Docket No. 09-cv-0083
(E.D. Ky. February 11, 2010)
In this case, the Shoopmans’ home was substantially damaged by fire. After they filed a claim, Allstate investigated the causes of the fire and suspected the fire was the result of arson and that an “insured person” was involved in the arson and/or concealed or misrepresented material facts relating to the loss. Allstate filed an action, asking the Court to declare that the Shoopmans are not entitled to coverage under their homeowners policy. The Shoopmans filed a counterclaim, alleging violations of the Unfair Claims Settlement Practices Act (“UCSPA”) and the Kentucky Consumer Protection Act (“KCPA”), for bad faith in handling their claim. At issue in this opinion was Allstate’s motion for summary judgment.
Regarding the ”insured person” issue, the policy precludes coverage if “any insured person” under the parties’ insurance policy engaged in or directed an intentional or criminal act in setting the fire or concealed or misrepresented any material fact or circumstance to Allstate during the claim investigation. Allstate argued that the Shoopmans’ son, Michael, resided in their home at the time of the fire and is an “insured person” as a matter of law. The Shoopmans argued that Michael was staying in the house temporarily to recover from injuries from a motorcycle accident, so he is not an “insured person” under the Policy. The Court concluded that the evidence supports more than one reasonable inference, so summary judgment was not appropriate on that issue.
Allstate also alleged that Michael misrepresented facts and concealed pertinent information about his father’s mandolin, his criminal background and his activities on the day of the fire which were “material” to the investigation. As the jury could find Michael was not an “insured person,” the Court declined to consider that argument.
Allstate also argued that the Shoopmans included a Gibson mandolin on the Proof of Loss but did not tell Allstate that the mandolin had been pawned and did not notify Allstate that the mandolin had been recovered until months later. The Shoopmans argued that Michael pawned the mandolin and they did not know of it until after Michael was arrested, well after they filed the Proof of Loss. The Shoopmans further contended that any alleged “misstatements” on the Proof of Loss related to the mandolin did not affect Allstate’s investigation. The Court held that whether the Shoopmans actually misrepresented or concealed information, and whether that information was material to the investigation, are questions for a jury and denied summary judgment.
As for the Shoopmans’ bad faith claim, the Court granted summary judgment in favor of Allstate. The Shoopmans argued that Allstate’s predisposition to blame Michael for setting the fire, failure to comply with its corporate adjusting requirements, and rude behavior towards them constituted more than “mere negligence” and were deliberate acts and reckless disregard for their rights as insured persons. The Court disagreed. “The Shoopmans’ assertions simply do not amount to outrageous conduct absent some affirmative act of harassment or deception.” The Court held that to prove a bad faith claim regarding a delay in claims handling, there must be proof or a reasonable inference that that the purpose of the delay was to extort a more favorable settlement or to deceive the insured regarding coverage. Allstate’s adjuster’s and investigator’s bad manners or errors in judgment were not sufficient to support a bad faith claim, nor were its technical violations of its procedures and rules.