HOUSTON — A federal judge ordered a State Farm Lloyds policyholder to repay more than $80,000 in alternative living expenses and $141,000 in attorneys fees and costs after the carrier proved that the policyholder committed fraud in connection with a mold damage claim. Howard v. State Farm Lloyds, No. H-04-0352 (S.D. Texas).

Maureen Howard sued State Farm Lloyds for breach of contract, bad faith and violation of the Texas Insurance Code and Deceptive Trade Practices Act, alleging that State Farm Lloyds failed to properly investigate mold and water damage claims and refused to properly fund repairs to her Houston home.

State Farm Lloyds moved the case from state court to the U.S. District Court for the Southern District of Texas in January 2004.

Howard said in an amended complaint that she reported seven instances of water intrusion or leaks from an air conditioner and water heater between Jan. 2, 2002, and Aug. 14, 2003. She also asserted in her complaint that State Farm denied a 1999 claim for damage from an overflow in an air conditioner pan, which resulted in mold damage.

Howard filed suit after State Farm Lloyds denied a 2004 claim for mold and water damage related to an overflowing French drain.

Howard complained that State Farm hired an engineering firm known for bias toward insurance companies, and that the carrier’s failure to pay for adequate remediation caused Howard to suffer permanent injuries and incur $100,000 in medical expenses.

State Farm filed a counterclaim and affirmative defenses on March 31, alleging that Howard was guilty of fraud in claiming additional living expenses for herself and her mother, Henrietta White.

State Farm paid Howard a total of $126,680 between April 2002 and April 2004 based, in part, on documents Howard provided showing a monthly rental fee of $4,500 to 'Triangle Trust.'

Howard failed to appear for a June 21 hearing on pending motions and on June 27 her attorney notified the court that documents submitted by Howard and White in support of Howard’s attorney informed the court on June 27 that various documents submitted to the court by Howard and her mother were false.

Counsel also informed the court that Howard was withdrawing all claims against State Farm Lloyds. State Farm decided to pursue its counterclaim.

Howard filed a pro se bankruptcy petition on July 7, which temporarily halted proceedings in the civil action. The bankruptcy court granted State Farm’s motion for relief from the automatic stay on Aug. 11, and on Oct. 13, U.S. District Judge Lee H. Rosenthal issued Findings of Fact and Conclusions of Law in State Farm’s favor.

Relying on deposition testimony, filings from Howard’s two bankruptcy proceedings, and drawing adverse conclusions from Howard’s assertion of her Fifth Amendment rights during an earlier hearing, Judge Rosenthal concluded that Howard had submitted fraudulent lease documents and that her actions voided the insurance contract.

Judge Rosenthal also concluded that Howard’s bad faith and statutory claims against State Farm Lloyds were brought in bad faith.

Judge Rosenthal concluded that 'Triangle Trust' was actually a trust created in 2000 by Howard’s mother for estate planning purposes, and that the house rented for $4,500 was actually purchased by Howard and her mother and was the security for a monthly mortgage of $1,156.90.

The judge also noted that while Howard represented to State Farm that the replacement value of her personal property was $341,759 and she owned original paintings by Renoir, Rembrandt and Picasso, she stated in bankruptcy proceedings that she owned collectibles worth $2,500 and personal property valued at $1,300.

Judge Rosenthal also noted discrepancies in lost business income reported to State Farm and her representation to the bankruptcy court in 2001 that she had no income from self-operated businesses.

Judge Rosenthal ruled that State Farm was entitled to recover from Howard the difference between the actual mortgage payments made by Howard and the payments made by State Farm, or $80,234.40, and attorneys fees and costs to State Farm for the cost of defending her bad faith claim and prosecuting its counterclaim.

The judge issued a separate order on Nov. 16 ordering Howard to pay State Farm Lloyds $129,150 in fees and $12,281.34 in costs.

Thomas F. Coleman Jr. and Sandra P. Williams of Houston represented Howard.

State Farm Lloyds was represented by Christopher W. Martin, Deborah E. Rank and Holly W. Kowis of Martin Disiere in Houston.


For More Information on this article, please click on the links below:
Related Document: Findings of Fact - MOL-0511-06 (PDF format)
Related Document: Order - MOL-0511-07 (PDF format)
Related Document: Complaint - MOL-0511-08 (PDF format)
 

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