In doubles tennis, business, and life, choosing the best partner is a key lesson because it usually predicts future success. Brenda Welch made a tragic choice.

Brenda Welch and David Morgan married in 2006. Welch owned a home in Lynnwood, Washington, where the couple lived throughout their marriage. The home was subject to a mortgage held by CitiMortgage. During their marriage, Welch and Morgan had one child together, K.W. In 2013, the parties separated, and Welch petitioned for divorce, explaining that Morgan was controlling and verbally abusive. The court finalized their divorce, awarded Morgan the family home and required that he sell the property or refinance the debts into his sole name within three years. After the divorce, Welch moved in with a new partner while she and Morgan shared custody of K.W. under a parenting plan that called for joint decision-making.

Welch went to the Lynnwood home at a prearranged time to pick up K.W. from Morgan’s care. But K.W. was not there. Instead, Morgan attacked Welch, beat her unconscious, doused her in gasoline, and set her and the house on fire. Welch survived but suffered significant injuries. The fire destroyed the house.

At the time of the fire, Welch and Morgan held an all-risk insurance policy on the property through PEMCO. The policy named both Welch and Morgan as insureds and listed CitiMortgage as a mortgage. The PEMCO policy excluded coverage for “any loss arising out of any act committed by or at the direction of an insured with the intent to cause a loss.” But it had an exception to that intentional loss exclusion for acts of “domestic abuse” by another insured under the policy.

PEMCO denied Welch’s claim for coverage, contending that the intentional loss exclusion precluded coverage for Welch because the fire was intentionally set by Morgan, another insured. PEMCO further argued that the domestic abuse exception to the exclusion did not apply because Welch and Morgan were no longer “family” members since their divorce.

Welch’s main arguments were that the domestic abuse exception to the intentional loss exclusion applied to provide coverage for her claim. Welch argued the term “family” in the exception was undefined and ambiguous, and should be construed against PEMCO to include her and Morgan since they shared a child they were raising together under a parenting plan.

The court emphasized that exclusions in insurance policies must be clear and unambiguous to be enforceable against the insured. This is a key principle of insurance contract interpretation. The court noted that under Washington law, exclusions are “contrary to the fundamental protective purpose of insurance” and, therefore, must be strictly construed against the insurer. Exclusions cannot be extended “beyond their clear and unequivocal meaning.” In other words, if there is any ambiguity in how an exclusion is worded, courts will interpret it narrowly in favor of coverage for the insured.

PEMCO argued “family” should be limited to current spouses or household members, which would mean the domestic abuse exception did not apply to Welch since she was divorced from and no longer living with Morgan at the time of the fire. But the court found the term “family” was undefined and susceptible to two reasonable interpretations – either limited to current family or also including former family raising a child together like Welch and Morgan:

…So, we look to the dictionary to determine the ordinary meaning of the term…. Older editions of the dictionary define ‘family’ as ‘a group of individuals living under one roof,’ or ‘the basic biosocial unit in society having as its nucleus two or more adults living together and cooperating in the care and rearing of their own or adopted children.’ Webster’s Third New International Dictionary 821 (2002). Under that definition, Welch does not meet the definition of ‘family.’ Welch divorced Morgan, moved out of the house, and was living with a new partner at the time of the fire.

But more modern editions of the dictionary define ‘family’ as ‘the basic unit in society traditionally consisting of two parents rearing their children,’ or ‘[a] group consisting of parents and their children.’ Merriam-Webster Dictionary, https://www.merriam-webster.com (last visited Aug. 20, 2024); Black’s Law Dictionary 747 (11th ed. 2019). Welch meets these definitions because she and Morgan were raising K.W. under a parenting plan that granted them shared custody and called for joint decision-making. As such, they were two parents rearing their child.

…. We …conclude that an average person purchasing insurance would understand the term ‘family’ under the more modern definition. Because Welch and Morgan share a child that they were raising together, Welch is ‘family’ under the policy’s domestic abuse exception to the intentional loss exclusion. 1

This case demonstrates how Washington courts place the burden on insurers to use crystal clear wording if they want exclusions to effectively preclude coverage. Any ambiguity will be construed against the insurer and in favor of the insured. Insurers cannot rely on their own narrow interpretation of exclusions. The case is not over because the court sent the matter back to the trial level to determine the amount of insurable interest Welsh has in the destroyed house and if it is greater than just the mortgage amount.

There are many variations to innocent co-insured attempts to collect, as I noted in An Innocent Co-Insured Wins on Appeal:

Divorce is devastating. It can get worse when a couple has an insurance claim. Often, one spouse refuses to participate in the claim process, leaving the one attempting to collect in turmoil with the insurance company.

Sometimes, insurers win, as I stated in The Innocent Co-Insured—Liberty Mutual Does Not Pay For Loss Caused By Emotionally Challenged Family Member:

Innocent co-insureds who have not done anything wrong are at jeopardy of losing their insured benefits when insured by Liberty Mutual. This may seem an unfair criticism by me since Liberty Mutual won the coverage case. But, every insurer, at the moment of truth, has to make claims decisions that demonstrate if it is a pro-customer insurer or one that is going to use sharp policy language to provide a harsh result to its customers. Unfortunately, Liberty Mutual showed its true colors in this recent case.

For those further interested in this topic, I would suggest reading My Spouse Burned Down the House, Am I Covered? Part 2, Massachusetts and My Spouse Burned Down the House, Am I Covered? Part III, Connecticut.

Ed Eshoo has excellent discussions of this topic with standard fire policy language in The Massachusetts Standard Fire Policy and the Innocent Co-Insured Doctrine and Standard Fire Insurance Policies Still Provide Basic Protections—A Major Victory for Policyholders and Merlin Law Group.

Thoughts For The Day

Make a positive difference in your children’s lives. Act and speak about your co-parent with respect and integrity.
—Allison Pescosolido

There is no such thing as a ‘broken family.’ Family is family, and is not determined by marriage certificates, divorce papers, and adoption documents. Families are made in the heart.
—C. Joybell

1 Welch v. PEMCO Mut. Ins. Co., No. 85466-6-I [Unpublished Opinion] (Wash. App. Sept. 3, 2024).