Arson for Profit and Material Misrepresentations Defeat Suit Against Insurer


Multiple Arson and Fraud Claims Defeated by Evidence

Sharon Paige Richey and Tommy Richey sued Auto-Owners Insurance Company asserting breach of contract, bad faith, malicious prosecution, and false imprisonment claims. They also sued as a result of criminal proceedings initiated against Plaintiffs, following two fires at Plaintiffs’ home. In Sharon Paige Richey, et al. v. Auto-Owners Insurance Co., Case No. 2:19-CV-219-KFP, United States District Court For The Middle District Of Alabama Northern Division (October 15, 2020) the USDC ruled on the insurer’s motion for summary judgment.


Plaintiffs Sharon and Tommy Richey purchased a home located in Montgomery, Alabama. On or about January 24, 2017, Mrs. Richey signed an application for insurance with Auto-Owners, seeking homeowner’s insurance coverage on the subject property. Auto-Owners subsequently issued an insurance.

The Fires

On January 26, 2017, a fire loss damaged the home. On February 26, 2017, a second fire occurred further damaging the home.  On March 1, 2017, Lt. Peoples, an investigator with the Montgomery Fire Department, sent a letter to Auto-Owners requesting that Auto-Owners provide a copy of any factual information Auto-Owners had in its file concerning the above referenced fire losses. Auto-Owners responded to the request and provided the requested information to Lt. Peoples. Auto-Owners supplemented its initial response twice.

The Richeys were indicted and arrested on two separate occasions for Insurance Fraud 1st Degree in relation to the insurance claim submitted to Auto-Owners following the fires. The original charges were nol prossed with leave to re-indict, and the second set of charges was dismissed. The Court found the following additional undisputed material facts: The purchase price of the home was $33,500, and the bond for title required the Richeys to purchase property insurance in the amount of $32,000. Mrs. Richey executed an application for property insurance from Auto-Owners two days before the first fire loss. In her application, she requested $135,300 in dwelling coverage, over $100,000 more than required by the bond for title. Auto-Owners issued a homeowner’s insurance policy for the property to Mrs. Richey with the requested $135,300 of coverage.

The Auto-Owners application Mrs. Richey executed and submitted requires an applicant to list all losses in the past five years. Mrs. Richey’s application contained multiple materially false statements like she had suffered no losses in the past five years; that she had not filed “personal bankruptcy”; Mrs. Richey, contrary to the requirement for listing valuable items listed none.

Had the application executed by Sharon Richey disclosed the bankruptcy and the November 2016 fire loss, based upon Auto-Owners’ normal practice, the policy would not have been written.

The Richeys’ Representations Following the Fire Losses

At some point between the first and second fire, the Richeys submitted a contents list to Auto-Owners identifying, among other things, a $44,815 painting (entitled “the Chess Game”), two $18,000 paintings, a $4,000 Rolex watch, and eight WWE wrestling belts totaling more than $3,000. Following the second fire, the Richeys submitted a second contents list that differed from the first, valuing the Chess Game painting at $245.99, omitting the two $18,000 paintings entirely, valuing the Rolex watch at $10,100, and listing only four WWE wrestling belts totaling approximately $65.

Criminal Proceedings Against the Richeys

In July 2017, the Richeys were indicted by the Montgomery County Grand Jury on charges of felony insurance fraud. In October 2017, the Richeys were re-indicted for first degree insurance fraud and, on October 24, 2017, a second set of arrest warrants were issued. Finally, on April 10, 2018, the charges against the Richeys were dismissed.

Other Fire Losses

The Richeys’ claim to be very unlucky since all four homes Mrs. Richey owns or has previously owned have been insured and have been damaged or destroyed by fire.

Access to the Home and the Richeys’ Financial Condition

Neither of the Richeys were employed at the time of the fire losses. Although Mrs. Richey received $1,200 per month in food stamps before moving to Montgomery in late 2016, she no longer received food stamps at the time of the fires.  Mr. Richey received disability payments of $679 per month, which was the Richeys’ only source of income for their household of ten. The Richeys reported that their normal monthly expenses totaled $4,613.27, of which the disability payments fell well short.


Auto-Owners argued that it denied the Richeys’ insurance claim because they failed to perform under the contract by violating two provisions of the insurance policy: the Exclusions provision and the Concealment or Fraud provision.

To establish a case of arson sufficient for summary judgment, Auto-Owners must show that (1) the fire was intentionally set; (2) the insured had a motive for committing the alleged arson; and (3) the insured either set the fire or had it set, which may be proved by unexplained surrounding circumstantial evidence implicating the insured.

Motive to commit arson can be deduced from an insured’s financial difficulties at the time of the fire. The undisputed evidence establishes the first element of the affirmative defense of arson for the Richeys’ insurance claim—the second fire was intentionally set. There is ample undisputed evidence in the record that Plaintiffs had motive for committing arson. Plaintiffs’ financial situation supports a finding of motive to commit arson. Finally, with respect to the third element, undisputed evidence demonstrates that the second fire was caused by the Richeys or at their direction. Mrs. Richey specifically requested $100,000 more in insurance coverage than required by her bond for title. Two days later, the house first caught fire.

Taken as a whole, the USDC concluded that the undisputed facts were sufficient to establish that the second fire was caused by the Richeys or at their direction. Therefore, all three elements for arson are supported by the record, giving Auto-Owners the defense to the breach of contract claim and a basis for not paying on the policy.

The Richeys Violated the Exclusions Including the Concealment or Fraud Provision

In addition the undisputed evidence demonstrates that Plaintiffs violated the Concealment or Fraud provision of the insurance policy. Auto-Owners denied the Richeys’ insurance claim under this provision on the basis that they had intentionally made numerous material misrepresentations to Auto-Owners.

For example the Richeys submitted two contrary proofs of loss, with the first claiming $113,529.05 for contents and a “priceless” value for the house and the second claiming $24,367.86 for contents and $135,300 for the house. The material misrepresentations made by Plaintiffs in their application and subsequent claim were plentiful and substantial. Given the misrepresentations in the application. A sworn proof of loss which includes numerous nonexistent items voids the entire policy as a matter of law.

In this case, given the number of misrepresentations the Richeys made to Auto-Owners; the extreme discrepancies in their contents lists, for which they provided either no explanation or conflicting explanations; their admittance that, despite knowingly and willfully completing and submitting the contents lists, they do not actually know the quantity or value of many of the included items; the fact that the contradictory proofs of loss were both sworn under oath; and the undisputed evidence supporting a finding of arson, the USDC found that, as a matter of law, Plaintiffs’ misrepresentations were intentional. Plaintiffs violated the Concealment or Fraud provision under the insurance policy and, thus, cannot establish a breach of contract claim against Auto-Owners.

The Richeys were arrested pursuant to two valid search warrants issued by a person or persons lawfully authorized to do so. It is undisputed that each of the arrest warrants were issued following a grand jury indictment, which constitutes probable cause. Thus, regardless of Plaintiffs’ feelings regarding the underlying charges for their arrests, Plaintiffs’ false imprisonment claim fails as a matter of law, and Auto-Owners is entitled to summary judgment as to that claim.

Defendant’s Motion for Summary Judgment was granted.


The Richeys made a good living from submitting fire insurance claims that were probably fraudulent. They seemed to be living off insurance claims after all of their homes seem to be destroyed by fire soon after they were insured. They lied continuously at the application and claims stage and were properly arrested for the crimes of insurance fraud and arson-for-profit. Why the state of Alabama dropped the criminal charges is astounding on, what the USDC found to be uncontroverted evidence, is an amazing breach of the duty to prosecute crime against insurers because – apparently – insurers are not a favored victim.  Auto-Owners Insurance Company and the other insurers of the Richeys should consider filing suit to recover the moneys paid for indemnity or costs incurred.

© 2020 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at and

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals. last two issues of ZIFL here. 

Go to Barry Zalma videos at at

Read posts from Barry Zalma at

Listen to the Podcast: Zalma on Insurance on Insurance 

Go to Barry Zalma on YouTube-

Go to the Insurance Claims Library – Version of ZIFL, it’s Free! – 


This entry was posted in Zalma on Insurance. Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.