Innocent Co-Insureds: Court Rules Intentional-Acts Exclusion Bars Coverage for House Fire Caused By Spouse

Earlier this year, I wrote how, under Michigan law, insurers were required to provide coverage to innocent co-insureds notwithstanding any insurance policy exclusion for intentional acts by an insured.¹ This was the case as Michigan law prohibits the exclusion as void against public policy. The Supreme Court of Arkansas, however, very recently found directly to the contrary with respect to innocent co-insureds.

In that case,² a man allegedly set fire to his house and its contents.³ The man’s wife made a claim under a homeowners insurance policy covering the property. The insurer investigated the fire and concluded the man intentionally caused the fire. Consequently, the insurer denied coverage to the wife under the policy’s intentional act exclusion.⁴ The wife then sued the insurer, arguing the policy language allowing an insurer to deny a claim by an innocent co-insured because of actions taken by another insured is void as against public policy.

Ultimately, the Supreme Court of Arkansas found that the policy’s intentional-acts exclusion barred coverage. In finding so, the court ruled that applying the intentional-acts exclusion to an innocent co-insured was not void as against policy under Arkansas law because the legislature has not specifically prohibited the exclusion.

Similar to Arkansas, in my home state of New Jersey, there is no statutory prohibition against enforcing a policy exclusion to deny a claim by an innocent co-insured because of actions taken by another insured. Consequently, a New Jersey court has ruled that a policy exclusion of coverage for damage resulting from arson “at the instigation of any insured” would have barred recovery for a fire loss even by an innocent co-insured.⁵
___________________________________
¹ https://www.propertyinsurancecoveragelaw.com/2020/01/articles/insurance/am-i-barred-from-recovering-under-an-insurance-policy-because-of-another-co-insureds-intentional-acts/
² Shelter Mutual Ins. Co. v. Lovelace, No. CV-19-578, 2020 Ark. 93, 2020 WL 945995 (Ark. Feb. 27, 2020).
³ The man died by suicide inside the home during the fire.
⁴ The insurance policy at issue provided, in pertinent part, the following exclusion: “An intentional act by, or at the direction of, any insured that a reasonable individual would expect to cause the loss for which the claim is made.”
⁵ Rena, Inc. v. Brien, 310 N.J. Super. 304 (App. Div. 1998).