United States District Court, W.D. Missouri, Western Division
LESLIE AKERS, and MARY AKERS, his wife, Counterclaim Defendants,
AUTO-OWNERS (MUTUAL) INSURANCE COMPANY, Counterclaim Plaintiff.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
GREG KAYS, Chief District Judge.
This case concerns insurance coverage for a fire which occurred at Leslie and Mary Akers' (collectively "the Akers") home. The Akers initiated this lawsuit, alleging that Defendant Auto-Owners (Mutual) Insurance Company ("Auto-Owners") vexatiously failed to pay all amounts due under their homeowner's policy. Auto-Owners denied the allegations, noting that it had paid more than $3.5 million under the Policy.
During discovery, Auto-Owners discovered evidence that the Akers prepared fraudulent invoices to inflate their losses. Auto-Owners filed a one-count counterclaim alleging that the Akers' conduct violated the policy's anti-fraud provision. Auto-Owners seeks a declaration that the Policy is void and that Auto-Owners is entitled to reimbursement of all amounts paid out under the Policy, as well as its attorneys' fees and costs incurred in defending this lawsuit. The Akers dismissed their claim with prejudice, but Auto-Owners is still pursuing its counterclaim.
On May 13, 2015, the Court held a bench trial. After carefully considering all of the evidence, the Court finds and declares that the Akers violated the Policy's "Concealment or Fraud" provision by misrepresenting material facts, engaging in fraudulent conduct, and making false statements. As a result, the entire Policy is void and Auto-Owners is entitled to reimbursement of all sums-$3, 929, 887.40-paid under the Policy. The Court also orders the Akers to reimburse Auto-Owners $146, 919.21 for its reasonable costs, expenses, and attorneys' fees incurred in defending against the Akers' claims in this case.
The Court enters judgment in favor of Auto Owners Insurance Company and against Leslie and Mary Akers, jointly and severally, in the amount of $4, 076, 806.61.
Findings of Fact
In determining the facts, the Court has carefully considered all of the record evidence, including the parties' stipulations and exhibits and witness testimony. Four witnesses testified in person: Auto-Owners' field claim representative Candice Sartin, forensic accountant Peter J. Karutz, C.P.A., Leslie Akers, and Mary Akers. Nine witnesses appeared via videotaped depositions: Akers' family members Amy Whiting, Laura Whiting, and Randy Akers, and present and former Akers' employees Brian Tripp, Edward Kalleck, Ron German, Bruce Parker, Levi Sherman, and Michael Stone.
In determining how much weight to give each witnesses' testimony, the Court made the following credibility determinations. The Court found Peter Karutz, Candice Sartin, Peter Karutz, Brian Tripp, Edward Kalleck, Ron German, Bruce Parker, Levi Sherman, and Michael Stone to be very credible and believes all, or nearly all, of their testimony. The Court gave greater weight to their testimony because it was consistent with the testimony of the other credible witnesses and the exhibits, and these witnesses had little or no motivation to testify falsely. Indeed, portions of Tripp, Kalleck, German, Parker, Sherman, and Stone's testimony were candid admissions against interest.
The Court found Amy Whiting, Laura Whiting, and Randy Akers to be somewhat credible. Amy Whiting was not credible to the extent she claimed that she did not remember certain things, such as whose idea it was to incorporate AL&H Construction ("AL&H"). Given her testimony and the testimony of others concerning her role in organizing and incorporation AL&H and in issuing checks for AL&H based on invoices Leslie Akers gave her, the Court suspects she minimized her knowledge of certain events, such as whether the invoices Leslie Akers gave her were fraudulent, in an attempt to shield her mother, Mary Akers, and step father, Leslie Akers, from civil and criminal liability. The testimony of Amy Whiting's sister, Laura Whiting, that she had no involvement with AL&H is not credible to the extent it conflicts with the testimony of her mother and step father that she had some involvement in the administration of their business affairs. The Court finds much of Randy Akers' testimony not credible. He acknowledged little more than what bank records and invoices conclusively proved and so could not be denied. His testimony appeared to be designed to protect his brother Leslie as much as he could without implicating himself. Accordingly, the Court gives credence to his testimony only to the extent it is corroborated by other, trustworthy evidence.
The Court finds Leslie Akers and Mary Akers' testimony not credible at all. Their testimony was inconsistent with the mountain of bank records presented and the testimony of the other credible witnesses. The Akers' testimony also contradicted sworn testimony they had given in their depositions on multiple salient points. When counsel for Auto-Owners confronted each of the Akers with this fact, they did not seem to care or be disturbed. Leslie Akers also appears to have attempted to influence some of the other witnesses' deposition testimony. Ron German and Edward Kalleck testified that shortly before their depositions, Leslie Akers attempted to contact them and encourage them to testify more favorably towards him. This weighs against Leslie Akers' credibility. Finally, and most importantly, the Court notes that when questioned by Auto-Owners' counsel on several crucial topics in this case-such as whether they knowingly submitted false invoices to Auto-Owners-the Akers declined to answer, invoking their Fifth Amendment right not to testify. The Court draws adverse inferences from these invocations. The Court finds that if the Akers had answered these questions truthfully, their answers would have confirmed that they conspired to submit false invoices to Auto-Owners and defraud it of millions of dollars.
After carefully reviewing and weighing all of the evidence, the Court finds the facts to be as follows. The Akers built a very large (approximately 20, 000 square foot) residence located at 1999 Southwest 2 Highway in Garden City, Missouri. Shortly after they completed construction a fire of undetermined origin occurred on August 8, 2010, severely damaging the house.
At the time, a homeowners policy ("the Policy") issued by Auto-Owners indemnified the Akers in the event of a fire at their home. The Policy provided "dwelling" coverage in the amount of $2, 402, 500; "other structures" coverage of $480, 500; "personal property" coverage of $1, 681, 750; and "additional living expenses" coverage of $720, 750. Ex. 569. It also included an "increased cost" endorsement that provided additional coverage, up to 25% of the dwelling coverage ($600, 625), to reflect the current cost to repair or replace the house, and potentially an additional $80, 500 to replace other structures on the property. Ex. 569. The Policy also covered up to 5% of the dwelling coverage ($120, 125) to replace trees, shrubs, plants, and lawns damage from a fire. Id.
The Policy also contained a "Concealment or Fraud" provision that stated:
This entire policy is void if, whether before, during or after a ...