Woodhouse v. Farmers Union Mut. Ins. Co.

• Decision Date: 10 January 1990
• Docket Number: No. 89-122,89-122
• Citation: 785 P.2d 192,241 Mont. 69
• Parties: Patricia WOODHOUSE, Plaintiff and Respondent, v. FARMERS UNION MUTUAL INSURANCE COMPANY, Defendant and Appellant.
• Court: Montana Supreme Court

Page 192

785 P.2d 192

241 Mont. 69

Patricia WOODHOUSE, Plaintiff and Respondent, v. FARMERS UNION MUTUAL INSURANCE COMPANY, Defendant and Appellant.

No. 89-122.

Supreme Court of Montana.

Submitted Oct. 17, 1989.

Decided Jan. 10, 1990.

Donald L. Ostrem, argued, Graybill, Ostrem, Warner & Crotty, Great Falls, for defendant and appellant.

Howard F. Recht, argued, Recht & Greef, Hamilton, for plaintiff and respondent.

SHEEHY, Justice.

This is an appeal from the District Court of the Fourth Judicial District, Ravalli County. Plaintiff Patricia Woodhouse brought suit, seeking a declaratory judgment that the loss of her personal property by fire be covered by her insurer, Farmers Union Mutual Insurance Co. Defendant (hereinafter "Farmers") counterclaimed, seeking a declaratory judgment excluding coverage for the loss. The District Court found in plaintiff's (hereinafter "Woodhouse") favor on a motion for summary judgment. Farmers appeals from that order. We reverse.

The issue raised by appellant Farmers is:

Whether the District Court erred in its determination that Farmers is obligated to provide coverage for an insured whose co-insured destroyed the property by arson.

Patricia and Alan Woodhouse were divorced on September 24, 1986. Alan Woodhouse was awarded the trailer house the parties had acquired during the marriage. The trailer house and its contents were insured by Farmers, with Patricia and Alan named as the insureds on the policy.

Following the divorce, Patricia Woodhouse left many items of personal property in the dwelling due to lack of storage space elsewhere.

On January 5, 1987, Alan Woodhouse intentionally set fire to the trailer house, and committed suicide within the burning dwelling. The dwelling was totally consumed by the fire.

Patricia Woodhouse submitted a claim to Farmers Insurance for the value of her personal goods lost in the fire. Farmers denied the claim on the basis that coverage was excluded because the loss was intentionally caused by an insured party.

Farmers maintains that this is a clear contract case. They submit that the "intentional loss" exclusion of the Woodhouse insurance policy acts to deny coverage in this situation. The provision reads as follows:

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.

Arson by an insured, Farmers maintains, is not, therefore, an insured risk. Alan Woodhouse was an insured party who clearly committed an intentional loss. Patricia Woodhouse is a named coinsured party and is therefore bound to the contractual provisions of the policy.

Farmers cites several cases for the premise that clear and unambiguous language of the contract controls. In Amick v. State Farm Fire and Casualty Company (8th Circuit 1988), 862 F.2d 704, the court stated:

The court sees no injustice in requiring the company to pay only those risks it insured, where, as here, the coverages are spelled out in clear and unambiguous language. Bryan v. Employers National Insurance (Ark.1988), 742 S.W.2d 557, 577. An innocent co-partner [can] not recover under a policy where arson was committed by a partner because the language of the policy specifically barred recovery. West Bend Mutual Insurance Co. v. Salemi (Ill.1987), [158 Ill.App.3d 241, 110 Ill.Dec. 608,] 511 N.E.2d 785.

* * * * * *

The key factor is whether the policy provision barring recovery by an innocent co-insured is clear and unambiguous.

Farmers cites the exclusion clause contained in the policy noted in Spezialetti v Pacific Employers Insurance Co. (3rd Cir.1985), 759 F.2d 1139, which reads:

[The] insurance shall not apply to loss or damage ... [resulting from] any dishonest act or omission by any insured....

The court in Spezialetti denied the innocent spouse's claim for insurance proceeds, based on the exclusionary language.

Finally, Farmers takes issue with the District Court's reliance on Kulubis v. Texas Farm Bureau Underwriters Insurance Co. (Tex.1986), 706 S.W.2d 953, for the proposition that an insurer's obligations under such insurance policies are "several and not joint, the wrongful acts of one coinsured cannot be imputed to another as a basis for denying coverage." This, Farmers states, unfairly places the burden of proving the innocence of the non-acting spouse on the insurer. Farmers contends that Kulubis is bad policy, stating that:

The law should assiduously seek ... to avoid holding out any incentive to such actions [as arson] and should be diligent to assure that it permits no benefits to be derived from them by their perpetrators. We conclude that it would be a strange...