In October 2012, the second district of the California Court of Appeal addressed whether an insurance carrier may deny a policyholder’s claim after the theft of an automobile when the policyholder’s statements about the loss were “inconsistent”.
The facts of Hodjat v. State Farm Mutual Automobile surrounded the purchase of a damaged and used BMW and its subsequent theft. In 2007, the policyholders purchased insurance under State Farm for a used BMW. In 2009, the policyholders reported the car stolen. In response to reporting the loss, State Farm required the policyholders to submit statements regarding the condition of the car.
When establishing his claim for the loss, the policyholder was required to produce five different types of statements regarding the purchase, condition, and loss of the car. These statements included: (1) a report, (2) an Affidavit of Loss, (3) Recorded Statement, (4) an Examination Under Oath, and (5) a Declaration in an opposition to a motion for summary judgment. In addition to these statements, State Farm requested the following documents from the policyholders: a set of keys for the car, the purchase information for the car, maintenance records, and contact information for potential drivers of the car.
After an investigation, State Farm denied the policyholders claim, stating that the statements about the loss were riddled with inconsistencies and that the policyholder had made material misrepresentations. The policyholder’s next initiated a law suit against the insurance company for breach of the duty of good faith and fair dealing. The trial court denied the policyholder’s motion and ruled in favor State Farm after a motion for summary judgment. On appeal, a three judge panel reviewed the evidence presented.
The Court found that the policyholder made conflicting reports about how much he paid for the car and when he last saw the car. Further, the policyholder claimed that he had sent the car to Mexico to be repaired but then backtracked and denied that this was ever completed. The Court found that the policyholder failed to present a genuine argument about why the denial of claim was in bad faith. The Court rejected the policyholder’s contention that the investigation into the claim was biased and unfair. In reading the language of State Farm’s policy, the Court found that the policy clearly stated that there would be no coverage for a loss when the policyholder made false statements about the claim.
The Court concluded that an owner’s false statements and failure to cooperate in an investigation were sufficient to deny a policyholder’s claim. Policyholders should note that they have an obligation to be honest to the insurance carrier and that a finding of inconsistency will be sufficient to deny the policyholders claim.
