Is There a Viable Cause of Action for Reverse Bad Faith Against an Insured?

Originally published by Brandee Bower.

In a recent case from Kentucky, the insured suffered a fire loss at her home.1 Although no one was home at the time of the fire, investigators found that the fire was intentionally set. The insured made an insurance claim for $866,000 of which approximately $425,000 was paid by the insurance company. Eventually, the insurance company sued in state court to declare the policy void and alleged that the plaintiff/insured caused the fire and inflated the loss in breach of the “intentional loss” and “concealment or fraud” provisions of the policy. The plaintiff removed the case to federal court and asserted claims against the insurance company for breach of contract and bad faith, among others.
The plaintiff eventually admitted that she solicited a friend to burn down her house to collect the insurance proceeds. The plaintiff and her friend were indicted on charges of conspiracy to use fire to commit wire fraud. Plaintiff pled guilty and confessed to filing a…

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