Insurance Compnay Gets Burned For Unsupported Arson Allegation

A Superior Court Judge sent a costly message to Travelers Home and Marine Insurance Company after it declined to pay a policyholder for losses suffered in a residential fire based on its own findings that the fire was intentionally set. The fire occurred on February 26, 2009, in Pomfret, Connecticut. Local fire officials determined that the fire was accidental and likely caused by faulty wiring. Travelers, however, claimed that its insured poured kerosene in the home and ignited it.

The insured C. Andrew Riley sued Travelers for breach of contract and negligent infliction of emotional distress after he was forced to spend $880,000 of his own money to repair his home. At trial, Riley’s attorneys presented evidence that Travelers’ investigators encouraged the local fire marshal to reconsider his determination with respect to the cause of the fire. The fire marshal refused and Riley received a $1.5 million jury verdict. Travelers filed a post-trial motions seeking to have the verdict thrown out, however, its efforts were unsuccessful as Judge David Sheridan instead added $76,000 in prejudgment interest to the verdict.

The additional $76,000 was not all that Travelers received from Sheridan. In the ruling, Travelers received harsh criticism from Sheridan for its tactics in determining that the cause of the fire was arson and denying coverage. “All of the collecting, analyzing, and interpreting of evidence was performed by Travelers employees, arguably skewing the results against the insured, and in favor of arson,” wrote Sheridan. “In the end, the analysis hardly approved to a scientific certainty, much less a preponderance of the evidence, that the fire was intentional, rather than accidental in origin. Yet, it was the basis for Travelers’ business decision that it was relieved of its contractual obligation to pay the claim of its insured.”

“This is not a breach of contract as a result of an honest mistake or a good faith misunderstanding,” continued Sheridan. “It is in the interests of justice to award interest for the detention of money under such circumstances.”

Sheridan’s 36-page ruling was uncharacteristic for a post-trial motion as it is evident that he wanted to send a message to Travelers with respect to its business practices and future handling of fire claims. Sheridan’s ruling should also serve as notice to other insurers that denying coverage based on a one-sided investigation which lacks sufficient supporting facts will not be tolerated. The case is cited C. Andrew Riley v. The Travelers Home and Marine Insurance Company and was decided in the Superior Court of Connecticut.  

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