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Alvey v. Allstate Vehicle and Property Insurance Co.

United States District Court, S.D. Indiana, New Albany Division

September 30, 2019

KEVIN ALVEY, Plaintiff,
v.
ALLSTATE VEHICLE AND PROPERTY INSURANCE COMPANY, Defendant. ALLSTATE VEHICLE AND PROPERTY INSURANCE COMPANY, Counter Claimant,
v.
KEVIN ALVEY, Counter Defendant.

          ENTRY ON DEFENDANT’S MOTION FOR SUMMARY JUDGMENT

          RICHARD L. YOUNG, JUDGE

         Kevin 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 Judgment.

         I. Background

         For 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).

         Two 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 at 1).

         Allstate 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).

         The 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).

         Allstate 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).

         When 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 – 9).

         But 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 money. (Id.).[1]

         Alvey’s 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).

         After 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 can get[.])).

         Allstate 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.).

         Alvey filed this lawsuit on October 20, 2017.[2] (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 ...


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