Past fraud does not affect future claims

A federal court in Colorado has ruled that language in a homeowner’s insurance policy did not bar coverage of a claim filed by an insured several months after he allegedly had misrepresented a different claim.

Was it hail damage/?

On October 4, 2016, Nicholas Duff notified his homeowner’s insurance company, Allstate Vehicle and Property Insurance Company, that his roof and his external air-conditioner unit had been damaged by hail during a storm that occurred in August 2016.

Allstate assigned a number to the August 2016 claim and scheduled an inspection for October 14, 2016.

Allstate reviewed the local weather data and concluded that no hailstorm had occurred between August 23, 2016 (the effective date of the policy) and the October 14, 2016 inspection. They examined Duff’s home and found no physical or additional damage to the property, and denied his claim in its entirety.

Nonetheless, Allstate offered to hire an independent third-party engineer to reevaluate Duff’s August 2016 claim. He agreed to the investigation, and Allstate hired a third-party engineer to inspect the home.

On November 9, 2016, an engineer examined Duff’s home and analyzed the local weather data to determine whether hail had struck the home during the policy period. He concluded that there were certain hail marks at the home from storms prior to the commencement of the Allstate policy, but observed that the weather data reflected that no hail-producing storms had occurred near the home during the policy period.

Allstate contacted Duff and explained that the third-party engineer had confirmed Allstate’s previous findings that there was no hailstorm during the policy period.

Homeowner files a subsequent wind claim

On the evening of March 23, 2017, a windstorm, without hail, occurred near Duff’s home. He notified Allstate of the storm, which assigned a number to his March 2017 claim and arranged for another inspection of his home.

Allstate inspected the home on April 10, 2017. The adjuster observed that some shingles had been pulled up by wind. The adjuster drafted and sent Duff an estimate based solely on the wind damage to the roof. The estimate was below the policy deductible, and Allstate paid nothing to Duff.

Duff sued Allstate, which moved for summary judgment. Allstate argued, among other things, that it was entitled to summary judgment because Duff had engaged in misrepresentation in asserting the August 2016 claim, which forfeited any further claim under the policy, and thus his March 2017 claim had to fail.

In response, Duff argued that he had never knowingly made any false statements and because Allstate already had denied his August 2016 claim and he no longer sought relief for it, the claim was no longer at issue.

The court’s decision

The court denied Allstate’s motion for summary judgment on this ground. In its decision, the court observed that the “plain language” of the Allstate policy stated that Allstate was relieved of covering “any loss . . . in which any insured person has concealed or misrepresented any material fact.”

The court reasoned that the policy language was “limited to individual claims” and found that it did “not operate as categorical relief for [Allstate] to deny new and unrelated claims months after the false representations were discovered in October 2016 and [Allstate] continued to accept insurance premiums and adjust new claims of loss.”

Therefore, the court ruled, Duff’s alleged misrepresentations regarding the August 2016 claim did not bar his March 2017 claim under the language of the policy.

The court concluded that to the extent that Duff’s alleged misrepresentations may have made the entire policy voidable, Allstate had waived that argument by failing to exercise its right to void the policy despite being aware of the alleged misrepresentations since at least October 2016. This was due to its investigation of the August 2016 claim, which revealed there had been no hailstorm during the policy period “and the claim was self-evidently fraudulent.”

It is worth noting that the court ultimately ruled that Duff could not recover for the March 2017 claim “because he denied Allstate’s reasonable requests for further inspection of the property and because Allstate’s actions were reasonable and appropriate.”

The case is Duff v. Allstate Vehicle and Property Ins. Co., No. 17-cv-01948-NYW (D. Colo. Oct. 30, 2018).

Steven A. Meyerowitz, Esq., (smeyerowitz@meyerowitzcommunications.com) is the director of FC&S Legal, the editor-in-chief of the Insurance Coverage Law Report, and the founder and president of Meyerowitz Communications Inc. This story is reprinted with permission from FC&S Legal, the industry’s only comprehensive digital resource designed for insurance coverage law professionals.