This story is reprinted with permission from FC&S Legal, the industry’s only comprehensive digital resource designed for insurance coverage law professionals. Visit the website to subscribe.


The U.S. Court of Appeals for the Fifth Circuit has upheld a jury’s decision that an insured restaurant failed to provide financial information requested by its insurer, to the insurer’s prejudice, and, therefore, the circuit court reversed the district court’s entry of judgment in favor of the restaurant.

The Case

A few months after Resie’s Chicken & Waffles restaurant opened in Houston, it was damaged by a fire. The Houston Fire Department concluded that it was an electrical fire.

Resie’s submitted a claim for damages to its commercial property insurance carrier, Acceptance Indemnity Company (“AIC”). AIC hired a third-party arson investigator to conduct an independent analysis of the incident.

Approximately nine months after the fire, AIC’s attorney sent a letter to Resie’s acknowledging the receipt of certain documents as well as financial and insurance claim records release authorizations from Resie’s. These documents and authorizations apparently were sent in response to a request or requests from AIC. The parties disputed, however, whether the documents AIC received were in fact the financial records it had requested.

Two months later, AIC denied Resie’s claim, concluding that (1) the fire was the result of arson, not an accidental loss; (2) Resie’s failed to maintain a working smoke alarm; and (3) Resie’s failed to provide the financial information requested on numerous occasions.

Resie’s sued AIC for breach of its insurance contract, among other things.

AIC asserted three affirmative defenses: arson attributable to Resie’s, a non-functioning smoke alarm on the premises, and Resie’s failure to cooperate with AIC’s requests for financial records.

At trial, Charese Foreman, the owner of Resie’s, gave extensive and at times conflicting testimony regarding the financial records. She stated that she “gave [AIC] everything that [it] asked for; receipts, invoices. [It] asked me for bank statements. [It] asked for me for tax returns. We gave [it] everything.” She also testified that she provided her attorney with Resie’s’ accounting documents, which she claimed to have retrieved from a computer at the restaurant that was undamaged by the fire.

AIC, however, introduced Ms. Foreman’s testimony from her deposition in which she claimed to have never used this computer to access any documents after the fire. Ms. Foreman also stated in her deposition that she did not have access to the accounting documents because the computer remained at Resie’s, from which she had been locked out by her landlord.

The jury rejected AIC’s arson and smoke detector defenses but found that Resie’s “failed to provide financial information relating to the business as requested” and that “such failure to provide documents to [AIC] was prejudicial to [AIC].”

The jury’s answers to interrogatories 4 and 5 were as follows:

INTERROGATORY NO. 4: Do you find from a preponderance of the evidence that Resie’s Chicken & Waffles Restaurant failed to provide financial information relating to the business as requested? Answer “Yes” or “No.”

Answer: Yes

INTERROGATORY NO. 5: Do you find that such failure to provide documents to Acceptance was prejudicial to Acceptance? Answer “Yes” or “No.”

Answer: Yes

AIC moved for entry of judgment and Resie’s moved for judgment as a matter of law on the grounds of insufficient evidence supporting the jury’s response to the financial records interrogatories, or, in the alternative, for a new trial only with respect to the financial records issue.

The U.S. District Court for the Southern District of Texas entered judgment as a matter of law for Resie’s, and AIC appealed.

The AIC Policy

The AIC insurance policy imposed a number of conditions in the event of loss or damage, including that Resie’s:

must . . . . [a]s often as may be reasonably required, permit [AIC] to inspect the property proving the loss or damage and examine [Resie’s’] books and records

and must:

[c]ooperate with [AIC] in the investigation or settlement of the claim.

The Fifth Circuit’s Decision

The circuit court ruled that the district court had erred in granting judgment as a matter of law for Resie’s.

In its decision, the Fifth Circuit explained that the district court had concluded that “the record show[ed], undisputedly, that the means for obtaining [Resie’s’ business] records [were] in [AIC’s] hands,” regardless of whether Resie’s actually had provided the records to AIC. The Fifth Circuit noted, however, that the only reference in the record to authorizations to obtain records appeared in the letter from AIC’s counsel to Resie’s counsel, which acknowledged receipt of authorizations for “(1) Insurance/Claim records; (2) General Release of Information; and (3) Financial Records.”

The circuit court then pointed out that AIC maintained that the financial records that it sought were Resie’s profit and loss statements, and its balance sheets, and that these were not available from third parties and could not reliably be recreated from information obtained from third parties, such as bank records. The Fifth Circuit found that the jury was entitled to conclude that Resie’s had not produced information reflecting its profits and losses or its balance sheets. According to the circuit court, there was “no evidence that it was available from other sources.”

The Fifth Circuit added that there was other evidence that the jury could have credited in reaching its conclusions, including the fact that Resie’s failed to present at trial the financial records that it said had been provided in response to requests by AIC. According to the circuit court, the facts and inferences did not point “so strongly and overwhelmingly in favor” of Resie’s to warrant judgment as a matter of law.

The circuit court also ruled that the jury’s finding that AIC had been prejudiced also was supported by the evidence, as a reasonable juror could have inferred that the failure to provide financial information prevented AIC from presenting a clear motive for the alleged arson.

Accordingly, the Fifth Circuit found sufficient evidence to reinstate the jury’s verdict that Resie’s had breached its policy by failing to provide requested financial information and that this breach had prejudiced AIC. It ordered the district court to reinstate the jury’s verdict.

The case is Foreman v. Acceptance Indemnity Co., No. 16-20680 (5th Cir. April 6, 2018). Attorneys involved include: For CHARESE FOREMAN, RESIE’S CHICKEN & WAFFLES RESTAURANT, Plaintiffs – Appellees, Cross-Appellants: Aubrey Dale Pittman, Pittman Law Firm, P.C., Dallas, TX; Wendle Van Smith, Anderson & Smith, P.C., Houston, TX. For ACCEPTANCE INDEMNITY COMPANY, IAT GROUP INVESTIGATIVE SERVICES UNIT, Defendants – Appellants, Cross-Appellees: Jack M. McKinley, Ramey, Chandler, Quinn & Zito, P.C., Houston, TX.


Steven A. Meyerowitz, Esq., is the Director of FC&S Legal, the Editor-in-Chief of the Insurance Coverage Law Report, and the Founder and President of Meyerowitz Communications Inc. As FC&S Legal Director, Mr. Meyerowitz, a member of the team that conceptualized FC&S Legal, provides daily analysis and commentary on the most significant insurance coverage law decisions from courts across the country and news regarding legislative and regulatory developments. A graduate of Harvard Law School, Mr. Meyerowitz was an attorney at a prominent Wall Street law firm before founding Meyerowitz Communications Inc., a law firm marketing communications consulting company.