The Allstate policy required that, in the event of a loss, Mr. Thomas (1) “submit to examinations under oath” as often as Allstate reasonably required, and (2) give Allstate “all accounting records, bills, invoices, and other vouchers or certified copies which [it] may reasonably request to examine.” The policy further stated that Allstate had “no duty to provide coverage” if Mr. Thomas failed to comply with the requirements and his noncompliance prejudiced Allstate.

Mr. Thomas provided two statements that were recorded and transcribed by Allstate insurance agents regarding the claim, and his business partners provided statements as well. Allstate then scheduled an examination under oath, to which Mr. Thomas initially agreed. Allstate requested that he bring personal financial records to the examination, including, among other things, federal and state income tax returns for the previous three years and bank statements from the previous year.

When Allstate requested these documents, Mr. Thomas' counsel threatened a lawsuit for bad faith, describing the request as “completely overbroad and burdensome.”

Mr. Thomas refused to sit for an examination, provide the requested financial documentation, or give Allstate authorization to obtain the information from third parties such as employers, banks, and the Internal Revenue Service.

Allstate then sent two letters requesting that Mr. Thomas sit for an examination under oath and provide the requested financial documentation. He agreed to provide an affidavit attesting to his previous recorded statements and to allow access to the damaged property, but nothing more.

Thereafter, Allstate denied coverage, asserting that Mr. Thomas' refusal to cooperate with the company's investigation violated the terms of his policy.

Mr. Thomas sued, alleging that Allstate had breached the insurance contract and had acted in bad faith by refusing to pay for the fire damage.

Allstate moved for summary judgment, arguing that there was no genuine dispute as to the material fact that Mr. Thomas had not cooperated in Allstate's investigation of the fire because he had refused to submit to an examination under oath and had refused to provide access to financial records material to whether he had a motive to commit arson.

The district court granted Allstate's motion for summary judgment, concluding that, under the terms of Mr. Thomas' policy, there was “no question that [he] had a duty to submit to an examination under oath.” The district court also found that the financial records requested by Allstate – including “personal financial records, records of payments made for construction of the property, federal and state income tax records, credit card and bank statements, a full financial statement, and personal cell phone records for a month prior to the fire and forty-eight hours after” – were “material to an insurer's arson investigation” because they were related to determining whether Mr. Thomas' financial status might have provided him with a motive to commit arson. Because such records were material to the arson investigation, the district court concluded that Allstate's requests were reasonable.

Mr. Thomas appealed to the Fifth Circuit.

The Fifth Circuit's Decision

The Fifth Circuit affirmed.

In its decision, the circuit court explained that, under Mississippi law, an examination under oath and financial records such as those requested by Allstate were material to an insurer's arson investigation, as they might reveal whether the insured had a motive to commit arson. The circuit court added that where arson was the suspected cause of the underlying claim for coverage, an insurance company's requests for additional material financial documents that might reveal a motive for arson by the insured were “reasonable as a matter of law.”

The Fifth Circuit then ruled that because the district court found that there was “no dispute that the cause of the fire was arson,” Mr. Thomas' argument that he could not be compelled to turn over material financial information failed.

Accordingly, the circuit court concluded, Allstate was entitled to summary judgment because Mr. Thomas refused to submit to an examination under oath and provide financial information material to Allstate's arson investigation.

The case is Thomas v. Allstate Vehicle and Property Ins. Co., No. 17- 60764 (5th Cir. March 28, 2019).