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MAY 04, 1988





This is a fraud by civil arson case. The jury found for the insurer, and judgment has been entered voiding coverage on the insureds' rental property. The case must be reversed,

 however, because the trial court failed to require that the insurer prove the insureds' arson by clear and convincing evidence, opting instead for the lesser by-a-preponderance-of-the-evidence standard. We remand for a new trial.



 In 1981, Bobby and Dorothy McGory bought from one Steven Hudson a house on Highway 6 in Nettleton, Mississippi. Dorothy McGory took title to the property in her name. The McGorys promised to pay Hudson $45,000.00, a promise secured by a deed of trust on the house. Unbeknownst to the McGorys, at the time of sale, the house was encumbered by a mortgage held by the Bank of Mississippi. The McGorys also bought a barbecue restaurant located right next door to the Nettleton house.

 The McGorys, jointly, purchased fire insurance on this property from Allstate Insurance Company, with coverage from May 12, 1983, through May 12, 1984. The house was insured for $60,000.00; its contents for $10,000.00. The policy listed only the Bank of Mississippi as a mortgagee and indicated that the house would be occupied by one family. In fact, both Hudson and the bank held mortgages, and the McGorys did not live in the house, but rented the downstairs to two single tenants and the upstairs to a family. The McGorys lived in nearby Okolona, Mississippi.

 The McGorys substantially repaired the house. They fixed the plumbing and wiring, leveled the wood floors, replaced the windows, hung chandelier fixtures, installed wall-to-wall carpeting and all new furnishings and painted. On March 21, 1984, the house was substantially damaged by fire. The fire was noticed at approximately 3:00 p.m. Uncontradicted proof established that: On the day of the fire, Dorothy was busy working in the next door restaurant and did not approach the house until the fire broke out; Bobby was in Okolona and was not seen in Nettleton near the burning house, until approximately 3:40 p.m.; and, the McGorys' three children were in school until 2:30 p.m. when they joined their mother at the barbecue restaurant.

 Two Nettleton volunteer firemen and an arson expert testified that the fire was incendiary (deliberate) in nature and had multiple origins. The arson expert was of the opinion, based on the pattern of the fire, that accelerants had been used to start it. One of the firemen and the arson expert stated positively that the fire could not have been

 started by children playing with matches. A fourth witness, a Mississippi fire marshall, indicated that there was one primary origin and two "most likely" other origins and agreed that the fire was consistent with incendiarism.

 At the time of the fire, Bobby owed a Nettleton furniture dealer $42,000.00. In addition, a collection agency had been employed to collect a total of $7618.27 from Bobby. In the few months before the fire, the McGorys had allowed all of their insurance policies, including the one on their primary home in Okolona, to lapse. The McGorys' insurance agent stated that the McGorys had on several occasions inquired about increasing the coverage on the Nettleton house. He stated further that not too long before the fire he had decided to cancel the policy covering the house and that the McGorys knew this. On the day of the fire, Bobby called him to ask whether the Nettleton house was still covered under the policy.

 The McGorys stated that they once inquired about increased coverage in response to a notice sent out by Allstate encouraging them to do so. They also claimed not to have known, prior to the fire, that the policy was being cancelled. In fact, they did not receive written notice of cancellation until April 2, 1984, which was twelve days after the fire.


 Allstate Insurance Company commenced this civil action by filing in the Chancery Court of Lee County, Mississippi, its complaint for declaratory judgment. See Rule 57, Miss.R.Civ.P. Allstate named as Defendants Bobby and Dorothy McGory and as well G. J. Gravlee d/b/a Gravlee Lumber Company, Nettleton Building Supply Corp. and Steve Hudson, each of whom was and is a creditor of the McGorys. The complaint alleged that Allstate had issued a policy of insurance covering certain property located in Nettleton effective May 12, 1983, to May 12, 1984, and sought a declaration, inter alia, that it had no responsibility under the policy by reason the fact that the fire was of incendiary origins attributable to the McGorys.

 The McGorys answered admitting the insurance policy but denying any responsibility for the fire. Moreover, the McGorys filed a counterclaim against Allstate asserting a loss within the coverage of the policy and demanding payment from Allstate.

 In due course, the matter was transferred to the Circuit

 Court of Lee County whereupon trial commenced on November 5, 1985, before the Circuit Court sitting with a civil jury. On November 6, 1985, the jury returned a verdict for Allstate, nine jurors voting for the verdict and three voting against it. See Rule 48 (a), Miss.R.Civ.P.

 The McGorys then timely filed a motion for judgment notwithstanding the verdict or, alternatively, for a new trial. On February 21, 1986, the Circuit Court entered its order overruling both motions. The McGorys now prosecute an appeal to this Court.



 The McGorys first argue that the Circuit Court erred in denying their motion for judgment notwithstanding the verdict. Conceding that the fire was of incendiary origins, the McGorys point, simply put, is that Allstate failed to prove that either of them lit the match.

 Under Mississippi law, willful incendiarism by an insured is a defense to the insurer's liability. Davidson v. State Farm Fire & Cas. Co., 641 F. Supp. 503, 507 (N.D. Miss. 1986); Sullivan v. American Motorist Ins. Co., 605 F.2d 169, 170 (5th Cir. 1979) citing Williams v. Cambridge Mut. Fire Ins. Co., 230 F.2d 293, 294 (5th Cir. 1956); and Brower v. State, 217 Miss. 425, 431-32, 64 So.2d 576, 579 (1953). This is true even if the insurance policy does not expressly exclude coverage for willful burning. Davidson, 641 F. Supp. at 507; Sullivan, 605 F.2d at 170.

 Arson like adultery is seldom seen, and our law allows that it be proved circumstantially. Recurrent in the cases are three elements of the circumstantial claim, to-wit: (1) an incendiary fire; (2) motive of the insured to destroy the property; (3) evidence that the insured had the opportunity to set the fire or to procure its being set by another. See Davidson v. State Farm Fire & Casualty Co., 641 F. Supp. 503, 507 (N.D. Miss. 1986); Vicksburg Furniture Mfg., Ltd. v. Aetna Cas. and Surety Company, 625 F.2d 1167, 1171-72 (5th Cir. 1980); Burress v. Standard Fire Insurance Co., 642 F. Supp. 62, 66-67 (N.D. Miss. 1986); and Gardner v. Wilkinson, 643 F.2d 1135, 1136 (5th Cir. 1981). See also Arms v. State Farm Fire & Casualty Co., 731 F.2d 1245, 1249 (6th Cir. 1984); Don Burton, Inc. v. Aetna Life ...

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