Givens v. West Bend Mut. Ins. Co., No. 4:13 CV 1287, 2014 WL 2946672 (N.D. Ohio Jul. 1, 2014)

The Northern District of Ohio concludes that insurer was justified in denying claim for two fires that were undisputedly set by insured.

            On August 11, 2011, Nina Givens, the administrator of A Mother’s Touch Daycare, contacted her insurance agent, Christina Heed, for a business coverage quote.   During discussions with Ms. Heed, Ms. Givens asked multiple times whether  she and her husband would be able to rebuild the daycare at a different location if the daycare were ever destroyed by fire.  West Bend ultimately issued a business coverage insurance policy to A Mother’s Touch. 

            In April 2012, two fires occurred at A Mother’s Touch.  The Youngstown Fire Department determined that the first fire, which occurred on April 7, was intentionally set, primarily because (1) upon arriving on the scene, the fire department found all the windows and doors were secure and there was no forced entry; (2) an accelerant was used to start the fires; and (3) there were fires in the house at three distinct locations, one of the locations being the stairs to the second floor.  

The day after the fire, Ms. Givens reported the fire to her insurance agent.  When West Bend’s adjustor spoke to the Youngstown Fire Chief, he had already determined that the fire was arson and that the building was damaged, but not a total loss.  On April 10, Ms. Givens met the West Bend adjuster at the property and asked if the daycare could be rebuilt at a different location if the building was a total loss.  The adjuster responded that the building was repairable and proceeded to secure estimates for completing the repairs. 

On April 29, Ms. Givens called the police to report that during a routine check of the property, she smelled smoke coming from the basement.  Upon arrival, the fire department discovered a fire in the basement that had burned itself out.  The fire department determined that the fire, like the first, was an arson because an accelerant was present and there were not possible accidental ignition sources.

West Bend proceeded to take statements from both Ms. Givens and her husband, the sole owner of A Mother’s Touch.   In her statement, Ms. Givens described a 20 percent decline in profits from A Mother’s Touch.  Five months after the first fire, West Bend denied the claim.  West Bend based its denial on three primary grounds: (1) the policy was void because material facts were concealed or misrepresented on the application; (2) coverage did not include dishonest or criminal acts; and (3) the Givenses, or individuals acting on their behalf, intentionally caused the fire.  

After the denial, the Givenses sued West Bend for breach of contract, intentional infliction of emotional distress, loss of consortium, and bad faith, both as individuals and on behalf of A Mother’s Touch.  West Bend filed two motions for summary judgment on the bad faith claims—one motion as to the Givenses and another as to A Mother’s Touch.

The court granted summary judgment in West Bend’s favor finding that West Bend had a reasonable justification for denying the claim.  According to the court, no reasonable jury could conclude that West Bend’s denial of the claim for the two fires lacked reasonable justification and was arbitrary and capricious based on four reasons.   First, there was no dispute that when she applied for an insurance policy, Ms. Givens inquired whether she could rebuild the daycare at a new location if it was destroyed by fire.  Second, there was no dispute that both fires were arson.   Third, there was no dispute that after the first fire Ms. Givens asked the adjuster whether she could rebuild the center at a new location.  Fourth, there was no dispute that the Givens’ income from the daycare had declined.