On May 20th, a federal court in Georgia held that the standard “requirements in case of loss” language compelling the insurer to turn over her books and records during the adjustment process did not require the production of recordings that she had secretly made of her telephone calls with the insurer’s representatives. In Armstead v. Allstate Prop. & Cas. Ins. Co., 2015 WL 2408049, 2015 U.S. Dist. LEXIS 66030 (N.D. Ga., May 20, 2015), the court rejected arguments that the policyholder’s refusal to disgorge the tapes was a violation of the “no action” clause that precluded her breach of contract and bad faith action because it held that the carrier had not shown that they were material to the adjustment of the claim.
Instead of contending that the “requirements in case of loss” language mandated the tapes’ production, of course, the insurer should have sought them through regular discovery and moved to compel if they weren’t forthcoming. It is hard to see how the policyholder could have resisted that motion given her allegations of bad faith.
The policyholder owned a home in Powder Springs, Georgia that sustained fire and smoke damage from an accidental grease fire on December 7, 2011. The insured submitted a proof of loss seeking $75,909.43, but her homeowners carrier contended that the repairs could be effected for far less, and it ultimately made payments totaling approximately $20,000.
During an examination under oath of the policyholder’s building contractor, the insurer learned for the first time that the insured had recorded her conversations with its representatives and that the building contractor had done the same thing on two or three occasions. Requests were then made for copies of the recordings; according to the insurance company’s counsel, they were relevant to the “veracity of the insured’s assertions” regarding the insurer’s conduct. The requests were refused, and the carrier then informed the policyholder that it would cease making any additional payments towards the loss. A lawsuit for breach of contract and bad faith followed.
The insurance policy required the insured to comply with the following provision in the event of a loss:
Give us all accounting records, bills, invoices, and other vouchers, or certified copies, which we may reasonably request to examine and permit us to make copies.
There was also a “no action” clause reciting that no action could be brought “unless there has been full compliance with all policy terms.” The insurer moved for summary judgment on the basis of those two provisions, contending that the first one required the insured to produce the recordings and that a refusal to do so precluded her claims pursuant to the second one.
Last week, the court disagreed, and the motion was denied. As Judge William Duffey, Jr., explained:
Section 3(a) pertains to a discrete set of documents: “accounting records,” “bills,” “invoices” “vouchers” and “certified copies.” These categories are all types of documents that evidence the damages, repairs or remediation, and their cost, associated with a loss. By their terms, they do not include conversations a policyholder may have had with an insured [sic] during the claim adjudication process. . . . The Court thus finds that Section 3(a) is not ambiguous and did not require Plaintiff to produce the recordings demanded.
The court noted that under Georgia law, the insured is only required to provide “material information to the insurer that the insurer is entitled to receive under the insurance policy.” That principle has been held to mean that other material – such as bank accounts, savings accounts, tax returns, W-2 forms, and other documents relating to the insured’s income – may be material and subject to production when the carrier contends that the policyholder is guilty of fraud. No such claims were made by Allstate, however; as a result, Judge Duffey found that the insurance company had not “presented evidence that the audio recordings are material to a complete investigation of the claim.”