Accused Of Arson By Insurance Company

Arson cases are the same in Grand Prairie, Arlington, Irving, Fort Worth, Dallas, Mesquite, Garland, Mansfield, Duncanville, Lancaster, De Soto, or anywhere else in Texas. Fires happen by accident and by arson. When a fire occurs the insurance company is going to investigate for reasons of denying coverage for the claim or to find reasons to lower the amount of money they may have to pay on the claim.
In 1992, the San Antonio Court of Appeals, issued an opinion in a case styled, State Farm Lloyds, Inc. v. Robert Polasek and Shirley Polasek.
In this case, arson and bad faith were asserted against State Farm. The Polasek’s prevailed at trial and State Farm appealed. The jury had awarded $40,000 in property damage and $500,000 as exemplary damages against State Farm. The court sustained the verdict for the property damage but overruled the finding of bad faith that allowed the award of exemplary damages. Here is some background.
In 1990, fire destroyed the Polasek’s video rental business, which State Farm insured. State Farm denied the claim based on the affirmative defense of arson.
The liability issues in this case fell into two categories: (1) whether State Farm established arson and misrepresentation and (2) whether the Polasek’s established that State Farm denied their insurance claim in bad faith.
In discussing the case, the court stated that to establish arson as a defense to a civil suit for insurance proceeds, State Farm had to prove by a preponderance of the evidence that the Polasek’s set the fire or caused it to be set. Because arson is usually planned and committed in secrecy to avoid detection, these elements may be proved by circumstantial evidence. Ordinarily the circumstantial proof that the Polasek’s committed arson here, would consist of evidence that the fire had an incendiary origin and that the Polaseks had an opportunity and a motive to set the fire.
There was considerable evidence that the fire had an incendiary origin. Burn patterns showed the presence of accelerants in two places. Laboratory tests found traces of kerosene. No accidental cause was apparent; electricity and heaters were not present in the areas where the fire started. There was no evidence of forced entry into the building; this indicated that someone with a key might have been involved.
The evidence on this issue – whether the Polasek’s set the fire or caused it to be set – was conflicting, and the jury’s finding was within their providence. There was evidence that the Polaseks had the opportunity to set the fire. Mrs. Polasek was the last person on the premises that night, no one else had a key, and the lights were not turned on, as they had been before. There was also evidence that the Polasek’s had a motive for destroying the store for the insurance proceeds. The business had not been profitable; it owed a $6500 note, which fell due several days after the fire. The company had only $365 in the bank. The Polaseks had been paying operating expenses from their personal funds. They had borrowed money and had been late paying the rent.
All this was evidence that a jury could have used in deciding against the Polaseks but the jury refused to do so.
The Polaseks’ bad faith cause of action was not satisfied by proof that they did not commit arson. It is not satisfied by proof that State Farm should have paid their claim, or that State Farm acted unreasonably in denying their claim. Instead, their bad faith claim required proof of a negative: that no reasonable basis existed for denying, or delaying payment of the claim. It is at this point that an experienced Insurance Lawyer is required for any hope in being successful on the claim because to be successful he must establish “the absence of a reasonable basis for denying or delaying payment of the benefits of the policy” and that the carrier knew or should have known that there was no reasonable basis for denying or delaying payment.
Courts have found that where there is undisputed evidence that a reasonable basis existed for denying an insurance claim, the bad faith cause of action is defeated as a matter of law. In deciding whether a reasonable basis exists for denying an insurance claim, the trier of fact does not weigh conflicting evidence; it decides whether the evidence existed and whether, standing alone, it constituted a reasonable ground for denying the claim.
In making its final decision the court stated, “State Farm did not simply deny the claim without investigating; it investigated the circumstances surrounding the fire.” “We hold that as a matter of law State Farm had a reasonable basis for denying the claim even though the jury later decided that State Farm should have believed contrary evidence and paid the claim.”
The case itself goes into more detail about the efforts made by State Farm to investigate. Part of this included getting into the financial records of the Polaseks. Anytime an insurance company requests financial records you can just about guarantee they are going to deny a claim.