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Insurance
5 min read
Areas of Expertise :
Insurance, Bad Faith, Fire Origin & Cause, Property Insurance, Mortgage Lending
Published Date:
Last Modified Date:
Jurisdiction:
Missouri State
Court:
Two fires damaged and then destroyed Jonathan and Juanita Hensley’s home near Steele, Missouri, on February 2 and 3, 2003. Shelter Mutual Insurance Company denied Jonathan Hensley’s homeowners insurance claim after concluding that he intentionally caused the second fire. The insurer treated Juanita as an innocent co-insured and also recognized that Cendant Mortgage Corporation held separate rights under the policy’s mortgage clause.
Jonathan filed suit for policy benefits, interest, statutory penalties, and attorney fees under Missouri Revised Statutes § 375.420. The jury heard evidence concerning Shelter’s fire investigation, conflicting records about a gasoline-positive debris sample, the delay in paying the mortgagee, and the reasons given for denying coverage. It awarded Jonathan $240,527.22. In Hensley v. Shelter Mutual Insurance Co., 210 S.W.3d 455 (Mo. Ct. App. 2007), the Missouri Court of Appeals affirmed the judgment under Missouri’s vexatious-refusal-to-pay statute.
Jonathan and Juanita Hensley purchased a one-story brick home with an attached garage near Steele, Missouri. Cendant Mortgage Corporation financed most of the purchase and was listed as the mortgagee under a Shelter Mutual homeowners insurance policy. The policy remained active, and the mortgage payments were current when the fires occurred in February 2003.
At approximately 4:00 p.m., the Steele Fire Department responded to a fire at the Hensley residence. Firefighters determined that the fire started on or near the kitchen stove and extinguished flames in the kitchen and dining area. They inspected the attic, found no signs of fire there, and disconnected the utilities before leaving. Jonathan returned to the residence but decided not to stay because of the smoke and fire damage.
At approximately 5:45 a.m. the following morning, the fire department received another call involving the property. When firefighters arrived, much of the residence was engulfed, and the roof had started to collapse. The second fire left most of the building reduced to exterior walls and portions of the attached garage.
Jonathan had spent the night at his girlfriend’s home in Osceola and learned about the second fire later that morning. Firefighters returned to the property several times during the following days to extinguish areas that had rekindled.
Shelter retained fire investigator Chris Silman to inspect the damaged residence. Silman photographed the property, prepared a hand-drawn diagram, and collected five debris samples for laboratory testing. Four samples tested negative for accelerants, while sample number two tested positive for gasoline. On February 8, Silman spoke with Jonathan by telephone about where he had stayed during the night before the second fire.
Silman did not contact Jonathan’s girlfriend, Danette Jones, or her children to confirm or dispute his account. Shelter later relied on its investigation in maintaining that Jonathan had set the second fire or caused it to be set.
Silman’s records did not consistently identify where sample number two had been collected. A photograph appeared to place the sample near an interior storage room where Jonathan kept gasoline for lawn equipment. The evidence log and diagrams placed the sample closer to the master bedroom or living-room area.
Silman had not measured the residence or verified its former room arrangement. His diagrams also omitted several interior spaces, including a storage room, bathroom, and closet. The jury later reviewed these differences while considering Shelter’s intentional-fire allegation and the investigation supporting the denial.
Shelter contacted Cendant Mortgage Corporation on February 24 and requested information about the original loan, outstanding principal, interest rate, and payment history. The records showed that Cendant held a secured interest in the property and that the remaining principal exceeded $77,000. Jonathan and Juanita signed a sworn proof of loss on March 28, which Shelter received on April 2.
Around this period, a Shelter representative reportedly told Jonathan that the company would not pay off the house and that he should obtain a lawyer. According to the testimony presented at trial, the representative did not give him a specific reason for the denial during that conversation.
Jonathan filed suit against Shelter Mutual on September 9, 2003. He sought homeowners insurance benefits, interest, statutory penalties, and attorney fees under Missouri’s vexatious-refusal-to-pay statute. His petition alleged that Shelter refused to pay the covered loss without reasonable cause or excuse.
Shelter answered on October 14 and alleged that Jonathan intentionally set the fire or caused it to be set with his knowledge and consent. The insurer also filed a counterclaim concerning amounts payable to Cendant and Juanita.
Jonathan amended his petition in May 2004 to allege that Shelter had not paid Cendant despite requests for payment. During a June deposition, Shelter’s designated corporate representative acknowledged that the company owed Cendant under the policy’s mortgage clause. Shelter continued to deny Jonathan’s claim while accepting that the mortgagee possessed separate contractual rights.
The mortgage remained unpaid while interest accumulated. Jonathan also faced possible foreclosure even though Shelter had obtained the loan information in February 2003.
Shelter deposited $83,100 for Cendant and $31,435 for Juanita into the trial court’s registry. The company identified those amounts as obligations owed to the mortgagee and the innocent co-insured rather than payment of Jonathan’s homeowners insurance claim. The money remained under court control while the parties continued litigating their rights.
Shelter later argued that the deposits should reduce the amounts awarded to Jonathan. The courts examined the purpose of the deposits, the conditions attached to them, and the date on which the funds were released.
The case proceeded to a jury trial on Jonathan’s claim for policy benefits and vexatious refusal to pay. The evidence covered the two fires, the gasoline-positive debris sample, Jonathan’s whereabouts, Shelter’s investigation, the unpaid mortgage, and the insurer’s reasons for denying coverage.
The jury reviewed the differences among Silman’s photographs, diagrams, and evidence records. Shelter maintained that Jonathan was responsible for the second fire. Jonathan argued that the company denied his claim after an incomplete investigation.
Shelter also referred to Jonathan’s refusal to take a polygraph examination, alleged financial difficulties, and an anonymous letter. The jury considered those matters together with the physical evidence and the records contained in the insurance claim file.
The jury found in Jonathan’s favor and awarded $158,970 in policy benefits. It also awarded $22,367.03 in interest, $15,713.11 in statutory penalties, and $43,477.08 in attorney fees. The combined verdict totaled $240,527.22.
The insurance award included $83,100 for the dwelling, $58,170 for personal property, $15,000 for additional living expenses, $4,700 for debris removal, and $500 for fire-department services. The jury deducted the $500 policy deductible and Shelter’s earlier $2,000 advance.
After the verdict, the trial court ordered the clerk to release $83,100 to Cendant. The payment satisfied the mortgage note and released the lien on the property. It was then credited as partial satisfaction of the judgment entered for Jonathan.
On March 14, 2005, the trial court entered judgment for the full $240,527.22 returned by the jury. The payment to Cendant reduced the unpaid balance but did not alter the amount of the verdict.
Shelter requested judgment notwithstanding the verdict, a reduced judgment, remittitur, or a new trial. The insurer argued that the funds deposited with the court should have reduced the policy benefits, interest, statutory penalty, and attorney-fee awards.
The trial court denied the post-trial motions on June 23, 2005. Shelter then appealed the judgment to the Missouri Court of Appeals.
The Missouri Court of Appeals affirmed the trial court’s judgment in all respects. It ruled that the jury had sufficient evidence to find that Shelter refused payment without reasonable cause or excuse. The court examined the delayed payment to Cendant, Shelter’s communication with Jonathan, gaps in the fire investigation, the reasons given for denying coverage, and the insurer’s different treatment of Jonathan and Juanita.
The appellate court also rejected Shelter’s argument that the court-registry deposits required a reduction of the verdict. Shelter continued to deny Jonathan’s claim while the money remained under court control. Payments later released for his benefit were treated as partial satisfaction of the judgment.
The court returned the case to the trial court only to determine the reasonable attorney fees Jonathan incurred during the appeal.
Circuit Court of Pemiscot County, Missouri
Case Name:
Hensley v. Shelter Mutual Insurance Co.
Homeowners Insurance
Fire Insurance
Insurance Claims
Insurance Coverage
Claims Adjuster
Fire Cause and Origin Investigations
Fire and Explosions Investigations
Residential Fires
Mortgage Banking
Damages Calculations
Two fires damaged and then destroyed Jonathan and Juanita Hensley’s home near Steele, Missouri, on February 2 and 3, 2003. Shelter Mutual Insurance Company denied Jonathan Hensley’s homeowners insurance claim after concluding that he intentionally caused the second fire. The insurer treated Juanita as an innocent co-insured and also recognized that Cendant Mortgage Corporation held separate rights under the policy’s mortgage clause.
Jonathan filed suit for policy benefits, interest, statutory penalties, and attorney fees under Missouri Revised Statutes § 375.420. The jury heard evidence concerning Shelter’s fire investigation, conflicting records about a gasoline-positive debris sample, the delay in paying the mortgagee, and the reasons given for denying coverage. It awarded Jonathan $240,527.22. In Hensley v. Shelter Mutual Insurance Co., 210 S.W.3d 455 (Mo. Ct. App. 2007), the Missouri Court of Appeals affirmed the judgment under Missouri’s vexatious-refusal-to-pay statute.
Jonathan and Juanita Hensley purchased a one-story brick home with an attached garage near Steele, Missouri. Cendant Mortgage Corporation financed most of the purchase and was listed as the mortgagee under a Shelter Mutual homeowners insurance policy. The policy remained active, and the mortgage payments were current when the fires occurred in February 2003.
At approximately 4:00 p.m., the Steele Fire Department responded to a fire at the Hensley residence. Firefighters determined that the fire started on or near the kitchen stove and extinguished flames in the kitchen and dining area. They inspected the attic, found no signs of fire there, and disconnected the utilities before leaving. Jonathan returned to the residence but decided not to stay because of the smoke and fire damage.
At approximately 5:45 a.m. the following morning, the fire department received another call involving the property. When firefighters arrived, much of the residence was engulfed, and the roof had started to collapse. The second fire left most of the building reduced to exterior walls and portions of the attached garage.
Jonathan had spent the night at his girlfriend’s home in Osceola and learned about the second fire later that morning. Firefighters returned to the property several times during the following days to extinguish areas that had rekindled.
Shelter retained fire investigator Chris Silman to inspect the damaged residence. Silman photographed the property, prepared a hand-drawn diagram, and collected five debris samples for laboratory testing. Four samples tested negative for accelerants, while sample number two tested positive for gasoline. On February 8, Silman spoke with Jonathan by telephone about where he had stayed during the night before the second fire.
Silman did not contact Jonathan’s girlfriend, Danette Jones, or her children to confirm or dispute his account. Shelter later relied on its investigation in maintaining that Jonathan had set the second fire or caused it to be set.
Silman’s records did not consistently identify where sample number two had been collected. A photograph appeared to place the sample near an interior storage room where Jonathan kept gasoline for lawn equipment. The evidence log and diagrams placed the sample closer to the master bedroom or living-room area.
Silman had not measured the residence or verified its former room arrangement. His diagrams also omitted several interior spaces, including a storage room, bathroom, and closet. The jury later reviewed these differences while considering Shelter’s intentional-fire allegation and the investigation supporting the denial.
Shelter contacted Cendant Mortgage Corporation on February 24 and requested information about the original loan, outstanding principal, interest rate, and payment history. The records showed that Cendant held a secured interest in the property and that the remaining principal exceeded $77,000. Jonathan and Juanita signed a sworn proof of loss on March 28, which Shelter received on April 2.
Around this period, a Shelter representative reportedly told Jonathan that the company would not pay off the house and that he should obtain a lawyer. According to the testimony presented at trial, the representative did not give him a specific reason for the denial during that conversation.
Jonathan filed suit against Shelter Mutual on September 9, 2003. He sought homeowners insurance benefits, interest, statutory penalties, and attorney fees under Missouri’s vexatious-refusal-to-pay statute. His petition alleged that Shelter refused to pay the covered loss without reasonable cause or excuse.
Shelter answered on October 14 and alleged that Jonathan intentionally set the fire or caused it to be set with his knowledge and consent. The insurer also filed a counterclaim concerning amounts payable to Cendant and Juanita.
Jonathan amended his petition in May 2004 to allege that Shelter had not paid Cendant despite requests for payment. During a June deposition, Shelter’s designated corporate representative acknowledged that the company owed Cendant under the policy’s mortgage clause. Shelter continued to deny Jonathan’s claim while accepting that the mortgagee possessed separate contractual rights.
The mortgage remained unpaid while interest accumulated. Jonathan also faced possible foreclosure even though Shelter had obtained the loan information in February 2003.
Shelter deposited $83,100 for Cendant and $31,435 for Juanita into the trial court’s registry. The company identified those amounts as obligations owed to the mortgagee and the innocent co-insured rather than payment of Jonathan’s homeowners insurance claim. The money remained under court control while the parties continued litigating their rights.
Shelter later argued that the deposits should reduce the amounts awarded to Jonathan. The courts examined the purpose of the deposits, the conditions attached to them, and the date on which the funds were released.
The case proceeded to a jury trial on Jonathan’s claim for policy benefits and vexatious refusal to pay. The evidence covered the two fires, the gasoline-positive debris sample, Jonathan’s whereabouts, Shelter’s investigation, the unpaid mortgage, and the insurer’s reasons for denying coverage.
The jury reviewed the differences among Silman’s photographs, diagrams, and evidence records. Shelter maintained that Jonathan was responsible for the second fire. Jonathan argued that the company denied his claim after an incomplete investigation.
Shelter also referred to Jonathan’s refusal to take a polygraph examination, alleged financial difficulties, and an anonymous letter. The jury considered those matters together with the physical evidence and the records contained in the insurance claim file.
The jury found in Jonathan’s favor and awarded $158,970 in policy benefits. It also awarded $22,367.03 in interest, $15,713.11 in statutory penalties, and $43,477.08 in attorney fees. The combined verdict totaled $240,527.22.
The insurance award included $83,100 for the dwelling, $58,170 for personal property, $15,000 for additional living expenses, $4,700 for debris removal, and $500 for fire-department services. The jury deducted the $500 policy deductible and Shelter’s earlier $2,000 advance.
After the verdict, the trial court ordered the clerk to release $83,100 to Cendant. The payment satisfied the mortgage note and released the lien on the property. It was then credited as partial satisfaction of the judgment entered for Jonathan.
On March 14, 2005, the trial court entered judgment for the full $240,527.22 returned by the jury. The payment to Cendant reduced the unpaid balance but did not alter the amount of the verdict.
Shelter requested judgment notwithstanding the verdict, a reduced judgment, remittitur, or a new trial. The insurer argued that the funds deposited with the court should have reduced the policy benefits, interest, statutory penalty, and attorney-fee awards.
The trial court denied the post-trial motions on June 23, 2005. Shelter then appealed the judgment to the Missouri Court of Appeals.
The Missouri Court of Appeals affirmed the trial court’s judgment in all respects. It ruled that the jury had sufficient evidence to find that Shelter refused payment without reasonable cause or excuse. The court examined the delayed payment to Cendant, Shelter’s communication with Jonathan, gaps in the fire investigation, the reasons given for denying coverage, and the insurer’s different treatment of Jonathan and Juanita.
The appellate court also rejected Shelter’s argument that the court-registry deposits required a reduction of the verdict. Shelter continued to deny Jonathan’s claim while the money remained under court control. Payments later released for his benefit were treated as partial satisfaction of the judgment.
The court returned the case to the trial court only to determine the reasonable attorney fees Jonathan incurred during the appeal.
Insurance Claims Expert Witness
An insurance claims handling expert may review the insurer’s investigation, file documentation, communications, coverage analysis, and payment decisions. The review may address whether the claim file supports the stated reasons for denial and whether relevant information received appropriate follow-up.
Damages Expert Witness
Damages experts may calculate dwelling benefits, personal-property losses, additional living expenses, debris-removal costs, deductibles, interest, and prior payments. The analysis may also separate amounts payable to the homeowner from obligations owed to a mortgagee.
Mortgage Banking Expert Witness
A mortgage banking expert may examine loan balances, accrued interest, payment histories, foreclosure procedures, application of insurance proceeds, lien releases, and credit reporting. In a dispute involving delayed payment to a mortgagee, the analysis may address how the delay affected the loan account and when the insurer’s payment satisfied the mortgage obligation.
Elements of a Missouri Vexatious Refusal to Pay Claim
Under Missouri Revised Statutes § 375.420, an insured must establish the existence of an insurance policy, the insurer’s refusal to pay a covered loss, and the absence of reasonable cause or excuse for that refusal. Available recovery may include policy benefits, interest, statutory damages, and reasonable attorney fees.
Effect of a Genuine Insurance Coverage Dispute
An insurer may litigate a legitimate factual or legal question concerning coverage. The existence of a dispute, however, does not automatically prevent liability under the vexatious-refusal statute. A jury may examine the insurer’s investigation, communications, payment decisions, and explanations for denying the claim.
Documentation of Fire Debris Sample Locations
Fire-scene photographs, diagrams, measurements, evidence logs, and laboratory reports should provide a consistent record of where each sample was collected. Conflicting locations may affect whether a gasoline result supports an intentional-fire allegation or has an explanation connected to ordinary household storage.
Mortgagee Rights Under a Homeowners Insurance Policy
A mortgage clause may require an insurer to pay a lender even when the company alleges intentional conduct by an insured homeowner. The insurer’s obligation to the mortgagee may continue while the homeowner’s right to receive policy benefits remains disputed.
Legal Effect of Funds Deposited With a Court
A court-registry deposit does not always constitute immediate payment to an insured. Its effect depends on the purpose of the deposit, the conditions placed on the money, the intended recipient, and the date on which the funds are released.
Shelter denied Jonathan Hensley’s homeowners insurance claim after the second fire destroyed most of the Missouri residence. The jury considered the conflicting records concerning the gasoline-positive debris sample, the lack of additional interviews about Jonathan’s whereabouts, the delayed mortgage payment, and Shelter’s stated reasons for refusing coverage before awarding $240,527.22 in policy benefits, interest, statutory penalties, and attorney fees. The Missouri Court of Appeals affirmed the judgment on January 4, 2007, credited the money released to Cendant as partial satisfaction of the award, and returned the case to the trial court only to calculate Jonathan’s attorney fees from the appeal.
What happened to Jonathan and Juanita Hensley’s Missouri home?
A fire started on or near the kitchen stove on February 2, 2003. Firefighters extinguished the flames, inspected the attic, and disconnected the utilities. A second fire began early the following morning and destroyed most of the residence.
Why did Shelter Mutual deny Jonathan Hensley’s insurance claim?
Shelter alleged that Jonathan intentionally caused the second fire. The insurer relied in part on a debris sample that tested positive for gasoline and also referred to his refusal to take a polygraph examination, alleged financial concerns, and an anonymous letter.
Why was the gasoline-positive debris sample disputed?
Only one of the five debris samples tested positive for gasoline. A photograph appeared to place the sample near a storage room where gasoline was kept for lawn equipment, while the evidence log and diagrams placed it closer to a bedroom or living area.
How much did the jury award Jonathan Hensley?
The jury awarded $158,970 in policy benefits, $22,367.03 in interest, $15,713.11 in statutory penalties, and $43,477.08 in attorney fees. The total verdict was $240,527.22.
What did the Missouri Court of Appeals decide?
The Missouri Court of Appeals affirmed the judgment on January 4, 2007. It upheld the jury’s finding of vexatious refusal to pay and rejected Shelter’s arguments concerning the funds deposited with the trial court. The remaining proceeding involved attorney fees incurred during the appeal.
Insurance Claims Expert Witness
An insurance claims handling expert may review the insurer’s investigation, file documentation, communications, coverage analysis, and payment decisions. The review may address whether the claim file supports the stated reasons for denial and whether relevant information received appropriate follow-up.
Damages Expert Witness
Damages experts may calculate dwelling benefits, personal-property losses, additional living expenses, debris-removal costs, deductibles, interest, and prior payments. The analysis may also separate amounts payable to the homeowner from obligations owed to a mortgagee.
Mortgage Banking Expert Witness
A mortgage banking expert may examine loan balances, accrued interest, payment histories, foreclosure procedures, application of insurance proceeds, lien releases, and credit reporting. In a dispute involving delayed payment to a mortgagee, the analysis may address how the delay affected the loan account and when the insurer’s payment satisfied the mortgage obligation.
Elements of a Missouri Vexatious Refusal to Pay Claim
Under Missouri Revised Statutes § 375.420, an insured must establish the existence of an insurance policy, the insurer’s refusal to pay a covered loss, and the absence of reasonable cause or excuse for that refusal. Available recovery may include policy benefits, interest, statutory damages, and reasonable attorney fees.
Effect of a Genuine Insurance Coverage Dispute
An insurer may litigate a legitimate factual or legal question concerning coverage. The existence of a dispute, however, does not automatically prevent liability under the vexatious-refusal statute. A jury may examine the insurer’s investigation, communications, payment decisions, and explanations for denying the claim.
Documentation of Fire Debris Sample Locations
Fire-scene photographs, diagrams, measurements, evidence logs, and laboratory reports should provide a consistent record of where each sample was collected. Conflicting locations may affect whether a gasoline result supports an intentional-fire allegation or has an explanation connected to ordinary household storage.
Mortgagee Rights Under a Homeowners Insurance Policy
A mortgage clause may require an insurer to pay a lender even when the company alleges intentional conduct by an insured homeowner. The insurer’s obligation to the mortgagee may continue while the homeowner’s right to receive policy benefits remains disputed.
Legal Effect of Funds Deposited With a Court
A court-registry deposit does not always constitute immediate payment to an insured. Its effect depends on the purpose of the deposit, the conditions placed on the money, the intended recipient, and the date on which the funds are released.
Shelter denied Jonathan Hensley’s homeowners insurance claim after the second fire destroyed most of the Missouri residence. The jury considered the conflicting records concerning the gasoline-positive debris sample, the lack of additional interviews about Jonathan’s whereabouts, the delayed mortgage payment, and Shelter’s stated reasons for refusing coverage before awarding $240,527.22 in policy benefits, interest, statutory penalties, and attorney fees. The Missouri Court of Appeals affirmed the judgment on January 4, 2007, credited the money released to Cendant as partial satisfaction of the award, and returned the case to the trial court only to calculate Jonathan’s attorney fees from the appeal.
What happened to Jonathan and Juanita Hensley’s Missouri home?
A fire started on or near the kitchen stove on February 2, 2003. Firefighters extinguished the flames, inspected the attic, and disconnected the utilities. A second fire began early the following morning and destroyed most of the residence.
Why did Shelter Mutual deny Jonathan Hensley’s insurance claim?
Shelter alleged that Jonathan intentionally caused the second fire. The insurer relied in part on a debris sample that tested positive for gasoline and also referred to his refusal to take a polygraph examination, alleged financial concerns, and an anonymous letter.
Why was the gasoline-positive debris sample disputed?
Only one of the five debris samples tested positive for gasoline. A photograph appeared to place the sample near a storage room where gasoline was kept for lawn equipment, while the evidence log and diagrams placed it closer to a bedroom or living area.
How much did the jury award Jonathan Hensley?
The jury awarded $158,970 in policy benefits, $22,367.03 in interest, $15,713.11 in statutory penalties, and $43,477.08 in attorney fees. The total verdict was $240,527.22.
What did the Missouri Court of Appeals decide?
The Missouri Court of Appeals affirmed the judgment on January 4, 2007. It upheld the jury’s finding of vexatious refusal to pay and rejected Shelter’s arguments concerning the funds deposited with the trial court. The remaining proceeding involved attorney fees incurred during the appeal.
Homeowners Insurance
Fire Insurance
Insurance Claims
Insurance Coverage
Claims Adjuster
Fire Cause and Origin Investigations
Fire and Explosions Investigations
Residential Fires
Mortgage Banking
Damages Calculations
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