IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF ALABAMA

SOUTHERN DIVISION

JANET CHAMPION, )

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Plaintiff,

vs. CIVIL ACTION NO. 14-206-CG-M

AUTO-OWNERS INSURANCE 

COMPANY,

Defendant.

MEMORANDUM OPINION AND ORDER

This matter is before the court on Defendant’s motion for partial summary 

judgment (Doc. 55), Plaintiff’s objection to Defendant’s evidence (Doc. 58), Plaintiff’s 

opposition to summary judgment (Doc. 59), Plaintiff’s supplemental opposition (Doc. 

50), and Defendant’s reply (Doc. 61). For the reasons explained below, the court 

finds that Defendant’s motion should be granted.

FACTS

This case involves an insurance claim for fire damage to the Plaintiff’s 

residence, located at 5560 Thomas Drive, Theodore, Alabama. The property was 

insured by Defendant, Auto-Owners Insurance Company (“Auto-Owners”). (Doc. 55-

2). The policy of insurance provides fire coverage but excludes “action by or at the 

direction of any insured committed with the intent to cause a loss.” (Doc. 55-2, p. 

19). The policy also included a concealment or fraud clause stating the following:

This entire policy is void if, whether before, during or after a loss, any insured has: 

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a. Intentionally concealed or misrepresented any material fact or 

circumstance;

b. Engaged in fraudulent conduct; or

c. Made false statements;

relating to this insurance.

(Doc. 55-2, p. 49).

Plaintiff’s residence was reported to be on fire on February 25, 2010 at 0203 

hours. (Doc. 55-3, p. 2). The Plaintiff, Janet Champion, and Mitchell Ferrell were 

reportedly asleep at the residence when the fire began and were awakened by a 

smoke detector and escaped through a window. (Doc. 55-3, p. 3). Firefighters forced 

entry through the front door. (Doc. 55-3, p. 3). The fire originated in the front den 

and appeared to be contained to the sofa bed. (Doc. 55-3, p. 4).

Later that same morning at 0712 hours, a second fire was reported at the 

residence. (Doc. 55-3, p. 5). The residence was unoccupied at the time and the front 

door had been nailed closed from the inside and the rear door was locked. (Doc. 55-

3, p. 5). The fire was determined to be incendiary and resulted from open flame 

application to combustible in the middle bathroom between the commode and the 

lavatory. (Doc. 55-3, pp. 5, 15). The official incident report indicates that the second 

fire occurred between 6:30 and 7:12. (Doc. 55-4, p. 152).

At 1021 on the day of the fire, John Michael Wilson called the fire 

department and said he had information about the fire. (Doc. 55-3, p. 30). Mr. 

Wilson reported that approximately two months prior, Ferrell said he “ought to just 

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burn the son of a bitch.” (Doc. 55-3, p. 30). Wilson reported that Ferrell said he 

wanted to burn the house because they were going through bad times. (Doc. 55-3, p. 

42; Ex. C). About two to three weeks before the fire Ferrell came by with the 

Plaintiff to talk to Wilson about storing some furniture and to see if Wilson had any 

old furniture he could put in the house because he was going to burn it down, but 

Plaintiff stayed in the truck and was not part of the conversation. (Doc. 55-3, p. 43; 

Ex. C). Wilson reported that Ferrell came by to see him on the morning of the fire 

between 0630 and 0700 about renting a trailer and Ferrell stated that he had just 

set the house on fire again because the first fire did not do enough damage. (Doc. 

55-3, pp. 30, 43, Ex. C). About 15-20 minutes later, Wilson heard the fire truck 

sirens. (Doc. 55-3, p. 30). Wilson recorded a later conversation with Ferrell in which 

Ferrell talked about starting the fires. (Doc. 55-3, pp. 44-45; Ex. C). Wilson reports 

that Plaintiff and Ferrell came back again to talk to him about whether he had a 

trailer to rent. (Doc. 55-3, p. 45; Ex. C). During that visit the Plaintiff said “let me 

tell you how it went down” and Ferrell stopped her saying they may have the truck 

bugged. (Doc. 55-3, p. 45; Ex. C). Another night the Plaintiff and Ferrell came back 

to see Wilson again about renting a trailer and Wilson told him if he would burn his 

own house, what would he do to his trailer. In response, the Plaintiff and Ferrell 

laughed. (Doc. 55-3, p. 45, Ex. C).

On February 25, 2010, claim representative Diana Gough met with Plaintiff 

and took her recorded statement. (Doc. 55-4, pp. 75-78). In the statement, Plaintiff 

reported that after escaping the fire, they went to the Red Roof Inn and “slept for a 

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hour...couple of hours...till day light, and they wouldn’t let me bring my dog in and 

he was hollerin.” (Doc. 55-4, p. 77). After that she said they left and went to 

Plaintiff’s daughter’s house and Ferrell went to sleep on the sofa while Plaintiff and 

her daughter watched the news. They saw the fire on the news and headed back to 

the Thomas Drive house. (Doc. 55-4, p. 77). 

The Thomas Drive property is adjacent to the Bellingrath RV Park. The Red 

Roof Inn is about a nine or ten minute drive from both the Thomas Drive house and 

Plaintiff’s daughter’s house. (Doc. 55-9).

Richard Ferrell was also interviewed on February 25, 2010, but by the 

Assistant Fire Marshal. (Doc. 55-4, pp. 158-159). Ferrell stated that he nailed a 2x2 

board across the front door after the first fire, before they went to the Red Roof Inn. 

Ferrell said he went out the back door and locked it prior to leaving. Ferrell said 

that at the Red Roof Inn they had to keep their dog in the car and he barked loudly. 

After a short time, around daylight, they left and drove to Plaintiff’s daughter’s 

house. Ferrell said he fell asleep on the couch and when Plaintiff saw the report of 

the second fire on the news, they returned to the Thomas Drive house. (Doc. 55-4, p. 

159).

On March 5, 2010, claims representative Diana Gough reported to the AutoOwners home office that a fire inspector had called and advised that arson was 

suspected and that the Plaintiff’s boyfriend had admitted the arson to a childhood 

friend. (Doc. 55-4, p. 64). 

On March 12, 2010, Plaintiff was arrested on charges of arson, second degree. 

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(Doc. 55-4, p. 149). During a video taped interview after being arrested (Ex. D), 

Plaintiff reported that the smoke detector woke them up and they went out the 

window. Plaintiff called 911. The Red Cross took them to the Red Roof Inn to stay, 

but there was no heat and it was cold. Also, Plaintiff said they would not let the dog 

stay in the room and he was yelping in the car. Plaintiff stated that they stayed 

and hour or so and then went to her daughter’s house. Plaintiff said they did not 

stop anywhere and that Ferrell went to sleep on the sofa in the living room and 

Plaintiff and her daughter watched the news. Plaintiff stated that Ferrell was with 

her the whole time. According to Plaintiff, when they saw the fire on the news 

Plaintiff woke Ferrell up and they went back. (Ex. D).

On March 29, 2010, a preliminary hearing was held in Mobile District Court 

on Plaintiff’s arson charges. The court found that probable cause existed for the 

charges against Plaintiff to be sent to the grand jury. (Doc. 55-4, p. 148). On August 

20, 2010, the grand jury indicted Plaintiff on two counts of arson. (Doc. 55-5). On 

January 31, 2013, Richard Ferrell plead guilty to one count of arson, second degree. 

(Doc. 55-6). 

On April 9, 2010 Auto-Owners received the cause and origin report it had 

commissioned by Crain & Associates. (Doc. 55-4, pp. 142-147). The report concluded 

that both fires were incendiary in nature and were caused by the burning of 

ordinary combustibles in two separate locations. (Doc. 55-4. P. 147). 

On August 3, 2010, an attorney for Auto-Owners, Judson Wells, conducted an 

examination under oath of Plaintiff, who appeared with her attorney. (Doc. 55-4, pp. 

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41-62). During the examination the Plaintiff said Ferrell was still her boyfriend 

and that she did not think he had anything to do with starting the fires 

intentionally. (Doc. 55-4, p. 53). Plaintiff stated that they went to the Red Roof Inn 

between 3:30 and 4:00 and their dog had to stay in their truck. (Doc. 55-4, pp. 53-

54). They napped off and on. It was cold and they could not get the heat to work in 

the room. (Doc. 55-4, p. 56). She called a neighbor, who told her everything looked 

fine and told her they were going to go to Plaintiff’s daughter’s house. (Doc. 55-4, p. 

56). It was about daylight, about 6:30, when they reached her daughter’s house. 

(Doc. 55-4, p. 57). Plaintiff confirmed that Ferrell was with her the entire time, 

from before the first fire through the Red Roof Inn and to her daughter’s house. 

(Doc. 55-4, p. 57). At her daughter’s house Ferrell slept on the couch in the living 

room near where Plaintiff and her daughter were watching TV and Ferrell did not 

leave her daughter’s house while she was there. (Doc. 55-4, p. 58). Ferrell and 

Plaintiff had keys that would have allowed them to get back in the house through 

the back door. (Doc. 55-4, p. 62).

On December 17, 2010, Judson Wells’ assistant prepared a memorandum of 

the information available pursuant to the release authorizations of Champion. (Doc. 

55-4, pp. 120-128). No records were available from the Red Roof Inn to show checkin and checkout times. (Doc. 55-4, p. 120). On September 23, 2010, Judson Wells 

provided a status report that stated that the requested cell phone records had not 

been provided and that no action had been taken yet by the grand jury. (Doc. 55-4, 

pp. 134-136). On October 22, 2010, Plaintiff provided her cell phone records to 

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Wells and they were forwarded to Auto-Owners. (Doc. 55-4, pp. 129-133). The 

records indicated that Plaintiff made a 911 call the morning of the fires at 2:02 a.m. 

and then made calls at 5:09, 5:28, 6:04, 6:52, 6:54, 6:57, 7:25 and 7:30. (Doc. 55-4, p. 

133). 

On December 28, 2010, an Auto-Owners Claim Supervisor sent an email 

advising that she thought they had enough to deny the claim at this time, but that 

she would probably suggest just waiting for the criminal hearing to take place in six

weeks to build a stronger case. (Doc. 55-7, p. 3). On February 15, 2011, Judson 

Wells reported that the Equifax records show that the Plaintiff “has lived on the 

financial edge for the last few years.” (Doc. 55-7, p. 4). On March 4, 2011, Wells met 

with an Assistant District Attorney about the case and received from him a copies of 

photographs and DVDs containing recorded interviews and wiretaps of Ferrell and 

interviews with the Plaintiff. (Doc. 55-4, p. 156). On April 17, 2011, Wells provided 

the claims representative, Diana Gough, with a detailed analysis of Plaintiff’s claim 

and concluded that based on the overwhelming evidence, it was his recommendation 

that the claim be denied for arson. (Doc. 55-4, pp. 65-71). On April 12, 2011, AutoOwners Home Office Claims advised Gough that it was “OK to deny claim as 

recommended.” (Doc. 55-4, p. 119). On October 11, 2011, Gough sent Wells a draft 

of a denial letter for his review, saying that she wanted to go ahead and send it out. 

(Doc. 55-4, p. 39). Wells responded the next day with comments. (Doc. 55-4, p. 38). 

Gough sent another draft to Wells on November 1, 2011. (Doc. 55-4, pp. 33-35). 

That same day, Wells responded with comments. (Doc. 55-4, pp. 36-37).

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On January 31, 2012, Ferrell plead guilty to Arson 2nd. (Doc. 55-6). Judson 

Wells reported to Auto-Owners that Ferrell had plead but that the Plaintiff refused 

to plead to attempted Arson 3rd and her trial was continued to August 21, 2012. 

(Doc. 55-4, p. 31). On August 21, 2012, Plaintiff again refused to change her plea, 

even though she was offered a misdemeanor count of false reporting to law 

enforcement. Plaintiff’s trial was continued to January 29, 2013. (Doc. 55-4, p. 26). 

By letter dated October 2, 2012, Auto-Owners denied Plaintiff’s fire loss 

claim. (Doc. 55-4, pp. 20-23). The letter quoted language from the policy that 

excluded coverage for “[a]n action by or at the direction of any insured committed 

with the intent to cause a loss” and included the following:

The cause of the fire determined by the fire inspector was arson. Your 

policy specifically excludes damages to property that were 

intentionally caused. Due to the facts uncovered during our 

investigation and after careful consideration, there is no coverage for 

you claim, due to concealment or fraud.

(Doc. 55-4, p. 22).

On January 29, 2013, Plaintiff’s criminal trial was continued until September 

23, 2013. (Doc. 55-4, p. 18). On September 23, 2013, the criminal arson charges 

against Plaintiff were nolle prossed. (Doc. 55-4, p. 14). Plaintiff’s attorney inquired 

about the insurance claim and Wells responded that Auto-Owners was firm in its 

denial of the claims. (Doc. 55-4, pp. 12-13). On March 14, 2014, counsel for Plaintiff 

wrote Wells, stating that the charges against Plaintiff had been nolle prossed and 

that Plaintiff had passed a polygraph test and requesting that Auto-Owners 

reconsider its denial. (Doc. 55-4, p. 4). Wells advised that his opinions had not 

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changed and that since Auto-Owners planned to call him as a witness he 

recommended the case be sent to Auto-Owners’ trial counsel. (Doc. 55-4, p. 9).

DISCUSSION

A. Summary Judgment Standard

Federal Rule of Civil Procedure 56(a) provides that summary judgment shall 

be granted: “if 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.” The trial court’s 

function is not “to weigh the evidence and determine the truth of the matter but to 

determine whether there is a genuine issue for trial.” Anderson v. Liberty Lobby, 

Inc., 477 U.S. 242, 249 (1986). “The mere existence of some evidence to support the 

non-moving party is not sufficient for denial of summary judgment; there must be 

‘sufficient evidence favoring the nonmoving party for a jury to return a verdict for 

that party.’” Bailey v. Allgas, Inc., 284 F.3d 1237, 1243 (11th Cir. 2002) (quoting 

Anderson, 477 U.S. at 249). "If the evidence is merely colorable, or is not 

significantly probative, summary judgment may be granted." Anderson, at 249-250. 

(internal citations omitted).

The basic issue before the court on a motion for summary judgment is 

“whether the evidence presents a sufficient disagreement to require submission to a 

jury or whether it is so one-sided that one party must prevail as a matter of law.” 

See Anderson, 477 U.S. at 251-252. The moving party bears the burden of proving 

that no genuine issue of material fact exists. O'Ferrell v. United States, 253 F.3d 

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1257, 1265 (11th Cir. 2001). In evaluating the argument of the moving party, the 

court must view all evidence in the light most favorable to the non-moving party, 

and resolve all reasonable doubts about the facts in its favor. Burton v. City of Belle 

Glade, 178 F.3d 1175, 1187 (11th Cir. 1999). “If reasonable minds could differ on 

the inferences arising from undisputed facts, then a court should deny summary 

judgment.” Miranda v. B&B Cash Grocery Store, Inc., 975 F.2d 1518, 1534 (11th 

Cir. 1992) (citing Mercantile Bank & Trust v. Fidelity & Deposit Co., 750 F.2d 838, 

841 (11th Cir. 1985)).

Once the movant satisfies his initial burden under Rule 56(c), the non-moving 

party "must make a sufficient showing to establish the existence of each essential 

element to that party's case, and on which that party will bear the burden of proof 

at trial." Howard v. BP Oil Company, 32 F.3d 520, 524 (11th Cir. 1994)(citing 

Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986)). Otherwise stated, the nonmovant must “demonstrate that there is indeed a material issue of fact that 

precludes summary judgment.” See Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 

(11th Cir. 1991). The non-moving party “may not rely merely on allegations or 

denials in its own pleading; rather, its response .... must be by affidavits or as 

otherwise provided in this rule be set out specific facts showing a genuine issue for 

trial.” Vega v. Invsco Group, Ltd., 2011 WL 2533755, *2 (11th Cir. 2011). “A mere 

‘scintilla’ of evidence supporting the [non-moving] party’s position will not suffice; 

there must be enough of a showing that the jury could reasonably find for that 

party.” Walker v. Darby, 911 F.2d 1573, 1577 (11th Cir. 1990) (citation omitted). 

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“[T]he nonmoving party may avail itself of all facts and justifiable inferences in the 

record taken as a whole.” Tipton v. Bergrohr GMBH-Siegen, 965 F.2d 994, 998 (11th 

Cir. 1992). “Where the record taken as a whole could not lead a rational trier of fact 

to find for the non-moving party, there is no genuine issue for trial.” Matsushita 

Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574 at 587 (1986) (internal 

quotation and citation omitted). 

B. Objection to Evidence of Non-Prosecution 

Plaintiff objects to any evidence relating to the criminal investigation, arrest 

and nolle prose of charges regarding the Plaintiff. In support of her contention she 

cites case law that holds that evidence of non-prosecution is inadmissible in a civil 

action. See e.g. FIGA v. R.V.M.P. Corp., 874 F.2d 1528, 1531 (11th Cir. 1989); Aetna 

Casualty & Surety Co. v. Gosdin, 803 F.2d 1153 (11th Cir. 1986); Williams v. 

Cambridge Mutual Fire Ins. Co., 230 F.2d 293 (5th Cir.1956). Such evidence is 

inadmissible because “the different standards of proof between a criminal 

prosecutorial decision and a civil case might mislead the jury.” Gosdin, 803 F.2d at 

1160. Even “a jury verdict of not guilty on a criminal charge is not admissible 

evidence in a later civil action brought by a private individual against the same 

defendant, for damages arising out of the same incident.” Williams, 230 F.2d at 

294 (citation omitted). The fact that a person was not convicted of arson does not 

conclusively determine that the accused did not commit arson and is irrelevant to 

the question. Id. As the Fourth Circuit has explained:

The reasons for this rule are easy to appreciate. First, such evidence 

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goes directly to the principal issue before the jury and is highly 

prejudicial. Second, a prosecutor's decision not to prosecute and a 

jury's decision to acquit in a criminal trial are based on different 

criteria than apply in a civil proceeding. In particular, a prosecutor's 

decision to nolle prosse may take into account many factors irrelevant 

in a civil suit, such as the higher standard of proof required for 

criminal conviction. In any event, a prosecutor's opinion whether the 

insured started the fire is inadmissible since based on knowledge 

outside his personal experience.

Rabon v. Great Southwest Fire Ins. Co. 818 F.2d 306, 309 (4th Cir. 1987). However, 

these cases do not hold that the exclusion extends to evidence obtained during or 

pursuant to a criminal investigation. Even evidence obtained by a criminal law 

enforcement officer pursuant to a warrant later found to be technically defective 

may be admitted in a subsequent civil proceeding. See e.g. United States v. Janis, 

428 U.S. 433 (1976). Evidence developed during a criminal fire investigation is 

relevant, but whether that evidence might have supported a criminal prosecution is 

irrelevant. Rabon, 818 F.2d at 309-310. 

Moreover, in the instant motion, Auto-Owners is not attempting to use 

information of Plaintiff’s indictment and prosecution in defense of Plaintiff’s breach 

of contract claim, but to show that it did not deny Plaintiff’s insurance claim in bad 

faith. Courts have held that the fact that an insured had been indicted for arson 

can be strong evidence that the insurance company had a reasonable justification 

for denial. See e.g. Rose v. Hartford Underwriters Ins. Co., 203 F.3d 417, 422 (6th

Cir. 2000) (“If an insured is indicted before an insurance company refuses to honor 

its policy, by contrast, then an indictment on arson charges certainly would be 

strong evidence that shows that the insurance company had a reasonable

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justification for the denial of a fire insurance claim, assuming that the insurance 

company knew about the indictment at the time it refused to honor the claim.”). 

The Supreme Court of Alabama has held that in a bad faith case, a Fire Marshall 

may testify whether the insureds were suspects in a criminal investigation of arson. 

United Services Auto. Ass'n v. Wade, 544 So.2d 906, 908 (Ala. 1989) (“Although a 

prosecutor may consider the higher burden of proof in determining whether to bring 

charges, an investigator obviously does not consider burdens of proof in determining 

whether or not he suspects someone of arson.”). The Wade Court found that it 

would be very relevant whether the insurer knew that the investigator from the 

Fire Marshall’s office did not suspect the insureds of arson. Id. Thus, in this case, 

the fact that Plaintiff was suspected of and was criminally investigated for arson by 

the authorities is relevant to Plaintiff’s bad faith claim to the extent that AutoOwners had knowledge of the investigation when it denied the claim.

C. Negligence and/or Wantonness Claim

Auto-Owners asserts that Count One of the complaint should be dismissed 

because it asserts a negligence and/or wantonness claim and claims for negligent 

and/or wanton handling of insurance claims are not recognized in Alabama. AutoOwners is correct that the Supreme Court of Alabama “has consistently refused to 

recognize a cause of action for the negligent handling of insurance claims, and it 

will not recognize a cause of action for alleged wanton handling of insurance 

claims.” Kervin v. Southern Guar. Ins. Co., 667 So.2d 704, 706 (Ala. 1995) (citing 

Pate v. Rollison Logging Equipment, Inc., 628 So.2d 337 (Ala.1993); Armstrong v. 

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Life Insurance Co. of Virginia, 454 So.2d 1377, 1380 (Ala.1984), overruled on other 

grounds, Hickox v. Stover, 551 So.2d 259, 264 (Ala.1989); Chavers v. National 

Security Fire & Casualty Co., 405 So.2d 1 (Ala.1981); Calvert Fire Ins. Co. v. Green, 

278 Ala. 673, 180 So.2d 269 (1965)). Additionally, Plaintiff did not contest summary 

judgment as to Count One. Accordingly, the court finds that summary judgment is 

due to be granted in favor of Auto-Owners as to Count One.

D. Bad Faith Claim

Count Three of Plaintiff’s complaint asserts a claim for bad faith denial of her 

claim for damage to her property caused by fire. (Doc. 1-1, pp. 20-21). The tort of 

bad-faith refusal to pay a claim requires evidence to prove the following elements:

(a) a breach of insurance contract, (b) the refusal to pay claim, (c) the 

absence of arguable reason, (d) the insurer's knowledge of such 

absence—with a conditional fifth element: “(e) if the intentional failure 

to determine the existence of a lawful basis is relied upon, the plaintiff 

must prove the insurer's intentional failure to determine whether 

there is a legitimate or arguable reason to refuse to pay the claim.”

EMCASCO Ins. Co. v. Knight, 2014 WL 5020044, *15 (N.D. Ala. Oct. 7, 2014) 

(quoting National Sec. Fire & Cas. Co. v. Bowen, 417 So.2d 179, 183 (Ala. 1982)). 

“The plaintiff asserting a bad-faith claim bears a heavy burden.” Shelter Mut. Ins. 

Co. v. Barton, 822 So.2d 1149, 1154 (Ala. 2001) (citing LeFevre v. Westberry, 590 

So.2d 154, 159 (Ala. 1991)). A “plaintiff must go beyond a mere showing of 

nonpayment and prove a bad faith nonpayment, a nonpayment without any 

reasonable ground for dispute.” Bowen, 417 So.2d at 183. “[A] finding of bad faith 

based upon rejection of an insurer's legal argument should be reserved for extreme 

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cases.” Barton, 822 So.2d at 1154 (quoting Safeco Ins. Co. of America v. Sims, 435 

So.2d 1219, 1226 (Ala. 1983) (Jones, J., concurring specially)). “The right of an 

insurer to deny a claim on any arguable legal issue is to be as zealously guarded as 

is its right to decline benefits on any debatable issue of fact, the test of 

reasonableness being the same.” Id. (quoting Safeco supra). “To defeat a bad faith 

claim, the defendant does not have to show that its reason for denial was correct, 

only that it was arguable.” Liberty Nat. Life Ins. Co. v. Allen, 699 So.2d 138, 143 

(Ala. 1997). “No matter how badly the insurer acted in investigating and evaluating 

the claim, if there was a debatable reason for refusing to pay the claim, when 

payment was refused, the insured was not entitled to prompt payment.” State Farm 

Fire & Cas. Co. v. Balmer, 672 F.Supp. 1395, 1406 (M.D. Ala. 1987) (italics and 

citation omitted). “[P]roof of mere negligence or mistake is not sufficient to support 

a claim of bad faith; there must be a refusal to pay, coupled with a conscious intent 

to injure.” Peachtree Cas. Ins. Co., Inc. v. Sharpton, 2001 WL 286919, *5 (M.D. Ala. 

March 20, 2001) (citation omitted).

“Ordinarily, if the evidence produced by either side creates a fact issue with 

regard to the validity of the [insurance] claim and, thus, the legitimacy of the denial 

thereof, the [bad faith] tort claim must fail and should not be submitted to the jury.” 

Nat. Sav. Life Ins. Co. v. Dutton, 419 So.2d 1357, 1362 (Ala.1982). To make out a 

prima facie case of bad faith refusal to pay, the insured must generally show that 

she is entitled to a directed verdict on the contract claim. Id. Plaintiff has not 

moved for summary judgment on her breach of contract claim and has not 

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suggested here that she is entitled to judgment as a matter of law on her breach of 

contract claim. Since Plaintiff has not shown that the facts demonstrate, as a 

matter of law, that Auto-Owners breached the contract of insurance, she cannot 

maintain a claim of bad faith refusal to pay.

Moreover, Auto-Owners contends that it had ample evidence to establish an 

arguable reason to deny the claim. As Auto-Owners points out, there were two 

incendiary fires, Plaintiff had access and motive, eyewitness testimony placed her 

near the scene at the time of the fire, Ferrell was taped admitting to the arson and 

later plead guilty, and Plaintiff testified over and over again that she was with 

Ferrell at all times and her testimony and her cell phone records and other evidence 

indicate that she would have known if Ferrell had left. 

To establish an arson defense under Alabama law, an insurer must “ 

‘prove by competent and relevant evidence arson by someone, motive 

by the plaintiff and unexplained surrounding circumstantial evidence 

implicating the plaintiff.’ ” Mueller v. Hartford Insurance Co., 475 

So.2d 554, 557 (Ala.1985) (quoting Great Southwest Fire Insurance Co. 

v. Stone, 402 So.2d 899, 900 (Ala.1981)). The insurer's burden of proof 

is not particularly heavy. Proof may be made by circumstantial 

evidence “if the inferences are not too remote and all circumstances, 

including the inferences, are of sufficient force to bring minds of 

ordinary intelligence to a persuasion of incendiarism by a fair 

preponderance of the evidence.” Id. Proof beyond a reasonable doubt, or 

proof by direct evidence, is not required.

Fondren v. Allstate Ins. Co., 790 F.2d 1533, 1535 (11th Cir. 1986).1 The facts 

 1 Plaintiff cites case law that states that for circumstantial evidence to support the 

defense of arson, the evidence must be “so convincing that it will sustain no other 

reasonable hypothesis but that the plaintiff was responsible for the fire.” (Doc. 59, p. 

6, citing Mueller v. Hartford Ins. Co. of Alabama, 475 So.2d 554, 558 (Ala. 1985)). 

However, this standard contradicts other case law and has been found to be 

incorrect. See Fondren, 790 F.2d at 1535, n. 4.

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presented here clearly meet the above standard. It is undisputed that the fires 

were incendiary. The Plaintiff had motive to have the house burned so that she 

could collect the insurance proceeds and there were circumstances implicating the 

Plaintiff. 

Plaintiff asserts that United Services Auto. Ass'n v. Wade, 544 So.2d 906 

(1989), holds that the circumstances that implicate the insured must be 

unexplained. In Wade, the Court found that the circumstances in that case were 

not unexplained. There was evidence that 1) Larry Wade had told others that they 

did not have insurance, 2) Larry Wade’s ex-wife testified that he had been involved 

in other fires, 3) the Wade’s alibi was that they had taken their young children to a 

late movie on a school night, 4) the Wades first drove slowly past the burning house 

when they arrived at the scene and 5) the Wades were the last people in the house 

and there were no signs of forced entry. Id. at 910-11. However, Larry Wade 

testified that he only said that he “hoped” they had insurance and there was 

evidence that the Wades had experienced difficulties with another insurance 

company. Id. at 911. There was also evidence that Mr. Wade’s ex-wife harbored ill 

feelings toward Wade and wanted to get back at him. Id. The Wades explained that 

they had just been told about the fire and were upset when they arrived at the 

house and wanted “to regain their composure before facing the crowd that had 

gathered at the scene.” Id. Additionally, the court found that the fact that the 

Wades were the last people in the house and that they took their children to a late 

movie simply did not imply that the Wades burned their own house. Id.

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In the instant case, the court would agree that the fact that Plaintiff had 

access is certainly explainable. However, the additional facts in this case are vastly 

different from the facts in Wade. In Wade, the fire officials found no basis to 

suspect the Wades of arson and the insurance company knew that the Wades were 

not suspects. Id. at p. 908. The Court in Wade also found that the opinion of the 

insurance company’s investigator that there was arson was “as a whole completely 

void of credibility” and “borders upon the perpetration of a fraud upon this court.” 

Id. at 909. In contrast, the Wade’s expert carefully and professionally investigated 

and inspected the scene and performed a detailed, thorough and professional 

investigation. Id. The Wade Court concluded that the insurance company’s 

investigator either “deliberately an intentionally set out to manufacture an arson 

case” or “his investigation was absolutely deficient, inept and inadequate.” Id. 

Thus, in Wade, unlike the instant case, there was no reliable evidence showing that 

the fire was even arson. The evidence implicating the insureds was so slight in 

Wade that the authorities did not even suspect the insureds of starting the fire. As 

previously stated with regard to Plaintiff’s objection to evidence, the fact that the 

Plaintiff in this case had been indicted for arson is strong evidence that the 

insurance company had a reasonable justification for denial.2 Rose, 203 F.3d at 422. 

At the time Auto-Owners decided to deny Plaintiff’s claim, it knew that Plaintiff 

had been charged with and was being investigated for arson. 

Plaintiff also points to testimony by the claims representative, Diana Gough, 

 2 There is no evidence of prosecutorial misconduct or that Auto-Owners participated 

in the decision to charge the Plaintiff.

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that she did not have proof that Plaintiff had set the fire, that it was just a hunch.

(Doc. 59-1, p. 4). However, there is no requirement that the insurance company 

have absolute proof before denying a claim, only that they have an arguable reason 

for denial. Moreover, Gough had never handled an arson case or any claim where 

the insured had been found to be at fault before and she received direction from 

Judson Wells and from the home office on the claim. (Doc. 59-1, p. 3; Doc. 61, pp. 17, 

18). Gough testified that “they felt that there was enough – they felt there was 

enough outstanding evidence or coincidences in the case that they wanted to stand 

firm on their denial.” (Doc. 59-1, p. 5). It was not Diana Gough’s decision to deny 

the claim, it was the decision of the home office. (Doc. 59-1, p. 13; Doc. 61, p. 18). 

Those looking at the claim at the home office had a lot more experience. (Doc. 61, p. 

20).

Plaintiff also points to testimony by Judson Wells where he admitted that 

there was no credible evidence that the Plaintiff herself set the fires. (Doc. 59-2, p. 

15). However, Auto-Owners has never maintained that Plaintiff physically started 

the fires herself. Auto-Owners denied the claim because the fire was started “by or 

at the direction of” Plaintiff “with the intent to cause a loss” and “due to 

concealment or fraud.” (Doc. 55-4, p. 22).

Plaintiff also contends that Auto-Owners intentionally failed to determine 

the existence of any legitimate or arguable reason to deny the claim. However, 

Auto-Owners clearly investigated the claim and had substantial investigatory 

evidence at its disposal to consider. As previously explained, even if the 

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investigation was lacking, if there is a debatable reason for refusing to pay the 

claim, the insured cannot be held liable for bad faith. Balmer, 672 F.Supp. at 1406. 

“[P]roof of mere negligence or mistake is not sufficient to support a claim of bad 

faith; there must be a refusal to pay, coupled with a conscious intent to injure.” 

Sharpton, 2001 WL 286919 at *5 (citation omitted). 

Where there is a factual dispute that centers around reasonable, but 

conflicting inferences that may be drawn from the evidence, “if any of the reasons 

for denial of coverage is at least ‘arguable,’ [the c]ourt need not look any further.” 

State Farm Fire and Cas. Co. v. Balmer, 891 F.2d 874, 877 (11th Cir. 1990) (citation 

omitted). Accordingly, the fact that Plaintiff later took a polygraph examination to 

support her contention that she was not involved in the fires did not require AutoOwners to change its position. Such evidence has been found to lack probative 

value and in this case it did not explain the circumstances, but merely added to the 

inconsistencies.

CONCLUSION

For the reason explained above, the Defendant’s motion for partial summary 

judgment (Doc. 55), is GRANTED and summary judgment is hereby GRANTED in 

favor of Auto-Owners Insurance Company as to Counts One and Three of Plaintiff’s 

complaint. 

DONE and ORDERED this 18th day of May, 2015.

/s/ Callie V. S. Granade 

UNITED STATES DISTRICT JUDGE

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