No Bad Faith

Effective, Professional Arson Investigation Defeats Claims of Bad Faith

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Plaintiffs Donald Lemon and Candice Lemon (the Lemons) sued State Farm Fire & Casualty Company (State Farm) because it alleged it breached an insurance contract, that State Farm acted in bad faith and that the Lemons are entitled to an award of punitive damages.

In Donald Lemon and Candice Lemon v. State Farm Fire & Casualty Company, No. C20-3018-LTS, United States District Court, N.D. Iowa, Central Division (June 28, 2022) the court was asked to rule on motions for partial summary judgment.


This case arose out of an insurance dispute between the Lemons and State Farm regarding a claim the Lemons submitted after a fire destroyed their residence.

The Lemons had been married for roughly two years at the time of the fire and their relationship was at times turbulent. For example, law enforcement officers had responded to domestic disturbances at their home. On April 26, 2019 – less than one week before the fire – Candice called the Franklin County Sheriff’s Office to advise that Donald had moved out of the residence and she was afraid he would “ransack” the place.

At the time of the fire, the couple was separated and proceeding to a divorce. While the Lemons deny their finances were dire, they admit they were seasonally behind on bills. Candice had inherited more than $100,000 in 2015, but the Lemons had spent all of that money by May 2019.

Candice provided inconsistent statements regarding whether Donald was at the house in the hours leading up to the fire. The day after the fire, she told a State Farm representative that Donald had been home roughly one hour before the fire to retrieve some of his fishing equipment. She later denied saying this. Donald denies being at the residence in the hours before the fire.

After the fire, the Lemons submitted a timely claim to State Farm. At the time of the fire, the home had a value of $76,900. The Lemons submitted a personal property inventory that totaled $173,137.57, although it is not clear that their home could accommodate the number of items claimed.

State Farm hired Independent Forensic Investigations Corporation (IFIC) to investigate the fire. Lonn Abeltins, an investigator with IFIC, traveled to the home on May 7, 2019, and June 12, 2019, to conduct his investigation. . As part of his investigation, Abeltins collected four pieces of debris from the rubble and subsequently sent them to the Armstrong Forensic Laboratory to be tested for accelerants. One of the samples tested positive for gasoline. Stacy Niemann, an investigator with IFIC, conducted multiple interviews with the Lemons, McKinney, Craighton, Einspahr, a neighbor and various firefighters who were at the scene.

In his final report to State Farm, dated May 17, 2019, Abeltins wrote: “This fire originated in the southeast corner area of the house. There is a door at that location with steps going down into the basement. Heavy fire damage and charring, consistent with the use of an ignitable liquid, was noted in the southeast corner of the house. Gasoline was found in the sample from the doorway area at that location. In my opinion, this fire loss was incendiary in nature.”

On March 31, 2020, State Farm denied the Lemons’ claim, because:

  1. the fire was intentionally set and does not meet the insurance agreement of an accidental, direct physical loss;
  2. the fire was intentionally caused or procured by an insured;
  3. you violated the Concealment or Fraud condition of the insurance policy by intentionally concealing or misrepresenting material facts and circumstances relating to the claim.


State Farm’s investigation of the facts and circumstances surrounding the fire revealed both Named Insureds had an opportunity to set the fire and both Named Insureds had motive to set the fire, including but not limited to financial motive. The home was overinsured. It was purchased for $40,000, had an assessed value of $86,900 and was insured for $276,100 with an additional $207,075 of coverage on the contents.

The investigation revealed the Named Insureds misrepresented or concealed material facts and circumstances surrounding the fire including, but not limited to both providing new information during their examination under oath that was more likely than not, fabricated to explain the presence of an ignitable liquid being present in the area of origin. Additionally Candice misrepresented and concealed information regarding their financial condition at the time of the fire by representing they had so much money in savings that the bank assigned them a personal banker. However, bank records show little money in the bank accounts at the time of the fire.

After filing this action, the Lemons retained an expert, David Gossman, to conduct an investigation into the cause and origin of the fire who concluded that the fire was “accidental” that it “started on the west or northwest side of the property.”

Count II – Bad Faith

Under Iowa law, Count II is a first-party bad faith claim, as it involves an insured’s attempt to recover for his or her own losses allegedly covered under the insurance policy. To prevail on such a claim, the plaintiff must show

  • that the insurer had no reasonable basis for denying benefits under the policy and,
  • the insurer knew, or had reason to know, that its denial was without basis.

The first element is objective and the second element is subjective.

With regard to the first element, a reasonable basis exists for denial of policy benefits if the insured’s claim is fairly debatable either on a matter of fact or law. State Farm argued it had a reasonable basis to deny the Lemons’ claims.

They admitted the amount of personal property found in the fire debris does not come close to approaching the quantity of personal property the Lemons claim was in the home on the day of the fire, even accounting for the fact that some personal property may have been completely reduced to ash.

A defendant can defeat a bad-faith claim by showing that it had only one reasonable basis for denying coverage – not by proving that all of its coverage positions were reasonable. In short, when it decided to deny the Lemons’ claim, State Farm had before it a great deal of evidence suggesting that the fire was incendiary in nature and that either or both of the Lemons had motive to start an intentional fire.

Courts and juries do not weigh the conflicting evidence that was before the insurer; they decide whether evidence existed to justify denial of the claim. State Farm met its burden of showing, as a matter of law, that reasonable minds could conclude that the Lemons were not entitled to coverage.

As such, the Lemons’ bad faith claim failed with regard to the first element – whether their insurance claim was “fairly debatable.” State Farm was entitled to summary judgment as to Count II of the Lemons’ state court petition.

Under Iowa law, a mere breach of contract, without an accompanying tort, cannot sustain a claim for punitive damages. State Farm is therefore entitled to summary judgment on Count III, which asserts a claim for punitive damages.

Because States Farm is entitled to summary judgment on the bad faith s claims the only substantive claim remaining for trial is Count I, the Lemons’ claim for breach of contract.


For the following reasons:

Plaintiffs’ motion for partial summary judgment is denied.

Defendant’s motion for partial summary judgment is granted. As a result, Counts II and III were dismissed.

The case will proceed to trial on Count I.


The evidence available to State Farm established beyond doubt that the Lemon’s attempted to defraud State Farm by causing a fire at their house, made claims for personal property in excess of the potential for the property to be in the house at the time of the fire, that they had overinsured their property, and that they had a financial motive to set the fire. No reasonable jury would – when presented with such facts – believe that the fire was accidental and that the claim presented was fair and reasonable.

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(c) 2022 Barry Zalma & ClaimSchool, Inc.

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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at and

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About Barry Zalma

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