Malone v. Allstate Insurance Company et al

Filing 34

MEMORANDUM OPINION Signed by Judge William M Acker, Jr on 6/10/14. (SAC )

FILED
2014 Jun-10 PM 04:19
U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
SHERRY MALONE,
Plaintiff,
v.
ALLSTATE INDEMNITY COMPANY,
Defendant.

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CIVIL ACTION NO.
2:13-CV-00884-WMA

MEMORANDUM OPINION
This case comes before the court on the motion of defendant
Allstate
judgment.

Indemnity

Company

(“Allstate”)

for

partial

summary

Plaintiff, Sherry Malone, instituted this action based

on an insurance contract, which plaintiff claims that Allstate
breached when it refused to pay insurance benefits after her house
burned down on March 28, 2011.

Allstate seeks summary judgment on

count two, bad faith denial of insurance benefits, and count three,
negligent, reckless, and/or wanton denial of insurance benefits.
Allstate filed an amended motion for partial summary judgment with
supplemental evidence pursuant to this court’s order of May 6,
2014.

Plaintiff did not file a response by the deadline of June 6,

2014, thereby

not

disputing

the

material

facts

set

forth in

Allstate’s amended brief. Doc. 33, ¶¶ 1-26. For the reasons stated
below, the court finds that Allstate is entitled to partial summary
judgment and will dismiss counts two and three by separate order.

DISCUSSION
To grant summary judgment, a court must determine that there
is no genuine dispute of material fact and that the movant is
entitled to judgment as a matter of law. FED. R. CIV. P. 56.

For

the purposes of summary judgment, the court views all admissible
evidence in the light most favorable to plaintiff, the nonmoving
party, and draws all reasonable inferences in her favor. See Scott
v. Harris, 550 U.S. 372, 378 (2007) (quoting United States v.
Diebold, Inc., 369 U.S. 654, 655 (1962)).

Plaintiff does not

dispute the material facts as presented by Allstate.
I.

Bad Faith Denial of Benefits
Prevailing on a claim of bad faith denial of benefits requires

evidence that the insurer either acted with intent to injure or had
no legitimately debatable reason to deny the claim. Aplin v. Am.
Surety Ins. Co., 568 So. 2d 757, 760 (Ala. 1990).

A reason can be

debatable based on an issue of fact or based on an issue of law.
Davis v. Cotton States Mut. Ins. Co., 604 So. 2d 354, 359 (Ala.
1992) (quoting Nat’l Sec. Fire & Casualty Co. v. Bowen, 417 So. 2d
179, 183 (Ala. 1982)).

“If any one reason for denial of coverage

is at least arguable, this court need not look any further, and a
claim for bad faith refusal to pay will not lie.” Weaver v.
Allstate Ins. Co., 574 So. 2d 771, 774 (Ala. 1990).
In the present case, Allstate had multiple debatable reasons
to deny plaintiffs’ claims: (1) evidence of arson; (2) evidence of
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a misrepresentation by plaintiff; and (3) the advice of counsel.
(1)

Evidence of Arson

Allstate may, of course, deny benefits if the property loss
was proximately

caused

by

plaintiff

or

by another

plaintiff’s solicitation. Doc. 30-2 at 26, ¶ 9.

person

at

Allstate had a

debatable reason to deny benefits under this provision because
Allstate had a prima facie case of arson.

A prima facie case of

arson requires evidence of “arson by someone”; “motive by the
insured”; and “unexplained surrounding circumstantial evidence
implicating the insured.” Williams v. Allstate Ins. Co., 591 So.2d
38, 41 (Ala. 1991) (quotations omitted).

Two Certified Fire

Investigators classified the fire as incendiary and found gasoline
at the area of origin, where no gasoline is stored, thereby
establishing “arson by someone.”

Plaintiff had a motive due to

financial difficulties, and she planned to move out of the state
imminently.

Circumstantial evidence implicated plaintiff.

She

obtained the insurance policy just days after receiving a job offer
that would require her to move to a different state, and only a few
weeks prior to the fire, although she had resided at the property
for over seven months.

Plaintiff and her alibi witness gave

conflicting accounts of plaintiff’s trip to the emergency room
around the time of the fire.

Finally, an informant contacted

Allstate claiming that plaintiff told him of her intent to recoup
the estimated $60,000 insurance proceeds (an accurate account of

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the policy limit) by having a fire started in her basement.
Whether this evidence proves arson is not at issue for this
particular claim.

This evidence clearly provided Allstate a

debatable reason to conclude that plaintiff proximately caused the
fire.
(2)

Evidence of a Misrepresentation by Plaintiff

Allstate’s insurance policy expressly states that it does not
cover

any

loss

in

which

the

insured

has

“concealed

or

misrepresented any material fact or circumstance.” Doc. 30-2 at 22.
Plaintiff submitted an inventory of her personal property that was
destroyed in the fire.

The inventory claims in excess of $82,000

in personal property, the majority of which is listed as belonging
to plaintiff for longer than one year and three months. See Doc.
30-11.

This time frame matters because plaintiff filed bankruptcy

on January 8, 2010, approximately one year and three months before
the fire of March 28, 2011.

In her sworn bankruptcy petition,

plaintiff claimed that she only owned $1,132 non-vehicle personal
property and had an annual income of $24,946.68. Doc. 30-3.

After

the bankruptcy and approximately four months before the fire,
plaintiff was promoted one government pay grade from GS6 to GS7.
Doc. 30-4 at 79.

Whatever moderate salary increase that promotion

involves, Allstate had legitimate grounds to doubt that it involves
a salary increase sufficient to buy $70,000-$80,000 worth of
personal property.

Allstate’s counsel investigating the claim

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questioned plaintiff on this point, and plaintiff stated that the
bankruptcy petition is incorrect, that she “opted” not to read the
sworn petition before filing it. Doc. 30-13 at 23.

Allstate’s

counsel observed that plaintiff had not amended the petition as of
September 7, 2011, despite counsel having brought the discrepancy
to

plaintiff’s

plaintiff’s

attention.

bankruptcy

Id.

petition

The
and

inconsistency
her

personal

between
property

inventory, her apparent failure to read a sworn document, and her
failure

to

later

amend

her

bankruptcy

petition

constitute

circumstantial evidence that plaintiff misrepresented the amount of
personal property that she lost during the fire.

This evidence

gave Allstate a debatable reason to deny plaintiff benefits.
(3) Advice of Counsel
Relying on informed advice by private counsel can bolster an
insurer’s showing that it did not act in bad faith and that it had
a debatable reason to deny benefits. See Davis v. Cotton States
Mut. Ins. Co., 604 So. 2d 354, 359 (Ala. 1992).

In Davis, the

insurers claimed that they were unsure about a vehicle’s coverage
and hired a private lawyer to conduct research. Id.

The Davis

Court found it “[c]rucial to the insurers’ showing that they did
not act in bad faith” that they employed “a lawyer in private
practice to research the coverage of the motor vehicle.” Id.
Hiring the

private

lawyer

reflected

a

good

faith

attempt

to

determine coverage, and nothing in the record indicated that the
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insurers were not entitled to rely on their lawyers’ advice. Id.
Similarly, in this case, Allstate hired a private lawyer to
assist

in

investigating

plaintiff’s

claim

and

to

make

a

recommendation regarding coverage of plaintiff’s claim. The lawyer
submitted a claim coverage opinion on which Allstate was entitled
to rely, at least without evidence to the contrary in the record,
which plaintiff has not asserted to exist. See Doc. 30-13.

Thus,

to the extent Allstate has not already shown debatable reasons to
deny plaintiff’s benefits, it has shown a lack of bad faith by
relying

on

the

informed

advice

of

its

private

counsel.

Accordingly, Allstate is entitled to summary judgment on the claim
of bad faith denial of benefits.
I.

Negligent, Reckless, and/or Wanton Denial of Benefits
Alabama

has

refused

to

recognize

a cause

of

action

for

negligent or wanton handling of an insurance claim. Kervin v. So.
Guaranty Ins. Co., 667 So. 2d 704, 706 (Ala. 1995) (citations
omitted). Accordingly, Allstate is entitled to summary judgment on
the

claim

for

negligent,

reckless,

and/or

wanton

denial

of

insurance benefits.
DONE this 10th day of June, 2014.

_____________________________
WILLIAM M. ACKER, JR.
UNITED STATES DISTRICT JUDGE

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