Error v. Western Home Ins. Co.
Decision Date | 28 September 1988 |
Docket Number | No. 20238,20238 |
Citation | 762 P.2d 1077 |
Parties | Julie A. ERROR, an individual, Plaintiff and Appellee, v. WESTERN HOME INSURANCE COMPANY, a Utah corporation, and American Savings & Loan Association, a Utah corporation, Defendants and Appellants. |
Court | Utah Supreme Court |
Dennis C. Ferguson, Salt Lake City, for defendants and appellants.
Dale E. Anderson, Salt Lake City, for plaintiff and appellee.
Insurer Western Home Insurance Company (Western) appeals a judgment awarding insured Julie A. Error (Julie) indemnification in her action which was initiated
after Western denied coverage for damages to Julie's home. We affirmAfter Julie initiated this action, the trial court granted American Savings' rule 41(b) motion, 1 disposing of Julie's claim against that defendant. The trial court then ruled in favor of Julie on her claim against Western and entered the following findings and conclusions:
'Ray Error did have an 'insurable interest' in the property at the time of the loss. The value of Ray Error's interest in the property at the time of loss would be minimal and not more than one-half of the appreciation in value from the date of remarriage in August of 1978 to the date of the second separation in April of 1982 during which time he contributed to family expenses.
"II
'The insurance policy excludes coverage for 'neglect' of the insured. This exclusion is not applicable to Plaintiff as there was no 'neglect' by Plaintiff and she was without fault.
Judgment was entered in accordance with these findings and conclusions, and Western appeals.
Western's first and principal point is that the judgment in favor of Julie was improper because her loss was "caused totally by the intentional conduct of [her] co-insured husband." Specifically, Western argues that where coinsureds have joint interests in property, an innocent coinsured cannot recover on a fire insurance policy following an act of arson by the other.
Despite Western's claim that this is the "traditional rule," we are not convinced, particularly since several of the cases Western cites to support its argument have been rejected, limited, overruled, or reversed. 2 Rather, the rule of law in a majority of jurisdictions is that an innocent insured is not necessarily precluded as a matter of law from recovering on a fire insurance policy because a coinsured intentionally destroyed the insured premises. 3 The rationales behind this rule vary, but fall into three broad--and sometimes overlapping--categories. Some jurisdictions focus upon the insured's property interest. 4 Others focus upon the insured's obligations under the insurance policy. 5 The rationale that most appeals to our sense of reason and fairness, and the rationale we adopt today, is that which focuses upon the responsibility for the fraudulent act. 6
When the responsibility or liability for the fraud is separate rather than joint, an insured's fraud cannot be attributed or imputed to an innocent coinsured. As noted by the Wisconsin Supreme Court when it adopted the same rationale:
Courts adopting the modern rule recognize the need to deter arsonists but also recognize the fundamental principle of indiv dual responsibility for wrongdoing. A legal principle denying coverage to an innocent party implicitly imputes the guilt of the arsonist to the innocent insured. ... An absolute bar to recovery by an innocent insured is particularly harsh in a case in which the arson appears to be retribution against the innocent insured. Having lost the property, the innocent insured is victimized once again by the denial of the proceeds forthcoming under the fire insurance policy. Focusing on the nature of the individual responsibility for wrongdoing, we hold that the obligations of the insurer under the insurance policy in this case should be considered several as to each person insured. 7
In this case, the trial court concluded that liability for the fraud--arson--was separate rather than joint and that the fraud could not be attributed or implied to Julie, the innocent coinsured. It follows, then, that Ray's fraud does not void the policy as to Julie.
Western's second point is that if Julie is entitled to recover, her recovery must be limited to one-half of the damages to the insured real and personal property. Western argues that if the insurance policy is treated as creating several rights, amounts owing under the policy must likewise be...
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