Jeffrey V. Mehalic, Esq.
Hostler & Segal
Charleston, West Virginia
Attorney for Appellee, Sharron Brown
Anita R. Casey, Esq.
Robert P. Martin, Esq.
Meyer, Darraugh, Buckler, Bebenek & Eck
Charleston, West Virginia
Attorneys for the Appellant
JUSTICE NEELY delivered the Opinion of the Court.
An insurance policy obtained fraudulently after the
occurrence of an "insured event" is void ab initio.
Sharron D. Brown brought suit against Community Moving &
Storage, Inc. (Community Moving), Roy W. McNemar, and The Home
Insurance Company (Home Insurance) in the Circuit Court of Harrison
County for the wrongful death of Sidney D. Brown in a car accident.
The circuit court denied Home Insurance's motion for summary
judgment and granted Ms. Brown's motion for summary judgment,
holding that Home Insurance had a duty to defend and indemnify
Community Moving and Mr. McNemar. Home Insurance now appeals the
summary judgment against it and the denial of its own motion for
summary judgment. We reverse and remand with directions to enter
summary judgment for Home Insurance.
Mr. Brown died as a result of an accident that occurred
in Nicholas County on 21 July 1988. One of the other vehicles in
the accident was owned by Community Moving, a furniture moving and
storage company, and was operated by Mr. McNemar. From April 1988
until 21 July 1988, Community Moving had no motor vehicle insurance
coverage. Shortly after the accident occurred, Mr. McNemar called
Mr. Leonard Papa, the President of Community Moving. Mr. Papa then
"tracked down" the State Police and confirmed that Mr. Brown had
died as a result of the accident.
Later that same afternoon, Mr. Papa telephoned Kathy
Brooks, with whom he had previously discussed possible insurance
coverage for Community Moving. Realizing that his company might be
facing a lawsuit, Mr. Papa requested Ms. Brooks to obtain an
insurance policy for Community Moving, and Ms. Brooks arranged
coverage with Home Insurance. Mr. Papa did not mention the
accident in his conversation with Ms. Brooks, and when Home
Insurance requested confirmation from Community Moving, Community
Moving submitted letters stating that there were no claims on the
vehicles for which the company was seeking coverage. On 27 July
1988, when Home Insurance discovered that the accident had
occurred, it informed Community Moving that it would not issue the
The circuit court found that Ms. Brown was an innocent
third-party beneficiary of the insurance policy. Ms. Brown argues
that fraud and misrepresentation by Community Moving should not be
grounds for denying her coverage.See footnote 1 However, plaintiff provides
only one case (from Massachusetts in 1936) that is even remotely on
point. In Royal Indemnity Company v. Granite Trucking Company, 4
N.E.2d 809 (Mass. 1936), the Supreme Judicial Court of
Massachusetts upheld coverage for an innocent third-party
beneficiary despite fraud on the part of the insured. The other
facts of Royal Indemnity, however, are significantly different from
this case. Granite Trucking was covered up until shortly before
the accident and had left a check with its insurance agent to
reinstate its canceled policy or procure a new policy elsewhere.
Granite Trucking did this before the accident.
A more recent case, more directly on point, is Mayflower
Ins. Exchange v. Gilmont, 280 F.2d 13 (9th Cir. 1960). In
Mayflower, the court found that the insurer was not liable to
third-party passengers in an automobile accident when the insured
had given false statements in order to obtain his insurance
policy.See footnote 2
This Court is not unsympathetic to innocent victims or
overly sympathetic to insurance companies, but here we must draw
the line. Home Insurance acted diligently and in good faith. It
denied the policy as soon as it discovered the fraud by Community
Moving and Mr. Papa. This is not a case of a motor carrier's
fraudulently procuring insurance in order to operate on the
highways of West Virginia. (Community Moving had been operating
for several years.) This is simply a case in which Community
Moving bought an insurance policy after the accident for which it
Generally, courts hold that fraud in the inducement is
not grounds for voiding an insurance policy as to innocent third
parties. See, e.g., Allstate Ins. Co. v. Sullam, 76 Misc.2d 87,
349 N.Y.S.2d 550 (1973); Ferguson v. Employers Mut. Cas. Co., 254
S.C. 235, 174 S.E.2d 768 (1970); State Farm Mut. Auto. Ins. Co. v.
Wall, 87 N.J. Super. 543, 210 A.2 109 (1965). See also Annotation,
"Recision or avoidance for fraud or misrepresentation, of
compulsory, financial responsibility, or assigned risk automobile
insurance," 83 A.L.R.2d 1104 (1962). However, none of these cases
addresses the instant situation. The very fraud perpetrated in
this case was the procuring of insurance for an accident that had
already happened. Accordingly, we find that the policy was
obtained fraudulently and, therefore, was void ab initio. See
Mayflower Ins. Exch. v. Gilmont, 280 F.2d 13 (9th Cir. 1960). See
also Strangio v. Consolidated Indemnity & Ins. Co., 66 F.2d 330
(9th Cir. 1933); Massachusetts Bonding & Ins. Co. v. Hoxie, 176 So.
480 (Fla. 1937).
For the foregoing reasons, the decision of the Circuit
Court of Harrison County is reversed and this case remanded with
directions to enter summary judgment for Home Insurance.
Reversed and remanded.
Footnote: 1Ms. Brown's lawyer makes the somewhat disingenuous claim that Home Insurance's rights are not harmed by the circuit court's decision because Home Insurance will still have its claims against Community Moving. However, it is obvious from the record that Community Moving has no money.
Footnote: 2The policy in Mayflower was not obtained under a financial responsibility law as was the policy in this case. However, the effect is no different; Community Moving did not begin to operate on the highways of West Virginia upon the issuance of this policy. It had been operating on our highways for several years.