Insurance companies have a duty to investigate claims fairly and pay what is owed. When our client’s home was destroyed in a fire on Christmas Day, his insurer, Allstate Indemnity Company, did not pay the claim. Instead, despite having collected premiums on the home for over 15 years, the insurer assigned the claim to its Special Investigations Unit (SIU) and filed a federal lawsuit against our client, seeking a declaration that it owed him nothing.
The Challenge
Allstate alleged that our client had made material misrepresentations regarding the occupancy of the home and the value of his personal property. The insurer further intimated that our client was responsible for the fire, despite its own fire investigator finding no evidence of accelerants or arson. Perhaps most egregiously, during the investigation, the insurer authorized a third party to bulldoze the property without our client’s permission, destroying potential evidence and the ability to inventory salvageable contents. We thought we had seen it all, but we had never seen anything like this before.
Our Strategy and Legal Victories
We aggressively defended our client and filed counterclaims for bad faith, negligence, and violations of the Washington Insurance Fair Conduct Act (IFCA) and Consumer Protection Act (CPA). Through rigorous litigation, we secured several critical court rulings that paved the way for a favorable resolution:
- Defeating the “Judicial Estoppel” Attack: Allstate attempted to limit our client’s personal property claim to a significantly lower value listed in a 2013 bankruptcy schedule. We successfully argued that bankruptcy liquidation values differ fundamentally from insurance replacement cost values. The Court agreed, denying Allstate’s motion and ruling that the valuations were based on different methodologies and were not “clearly inconsistent”.
- Proving the Insurer’s Knowledge: Allstate claimed our client misrepresented that the home was vacant. We presented evidence that the client had informed his agent he had moved out years prior. The Court denied Allstate’s summary judgment motion, noting that a reasonable jury could find Allstate was fully aware of the change in occupancy.
- Establishing Bad Faith: We presented evidence that Allstate failed to conduct a reasonable investigation, including instructing their investigator not to interview the insured and withholding reports that found no evidence of arson. In a significant order, the Court denied Allstate’s motion to dismiss the bad faith claims. The Judge ruled that a jury could reasonably conclude Allstate “developed a speculative theory that Mr. Lindquist burned down the Fisher Road House and pursued that theory to the exclusion of its other claim adjusting efforts,” thereby prioritizing its own interests over the insured’s.
The Result
By systematically dismantling the insurer’s defenses and exposing its failure to conduct a fair investigation, we placed our client in a position of strength. Following these significant rulings by the U.S. District Court for the Western District of Washington, the case resulted in a favorable, confidential settlement for our client.
If your insurance company has denied your claim or treated you unfairly, you need a legal team that understands how to fight back against bad faith tactics.