Summary
denying coverage to innocent business partner whose co-partner committed arson where policy excluded coverage for any criminal act by "any insured"
Summary of this case from American Economy Insurance v. Camera Mart, Inc.Opinion
No. 87-255
Opinion delivered January 19, 1988 [Rehearing denied February 22, 1988.]
Purtle J., would grant rehearing.
INSURANCE — EXCLUSION PROVISION PREVENTED RECOVERY WHERE NAMED INSURED SET THE FIRE. — Where the insurance policy excluded from coverage any loss caused by "[a]ny fraudulent, dishonest, or criminal act done by or at the instigation of any insured, partner or joint adventurer in or of any insured . . ." appellant could not recover under the policy for the damage done by fire to his motel since his partner, the named insured, was found guilty of arson.
Appeal from Faulkner Chancery Court; Roger Logan, Chancellor; affirmed.
Hankins, Capps, Hicks Madden, by: Stuart W. Hankins, Sherry S. Means, for appellant.
Matthews Sanders, for appellee.
This case involves the interpretation of the exclusionary language of an insurance policy. The appellant, James Bryan, and Jack Hill entered into an oral partnership agreement in 1982 for the purse of operating the Townhouse Motel and Restaurant in Conway, Arkansas, and the King's Inn Best Western in Russellville, Arkansas. In 1985 Hill procured insurance from the appellee, Employers National Insurance Corporation ("Employers National"), to cover both the Townhouse Motel and King's Inn Best Western. The named insured under the policy was Jack Hill d/b/a Townhouse Motel and King's Inn Best Western. One day after the procurement of the policy the Townhouse Motel was damaged by fire. Subsequently, Hill was convicted of arson of the insured premises. Bryan was not involved in the crime.
In 1987 Bryan filed a third-party complaint and petition for declaratory judgment alleging that he was entitled to a portion of the proceeds of the policy. Employers National responded by filing a motion for summary judgment. In granting summary judgment, the trial court found that Bryan was not entitled to the insurance policy proceeds for three reasons: (1) he was not an insured under the policy, (2) Jack Hill committed arson of the insured property and, therefore, Bryan could not recover as an innocent co-partner as a matter of Arkansas law, and (3) the language of the policy specifically barred recovery. Bryan contends that the trial court erred in its findings. We find that the exclusionary provisions of the policy prohibit his recovery. Accordingly, we do not address the other issues on appeal.
The Employers National insurance policy issued to Jack Hill provides in pertinent part as follows:
VI. Exclusions.
A. This policy does not insure under this form against loss caused by:
10. Any fraudulent, dishonest, or criminal act done by or at the instigation of any insured, partner or joint adventurer in or of any insured. . . .
The explicit language of the policy precludes recovery if any insured commits a criminal act. Since Jack Hill, a named insured, was found guilty of arson, Bryan cannot recover. The trial court properly rendered summary judgment as there was no genuine issue of material fact for trial. Terry v. Taylor, 293 Ark. 237, 737 S.W.2d 437 (1987).
Affirmed.
PURTLE, J., dissents.
The language in the insurance policy relied upon by the majority does not "preclude recovery if any insured commits a criminal act." The language is designed to prevent any insured from collecting for a loss resulting by his "fraudulent, dishonest, or criminal act" or for loss resulting from such acts done "at the instigation" of such insured. This language was not intended to give the insurance company an excuse from paying a loss to an innocent insured even though another insured intentionally caused the loss.
The majority has adopted the "guilt by association" doctrine which certainly is not consistent with our prior decisions or public policy. For instance, under the majority's decision a couple owning an insured dwelling could divorce and one spouse could intentionally burn down the dwelling for spite and thereby deny the innocent spouse the right of recovery. Or, a co-tenant with criminal intent could burn property co-owned by an innocent party in order to abandon him without any hope of recovery.
In the case of Mechanic's Insurance Company v. Inter-Southern Life Insurance Company, 184 Ark. 625, 43 S.W.2d 81 (1931), we decided that the criminal act of a co-owner did not defeat the claim of an innocent owner. In Mechanics the landlord and the tenant had entered into an oral agreement whereby the tenant would farm rice on land owned by the landlord. The threshed rice was stored in a building which was destroyed by fire. After the tenant signed a proof of loss, he was indicted for arson and the fire insurance company refused to pay the loss. The landlord filed suit alleging that he did not know the origin of the fire and that the fire did not occur by any violations on his part of the provisions of the policy. The insuror denied liability claiming that it did not have notice of the landlord and tenant relationship and further that the tenant moved the rice from the building, burned the building, and then falsely swore to the proof of loss. The insurance company argued that the landlord and tenant were partners and that the tenant's act of arson barred the landlord's recovery under the policy. The thrust of the holding in Mechanics was that criminal conduct by a co-owner will not defeat the claim of an innocent co-owner.
We have also previously held that a former spouse who purchases fire insurance in his or her own name cannot deprive the other spouse of a pro rata recovery paid by an insurance company. In Brown v. Brown, 263 Ark. 189, 563 S.W.2d 444 (1978), we upheld the trial court's finding that a fire insurance policy obtained by the husband which did not name the wife as an insured, inured to the benefit of the wife. We specifically reaffirmed that decision in Caffey v. Caffey, 274 Ark. 335, 625 S.W.2d 444 (1981), where the divorced wife purchased and paid for an insurance policy without naming her former husband, a tenant in common. We held that the policy inured to the benefit of both parties. The rationale for both Brown and Caffey was that tenants in common or joint tenants have a fiduciary relationship with each other. See also Hendricks v. Hendricks, 256 Ark. 289, 506 S.W.2d 848 (1974).
The trial court granted summary judgment upon the pleadings and agreement of counsel. It is my opinion that there were genuine issues of fact to be determined. Therefore, summary judgment was improper.
In any event the majority clearly misinterprets the exclusionary language in the policy. I would reverse and remand for further proceedings.