Intentional Act Exclusion Applies When Resident Child Sets Fire

Setting Fire to a Blanket to Upset Her Father is an Intentional Act

On August 30, 2018, the property suffered significant damage due to a fire which originated from the bedspread in Plaintiffs’ bedroom. The fire spread from the bed and caused damage to other areas of the property. Zoe was inside the property at the time the fire began. Zoe was angry with her father due to an argument they had earlier in the day. Because she wanted to upset her father, Zoe used a lighter to ignite the bedspread. Zoe attempted to put the fire out but was unable to do so. Zoe went outside and called the fire department.

In Christina Taylor and Donald Taylor v. LM Insurance Corporation, Case No. 19-1030-JWB, United States District Court For The District Of Kansas (July 15, 2020) the insurer refused to pay under the intentional act exclusion of its policy because Zoe was an insured and intentionally set the fire.

Uncontroverted Facts

Plaintiffs Christina and Donald Taylor own a home located at 301 S. Summit Street, El Dorado, Kansas (“the property”). Plaintiffs purchased a homeowner’s insurance policy (“the policy”) from Defendant LM Insurance Corporation for the property and were the named insureds under the policy. Under the terms of the insurance policy, an insured includes members of the family of the named insureds residing at the property. Plaintiffs’ daughter, Zoe, was living at the property with Plaintiffs. Zoe was an insured under the policy.

The policy contains an exclusion for intentional loss.  The fire spread from the bed and caused damage to other areas of the property. Although Zoe initially denied starting the fire, she later admitted her involvement. Zoe told Detective Sergeant Sam Humig of the El Dorado Police Department that she intended to burn the blankets and she got scared once the fire started.

Plaintiffs made a claim for coverage under the policy. After receiving notice of the loss, Defendant began adjusting the loss and advanced funds to Plaintiffs. The insurer advised Christina Taylor by phone that Defendant was denying the claim on the basis that the policy excludes coverage for intentional loss and Defendant determined that Zoe set the fire to the bedspread in the master bedroom.

Plaintiffs sued Defendant asserting that Defendant breached its agreement to provide coverage for the loss. Both parties  moved for summary judgment.

Analysis

Plaintiffs claim that Defendant breached its agreement to insure Plaintiffs by failing to pay the claim and failing to reasonably investigate the claim.

The interpretation of the policy is a question of law for the court. In construing the policy, the court should consider the policy as a whole and construe it in a way that will give effect to the parties’ intent. If the policy language is unambiguous, the court must take the unambiguous language in its plain, ordinary, and popular sense.

To determine whether the claim is covered under the policy, the insured bears the burden of proving that the claim falls within the policy. The insurer then has the burden to prove that an exclusion in the policy precludes coverage of the claim.

Intentional Loss Exclusion

In this case, there is no dispute that the policy provides coverage for property damage due to fire. Property damage is covered under section one of the policy. The policy also includes exclusions under section one. Defendant denied coverage on the basis that the intentional loss provision under section one excluded coverage for the claim.

Because it is undisputed that Zoe is an insured and that she intended to set fire to the bedspread the exclusion applies. Plaintiffs argue that the term “loss” is ambiguous, and that the intention of the parties was for the language to mean the “intent to cause an [insured] loss.” Plaintiffs argue that this reading is a common sense reading of the policy because otherwise the exclusion would bar someone who burned down their home after disposing of leaves in a burn barrel.

The term loss is not defined in this policy. Black’s Law Dictionary defines the term “loss” as “[a]n undesirable outcome of a risk; the disappearance or diminution of value, [usually] in an unexpected or relatively unpredictable way.” This definition is reasonable in reading the policy as a whole. A loss is the disappearance or diminution of value. A “loss” occurs when there has been damage to that covered property as the value of the property is diminished when it has been damaged.

What Is Required To Show That Zoe “Intended” To Cause A Loss?

The Kansas Supreme Court has set forth the standard to evaluate an intentional act exclusion in an insurance policy in Thomas v. Benchmark Ins. Co., 285 Kan. 918, 933, 179 P.3d 421, 431 (2008). The court held that “the ‘intentional act’ or ‘intentional injury’ exclusion test in Kansas should be as follows: The insured must have intended both the act and to cause some kind of injury or damage. Intent to cause the injury or damage can be actual or it can be inferred from the nature of the act when the consequences are substantially certain to result from the act.”

Moreover, although the provision at issue is titled intentional loss, the provision is applicable to intentional acts that result in an intentional loss. As such, it is an exclusion based on an intentional act. The court concluded that Thomas is applicable to the policy in this case which excludes coverage for an intentional loss arising out of any act by an insured with the intent to cause the loss. Zoe’s actions in lighting the fire were intentional as she wanted to make her father upset. All that is required is the intent to cause some damage or, as applied to the policy, a loss.

Plaintiffs make several references to Zoe’s mental health and argue that she was unable to form the requisite intent. The uncontroverted facts, however, are that Zoe intended to burn the blankets. Plaintiffs have the burden of proof to rebut the presumption of sanity and intent by introducing evidence to show that Zoe’s mental condition prevented her from forming the necessary intent. Plaintiffs have not done so.

The court found that the damage to the bedspread is a loss. Therefore, Zoe intentionally caused a loss. The resulting loss of approximately $200,000 to other parts of the property arose out of the fire set to the bedspread. Accordingly, that loss is excluded under the policy. Because the policy excludes any loss that arises of out an act committed by “an insured,” the policy does not permit Plaintiffs to recover under the policy.

Duty to Investigate

Plaintiffs also contend that Defendant breached the contract by failing to investigate the claim in good faith. Defendant asserts that Plaintiffs cannot succeed on this claim as the policy does not provide coverage under the intentional loss provision and that Defendant does not owe any additional duties under the contract.

Conclusion

The trial court was not pleased with its decision. It found the case to be difficult because, in many ways, the outcome seems unfair. Plaintiffs are indisputedly innocent insureds. Plaintiffs have been paying their insurance premiums and, as any insured, would expect that a fire loss would be covered under a policy. The circumstances of this case make the loss all the more bitter because it was caused by Plaintiffs’ own child.

The court is required to enforce the policy according to its terms, and under Kansas law those terms compel the result reached herein.

ZALMA OPINION

Kansas law required the conclusion reached. Clearly, Zoe intentionally set fire to blankets expecting to upset her father and have some “fun.” The house was almost destroyed as a result. There was no question that she intended to destroy the blankets and that was enough to deprive her parents of insurance coverage. They should punish her accordingly. There was a mortgage on the house and it would have had a viable claim if it had been made. This suit could have been avoided had the insurer issued a Union Mortgage Clause and advised the mortgagee of its right to make a claim up to the amount of its interest. The mortgagee decided, perhaps to its detriment, to wait for the conclusion of this appeal.


© 2020 – 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 zalma@zalma.com.

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