My colleague, Nicole Vinson, is licensed to practice law in the state of North Carolina and is a strong advocate for policyholders. Naturally, when I'm retained by a policyholder in North Carolina, I immediately ask Nicole to co-counsel the case.
Recently, Nicole and I were retained by a policyholder whose fire claim has an issue potentially implicating the Innocent Spouse Doctrine, also known as the Innocent Co-Insured Doctrine. This doctrine is not recognized in every jurisdiction and the doctrine provides that a spouse's/insured’s insurance coverage is not forfeited by the wrongful conduct of the other spouse/insured.
In Lovell v. Rowan Mutual Fire Insurance Company,1 the North Carolina Supreme Court held that the right of an innocent spouse to recover on a homeowner’s insurance policy where the property loss is caused by the wrongful act of the other spouse is not lost. In fact, North Carolina does not even require the innocent spouse to be a named insured.2 If the property is held jointly by both spouses, even though only one spouse’s name appears on the policy, the other spouse is also an insured party under the additional insured language in most policies.
A similar issue is whether a wife, living separate and apart from her husband, can collect on an insurance policy taken out by him alone on properties owned jointly. The North Carolina Supreme Court, in Carter v. Continental Insurance Company of New York,3 held that she could, and that the loss benefits created by the insurance policy inured to the benefit of the entire estate as owned by both husband and wife. The innocent spouse in this fact scenario is entitled to half of the amount of the loss after the mortgagees are paid under North Carolina law.4
Any time the Innocent Spouse Doctrine is at issue, the insurer will conduct an extensive investigation that often includes recorded statements, interviews, and examinations under oath to determine whether the non-violating spouse is in fact "innocent." If the spouse is vindicated, the insurer must tender the owed benefits.
1 Lovell v. Rowan Mut. Fire Ins. Co., 302 N.C. 150, 274 S.E.2d 170 (1981).
3 Carter v. Continental Ins. Co. of New York, 242 N.C. 578, 89 S.E.2d 122 (1955).
4 See Peterson v. Finger, 82 N.C. App. 743, 348 S.E. 2d 351 (1986)(holding that an innocent co-insured/wife was entitled to recover half the amount of the agreed loss after the mortgages were paid rather than half the total loss).