Richard E. Carter, Appellant v. American Mutual Fire Insurance Company, Respondent
South Carolina Court of Appeals, Opinion No. 1271, heard November 15, 1988 and decided December 15, 1988 (Shaw, J., for the Court; Bell and Cureton, JJ., concurring). The complete opinion appears below. Our text comes from the Caselaw Access Project (case.law), Harvard Law School’s open archive of published U.S. case law. Removed: the reporter’s head matter — the opinion number, the caption, the parallel-cite line “(375 S. E. (2d) 356)”, the court line, the argued and decided dates, and the counsel-of-record blocks for appellant (Ray L. Derrick, of Funderburk & Derrick, Columbia) and respondent (Jeter E. Rhodes, Jr. and G. D. Morgan, Jr., both of Whaley, McCutchen, Blanton & Rhodes, Columbia) — that information is stated in this line instead. Also removed: the archive’s structural bracket marker labeling the opinion. Every scan repair made, in full: the judge’s name line is set in bold; the passage the reporter sets as a block quotation is set as a block quote; and the missing space restored in “November 10,1980”. The reporter’s older citation style for the South Carolina and South Eastern reporters — “282 S. C. 393, 321 S. E. (2d) 40” — is the court’s own and is left exactly as printed. No word of the Court’s has been changed, condensed, or paraphrased. Note on which decision this is: this is the second appellate decision in Richard E. Carter’s fire claim. The first is Carter v. American Mut. Fire Ins. Co., 279 S.C. 367, 307 S.E.2d 225 (1983), where the Supreme Court of South Carolina reversed a demurrer and reinstated his bad-faith cause of action; that opinion is on our shelf, and it shares the same appellant, the same insurer, the same fire, and the same counsel. The 1988 opinion below makes no reference to the earlier appeal.
The full opinion
Shaw, Judge:
Appellant, Richard E. Carter, sued respondent, American Mutual Fire Insurance Company, for breach of contract and bad faith refusal to pay insurance benefits arising from the insurance company’s denial of Carter’s claim under a fire insurance policy. The jury returned a verdict for the insurance company. From a denial of Carter’s motions for directed verdict and judgment notwithstanding the verdict, Carter appeals. We affirm.
In ruling on a trial judge’s denial of motions for directed verdict and judgment notwithstanding the verdict, we must consider the evidence in the light most favorable to the prevailing party and we are not at liberty to pass upon the veracity of the witnesses and determine the case according to our view of the weight of the evidence. Graham v. Whitaker, 282 S. C. 393, 321 S. E. (2d) 40 (1984). Our task is to determine whether sufficient evidence existed warranting submission of the case to the jury. Woodward v. Todd, 270 S. C. 82, 240 S. E. (2d) 641 (1978). A review of the record in the light most favorable to the insurance company reveals the following:
On November 10, 1980, a fire occurred at the home of Mr. Carter. On that day, he left his home between 6:00 and 7:00 p.m. to help an employee with car trouble. Mrs. Carter and her daughter left the home sometime after Mr. Carter and went to a friend’s house where the Carters were invited for dinner. Unable to repair the employee’s car, Mr. Carter returned to his home and allowed the employee to take his car. The employee testified they arrived at the home around 9:30 p.m. Mr. Carter called his wife who picked him up and drove him to their friend’s house. The fire was discovered at approximately 11:00 p.m. Mr. Carter returned home around 12:30 a.m.
The evidence also reveals Mr. Carter was experiencing financial difficulties at the time of the fire. His home had been listed for sale for over a year and was still for sale at the time of the fire. There were two mortgages on the home. He also had both a federal and state tax lien filed against him. A background investigation revealed Mr. Carter was having trouble paying credit card accounts.
Finally, three defense experts testified the fire was intentionally set. They opined a flammable liquid was poured on the floor. One of the experts testified it was possible the fire was set prior to 9:00 that evening if a delaying device were used.
The insurance company relied on circumstantial evidence to prove Mr. Carter was guilty of civil arson. This court has held an insurer must prove by the preponderance of the evidence that the fire was of an incendiary origin and the insured caused the fire. See Rutledge v. St. Paul Fire and Marine Ins. Co., 286 S. C. 360, 334 S. E. (2d) 131 (Ct. App. 1985). However, the appellate courts of this state have yet to address the elements necessary to prove civil arson when relying on circumstantial evidence. We adopt the elements set out by the Georgia Court of Appeals in Fortson v. Cotton States Mutual Ins. Co., 168 Ga. App. 155, 308 S. E. (2d) 382 (1983). In Fortson, the court followed the well accepted line of federal cases in holding as follows:
An insurance company can prevail in an arson defense based solely on circumstantial evidence if it shows that the fire was of incendiary origin and that the plaintiff had both the opportunity and motive to have the fire set. (emphasis added)
Based on the foregoing evidence, we find there was sufficient evidence of incendiary origin, motive and opportunity to submit the case to the jury. We therefore hold the trial judge correctly denied Mr. Carter’s motions for directed verdict and judgment notwithstanding the verdict.
In light of the above decision, we need not address the issue of the fraudulent proof of loss defense.
Affirmed.
Bell and Cureton, JJ., concur.
What it decided
Richard Carter’s house burned on the night of November 10, 1980. His insurer refused to pay, defending on civil arson. A jury sided with the insurer. Carter appealed the denial of his directed-verdict and JNOV motions, arguing the insurer’s circumstantial case was too thin to reach a jury at all. The Court of Appeals affirmed, and in doing so decided two things.
The burden stays on the insurer. The opinion states the rule plainly: “an insurer must prove by the preponderance of the evidence that the fire was of an incendiary origin and the insured caused the fire,” citing Rutledge v. St. Paul Fire and Marine. The policyholder does not have to prove he is innocent. The company that accuses him has to prove it.
But that burden can be carried entirely by circumstantial evidence, and South Carolina now has a three-part test for when it is. Noting that “the appellate courts of this state have yet to address the elements necessary to prove civil arson when relying on circumstantial evidence,” the court adopted the Georgia formulation from Fortson v. Cotton States Mutual: an insurer “can prevail in an arson defense based solely on circumstantial evidence if it shows that the fire was of incendiary origin and that the plaintiff had both the opportunity and motive to have the fire set.”
Applied to this record, the pieces the court identified were: three defense experts testifying a flammable liquid was poured on the floor (incendiary origin); a house listed for sale more than a year, two mortgages, federal and state tax liens, and credit-card trouble (motive); and a timeline in which Carter was at the house until roughly 9:30 p.m. with expert testimony that a delaying device could have set the fire before 9:00 (opportunity). That was enough to get to a jury, and the jury believed it.
What it did NOT decide
Publish this one honestly, because the homeowner lost and the rule the court adopted is the one carriers reach for.
- It did not weigh the evidence. The court says so twice: on review of a directed-verdict denial, it takes the evidence in the light most favorable to the winning party and is “not at liberty to pass upon the veracity of the witnesses.” This is a decision about whether the case could go to a jury, not a finding that Richard Carter burned his house.
- It did not lower the insurer’s burden. Preponderance of the evidence, and the insurer carries it. Circumstantial proof is a permitted method, not a discount on the standard.
- It did not hold that financial trouble alone is motive, or that being home earlier in the evening alone is opportunity. All three elements were present together on this record. The test is conjunctive: incendiary origin and motive and opportunity.
- It did not decide the fraudulent-proof-of-loss defense. The last line of the opinion expressly declines to reach it. Whatever South Carolina law says about a false or padded proof of loss, it does not come from this case.
- It did not decide anything about an innocent co-insured. One insured, one policy, one accusation. For what happens when the arsonist is a family member and another insured claims innocence, see S.C. Farm Bureau v. Kelly.
- It did not reach the bad-faith claim. Carter pleaded bad faith refusal to pay alongside breach of contract, and once the jury found for the insurer on the arson defense, nothing in the opinion analyzes bad faith. That claim is the one the Supreme Court had revived five years earlier in the 1983 Carter appeal, applying the then-new cause of action from Nichols v. State Farm. South Carolina’s bad-faith root is Tyger River, and the fee remedy for a refusal to pay is S.C. Code § 38-59-40.
- It did not decide the arson question itself. The jury did. A verdict is not a holding, and nothing here binds a future court on any similar set of facts.
Why it matters to policyholders
Most people never imagine their insurer will accuse them of a felony. Then a fire happens, an origin-and-cause investigator arrives, an examination under oath gets scheduled, and someone starts pulling credit reports and mortgage records. Carter is the case that tells you what that machine is being built to prove.
The shield first. The company has the burden. If it wants to keep your money on an arson theory, it has to prove by a preponderance that the fire was intentionally set and that you set it or had it set. A carrier that hints, delays, and never puts that proof together has not met a burden — it has made an accusation. That distinction is worth saying out loud, in writing, early.
The sword, because you need to see it coming. Three things are being assembled from the day the fire is reported:
- Incendiary origin — the origin-and-cause report. Pour patterns, accelerant samples, the burn pattern on the floor. This is expert-versus-expert territory, and the policyholder is entitled to an expert too.
- Motive — your finances. In Carter it was a listing that had sat for over a year, two mortgages, a federal lien, a state lien, and credit-card delinquency. Every one of those is a public or easily obtained record, and none of them is evidence that anyone did anything wrong.
- Opportunity — the timeline. Who was where, when, and for how long, plus expert testimony about delay devices that can stretch “opportunity” hours past when you left the house.
What that means for how you handle a fire claim. Preserve the scene and the debris until your own investigator has seen it. Build the timeline in writing while memories are fresh, including the people who can corroborate it. Take the examination under oath seriously and prepare for it. Never guess at an answer, and never let a padded or careless proof of loss into the file — Carter deliberately left the fraudulent-proof-of-loss defense undecided, which means it is still available to a carrier in the right case.
Where a public adjuster fits and where it does not: we document the loss, inventory and value the contents and the structure, prepare the sworn proof of loss, and negotiate the amount. We do not try arson cases. When a carrier moves from investigating a claim to accusing a policyholder, that is the moment to have a lawyer, and we refer it out. South Carolina’s improper-claim-practice statute is § 38-59-20, and more South Carolina authority sits on the South Carolina shelf.
An accusation is not proof. In South Carolina, the company that makes it has to carry it.
Now you know the rule. Enforcing it against a carrier is a different job — and it's ours. A free, confidential case review by a licensed public adjuster takes three taps.
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