Federal Judge Enters Judgment for Safeco against Homeowner who fraudulently Received Living-Expense Proceeds


This month concluded a bench trial in which Senior District Judge David Alan Ezra of Austin found that a homeowner made fraudulent claims for living expenses in violation of Safeco’s insurance policy. The dispute in Safeco Ins. Co. of Indiana v. Igwe, No. AU-14-CV-587-DAE, 2016 WL 866360 (W.D. Tex., Mar. 3, 2016), arose from a claim that insured Charles Igwe reported on March 10, 2011 for water damage to his home. While Safeco assessed and repaired the water damage, it arranged for Igwe’s temporary housing under the “loss of use” coverage of his homeowners’ policy. From early in the claim, Igwe complained to Safeco and its third-party housing contractor about the housing options offered to him. Specifically, he complained that the hotels and condominiums that Safeco offered were not large enough to accommodate his wife and four children. Igwe claimed and received per diem reimbursement for expenses for each member of his family.

In April of 2011, Safeco’s investigation determined that Igwe and his wife were separated and that his children did not live with him at all times. In a September 2, 2011 letter, Safeco notified Igwe that its $17,200 per diem allowance was comprised of $4,300 per person to cover meal expenses for each family member. Safeco advised him to submit reimbursement receipts for expenses incurred after July 25, 2011. Safeco’s letter also informed Igwe that the home restoration would be completed on December 2, 2011 and that this living-expense coverage would end on this date.

Igwe later filed suit against Safeco in Hays County state court for breach of contract and violations of the Texas Insurance Code for Safeco’s failure to pay two claims under the policy. Safeco removed the action to federal court in Austin and counterclaimed for fraud by Igwe in connection with the living-expense claim. Safeco moved for summary judgment on Igwe’s claims, which the district court granted. This left Safeco’s counterclaim as the only remaining claim for trial.

In a bench trial, Judge Ezra found that Safeco paid Igwe $17,200 for per diem expenses; $76,978.43 for two hotel rooms between March 1, 2011 and November 3, 2011; and $12,970.46 to reimburse Igwe for his stay at the Omni Hotel after November 6, 2011. Given evidence that Igwe’s children did not live with him during most of this period, the Court found that Igwe committed fraud on Safeco in securing the various living-expense payments. The court further found that this fraud voided the policy, requiring Igwe to repay all amounts Safeco paid to him under the “loss of use” coverage.

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