Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ared-1_05-cv-00039/USCOURTS-ared-1_05-cv-00039-0/pdf.json

Parties Involved:
Allstate Insurance Company
Counter Defendant
Lakeland Cinema
Counter Claimant
Victor Weber
Counter Claimant

Document Text:

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IN THE UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF ARKANSAS

NORTHERN DIVISION

ALLSTATE INSURANCE COMPANY PLAINTIFF

vs. CASE NO. 1:05CV00039GH

VICTOR WEBER d/b/a LAKELAND CINEMA DEFENDANT

ORDER

Plaintiff Allstate Insurance Company (Allstate) has filed an action for declaratory

judgment against defendant Victor Weber (Weber) on a policy of insurance, Policy No. 49

648219 (Policy) to declare it void and exclude coverage for failure to meet a condition of

coverage, which required that a sprinkler be in the theater owned by Weber. In particular

Allstate seeks to void coverage based upon the Protective Safeguard Endorsement which

excludes coverage for the insured’s failure to maintain the required sprinkler system. 

Weber filed a counterclaim, asserting bad faith and entitlement to punitive damages. 

 Weber purchased an insurance policy from Allstate in 1996 to insure his theater

business. On February 4, 2005, there was a fire at one of Weber’s theaters, Lakeland

Cinema, which caused substantial damage. Weber made a claim which Allstate denied.

Allstate has filed a motion for partial summary judgment on Weber’s claims of bad

faith and punitive damages. “An insurance company commits the tort of bad faith when it

affirmatively engages in dishonest, malicious, or oppressive conduct in order to avoid a

just obligation to its insured. We have defined ‘bad faith’ as dishonest, malicious, or

oppressive conduct carried out with a state of mind characterized by hatred, ill will, or a

spirit of revenge. State Auto Property and Cas. Ins. Co. v. Swaim 338 Ark. 49, 56 (1999)

(citations omitted).

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The Court considered the reply brief Allstate submitted in rendering its decision.

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Allstate argues that there is no evidence to support a bad faith claim against it. It

fully investigated the claim and based on the investigation denied the claim. It contends

that a bad faith claim cannot be based on a good faith denial or a mere refusal to pay. See

Steven v. Union Standard Ins. Co., 294 Ark. 651.654 (1988).

Weber contends that he did not sign the insurance application or misrepresent that

he had a sprinkler system Weber states that he never told Allstate or its agents that he

had sprinkler systems in his movie theaters and he contends he never signed an insurance

policy clause that excluded coverage if there was not a sprinkler system. He asserts that

Allstate acted in bad faith in basing its denial of coverage on an insurance application with

a forged signature and the subsequent endorsement resulting from the forged application.

Allstate denied the claim in part based on what it contends were material

misrepresentations made in the application for insurance. As noted in the previous order

denying the motions for summary judgment, there is a question of fact as to what Allstate

knew with regard to the alleged forgery of the application. That is, if Allstate knew that the

signature on the application had been forged, that Weber had not authorized the signature

or that the application contained erreoneous information a jury could find that Allstate’s

denial of the claim was made in bad faith. See Cincinnati Life Ins. Co. v. Mickles, 85 Ark.

App. 188, 201 (2004) (insurer committed acts of bad faith after claim was asserted “by

turning a blind eye to clear evidence that insured had made no misrepresentations and

that, in fact, all the evidence pointed to the conclusion that it or its agent had altered an

insured’s application.”)

The Court finds that the facts are in dispute and that Allstate is not entitled to

judgment on Weber’s bad faith and punitive damages claims.

Accordingly, the motion for partial summary judgment is denied; the motion for

leave to file a reply is granted.1

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IT IS SO ORDERED this 26th day of October, 2006.

__________________________________ UNITED STATES DISTRICT JUDGE

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