When Mentally Ill Son Sets Fire to House in an Attempted Suicide May his Innocent Parents Recover?
When an insurer denies a claim because of an intentional act exclusion the insurer must prove that the act was done by an insured, that the insured intended to do the act to damage the property the risk of loss of which was insured, and whether his co-insureds were entitled to recover indemnity for losses caused by the insured acting intentionally.
In Kentucky, in Brent Foreman, Kathleen Foreman, And Logan Foreman Appellants v. Auto Club Property-Casualty Insurance Company, 2018-SC-0618-DG, Supreme Court of Kentucky (February 18, 2021) Brent and Kathleen Foreman brought a declaratory judgment action in the circuit court to establish that Auto Club Property-Casualty Insurance Company owed payment under a homeowner’s insurance policy for property damage caused by a house fire started by their teenage son, Logan, in a suicide attempt. Auto Club denied liability based on the intentional-loss exclusion in the policy.
The circuit court granted summary judgment in the Foremans’ favor. The trial court’s judgment declared the exclusion inoperative because Logan was “of such unsound mind as to render him incapable of forming an intent to cause a loss as defined under [the Auto Club policy].”
The Court of Appeals reversed the judgment, holding that the trial court’s summary judgment erroneously ignored unambiguous policy language that stated an objective component for judging Logan’s reasonable expectation of property damage when he ignited gasoline-soaked furniture in the basement of the home.
It is undisputed that Logan, Brent and Kathleen’s then sixteen-year-old son lived at home with them when he set fire to the family home in a suicide attempt. In a disturbed mental state only few days after his release from a psychiatric hospitalization, while his family slept, Logan piled his school books onto a couch in the basement of the family home and doused the couch and books with gasoline before returning to his bedroom on the second floor. Early the next morning before the family arose, he returned to the basement, set the couch ablaze, and returned to his upstairs bedroom to await the outcome.
Logan later admitted to investigators that he started the fire to take his own life.
The pertinent policy provisions read:
“EXCLUSIONS: We do not insure under Part 1 [Property Insurance Coverages] – Property Insurance Coverages for loss caused directly or indirectly by any of the following, regardless of the cause of the excluded event or damage; other causes of the loss; whether any other cause or event acts produce the loss; or whether the loss or event occurs suddenly or gradually, involves isolated or widespread damage or occurs as a result of any combination of these. *** 9. Any action by or at the direction of an insured person committed with the intent to cause a loss, or that could be reasonably expected to cause a loss.”
It also limited the exclusion by stating:
“However, this exclusion does not apply to loss to the covered property of an innocent co-insured if the loss: a. arose out of a pattern of domestic violence; and b. the perpetrator of the loss is criminally prosecuted for the act of causing the loss.”
Relying upon its reading of the reasonable-expectations doctrine the trial court ruled the disputed exclusion inapplicable, reasoning that the reasonable expectation of loss must be viewed from Logan’s subjective viewpoint: when he set the fire, the trial court reasoned, Logan lacked mental capacity to form the intent to damage the home.
Noting that the contract language unambiguously excluded coverage for acts that, when judged objectively, could be reasonably expected by the insured to cause a loss, the Supreme Court found that an insured could reasonably expect that igniting a gasoline-soaked couch, as Logan unquestionably did, could reasonably be expected to burn the couch and spread to the rest of the house where he waited for the fire to kill him. Therefore, it concluded summary judgment in favor of the Foremans was error.
Regardless, the Foremans may still be able to pursue payment under their policy. Courts generally hold that intentional-act exclusions do not apply if the insured was suffering from a lack of mental capacity at the time of the act.
Allowing a mental-incapacity defense potentially to defeat an intentional-act exclusion accords with the reasonable-expectation principle that all insurance contracts are to be construed to give effect to the coverage the insured reasonably expected while allowing insurers to protect themselves from unreasonable exposure. The Supreme Court recognized that an individual who lacks mental capacity to conform his conduct will not be influenced by the existence or nonexistence of coverage.
The Supreme Court found that the reasonable-expectations policy to protect insureds from conduct no one could foresee can apply in the rare instance where mental incapacity may apply. Although the current contract provision is to be judged objectively, a mental-incapacity defense remains available to the Foremans. An objective analysis requires the court to ask what loss, when judging the circumstances objectively, could Logan reasonably expect to result from his intentional actions.
Determining whether loss could reasonably be expected requires a determination of what results were reasonably foreseeable to the insured at the time the insured acted. Mental incapacity prevents the actor from forming intent enough to know the nature and quality of his act and a person’s actions will not be considered intentional if he is unable to comprehend the physical nature of their consequences. Mental incapacity renders a person unable to have knowledge of the matters pertinent to assessing foreseeability of risk because it prevents the actor from being able to understand the nature and quality of their actions. A mentally incapacitated actor cannot ascertain the foreseeability of risks. It is, therefore impossible to judge objectively what an insured acting under delusion could have reasonably expected to result from his actions.
The Supreme Court held, therefore, that an intentional-act exclusion will be defeated if the insured shows that, at the time of the act, not just that he did not know right from wrong, but that he did not understand the nature and quality of his actions so that he was rendered unable to understand the physical nature of their consequences.
Summary judgment was erroneously granted. However, because the Supreme Court found that an insured’s mental-incapacity defense applies to intentional-act exclusion provisions, summary judgment in favor of Auto Club is inappropriate at this juncture. The record reflects evidence that would permit an inference that Logan was aware of the nature of his actions.
For example, as the Court of Appeals notes, Logan told the official arson investigator that he obtained gasoline from the basement earlier in the evening, poured the gas around the couch and placed his books on it. A fact-finder could reasonably infer that Logan was able to understand the nature of his actions and had either the subjective intent to start a fire to end his life in a way that would cause damage to the home or that it was at least reasonably foreseeable that damage to the couch, if not destruction of the family home could happen.
Affirming the Court of Appeals’ decision reversing the trial court’s grant of summary judgment in favor of the Foremans the Supreme Court remanded the case to the trial court to allow the insureds an opportunity to litigate a lack-of-capacity defense consistent with the standard set forth in this opinion.
I agree with the concurring opinion where a justice noted the innocent co-insured holding of the Supreme Court’s earlier decisions. I agree it is difficult to imagine that a parent reasonably expected to be excluded from homeowners’ insurance coverage if his or her child, struggling with mental health issues, starts a fire in the house during an attempted suicide. Although changes in public policy should not be made by judicial fiat the Kentucky legislature should note that it is time to enact greater protections for innocent co-insureds so that insurance coverage better aligns with the reasonable expectations of the insured. Logan should recover nothing from the policy but his innocent parents should not suffer as a result.
© 2021 – Barry Zalma
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and firstname.lastname@example.org.
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.
Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and Read last two issues of ZIFL here.