Thank you to those who sent me great comments on my post, Under a Standard Fire Policy, Intentional Conduct may be Covered. In response, I thought I would make this into a series and update you on how a variety of states are handling exclusions in fire policies for intentional acts. This post will be dedicated to California.
In Century-National Insurance Company v. Garcia,1 the Garcias owned a home and had a residential insurance policy with Century-National. The father was a named insured and the mother and adult son that resided in the home qualified as "insureds" as well. The son set fire to the home and the insurance company investigated and denied the claim. The company filed a declaratory judgment action because the policy had an exclusion for intentional acts of "any insured."
Similar to the Illinois case from my earlier blog, California fire insurance policies are regulated by the Insurance Code and require standard forms or at least "substantially equivalent" coverage. The policy at issue did not cover "[I]ntentional Loss, meaning any loss arising out of any act committed by or at the direction of any insured having the intent to cause the same." The key word here is ‘any’ because coverage exclusions that reference ‘an’ or ‘any’ as opposed to ‘the’ insured is deemed to apply collectively and refer to all insureds.2 Thus, even though the Garcias are innocent and did not participate in setting the fire, their son is an insured who intentionally set the fire. The policy seems to exclude coverage, but this provision must now be compared to the California standard fire form to confirm that the policy provides the same or better coverage.
The standard form does not contain an exclusion for losses caused by intentional acts. It does state that "[a]n insurer is not liable for a loss caused by the willful act of the insured."3 The key word here is ‘the’ which does not bar coverage for innocent coinsureds.4 Additionally, the standard form contains no clause stating that exclusions operate on a joint basis and consistently refers to ‘the’ insured, not ‘an’ insured. The Century-National policy provides less favorable coverage than the standard form.
"Fire insurance is effected in every state through a standard form required by state statute. The majority of states follow the New York 1943 form of 165 lines. Although minor differences exist from state to state, there is substantial uniformity in the provisions."5
The court looked to other jurisdictions with identical or similar standard form fire policies and reached the same conclusion; an insurance clause that excludes coverage for an innocent insured based on the intentional act of a coinsured is unenforceable because it attempts to reduce statutorily mandated coverage.6 These other cases implied that a wrongdoer should not benefit from his or her conduct but mentioned no implied statutory exclusion. ‘[W]e find no provision…creating a joint obligation whereby the wrongful actions of one insured could prejudice the rights of an innocent coinsured."7 There is a broad consensus as to the interpretation of the common standard form fire policy.8
The exclusion in the Century-National policy that barred coverage for innocent insureds was held to be invalid because the policy did not result in coverage that was at least substantially equivalent to the level of protection found in the standard form fire policy.
Stay tuned to read my upcoming blogs on how coverage for intentional acts is construed in other states. If you want your state to be next, send me an email at firstname.lastname@example.org and let me know!
1 Century-Nat’l Ins. Co. v. Garcia, 51 Cal. 4th 564, 246 P.3d 621 (2011).
2 Minkler v. Safeco Ins. Co. of America, 49 Cal.4th 315, 318 (2010).
3 See § 2071.
4 See Arenson v. Nat. Automobile & Cas. Ins. Co., 45 Cal.2d 81, 83 (1955).
5 Herr, Commercial and Residential Property and Liability Insurance, 17 Real Prop. Prob. & Tr.J. 633, 634, fn. ommitted (1982); See Aliberti v. Allstate Ins. Co., 74 Cal.App.4th 138, 145 (1999) (noting the New York form was adopted by California in § 2071 and by a majority of state legislatures).
6 See Nangle v. Farmers Ins. Co., 73 P.3d 1252 (Ariz. Ct. App. 2003); Trinity Universal Ins. Co. v. Kirsling, 73 P.3d 102 (Idaho 2003); Sager v. Farm Bureau Mut. Ins. Co., 680 N.W.2d 8 (Iowa 2004); Osbon v. National Union Fire Ins. Co., 632 So.2d 1158 (La. 1994); Barnstable Country Mut. Ins. Co. v. Dezotell, 21 Mass.L.Rptr. 269 (Mass.Super.Ct. 2006); Borman v. State Farm Fire & Cas. Co., 521 N.W.2d 266 (Mich. 1994); Williams v. Auto Club Group Ins. Co., 569 N.W.2d 403 (Mich.Ct.App. 1997); Watson v. United Services Automobile Assn., 566 N.W.2d 683 (Minn. 1997); Lane v. Security Mut. Ins. Co., 724 N.Y.S.2d 670 (N.Y. 2001); Volquardson v. Hartford Ins. Co., 647 N.W.2d 599 (Neb. 2002); and Icenhour v. Continental Ins. Co., 365 F.Supp.2d 743 (S.D.W.Va. 2004).
7 Volquardson at 610.
8 Alberti at 147.