Utah Farm Bureau Insurance Co v. Crook
Annotate this Casepublication in the Pacific Reporter.
IN THE SUPREME COURT OF THE STATE OF UTAH
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Utah Farm Bureau Insurance Co.,
Plaintiff and Appellee,
v.
Clinton E. Crook and Rhonda L. Crook,
Defendants and Appellants.
No. 970326
F I L E D
May 11, 1999
1999 UT 47
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Eighth District, Duchesne Dep't
The Honorable A. Lynn Payne
Attorneys:
Stephen G. Morgan, Cynthia K. C.
Meyer, Salt Lake City, for plaintiff
Gerry D'Elia, Park City, for defendants
---
STEWART, Justice:
¶1
Rhonda Crook appeals from a district
court order denying her motion for summary judgment and granting Utah Farm
Bureau Insurance Co.'s motion for summary judgment. Farm Bureau insured
Clinton and Rhonda Crook's mobile home under a homeowner policy (the "Policy").
On July 13, 1995, the couple drank at a local bar. Around 10:00 p.m., Clinton
asked Rhonda to return home with him, but she refused. He became angry,
told her that he was going to burn down their home, and left. Upon returning
home, he called her at the bar and renewed his threat. She again refused
to return. Clinton then poured nearly a gallon of diesel fuel on the carpet
and lit it. The carpet ignited, and the fire grew to almost two feet wide
and one foot high. Clinton thought he had extinguished it after five minutes,
but by the next morning, the house had burned to the ground. Clinton pled
guilty to third degree arson. There is no factual dispute that Clinton
burned the house.
¶2
Ms. Crook claimed insurance from
Farm Bureau under the Policy. Farm Bureau refused payment and filed a declaratory
action to establish that it was not liable under the Policy. On cross motions
for summary judgment, Farm Bureau argued that it could deny coverage under
the Policy's intentional acts exclusion. That provision states Farm Bureau
does not insure losses caused by the intentional acts of an insured. The
trial court granted summary judgment for Farm Bureau, and Ms. Crook appealed.(1)
We affirm.
¶3
This Court reviews a trial court's
entry of summary judgment for correctness and gives its conclusions of
law no deference. See Alf v. State Farm Fire & Cas. Co.,
850 P.2d 1272, 1274 (Utah 1993). Summary judgment is appropriate when no
genuine issues of material fact exist and the moving party is entitled
to judgment as a matter of law. See id.; Utah R. Civ. P.
56(c).
¶4
Ms. Crook argues that the Policy's
intentional acts exclusion is ambiguous and that the trial court's construction
of that provision to exclude coverage violates public policy under
Error
v. Western Home Insurance Co., 762 P.2d 1077 (Utah 1988). We turn first
to the issue of ambiguity.
I. AMBIGUITY
¶5
Insurance policies are generally
interpreted according to rules of contract interpretation. See Alf,
850 P.2d at 1274. Courts interpret words in insurance policies according
to their usually accepted meanings and in light of the insurance policy
as a whole. See Nielsen v. O'Reilly, 848 P.2d 664, 665 (Utah
1992). Policy terms are harmonized with the policy as a whole, and all
provisions should be given effect if possible. See id. Insurers
"may exclude from coverage certain losses by using language which clearly
and unmistakably communicates to the insured the specific circumstances
under which the expected coverage will not be provided." Alf, 850 P.2d at 1275 (internal quotations omitted).
¶6
Whether an insurance policy is ambiguous
is a matter of law that we review for correctness. See Alf,
850 P.2d at 1274. A contract is ambiguous if it is unclear, omits terms,
has multiple meanings, or is not plain to a person of ordinary intelligence
and understanding. See id. at 1274-75; Nielsen, 884 P.2d at 666. Ambiguities are construed against the drafter--the insurance
company--and in favor of coverage. See Alf, 850 P.2d at 1274;
Nielsen,
848 P.2d at 666. However, courts must enforce an unambiguous contract and
"may not rewrite an insurance contract . . . if the language is clear."
Alf, 850 P.2d at 1275;
see also Woodhouse v. Farmers Union
Mut. Ins. Co., 785 P.2d 192, 194 (Mont. 1990); Dolcy v. Rhode Island
Joint Reins. Ass'n, 589 A.2d 313, 316 (R.I. 1991).
¶7
The Policy provision Ms. Crook asserts
is ambiguous states:
1. We do not insure for
loss caused directly or indirectly by any of the following. Such loss is
excluded regardless of any other cause or event contributing concurrently
or in any sequence to the loss.
. . . . 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.
The Policy defines "insured" as:
[Y]ou and residents of your household
who are:
a. Your relatives; or
b. Other persons under the age of 21 and in the care of any person named above. The word "you," as used in the definition of the term "insured," means "the 'named insured' shown in the Declarations and the spouse if a resident of the same household." The Declarations page names Clinton Crook as the named insured. Ms. Crook, as Clinton Crook's resident spouse, is thus also an insured.
¶8
Ms. Crook argues that the provision
is unclear because it does not clearly state that innocent co-insureds
may not recover when a co-insured causes an intentional loss. She specifically
argues that the words "an insured" in the provision are ambiguous:
This [provision] bars recovery
for "any act" by "an insured." It does not bar recovery for "any act" by
"any insured." Therefore, the provision seems to be directed at denying
"an insured" from recovery for "any act" causing a loss. However it is
not clear from the policy language.
She cites cases from other jurisdictions
holding similar insurance provisions ambiguous. See id. (citing
Allstate Ins. Co. v. Worthington, 46 F.3d 1005, 1009 (10th Cir.
1995);
McFarland v. Utica Fire Ins. Co., 814 F. Supp. 518, 525-26
(S.D. Miss. 1992);
American Hardware Mut. Ins. Co. v. Mitchell,
870 S.W.2d 783, 785 (Ky. 1993)).
¶9
However, when the provision is read
as a whole, it is clear and directly applies. It states that Farm Bureau
does not insure certain losses. One type of excluded loss is an intentional
loss, defined as "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."
The facts are undisputed that Mr. Crook caused an intentional property
loss. If he is "an insured," the Policy does not cover loss from his intentional
property destruction. Mr. Crook is an insured; in fact, he is the Policy's
named insured. Therefore, an insured intentionally caused a loss--a loss
that Farm Bureau clearly communicated it would not insure, regardless of
claimant.
¶10
Ms. Crook has specifically argued
that the words "an insured" in the exclusion are ambiguous. She cites other
courts so holding.(2) But when we read the
exclusion with the Policy's definition of insured, "an insured" is clear:
"Insured" means you and
residents of your household who are:
a. Your relatives; or
b. Other persons under the age of 21 and in the care of any person named above. (Emphasis added.) The Policy defines "you" as "the 'named insured' shown in the Declarations and the spouse if a resident of the same household." More than one person can thus be "an insured" under the Policy. In this situation, Clinton Crook is the named insured--clearly "an insured." Rhonda Crook, his spouse and a resident of the same household, is also "an insured." Any other resident who is either a relative or under 21 and in an insured's care would also be "an insured." Thus, "an insured" in the Crooks' Policy may refer to multiple persons by definition, and intentional property damage by any insured is excluded under the Policy.
¶11
Clinton Crook, "an insured," committed
an "intentional loss." Farm Bureau clearly communicated that it "do[es]
not insure" intentional losses; thus, no insured may recover. The trial
court correctly found the exclusion unambiguous and applicable; this Court
must therefore enforce it.
II. PUBLIC POLICY
¶12
Ms. Crook argues that reading the
Policy as above causes a result that is unfair and contrary to public policy.
She quotes dicta in Martin v. Christensen, 454 P.2d 294 (Utah 1969),
that insurance policies should be upheld
unless considerations of
equity and justice, or of public policy, dictate that the contract should
not be enforced because of fraud, duress, mistake, unconscionability, illegality
or some other such cogent reason.
Id. at 295; see also Farmers
Ins. Exch. v. Call, 712 P.2d 231, 233 (Utah 1985) ("[A]n insurer may
include in a policy any number or kind of exceptions and limitations to
which an insured will agree unless contrary to statute or public policy."
(emphasis added)); Gee v. Utah State Retirement Bd., 842 P.2d 919,
921 (Utah Ct. App. 1992). However, "the general judicial attitude toward
insurance policies is to sustain them on grounds of public policy wherever
possible." Ross v. Producers Mut. Ins. Co., 4 Utah 2d 396, 401,
295 P.2d 339, 343 (1956).
¶13
Ms. Crook argues that Error v.
Western Home Insurance Co., 762 P.2d 1077 (Utah 1988), established
a public policy that innocent co-insureds should recover notwithstanding
the acts of another co-insured and regardless of applicable policy exclusions.
In Error, a husband intentionally burned down the couple's home,
and the wife, an innocent co-insured, claimed coverage under a homeowner's
policy. The insurer denied coverage under policy exclusions for "neglect"
and "fraud":(3)
Section I - EXCLUSIONS
5. Neglect, meaning neglect of the insured to use all reasonable means to save and preserve Property at and after the time of loss, or when the property is endangered by a Peril Insured Against.
Section I and Section II - CONDITIONS
2. Concealment or Fraud. We do not provide coverage for any insured who has intentionally concealed or misrepresented any material fact or circumstance relating to this insurance. The trial judge, after a nonjury trial, ruled for the wife, holding the exclusions inapplicable. We affirmed, stating: [T]he rule of law in a majority of jurisdictions is that an innocent insured is not necessarily precluded as a matter of law from recovering on a fire insurance policy because a coinsured intentionally destroyed the insured premises. The rationales behind this rule vary, but fall into three broad--and sometimes overlapping--categories. Some jurisdictions focus upon the insured's property interest. Others focus upon the insured's obligations under the insurance policy. The rationale that most appeals to our sense of reason and fairness, and the rationale we adopt today, is that which focuses upon the responsibility for the fraudulent act. Error, 762 P.2d at 1080 (footnotes omitted) (emphasis added). In the absence of an applicable policy exclusion, the Error innocent co-insured recovered because she was not personally responsible for the arson. See id. at 1081.
¶14
Ms. Crook would read the public
policy in Error as allowing an innocent co-insured to recover despite
a directly applicable policy exclusion. However, Error cannot be
read that broadly because there was no directly applicable exclusion in
that case. The trial court found the exclusions in Error inapplicable,
see
id. at 1079, and the appellant did not challenge that aspect of
its ruling on appeal. Thus, in Error we addressed the question of
an innocent co-insured's recovery as a "matter of law," id. at 1080,
and not under the insurance policy. Error held that when an insurance
policy does not contain an exclusion that clearly and unambiguously denies
coverage, public policy requires that an insured who is not personally
responsible for causing a loss can recover. This public policy does not
extend to cases in which an insurance policy contains a specific, unambiguous
provision that applies to exclude coverage. Ms. Crook's Policy contains
an exclusion that clearly excludes coverage when an insured commits an
intentional act; therefore, we hold that the public policy articulated
in Error does not apply to her case. This holding in no way limits
Error's
application to cases factually similar to it, i.e., in which no policy
exclusion applies to deny coverage; Error would then still allow
an innocent co-insured's recovery.
¶15
Many of the cases we relied upon
in
Error were premised on the fact that no exclusion clearly barred
recovery. SeeError, 762 P.2d at 1080 n.6 (citing cases). For example,
in
McCracken v. Government Employees Insurance Co., 325 S.E.2d 62, 64 (S.C. 1985), the South Carolina Supreme Court held: "[I]n the absence
of any statute or specific policy language denying coverage to a co-insured
for the arson of another co-insured, the innocent co-insured shall be entitled
to recover his or her share of the insurance proceeds." A subsequent South
Carolina Court of Appeals case addressed facts similar to McCracken,
but the applicable insurance policy specifically excluded coverage for
the type of loss at issue. The court found McCracken "inapposite"
because the policy in question specifically excluded coverage and denied
a co-insured's recovery. See Nationwide Mut. Ins. Co. v. Commercial
Bank, 479 S.E.2d 524, 527 (S.C. Ct. App. 1996); see also Chacon
v. American Family Mut. Ins. Co., 788 P.2d 748, 751 (Colo. 1990) (disregarding
Republic
Ins. Co. v. Jernigan, 753 P.2d 229 (Colo. 1988)).
¶16
The Policy's intentional acts exclusion
is clear, unambiguous, and consistent with law and public policy. Affirmed.
---
¶17
Justice Zimmerman and Justice Russon
concur in Justice Stewart's opinion.
---
HOWE, Chief Justice, concurring:
¶18
I concur. I agree that the policy's
intentional acts exclusion is unambiguous and does not violate our law
or public policy. However, I believe the conclusion we have reached today,
although legally correct, burdens Ms. Crook with an unjust result.
¶19
I write to suggest that our legislature
consider enacting legislation which would allow innocent co-insureds to
recover under insurance policies despite the felonious intentional acts
of spouses or other co-insureds. Many states have already created an "innocent
spouse" rule of some variation. Nebraska, North Dakota, and Washington
have recently enacted statutes which allow an "innocent spouse" to recover
where the intentional act of a co-insured is part of a pattern of domestic
abuse. See Neb. Rev. Stat. Ann. § 44-7406(6) (1998); N.D. Cent.
Code § 26.1-32-04 (1995); Wash Rev. Code § 48.18.550 (1998).
¶20
For example, the Washington statute
cited above allows insurers to exclude coverage for losses caused by the
intentional or fraudulent acts of any insured. However, that exclusion
shall not apply to deny
an insured's otherwise-covered property loss if the property loss is caused
by an act of domestic abuse by another insured under the policy, the insured
claiming property loss files a police report and cooperates with any law
enforcement investigation relating to the act of domestic abuse, and the
insured claiming property loss did not cooperate in or contribute to the
creation of the property loss.
Id. § 48.18.550(3).
---
¶21
Associate Chief Justice Durham concurs
in Chief Justice Howe's concurring opinion.
1. Mr. Crook is not a party on appeal.
2. These courts, however, do not read those words with the insurance policy as a whole but focus narrowly on the ambiguity of the word "an" by examining its definition in various dictionaries. See, e.g., McFarland, 814 F. Supp. at 525-26; Brumley v. Lee, 963 P.2d 1224, 1227-28 (Kan. 1998). Courts holding "an insured" unambiguous read that language with the policy as a whole. See, e.g., Dolcy, 589 A.2d at 316; Chacon, 788 P.2d at 752 (construing phrase "any insured"). We agree with those courts that read "an insured" as we do--with the policy as a whole.
3. The Error opinion did not quote these exclusions, but they are found in the Error appellant's brief before this Court.
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