Insureds filing a fire loss claim against their homeowner’s insurance carrier for property damage and loss of personal property must not conceal or misrepresent any material fact or circumstance in presenting the claim.

In a recent unreported Appellate Division case in New Jersey, Masaitis v. Allstate, plaintiffs (the homeowners) sued Allstate for significant fire loss damages to property and contents. Allstate counterclaimed, alleging that the plaintiffs misrepresented their losses in making the claim. Although Allstate also alleged arson, that issue was considered and rejected by the jury, who concluded Allstate had not proven the plaintiffs committed arson. Regardless, the jury was very skeptical about the proofs presented by the plaintiffs, and held that the plaintiffs fraudulently claimed loss of items they could not prove they had ever owned, let alone had lost in the fire.

Although the fire marshal concluded the cause of origin could not be determined, there were apparently substantial proofs submitted to the jury, challenging the plaintiffs’ credibility regarding motive – based, in part, on their pets, vehicles, and expensive items of personal property, having been removed from the property prior to the fire and having presented conflicting testimony regarding at least one of the plaintiff’s whereabouts at the time of the fire.

Ultimately, the homeowners were found to have violated a New Jersey statute, which allows an action by an insurance carrier, against someone who knowingly files a statement of claim containing any false or misleading information. If the insurance company can prove a claim under the statute, they are entitled to reasonable investigation expenses, costs of suit and attorneys fees. Here the jury awarded over $800,000 to the insurance company.

The take away is that insureds must be honest in presenting claims to the insurance carrier following a property casualty loss. Often insureds are traumatized; the fire loss scene is chaotic; and proofs are hard to come by, depending upon the seriousness of the damage to property and the ability to reconstruct damaged items after the fact.

Notwithstanding, insureds must be straightforward in presenting claims and must not use a serious property loss to serve as a smokescreen for trying to inappropriately gain. Insurance companies are adept at investigating and approach losses with a skeptical, if not jaundiced, view of their insureds, as they sift through the evidence and form opinions regarding not only the cause of loss, but the quality of the proofs. This case is a sobering reminder that this process is a two-way street, requiring scrupulous honesty by all involved.