Opinion ID: 2548554
Heading Depth: 2
Heading Rank: 1

Heading: The Fire, the Investigation and Allstate's Bad Faith

Text: Plaintiffs Fareed and Rashida Cassim (the Cassims) successfully sued defendant Allstate Insurance Company (Allstate) for bad faith in the handling of their insurance claim. As the Cassims were the prevailing parties at trial, we view the evidence, which was conflicting and vigorously contested, in a light most favorable to them, resolving all conflicts in their favor. ( Bickel v. City of Piedmont (1997) 16 Cal.4th 1040, 1053, 68 Cal.Rptr.2d 758, 946 P.2d 427; Jessup Farms v. Baldwin (1983) 33 Cal.3d 639, 660, 190 Cal.Rptr. 355, 660 P.2d 813.) The Cassims purchased a home in Palmdale in 1989 and insured the property against loss with Allstate. In December 1990, a fire later determined to be arson caused damage to the home; although the fire burned only in the master bedroom and the kitchen, the extensive heat, smoke and water damage to the rest of the structure rendered the home uninhabitable. Deborah Birkmeyer, an Allstate representative, met the Cassims at the house, inspected the scene, photographed the damage, and gave the Cassims a check for $10,000 as an advance on additional living expenses (ALE). Allstate assigned John Parker of Frontier Adjustors, an independent field adjuster, to the case. He began his investigation. The Cassims initially moved to a motel in Palmdale, then to one nearer Fareed's job, where they rented two rooms for themselves and their three children. (Rashida was pregnant with a fourth child.) They later moved back to Palmdale, but after renting an unfurnished apartment, buying two mattresses, a television, bedding and towels, and making a mortgage payment on their Palmdale home, the $10,000 ALE was almost exhausted. The Cassims had been in contact with Parker, but Allstate neither offered nor paid any further ALE. Allstate made no settlement offer, although Parker had informed Allstate that his initial estimate for the value of the home's lost contents was $40,000 and for repairing the home's structural damage was $60,000. Frustrated by the slow pace in which the matter was being resolved, the Cassims hired Anthony Thompson, a public adjustor, who determined that repairing the Cassims' home would cost $87,000. Birkmeyer rejected that estimate as inflated, and her supervisor decided to refer the matter to a law firm to have the Cassims submit to an examination under oath (EUO). At this point Allstate began to breach its duty to handle the Cassims' claim with good faith and fair dealing. Numerous instances were presented to the jury. For example, Birkmeyer stated in a declaration under oath that the Cassims' home was sparsely furnished, suggesting they were attempting to claim replacement value to which they were not entitled. She later admitted at trial her declaration was incorrect and the home was adequately furnished. Further, although Allstate's position was that the Cassims had themselves set the fire [1] and there was no sign of forced entry, one of Birkmeyer's photographs showed glass debris from a sliding glass door scattered inward into the home, indicating someone had broken in from the outside. Parker testified he never suspected the Cassims set the fire, nor did Birkmeyer or Allstate's attorneys ever suggest he investigate that possibility. Gary Fye, plaintiffs' expert, testified the fire was a message fire that was not intended by the arsonist to destroy the home but to instead cause great discomfort to the occupants. (Fareed Cassim is of Iranian descent; Rashida is of Indian descent.) Birkmeyer admitted at trial that, because the Cassims had so little equity in the home, they had little financial incentive to set the fire because any insurance payout would simply benefit the mortgagor. Rashida paid cash every day for the motel rooms her family occupied after the fire. During this time, the family ate at fast-food establishments and a Persian restaurant. Rashida kept track of the day's aggregate expenses in a notebook but did not keep original receipts or other specific documentation because Birkmeyer had not instructed her to do so. When Thompson learned of this practice, he told Rashida to try obtaining replacement receipts for the family's living expenses. She then approached the restaurants and the motel but had difficulty obtaining replacement receipts. (For example, she testified the motel clerk kind of remembered the Cassims but refused to fill out the replacement receipt because he did not want to become involved.) Rashida filled out some replacement receipts in her own handwriting. She did not try to camouflage her handwriting and never pretended she was submitting original receipts. She testified that Thompson knew she did not have original receipts; her understanding was that he was asking her to provide reconstructed receipts. Thompson similarly testified he told Parker that Rashida had filled out the receipts to the best of her ability, trying to reconstruct the meals she had paid for. No one asked Rashida about the reconstructed receipts in any of her lengthy EUO's or depositions, nor did Allstate conduct any investigation into the legitimacy of the receipts she submitted, although it later cited her actions as evidence of fraud and misrepresentation. Other examples of bad faith relate to how Allstate exploited its knowledge of the Cassims' perilous financial condition resulting from the exhaustion of the $10,000 ALE payment and the impending foreclosure on their home. Aware of these facts, Allstate unfairly delayed resolving the Cassims' claim, insisting that small aspects of the case justified the delay. For example, Allstate denied the Cassims' claim in part because it concluded they had been materially false with regard to the submission of information concerning the ... nature and extent of the property claimed, citing the Cassims' request for reimbursement for an antique set of china. Allstate asserted there were no signs that such property existed even though the debris in the cabinet area was sifted in hopes of finding some remnants. At trial, however, Thompson testified he and Parker (Allstate's adjuster) conducted a joint walk-through of the Cassims' home, videotaping the home's interior, and they observed the broken china. (Although Allstate assured Thompson it would give him a copy of the tapes, it never did so.) Allstate decided it would pay $35,400 for dwelling repair and refused to consider a higher amount, although many estimates were much higher. Allstate informed the Cassims that if they wanted more, they would have to follow through on their previous request for an appraisal. The Cassims, lacking the approximately $10,000 needed to pay for an appraisal and facing imminent foreclosure, eventually accepted Allstate's low estimate for the house so they could begin repairs and forestall foreclosure. The Cassims claimed the amount of their loss for the contents of their house was $43,000; Parker (Allstate's adjustor) estimated the loss to be $45,000; and Birkmeyer admitted these numbers did not seem out of line. Allstate, however, originally offered the Cassims only $5,000 to replace the contents of the house, an offer it later revised to $7,000. Evidence was adduced suggesting Allstate offered a small amount that conformed to a standard target amount it used to minimize its pay-outs in similar cases, and that the offer did not reflect a good faith estimate of the Cassims' actual losses. Rashida Cassim approached Birkmeyer and informed her the mortgage company was going to foreclose on her home and asked whether the claim could be resolved. Birkmeyer told Rashida she would have to fire Thompson, the public adjustor the Cassims had hired, and Birkmeyer gave Rashida instructions on how to do that. After Rashida did as she was instructed, Birkmeyer nevertheless offered no more than the $7,000 already offered and falsely told Rashida that Thompson had already accepted the check for that amount. In the meantime, the Cassims were evicted from their apartment for nonpayment of rent and lived with relatives for a time. When repairs were finished on their home, they moved back, but subsequently lost the house to foreclosure. Allstate eventually denied their claim on the policy, asserting both that the Cassims had set fire to their own home and that they had been materially false with regard to the submission of information concerning the cause and origin of this loss and the nature and extent of the property claimed. The Cassims filed this suit against Allstate for breaching the implied covenant of good faith and fair dealing in connection with their insurance claim.