Homeowners Policy And Fire

Insurance law attorneys will one day see a claim wherein the insurance company is denying a fire loss by asserting that the fire was the result of arson by the homeowner. The Houston Court of Appeals [14th Dist.] issued an opinion in a case wherein that denial occurred. The style of the case is, American Risk Insurance Company, Inc. v. Ahmad Abousway and Ibrahim Abousway. Here is the relevant information from that case.
Ahmad and Ibrahim Abousway had a homeowner insurance policy with American Risk Insurance Company, Inc., insuring a home the two brothers bought together in early 2008. The policy included coverage for fire loss. Following a 2010 fire that rendered the home uninhabitable, the Abousways submitted a claim for losses under the policy. American Risk hired a fire expert to investigate the fire. Based on his findings, American Risk refused payment of the claim until further investigation had concluded.
The Abousways sued American Risk, asserting claims for breach of contract and violations of chapters 541 and 542 of the Texas Insurance Code. American Risk answered the suit, asserting that the fire was an act of arson, thereby voiding the policy. The case was tried to the bench.
On October 22, 2012, the trial court signed a final judgment in favor of the Abousways, finding that American Risk was liable for breach of contract and for violating provisions of chapters 541 and 542 of the Texas Insurance Code. As a result of American Risk’s breach of contract, the trial court awarded the Abousways $200,000 in insurance benefits for the structure, $37,317.61 in benefits for lost personal property, and $72,509.88 in statutory penalties. In addition, the trial court awarded the Abousways attorney’s fees of $115,537.89 under chapter 541 of the Texas Insurance Code.
Arson is an affirmative defense to a civil suit for insurance proceeds from a loss resulting from a fire. To establish arson as a defense, the insurer must show by a preponderance of the evidence that the insured set the fire or caused the fire to be set. ften, parties attempt to prove arson by circumstantial evidence that the fire had an incendiary origin and that the insured had an opportunity and motive to set it.
American Risk asserts that testimony from Ahmad Abousway demonstrates his motive and opportunity to set the fire. Ahmad testified that, at the time of the fire, he and his brother were behind on several mortgage payments and the electricity to the home had been disconnected for lack of payment. He testified that the house was not being remodeled, and he did not cook anything on the morning of the fire. Ahmad was at a local coffee shop with his dog when he learned of the fire from a neighbor. Although Ahmad testified that their living room had several couches and a large-screen television, the television was not present after the fire. Additionally, Ahmad’s father’s “Hummer” automobile was parked across the street. The record reflects that there were no signs of forced entry, and Ahmad testified that he locked the door to the house on the morning of the fire.
Furthermore, American Risk contends that evidence from its fire expert and its senior claims examiner established the fire’s incendiary origin. Richard Benson, American Risk’s cause and origin expert, concluded that the fire was an “incendiary act,” evidenced by multiple areas of origin and the possible use of petroleum distillates as accelerants. Benson smelled strange odors in several places that, based on his experience, smelled like charcoal starter fluid or lacquer thinner. Four places in the home were tested for petroleum distillate, and three tests yielded positive results. Benson also testified that he noticed the gas burner knobs on the stove were missing, and he suspected the burners may have been used to help start the fire. When Benson investigated the house, he did not see the large screen television. The record also reflects that pamphlets for prospective tenants for other residences, which American Risk asserts demonstrate the Abousways’ plans to move, were found among the fire-damaged remains. Eduardo Schleh, American Risk’s senior claims examiner, testified that he thought the results of the investigation suggested arson.
The trial court could have concluded that American Risk failed to prove arson because the fire’s origin was not incendiary. Although Benson, in expert testimony, concluded that the fire was an incendiary act, the trial court was not bound by his conclusion because his findings were based more on the lack of evidence for alternative explanations than direct evidence supporting his theory. Eduardo Schleh testified that his conclusions were based on the Benson report, but Schleh was only a fact witness, not an expert witness.
Given the uncertain nature of this testimony, the trial court could have concluded that American Risk failed to prove by a preponderance of the evidence that the fire had an incendiary origin.
Alternatively, the trial court could have determined that American Risk failed to prove that the fire was set or caused to be set by the Abousways. On cross-examination, Eduardo Schleh testified that he was not accusing any particular person of causing the fire. In a deposition, Schleh stated he did not have any information or evidence suggesting that the Abousways were involved in setting the fire, fraudulently concealed information about the fire, or gave false statements about the fire. Similarly, Richard Benson testified that his purpose in investigating the fire was to determine the fire’s cause and origin, not to determine who set the fire. Although Benson testified that lab results showed petroleum distillate in three of four areas tested, none of the areas with the positive results actually burned; the only sample taken from an area that actually burned tested negative. The presence of any chemicals was explained by Ahmad, who testified that he stored turpentine and mineral spirits in his garage as part of his flooring business. Ahmad explained that the prospective-tenant pamphlets actually belonged to his girlfriend, who subsequently moved into an apartment. At the time Benson investigated the house, he observed the stove burners in the “off” position, and admitted he did not have any evidence showing the burners were in the “on” position at the time of the fire. Finally, Benson did not investigate the house until seven days after the fire, and admitted he was unsure if anyone else had been in the house.
Viewing the evidence in the light most favorable to the verdict, this court held that the evidence would enable a reasonable and fair-minded factfinder to conclude that American Risk failed to prove by a preponderance of the evidence that the fire was deliberately set or that the Abousways set the fire or caused the fire to be set. Thus, the evidence is legally sufficient to sustain the trial court’s verdict.