Last week, the Southern District’s Houston Division granted an insured’s motion for new trial, invalidating the jury’s finding that the insured failed to provide all financial information material to the insurer’s investigation. In Resie’s Chicken & Waffles Restaurant v. Acceptance Indemnity Company, 2016 WL 1643053 (S.D. Tex., Houston Division, April 26, 2016), the insured, Resie’s Chicken & Waffles Restaurant, opened in August 2011. In January, a fire caused damage in excess of $100,000 to the restaurant.  The insured then made a claim under its property loss policy with Acceptance Indemnity Company.  The insurer dispatched its arson investigator to the scene within three days of the fire.  The investigator concluded that the fire had been intentionally set in part because the insured refused to turn over footage from their security cameras.  In addition, the arson investigator identified multiple points of origin and an ignition source for the fire. He concluded that pure ethanol—the high proof alcohol found in whiskey—was an accelerant of the fire.  Other evidence revealed that insured stored beer, wine, and cleaning supplies on its premises.  In contrast to the insurer’s arson investigator, the fire department and insured’s electrical expert concluded that a lighting strike had caused the fire. The insurer’s attorneys sent a letter acknowledging receipt of insured’s financial documents and authorizations to obtain additional financial documents from the insured in October 2012. However, the insurer’s December 2012 denial letter explained that it was denying coverage due to insured’s failure to have an operational fire alarm, failure to provide requested financial information, and its conclusion that the fire had been set intentionally. 

The insured then filed suit against the insurer alleging breach of contract and failure to comply with various provisions of the Texas Insurance Code.  The breach of contract claim was tried to a jury.  The jury found that the insured did not fail to keep an operational fire alarm and that employees had not intentionally set the fire.  However, the jury also found that insured failed to provided all material financial information to the insurer and that this failure was prejudicial to insurer.  The insured moved for judgment as a matter of law, or in the alternative, for a motion for new trial with respect to the jury’s findings regarding financial documents. The insurer moved for judgment that insured take nothing in light of the jury’s finding that insurer was prejudiced by insured’s failure to provide all financial information requested. 

In evaluating the competing motions, the court focused on the conflict between the October 2012 letter from the insurer’s attorneys acknowledging receipt of insured’s pertinent financial information, and the December denial letter from insured’s claims department stating that material financial documents had been withheld.  In addition, the court noted that the insured owner had testified that all financial documents had been provided.  In contrast, the court found no corroborating evidence to support insurer’s assertion in its denial letter that insured had failed to comply with “numerous requests” for financial documents.  Due to the lack of documentation of the timing of these “numerous requests,” the court held that no competent evidence supported the jury’s finding that insured had failed to provide sufficient financial information.  Consequently, the court ordered a new trial on the issue of whether insurer had failed to provide all requested financial information.

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