Tate Farm Fire & Cas. Co. v. Allied & Assocs.
| Decision Date | 19 March 2012 |
| Docket Number | Case No. 11–10710. |
| Citation | 860 F.Supp.2d 432 |
| Parties | STATE FARM FIRE AND CASUALTY COMPANY, Plaintiff, v. ALLIED AND ASSOCIATES, Gary M. Lappin, Janel Sykes, Derwin Sykes, Kristy Jackson, April Conway, Linda Hunter, Bruce Goodman, Johnnie Goodman, Sr., Johnnie Goodman, Jr., Loretta Turnbow, Lynette Hurt–Hatter, Kenyatta Miller, and Loraina Chapman, Defendants, and Lynette Hurt–Hatter, Counter claimant, v. State Farm Fire and Casualty Company, Counter defendant. |
| Court | U.S. District Court — Eastern District of Michigan |
OPINION TEXT STARTS HERE
Gil M. Soffer, Patrick C. Harrigan, Ross O. Silverman, Katten Muchin Rosenman LLP, Chicago, IL, Morley Witus, Barris, Sott, Detroit, MI, for Plaintiff.
Michael S. Cafferty, Michael S. Cafferty & Assoc., Detroit, MI, Loyst Fletcher, Jr., Law Office of Loyst Fletcher, Jr., Mark E. Ross, Mark E. Ross, PLLC, Kenneth M. Scott, Glenn M-D Cotton, Flint, MI, for Defendants.
Loretta Turnbow, Flint, MI, pro se.
Plaintiff State Farm Fire and Casualty Company filed the present action alleging that the defendants conspired to set fire to rental properties in order to submit fraudulent fire insurance claims to State Farm and other insurers. Defendants Johnnie Goodman, Sr., Bruce Goodman, and Johnnie Goodman, Jr. responded with motions to dismiss or for summary judgment, arguing generally that the complaint does not state claims against them. Those defendants also filed a motion to sever the claims against them. And State Farm filed a motion to dismiss a counterclaim brought by one of the other defendants. The Court heard oral argument on those motions on June 27, 2011 and discussed some the complaint's shortcomings on the record. The motions were taken under advisement, and plaintiff subsequently was granted leave to amend. The amended complaint deletes a count for declaratory relief, adds no new counts, and attempts to fortify some of the factual allegations against the defendants. The Court permitted the defendants to direct their arguments to the allegations in the amended complaint without filing new motions to dismiss, and to supplement their briefs to address the newly-pleaded allegations if they chose. No new briefs were filed, and the motions are ready for decision. The Court concludes that the plaintiff has asserted a right to relief against all the defendants arising from a series of allegedly related transactions, so severance of the claims is not required at the present time; the amended complaint fails to state a claim for relief against Johnnie Goodman, Sr. and Johnnie Goodman, Jr., but it pleads a cognizable claim against Bruce Goodman; and defendant Hurt–Hatter's counter-complaint fails to state a claim for abuse of process but it does plead a claim of slander. Therefore, the Court will grant in part and deny in part Johnnie Goodman, Sr.'s and Bruce Goodman's motion to dismiss, grant Johnnie Goodman, Jr.'s motion for summary judgment, and grant in part and deny in part State Farm's motion to dismiss defendant Hurt–Hatter's counterclaim.
State Farm alleges that the defendants, working together over the last eighteen years, defrauded State Farm by intentionally setting fire to their properties and submitting fraudulent insurance claims for “accidental” fire damage to State Farm and other insurance carriers. State Farm alleges that although the insurance-fraud scheme involved dozens of people, all living in or around Flint, Michigan, it revolved around overlapping groups of individuals connected by blood, marriage, friendship, business affiliation, and other relationships. According to the amended complaint, two groups of individuals, the “Sykes group” and the “Goodman group” were the most closely associated with the fraud scheme. The Sykes group included Derwin Sykes and Janel Sykes, his then-wife, and others. The Goodman group consisted of Bruce Goodman (a friend of Derwin Sykes and landlord of Janel Sykes), Johnnie Goodman, Jr. (Bruce's brother), Johnnie Goodman, Sr., and others. A common feature of the two groups, according to the plaintiff, was the involvement of a public adjuster, Allied and Associates, Inc. (Allied) and its president, defendant Gary Lappin, who supposedly facilitated the submission of the fraudulent claims. State Farm says it paid in excess of $1.2 million in reliance on the defendants' fraudulent claims.
State Farm describes three types of State Farm insurance policies under which the fraudulent claims were submitted: homeowners policies, renters policies, and rental dwelling policies. All three of these policies limited coverage to “accidental direct physical loss” and included both an “intentional acts” exclusion clause and a “fraud and concealment” clause. Both purported to void the policies if those provisions were violated.
In nearly 80% of the claims submitted to State Farm (15 of 19), the defendants employed defendant Allied as their public adjuster. State Farm alleges that Allied and Lappin were integral to the scheme because they presented State Farm and the other carriers with insurance claims they knew to be fraudulent and facilitated the payment of those fraudulent claims. State Farm also alleges that Derwin Sykes brought fraudulent claimants to Allied and Lappin, Derwin Sykes testified under oath that he furnished Allied's business cards to potential claimants, and Lappin paid Sykes a “commission” for claimants who engaged Allied. State Farm alleges that Allied's and Lappin's conduct violated Michigan's anti-solicitation statute, Mich. Comp. Laws § 500.1226(1) ().
It appears that the heart of the plaintiff's case, at least at the pleading stage, comes from testimony by a witness described only as Derwin Sykes's former girlfriend. The plaintiff alleges that she has testified that Sykes has been setting fires for the past 20 years, he obtained cash for that activity from Lappin, the two met with Janel Sykes to “keep her quiet” about that activity, and Derwin Sykes told the girlfriend that he, Lappin, and Bruce Goodwin needed to “stick together” when State Farm began seeking statements from them. She also testified that Derwin Sykes told her that he had been paid when he started a fire “to do an insurance job” on a house located on East Baltimore Street in Flint, Michigan.
State Farm's amended complaint alleges other suspicious circumstances that led it to believe that a conspiracy was afoot. For instance, in over 70% of the more than 40 “fraudulent” claims on which Allied worked, the claimant had obtained insurance coverage within one year of the fire. In one instance, a claimant purchased insurance 13 days before the fire, another five days before, and one the very same day of the fire. As for specific fire losses, State Farm describes separately claims made by members of the “Sykes group” and the “Goodman group.”
State Farm alleges that Derwin Sykes and Janel Sykes deliberately started several fires on properties insured by State Farm and submitted insurance claims for the damage. State Farm alleges that Janel Sykes was the named insured for two fraudulent claims: one for $59,039.30 for a house on 6509 Fleming in Flint on July 24, 2006, and one for $49,242.16 for a house on 3420 W. Mott on February 26, 2007. Allied was the public adjuster on both claims. The fire at 6509 Fleming was allegedly caused by a candle, but the plaintiff alleged that an acquaintance of Janel Sykes testified that Janel admitted planning to set a fire so she could “cash in” on the house. The insurance policy became effective seven weeks before the fire.
The fire at 3420 W. Mott was allegedly caused by smoking, but Derwin Sykes's former girlfriend testified that Derwin said Janel started the fire. The policy under which this claim was made had an inception date just 25 days before the fire.
State Farm alleges that Derwin Sykes submitted three fraudulent claims, two for a house on Winona in 1995 and 1997, respectively, and for a house on Kermit in 2005. Allied was the public adjuster, but Michigan Basic Insurance Company was the insurance carrier. State Farm paid out no money on those claims, although it has argued that Allied's involvement in the claims process supports its argument of a conspiracy.
The amended complaint also alleges that Kristy Jackson, Janel Syke's half-sister and Derwin Syke's sister-in-law, submitted three fraudulent claims to State Farm in 2004, 2006 and 2007. Two separate properties were involved, and Allied was the public adjuster in each case. State Farm says that the July 2006 fire was allegedly caused by cooking, but Derwin Sykes's former girlfriend testified that Jackson admitted setting a fire, and that Derwin Sykes said the fire had been set by Jackson's boyfriend.
State Farm also alleges that fraudulent fire loss claims were submitted by April Conway, who is Kristy Jackson's manager at work (one fire); Leroy Conway, April Conway's brother (two fires); Glenda Hunter, April Conway's mother (three fires); and Linda Hunter, who is April Conway's aunt and Glenda Hunter's sister (one fire). Allied was the public adjuster in three of those fires. The fires occurred between 2001 and 2007.
The “Goodman group” as identified by State Farm was responsible for submitting 27 claims for fire losses between 1992 and 2009. Not all the claims were submitted to State Farm, and Allied was the public adjuster on six of them. The plaintiff alleges that all the claims...
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