Larry Curtis Personal Injury Attorney

November 18, 2003 - Jury: Insurer must pay more than $1M for home

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After a two-week trial, a federal jury in Baltimore has awarded more than $1 million to a Harford County couple whose insurance company refused to pay after their house burned down two years ago.

Pennsylvania-based Mutual Benefit Insurance Co. tried to convince the jury that Wayne and Tracey Simms committed fraud by inflating the costs needed to rebuild the home and padding the inventory of what was lost; but on Friday, the jury found the Simms had committed no fraud and ordered the insurer to pay them $1,023,147.

Irwin R. Kramer, who represented the Simms, said this case is a perfect illustration of the need for legislation addressing first-party bad faith in Maryland -- an unlikely perspective from a lawyer whose practice is predominantly insurance defense work.

"I believe that insurance is a two-way street. There are two parties to every insurance contract and each must deal fairly with the other," Kramer said. "As much as I believe in defending insurance companies who act properly, I feel just as firmly that I have an important role in litigating against those that don't."

First-party bad faith laws, like the ones in Pennsylvania and many other states, Kramer said, could have saved the Simms from the hassle of litigation.

"It is designed to make sure that an insurance carrier looks after its policyholders first and the bottom line second," Kramer said. "What is the insurance company's incentive to pay a claim if it can deny a claim, litigate, and the most they could ever be held liable for is the amount they would have to pay anyway?

"There has to be a level playing field and I think first-party bad faith legislation is the way to accomplish that fairness," he added.

Tracey Simms' father built the home in 1998, and the couple lived there with their infant son until the fire in November 2001.

The Simms' homeowners' policy provides for $434,000 to repair or replace the home, and includes a guaranteed replacement cost policy to handle inflation. It also contains $303,800 in protection for replacing personal property, as well as coverage for loss of use and debris removal.

Following the fire, Mutual Benefit sent out an arson investigator who never determined the cause of the blaze.

In March 2002, one of Mutual Benefit's lawyers sent the Simms a letter saying their policy was "void for misrepresentations, false statements, and fraudulent conduct you have engaged in with regard to the fire, and your subsequent claim."

The following month, the Simms filed their case in the U.S. District Court in Baltimore.

William C. Parler Jr., attorney for the insurance company, said he is preparing an appeal.

"We feel very strongly that the court erred in not permitting us to introduce evidence of the plaintiff's financial condition in an insurance fraud case," Parler said. "We felt very strongly that the financial condition evidence that we had should have come in to show motive and to show the inability of the plaintiff to acquire the personal property."