United States District Court, N.D. Indiana, Fort Wayne Division
OPINION AND ORDER
JUDGE THERESA L. SPRINGMANN, UNITED STATES DISTRICT COURT
December 5, 2014, Plaintiff Pam Smith filed a Complaint [ECF
No. 3] in Dekalb Superior Court against Defendants Nationwide
Affinity Insurance Company (Nationwide) and PHH Mortgage
Corporation (PHH), alleging breach of contract and bad faith.
The Plaintiff also sought declaratory judgment and injunctive
relief against PHH. PHH removed the case to this Court on
January 12, 2015. On November 11, 2016, the Court granted the
parties' joint stipulation to dismiss PHH. [ECF No. 60].
This matter is now before the Court on Defendant
Nationwide's Motion for Partial Summary Judgment [ECF No.
31] as to the Plaintiff's bad faith claim (Count II). For
the reasons stated in this Opinion and Order, the Court finds
that the Defendant is entitled to summary judgment on Count
following facts are undisputed. Before and on April 4, 2014,
the Plaintiff maintained a homeowner's insurance policy
[ECF No. 64-1] with Nationwide. The Policy excludes coverage
for “any loss arising out of any act an
‘insured' commits or conspires to commit with the
intent to cause a loss.” (Policy at 27, ECF No. 64-1.)
The Policy also excludes coverage if an insured has
“intentionally concealed or misrepresented any material
fact or circumstance; engaged in fraudulent conduct; or made
false statements” relating to the insurance.
(Id. at 30-31.)
April 4, 2014, a fire occurred at the Plaintiff's house,
located at 922 South Ijams Street in Garrett, Indiana.
(See Fire Loss Documents, ECF No. 64-4.) At the time
of the fire, the Plaintiff lived in the house with four of
her children, including her 19-year old son, Austin Carroll,
and her four dogs. (P. Smith Stmt. 3-4, ECF No. 64-16.) The
day before the fire, the Plaintiff maintains that she took
her younger children and their friends to the Children's
Museum in Indianapolis on an overnight trip. (Id. at
18-19.) She also carried, in her purse, $5, 000 in cash that
she had previously received from Nationwide on a separate
insurance claim. (P. Smith Second Stmt. 24-26, ECF No.
64-14.) Carroll, who remained at home alone, stated that he
made dinner on the stove the night before the fire, went to
bed, and awoke at around 1:00 AM due to black smoke in his
bedroom. (A. Carroll Stmt. 3, 5; ECF No. 64-17.) Upon
noticing the smoke, he maintains that he jumped out of his
window, ran to the front of the house to get the dogs out,
and called the fire department. (Id.) The same day,
after learning about the fire from her son, the Plaintiff
made a claim under the Policy. Also on the same day,
Nationwide's claims adjuster met with the Plaintiff and
advanced her money to cover her immediate expenses.
Nationwide's Investigation of the Cause of the
cause-and-origin investigator, Jim Hunter, was assigned to
the case. Four days after the fire, he inspected the house,
took photographs, reviewed the Garrett Volunteer Fire
Department's (VFD) report, collected evidence, and
interviewed the Plaintiff and her son. Though the house
sustained smoke damage, the Plaintiff does not contest
Nationwide's conclusion that the damage did not
constitute a total loss and instead, the house was in such a
condition would allow for remodeling. (P. Smith Second Stmt.
also determined that there were two separate fires in the
house: one in the kitchen on the stovetop, where newspapers
were stuffed underneath the grate of one of the gas burners;
and one in the hallway, where there was an unusual burn
pattern indicating the presence of an ignitable liquid
trailer. (Hunter Report 7, ECF No. 51-2.) Hunter took samples
of the carpet and pad from the hallway and laboratory testing
confirmed that the ignitable liquid on one sample was
gasoline residue. (Id. at 6.) Ultimately, Hunter
opined that the cause of the two fires was “the result
of an intentional human act[;] this is an incendiary
fire.” (Id. at 7.)
to Nationwide, because it had reason to believe that the fire
was intentionally set, the case was assigned to Christopher
Lease of Nationwide's Special Investigations Unit (SIU)
to determine who set the fire. Lease maintains that he
examined the house, canvassed the neighborhood, and
interviewed the Plaintiff and Carroll. (Lease Dep.
108:17-110:8, ECF No. 64-12.) From his interview of the
Plaintiff, Lease noted that one month earlier, the
Plaintiff's basement flooded due to a sewer backup and
she had received $10, 000 from Nationwide. From his
examination of the house, Lease determined that although the
Plaintiff cleaned her basement after the sewer backup, she
did not have the damage repaired. (P. Smith Stmt.
8-9; Case Manager System (CMS) Notes 21-22, ECF No. 64-13.)
also spoke with the Garrett VFD Chief and confirmed that the
VFD found two separate fires in the house. (Lease Dep.
106:12-16; CMS Notes 21.) Though the VFD categorized the fire
as still “under investigation, ” they did not
investigate the fire because the VFD did not have any
certified fire investigators. (Lease Dep. 105:14-106:11; CMS
did not talk to the firefighters who were at the scene of the
fire, nor did he receive any photos from the VFD, though he
requested photos on at least one occasion. (Lease Dep. 108:2-
9.) The VFD Fire Marshal ultimately informed Lease that they
were not interested in investigating the fire any further.
(Id. at 263:2-12.) Lease also learned from the
Garrett Police Department (PD) that Carroll had previously
“vandaliz[ed] mailboxes.” (Id. at
109:11-110:8.) During a recorded interview with Lease, the
Plaintiff confirmed that Carroll had been caught vandalizing
mailboxes and a golf course. (P. Smith Second Stmt. 12-13.)
his interview with the Plaintiff, Lease disclosed that Hunter
found two points of origin of the fire: the first emanating
with the newspapers on the stove and the second due to the
presence of gasoline in the hallway. (Id. at 38-39.)
Lease then explained that the evidence “leads to Austin
[Carroll].” (Id. at 40.) Though neither party
contests the content of the interview, the parties have
differing interpretations of the inferences resulting from
Lease's statement in the following portions of the
I know you filed bankruptcy a couple of years ago and
you're getting back on your feet and doing everything
that you can. And I think you're doing the right thing. I
think you're doing everything that you can.
You're working hard and you're paying your bills, and
you're doing everything, um, Austin is too. It
doesn't seem like Austin's a bad kid.
Um, so now, we have, I'm stuck in a situation, here, and,
obviously, um, when law enforcement requests my information
or my file . . . I have to turn it over. I have to turn it
over. I have to turn it over to the State Fire Marshal's
office, um, and, yeah, the department of insurance, National
Insurance Crime Bureau and Garrett Fire Department or
No one has requested that, obviously. I wanted to take the
opportunity to first meet with you.
And try to figure out what is the best thing we can do okay?
. . . [H]e's only 19 and, you know, you're,
you're not too old yourself. I mean you've got a life
too, I mean, um, in time you'd have quite a few
(Id. at 40, 41, 43-44.)
asked the Plaintiff, “What do you want Nationwide to
do?” and she replied “Like, figure out what
happened.” (Id. at 45.) Lease replied back,
“I'm, okay, I'm certain as to what
happened.” (Id.) Lease informed the Plaintiff
that if she wished to continue to pursue her claim,
Nationwide would move forward with requests to obtain the
Plaintiff's financial records and conduct an examination
under oath (EUO) of both the Plaintiff and Carroll.
(Id.) If the claim was denied, then Nationwide would
have to report “everything” to the National
Insurance Crime Bureau and the Indiana Department of
Insurance, “[a]nd, then they follow up with any
possible criminal charges.” (Id. at 46.)
Alternatively, Nationwide would conclude the investigation if
she decided to no longer pursue her claim. (Id.
(“[T]he other thing is, is if you withdrew your claim
then I stop here.”).)
Plaintiff explained that she was “not gonna just let it
go. I mean . . . I lost my house.” (Id.) She
also expressed doubts that Carroll burned the house down,
stating “[W]hether anybody did come in or not I
don't know. I wasn't there. . . . So it's
possible that somebody did, I don't know. But you're
trying to say Austin did it.” (Id. at 47.)
Lease affirmed, “[T]he evidence, certainly, points that
way . . . .” (Id.) Lease explained that his
canvassing of the neighborhood led him to the conclusion that
the neighborhood was safe and Carroll told him that he did
not have any enemies, so it was unlikely that someone broke
in and started the fire. (Id. at 48). Lease also
confirmed with the Plaintiff that there had been no threats
or harassing phone calls against her. (Id.) The
Plaintiff maintained that she believed Carroll could not have
done it. (Id. (“[T]here's no way that he
would want to lose his house.”).) The interview
concluded with Lease affirming that as long as the Plaintiff
wished to continue to pursue her claim, Nationwide would
continue with the investigation and both the Plaintiff and
Carroll would have to submit to EUOs.
subsequently interviewed Carroll, who confirmed that there
were newspapers near the stove, though Carroll stated he did
not know how they got under the burner. (Carroll Second Stmt.
24, ECF No. 64-15.) Lease explained that the evidence
indicated Carroll started the fire:
Lease: And I know how much you love your mother.
Lease: I mean, you'd probably do anything for you[r]
Lease: And I think she'd do anything for you.
Lease: Right, and the reason I wanted to talk to you both,
you know, both of you here today is because once this can,
continues to grow then the Indiana State Fire Marshal might
want my file, the Indiana Department of Insurance, National
Insurance Crime Bureau, I don't know, anyone that
requests my file I have to legally turn it over to them.
Lease: But we're not, we're not at that stage and no
one's asked for my information, okay. I haven't even
talked to the State Fire Marshal.
Lease: Okay? Um, and I just want to be clear that if, if you
were, ‘cause you seem just as, you seem like a good kid
and you know, you know, and everything points to a bad choice
of, you know, renovate the house, maybe, get a little bit of
insurance money. . . .
Lease: And then, I told her [the Plaintiff], I said, well,
let me talk to Austin [Carroll] because if I talk to Austin
and we can straighten this out then I don't have to go
Lease: I don't have to do anything. I don't have to
talk to Indiana State Fire Marshal, the County Prosecutor, or
anything of that nature, you know what I mean?
Lease: Um, with that being said do you understand everything
that I j-, ...