Ryan v. MFA Mut. Ins. Co.

• Decision Date: 25 April 1980
• Citation: 610 S.W.2d 428
• Court: Tennessee Court of Appeals
• Parties: James RYAN, Plaintiff-Appellant, v. MFA MUTUAL INSURANCE COMPANY, Defendant-Appellee.

Page 428

610 S.W.2d 428

James RYAN, Plaintiff-Appellant, v. MFA MUTUAL INSURANCE COMPANY, Defendant-Appellee.

Court of Appeals of Tennessee, Middle Section.

April 25, 1980.

Certiorari Denied by Supreme Court June 23, 1980.

Clyde W. Richert, III, Springfield, for plaintiff-appellant.

John M. Baird and William H. Crawford, Jr., Nashville, for defendant-appellee.

OPINION

DROWOTA, Judge.

The sole issue in this appeal from the granting of a motion to dismiss is whether an innocent co-insured can collect on a joint insurance policy where the other co-insured destroyed the insured property, and where the innocent co-insured's interest in the property is severable from that of the other co-insured. In this case, appellant James Ryan's wife set fire to their house, and Ryan sought a recovery from appellee MFA Mutual Insurance Company for the value of certain destroyed contents of the house which he claimed belonged to him. A copy of Ryan's policy with the relevant provisions underlined is attached to this opinion as an appendix.

Appellant filed his complaint on July 21, 1979, in the Robertson County Circuit Court, alleging that he and his wife Betty were insured for fire loss to their residence in the amount of $20,000.00 and for loss and damage to the contents of their house in the amount of $10,000.00 under a policy of insurance issued by appellee MFA Mutual Insurance Company; that on June 5, 1978, his wife set fire to their house after he and she had had an argument and after he had left the house for a short visit to a relative's home; that he was innocent of any participation in or encouragement of his wife's act; that he, being an insured under the aforementioned insurance policy, was a proper party to recover under the policy; that the great majority of items listed in the proof of loss he submitted to appellee were purchased either by him directly or with income derived from his employment; that appellee had denied his claim under the policy; and seeking a recovery from appellee in the amount of $8,958.15, which was the value of the estimated loss to "his contents that were in the damaged dwelling." It was also stated in the complaint that the loss payee on the policy for any structure loss was the Investors Savings & Loan Association of Springfield, Tennessee, the first mortgagee on the real property and house. It is unclear whether the mortgagee has been paid under the policy for fire loss to the house; in any event, as has been indicated, appellant's claim is only for coverage under that portion of the policy pertaining to contents and not for coverage of the house itself.

Appellee on September 11, 1979, filed a motion to dismiss appellant's complaint, alleging, inter alia, that the complaint failed to state a cause of action upon which relief could be granted.

Oral argument was heard on appellee's motion on September 26, 1979, and on October 26, 1979, the trial court issued a memorandum opinion in which it found that under the facts which had been "practically agreed to" (meaning, presumably, the facts as alleged in the complaint), this case was "on all fours" with those of a Wisconsin case, Klemens v. Badger Mutual Insurance Company, 8 Wis.2d 565, 99 N.W.2d 865 (1959), which case was "representative of the majority rule in the United States" (under which rule recovery is denied in cases such as this); and sustained appellee's motion to dismiss. An order incorporating this memorandum opinion by reference and dismissing this case was entered on November 1, 1979. An appeal from this order was perfected by appellant.

Appellant urges that we reverse the decision of the trial court and remand this case for a trial on the merits of the case, both on the issue of his own innocence as to the burning of the house, "if (appellee) wishes to raise this point," and on the question of damages.

This being a case of first impression in this state, appellant bases his arguments on a line of cases from other jurisdictions which hold generally that an innocent co-insured in a case such as this may recover when insured property is destroyed by another co-insured. Appellant insists that the authorities he presents represent a "better reasoned" approach to the issue at hand than do the cases cited by appellee, which cases appellee alleges represent the dominant line of authority in the United States.

It is true that until recently the cases upon which appellee bases its argument did represent the majority rule in the United States. As we shall hereinafter illustrate, this old majority rule has been supplanted by a new majority of jurisdictions which would allow recovery in a case such as this. However, in the interest of showing how and on what grounds this supplanting has occurred, we shall begin our discussion of the relevant law in this case with an examination of those authorities which would arguably deny recovery in this case.

THE "OLD" DOMINANT RULE

Appellee has cited for us cases representing this "old" "dominant line of authority" from Alabama, Louisiana, Massachusetts, Michigan, Texas, Vermont, Virginia, and Wisconsin. See Home Insurance Company v. Pugh, 51 Ala.App. 373, 286 So.2d 49, 50 (1973); Fuselier v. United States Fidelity and Guaranty Company, 301 So.2d 681, 682 (La.App.1974); Kosior v. Continental Insurance Company, 299 Mass. 601, 13 N.E.2d 423, 424 (1938); Ijames v. Republic Insurance Company, 33 Mich.App. 541, 190 N.W.2d 366, 369 (1971); Bridges v. Commercial Standard Insurance Company, 252 S.W.2d 511, 512 (Tex.Civ.App.1952); Cooperative Fire Insurance Association of Vermont v. Domina, 399 A.2d 502, 503 (Vt.1979); Rockingham Mutual Insurance Company v. Hummel, 219 Va. 803, 250 S.E.2d 774, 776 (1979); Klemens v. Badger Mutual Insurance Company of Milwaukee, 8 Wis.2d 565, 99 N.W.2d 865, 866 (1959).

In Klemens, the case cited by the trial court in its memorandum opinion, the husband of a couple who were jointly insured against fire loss to their house set fire to the house. The wife sought a recovery against the insurance company for the loss. The policy contained provisions stating that the insurer was not liable for loss caused by neglect of the insured to save and preserve the property at and after a loss, and that the policy should be void in any case of fraud by the insured, provisions similar to ones in the policy in this case. The Supreme Court of Wisconsin essentially held that since the insurance policy was written in the joint names of Mr. and Mrs. Klemens, they had a joint obligation to comply with the terms of the policy, i. e. to save and preserve the property; that the breach of this obligation by Mr. Klemens in intentionally burning the house was thus chargeable to Mrs. Klemens; and that she therefore could not recover under the policy. We note that the Supreme Court in reaching its decision cited a rule taken from 45 C.J.S. Insurance § 822, according to which "where ... property is jointly owned, or where there is a joint obligation on the part of the owners to save and preserve the property, an innocent owner cannot recover on the policy where a coowner willfully set the property on fire." The court also specifically concurred in the trial court's decision which was based in part on Mrs. Klemen's "position as a joint owner of property." Klemens, supra, 99 N.W.2d at 867.

In Kosior, supra, a woman whose husband had intentionally burned buildings owned by the couple as tenants in common conceded that, at law, her husband's act rendered the fire insurance policy in both their names void, but asked for recovery for the value of her interest in the property under the equity powers of the court. The Supreme Judicial Court of Massachusetts denied her claim, basing its decision on the finding that the policy was joint and that the "act of her husband in burning the insured buildings was an act of the 'insured,' and as such it was fraud upon the (insurer) which rendered the policies void in accordance with their terms." Kosior, supra, 13 N.E.2d at 425.

In Bridges, supra, a man who had a fire insurance policy on a house which was intentionally burned by his wife was denied recovery on the policy. The Court of Civil Appeals of Texas held that "where two persons have a joint interest in property which is destroyed by being intentionally burned by one of them, the other, though innocent, cannot recover on a fire insurance policy," and specifically included in the holding both the homestead and household goods which in Texas were considered community property of the couple. Bridges, supra at 512.

In the Domina case, the husband of the couple who had insured their property against loss by fire burned the property and later plead guilty to second degree arson in connection with the burning. The insurance company denied coverage. Husband and wife sued the company, claiming that the innocent wife at least should be permitted to recover to the extent of her interest in the property. The Supreme Court of Vermont considered and refused to follow the New Jersey case of Howell v. Ohio Casualty Insurance Co., 130 N.J.Super. 350, 327 A.2d 240 (1974), which had held that "fraud or misconduct of one insured should not bar recovery by innocent co-insureds to the extent of their respective interests in the property involved." Howell, supra, 327 A.2d at 243, quoted in Domina, supra at 503. The court stated that even assuming that the misconduct of the husband would not bar recovery of the innocent wife, "nevertheless her interest in the property as tenants by the entirety is such that the extent thereof cannot be determined," and then held that the wife "cannot be permitted to make a burning, fraudulently done by her co-insured husband, the basis of recovery in this action of the total proceeds of the policy," and "further, permitting a recovery by the wife of one-half the proceeds of the policy, as suggested by the appellees, would be to substitute another contract in place of the one made to...