Indiana Court of Appeals: Don’t Go Chasin’ Waterfalls, Please Stick to the Policy Interpretation You’re Used To…

(I know I’m dating myself here with a TLC joke, but I couldn’t resist.)

Anyway, last week, the Indiana Court of Appeals affirmed summary judgment in favor of the insurer in Deeter v. Indiana Farmers Mutual Insurance Company (the opinion is below). So how does Left Eye Lopes burning down Andre Rison’s house fit into this? Read on.

Rick and Callie Deeter owned a home in Pierceton, Indiana, which was covered by a Farmers’ homeowners policy. Not surprisingly, the policy had an “intentional acts” exclusion that said “‘We’ do not pay for loss which results from an act committed by or at the direction of an ‘insured’ and with the intent to cause a loss.” “Insured,” in turn, was defined as “you,” and “you” means “the person or persons named as the insured on the ‘Declarations’. If ‘you’ are an individual, this includes ‘your’ spouse if a resident of ‘your’ household.” Rick and Callie were listed on the declarations page, so they were both insureds.

One day in March 2011, while Rick was at work, Callie’s niece came to tell her that Rick was having an affair. That set Callie off; she started breaking things, called Rick to tell him she was “tearing up the house,” and then she set a fire in the living room. When the police arrived, Callie admitted to setting the fire. She later pleaded guilty to criminal mischief.

Farmers refused to pay for the damage on the house because–duh–arson. Rick sued, and the trial court granted summary judgment to Farmers because of the intentional act exclusion.

On appeal, Rick argued the intentional acts exclusion was ambiguous because “a reasonable person might interpret that clause to mean that Farmers will not cover loss that results from an intentional act that is intended to cause a loss that will result in property damage or the intent to cause a loss to recover from the insurance policy” and asserted that “while Callie intended to damage their home, she was not motivated to do so because she wanted to recover the proceeds from the insurance policy.” That argument was quickly rejected because the exclusion was clear and unambiguous.

Rick’s other argument was that because he is an “innocent co-insured spouse,” he should not be barred from recovery. In support, he cited a couple of early-1980s Indiana cases that held that “in the absence of any language in the policy that could ‘support an exclusion,’ we would fulfill an ‘innocent co-insured’s’ reasonable expectation to be indemnified for loss,” and that “where an insurance company had not provided an explicit exclusion for intentional loss by a co-insured, it was possible for the innocent spouse to recover.”

That argument fared no better because the Court of Appeals held that “when an insurance company has included an explicit exclusion in its policy to cover loss that results from an intentional act by a co-insured, we will respect the parties’ right to contract and enforce that exclusion.” Since both Rick and Callie were listed as insureds and the policy expressly didn’t cover losses intentionally caused by an insured, Rick was out of luck. So, to the extent those older cases left open the door, the Court of Appeals slammed it shut–presumably in the same way that Callie slammed some doors before exiting the burning house.

(And, yes, I know that the Talking Heads’ “Burning Down the House” would have probably fit much better with this whole post, but I’m already committed to the bit…)

About Brian Jones

I represent clients in all aspects of business litigation, but focus my practice on complex litigation and arbitration matters concerning insurance and reinsurance, antitrust, class actions, securities, real estate disputes, and contract matters. I am the co-chair of the Bose McKinney & Evans Insurance Group. I was listed in the 2017 and 2016 "Best Lawyers in America" for Insurance Coverage and named a "Rising Star" in Insurance Coverage by Super Lawyers in Indiana in 2014. I was also named a "Rising Star" in Business Litigation by Super Lawyers in Indiana in 2013 and 2012, and a 2010 “Rising Star” in Business Litigation in Texas. I am a member of the State Bars of Indiana and Texas, the Defense Research Institute, a former member of the Pro Bono College of the State Bar of Texas, and I am licensed to practice before all state courts in Indiana and Texas, as well as all federal courts in Indiana, the Northern, Western, and Southern Districts of Texas, the Northern District of Illinois, and the United States Courts of Appeals for the Fifth, Seventh, and Eleventh Circuits. I received my bachelor’s degree, cum laude, in political science and my master’s degree in teaching from Trinity University, where I was elected to Phi Beta Kappa. I received my doctor of jurisprudence degree from the University of Texas School of Law, where I was the Director of Communications for the Legal Research Board and a member of the Phi Delta Phi Honor Society. Before attending law school, I taught high school geography, government and economics in San Antonio, Texas.
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