Spence v. Allstate Ins. Co.

• Decision Date: 22 August 1994
• Parties: James A. SPENCE, Plaintiff-Appellant, v. ALLSTATE INSURANCE COMPANY, Defendant/Third-Party Plaintiff-Appellee. v. Pamela A. SPENCE, Third-Party Defendant-Appellant.
• Court: Tennessee Supreme Court

Page 586

883 S.W.2d 586

James A. SPENCE, Plaintiff-Appellant, v. ALLSTATE INSURANCE COMPANY, Defendant/Third-Party Plaintiff-Appellee. v. Pamela A. SPENCE, Third-Party Defendant-Appellant.

Supreme Court of Tennessee,

at Nashville.

Aug. 22, 1994.

William Thomas McHugh and Thomas V. White, Tune, Entrekin & White, Nashville, for plaintiff-appellant.

John D. Kitch and John J. Garman, Kitch & Garman, Nashville, for third-party defendant-appellant.

John D. Schwalb, Brewer, Krause, & Brooks, Nashville, for defendant/third party plaintiff-appellee.

OPINION

DROWOTA, Justice.

In this action to recover under a fire insurance policy, the appellants James Spence and Pamela Spence present several issues for our determination, including: (1) whether the Court of Appeals erred in holding that the "innocent co-insured doctrine" did not apply to this case because of the language in the policy, thereby denying any recovery under the policy to the innocent co-insured--James Spence; (2) whether the Court of Appeals erred in affirming the trial court's ruling that increased the judgment on the insurance company's indemnity claim against Pamela Spence without her consent; and (3) whether the trial court had jurisdiction to entertain motions filed by James and Pamela Spence pursuant to Rule 60.02(5) of the Tennessee Rules of Civil Procedure while their applications for permission to appeal from the judgment of the Court of Appeals were pending in this Court. For the reasons set forth below, we affirm in part and reverse in part the judgment rendered by the Court of Appeals.

FACTS AND PROCEDURAL HISTORY

In 1988 James and Pamela Spence purchased a home located at 670 Harding Place in Nashville, Tennessee. At that time, the Spences bought from Allstate Insurance Company a Deluxe Plus Homeowners Policy; the policy listed James and Pamela Spence as the insureds and BancBoston Mortgage Corporation as the mortgagee of the home.

Because of marital difficulties, the Spences separated and Pamela Spence filed for divorce in February 1990. On March 12, 1990, the Spences executed a marital dissolution agreement which provided for the division of their property. They agreed that their three minor children would decide with which parent they wanted to live and that that parent would have possession of the home. The agreement provided that the Spences would continue to own the home as tenants-by-the-entirety and that, if and when the house was sold, they would divide the proceeds equally. The agreement also included a clause which divided the Spences' personal property. That clause provided: "[t]he parties have already divided their household items and personal property to each's satisfaction. Each party will be awarded those items of household furnishings and personal property which is in his or her possession at the time of execution of this agreement." By its terms, the marital dissolution agreement was not to become effective until it was incorporated into a final decree of divorce. Because the children chose to live with James Spence, Pamela Spence moved in with her boyfriend, David Smith, who is now her husband.

On June 8, 1990, James Spence, his son, and a friend of his daughter travelled to South Bend, Indiana, to pick up his daughters, who had been visiting relatives. Before leaving, either James Spence or his son asked Pamela Spence to take care of the home and to feed the dogs while they were in Indiana.

On June 9, Pamela Spence and her boyfriend visited the home. Pamela Spence testified that the house was in disarray; she also testified that she was unable to feed one of the dogs because it was hiding under the bed in an upstairs bedroom. Pamela Spence returned to the home about 9:30 that evening in order to clean the home, and to repeat her attempt to feed the dog. Because she worked the late shift as a dispatcher for the Metropolitan Police Department, Pamela left for work after completing the cleaning tasks. However, she was again unable to feed the dog.

Pamela Spence arrived at the Police Communications Center around 10:30 p.m. Around 4:50 a.m., she left for her "lunch hour." Pamela arrived at her boyfriend's house at 5:10 a.m. and stayed for approximately fifteen minutes. At that time she left his house and returned to the residence at 670 Harding Place to try and feed the reluctant dog; she arrived at the home at approximately 5:30 a.m. This time Pamela was successful in feeding the dog, and after so doing, she returned to work, arriving there between 5:47 and 5:51 a.m.

At 5:51 a.m. the fire department received notification of a fire in the 600 block of Harding Place. Thereafter, it was discovered that the fire was actually in the Spence residence. After the first fire company arrived on the scene at 5:54 a.m., the officer in charge called the Fire Marshal because there was evidence of forcible entry into the home. After arriving on the scene, the Fire Marshal took photographs and began an investigation into the cause of the fire. The next day, a certified fire investigator hired by Allstate conducted an investigation to determine the cause of the fire.

Shortly after the fire, Ray Brashears, the senior staff claim representative of Allstate met with Pamela and James Spence. At that time, Allstate gave a $1,500 check to James Spence for temporary living expenses. On July 9, 1990, James and Pamela Spence submitted a "sworn statement in proof of loss" to Allstate for their losses in the fire. This document requested compensation for the loss of real and personal property damaged in the fire; it also included a notarized statement by James and Pamela Spence that neither of them had had anything to do with the fire.

On October 16, 1990, Allstate, by separate letters to James and Pamela Spence, denied the claims. In its letter to Pamela, Allstate explained that its denial was based on its opinion that Pamela Spence, either alone or acting in concert with others, "intentionally set fire to the premises with the intention of destroying same for the purpose of defrauding Allstate Insurance Company." Allstate asserted that Pamela Spence's conduct in setting the fire violated two specific provisions of the insurance policy: the "concealment or fraud" clause and the "intentional acts" exclusion clause. ¹ Allstate's denial letter to James Spence was substantially similar, except that Allstate requested James Spence to resubmit a proof of loss for the items of property in which he had a "sole and separable interest from Pamela Spence on the date of the fire."

On November 9, 1990, James Spence resubmitted a proof of loss containing an itemized list of personal property lost in the fire. In the document James Spence described the claimed property as belonging to himself and Pamela Spence, except as subject to the marital dissolution agreement.

On November 28, 1990, Allstate denied James Spence's second claim. In the denial letter, Allstate pointed out that James Spence had admitted in the proof of loss that both he and Pamela Spence had title to the various items of property, subject to the marital dissolution agreement. Allstate then noted that by its terms the agreement did not become effective until a decree of divorce was entered; and it noted that such a decree was not entered until August 22, 1990, some two months after the date of the fire. Allstate reasoned from these facts that the property was jointly owned as of the date of the fire, and that therefore James Spence had no interest in the property separate from that of Pamela Spence. Because it believed that it was not liable to James Spence for any of the losses incurred in the fire, Allstate refused to advance any additional living expenses to him; it had paid $4,990 as of that time.

On December 27, 1990, James Spence brought an action against Allstate, alleging that it had breached the contract of insurance by denying his claims for the value of the personal property and additional living expenses. Before Allstate answered the complaint, Pamela Spence also filed a lawsuit against Allstate; this action was later consolidated with James Spence's action. Allstate then filed a third-party complaint against Pamela Spence, alleging that she had intentionally set the fire that caused the losses and seeking indemnity from her for any monies that it would have to pay to James Spence. After the initial complaint was filed, but before the case came to trial, Allstate paid the sum of $53,261.40--the estimated cost of repair to the home--to BancBoston Mortgage Company.

The case was tried before a jury in November 1991. The jury returned a verdict in favor of James Spence in the amount of $30,526.10. However, the jury also found that Pamela Spence intentionally set the fire, and it returned a verdict against her and in favor of Allstate in the amount of $4,990 on Allstate's third-party complaint.

Allstate then filed a motion for J.N.O.V. against James Spence, asserting that because of clear language in the insurance policy, there was no material evidence to support the jury's finding that the "innocent co-insured doctrine" applied to his case. Allstate also filed a motion for additur, requesting that the trial court increase its verdict against Pamela Spence to $88,777.50--the total amount Allstate had been required to pay because of the fire. ² The trial court denied Allstate's J.N.O.V. motion against James Spence and granted its additur motion as to Pamela Spence.

Both Allstate and Pamela Spence appealed to the Court of Appeals. Basing its decision on Ryan v. MFA Mut. Ins. Co., 610 S.W.2d 428 (Tenn.App.1980), the Court reversed the judgment in favor of James Spence, holding that the J.N.O.V. should have been granted because the clear language of the insurance policy precluded the application of the "innocent co-insured doctrine" adopted in Ryan. The Court affirmed the trial court's ruling on Allstate's motion for additur, holding that because Allstate's claim was...