James H. Stallings Lorraine S. Stallings v. State Farm General Insurance Company, 976 F.2d 727, 4th Cir. (1992)

976 F.
2d 727
NOTICE: Fourth Circuit I.O.P. 36.6 states that citation of

unpublished dispositions is disfavored except for establishing
res judicata, estoppel, or the law of the case and requires
service of copies of cited unpublished dispositions of the Fourth
Circuit.
James H. STALLINGS; Lorraine S. Stallings, PlaintiffsAppellants,
v.
STATE FARM GENERAL INSURANCE COMPANY,
Defendant-Appellee.
No. 91-1227.
United States Court of Appeals,

Fourth Circuit.
Argued: June 5, 1992
Decided: Sept. 16, 1992
Appeal from the United States District Court for the Eastern District of
Virginia, at Alexandria. James C. Cacheris, Chief District Judge. (CA-91217-A)
Argued: John A. Keats, Fairfax, Virginia, for Appellants.
August W. Steinhilber, III, Brault, Palmer, Grove, Zimmerman, White &
Mims, Fairfax, Virginia, for Appellee.
E.D. Va.
AFFIRMED.
Before PHILLIPS, Circuit Judge, BUTZNER, Senior Circuit Judge, and
STAMP, United States District Judge for the Northern District of West
Virginia, sitting by designation.
PER CURIAM:
OPINION
1
James and Lorraine Stallings ("Stallings") purchased a fire insurance policy for
a residence in Falls Church, Virginia, from State Farm General Insurance
Company ("State Farm") for the one year period from May 25, 1990, to May
25, 1991. On July 31, 1990, a fire occurred at the dwelling, causing extensive
damage. After State Farm denied coverage, the Stallings filed suit in the United
States District Court for the Eastern District of Virginia alleging breach of
contract. State Farm pled material misrepresentation as an affirmative defense.
At the close of a three day trial, the district court prepared a special verdict
form for use by the jury. The first question of the special verdict form asked
whether the Stallings "falsely answer[ed]" certain questions on the application
for insurance. The Stallings interposed their objection to this question, arguing
the correct question was whether they made a "material misrepresentation" on
the application for insurance. The district court overruled the Stallings'
objection. The jury answered the first special verdict question in the
affirmative, and the district court entered judgment in favor of State Farm,
finding the insurance policy void. Following the denial of their motion for a
new trial, the Stallings timely noted this appeal on the issue of "Whether the
[District] Court erred in its use of special interrogatories which were misleading
and contained no general verdict." Finding no error, we affirm.
I.
3
The use of special interrogatories rests with the sound discretion of the trial
court and review upon appeal is limited to determining whether the district
court abused its discretion. Norfolk Southern Ry. Co. v. Davis Frozen Foods,
195 F.2d 662, 666 (4th Cir. 1952). Whether the special interrogatories were
legally deficient is solely a question of law that this court must review de novo.
See Salve Regina College v. Russell, 111 S. Ct. 1217, 1221, 113 L. Ed. 2d 190,
198 (1991).
II.
4
In early May 1990, James Stallings contacted Arthur Smith ("Smith"), a State
Farm insurance agent, about obtaining fire insurance on a property the Stallings
were in the process of purchasing in Falls Church, Virginia. The Stallings were
required to obtain insurance as part of the settlement proceeding, which was
scheduled to occur June 11, 1990. Anna Huko ("Huko"), a licensed State Farm
agent employed by Smith, contacted James Stallings by telephone to ask him
several questions contained within the insurance application. Huko asked James
Stallings whether the property he and his wife were purchasing would be used
as their personal residence, to which James Stallings replied that it would. In the
section of the application labelled "Dwelling," a question asks "Does owner
occupy building?" Huko checked the box marked "Yes" in response to the
question. At the time the application was completed, which was prior to the
date of settlement, the dwelling was not occupied by the Stallings, as Huko
knew.
5
Huko also asked James Stallings whether the dwelling was being remodeled.
Huko marked the "No" box in response to the question "Is dwelling being
remodeled?" The house was not being remodeled at the time the question was
answered, but remodeling was to occur in the future. The Stallings intended to
spend between $15,000.00 and $20,000.00 remodeling the home prior to
occupying it.
On July 31, 1990, the Stallings' dwelling was damaged by fire. The Stallings
submitted proof of loss to State Farm on September 19, 1990, placing the cost
of repair or replacement to the structure at $64,564.16. By letter dated February
22, 1991, State Farm rescinded the policy and denied all coverage for the fire
losses, basing its denial upon the Stallings' alleged concealment and
misrepresentation of material facts in the insurance application. State Farm
stated in the letter that if it had been aware that the residence was being
remodeled and that the Stallings did not reside in the residence at the time of
the application, it would not have issued the policy.
The Stallings filed suit and the case proceeded to trial. At the close of trial,
after the court concluded that the Stallings' intention not to immediately occupy
the residence and to effect substantial renovations prior to occupancy would
have been material to State Farm in determining whether to issue the policy, the
district court posed special interrogatories to the jury. The first special
interrogatory asked:
"Did the insured plaintiffs ... falsely answer the application for insurance?" The
interrogatory then provided a line for "Owner occupied dwelling" "Yes #
6D6D6D6D6D6D6D6D7F# "No # 6D6D6D6D6D6D6D6D7F# and a line for
"Remodeling" "Yes # 6D6D6D6D6D6D6D6D7F# "No #
6D6D6D6D6D6D6D6D7F# .
The Stallings timely objected, arguing the correct question should have been:
10
"Did the insured plaintiffs ... make intentional misrepresentations with regard to
10
11
the following questions on the application for insurance?" With a line for
"Owner occupied dwelling" "Yes # 6D6D6D6D6D6D6D6D7F# "No #
6D6D6D6D6D6D6D6D7F# and a line for "Remodeling" "Yes #
6D6D6D6D6D6D6D6D7F# "No # 6D6D6D6D6D6D6D6D7F# .
The district court overruled the Stallings' objection, and submitted its special
verdict form to the jury. Following the jury's determination that the Stallings
falsely answered the owner occupied dwelling and remodeling questions on the
insurance application, the district court entered judgment in State Farm's favor.
The district court denied the Stallings' motion for a new trial, and this appeal
followed.
III.
12
Federal Rule of Civil Procedure 49(a) permits the district court to require the
jury to return only a special verdict.
13 court may require a jury to return only a special verdict in the form of a special
The
written finding upon each issue of fact.... The court shall give to the jury such
explanation and instruction concerning the matter thus submitted as may be
necessary to enable the jury to make its findings upon each issue....
14
Fed.R.Civ.P. 49(a).
15
The formulation of issues, the use of special verdicts, and the form of the
submitted interrogatories rest with the sound discretion of the district court.
Tights, Inc. v. Acme-McCrary Crop., 541 F.2d 1047, 1060 (4th Cir.), cert.
denied, 429 U.S. 980 (1976). The trial court must, however, provide a sufficient
explanation of the special interrogatories to enable the jury to make its findings
on each issue. Scott v. Isbrandtsen Co., 327 F.2d 113, 119 (4th Cir. 1964). We
conclude that the use of special interrogatories in this case was not an abuse of
discretion and that the district court's explanation of the interrogatories satisfied
the requirements established in Scott.
16
The district court instructed the jury on the burden of proof and the elements
that each party was required to prove in order to prevail in the case. The court
informed the jury that "In considering whether the statement [on the
application for the policy] was false, you may consider the nature of the
question asked in the application and what that question would have meant to a
reasonable person applying for insurance." The court also noted that "Forfeiture
of insurance claims are not favored, and to warrant denying the plaintiffs' right
of recovery on the grounds of making false statements concerning material
facts, you must find that the defendant, State Farm, has established the material
misrepresentation by clear, unequivocal and convincing evidence." Finally, the
court read the special interrogatories to the jury, and indicated that, as to the
first question, "Answer of yes is in favor of the defendant. Answer of no is in
favor of the plaintiffs."
17
As this court recognized in Tights, the use of special forms of verdict rests with
the sound discretion of the district court. 541 F.2d at 1060. The district court's
use of a special verdict is explicitly permitted by the Federal Rules of Civil
Procedure. The court's instructions and review of the special verdict form were
sufficient "to enable the jury to make its findings upon each issue."
Fed.R.Civ.P. 49(a); Scott, 327 F.2d at 119. The special verdict form itself was
clear and unambiguous. Applying the applicable standard of review, this court
must conclude that the district court did not abuse its discretion by electing to
use a special verdict in this case.
IV.
18
The Stallings next argue that the interrogatories posed by the district court
incorrectly stated the applicable Virginia law. We do not agree.
19
Under Virginia law, in order for an insurer to be able to void an insurance

policy, the insurer must prove that the information supplied by the insured on
an application was untrue when made and that the untrue information was
material to the risk. Va. Code Ann. 38.2309 (1992) ("No statement in an
application ... shall bar a recovery upon a policy of insurance unless it is clearly
proved that such answer or statement was material to the risk when assumed
and was untrue"); Hawkeye-Security Ins. Co. v. Governmental Employees Ins.
Co., 207 Va. 944, 947, 154 S.E.2d 173, 176 (1967) ("[A] misrepresentation of a
fact material to the risk when assumed renders an insurance contract void.");
Green v. Southwestern Voluntary Ass'n, 179 Va. 779, 787, 20 S.E.2d 694, 697
(1942) ("[N]o such statement ... shall be allowed to bar a recovery upon the
policy ... unless it be 'clearly proved' that it was both false and material to the
risk." (citations omitted)). Whether a statement is untrue is a question for the
jury, but materiality is a question for the court. Hawkeye-Security, 207 Va. at
947, 154 S.E.2d at 175.
20
The Virginia Supreme Court has used "intentional misrepresentation", "false

answer", and "untrue statement or answer" interchangeably in determining
whether an insurer may void a policy under Va. Code Ann. 38.2-309. See
Hawkeye-Security, 207 Va. at 947, 154 S.E.2d at 176; Chitwood v. Prudential
Ins. Co., 206 Va. 314, 316-18, 143 S.E.2d 915, 917-19 (1965); Green, 179 Va.
at 787, 20 S.E.2d at 697. Indeed, Black's Law Dictionary defines "False" as

"Not true," continuing: "A statement (including a statement in a claim or
document), is 'false' if it was untrue by the person making it, or causing it to be
made." Black's Law Dictionary 600 (6th ed. 1990). "False" is a synonym of
"untrue" and the district court's use of "false" in the special interrogatory
correctly stated existing Virginia law.
21
In this case, the district court made a preliminary determination that the
answers to the "owner occupied dwelling" and "remodeling" questions would
have been material to State Farm in deciding whether to write the policy. The
court then submitted its special interrogatories to the jury, asking whether the
Stallings "falsely answer[ed]" the questions on the insurance application. The
jury answered the questions in the affirmative, and the district court entered
judgment in favor of State Farm. The court properly decided the question of
materiality as a matter of law. The special interrogatory questions posed by the
district court were not misleading and accurately reflect Virginia law. The
district court did not err.
V.
22
For the reasons stated herein, the judgment of the district court is affirmed.
AFFIRMED

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976 F.

NOTICE: Fourth Circuit I.O.P. 36.6 states that citation of

United States Court of Appeals,

Under Virginia law, in order for an insurer to be able to void an insurance

The Virginia Supreme Court has used "intentional misrepresentation", "false

at 787, 20 S.E.2d at 697. Indeed, Black's Law Dictionary defines "False" as

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