The following facts, unless otherwise indicated, are not in dispute. 1

The Rental Property was insured against loss or damage due to a fire under 2

Allstate Policy No. 964403968. Docket No. 15 at 5-6, ¶ 3.

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLORADO

Judge Philip A. Brimmer

Civil Action No. 11-cv-02369-PAB-KMT

LARRY SIPES,

Plaintiff,

v.

ALLSTATE INDEMNITY COMPANY, an Illinois corporation,

Defendant.

ORDER

This matter is before the Court on the Motion for Partial Summary Judgment filed

by defendant Allstate Indemnity Company (“Allstate”) [Docket No. 42]. The Court has

jurisdiction over this case pursuant to 28 U.S.C. § 1332.

I. BACKGROUND1

This case involves a dispute between plaintiff Larry Sipes and Allstate over

whether Allstate properly denied coverage for a fire that damaged plaintiff’s rental

property. The fire occurred on March 30, 2010 at Mr. Sipes’ rental house located at

413 30 1/4 Rd., Grand Junction, Mesa County, CO (the “Rental Property”). Allstate

insured the Rental Property. As a result of the fire, Mr. Sipes filed a claim with Allstate 2

for insurance benefits. 

Case 1:11-cv-02369-PAB-KMT Document 153 Filed 06/07/13 USDC Colorado Page 1 of 23
Mr. Rowland later issued a “final” report that contained identical conclusions. 3

Docket No. 42 at 6, n. 1. 

The word “incendiary” as used in the fire investigation context means a fire that

4

is intentionally, not accidentally, set by one or more persons. Somnis v. Country Mut.

Ins. Co., 840 F. Supp. 2d 1166, 1169 (D. Minn. 2012).

2

Allstate assigned Mr. Sipes’ claim to senior claims analyst Stephanie Littleton,

manager of Allstate’s special investigations unit. Docket No. 42-2 at 5 (Littleton Dep.

12:20-25). To investigate Mr. Sipes’ claim, Allstate obtained a fire origin and cause

report prepared by the Clifton Fire Department, Docket No. 42-7, retained Phoenix

Investigations, a private fire inspection company, to prepare a fire origin and cause

report, Docket No. 42-8, and retained Rita L. Booker, an attorney who specializes in

insurance defense litigation, Docket No. 42-4 at 3-4 (Booker Dep. 7:17-8:6), to prepare

a coverage analysis opinion letter. Docket No. 42-3. 

The Clifton Fire Department’s report on the origin and cause of the fire was

prepared by Chris Rowland, a firefighter with the Clifton Fire Department. Mr. Rowland

began his investigation after the Clifton Fire Department extinguished the fire on March

30, 2010. He issued a Preliminary Origin and Cause Investigation Report [Docket No.

42-7] on May 5, 2010. Mr. Rowland’s investigation consisted of an examination of the 3

exterior and interior of the rental property, as well as interviews with Mr. Sipes,

firefighters, previous tenants of the Rental Property, and neighbors of the Rental

Property. Docket No. 42-7 at 1. In the report’s conclusions, Mr. Rowland opined that

the fire had two areas of origin (1) the north wall of the kitchen and (2) the utility room

west of the kitchen. Id. at 7. In addition, Mr. Rowland opined that the fire was

incendiary. Id. Mr. Rowland reached this conclusion because he eliminated all 4

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3

potential accidental causes of the fire, such as lightning, chemicals capable of

spontaneous ignition, fire sources from the exterior of the house, overheated or

overloaded electrical systems, household devices plugged into a power source, and

explosions due to the release of natural gas. Id. at 8. Mr. Rowland’s belief that the fire

was incendiary was further bolstered by evidence indicating that there were (1) multiple

areas of origin, (2) insufficient fuel loads in the areas of origin to sustain a fire, (3) no

reasonable accidental or natural ignition sources in the areas of origin, and (4) the fact

that the Rental Property was unlocked before the fire. Id. at 7-8.

In addition to the report from the Clifton Fire Department, Allstate retained

Phoenix Investigations for a second opinion on the origin and cause of the fire. Docket

No. 42-8 at 1. Jason Kramarczyk, a certified fire and explosion investigator with

Phoenix Investigations, prepared a fire origin and cause report. To conduct his

investigation, Mr. Kramarczyk examined the interior and exterior of the Rental Property,

interviewed Mr. Sipes and his neighbors, and contacted the Clifton Fire Department for

a copy of Mr. Rowland’s report. Id. at 2. Based on his investigation, Mr. Kramarczyk

made the following findings: (1) the fire originated near the floor area surrounding the

north wall of the kitchen to the left/west of the cabinets; (2) all accidental causes of the

fire were examined and eliminated; (3) the fire damage was not consistent with the fuel

load reportedly present in the kitchen prior to the fire; and (4) the fire was most likely

caused by an unidentified human act. Docket No. 42-8 at 1. Mr. Kramarczyk, however,

could not opine as to whether the unidentified human act was intentional. Docket No.

47-6 at 5 (Kramarczyk Dep. 155:18-20). 

Case 1:11-cv-02369-PAB-KMT Document 153 Filed 06/07/13 USDC Colorado Page 3 of 23
4

In addition to the fire origin and cause reports, Allstate retained Ms. Booker to

prepare a coverage analysis opinion. On August 31, 2010, Ms. Booker issued a

coverage analysis opinion based on a review of the fire origin and cause reports, a

deposition of Mr. Sipes, and an analysis of the case law applicable to Mr. Sipes’ claim.

Docket No. 42-3 at 1. Ms. Booker concluded that there was a “reasonable good-faith

basis upon which to deny Mr. Sipes’ property damage claims as an intentional act

excluded from coverage.” Docket No. 42-3 at 8. 

Ms. Booker opined that Allstate also had sufficient evidence to deny Mr. Sipes’

coverage claim based on the defense of arson. Docket No. 42-3 at 5-6. Specifically,

Ms. Booker found that the fire origin and cause reports and the relevant interviews

sufficiently established that (1) there was evidence of arson, (2) Mr. Sipes had a motive

to commit arson, and (3) the circumstantial evidence supported a finding of arson. Id.

at 5-7. With regard to evidence of arson, Ms. Booker reasoned that the findings from

the fire origin and cause reports conducted by Mr. Rowland and Mr. Kramarczyk

showed that “an intentionally set fire [was] the only fire cause scenario that fits with both

the fire’s origin being distant from a fuel load and the cause of the fire in an area distant

from any other potential causes.” Id. at 6. As to motive, Ms. Booker opined that mold

in the Rental Property gave Mr. Sipes a motive to commit arson because: (a) Mr. Sipes

claimed that he did not know the extent of the mold even though two different tenants

had reported the mold; (b) the mold was the reason the Wesolowskis – the prospective

tenants of the Rental Property – chose to break their lease agreement; and (c) Mr.

Sipes specifically denied the existence of mold in the Rental Property when first

questioned by Mr. Rowland and conceded its existence only after Mr. Rowland

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5

interviewed the Wesolowskis. Id. at 6. Additionally, Ms. Booker opined that Mr. Sipes

could have had a financial motive to commit arson because a report prepared by Larry

Engrav, an accountant, concluded that Mr. Sipes did “not receive reportable income

sufficient to cover his household expenses.” Id. at 4. Finally, Ms. Booker found that the

circumstantial evidence supported an inference of arson because it was suspicious that

Mr. Sipes left the Rental Property unlocked and bought several gallons of easily

returnable paint on the day of the fire, even though he allegedly did not personally

inspect the mold. Id. at 6-7. In particular, Ms. Booker found that Mr. Sipes’ purchase of

paint without any color additive proved suspicious because Mr. Sipes could return the

untinted paint for full value and it was reasonable to infer from the purchase that it was

made to establish an alibi. Id. at 7.

After Ms. Littleton received the fire origin and cause reports and Ms. Booker’s

coverage analysis, she prepared an “Outcome Summary,” which described Allstate’s

analysis of Mr. Sipes’ coverage claim. Docket No. 42-6 at 1-2. Ms. Littleton’s summary

concurred with Ms. Booker’s findings: it described the fire at the Rental Property as

“suspicious,” noted that Mr. Sipes’ inconsistent statements about the mold in the Rental

Property raised questions about his credibility, and suggested that mold was a potential

motive. Id. at 1. Ms. Littleton’s summary also concluded that, although there was no

direct evidence linking Mr. Sipes with the fire at the Rental Property, the evidence was

sufficient to establish a reasonable good-faith basis upon which to conclude that Mr.

Sipes intentionally set fire to the Rental Property, thereby excluding the loss from

coverage under the insurance policy. Docket No. 42-6 at 1. 

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Ms. Littleton testified that she considered the reports from all investigators and 5

consulted Rand Smith to ensure that the decision to deny coverage was defensible. 

Docket No. 42-2 at 15 (Littleton Dep. 79:10-25). 

6

On September 18, 2010, Rand Smith, an Allstate claims analyst with experience

investigating arson claims, reviewed Ms. Littleton’s summary. Docket No. 42-6 at 2; 5

Docket No. 42-2 at 15 (Littleton Dep. 79:9-23). Mr. Smith concurred with Ms. Littleton’s

summary and concluded that there was sufficient evidence to believe that Mr. Sipes

caused the fire at the Rental Property, with his financial difficulties or the mold being a

motive for the arson. Docket No. 42-6 at 2. Of particular importance to Mr. Smith was

Mr. Sipes’ presence at the Rental Property the morning of the fire, the fact that Mr.

Sipes purchased paint “without tinting or adding color,” which indicated that he intended

to return the paint, and the fact that there remained questions about whether Mr. Sipes

had sufficient income to cover the mortgage on the Rental Property. Id. 

On September 23, 2010, Allstate sent Mr. Sipes a Claim Denial letter [Docket

No. 42-1]. The letter explained that Allstate had denied Mr. Sipes’ coverage claim

based on the physical evidence gathered at the Rental Property, the Clifton Fire

Department’s report, the Phoenix Investigations report, and Ms. Booker’s coverage

analysis letter. Docket No 42-1. The Claim Denial letter states that, after investigation,

Allstate had a reasonable belief that (1) the fire was intentionally set and not caused by

any natural or accidental means, (2) Mr. Sipes either started the fire, or the fire was set

at his direction or with his knowledge and consent; and (3) Mr. Sipes concealed or

misrepresented material facts related to the Rental Property, such as the cause of loss,

his activities prior to the loss, his testimony that he never saw mold in the Rental

Case 1:11-cv-02369-PAB-KMT Document 153 Filed 06/07/13 USDC Colorado Page 6 of 23
The Allstate Policy states, in relevant part: 6

Section 1 - Your Property Losses We Do Not Cover Under

Coverage’s A & B:

We do not cover loss to the property described in Coverage A - Dwelling

Protection or Coverage B - Other Structures Protection consisting of

or caused by:

 . . .

9. Intentional or criminal acts of, or at the direction of, an insured

person, if the loss that occurs:

a) may be reasonably expected to result from such acts; or,

b) is the intended result of such acts.

This exclusion applies regardless of whether an insured

person is actually charged with, or convicted of, a crime.

Misrepresentation, Fraud or Concealment

We do not cover any loss or occurrence in which any insured person

has concealed or misrepresented any material fact or circumstance

relating to this insurance, before or after the loss.

Docket No. 42-1 at 2 (emphasis in original). 

7

Property, and his financial condition before and after the loss, which placed Mr. Sipes’

coverage claim within the exclusions of the insurance policy. Id. at 2-3. Based on the

foregoing, Allstate notified Mr. Sipes that his claim was excluded under the “intentional

act,” and “misrepresentation, fraud or concealment” clauses of the policy. See Docket 6

No. 42-1 at 2-3. Mr. Sipes disputes Allstate’s conclusions that he intentionally set fire to

the Rental Property and concealed or misrepresented any information regarding the

fire. Docket No. 47-8 at 8 (Sipes Dep. 93:16-18); id. at 6 (Sipes Dep. 81:13-21). 

Case 1:11-cv-02369-PAB-KMT Document 153 Filed 06/07/13 USDC Colorado Page 7 of 23
8

On September 8, 2011, Mr. Sipes filed this case. In his complaint, he brings

claims against Allstate for breach of contract and unreasonable delay or denial of

insurance benefits in violation of Colo. Rev. Stat. §§ 10-3-1115 and 10-3-1116. Docket

No. 1. Through the present motion, Allstate requests that the Court enter summary

judgment for Allstate on Mr. Sipes’ claim of unreasonable delay or denial of insurance

benefits. 

II. STANDARD OF REVIEW

Summary judgment is warranted under Federal Rule of Civil Procedure 56 when

the “movant shows that there is no genuine dispute as to any material fact and the

movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a); see Anderson

v. Liberty Lobby, Inc., 477 U.S. 242, 248-50 (1986). A disputed fact is “material” if

under the relevant substantive law it is essential to proper disposition of the claim. 

Wright v. Abbott Labs., Inc., 259 F.3d 1226, 1231-32 (10th Cir. 2001). Only disputes

over material facts can create a genuine issue for trial and preclude summary

judgment. Faustin v. City & Cnty. of Denver, 423 F.3d 1192, 1198 (10th Cir. 2005). An

issue is “genuine” if the evidence is such that it might lead a reasonable jury to return a

verdict for the nonmoving party. Allen v. Muskogee, 119 F.3d 837, 839 (10th Cir.

1997).

III. ANALYSIS

Allstate argues that it acted reasonably when it relied on the results of the fire

and cause investigations, as well as Ms. Booker’s coverage analysis, to deny Mr. Sipes’

coverage claim. Docket No. 42 at 13-14. Specifically, Allstate claims that, based on

Case 1:11-cv-02369-PAB-KMT Document 153 Filed 06/07/13 USDC Colorado Page 8 of 23
 A first-party claimant means an individual, corporation, association, partnership, 7

or other legal entity asserting an entitlement to benefits owed directly to or on behalf of

an insured under an insurance policy. Colo. Rev. Stat. § 10-3-1115. It is undisputed

that Mr. Sipes is a first-party claimant within the meaning of the Statutes. 

9

the information it possessed on September 23, 2010 – the date on which it sent the

Claim Denial letter – it had a reasonable belief that Mr. Sipes intentionally set fire to the

Rental Property and misrepresented information during the investigation, thereby

placing his claim outside the policy limits. Id. at 15-16. Moreover, Allstate contends

that, based on its investigation of Mr. Sipes’ coverage claim, it had a reasonable belief

that it could present a valid defense of arson. Id. Mr. Sipes disputes that he set the fire

at the Rental Property and argues that there are genuine disputes of material fact about

the inferences Allstate draws from the evidence gathered during its investigation. 

Docket No. 47 at 9-10.

Under § 10-3-1115, an insurer may not “unreasonably delay or deny payment of

a claim for benefits owed to or on behalf of any first-party claimant.” Colo. Rev. Stat. 7

§ 10-3-1115(1)(a). Similarly, § 10-3-1116 states that “[a] first-party claimant as defined

in section 10-3-1115 whose claim for payment of benefits has been unreasonably

delayed or denied may bring an action in a district court to recover reasonable attorney

fees and court costs and two times the covered benefit.” Colo. Rev. Stat. § 10-3-

1116(1). An insurer’s delay is unreasonable “if the insurer delayed or denied

authorizing payment of a covered benefit without a reasonable basis for that action.” 

Colo. Rev. Stat. § 10-3-1115(2) (emphasis added). 

The determination of whether an insurer has breached its duties to the insured is

one of reasonableness under the circumstances. Estate of Morris v. COPIC Ins. Co.,

Case 1:11-cv-02369-PAB-KMT Document 153 Filed 06/07/13 USDC Colorado Page 9 of 23
10

192 P.3d 519, 523 (Colo. App. 2008). In other words, the question is whether a

reasonable insurer under similar circumstances would have denied or delayed payment

of the claim. Id. The reasonableness of an insurer’s conduct must be determined

objectively, based on proof of industry standards. Travelers Ins. Co. v. Savio, 706 P.2d

1258, 1274 (Colo. 1985). 

Whether an insurer’s conduct was reasonable under the circumstances is

ordinarily a question of fact for the jury when conflicting evidence exists. Zolman v.

Pinnacol Assurance, 261 P.3d 490, 497 (Colo. App. 2011). However, in appropriate

circumstances, as when there are no genuine disputes of material facts,

reasonableness may be decided as a matter of law. COPIC, 192 P.3d at 524. 

Under common law bad faith principles, Colorado courts traditionally find that it is

reasonable for an insurer to challenge claims that are “fairly debatable.” Zolman, 261

P.3d at 496. Thus, under common law, finding that an insurer’s justification for denying

or delaying payment of a claim is “fairly debatable” typically weighs against finding that

an insurer acted unreasonably. Sanderson v. Am. Fam. Mut. Ins. Co., 251 P.3d 1213,

1218 (Colo. App. 2010) (citation omitted). 

Because the statutes at issue here, however, create a right of action that is

different from the common law tort of bad faith breach of an insurance contract, the

“burden of proving th[e] statutory claim is less onerous than that required to prove a

claim under the common law for breach of the duty of good faith and fair dealing.” 

Kisselman v. Am. Fam. Mut. Ins. Co., 292 P.3d 964, 975 (Colo. App. 2011). Even if a

defendant’s denial was “fairly debatable” in the common law context, that would not

Case 1:11-cv-02369-PAB-KMT Document 153 Filed 06/07/13 USDC Colorado Page 10 of 23
11

alone establish that the defendant’s actions were reasonable as a matter of law under

the statutes. Vaccaro v. Am. Fam. Ins. Grp., 275 P.3d 750, 760 (Colo. App. 2012); see

also Sanderson, 251 P.3d at 1218 (noting that, even under common law, finding that a

claim was fairly debatable “is not a threshold inquiry that is outcome determinative as a

matter of law, nor is it both the beginning and the end of the analysis in a bad faith

case”).

Allstate argues that it reasonably relied on its experts to conclude that Mr. Sipes’

claim was excluded from coverage because there was evidence showing that (1) Mr.

Sipes intentionally set the fire or the fire was set at his direction and (2) Mr. Sipes made

misrepresentations during the investigation. Docket No. 42-1 at 2. The Court will first

address whether it was reasonable for Allstate to rely on the evidence gathered during

its investigation to conclude that Mr. Sipes intentionally caused the fire at the property. 

 Allstate claims that, based on the origin and cause reports and Ms. Booker’s

coverage analysis, it had a reasonable basis to believe that (1) the fire at the Rental

Property was incendiary, (2) Mr. Sipes had a motive to set fire to the Rental Property,

and (3) the circumstantial evidence supported an inference of arson. Docket No. 42 at

13-17; see Klayman v. Aetna Cas. & Sur. Co., 501 P.2d 750 (Colo. App. 1972) (noting

that, to prove that plaintiff’s coverage claim is excluded under the terms of the contract

based on a defense of arson, defendant must prove by a preponderance of the

evidence that plaintiff conspired to set fire to his rental property).

With regard to evidence of arson, Allstate contends that it had a reasonable

basis to believe that the fire at the Rental Property was incendiary because the fire

origin and cause reports from the Clifton Fire Department and Phoenix Investigations

Case 1:11-cv-02369-PAB-KMT Document 153 Filed 06/07/13 USDC Colorado Page 11 of 23
NFPA 921 (2011): Guide for Fire and Explosion investigations, available at 8

http://www.nfpa.org/aboutthecodes/list_of_codes_and_standards.asp.

12

both eliminated accidental causes of the fire and concluded that a human act must

have caused the fire. Docket No. 42 at 13. Additionally, Ms. Booker opined that an

intentionally set fire was the only theory consistent with the origin of the fire and the

location of the fuel load. Id. at 14. 

Mr. Sipes claims that Allstate’s reliance on Mr. Rowland and Mr. Kramarczyk’s

reports was unreasonable because Allstate has not shown that the conclusions of the

reports are valid and Allstate did not take into consideration the expert report from John

Lentini, Docket No. 47-7, Mr. Sipes’ fire origin and cause expert. Docket No. 47 at 5, 9.

The Court finds that Allstate had no reason, based on the contents of the reports

themselves, to question the validity of the fire origin and cause reports provided by the

Clifton Fire Department and Phoenix Investigations. With regard to the Clifton Fire

Department’s report, it is undisputed that Mr. Rowland reached his opinions about the

origin and cause of the fire by relying in part on the National Fire Prevention Association

(“NFPA”) 921: Guide for Fire and Explosion Investigations (2008). The parties here do 8

not dispute that NFPA 921 is a generally accepted peer reviewed fire investigation

guide that is the industry standard for investigations of fires and explosives. See

Travelers Prop. & Cas. Corp. v. Gen. Elec. Co., 150 F. Supp. 2d 360, 366 (D. Conn.

2001); United Fire & Cas. Co. v. Whirlpool Corp., 704 F.3d 1338, 1341 (11th Cir. 2013). 

Additionally, Mr. Rowland utilized a generally accepted systematic approach to

determine the origin of a fire as he performed a physical inspection of the interior and

exterior of the Rental Property; analyzed the interior burn patterns; and observed that

Case 1:11-cv-02369-PAB-KMT Document 153 Filed 06/07/13 USDC Colorado Page 12 of 23
Drop-down burning occurs when combustible material falls from an elevated 9

location onto the floor causing a low, even burn. Docket No. 42-7 at 3.

Negative corpus is the process of determining the ignition source of a fire by 10

eliminating all other ignition sources found, known, or believed to have been present in

the area of origin. Docket No. 38-4 at 3 (NFPA 921 § 18.6.5 (2011)). Negative corpus

is short for negative corpus delicti and “is fire investigator shorthand for the

determination that a fire was incendiary based on the lack of evidence of an accidental

cause.” 5 Faigman, Kaye, Saks & Sanders, Modern Scientific Evidence: The Law and

Science of Expert Testimony § 39:65 (2012). 

In 2011, the NFPA rejected fire investigators’ use of negative corpus to reach 11

the conclusion that a fire is incendiary, finding that negative corpus “is not consistent

with the Scientific Method, is inappropriate, and should not be used because it

generates un-testable hypotheses, and may result in incorrect determinations of the

ignition source and first fuel ignited.” Docket No. 38-4 at 3 (NFPA 921 § 18.6.5).

Instead, the NFPA recommended that investigators who eliminated all accidental

causes of a fire but did not find a fuel source in the area of origin conclude that the

cause of the fire is “undetermined.” Id. (NFPA § 18.6.5.1).

13

the fire’s trajectory suggested drop-down burning originating from the kitchen. Docket 9

No. 42-7 at 4-5. Based on his examination of the property, his analysis of the burn

patterns, and observations of the fire’s trajectory, Mr. Rowland opined that the fire

originated around the “V” burn pattern on the north wall of the kitchen and the calcined

drywall in the utility room. Id. at 7; see Russell v. Whirlpool Corp., 702 F.3d 450, 457

(8th Cir. 2012) (finding a fire expert’s methodology reliable when the expert considered

burn patterns, identified a point of origin, and eliminated as many alternative causes of

the fire as possible). Mr. Rowland’s use of negative corpus, or process of elimination,

10

to rule out all ignition sources present in the areas of origin to conclude that the fire was

incendiary was a generally accepted methodology that complied with NFPA 921 at the

time of his investigation. See NFPA § 18.5 (noting that investigators should 11

hypothesize about ignition sources and test these hypotheses through deductive

Case 1:11-cv-02369-PAB-KMT Document 153 Filed 06/07/13 USDC Colorado Page 13 of 23
14

reasoning); Hickerson v. Pride Mobility Prods. Corp., 470 F.3d 1252, 1257-58 (8th Cir.

2006) (holding that “[b]ased on the identification of a point of origin and the elimination

of other possible causes, it is permissible for [the cause and origin expert] to testify as

to the point of origin and to explain that he inferred through process of elimination that

the PowerChair was the cause of the fire”); Somnis v. Country Mut. Ins. Co., 840 F.

Supp. 2d 1166, 1172 n.2 (D. Minn. 2012) (discussing the history of negative corpus and

NFPA 921). Because Mr. Rowland’s methodology, including the use of negative

corpus, was generally accepted by the relevant scientific community at the time Allstate

sent its Claim Denial letter, the Court finds that it was reasonable for Allstate to rely on

Mr. Rowland’s fire origin and cause report in making its coverage decision. See State

Farm Mut. Auto Ins. Co. v. Reyher, 266 P.3d 383, 390 (Colo. 2011) (noting that an

insurer’s decision to deny benefits to its insured must be evaluated based on the

information before the insurer at the time of that decision); Totty v. Chubb Corp., 455 F.

Supp. 2d 376, 390 (W.D. Pa. 2006) (noting in a bad faith insurance case that, “even if

the expert incorrectly assessed the cause of damage, this is not evidence that his

conclusions were unreasonable or that Defendant acted unreasonably in relying upon

them”); cf. State Farm Lloyds v. Nicolau, 951 S.W.2d 444, 448 (Tex. 1997) (noting in a

bad faith insurance case that an “insurer’s reliance upon an expert’s report, standing

alone, will not necessarily shield the carrier if there is evidence that the report was not

objectively prepared or the insurer’s reliance on the report was unreasonable”).

The Court also finds that it was reasonable for Allstate to rely on Mr.

Kramarczyk’s fire origin and cause report. Although Mr. Kramarczyk did not utilize the

Case 1:11-cv-02369-PAB-KMT Document 153 Filed 06/07/13 USDC Colorado Page 14 of 23
Pursuant to NFPA § 17.1.2, to determine the origin of the fire, an investigator 12

must analyze witness information, fire patterns, arc mapping (the analysis of whether

the electrical system caused damage), and fire dynamics (the analysis of fire growth). 

15

NFPA to prepare his report, NFPA 921 § 1.3 specifically indicates that “[d]eviations from

[NFPA] procedures . . . are not necessarily wrong or inferior but need to be justified.” 

See also Pekarek v. Sunbeam Prods., Inc., 672 F. Supp. 2d 1161, 1176 (D. Kan. 2008)

(noting that the fact that a fire investigator did not cite or use NFPA 921 as his guide

does not necessarily mean that his methodology is not reliable). Mr. Kramarczyk’s

methodology was otherwise consistent with the NFPA as he identified the origin of the

fire based on an examination of the exterior and interior of the property, analysis of burn

patterns, and observation of the fire’s trajectory. Docket No. 42-8 at 10-13. 12

Additionally, Mr. Kramarczyk eliminated all possible accidental ignition sources and

opined that “[a]n intentionally set fire is the only fire cause scenario that fits both the

fire’s origin being distant from a fuel load and the cause of the fire in an area distant

from any other potential causes.” Docket No. 42-8 at 14. Because Mr. Kramarczyk

used a methodology that is generally accepted and consistent with the NFPA, the Court

finds that it was reasonable for Allstate to rely on his fire origin and cause report in

making its coverage decision. Schlesinger v. United States, 898 F. Supp. 2d 489, 504

(E.D.N.Y. 2012) (noting that courts do not generally refuse “to admit expert testimony in

an arson case because” the expert used a “methodology other than that prescribed in

NFPA 921”); Farmland Mut. Ins. Cos. v. Chief Indus., Inc., 170 P.3d 832, 836 (Colo.

App. 2007) (finding that the process of elimination is a reliable methodology to

determine the origin and cause of a fire). Moreover, Mr. Sipes has not otherwise shown

Case 1:11-cv-02369-PAB-KMT Document 153 Filed 06/07/13 USDC Colorado Page 15 of 23
The Court notes that Mr. Sipes does not appear to raise a new claim of 13

unreasonable denial based on Allstate’s subsequent refusal to consider Mr. Lentini’s

report. Cf. Kisselman v. Am. Fam. Mut. Ins. Co., 292 P.3d 964, 975 (Colo. App.

2011)(noting that “the General Assembly intended the Statutes to apply prospectively to

an insurer’s acts of unreasonable delay or denial that occur after August 5, 2008,

regardless of when the original claim for benefits was made.”) 

16

that Allstate’s reliance on the fire origin and cause reports from the Clifton Fire

Department, an independent government body, and Phoenix Investigations, a private

company, was contrary to industry standards. Savio, 706 P.2d at 1274. Thus, because

Mr. Sipes has provided no evidence showing that Allstate had any reason to question

the validity of the fire origin and cause reports or that Allstate’s reliance on these reports

was contrary to industry standards, the Court finds that it was reasonable for Allstate to

rely on the fire origin and cause reports to make its decision on Mr. Sipes’ coverage

claim. See COPIC, 192 P.3d at 524.

To the extent Mr. Sipes argues that it was unreasonable for Allstate not to

consider the expert report from Mr. Lentini, the Court disagrees. Allstate could not have

acted unreasonably in connection with Mr. Lentini’s expert report because this report

was not available for Allstate’s consideration before it sent the Claim Denial letter.13

See Pham v. State Farm Mut. Auto. Ins. Co., 70 P.3d 567, 572 (Colo. App. 2003)

(noting that, for purposes of bad faith, the reasonableness of an insurer’s conduct is

evaluated under the circumstances that existed at the time).

Although it was reasonable for Allstate to rely on the fire origin and cause

reports, these expert reports, by themselves, are insufficient to establish a reasonable

belief that Mr. Sipes intentionally set fire to the Rental Property. Mr. Kramarczyk’s

report concluded that the fire was the result of an unidentified human act, but Mr.

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Kramarczyk did not opine on whether this action was intentional. Docket No. 47-6 at 5

(Kramarczyk Dep. 155:18-20). Additionally, although Mr. Rowland concluded that the

fire was incendiary, there was also evidence that the Rental Property was unlocked on

the day of the fire, allowing for the possibility that someone other than Mr. Sipes set the

fire. Docket No. 42-7 at 5. Additionally, Ms. Littleton’s summary noted that “[t]here

[was] no direct evidence uncovered to date which points to Larry Sipes.” Docket No.

42-6 at 1. Thus, although it was reasonable for Allstate to rely on the fire origin and

cause reports to conclude that an unidentified human act started the fire, this evidence

alone does not reasonably place Mr. Sipes’ coverage claim within the “intentional act”

exclusion of the policy. 

To further support its claim decision, Allstate argues that, in addition to the

evidence suggesting arson, it had evidence that Mr. Sipes had a financial motive for

setting the Rental Property on fire. Docket No. 42 at 14. Specifically, Allstate relies on

Mr. Engrav’s conclusion that Mr. Sipes did “not receive reportable income sufficient to

cover his household expenses.” Docket No. 42-3 at 4. Allstate contends that, because

it had evidence that Mr. Sipes relied on his monthly income to pay for his mortgages

and other expenses, it was reasonable or fairly debatable for Allstate to conclude that

“Mr. Sipes chose to commit arson and collect insurance proceeds as a means to

alleviate his financial responsibilities and difficulties.” Docket No. 42 at 14. 

In this case, the Rental Property was vacant for less than a month. The previous

tenants vacated the premises on March 6, 2010, Docket No. 42-7 at 4, and the fire

occurred on March 30, 2010. In addition, Allstate’s investigation showed that, although

the Wesolowskis chose not to stay in the Rental Property, Mr. Sipes kept $560 from the

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Wesolowskis’ deposit as rent for the month of March. Id. at 5. Although Mr. Engrav’s

report indicated that Mr. Sipes needed the income from the Rental Property to cover his

monthly expenses, Docket No. 47-3 at 2 (Littleton Dep. 70:11-18), there is no evidence

in the record showing that Mr. Sipes actually suffered from financial hardship or that he

was behind on his mortgage payments. There is also no evidence that Mr. Sipes had

trouble finding tenants for his rental properties. See Docket No. 42-3 at 2 (noting that

the Rental Property “held tenants on a fairly continuous basis”). Instead, Allstate’s

evidence of a financial motive relies primarily on the inferences Ms. Booker drew about

Mr. Sipes’ month-to-month income. Because Mr. Sipes denies that he had a financial

motive for setting the fire and there is no indication that he was behind on his mortgage

payments or that he otherwise suffered from financial hardship, the Court finds that

whether it was reasonable for Allstate to infer that Mr. Sipes had a financial motive to

set the fire based on a vacancy of less than a month raises a genuine dispute of

material fact. See COPIC, 192 P.3d at 524. Even if, as Allstate argues, this genuine

dispute of material fact is “fairly debatable,” the Court finds that the evidence of a

financial motive is still insufficient as a matter of law to show that Allstate’s reliance on

such evidence was reasonable under the statutes. Vaccaro, 275 P.3d at 760.

Next, Allstate argues that it had a reasonable basis to infer that mold in the

Rental Property gave Mr. Sipes a motive to commit arson. Docket No. 42 at 14. 

Allstate argues that it was suspicious for Mr. Sipes to purchase materials to remediate

the mold despite Mr. Sipes’ allegation that he had not seen the mold. Id. Additionally,

Allstate claims that the mold may have served as a motive for Mr. Sipes to set fire to

the Rental Property because it was proving “deleterious” to his ability to secure future

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During Mr. Sipes’ deposition, Mr. Sipes indicated that he purchased Kilz to 14

cover the original wall paint. Docket No. 47-8 at 5 (Sipes Dep. 68:13-25). Mr. Sipes’

plan to remediate the mold was to wash the mold with “high priority” bleach water, cover

the walls with Kilz, and then paint the house. Id. at 2 (Sipes Dep. 56:19-22).

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tenants. Id. at 14-15. Mr. Sipes disputes the existence of mold as a motive. Docket

No. 47 at 7. Mr. Sipes claims that, because there is no evidence of the extent of the

mold at the Rental Property, Allstate’s inference that the mold served as an incentive to

commit arson is based on speculation. Id. 

In this case, there is no evidence about the actual extent of the mold at the

Rental Property. Docket No. 42-3 at 6. The Wesolowskis stated that there was some

mold on the bathroom ceiling, Docket No. 42-8 at 7, and Mr. Sipes admitted that he was

told that there was some mold in the kitchen. Docket No. 42-8 at 4. Mr. Sipes testified

that he was in the process of removing the mold and that he bought bleach to do so, as

well as untinted paint and Kilz primer to paint the walls of the Rental Property. Docket 14

No. 47-8 at 5 (Sipes Dep. 66:1-23). Moreover, apart from evidence that the

Wesolowskis refused to lease the Rental Property, Allstate has presented no evidence

that Mr. Sipes had trouble finding new tenants for the Rental Property. Thus, because

there is no evidence about the extent of the mold in the Rental Property, Mr. Sipes

testified that he was in the process of removing the mold and plaintiff disputes that the

mold provided a motive to set the fire, the Court finds that whether it was reasonable for

Allstate to infer from mold in the property that Mr. Sipes had a motive to commit arson

presents a genuine dispute of material fact. Vaccaro, 275 P.3d at 760.

Finally, Allstate argues that it was reasonable to infer from the circumstantial

evidence that the fire was the result of arson. Docket No. 42 at 15. Allstate claims that

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Mr. Sipes’ purchase of untinted paint and Kilz primer at the exact time that the fire was

burning suggests an attempt to create an alibi. Id. Allstate also contends that Mr.

Sipes’ inconsistent statements about the mold to the Clifton Fire Department suggest

that Mr. Sipes knew about the mold at the Rental Property and believed the mold to be

a major issue. Id. Moreover, Allstate claims that there was no reasonable basis for Mr.

Sipes to purchase such a large quantity of paint and primer if he had never seen the

extent of the mold at the Rental Property. Id. 

Mr. Sipes does not dispute the existence of circumstantial evidence, but rather

disputes the inferences Allstate draws from this evidence. Docket No. 47 at 10-11. Mr.

Sipes also denies responsibility for setting the fire or any knowledge about who may

have set fire to the rental property. Docket No. 47-8 at 6 (Sipes Dep. 81:13-21). He

testified that he purchased the paint and the Kilz to paint the house. Id. at 5 (Sipes

Dep. 66:1-23). Specifically, Mr. Sipes testified that he bought untinted paint because

he did not know what color the Wesolowskis used to paint the walls of the Rental

Property, so he bought untinted paint which he could “mix” with other colors once he

knew the color of the walls. Id. (Sipes Dep. 66:19-67:25).

Because the resolution of these factual disputes – i.e., whether Mr. Sipes saw

the mold before the fire, the reason why Mr. Sipes did not tell the Clifton Fire

Department about the mold, and why Mr. Sipes bought large amounts of paint –

requires a judgment about Mr. Sipes’ credibility, the Court finds that whether it was

reasonable for Allstate to draw the inferences it did from circumstantial evidence

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To the extent Mr. Sipes seeks to submit his polygraph results as evidence, the 15

Court notes that polygraph tests are generally inadmissible in the Tenth Circuit. Palmer

v. City of Monticello, 31 F.3d 1499, 1506 (10th Cir. 1994). Because Mr. Sipes has not

endorsed an expert to testify about the admissibility of such results under Daubert v.

Merrell Dow Pharms., Inc., 509 U.S. 579 (1993), he may not submit his actual

polygraph results. See United States v. Call, 129 F.3d 1402, 1404 (10th Cir. 1997). In

addition, the Court finds that the introduction of evidence that Mr. Sipes took a

polygraph and submitted the results to Allstate is an impermissible end run around the

general inadmissibility of polygraph results. See Jones v. Geneva Pharms., Inc., 132 F.

App’x 772, 776 (10th Cir. 2005). 

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presents a genuine dispute of material fact. Vaccaro, 275 P.3d at 760. Even if the 15

inferences Allstate drew from this evidence were fairly debatable, that alone would be

insufficient to entitle Allstate to summary judgment. Id. 

In summary, although it was reasonable for Allstate to infer that the fire at the

Rental Property was potentially caused by a human act, there remain genuine disputes

of material fact about whether it was reasonable for Allstate to infer that Mr. Sipes had a

motive to commit arson and whether it was reasonable for Allstate to infer that Mr.

Sipes committed arson because of the circumstantial evidence based upon the fire

origin and cause reports. Accordingly, the Court finds that Allstate is not entitled to

summary judgment on its defense that it had a reasonable belief to deny Mr. Sipes’

claim because it fell within the “intentional act” exclusion of the insurance policy. 

Vaccaro, 275 P.3d at 760.

Second, Allstate argues that it acted reasonably when it denied Mr. Sipes’ claim

because Allstate uncovered information showing that Mr. Sipes “concealed and/or

misrepresented” facts related to matters involving the insurance including the “cause of

loss, [his] activities prior to the loss, [his] testimony that [he] never saw the mold in the

rental home, and, [his] financial condition prior to and after the loss.” Docket No. 42-1

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at 2. The Court finds that whether Mr. Sipes concealed or misrepresented facts during

Allstate’s investigation presents a genuine dispute of material fact. 

First, Mr. Sipes has maintained that he did not set fire to the Rental Property

and, as discussed above, the circumstantial evidence is insufficient to entitle Allstate to

summary judgment. Docket No. 47-8 at 6 (Sipes Dep. 81:13-21). Second, there is no

evidence that Mr. Sipes misrepresented or concealed any information regarding his

activities the morning of March 30, 2010. Allstate has presented no evidence to

contradict Mr. Sipes’ statement that he left his girlfriend’s house, stopped by the garage

outside the Rental Property, and then went to the Home Depot. Docket No. 47-8 at 3

(Sipes Dep. 58:1-60:25). Third, Allstate’s belief that Mr. Sipes “misrepresented” that he

never saw the mold in the Rental Property is based on inferences Allstate draws from

its investigation. See, e.g., Docket No. 42-6 at 2 (“[t]he insured has denied knowing the

extent of the mold, but the purchases he made on the DOL . . . at Home Depot would

indicate that the mold was extensive”); Docket No. 42-3 at 6 (describing the reasons

why it is unlikely that Mr. Sipes never saw the mold). Because the parties dispute

whether Mr. Sipes saw the mold before the date of the fire, the Court finds that this

question raises a genuine dispute of material fact. Vaccaro, 275 P.3d at 760. Finally,

there is no evidence in the record to indicate that Mr. Sipes lied about his financial

situation at any time during Allstate’s investigation. Instead, it appears that Mr. Sipes

gave Allstate his financial documents and Mr. Engrav made a conclusion about Mr.

Sipes’ finances. Docket No. 42-3 at 4; Docket No. 42-2 at 12 (Littleton Dep. 66:1-25).

Accordingly, because there are genuine disputes of material fact about whether

Mr. Sipes misrepresented or concealed information during Allstate’s investigation of his

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claim, the Court finds that Allstate is not entitled to summary judgment on its defense

that it had a reasonable belief to deny Mr. Sipes’ claim because it fell within the

“misrepresentation, fraud or concealment” exclusion of the insurance policy. Vaccaro,

275 P.3d at 760. 

IV. CONCLUSION

For the foregoing reasons, it is

ORDERED that Allstate Indemnity Company’s Motion for Partial Summary

Judgment [Docket No. 42] is DENIED. 

DATED June 7, 2013.

BY THE COURT:

 s/Philip A. Brimmer 

PHILIP A. BRIMMER

United States District Judge

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