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Farmers Mutual loses Wexford County arson allegations; must pay fire coverage

Jason and Melaney Cardinal's home was virtually destroyed by fire one morning as they were preparing to leave for work.  The fire started in a joist channel in the basement above the water heater. The local fire authorities deemed the cause "undetermined," however, Farmers hired experts who claimed the cause must be arson because they could not find an electrical explanation.

Taking advantage of its policy rights to examine the Cardinals under oath, Farmers concluded that they were on tenuous financial grounds and that they weren't fully candid about their financial challenges.  Using these claims to buttress its "cause and origin" fire experts, the insurer refused to pay the benefits the Cardinals paid for.  The Cardinals sued and ultimately secured a jury verdict that the fire wasn't arson and that the Cardinals had not made material misrepresentations to Farmers that would invalidate its coverage.

Farmers appealed.  It argued that the trial judge should have ruled in its favor that the cause of the fire must have been arson by the Cardinals, based on Farmers' paid expert opinion testimony. The Court of Appeals rejected this appeal argument, noting that the Cardinals' adamant denial of arson activity created a legitimate question of fact for the jury to weigh against the paid experts' circumstantially-based opinions.

The court also rejected a number of evidentiary objections by Farmers, pointing out that several were based on a "mischaracterization of the record" by Farmers.  For example, the higher court noted that while Mrs. Cardinal denied knowning that the family was facing foreclosure, she openly admitted receiving notices from the bank and that they were behind on payments. 

Furthermore, the court rejected Farmers' attempt to avoid case evaluation sanctions arising out of Farmers' rejection of an experienced attorney panel's recommended settlement. While Farmers' suggested that the case evaluation was so vague as to be unenforceable, the court noted that the recommended settlement was in fact written with precision to confirm that it did not apply to third-parties.

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