In the unpublished decision of Pierce v. Allstate Insurance Company, 2008 U.S. Dist. LEXIS 71957 (USDC, ND of GA, Atlanta Div., Sept. 19, 2008) Judge Owen Forrester did something extremely rare in a property insurance case.
In the unpublished decision of Pierce v. Allstate Insurance Company, 2008 U.S. Dist. LEXIS 71957 (USDC, ND of GA, Atlanta Div., Sept. 19, 2008) Judge Owen Forrester did something extremely rare in a property insurance case. He granted summary judgment based upon both application and claims misrepresentation. While it is not particularly unusual to have a summary judgment granted for application misrepresentation, it is extremely unusual to have a summary judgment granted in favor of an insurer based upon claims misrepresentation. In almost every instance, claims misrepresentation is considered to be a factual issue for the jury. Nevertheless, when the facts are bad enough, anything is possible. This is just such a case.
On January 4, 2007, Ms. Carita Pierce suffered a fire loss to her home in Kennesaw, GA. She notified Allstate of the fire that same morning and Allstate came to investigate the cause of the fire and the resulting damages on January 8, 2007. By January 9, 2007, Ms. Pierce was no longer pleased with the handling of her claim. To show her frustration, she hired a public adjuster and filed a complaint with the Insurance Commissioner’s Office. This was only 5 days after the fire loss.
On January 12, 2007, Allstate sent an advance of $2,500 to Ms. Pierce. Further, on January 22, 2007, Allstate sent a proof of loss form as well as personal property inventory worksheets. These forms were never completed, but on January 29, 2007, Ms. Pierce sent a demand for another advance to Allstate.
On February 9, 2007, one month after the loss, Ms. Pierce wrote a letter to the president of Allstate Insurance Company demanding payment within 24 hours or she would file a lawsuit. She also sent a letter to the president of Allstate on that same date, stating that the public adjuster was no longer representing her.
On February 14, 2007, Ms. Piece filed suit demanding $400,000. As the litigation progressed, plaintiff amended her lawsuit requesting punitive damages totaling $1,638,857.08. Allstate filed a motion for summary judgment based on both application misrepresentation and claims misrepresentation.
Allstate’s claim of application misrepresentation was based upon six allegedly fraudulent and material misstatements.
In her application, plaintiff claimed that:
(1) She purchased and moved into the insured residence in October, 2006;
(2) She was single at the time;
(3) She was the only “owner” and adult occupant of the household and there were no children occupants;
(4) She purchased the home for $242,000;
(5) She filed no prior insurance claims for loss; and
(6) She had never had an insurance policy cancelled or non-renewed
As it turns out, all these representations were false. The plaintiff did not own the house, it was purchased by her husband for $198,000. She also lived in the house with her husband and daughter at the time of the application.
More importantly, she had filed two prior homeowners’ insurance claims. These two prior claims had led her prior insurance carrier to cancel her policy in October, 2006. These claims consisted of a substantial burglary to her house in March, 2006 for which she had made a claim for over $100,000. Further, on November, 2005, she had a fire loss in which she received a $75,000 settlement.
Not surprisingly, the court found that all of these misrepresentations were material and under O.C.G.A. § 33-4-7, the policy was void.
What makes this case more interesting, however, is that the court then went on, even after voiding the policy, to find, that the insured had committed claim misrepresentation.
Specifically, the insured submitted hotel receipts in support of her claim for additional living expenses. On further investigation, Allstate determined that the hotel receipts were fraudulent and that the insured had never stayed in the hotels listed on the receipts. Allstate obtained sworn affidavits and depositions from hotel employees that confirmed that the insured had never stayed at their hotels and that the invoices submitted were not invoices generated by the hotels.
Further, the insured had also provided Allstate with a lease agreement for a house that they rented while the house was being prepared. It appeared, upon further examination, that the lease was also fraudulent and the alleged landlord was, in fact, her husband.
Finally, Allstate had concerns about the amounts listed on claimant’s property inventory form. The court was unclear, however, whether the inventory was completely fraudulent like plaintiff’s other documents. The court did note that the insured provided no receipts or documentation, including credit card receipts even though she testified that the items were purchased mainly with credit cards.
Interestingly, the court noted that during the deposition of the insured, she made radical changes to the values claimed in the inventory during the deposition. As the court noted:
Plaintiff’s inventory shows places where she scratched out amounts during her deposition and replaced them with the correct amount. Some of these changes were very significant. For example, plaintiff marked out $7,000 for dress shirts and wrote in $565; $2,000 for jeans and wrote in $500; $3,000 for dresses and wrote in $780, and marked out $900 in jewelry completely.
The court found that the evidence in support of these misrepresentations sufficient to hold that cause as a matter of law, plaintiff voided her policy coverage for claims misrepresentation.
There is some question as to whether a judge would have granted a summary judgment based upon a claims misrepresentation alone, even as strong as this one was. It is possible that Judge Forrester knew that he was on solid ground with the application misrepresentation and thus went further to demonstrate his frustration with the clear fraud of the insured. Nevertheless, this case represents a major victory and it holds out a light of hope that, when presented with the right case, a court will grant summary judgment based upon claims misrepresentation alone.