Trinity Universal Ins. Co. v. Kirsling

• Decision Date: 02 July 2003
• Docket Number: No. 28581.,28581.
• Citation: 139 Idaho 89,73 P.3d 102
• Parties: TRINITY UNIVERSAL INSURANCE COMPANY, a foreign corporation, Plaintiff-Appellant, v. Benedict KIRSLING, Defendant, and Lynette Marco, Defendant-Respondent.
• Court: Idaho Supreme Court

73 P.3d 102

139 Idaho 89

TRINITY UNIVERSAL INSURANCE COMPANY, a foreign corporation, Plaintiff-Appellant, v. Benedict KIRSLING, Defendant, and Lynette Marco, Defendant-Respondent.

No. 28581.

Supreme Court of Idaho, Boise, April 2003 Term.

July 2, 2003.

Law Office of Susan K. Servick, P.C., Coeur d'Alene, for appellant. Susan K. Servick argued.

Evans, Craven & Lackie, P.S., Spokane, Washington, for respondent. Everett B. Coulter Jr. argued.

KIDWELL, Justice.

Trinity Universal Insurance Company (Trinity) filed suit against Benedict Kirsling (Kirsling) and Lynette Marco (Marco) to recover payment made under a fire insurance policy for damage to a residence. Trinity alleged that Kirsling's intentional act caused the loss. Marco contended that she was nonetheless allowed to recover under Trinity's insurance policy because she was an innocent co-insured. Trinity and Marco filed cross motions for summary judgment. The district court found, as a matter of law, Marco could retain the money Trinity paid her under the policy as a result of the loss to her interest in the property. The district court granted Marco partial summary judgment and Trinity filed this interlocutory appeal. We affirm the district court's grant of partial summary judgment and remand this case for further proceedings.

I. FACTS AND PROCEDURAL BACKGROUND

The parties do not dispute the relevant facts underlying this matter.

In 1997, Kirsling and Marco, then husband and wife, owned a home in Sandpoint (the home). The home was Marco's separate property purchased with money from a property settlement from a previous marriage.

Marco and Kirsling purchased homeowners' insurance from Trinity, effective from November 10, 1996, to November 10, 1997. Marco and Kirsling were each "insured" under the policy. The policy excluded coverage for "intentional loss." The policy defined "intentional loss" as: "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." The policy also stated, "[t]he entire policy will be void if, whether before or after a loss, an `insured' has: [1] Intentionally concealed or misrepresented any material fact or circumstance; [2] Engaged in fraudulent conduct; or [3] Made false statements relating to this insurance."

On June 22, 1997, the home and its contents burnt. Marco and Kirsling notified Trinity of the loss on June 23, 1997. On May 4, 1998, Trinity paid Marco and Kirsling $183,676.05 and, in exchange, Kirsling and Marco signed a partial release.

On October 25, 1999, Kirsling was convicted of arson and insurance fraud in connection with the fire at the home. On December 15, 1999, Trinity filed suit against Kirsling and Marco to recover the money Trinity had paid as a result of damage to the home.

Trinity and Marco filed cross motions for summary judgment. On June 27, 2001, the district court heard argument on the motions. At argument the court noted that Kirsling had not responded to Trinity's motion for summary judgment and the court later granted summary judgment against Kirsling. Kirsling does not appeal. On July 24, 2001, the court entered a memorandum decision and order granting summary judgment in favor of Marco. The court found that the language of Trinity's policy unambiguously barred Marco from recovering for her loss and that the Policy did not violate Idaho insurance law. Nonetheless, the court found that Trinity's exclusion of coverage for an innocent co-insured spouse violated public policy. Trinity sought, and the district court granted, permission for an interlocutory appeal of the court's order granting partial summary judgment in favor of Marco.

II. STANDARD OF REVIEW

Summary judgment is proper if the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. When reviewing an appeal from a grant of summary judgment, this Court employs the same standard used by the district court originally ruling on the motion....

Murphy v. Union Pac. R.R. Co., 138 Idaho 88, 90, 57 P.3d 799, 801 (2002) (quoting Northwest Bec-Corp. v. Home Living Serv., 136 Idaho 835, 838-39, 41 P.3d 263, 266-67 (2002)).

III. ANALYSIS

A. The District Court Properly Granted Partial Summary Judgment To Marco.

As the facts of this case are undisputed, the issue is whether Marco's loss is covered by Trinity's policy, thus entitling her to judgment as a matter of law. The analysis necessary to determine whether Marco's loss is covered under Trinity's insurance policy is two-fold. See Watson v. United Serv. Auto. Ass'n, 566 N.W.2d 683, 689 (Minn.1997). First, courts consider whether the language of Trinity's policy excludes coverage for an innocent co-insured. Id. Second, in states with statutory standard fire policies, such as Idaho has adopted in I.C. § 41-2401, even if the policy language excludes coverage, courts consider whether the policy provides the coverage required by the standard fire policy. Watson, 566 N.W.2d at 689.

1. In the absence of the standard policy, the words of both the "intentional acts" exemption and the "concealment or fraud" exemption would prevent recovery by Marco, an innocent co-insured.

Trinity argues that the district court correctly found that use of the words "an insured," like "any insured," unambiguously creates a joint obligation among the insured to refrain from intentionally causing loss or defrauding Trinity. Marco, in contrast, contends that the words "an insured" may be read as singular or plural and are, therefore, ambiguous; they may reasonably be read to create a joint- or several-obligation amongst co-insureds. This Court should, Marco asserts, construe the ambiguity against the policy's drafter, Trinity, and hold that it provides coverage for an innocent co-insured.

"Insurance policies are a matter of contract between the insurer and the insured." Gordon v. Three Rivers Agency, Inc., 127 Idaho 539, 542, 903 P.2d 128, 131 (Ct.App.1995) (citing Brinkman v. Aid Ins. Co., 115 Idaho 346, 352, 766 P.2d 1227, 1233 (1988)). Whether a contract is ambiguous presents a matter of law subject to free review by this Court. DBSI/TRI V v. Bender, 130 Idaho 796, 802, 948 P.2d 151, 157 (1997) (citation omitted). Ambiguity exists when a contract term is reasonably susceptible to more than one interpretation. Id. at 803, 948 P.2d at 158. If a policy term is ambiguous, this Court construes it "liberally in favor of recovery, with all ambiguities being resolved against the insurer." Gordon, 127 Idaho at 542, 903 P.2d at 131 (citing Foremost Ins. Co. v. Putzier, 102 Idaho 138, 142, 627 P.2d 317, 321 (1981); Ryan v. Mountain States Helicopter, Inc., 107 Idaho 150, 153, 686 P.2d 95, 98 (Ct.App.1984)).

Here, the question becomes whether the language of the intentional acts or concealment or fraud exceptions are susceptible to more than one interpretation, or whether the clauses unambiguously exclude coverage for an innocent spouse. The intentional acts exclusion stated that the policy did not cover "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." The concealment or fraud exception stated: "The entire policy will be void if, whether before or after a loss, an `insured' has: [1] Intentionally concealed or misrepresented any material fact or circumstance; [2] Engaged in fraudulent conduct; or [3] Made false statements relating to this insurance." Several courts have grappled with this issue of whether the "an insured" language of these and other similar clauses is ambiguous. See Michigan Millers Mut. Ins. Corp. v. Benfield, 140 F.3d 915, 926 (11th Cir.1998); Watson, 566 N.W.2d at 683; Volquardson v. Hartford Ins. Co. of the Midwest, 264 Neb. 337, 647 N.W.2d 599 (2002); Taft v. W. Am. Ins., 1999 WL 1483437 (Ohio App.1999) (unreported).

Based on a reading of the plain, unambiguous language of the insurance contract, we hold that both the intentional acts exemption and the fraud exemption unambiguously exclude coverage for an innocent co-insured such as Marco. Our decision is in accord with the vast weight of persuasive authority from other jurisdictions. See generally Watson, 566 N.W.2d 683 ("We conclude that the `an insured' language of [the] policy unambiguously bars coverage for innocent co-insured spouses"); Volquardson, 647 N.W.2d at 606 ("We conclude that this [`an insured' language] means, simply and unambiguously, that if a loss is caused intentionally by someone who is insured under the policy, it is not covered."); Taft, 1999 WL 1483437 ("[L]anguage such as that found in [the] policy, excluding coverage when "an insured" has intentionally committed the loss, unambiguously precludes a co-insured from recovery."); but see Michigan Millers Mut. Ins. Corp., 140 F.3d at 926 (holding "an insured" is ambiguous and construing the policy to provide coverage for an innocent co-insured). Thus, we consider whether the unambiguous language of the policy violates Idaho insurance law.

2. The clauses of the policy that prevent recovery by Marco provide less coverage than the standard policy in violation of Idaho insurance law and, are, therefore, unenforceable.

Trinity argues that its intentional act exception cannot conflict with the standard policy provisions adopted through I.C. § 41-2401 because the standard policy does not include an intentional loss provision. Furthermore, Trinity notes that courts have interpreted "an insured" to be unambiguous, whereas courts have found "the insured," as used in the standard policy, ambiguous. Trinity contends that it is unlikely that the legislature intended insurance companies to use ambiguous terms in their policies. Marco, on the other hand, argues that the standard policy language adopted in Idaho through I.C. § 41-2401 allows an innocent co-insured to recover...