United States District Court, S.D. Indiana, New Albany Division
ENTRY ON DEFENDANT’S MOTION FOR SUMMARY
RICHARD L. YOUNG, JUDGE
Alvey purchased a home for $17, 500 in August of 2016. After
a fire destroyed the home two months later, he sought over
half a million dollars under his homeowner’s policy
from Allstate Vehicle and Property Insurance Company. Sensing
insurance fraud, Allstate investigated the fire and
ultimately denied Alvey’s claim. None too pleased with
the denial, Alvey sued Allstate alleging it breached the
insurance policy and acted in bad faith. Because Allstate did
not breach the terms of the policy as a matter of law nor act
in bad faith when denying Alvey’s claim, the court
GRANTS Allstate’s Motion for Summary
years, Alvey managed his own construction business in
southeast Indiana, accepting any jobs that would pay the
bills. (Filing No. 70-2, Examination Under Oath of Kevin
Alvey (“Alvey EUO.”) at 21:19 – 22:17). In
August of 2016, he decided to try something new: real estate.
(Id. at 41:12 – 16; 44:22 – 45:2). Alvey
purchased a foreclosed home in French Lick, Indiana for $17,
500. (Id. 41:5 – 22). He spent the first few
weeks making repairs and replacing some of the old
infrastructure with the hopes of selling it for more money or
renting it out. (Id. at 44:22 – 45:2; 50:14
– 16; 97:15 – 98:9).
months later, his plan went up in smoke-literally and
figuratively. (Id. 72:4 – 9). A fire ravaged
the home on October 21, 2016 around 8:30 a.m. (Filing No.
70-3, Sworn Statement in Proof of Loss at 1; Filing No. 70-1,
Origin and Cause Report at 4). Alvey claimed he does not know
who or what caused the fire, and he only learned about it
after receiving a call from the state fire marshal. (Alvey
EUO at 70:16 – 24;75:22 – 76:2). With his home
reduced to ashes, Alvey turned to Allstate. (See
Proof of Loss). He completed a sworn proof of loss and
requested $537, 758 for the loss of the home. (Proof of Loss
denied the claim because Alvey failed to provide a detailed
list of damages, and so Allstate requested that he resubmit
the proof of loss with the appropriate documentation (Filing
No. 70-11, Allstate Letter to Alvey, Nov. 21, 2016). That was
not all though. Concerned with the possibility of insurance
fraud, Allstate launched its own investigation. (Filing No.
70-12, Attorney Letter to Alvey, November 22, 2016).
investigation raised some red flags. For starters, Nathan
Bromen, Allstate’s retained fire expert, classified the
cause of the fire as incendiary and concluded that the fire
originated in the middle of the second floor. (Origin and
Cause Report at 8). The fire started when a handheld,
portable ignition device ignited a petroleum-based liquid
spread on the floor and hallway. (Id.). Pictures
revealed a significant amount of straw (hay) located in the
origin room as well as a sock soaked in ignition liquid.
(Id. at 23 – 27). Translation: somebody
intentionally started the fire. (See Id . at 7).
then examined Alvey under oath and learned that he lied on
his insurance application. (Alvey EUO at 108:15 – 17).
He listed the purchase price as $200, 000 and requested that
the home be insured for $316, 000 even though he only paid
$17, 500 for the home. (Filing No. 70-5, Application for
Insurance at 4). When an Allstate agent recommended reducing
coverage to $195, 000 based on a visual site inspection,
Alvey balked at this request. (Alvey EUO 104:5 – 19).
Allstate also learned through the examination that Alvey
could not produce the phone he was using leading up to the
fire because it was lost or stolen. (Alvey EUO 15:12 –
17 (Q: Do you have the cell phone you were utilizing on the
date of the fire? A: No. Q: Where is it? A: It was lost or
stolen or – but I don’t have it)). He also could
not identify several phone numbers that called his phone on
the day of the fire. (Alvey EUO 90:25 – 92:17).
asked about his location on the day of the fire, Alvey
explained that he traveled to Erlanger, Kentucky two days
before the fire occurred to work on a retention basin that he
had started for one of his clients. (Id. at 56:3
– 57:3). On the way back to Indiana, Alvey’s
truck broke down in Carrollton. (Id. at 61:21
– 23). His parents picked him up and drove him to GEA
Trucking, a friend’s garage, in New Albany, Indiana.
(Id. at 62:1 – 24; see also Filing
No. 70-8, Report of Condit & Associates at 4). Alvey
helped his friend, Denny Endres, with work around the garage
the rest of the night and attempted to find a replacement
part for his truck. (Id. at 63:7 – 25). The
following day, Alvey drove back to Carrollton to pick up his
truck, and that is when he received the phone call from the
state fire marshal concerning the fire. (Id. at 64:5
this story did not entirely check out when Allstate
investigated further. Kevin Sample, Alvey’s client in
Erlanger, explained that he employed Alvey to repair a
retention basin, but the job was completed in April of 2015-a
year and a half before Alvey’s trip. (Filing No. 97-1,
Affidavit of Kevin Sample ¶ 4). Sample has no record of
any communications with Alvey since completion of the project
and does not recall ever speaking with Alvey in October of
2016. (Id. ¶ 6). Additionally, Endres explained
that Alvey showed up “in his pickup truck” when
Alvey arrived at Endres’s garage in New Albany. (Report
of Condit & Associates at 4). Endres also said that Alvey
was there to help out on a job because Alvey owed Endres
financial situation gave Allstate more reason to pause. He
claimed during his examination that his construction company
averages between $175, 000 and $250, 000 in income each year
and that it earned approximately $200, 000 in 2016.
(Id. at 23:9 – 24:16). But Alvey refused to
provide his tax returns to verify that income, (Id.
at 11:9 – 12:7), and a subsequent records request from
his personal and business bank showed that three out of four
of his bank accounts were closed or inactive as of March of
2015. (See Filing No. 70-9, Woodforest National Bank
Records). The one account that was active showed an account
balance of $678.18. (Filing No. 70-10, Genesis Construction
Account Records). Alvey could not point to any other active
accounts and told Allstate that he mostly used cash. (Alvey
EUO at 35:11 – 17).
the examination under oath, Allstate followed up with Alvey
concerning an itemized list of losses. (Filing No. 70-13,
Attorney Letter to Alvey, January 23, 2017). He never
submitted one. He simply sought the maximum amount of
coverage under the policy. (Id.; Alvey EUO at 128:9
– 18 (Q: [H]ave you gotten far enough on your contents
inventory that you can estimate for us the amount of money
you are claiming for personal property? A: No. Like I said,
I’m going to try to get as close to a high number as I
eventually denied Alvey’s claim. (See Filing
No. 70-14, Allstate Denial Letter). The denial was based on
Allstate’s opinion that Alvey intentionally burned down
his home to collect on the insurance proceeds. (Id.
at 5). Allstate also denied Alvey’s claim because he
made material misrepresentations during the application and
claims process, and he failed to submit the necessary
documents to prove his claim. (Id.).
filed this lawsuit on October 20, 2017. (Filing No. 1-2).
Allstate removed the case to federal court on November 16,
2017. (Filing No. 1). Alvey alleges that Allstate breached
the insurance policy by failing to reimburse him for the loss
of the home. (Filing No. 1-2). He also alleges Allstate
engaged in bad-faith by denying him coverage. (Id.).
Allstate filed a counterclaim seeking a declaratory judgment
that there was ...