Alfa found guilty of insurance fraud

posted on:
January 13, 2005

author:
Staff

For immediate release

Montgomery, Alabama (January 13, 2005) Today, an Escambia County jury returned a $500,000 verdict against Alfa Mutual Insurance Company for fraud. Willie Hudson and his companion, Betty Jo Phillips, accused Alfa and its agent, Allen Walston, of misrepresenting information contained on Mr. Hudson’s application for a farm owners/homeowners insurance policy. The misrepresentation was later used by Alfa to deny a total loss fire claim on the Hudson home. The fire was believed to have been caused by lightning.

Mr. Hudson was convicted of a crime over thirty years ago, a fact he claims he disclosed to his agent in response to the agent’s inquiry “have you ever been arrested,” on the homeowners’ policy application. The agent, according to Mr. Hudson, stated that the arrest was “too long ago” and “did not matter” then the agent marked the application “no.” There was approximately seven other errors contained on the very same application.

Approximately a year after Mr. Hudson purchased the Alfa homeowners insurance, Mr. Hudson experienced a total fire loss of his home, but Alfa denied his claim and accused Mr. Hudson of lying on his application about his thirty year old arrest. In April 2001, Alfa sued Mr. Hudson asking for the Court to declare that Mr. Hudson’s policy could be rescinded and that they would have no obligation to pay any claim. In response, Mr. Hudson filed a counterclaim alleging fraud against Alfa because their agent had misrepresented Hudson’s information on the Alfa application. Since November 2001, Mr. Hudson and his companion, Ms. Phillips, have been forced to live in a “converted barn” that was located next to the home that had burned in the fire.

At the three day trial, which began on Monday, January 10th, several witnesses were called by the Plaintiff to testify that their Alfa agent had also failed to either ask the same “arrest” question on the application, or that Alfa provided them coverage despite their prior arrests, with two witnesses having convictions over twenty five years old. Mr. Hudson’s attorneys were also able to prove to the jury that Alfa had a flawed system of underwriting which allowed agents to abuse the application process, and those same abuses would be used to deny large claims at a later date. The jury deliberated approximately two hours before returning the $500,000 verdict.

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