Indiana Changes Course on Application of Intentional Acts Exclusion in Homeowners Policies

by Traub Lieberman Straus & Shrewsberry LLP
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In Deeter v. Ind. Farmers Mut. Ins. Co., 999 N.E.2d 82 (Ind. App. 2013), the Indiana appellate court denied property damage proceeds to a husband when his wife admitted to intentionally causing the fire that burned down their home.  The husband, Rick Deeter, was at work on March 3, 2011, while his wife was at their home babysitting their niece’s daughter.  When the niece arrived to pick up her daughter, she informed the wife that her husband was allegedly having an affair with another woman.  The wife became irate and called the husband and informed him that she was “tearing up the house.”  She purposefully set fire to the home and admitted setting the fire to the responding police officer.  She ultimately pleaded guilty to criminal mischief, a class D Felony.

The husband sought to recover under the couple’s homeowners policy they purchased from Farmers.  The policy provided $124,000 in property coverage.  Farmers denied coverage citing its Intentional Acts exclusion.  The trial court granted Farmers summary judgment and the husband appealed.  On appeal, he cited the long standing “innocent co-insured spouse” exception to the Intentional Acts exclusion.  The appellate court, reversing course, affirmed the trial court’s denial of coverage.

The Intentional Acts exclusion at issue provided: Intentional Acts – “We” do not pay for loss which results from an act committed by or at the direction of an “insured” and with the intent to cause a loss.  The Indiana appellate court found the exclusion was unambiguous and that it excluded coverage for loss intended by an insured. The wife intended to burn down the house, and she qualified as an insured.  Therefore, the appellate court held the exclusion barred coverage.

The husband argued that Indiana’s “innocent co-insured spouse” doctrine prevented the exclusion from applying to him.  In American Economy Ins. Co. v. Liggett, 426 N.E.2d 136, 140 (Ind. App. 1981), the appellate court found that absent express language addressing such a scenario it would “fulfill an innocent co-insured’s reasonable expectation to be indemnified for loss.” In Liggett, the husband purposefully set fire to the house and his wife was still able to recover the insurance proceeds. The Indiana appellate court affirmed the “innocent co-insured spouse doctrine” in Fuston v. National Mut. Ins. Co., 440 N.E.2d 751, 754 (Ind. App. 1982).

Recognizing that it was breaking with prior precedent, the appellate court found in Deeter, “[w]e now determine that when an insurance company has included an explicit exclusion in its policy to cover loss that results from an intentional act by a co-insured, we will respect the parties’ right to contract and enforce that exclusion.” The appellate court found the “innocent co-insured spouse doctrine” no longer applied and denied coverage for the fire loss.

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In Deeter v. Ind. Farmers Mut. Ins. Co., 999 N.E.2d 82 (Ind. App. 2013), the Indiana appellate court denied property damage proceeds to a husband when his wife admitted to intentionally causing the fire that burned down their home.  The husband, Rick Deeter, was at work on March 3, 2011, while his wife was at their home babysitting their niece’s daughter.  When the niece arrived to pick up her daughter, she informed the wife that her husband was allegedly having an affair with another woman.  The wife became irate and called the husband and informed him that she was “tearing up the house.”  She purposefully set fire to the home and admitted setting the fire to the responding police officer.  She ultimately pleaded guilty to criminal mischief, a class D Felony.

The husband sought to recover under the couple’s homeowners policy they purchased from Farmers.  The policy provided $124,000 in property coverage.  Farmers denied coverage citing its Intentional Acts exclusion.  The trial court granted Farmers summary judgment and the husband appealed.  On appeal, he cited the long standing “innocent co-insured spouse” exception to the Intentional Acts exclusion.  The appellate court, reversing course, affirmed the trial court’s denial of coverage.

The Intentional Acts exclusion at issue provided: Intentional Acts – “We” do not pay for loss which results from an act committed by or at the direction of an “insured” and with the intent to cause a loss.  The Indiana appellate court found the exclusion was unambiguous and that it excluded coverage for loss intended by an insured. The wife intended to burn down the house, and she qualified as an insured.  Therefore, the appellate court held the exclusion barred coverage.

The husband argued that Indiana’s “innocent co-insured spouse” doctrine prevented the exclusion from applying to him.  In American Economy Ins. Co. v. Liggett, 426 N.E.2d 136, 140 (Ind. App. 1981), the appellate court found that absent express language addressing such a scenario it would “fulfill an innocent co-insured’s reasonable expectation to be indemnified for loss.” In Liggett, the husband purposefully set fire to the house and his wife was still able to recover the insurance proceeds. The Indiana appellate court affirmed the “innocent co-insured spouse doctrine” in Fuston v. National Mut. Ins. Co., 440 N.E.2d 751, 754 (Ind. App. 1982).

Recognizing that it was breaking with prior precedent, the appellate court found in Deeter, “[w]e now determine that when an insurance company has included an explicit exclusion in its policy to cover loss that results from an intentional act by a co-insured, we will respect the parties’ right to contract and enforce that exclusion.” The appellate court found the “innocent co-insured spouse doctrine” no longer applied and denied coverage for the fire loss.

 

In Deeter v. Ind. Farmers Mut. Ins. Co., 999 N.E.2d 82 (Ind. App. 2013), the Indiana appellate court denied property damage proceeds to a husband when his wife admitted to intentionally causing the fire that burned down their home.  The husband, Rick Deeter, was at work on March 3, 2011, while his wife was at their home babysitting their niece’s daughter.  When the niece arrived to pick up her daughter, she informed the wife that her husband was allegedly having an affair with another woman.  The wife became irate and called the husband and informed him that she was “tearing up the house.”  She purposefully set fire to the home and admitted setting the fire to the responding police officer.  She ultimately pleaded guilty to criminal mischief, a class D Felony.

The husband sought to recover under the couple’s homeowners policy they purchased from Farmers.  The policy provided $124,000 in property coverage.  Farmers denied coverage citing its Intentional Acts exclusion.  The trial court granted Farmers summary judgment and the husband appealed.  On appeal, he cited the long standing “innocent co-insured spouse” exception to the Intentional Acts exclusion.  The appellate court, reversing course, affirmed the trial court’s denial of coverage.

The Intentional Acts exclusion at issue provided: Intentional Acts – “We” do not pay for loss which results from an act committed by or at the direction of an “insured” and with the intent to cause a loss.  The Indiana appellate court found the exclusion was unambiguous and that it excluded coverage for loss intended by an insured. The wife intended to burn down the house, and she qualified as an insured.  Therefore, the appellate court held the exclusion barred coverage.

The husband argued that Indiana’s “innocent co-insured spouse” doctrine prevented the exclusion from applying to him.  In American Economy Ins. Co. v. Liggett, 426 N.E.2d 136, 140 (Ind. App. 1981), the appellate court found that absent express language addressing such a scenario it would “fulfill an innocent co-insured’s reasonable expectation to be indemnified for loss.” In Liggett, the husband purposefully set fire to the house and his wife was still able to recover the insurance proceeds. The Indiana appellate court affirmed the “innocent co-insured spouse doctrine” in Fuston v. National Mut. Ins. Co., 440 N.E.2d 751, 754 (Ind. App. 1982).

Recognizing that it was breaking with prior precedent, the appellate court found in Deeter, “[w]e now determine that when an insurance company has included an explicit exclusion in its policy to cover loss that results from an intentional act by a co-insured, we will respect the parties’ right to contract and enforce that exclusion.” The appellate court found the “innocent co-insured spouse doctrine” no longer applied and denied coverage for the fire loss.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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