Last week in my post titled Carrier’s Motion for Partial Summary Judgment in Bad Faith Action Denied, I wrote about a court in Ohio that denied a carrier’s motion for summary judgment. In that case, the carrier asked the Court to find that it did not act in bad faith when using fraud as a basis to deny coverage for a fire loss. This week, I am writing about a case in South Carolina where another insurance company’s motion for summary judgment was also denied.
In Bennett v. American Hallmark Insurance Company of Texas, Shellie Bennett wanted homeowners’ insurance for his home. He met with his insurance agent who completed Mr. Bennett’s insurance application for him. The application was for coverage with American Hallmark Insurance Company of Texas (“AHICT”). A few months after getting coverage with AHICT, Mr. Bennett’s home was destroyed by a fire. Like many homeowners with this type of coverage, he filed a property damage insurance claim with AHICT, expecting that the carrier would pay the covered loss.
During its investigation of the fire claim, AHICT learned that Mr. Bennett had been unemployed at the time that he bought his home. It seems he was also unemployed at the time that he applied for the insurance coverage with AHICT. Mr. Bennett’s insurance application, however, indicated that he was employed. AHICT took advantage of this discrepancy and used it as the basis to deny his claim. AHICT alleged that he made a material misrepresentation on his insurance application.
Mr. Bennett sued AHICT for wrongful denial of his claim. During the course of the lawsuit, AHICT filed a motion for summary judgment on the breach of contract and bad faith claims arising from its denial of the claim based on material misrepresentation of employment status on the policy application.
The U.S. District Court for the District of South Carolina explained that, when reviewing the facts in a light most favorable to Mr. Bennett, there was evidence that his insurance agent did not ask him if he was employed. The facts also demonstrated that Mr. Bennett signed the application without reading it. When taking into consideration the agent’s actions and the fact that Mr. Bennett did not review his application, the Court decided to deny AHICT’s motion for summary judgment on the breach of contract claim, concluding:
[T]here is a genuine issue of fact for determination by a jury as to whether or not Plaintiff intended to deceive Defendant with regard to his employment status.
Additionally, the U.S. District Court for the District of South Carolina denied AHICT’s motion for summary judgment on the bad faith claim, explaining:
[I]f a jury were to find that [Bennett] had no intent to deceive [AHICT], it is possible that a jury could also find that [AHICT] was unreasonable in relying on the error of its own agent to deny coverage without investigating the circumstances surrounding the completion of [Bennett’s] insurance application.
The decision above is specific to the U.S. District Court for the District of South Carolina. Courts in other jurisdictions might decide a similar case differently. Regardless of the jurisdiction, this is another example of a case where the insurance company’s motion for summary judgment was without merit.