Malone v. Allstate Insurance Company et al
MEMORANDUM OPINION Signed by Judge William M Acker, Jr on 6/10/14. (SAC )
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
ALLSTATE INDEMNITY COMPANY,
CIVIL ACTION NO.
This case comes before the court on the motion of defendant
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,
Plaintiff did not file a response by the deadline of June 6,
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.
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.
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.
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
a misrepresentation by plaintiff; and (3) the advice of counsel.
Evidence of Arson
Allstate may, of course, deny benefits if the property loss
plaintiff’s solicitation. Doc. 30-2 at 26, ¶ 9.
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
Circumstantial evidence implicated plaintiff.
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
the policy limit) by having a fire started in her basement.
Whether this evidence proves arson is not at issue for this
This evidence clearly provided Allstate a
debatable reason to conclude that plaintiff proximately caused the
Evidence of a Misrepresentation by Plaintiff
Allstate’s insurance policy expressly states that it does not
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.
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.
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
Allstate’s counsel investigating the claim
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.
counsel observed that plaintiff had not amended the petition as of
September 7, 2011, despite counsel having brought the discrepancy
inventory, her apparent failure to read a sworn document, and her
circumstantial evidence that plaintiff misrepresented the amount of
personal property that she lost during the fire.
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.
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.
determine coverage, and nothing in the record indicated that the
insurers were not entitled to rely on their lawyers’ advice. Id.
Similarly, in this case, Allstate hired a private lawyer to
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.
to the extent Allstate has not already shown debatable reasons to
deny plaintiff’s benefits, it has shown a lack of bad faith by
Accordingly, Allstate is entitled to summary judgment on the claim
of bad faith denial of benefits.
Negligent, Reckless, and/or Wanton Denial of Benefits
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
DONE this 10th day of June, 2014.
WILLIAM M. ACKER, JR.
UNITED STATES DISTRICT JUDGE
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