Arsons happen in Weatherford, Mineral Wells, Aledo, Azle, Millsap, Hudson Oaks, Willow Park, Brock, Peaster, Springtown, and all over Parker County and Texas. But that does not mean the person who owned the property committed the arson. And when the insurance company does an investigation and finds the property owner is having financial problems that does not mean the property owner burned the property either. After all the vast majority of people have financial problems.
Here is a case that deals with arson and the insurance company attempt to blame the arson on the homeowners. The case opinion was issued in 2000, by the Dallas Court of Appeals. The case is styled, Texas Farmers Insurance Company v. Cloteal L. Cameron, et al.
The jury found against Farmers for violations of the Texas Insurance Code, bad faith, violation of the Prompt Payment of Claims Act, mental anguish, violations of the Texas Deceptive Trade Practices Act, knowing and intentional conduct, and attorney fees. This appeals court reversed the finding regarding the mental anguish claim and part of the attorney fees claim and the calculation of interest on the claim.
Set out here, is only the factual aspect of the claim. This is to give an ideal of the way some claims are denied. Hopefully it is obvious that an experienced Insurance Law Attorney should be involved in the cases early.
On Sunday, March 19, 1995, around 4:00 a.m., a fire destroyed the Camerons’ residence and most of its contents. Neither Alfred Cameron nor his wife Cloteal was present at the time. Farmers was the insurer, and the Camerons’ insurance policy had limits of $60,000 for the residential structure and $36,000 for the contents. The evidence is overwhelming that the setting of the fire was arson, and even Paul Sanders, an expert witness who testified on the Camerons’ behalf, agreed the fire was incendiary.
After the Camerons reported the fire to Farmers, Wendy High, a claims adjuster, drove past the remains of the house. Concluding that the Camerons would need temporary living expenses, High authorized a $500 advance for the Camerons. On Tuesday, March 22, High met with the Camerons, public adjuster Curtis Hordge, and two contractors. She gave the Camerons the $500 check. She did a walk through of the residence and a basic inventory, noting items that would have been worth more than $100. She also gave the Camerons the appropriate claim forms to fill out and explained the forms to them. On May 1, 1995, the Camerons executed a sworn proof of claim, which reflected that the actual cash value of the structure was $60,000, with a replacement value of $75,000. The Camerons claimed $60,000 for the loss or damage of the structure and $36,000 for the loss or damage to the contents, the full limits of the policy.
Hordge assisted the Camerons in compiling an itemized inventory of their losses. Hordge took about six weeks before submitting anything to High. High noticed some discrepancies between her own rough inventory and Hordge’s. When High did her walkthrough, for example, she noticed two sofas; at the time, Cloteal told her that one sofa was worth about $1,000 and the other was worth between $1,500 and $1,800. Hordge’s inventory, however, valued the sofas at more than twice those amounts.
Both Camerons had alibis for the time of the fire. Alfred had left Dallas around 7:00 p.m. on Saturday, March 18, to go to the Horseshoe Casino in Shreveport, Louisiana. A friend, John McCrumbly, accompanied him. The two men left the casino around 4:00 a.m. on Sunday, March 19, and arrived back home in Dallas around 7:00 a.m. Cloteal was at her daughter’s apartment assisting her packing for an anticipated move. Cloteal arrived at her daughter’s apartment around 6:00 p.m. on Saturday, March 18. The two women got take-out food from Colter’s Barbecue and returned to the apartment. Because her daughter had only one bed, the two slept together. Between 7:00 and 8:00 a.m. the next morning, Alfred telephoned to tell Cloteal about the fire. McCrumbly vouched for Alfred’s whereabouts, and Cloteal’s daughter, Sheritrice Spencer, vouched for Cloteal’s.
On August 3, 1995, McCrumbly executed an affidavit confirming Alfred’s alibi. On August 11, Spencer executed an affidavit confirming Cloteal’s alibi. The affidavits were forwarded to Farmers. Tony Poncio, the branch manager for Farmers, reviewed the affidavits. Without interviewing either McCrumbly or Spencer personally, he rejected the Camerons’ claim. Poncio took the position that “their testimony was already in front of us signed and notarized. There was nothing else to look into about it.”
On September 18, 1995, Poncio wrote the Camerons a letter informing them that Farmers was denying the claim. The reason given was that Farmers had “a good faith belief that the fire in question was caused intentionally by you or by persons instructed by you to set the fire.” The letter went on to accuse the Camerons of making material misrepresentations when Farmers’ representatives investigated the claim. Poncio quoted in full the policy provision concerning concealment or fraud, which stated that, in the event of an insured’s intentional concealment or fraud relating to a material fact, “this policy is void.” The text of Poncio’s letter, however, did not actually declare the policy void; it simply stated that the Camerons’ alleged misrepresentations were an additional reason for denial of the claim.
All this time, however, Farmers had been paying the Camerons temporary living expenses. Because High wanted to give the Camerons “enough time to figure out where they needed to go,” checks for these expenses continued throughout the month of September, despite the rejection in mid-September of the Camerons’ claim. From the days immediately after the fire through September, Farmers made nine payments for a total of $10,044.62. At the same time, High did not investigate further the discrepancies she noticed between her contents work sheet and the itemized list provided by Hordge. Although she normally would reinvestigate if there were discrepancies between her contents work sheet and a proof of claim submitted by an insured, she did not do so in the Camerons’ case: by the time she “got her contents work sheet and investigation through management,” Poncio had already denied the claim.
The Camerons then sued for all the reasons stated earlier.
In upholding the findings of violations of the Texas Insurance Code and bad faith, this court reviewed the evidence of lack of follow-up by Farmers on investigating the inventory discrepancies. The lack of interviewing alibi witnesses. The lack of any proof the Camerons were involved in the fire. Allegations of past financial problems the Camerons had but no mention that they were current on all obligations at the time of the fire. The fact that if Farmers had actually cancelled the policy, that a pro rate share of the premiums should have been refunded.
The case lists several other things Farmers did or failed to do to properly investigate this claim before denying coverage to the Camerons. It is good reading to understand how some of these arson cases are investigated and evaluated.
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