Great American Ins. Co. v. Gaspard

• Decision Date: 30 November 1992
• Docket Number: No. 92-C-0702,92-C-0702
• Citation: 608 So.2d 981
• Parties: GREAT AMERICAN INSURANCE COMPANY v. Willard GASPARD, et al. HANOVER INSURANCE COMPANY v. Willard GASPARD, et al. Joseph B. INGRAM, and Karen Ingram, d/b/a Ingrams' Supermarket v. HANOVER INSURANCE COMPANY, et al. The STANDARD FIRE INSURANCE COMPANY, et al. v. Will GASPARD, et al. Murray J. INGRAM v. INSURANCE COMPANY OF NORTH AMERICA.
• Court: Louisiana Supreme Court

Page 981

608 So.2d 981

GREAT AMERICAN INSURANCE COMPANY v. Willard GASPARD, et al.

HANOVER INSURANCE COMPANY v. Willard GASPARD, et al.

Joseph B. INGRAM, and Karen Ingram, d/b/a Ingrams' Supermarket v. HANOVER INSURANCE COMPANY, et al.

The STANDARD FIRE INSURANCE COMPANY, et al. v. Will GASPARD, et al.

Murray J. INGRAM v. INSURANCE COMPANY OF NORTH AMERICA.

No. 92-C-0702.

Supreme Court of Louisiana.

Nov. 30, 1992.

Charles G. Tutt, Cook, Yancey, King & Galloway, Shreveport, for applicant.

David A. Hughes, Gist, Methvin, Hughes & Munsterman, Alexandria, for respondents.

HALL, Justice.

The sole issue presented in these consolidated cases is whether the liability insurance policy issued by State Farm Fire and Casualty Company to a tenant of a strip shopping center provides coverage for property damage sustained by the owner and other tenants of the shopping center when State Farm's insured intentionally set fire to the contents of his leased premises.

In denying coverage, State Farm relies on a provision in its policy which defines an "occurrence" to which the insurance applies as "an accident, ... which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured ..." State Farm takes the position that the property damage in this case was expected or intended by its insured when he intentionally and criminally set the fire, and such damage is excluded from coverage.

The district court found that the insured's intention was only to destroy his own merchandise, he did not intend to destroy any surrounding buildings or property, and the intentional act exclusion did not apply. The court of appeal affirmed, finding that the conclusion of the trial court was not manifestly erroneous and that there was no evidence the fire was started with the intent to damage the property of third persons. 594 So.2d 981, 987, 988, 989 (La.App. 3d Cir.1992). We granted State Farm's writ application, 598 So.2d 343 (La.1992), and now reverse the judgment against State Farm.

I

Five separate suits were filed by the owner of the shopping center, several tenants of the center, and their insurers. The alignment of parties to each suit and the procedural history of these cases is complicated and confusing, but is not at issue and need not be fully set forth here. Essentially, the cases proceeded as follows: Skip Converse, Inc., a contractor who recently built an allegedly defective fire wall in the center, and its insurer, American Alliance Insurance Company, were made defendants. State Farm Fire and Casualty Company, as liability insurer of Kelly's Fashions/Linda's Fashions, and its partners, was made a defendant along with its insureds. Judgments were rendered against Skip Converse, Inc., American Alliance and State Farm totaling several hundred thousand dollars. While the cases were on appeal, American Alliance settled with all plaintiffs and third-party plaintiffs, taking assignments of their claims against State Farm. Thus, the only remaining parties at interest are American Alliance and State Farm, and the only issue is whether State Farm provided coverage for the acts of its insured so as to entitle American Alliance to recovery from State Farm under contribution principles and its assignments from the other parties.

II

On November 1, 1986, Willard Gaspard and Linda Deselle opened a clothing store known as Kelly's Fashions or Linda's Fashions in a 25 by 82 foot space near the center of the Ingram Shopping Center in Tioga, Louisiana. On the evening of November 21, 1986, Gaspard set fire to the store and its contents. It was stipulated that the fire was intentionally set and accelerated through the use of gasoline which was poured in the portion of the shopping center occupied by Kelly's Fashions. The fire caused substantial damage to the shopping center and the surrounding stores. At the time of the blaze, State Farm had a liability insurance policy in effect covering Kelly's Fashions.

Two experts were qualified and accepted by the trial court concerning the fire and its cause. The chief of the Alpine Volunteer Fire Department, Robert Taylor, testified that he arrived at the scene less than three minutes after the call was received. Upon arrival, he observed heavy smoke coming from the entire shopping center and a glow in the area occupied by Kelly's Fashions. The roof had already begun to collapse. He concluded that the fire started with an accelerant and normally such a fire spreads very rapidly.

Donald Zwick was qualified as an expert in determining the origin of fires. He opined that the fire was intentionally set and that an accelerant was used. He estimated that between four to five gallons of accelerant were ignited to initiate the blaze. Additionally, his laboratory tests and the burn patterns revealed that while the gasoline was concentrated in the rear of the store, there was accelerant spread throughout the space and up to approximately fifteen feet from the front of the building. If the fire department had not responded so quickly and brought the fire under control, the large amount of accelerant would have caused the fire to spread quickly and in Zwick's opinion, the entire shopping center would have been destroyed.

At trial, Gaspard refused to testify, invoking the Fifth Amendment right against self incrimination. The trial judge, however, concluded that:

In this case the court finds that Mr. Gaspard's intention was only to destroy his own merchandise, and he did not intend to destroy any surrounding buildings or property. There is no rational basis to belief [sic] that he intended to do anything other than destroy his own merchandise. There is no reason to believe that Mr. Gaspard intended to destroy the entire shopping center. There would be no basis at all for him to reason in that manner.

Therefore, the court held, the intentional act exclusion did not apply.

The court of appeal affirmed stating that the trial court was not manifestly erroneous and that there was no evidence that the fire was started with the intent to destroy the property of a third person.

III

State Farm's policy provides coverage for the following:

The Company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury, property damage, or personal injury caused by an occurrence to which this insurance applies.

"Occurrence" is defined as:

Occurrence means an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured ...

Thus, the question is whether the property damage to the building and the surrounding tenants was expected or intended by Gaspard, the insured, when he set the fire.

As with any exclusion in an insurance policy, the insurer bears the burden of proving that the intentional injury provision is applicable. Richard v. Old Southern Life Ins. Co., 502 So.2d 1168 (La.App. 3d Cir.1987). Exclusions must be narrowly construed and any ambiguity should be construed in favor of coverage. Breland v. Schilling, 550 So.2d 609 (La.1989); Snell v. Stein, 261 La. 358, 259 So.2d 876 (1972). The exclusion clause at issue is indeed ambiguous. Pique v. Saia, 450 So.2d 654 (La.1984); Breland, supra. "The exclusion 'is designed to prevent an insured from acting wrongfully with the security of knowing that his insurance company will "pay the piper" for the damages.' " Breland, 550 So.2d at 610, quoting Transamerica Ins. Group v. Meere, 143 Ariz. 351, 694 P.2d 181, 186 (1984).

This court first addressed the meaning of the phrase "expected or intended from the standpoint of the insured" in Pique v. Saia, supra. The limitation was found to be ambiguous and to only exclude from coverage injuries that were intentional. The court went on to define what it meant by intentional injury:

An injury is intentional, i.e., the product of an intentional act, only when the person who acts either consciously desires the physical result of his act, whatever the likelihood of that result happening from his conduct; or knows that the result is substantially certain to follow from his conduct, whatever his desire may be as to the result. Bazley v. Tortorich, 397 So.2d 475 (La.1981); W. Prosser, Law of Torts Sec. 8 (4th ed. 1971); Restatement (Second) of Torts, American Law Institute Sec. 8A (1965).

Pique, 450 So.2d at 655.

The test enunciated in Pique was subsequently modified in Breland v. Schilling, supra. In Breland, the defendant struck plaintiff in the jaw with his fist during the course of a ball game. Unusually severe injuries resulted since the plaintiff's jaw was open at the time of the blow. The defendant, while intending only to inflict minor injuries, instead did extensive damage. The court rejected the reasoning that "intentional" as used in an insurance policy has the same meaning as "intentional" in tort law ¹, worker's compensation ² or criminal law ³. "The phrase 'bodily injury ... which is expected or intended,' emphasizes that an excluded injury is one which the insured intended, not one which the insured caused, however intentional the injury-producing act." Breland, 550 So.2d at 611. This interpretation makes it clear that not all injuries from an intended act will be excluded, but only those injuries that were intended. Additionally, the court reasoned that "from the standpoint of the insured" indicates that the subjective intent of the insured is the key and not what the average or ordinary reasonable person would expect or intend. The subjective intent of the insured, as well as his reasonable expectations as to the scope of his insurance coverage, will determine whether an act is intentional. An act is intended if the perpetrator desires the results of his action or he believes that the results are substantially certain to occur. Breland, 550 So.2d at 613, quoting United Servs. Auto....