Utah Farm Bureau Ins. Co. v. Crook

• Decision Date: 11 May 1999
• Docket Number: No. 970326,970326
• Parties: 369 Utah Adv. Rep. 29, 1999 UT 47 UTAH FARM BUREAU INSURANCE CO., Plaintiff and Appellee, v. Clinton E. CROOK and Rhonda L. Crook, Defendants and Appellants.
• Court: Utah Supreme Court

Page 685

980 P.2d 685

369 Utah Adv. Rep. 29, 1999 UT 47

UTAH FARM BUREAU INSURANCE CO., Plaintiff and Appellee, v. Clinton E. CROOK and Rhonda L. Crook, Defendants and Appellants.

No. 970326.

Supreme Court of Utah.

May 11, 1999.

Stephen G. Morgan, Cynthia K.C. Meyer, Salt Lake City, for plaintiff.

Gerry D'Elia, Park City, for defendants.

STEWART, Justice.

¶1 Rhonda Crook appeals from a district court order denying her motion for summary judgment and granting Utah Farm Bureau Insurance Co.'s motion for summary judgment. Farm Bureau insured Clinton and Rhonda Crook's mobile home under a homeowner policy (the "Policy"). On July 13, 1995, the couple drank at a local bar. Around 10:00 p.m., Clinton asked Rhonda to return home with him, but she refused. He became angry, told her that he was going to burn down their home, and left. Upon returning home, he called her at the bar and renewed his threat. She again refused to return. Clinton then poured nearly a gallon of diesel fuel on the carpet and lit it. The carpet ignited, and the fire grew to almost two feet wide and one foot high. Clinton thought he had extinguished it after five minutes, but by the next morning, the house had burned to the ground. Clinton pled guilty to third degree arson. There is no factual dispute that Clinton burned the house.

¶2 Ms. Crook claimed insurance from Farm Bureau under the Policy. Farm Bureau refused payment and filed a declaratory action to establish that it was not liable under the Policy. On cross motions for summary judgment, Farm Bureau argued that it could deny coverage under the Policy's intentional acts exclusion. That provision states Farm Bureau does not insure losses caused by the intentional acts of an insured. The trial court granted summary judgment for Farm Bureau, and Ms. Crook appealed. ¹ We affirm.

¶3 This Court reviews a trial court's entry of summary judgment for correctness and gives its conclusions of law no deference. See Alf v. State Farm Fire & Cas. Co., 850 P.2d 1272, 1274 (Utah 1993). Summary judgment is appropriate when no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law. See id.; Utah R. Civ. P. 56(c).

¶4 Ms. Crook argues that the Policy's intentional acts exclusion is ambiguous and that the trial court's construction of that provision to exclude coverage violates public policy under Error v. Western Home Insurance Co., 762 P.2d 1077 (Utah 1988). We turn first to the issue of ambiguity.

I. AMBIGUITY

¶5 Insurance policies are generally interpreted according to rules of contract interpretation. See Alf, 850 P.2d at 1274. Courts interpret words in insurance policies according to their usually accepted meanings and in light of the insurance policy as a whole. See Nielsen v. O'Reilly, 848 P.2d 664, 665 (Utah 1992). Policy terms are harmonized with the policy as a whole, and all provisions should be given effect if possible. See id. Insurers "may exclude from coverage certain losses by using language which clearly and unmistakably communicates to the insured the specific circumstances under which the expected coverage will not be provided." Alf, 850 P.2d at 1275 (internal quotations omitted).

¶6 Whether an insurance policy is ambiguous is a matter of law that we review for correctness. See Alf, 850 P.2d at 1274. A contract is ambiguous if it is unclear, omits terms, has multiple meanings, or is not plain to a person of ordinary intelligence and understanding. See id. at 1274-75; Nielsen, 848 P.2d at 666. Ambiguities are construed against the drafter--the insurance company--and in favor of coverage. See Alf, 850 P.2d at 1274; Nielsen, 848 P.2d at 666. However, courts must enforce an unambiguous contract and "may not rewrite an insurance contract ... if the language is clear." Alf, 850 P.2d at 1275; see also Woodhouse v. Farmers Union Mut. Ins. Co., 241 Mont. 69, 785 P.2d 192, 194 (1990); Dolcy v. Rhode Island Joint Reins. Ass'n, 589 A.2d 313, 316 (R.I.1991).

¶7 The Policy provision Ms. Crook asserts is ambiguous states:

1. We do not insure for loss caused directly or indirectly by any of the following. Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss.

....

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.

The Policy defines "insured" as:

[Y]ou and residents of your household who are:

a. Your relatives; or

b. Other persons under the age of 21 and in the care of any person named above.

The word "you," as used in the definition of the term "insured," means "the 'named insured' shown in the Declarations and the spouse if a resident of the same household." The Declarations page names Clinton Crook as the named insured. Ms. Crook, as Clinton Crook's resident spouse, is thus also an insured.

¶8 Ms. Crook argues that the provision is unclear because it does not clearly state that innocent co-insureds may not recover when a co-insured causes an intentional loss. She specifically argues that the words "an insured" in the provision are ambiguous:

This [provision] bars recovery for "any act" by "an insured." It does not bar recovery for "any act" by "any insured." Therefore, the provision seems to be directed at denying "an insured" from recovery for "any act" causing a loss. However it is not clear from the policy language.

She cites cases from other jurisdictions holding similar insurance provisions ambiguous. See id. (citing Allstate Ins. Co. v. Worthington, 46 F.3d 1005, 1009 (10th Cir.1995); McFarland v. Utica Fire Ins. Co., 814 F.Supp. 518, 525-26 (S.D.Miss.1992); American Hardware Mut. Ins. Co. v. Mitchell, 870 S.W.2d 783, 785 (Ky.1993)).

¶9 However, when the provision is read as a whole, it is clear and directly applies. It states that Farm Bureau does not insure certain losses. One type of excluded loss is an intentional loss, defined 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 facts are undisputed that Mr. Crook caused an intentional property loss. If he is "an insured," the Policy does not cover loss from his intentional property destruction. Mr. Crook is an insured; in fact, he is the Policy's named insured. Therefore, an insured intentionally caused a loss--a loss that Farm Bureau clearly communicated it would not insure, regardless of claimant.

¶10 Ms. Crook has specifically argued that the words "an insured" in the exclusion are ambiguous. She cites other courts so holding. ² But when we read the exclusion with the Policy's definition of insured, "an insured" is clear:

"Insured" means you and residents of your household who are:

a. Your relatives; or b. Other persons under the age of 21 and in the care of any person named above.

(Emphasis added.) The Policy defines "you" as "the 'named insured' shown in the Declarations and the spouse if a resident of the same household." More than one person can thus be "an insured" under the Policy. In this situation, Clinton Crook is the named insured--clearly "an insured." Rhonda Crook, his spouse and a resident of the same household, is also "an insured." Any other resident who is either a relative or under 21 and in an insured's care would also be "an insured." Thus, "an insured" in the Crooks' Policy may refer to multiple persons by definition, and intentional property damage by any insured is excluded under the Policy.

¶11 Clinton Crook, "an insured," committed an "intentional loss." Farm Bureau clearly communicated that it "do[es] not insure" intentional losses; thus, no insured may recover. The trial court correctly found the exclusion unambiguous and applicable; this Court must therefore enforce it.

II. PUBLIC POLICY

¶12 Ms. Crook argues that reading the Policy as above causes a result that is unfair and contrary to public policy. She quotes dicta in Martin v. Christensen, 22 Utah 2d 415, 454 P.2d 294 (1969), that insurance policies should be upheld

unless considerations of equity and justice, or of public policy, dictate that the contract should not be enforced because of fraud, duress, mistake, unconscionability, illegality or some other such cogent reason.

Id. at 295; see also Farmers Ins. Exch. v. Call, 712 P.2d 231, 233 (Utah 1985) ("[A]n insurer may include in a policy any number or kind of exceptions and limitations to which an insured will agree unless contrary to statute or public policy." (emphasis added)); Gee v. Utah State Retirement Bd., 842 P.2d 919, 921 (Utah Ct.App.1992). However, "the general judicial attitude toward insurance policies is to sustain them on grounds of public policy wherever possible." Ross v. Producers Mut. Ins. Co., 4 Utah 2d 396, 401, 295 P.2d 339, 343 (1956).

¶13 Ms. Crook argues that Error v. Western Home Insurance Co., 762 P.2d 1077 (Utah 1988), established a public policy that innocent co-insureds should recover notwithstanding the acts of another co-insured and regardless of applicable policy exclusions. In Error, a husband intentionally burned down the couple's home, and the wife, an innocent co-insured, claimed coverage under a homeowner's policy. The insurer denied coverage under policy exclusions for "neglect" and "fraud": ³

Section I EXCLUSIONS

5. Neglect, meaning neglect of the insured to use all reasonable means to save and preserve Property at and after the time of loss, or when the property is endangered by a Peril Insured Against.

Section I and Section II--CONDITIONS

2. Concealment or Fraud. We do not provide coverage for any insured who has intentionally concealed or misrepresented any material fact or circumstance relating to this insurance.

The trial judge, after a nonjury trial, ruled for the wife, holding the exclusions inapplicable. We affirmed, stating:

[T]he rule of law in a majority of jurisdictions is that an innocent insured is not necessarily...