
cases are not apposite. A jury could reasonably have found that Ms. Willis's statement
about the cash was material, not because the falsehood went to the amount of the claim
but because it could have hindered State Farm's investigation of the fire.

       We note, moreover, that the cases cited by the Willises are of limited persuasive
value. The analysis in Smith, 35 S.W.2d at 583, depended on a liquidated damages
statute that is no longer in effect, and more recent decisions from states other than
Arkansas have held that misstatements of value can be material even if the uncontested

                                          -7-
losses exceed the policy limit. See, e.g., Webb v. American Family Mutual Insurance
Co., 493 N.W.2d 808, 811 (Iowa 1992), and Mutual of Enumclaw Insurance Co. v.
Cox, 757 P.2d 499, 502 (Wash. 1988) (en banc) (remarking that "[d]ishonesty by
insureds cannot be ignored").

       At oral argument the Willises also argued that State Farm failed to produce any
evidence refuting Ms. Willis's claim that $10,000 was in the cabinet. We note,
however, that a jury is free to disbelieve any witness, even if the testimony is
uncontradicted or unimpeached. See Powers v. Bayliner Marine Corp., 83 F.3d 789,
797-98 (6th Cir. 1996), cert. denied, 519 U.S. 992 (1996). Although we agree that
State Farm bears the burden of proving its defense, the jury is permitted to draw
reasonable inferences from the evidence, see Richard Short Oil Co., Inc. v. Texaco,
Inc., 799 F.2d 415, 419 (8th Cir. 1986), and in this case we think that the jury could
reasonably have found that Ms. Willis was lying about leaving $10,000 in a cabinet a
few feet away from where she was sleeping, particularly if the jury believed the
evidence that she had found time to retrieve her fire insurance policy before leaving the
home.

                                            III.
       The trial court based its conditional grant of the Willises' motion for a new trial
on the same analysis that it used to assess their motion for judgment as a matter of law.
For the reasons already indicated, we believe that the court construed the scope of State
Farm's defense of fraud and false swearing too narrowly, and that this error of law
requires us to vacate the court's grant of a new trial. See Gregg v. Allstate Insurance
Co., 126 F.3d 1080, 1082 (8th Cir. 1997).

       We therefore vacate the trial court's order awarding judgment as a matter of law
and a new trial to the Willises, and we remand the case to the trial court with
instructions to enter judgment in favor of State Farm.


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A true copy.

      Attest:

         CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.




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