The Eastern District of PA recently awarded summary judgment to an insurer, as well as $25,000 in damages, for an insured’s material misrepresentation in his insurance application in the case Payne v. Allstate Insurance Co..

On December 31, 2009, the insured, Payne, entered into a homeowner’s insurance agreement with Allstate Insurance Company (“Allstate”) to insure his home located in Philadelphia, PA.  As a prerequisite to obtaining the insurance agreement, Payne had to fill out an insurance application.  On the application, Allstate specifically asked Payne whether he used any alternative or supplemental heating source in his home.  Payne answered “no.”

Unsurprisingly, on February 9, 2010, Payne’s home caught fire.  Thereafter, Payne filed a claim with Allstate.  As part of its claim investigation, Allstate requested that Payne submit to an examination under oath.  During the examination, Payne admitted to using kerosene heaters in the home and that the kerosene heaters may have started the fire.  After the examination, Allstate denied Payne’s claim leading to a declaratory judgment action.  Allstate counterclaimed, suing Payne for breach of contract, breach of common law duty of good faith, and insurance fraud.  Both parties filed motions for summary judgment on the issues.

Upon review, the court found that Payne made a material misrepresentation when he failed to disclose that he used kerosene heaters, an alternative or supplemental heating source, on his insurance application.  Specifically, the court stated that the misrepresentation was material because whether Payne used alternative sources of heat was pertinent to the risk at issue in this case: fire.  Because of Payne’s material misrepresentation regarding the use of an alternative heat source in the house, the court granted summary judgment as to Allstate’s claims for breach of contract, breach of common law duty of good faith, and insurance fraud.  The court also awarded Allstate $25,000 in damages.  Likewise, because of Payne’s material misrepresentation, the court dismissed Payne’s breach of contract claim against Allstate with prejudice.

Thanks to Erin Connolly for her contribution.

For more information, contact Denise Fontana Ricci at .