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Innocent Spouse, Family Home, Arson, Insurance Coverage


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3/6/2015
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A Knoxville story on KNIA/KRLA Radio reports someone charged with first-degree arson for what appeared to be intentionally burning down their own home.

Sheriff: Man tells woman get kids out, he's burning house down, KCCI

This story brings back memories from 1989 when I represented a family whose home was set on fire by a child who simply needed his family to move so the kids at school would stop picking on him. [Can you imagine?] We settled that case just before Vance v. Pekin Insurance Co., 457 N.W.2d 589, 591 (Iowa 1990) was decided and after I read the Vance decision I breathed a sigh of relief. According to the decision in the Vance case the husband was convicted of second-degree arson for setting fire to the couple’s residence. There was no evidence the wife was implicated in the arson, but under the policy she met the definition of an “insured” and the court decided against her and in favor of the insurance company.

Here is a quote from the Iowa Supreme Court’s decision in Vance.

 “The question whether arson by one coinsured spouse bars the innocent coinsured spouse from recovering under an insurance policy is one of first impression in this state. Courts have developed three distinct theories of recovery to resolve the question. Several years ago one writer critically examined those theories and the rationales for them. See, generally, The Problem of the Innocent Coinsured Spouse: Three Theories of Recovery, 17 Val.U.L.Rev. 849 (1983) [hereinafter Innocent Coinsured Spouse].”

Vance v. Pekin Ins. Co., 457 N.W.2d 589 (Iowa, 1990)

When faced with deciding whether the innocent spouse can recover under the homeowner’s policy, there are three main approaches courts take across the United States might take. As for the innocent spouse in Vance the bottom line in Iowa was that the innocent spouse simply would not be allowed to recover when the policy language excludes coverage for intentional losses by or at the direction of an “insured”, which in most marriages each spouse is an insured. But wait because there is better news to come later in this blog.

The Court later described the Vance holding this way: “In Vance v. Pekin Insurance Company, we held that where one spouse had intentionally set fire to the family home, an innocent coinsured spouse could not recover under a homeowner’s policy which clearly and unequivocally excluded coverage from losses resulting from the intentional acts of "an insured." 457 N.W.2d at 593 (emphasis added).

A provision of the policy provides that [coverage is excluded for] intentional loss ... committed by or at the direction of an insured.

Under a contract analysis, we conclude for reasons that follow that Susan is barred from recovering under the policy."

Pretty much the innocent spouse recovered nothing, according to the holding in Vance.

Vance v. Pekin Ins. Co., 457 N.W.2d 589, 593 (Iowa, 1990)

Marching Beanie Babies

But then came the Sager case which turned on Iowa Code section 515.138 requiring all fire polices in this state to conform to the standard form provisions for fire polices. Here is what this means. If the insurance companies issue a policy that is different than the standard ISO policy terms the policy can be rewritten (interpreted) by the court conform to the standard ISO language. And in Sager when the court researched the case law in other states it found this language did in fact allow the innocent spouse to recover.

What did you say? You mean Sager gets paid! Yahoo! Yeah, take a look at page 13 of the Northwest opinion. You go for it Ramona!

Ramona’s lawyers did some fine legal work and should be commended. They drove the last nail in the insurance company’s coffin with their 515.138 analysis. Ramona had creative attorneys representing her.

As for why the law would allow this, there is a reason why we refer to it as ‘the practice of law’; and Judge Streit wrote eloquently explaining to anyone willing to listen.

“Farm Bureau's argument also ignores the organic nature of law: the law develops over time, in no small part due to the ability of lawyers to develop new arguments. Unfortunately, the best arguments are not marshaled before us in every case. We do not, then, "overrule" Vance, because in that case we were not presented with the statutory argument. Instead, our decision today simply "adds a second step to the contractual analysis." Watson, 566 N.W.2d at 689 (citations omitted).

We agree with this assessment, and hold the policy, insofar as it bars recovery to an innocent coinsured spouse, is not the substantial equivalent of Iowa Code section 515.138.”

I miss the wit and the wisdom of Judge Streit. He was one of Iowa’s greatest jurists.

Sager v. Farm Bureau Mut. Ins. Co., 680 N.W.2d 8 (Iowa, 2004) Alleged intentional act was an attempt to torch the wife’s Beanie Babies collection. Try sissors next time.

Caveat: There may be other decisions that affect whether you can or cannot recover when you are the innocent spouse in an arson case involving your family home. Please seek legal advice because the law cited in this blog is only a start, not the end.

If we can help you call us, we work on a contingent fee and never charge you to find out if you have a case we are willing to take.



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