Great American Ins. Co. v. K & W Log, Inc.

• Citation: 22 Wn.App. 468,591 P.2d 457
• Decision Date: 19 January 1979
• Docket Number: No. 2948-II,2948-II
• Court: Court of Appeals of Washington
• Parties: GREAT AMERICAN INSURANCE COMPANY, a New York Corporation, Respondent, v. K & W LOG, INC., a Washington Corporation, and H. M. (John) King, Individually, a resident of the State of Washington, Appellants.

Page 468

22 Wn.App. 468

591 P.2d 457

GREAT AMERICAN INSURANCE COMPANY, a New York Corporation, Respondent, v. K & W LOG, INC., a Washington Corporation, and H. M. (John)

King, Individually, a resident of the State of

Washington, Appellants.

No. 2948-II.

Court of Appeals of Washington, Division Two.

Jan. 19, 1979.

Charles B. Welsh, South Bend, for appellants.

Fred G. Clarke, Jr., Clarke & Bovingdon, Seattle, for respondent.

REED, Judge.

Defendants K & W Log, Inc., and H. M. (John) King appeal from a declaratory judgment obtained in Grays Harbor Superior Court by plaintiff Great American Insurance Company (Great American). The judgment declares that a certain insurance policy issued by Great American affords no coverage for the destruction by explosion of three pieces of K & W's logging equipment. We affirm.

Defendant King and his wife, residents of Raymond, Washington, own 98 percent of the capital stock of K & W, a Washington corporation. King is president and manager of the corporation, which in 1975 owned three major pieces of heavy logging equipment: a Skagit yarder or "tower," a shovel-type Linkbelt loader and a D-7 Caterpillar tractor. The equipment, which was subject to liens for approximately $109,000, was insured by Great American against loss or damage for $183,500. The corporation owed other obligations and had been operating at a substantial loss. Although King had been engaged as an independent logger for some 46 years, he had little in the way of assets and was personally indebted for about $9,000. No evidence was offered at trial that King had guaranteed or was otherwise personally responsible for his corporation's debts.

In late 1975, King was engaged in a logging operation on the Cedar River watershed near North Bend. On October 15, 1975, because weather conditions would no longer permit logging, King pulled his equipment out of the woods and stored it temporarily in a yard belonging to the Mountain Tree Farm. The storage yard was located on a private logging road some 12 miles distant from a metal gate which gave access to the area. King and others working in the area had keys to the gate.

On November 24, King was living in a mobile home park at North Bend, about 30 miles from the storage yard. About 6 p. m. that evening he was informed by telephone that his equipment was on fire. King drove to the scene where he found other loggers and firefighting units extinguishing fires which were still burning on certain portions of the tower which had not yet been extensively damaged. The loader and D-7 tractor were sitting nearby and appeared to have been untouched. After the fire was extinguished King returned to his trailer home, arriving between 8 and 9 p. m.

At approximately 10:30 p. m., King decided to check on his equipment and drove back to the scene; he unlocked the gate to gain entrance and relocked it behind him. According to King, he met a "kind of a blue pickup" leaving the area at a point about two miles inside the gate. He could not identify the vehicle. Upon arriving at the scene he found the loader had been driven over a steep bank 75 to 100 feet from its original position; it was badly damaged and burning. King returned to North Bend it was now midnight and notified the fire department.

Sometime after Thanksgiving a portion of the logging road washed out, preventing all vehicular access to the storage site. Great American intended to move the equipment to a safer location and on or about December 10, King employed his D-7 tractor to repair the road, after which the tractor was returned to the storage site. That day or the next, King and two others drove to the site to prepare the equipment for the move. Upon arrival the men observed numerous sticks and boxes of dynamite had been placed on and underneath the tower. They immediately called the King County bomb squad; Lieutenant Thomas C. Regan and two other officers arrived on the scene. Investigation revealed approximately 750 pounds of unexploded dynamite, time fuses and detonators packed around the three pieces of equipment. Photos were taken and the dynamite was defused and removed to a safe distance where it was detonated.

While at the scene, Lieutenant Regan "within earshot of Mr. King" was openly critical of the "bomber's" use of time fuses in place of "Primacord" or "Detcord" ¹ in setting the charges. According to Lieutenant Regan the dynamite failed to detonate because of the amateurish methods used.

K & W's equipment later was moved to another storage yard located approximately four miles from North Bend, where it was left sitting among numerous pieces of heavy machinery belonging to other loggers. On January 5, 1976, the yarder, loader and D-7 tractor were completely demolished by a dynamite blast. Investigation by state and federal officers disclosed that approximately 600 to 700 pounds of "Trojan" dynamite had been used and that "Detcord" had been employed to set off the charges. The K & W equipment was the focal point of the blast and had been totally destroyed, but other equipment standing nearby sustained only minor "fragmentation" damage.

After rejecting King's proof of loss, ² Great American initiated the present lawsuit seeking to be relieved of liability under its policy and alleging (1) King had caused or arranged for the destruction of the insured property; and (2) King had made a false and fraudulent proof of loss. The trial court agreed with Great American and entered judgment accordingly. K & W and King appealed.

Defendants' assignments of error present the following issues: (1) whether an insurance company's defense of willful destruction of the insured property by the insured may be proved by a preponderance of the evidence or whether a higher standard of proof is required, such as clear and convincing evidence; and (2) whether the evidence presented to the trial court, which was wholly circumstantial, is sufficient to support the trial court's findings, conclusions and judgment. We hold that the defense may be proved by a preponderance of the evidence which may be entirely circumstantial. We further hold the evidence in this case sufficiently supports the trial court's findings and judgment.

Defendants would have us adopt a more stringent standard of proof. Their theory is that because the affirmative defense of incendiarism charges both a fraud and a commission of a crime, the evidence in support thereof must be "clear and convincing" before it will overcome the common law presumptions of innocence of crime and lack of fraudulent intent. Cf. National Surety Co. v. Petersen, 155 Wash. 113, 283 P. 668 (1930); 30 Am.Jur.2d, Evidence §§ 224, 1167, 1169 (1967); 46 C.J.S., Insurance § 1359 (1946).

We recognize that some courts adhere to the more strict standard of proof espoused by defendants, See for example Milonczyk v. Farmers' Mutual Fire Ins. Co., 200 Wis. 255, 227 N.W.2d 873 (1929), and Carpenter v. Union Ins. Soc., 284 F.2d 155 (4th Cir. 1960). Such is not the law in Washington. As early as 1910, in Bruff v. Northwestern Mutual Fire Ass'n, 59 Wash. 125, 109 P. 280 (1910), our Supreme Court rejected an insured's contention that a defense of incendiarism must be established beyond a reasonable doubt, and adopted a "fair preponderance of the evidence" test. The Bruff rule was adhered to in King v. King, 83 Wash. 615, 145 P. 971 (1915). With these decisions, our highest state court joined the ranks of a majority of courts which have addressed this problem. See for example Honeycutt v. Aetna Ins. Co., 510 F.2d 340 (7th Cir. 1975), Cert. denied 421 U.S. 1011, 95 S.Ct. 2416, 44 L.Ed.2d 679 (1975); Connecticut Fire Ins. Co. v. Fox, 361 F.2d 1 (10th Cir. 1966); MFA Mutual Ins. Co. v. Pearrow, 245 Ark. 795, 434 S.W.2d 269 (1968); Klayman v. Aetna Cas. & Sur. Co., 501 P.2d 750 (Colo.App.1972): Werner's Furniture, Inc. v. Commercial Union Ins. Co., 39 Ill.App.3d 59 349 N.E.2d 616 (1976); Raphtis v. St. Paul Fire & Marine Ins. Co., 86 So.Dak. 491, 198 N.W.2d 505 (1972); see also 18 G. Couch, Insurance § 74.664 (2d ed. 1968).

Defendants, however, contend that by whatever standard it is measured, the evidence here failed utterly to...