Montgomery Mut. Ins. Co. v. Dyer

• Decision Date: 06 November 2001
• Docket Number: No. 3:00CV00079.,3:00CV00079.
• Court: U.S. District Court — Western District of Virginia
• Parties: MONTGOMERY MUTUAL INSURANCE COMPANY, Plaintiff, v. Diana F. DYER and Gregory Dyer, Defendants.

170 F.Supp.2d 618

MONTGOMERY MUTUAL INSURANCE COMPANY, Plaintiff, v. Diana F. DYER and Gregory Dyer, Defendants.

No. 3:00CV00079.

United States District Court, W.D. Virginia, Charlottesville Division.

November 6, 2001.

Robert S. Reverski, Jr., Niles, Barton & Wilmer, Baltimore, MD, for Plaintiff.

Roy David Bradley, Bradley Law Firm, P.C., Madison, VA, for Defendants.

MEMORANDUM OPINION

MICHAEL, Senior District Judge.

Before the court are the parties' cross motions for summary judgment. This matter was referred to United States Magistrate Judge B. Waugh Crigler for proposed findings of fact, conclusions of law, and a recommended disposition. See 28 U.S.C. § 636(b)(1)(B) (West 1993 & Supp. 2000). On August 28, 2001, the Magistrate Judge issued a Report and Recommendation wherein he recommended that the court grant defendant Diana Dyer's motion for summary judgment. Both the plaintiff and defendant Diana Dyer filed timely objections. This court has reviewed the case de novo. See id.; Fed R. Civ. P. 72(b). Having thoroughly considered the entire case and all relevant law, the court shall grant defendant Diana Dyer's motion for summary judgment.

I.

The plaintiff, Montgomery Mutual Insurance Company, filed this action for declaratory relief for a determination of its obligations under an insurance contract with the defendants. Specifically, the plaintiff asked for a determination of whether it was liable to Diana Dyer for property loss caused when her son, Gregory Dyer, set fire to her house.

On March 24, 2000, the defendant, Diana Dyer, entered into a contract for homeowner's insurance with the plaintiff. Gregory Dyer, the son of Diana Dyer, lived in her house, and as such, is an insured under the policy.¹

On April 11, 2000, Gregory Dyer set fire to his mother's house. This was after he fired a firearm at the house and before he drove his pickup truck into the flames. He said he was Jesus Christ to the police officers who found him ranting and standing on the bed of his truck amidst the flames. Later that evening, he told a mental health professional: "One of the best things I've ever done is to burn down my house." (Uniform Pre-Admission Screening Form, at 3). According to a physician who evaluated him the next day, Mr. Dyer indicated that he had felt "the presence of spirits" which spurred his actions "to erase negative associations that he claims are embedded in his house." (Comprehensive Psychiatric Update at 1-2). Nobody was injured in the blaze, but the damage was estimated at $248,000. Mrs. Dyer subsequently filed a claim in proper form with the plaintiff.

In a letter dated June 28, 2000, the plaintiff denied Mrs. Dyer's claim under the "Intentional Loss Exclusion" clause of the original policy which read:

1. We do not insure for loss caused directly or indirectly by any of the following. [...]

h. Intentional Loss, meaning any loss arising out of any act committed:

(1) By or at the direction of an "insured"; and

(2) With the intent to cause a loss.

(Homeowner's Agreement, Section I — Exclusions at 10)

The plaintiff concluded that Gregory Dyer was an insured, that he had admitted to starting the fire and that therefore, under the intentional loss exclusion, no insured could recover under the policy.

The language relied on by the plaintiff had in fact been amended by an endorsement to the policy, entitled "Special Provisions — Virginia." The endorsement provides that:

8. Intentional Loss is deleted and replaced by the following:

8. Intentional Loss. We do not provide coverage for an "insured" who commits or directs an act with the intent to cause a loss.

(This is item 1.h. in Form HO 00 03.)

(Endorsement at 2)

The parties now agree that the exclusion clause contained in the endorsement applies in this case.

In this suit for declaratory relief, filed on September 7, 2000, the plaintiff requests that the court find that Gregory Dyer set the fire, that Greg Dyer is an "insured" under the policy, and that all the defendants are barred from recovery pursuant to the intentional loss exclusion of the policy.

The defendant moved for summary judgment on the grounds that the applicable exclusionary language precluded coverage only if the insured seeking coverage was the wrongdoer. Hence, an innocent co-insured may recover. In addition, the defendant argued that the severability provision in the liability section of the insurance contract is applicable to property damage claims, and that her son did not have the requisite intent for exclusion of the loss.

The plaintiff also moved for summary judgment on the grounds that the loss committed was intentional, and thus, was precluded under the policy. Furthermore, the plaintiff argues that the exclusion clause creates a joint obligation upon both Mrs. Dyer and her son, a co-insured, to refrain from causing an intentional loss.

Magistrate Judge Crigler found that although Mrs. Dyer's son did have the intent necessary to make this an intentional loss under the insurance contract, the language of the policy allowed for Mrs. Dyer to recover. Namely, the amended language of the intentional loss exclusion denies coverage only to the insured who is responsible for the loss. Since Mrs. Dyer is the insured seeking coverage here and she did not set the fire, she is entitled to recover.

Both sides filed objections to the Magistrate Judge's report. The defendant continues to assert that her son lacked the requisite intent and that the severability provision of Section II of the policy applies to Section I. The plaintiff, meanwhile, objects to the Magistrate Judge's interpretation of the exclusionary language and proffers its own version to this court. The court reviews de novo those portions of the Report and Recommendation to which objection was made. See 28 U.S.C.A. § 636(b)(1) (West 1993 & Supp.2001).

II.

A party is entitled to summary judgment when the pleadings and discovery show that there is no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). "[S]ummary judgment or a directed verdict is mandated where the facts and the law will reasonably support only one conclusion." Hawkins v. PepsiCo, Inc., 203 F.3d 274, 279 (4th Cir.2000) (quoting McDermott Int'l, Inc. v. Wilander, 498 U.S. 337, 356, 111 S.Ct. 807, 112 L.Ed.2d 866 (1991)). If the evidence is such that a reasonable jury could return a verdict in favor of the non-moving party, then there are genuine issues of material fact. See 477 U.S. at 248, 106 S.Ct. 2505. All facts and inferences shall be drawn in the light most favorable to the non-moving party. See Food Lion, Inc. v. S.L. Nusbaum Ins. Agency, Inc., 202 F.3d 223, 227 (4th Cir. 2000).

A.

The court will first address the defendant's objection to the Magistrate Judge's finding that Gregory Dyer acted in such a way as to meet the intent requirement of the exclusion clause. The clause requires that the act have been committed "with the intent to cause a loss." The defendant contends that Gregory Dyer's mental state was such that he did not possess the specific intent necessary under the insurance policy. The plaintiff argues, and the Magistrate Judge agreed, that under Virginia insurance law, a person acting with intent is only required to possess a "minimal degree of awareness of his actions." Johnson v. Insurance Co. of North America, 232 Va. 340, 347, 350 S.E.2d 616, 620 (1986).²

In Johnson, the Virginia Supreme Court found that an insured, who shot an acquaintance six times because he claimed that God had ordered him to do so, did intend to commit the act for purposes of the exclusionary clause of the insurance policy. The Johnson court rejected the argument that the act of an insured who suffers from a mental illness cannot be treated as intentional. The court explained that such an act may be intentional within the meaning of the exclusion where evidence shows "that the actor understood the physical nature and consequences of his conduct, and had the purpose and volition to cause the injury, although he was mentally incapable of distinguishing between right and wrong." See id. at 346, 350 S.E.2d 616.

The court supports its conclusion by noting that the "two elements of the M'Naghten rule, nature-of-the-act test and right-wrong test, logically can be separated." See id. at 347, 350 S.E.2d 616. For the purposes of insurance law, it is sufficient to show that an insured knew the nature of his act. See id. at 347-8, 350 S.E.2d 616. In Johnson, this meant that when the insured aimed the pistol at the victim, he knew that he was shooting a human being and not, "for example, that he was peeling a banana." See id. at 347, 350 S.E.2d 616.

Similarly, in this case, Gregory Dyer knew when he doused the house in gasoline and ignited it that he was setting a fire. In statements made after the incident, Mr. Dyer demonstrated that he knew the nature of his act. For example, he stated: "One of the best things I've ever done is burn down my house" (Uniform Preadmission Screening Form at 3) and "There was too much bad [expletive deleted] that had gone on in that house, so I tried to burn it." (Central State Hospital History Form at 1).

The defendant attempts to distinguish Johnson from the facts in this case. Mrs. Dyer notes that the Johnson perpetrator exhibited calm resolve and preparation before committing the shooting. See Johnson, 232 Va. at 347, 350 S.E.2d 616. In contrast, Gregory Dyer's behavior was, among other things, agitated and hostile. The defendant argues that an act is intentional only if the perpetrator intended to cause harm. According to the defendant, Gregory Dyer "set fire to his mother's house without the intent to cause harm, but to eliminate `spirits'." (Def.'s Opp'n to Pl.'s Mot. for Summ. J. at 7). For support, the defendant relies on a Virginia tort case, ...