Spotlight: Settlement for couple whose insurer helped prosecute husband for arson

Law Reporter, Jun 2000

SETTLEMENT FOR COUPLE WHOSE INSURER HELPED PROSECUTE HUSBAND FOR ARSON.

Alsup v. Farmers Ins. Co., U.S. Dist. Ct., W.D. Okla., No. CIV-98-1499-AR, Feb. 18, 2000.

The home of Shirley and Clint Alsup was substantially damaged in a fire. Two days later, an investigator for the Alsups' insurer, Farmers Insurance Company, examined the scene and determined gasoline was present. Farmers then denied the Alsups' claim, based on the presence of gasoline and a determination that the claim satisfied the following elements of Farmers' "suspicious claim" profile: (1) the Alsups were not home when the fire occurred, (2) their house had previously been on the market for sale, and (3) they had accrued several thousand dollars in credit card debt.

Farmers reported its findings to the state fire marshal's office, and Clint Alsup was prosecuted for arson. The company assisted the prosecution by providing counsel and three experts. Mr. Alsup was acquitted, but Farmers continued to deny the Alsups' claim.

William Eakin of Waurika, Oklahoma, the attorney who had defended Mr. Alsup in the arson case, contacted ATLA members Randy P. Conner and Christopher J. Bergin, both of Oklahoma City, Oklahoma, to represent the Alsups in a lawsuit against Farmers for bad faith and malicious prosecution. Eakin assisted Conner and Bergin in the civil litigation. Suit alleged defendant failed to thoroughly investigate plaintiffs' claim by not interviewing plaintiffs' neighbors and other witnesses. They would have testified that they did not smell gas until after they saw defendant's investigator carry a gasoline can into the house. In addition, Perry Brenigar, a fire investigation and arson expert from Duncan, Oklahoma, would have testified that the fire scene did not have the bum patterns and other physical evidence characteristic of an arson fire.

To rebut the claim that this case fit an arson profile, counsel was prepared to present testimony from plaintiffs. They would have testified that nothing was missing from the home and they were not in any financial distress. They would have explained that although their credit card bills were 30 to 45 days overdue at the time of the fire, Mrs. Alsup was in the hospital when the fire occurred and she typically paid the couple's bills. To support plaintiffs' allegations of malicious prosecution, counsel was prepared to present evidence that defendant funded the arson prosecution by paying for expert witnesses who had testified against Mr. Alsup during the criminal trial. This funding occurred even after the prosecutor had expressed doubts about the viability of the criminal prosecution.

Bergin said the biggest obstacle in the case was defendant's refusal to produce its policy and procedures manual. He overcame this obstacle by obtaining this information from other attorneys who had previously received these documents without a protective order.

Bergin believes that this case demonstrates the danger of using profiles to evaluate insurance claims. "Insurance carriers' use of checklists or profiles to analyze claims readily leads to bad faith when insurers fail to consider all the circumstances surrounding a claim," Bergin said. "This case also shows the conflict of interest inherent when an insurer prosecutes a claim that it is supposed to be investigating," he added.

The parties settled before trial for $600,000.

In addition to Brenigar, plaintiffs' expert witnesses included Charles Ashley, claims investigation/bad faith, Oklahoma City; and Steven D. Hinshaw, family medicine, Waurika.

Defendant's experts were Dave Dallas, fire investigation, and WT. Cronenwett, electrical engineering, both of Norman, Oklahoma; and Dennis C. Akin, chemistry/flammable liquids, Hendersonville, Tennessee.

SL