# FILED March 5, 1997 Cecil W. Crowson Ap pellate Cou rt Clerk IN THE COURT OF AP PEALS OF

TENNESSEE, WESTE RN SECTION AT NASHVILL E

_______________________________________________________ ) RICHARD

E. FINCH , ) Bedford County Circuit Court ) No. 6616 Plaintiff

/Appella nt. ) ) VS. ) C. A. NO. 01A01-9607-CV-00342 ) TENNESSEE FARMERS MUTUAL ) INSURANCE COMPANY , ) ) Defendant/Appellee. ) )

______________________________________________________________________________ From the Circuit Court of Bedford County at Shelbyville. Honorable Lee Russell, Judge
William J. Abernathy, Jr. , LEI TNER, MOFFITT, WI

LL IAMS, DOOL

EY and NAPOLI

TAN, PLL

C, Nashville, Tennessee Attorney for Plain tiff/App ellant.

John T. Bobo , Charles L. Rich , BOBO, HUNT & BO BO, Shelbyville, Tenne ssee Attorneys for D efendant/Appellee.

OPINI ON FIL

ED: REVERSED A ND REMAN DED FARMER, J.

CRAWF ORD, P. J., W.S. (Concur s) HIGHERS, J. : (Concur s)1 The summary judgment was entered September 27, 1993.
2 The policy was or

iginally issued by

TFMIC in 1984.
3 The record indicates that the named insureds purc hased the property

in August 1977. The sellers were mortgag ees of the property
.

This appeal addresses the issue of whether the “innoce

nt co-ins ured doctrine,” first recognized

by our supreme c ourt in Spence v. Allstate Insurance Co. , 883 S.W.2d 586 (Tenn. 1994), should be extended so as to permit the appellant, Richard E. Finch (Finch) to rec over under an insurance policy, issued by the appellee, Tennessee

Farmers Mutual Insura

nce Company (TF

MIC), for loss to propert y held jointly with his co -insure d spouse whose inte

ntional a cts caus ed the los s. The trial court, interpreting Tenness ee case law to disa

llow such r

ecover y pr imarily “on the ba sis of policy considerations,” entered a summary judgment for TFM IC. 1 Finch challenges the corr ectness of that decision. For reasons to be set forth, we re verse and remand.

The following

facts are undisputed: TFMIC rene wed a property owne

rs’ insurance policy to named insureds “Richard E. Finch and wife, Willa I . Finch” for policy period August 1, 1991 to August 1, 1992. 2 The policy insured a 70 acre tract of land with a dwelling house and other farm structures, owned by

the named insur eds as t en an ts by t he en ti re ty, 3 and pers onal prop erty agains tloss by fire. The

limits of liability were $30,000 for the house, $18 ,000 for p ersonal propert y and $15,000 for each chicken barn.

In May 1991, Willa Finch filed fo r divorce and the couple separated in July . On December

27/28, 1991, with the policy in effect, Willa Finch intentionally burned the house and its contents . Finch and his wife were divorced on Mar ch 20, 1992. Pursuant to a property settlement agree ment, approved by the

divorce court, Ms. Finch quitclaimed her inte rest in the subj ect rea

lty to Finch a nd waive d any

interest in insurance proceeds possibly recovered by

Finch as a result of the fire. Finch filed the present action after TFMI C declinedpay

ment of hisclaim bec ause of Ms. Finch’s arson

and the insurance carrier’s interpre tation of “Tennessee La

w regarding innocent spouse claims.”In hiscomp lain t, Finch denies any participation in setting the fire, any prior or concurrent

knowledg e of Ms. Finch’s actions or “any other act or neglect that

led to the house fire.” For answer, TFMIC de

nied all material allegations and asserted the af firmative defense that the4 TFMIC does not d ispute co verag e for the se individ ually owned ite

ms. 5 The matte

r proce eded to f

urther hearing

regar ding App ellant’sclaim tha t he is enti

tled to be subrog ated to the intere sts of the m ortgag ees. Thisissue and the trial court’sruling t

hereon i s not befor e us on ap peal.
6 Ryan , along with the unreported appellate court decisions which the trial court considered, will be discussed in more detail hereinafter. complain t failed t o state a claim up on which r

elief ca n be gr anted. T he parti es stipula

ted that Ms
. Finch intentionally burned the premises; that Mr. Finch timely f iled a proof of loss claim ; that Ms. Finch refused to file a claim for the house fire; and that only two items of

personalty lost in the fire
were ow ne d b y Fi nc h i nd iv id ua ll y, 4 with all other personalty and r

ealty being

owned jointly

by Wi lla and Richard Finch.

The matter was argued before the trial court as a motion for summary judg ment. For purposes of said motion, the cou rt express l y a ssumed tha t Finch w as not per sonally involved in causing the fire. The trial court concluded that TFMI C was entitled to a summar y judgmen t “in regard to the cla ims
. . . r el at ed to jo in tl y ow ne d p ro pe rt y” 5 and held: “[f]ollowing the lead of our
own intermed

iateappella

te court , this trial court concerns itself with the policy considerations rather than the policy lang

uage a nd declines to extend the holding in [ Ryan v. MFA Mutual Insurance Co. , 610 S.W.2d 428 (Tenn. App. 1980)] to jointly owned property .” 6

As not ed, the is su e befor e us is wheth er the t rial c ourt w as corr ect in enteri ng a summary judgment for TFMIC upon finding, as a matter of law, that Finch is not entitled to recover under the in sura

nce p olicy

for l oss to

joint ly owne d propert

y. We begin o ur analysis with a discussion of the “innocent co-insured doctrine” as it pres ent ly exists in Tennessee. The doctrine is defined by our

supreme court in Spence v . Allstate upon noting its original adoption by the court of appeals in Ryan . In refere nce thereto, Spence states:

After conducting an e

xtensive jur

isdictiona l survey of the la w on this issue, [ Ryan ] determined that the traditional rule--in which wrongdoing by an insured ser ved as a complete bar to recovery by an innocent co-insured--h a d been supplanted by a rule allowing the innocent coinsured to re cover if: (1) the policy language gove

rning the ri ghts of an innocent co-insured was ambiguous fr om the standpointof the reasonable person purchasing insurance; and

(2) if the in noce nt co-ins ured cou ld show tha

t he had a

sole or se

parate interest in the pro

perty claimed in the proo f of the lo ss.7 Nor did the court in Ryan have ne ed to cons ider the issue. The

re, the c ourt spec ifically found that the innocent spouse sought recovery “only for items he c laims belong to him.” Ryan , 610 S.W.2d at 437. Spence , 883 S.W.2d at 590-91. Spence upheld the doctrine as set forth in Ryan . Notably, the court
was not directly con

fronted with the issue now before us. There, the only property for

which the innocent co-insur ed sought to colle ct under the polic y w as deter

mined to be

his sole a

nd separ ate pr op er ty. 7 Id . at 593-94.

The following provisions are included in th e policy of insuranc e issued Finch and wife, Willa

by T FMI C:

DEFINITIONS USED THROUGHOUT THIS POLICY

. . . .

“ You ” and “ your ” means the Policyholder named in the Declarations and spouse if living in the same household.

. . . . “Insured Person ” means: (a) you ; (b) your spouse or the rela tives of e ither re siding in your

household; and

. . . .

“ Insured premises ” means: (a) the farm pre

mises or r esidence premises describ ed in declar ations.

. . . . SECTION I

. . . . EXCLU SION S: We do not cov er loss re sulting d irectly or indirectly

from:

. . . . 8. An action by or a

t the direction of an insured person committed withthe inten

t to cause a loss. Thi s exclusion

does not a

pply to loss sustained by an insured person who does not participate in suchaction nor have knowledge of such a ction.

. . . . GENERAL

POLI CY CONDI

TION S A P PLYI

NG TO SECTION I AND SE CT ION II

. . . . 4. Concealm

ent Or F raud This entire policy is void as to the insured , if an insured person has intentiona

lly concealed or misrepr esented any material fact or circumstances relat ing t o this insurance, or acted fraudulently or made false statements relating to this insurance.

It is not disputed that the actions of Willa Finch in burning the insured property were intentiona

l. Loss of this nature is specifically a ddressed in Exclusion 8. Under this provision,
covera ge is notprovided

for loss r esulting directly or indirectly

from such intention al acts a s those of Ms. Finch, except for that “loss sustained by an insuredperson w

ho does no t partici

pate in such action nor have knowledge of such action.” We find the unequivocal language of this “e xception,”
or severa bility clause as it is sometimes referred, to afford covera ge to Mr. Finch if in fact he did not particip atein or have knowledge of hi s former w ife’s actions in burning the property . However, when reading the “Concealment Or F raud” provision, we find a contractual inten t to d eny coverage to both insureds for the fraud ulent acts of “ an insured person. ” This languag e, howev er, mer ely
serves to create an ambiguity in the policy reg arding an innocent co-insured’s rights w hen rea d with the provisi ons under Exclusion 8. As it is well settled that ambiguous provisions of an insurance policy are to be construed again st its drafte r and in favor of the insured, see, e.g ., Tata v. Nichols , 848 S.W.2d 649, 6 50 (Tenn . 1993); Ryan , 610 S.W.2d at 437; we interpret the foregoingpolicy

to
a ffordcoverage to Mr. Finch if in fa ct he did not participate in or have knowledge of h is former wife’s arson.

This does not end our inquiry, howeve r, as we must now determine to what extent
covera ge exists for M

r. Finch . TFMI

C does not d

ispute the

unambig uity of the la

nguag e in Exclusion 8, instead maintaining that the “unambiguous” lang uage is “w holly cons istent with the ‘innocent co-insur ed doctr in e’ if appl ied.” TF

MIC r easons th at from th

e standpo int of the r

easonab le person purchasing insurance, the provision could only

apply to proper ty o wned sole

ly and sepa rately8 As correctly pointed out by Appellant, the doctrine of interspousal tort immunity was later abolished in Davis v. Davis , 657 S.W.2d 753 (Tenn. 1983). by an innocent co-insured because the co- insured intentiona lly cau sing the loss cannot recover his/her interest in the property . To this extent, we cannot agree. We find noth ing in the la nguage under Exclusion 8 to even remotely sug gest a l imit ation on the loss sustained by an innocent c oinsured t o only that prop erty

in which he/she ma

intains a s ole or se

parate interest
. We do not find that a “reasonable person purchasing in sur anc e” w oul d co nst rue th e pr ovi si on i n su ch m ann er. If it was the intent of

TFMIC to limit its cov erage in the way

sugge sted, it co

uld have e asily

done so by using clear and

precise language

to thateffec t. Thus, ins ofar asthe contr act of in surance

itself is co nc er ne d, we co nc lu de th at co ve ra ge ha s n ot be en ex cl ud ed fo r l os s t o j oi nt ly h el d p ro pe rt y.

We must yet determine whe ther there exist overriding concerns of pub lic policy which warrant deny

ing recovery

for su ch lo ss . Q ui te ob vi ou sl y, the major concerns in this regard
are collusion by the co-insureds to per petrate a f ra ud upon the insurance company and preventing
o ne from profiting indirectly from that which he is not entitled to profit directly
. The trial cour t reviewed three un reporte d opinions r

endere d by

the cour t of appe als since Ryan to conclude that the innocent co-insured doctrinedoes not e xtend to jo in tl y he ld pr op er ty o n g ro un ds of pu bl ic po li cy. The first of s uch case s, Tennessee Farmers Mutual Insurance Co. v. Billings , 6 TAM 36-8 (Tenn. App. filed July 22, 1981), aff’d 7 TAM 40-4, C.R.O., refused to extend the doctrinefor the policy
reasons expressed above, noting also the common law rule of unity of husband and wife which, according to the court, would render a n insurance carrier’s subrog ated cause of action “meaningless.” 8

The second case, Snowden v. St ate Farm Fire & Casualty Co. , 8 TAM 29-17 (Tenn. App. filed June 8, 1983), inv olves a similar factual pattern to the case at bar. Ther e, husband and wi fe own ed th e i ns ur ed ho me as te na nt s b y th e e nt ir et y; a ll pe rs on al pr op er ty w as ow ne d j oi nt ly. The couple separated prior to a fire to their home, whic h a jury deter

m in ed was the result of the husband’s arson, and were divorce d subsequent thereto. Unlike the present case, however , the divorce decree awarded the inn o cent wife only one -half of the fire insurance proceeds. Both husband and wife filed suit to recover under the policy . In deny ing recovery , the court cited Billings for its public policy conce

rns, but al so reli ed upon the expressprovision s of the in surance contract tosupport

its decisi on. The c ourt re ferred to the policy ’s “concealment or fraud” provision, which voided the entire policy f or “any” insured’s intentional concealment or misrepresentation of any material fact relating to the insurance. Th e c ou rt fo un d t ha t h us ba nd ’s ar so n f ol lo we d b y a claim for recovery was tantamount to fraud as contemplated by the contract.

Fi na ll y, in Adams v. Aetna Casualty & Surety Co. , 10 TAM 52-2 (Tenn. App. filed Nov. 19, 1985) (Franks, J., dissenting), appeal denied , the innocent wife was denied recove ry fo r loss to the couple’s home owned as tenants by the entirety. The

c ourt cited Ryan along with the unreported

decisions above-mentioned, underscoring the position that to all ow such r ecover y w ould encourage the practice of fraud upon the insurance car rier.

In a dissenting opinion to Ada ms , Judge Fr anks recognized a trend among othe r jurisdict i ons, as did t he trial c ourt in the present case, to ward all owing in nocent c o-insure ds to
recover for the loss of jointly owned property. I

n rejecting the major

ity’ s view, Judg e Fran

ks states:

The insuranc e comp an y c ontends, a nd the maj ority

agree s, that abandonment of the tra dition al rule will encourage collusion betweenhusband a

nd wife to

perpetu ate fra

ud upon ins urors. Allowing a truly innocent insured spouse to recover wo uld no t encou rage fraud. As one court has noted, recover y shoul d only

be allowed“where . . . there

has been no f

inding th at the insu

red directly set the fi re, had knowl edge and authorized its setting or later ratified the wrongful act.” St. Paul Fire andMarine Ins. Co. v. Molloy , 433 A.2d 113 5 (Md. App. 1981). Proof of fraud on the part of the coinsured would den

y the co-in sured recovery ; absent such proof, the public policy rationale implicit in the “old dominant rule” disappea rs.
Judge Franks noted also that the major

ity’ s ruling , in effect, holds the innocent s pouse re sponsible for the other spouse’scrime

and, thus, “contra

venes the gener al rule th at a spous e is not vic ariously responsible for the criminal acts of his or her spouse.”

The dissent makes specific reference to a decision of the Appellate Division of the New Jersey

Superior Court, Howell v. Ohio Casualty Insurance Co. , 327 A.2d 240 ( N.J. Super. Ct. App. Div. 1974). Howell

allows an innocent wife to recover under a homeowner’s insurance policy for lo ss to jointly held personal property destroyed by

the husband’s arson. The insured premises9 Howell indicates that the insuror paid for repairs to the burned home because an innocent mortgagee was involved, but had re fused to pay the wife for personal property loss. Howell , 327 A.2d at 241. was owned by the husband a nd wife as tenants by

the entiret y. 9 T he policy designated the named insured as the hus band “a nd/or” the wife. A

fter set ting the fire, the husb and committed suicide. Howell , 327 A.2d at 241.

Howell reasonsas follow s:

We hold that the trial court correctly determinedthat the fraud of the husba nd was no bar to recovery under the policy by

the innocent wife. Ho wever, we rea

ch this result irrespective of whether the interests of the wife and husband in the tenancy by the entirety , in the personal property , or in the contract rights under t he policy are deemed to b e joint or several. The significant factor is that the responsi bility or liability for the fraud - - here, the arson -- is several and separate rather than joint, and the h usband ’s fraud cannot be attributed or imputed to the w ife who is not implicated therein. Ac co rd in gl y, the fraud o f the co-insured husband does not void the policy as to plaintiff wife.

Id
. at 242. Interestingly , Howell found its conclusion “supported” by the terms of the insura nc e po li cy, including what the court considered the ambiguous phrase “and/or,” but did not deem such provisions controlling. Id
.

An identica

l question as that no w confr

onting uswas pose d to the Supr emeCourt of Delaware in Steigler v. Insurance Co. of North America , 38 4 A. 2d 3 98, 399 (De l. 197 8). In a case of first impression, the court considered the tradition al arguments ad va nc ed fo r d en yin g r ec ov er y: the “legal oneness” of the husband and wife relationship and the unity and indivisibility of

propert y held by tenants by

the entireties. Steigler , 384 A.2d at 400. The court acknowledged that rec overy is gener ally denie d on the grou nd that spouses who hold joint interests in insured property ha ve a joint obligat

ion to ref rain fro m fraud a

nd, thus, the fra

ud of one necessa rily becomes the fraud of the other. Steiglerinstead c

hose totreat the matter as purely “a contract dispute,” focusing on the law pertaining thereto rather than that which g overns “land titles.” Id
. at 399-400. Relying then upon principles of contract law, the court determined the policy ’s fra ud provision ambiguous and construed it in favor of the innocent insured to afford cove rage. The court held:10 The fraud provision in the policy rendered the contract void “in case of any fr aud . . . by the insured relating thereto.” Steigler , 384 A.2d at 399 n. 1. It was not disputed that the husband committed fraud within the meaning of the policy by deliberate

ly burning the home
. Id . at 399. In our judgmen

t, the con tract in t his case can and should be r

ead to accord with the reasonable expectations of an ordinary purchaser, that is, [the innocent spouse] had an interest in the property , the policy namedher without qualification as one of the persons insured and she should not be barred from recovering under the policy by

the fraud of the other co-tena nt.

Id
. at 401. 10 The court described the “oneness” the oryurged by the defendant carrier as ra ther “quaint”in modern

day and felt it overri dden by

other “p rinciple s at stake. ” Id . One being the general rule that a spouse is not

vicariously liable for

the criminal

acts of th e other m erely because of the existence of the marital relationship. Id . at 401-02. Thus, Steiglerp refer red to align itself with the reasoning of Howell , finding it “to represent both a more modern ana lysis of the problem
a nd to produce a fairer result.” Id . at 402. Steiglerpermitted a recovery for the innocent wife of one-half of the damages within policy limits, inasmuch as the rights of the husband and wife were viewed as separate under the contra ct. Id
.

A like dec ision was r

endere d by

th e Supreme C ourt of Texas in Kulubis v. Texas Farm Bureau Underwriters Insurance Co. , 706 S.W.2d 953 (Tex. 1986). There, the court declined to follow prior decision to hold that the illegal de struct ion of jointly owned propertyby one coinsured does not bar recovery under the insurance policy by an innocent c o-insured. Kulubis , 706 S.W.2d at 955. The court obs erved th at prior r ule disall owing su ch reco very was pre mised on pu

blic poli cy that a wrongdoer not benefit from his wrong doing and on the notion that the innocent co insured was mutually obligated unde r the insurance contract. Id . However, in examining the various other e xpressed policy considerations -- prevention of fraud upon the insurance company ; prev entio n of unjust enrichment by the insuranc e company ; refusa l to impute the criminal acts of the wrongdoer to an innoce

nt victim; and requiring an innocent co-insured to recover based up on his/her

reasona ble expectations -- Kulubis concluded that the se conce rns are best protect ed by allowing recove ry to the innocent co-insured if the trial court determines that he/she is indeed innocent. Id
. Kulubis reasons :

A trial cou

rt is unique

ly s ituated to

make the determination of the coinsured’s inn ocence , and, unless there is a finding of lack of innocence, the co-insured shall be permitted to rec over.11 Liggett noted that such was an impossibility there, as the guilty spouse wa s dead. Liggett , 426 N.E.2d at 140. Thus, the court chose to award the innocent spouse a “full recovery under the policy”as the “sole surviving insured, owning the entire c laim for indemnification

We hold that th

is test will best protect the insurance company from fraud while assu

ring th at the insurance company will not be unjustly enriched. It w ill also pe rmit an inn ocent victim whose property ha s been destroyed to collect under an insurance policy for a loss rea sonably

expected to be cove

red. Thistest a

lso avo ids the imputation

of crimin al action

to an innoc ent victim
.
Id
. Kulubis allowed the innocent spouse to recover one-half of the stipulated amount of loss. Id
. Recovery for the innocent spouse was also recognized by the Cou rt of Appe als of Indiana in American Eco nomy Insurance Co. v. Ligg ett , 426 N.E .2d 136 (Ind. Ct. App. 1981). That court like

wise disp ensed w ith the “o neness”theory by noting tha

t spouses a

re not held vicariously

liable for torts merely

because of the marital relationship. Liggett , 426 N.E.2d at 138-39. As to the claimed indivisibility of a spousal interest in entireties’ prope rty, the court stated:

The legal fiction of

the entireties’ estate in real estate is designed for the protection of the spouse s and the marriag e. I t was initia

lly designed to prevent the individual creditors of either spouse fr o m taking the marital home. The courts gener ally , and divo

rce cou rts in particular, find no difficulty in dividing an e ntireties estate. I find it a perver sion of thislegal f iction, de signed t

o protec t the sp ous es’ rights and marital property, to use it to destroy

the property r

ights of an innocent spouse. . . . . . . . I t is not an undivided interest in real estate which is an issue in these cases but a

claim or chose in action against an insurance co mp an y; a right to be reimbursed for the lo ss which has been sustained.

Id . at 140.
Liggett

further held that valid public po li cy which prohibits a guilty pa rty from profiting from his wrongdoing is “easily vindicat ed” by barring any recove ry to the “liv

ing” g uilty spouse and permitting the innocent spouse recovery of one-half o f the insured loss within policy limits, and suggested that “[w]here there is some prospect that the guilty party might be

nefit, even in di re ct ly, a careful factual analy sis can be made by the trial court to determine whether that prospect exists and to protect against it.” 11 Id . Finally, the cour tcommented that since the decision renderedagainst the [carrier].” Id . at 144-4 5. The court noted , howeve r, that “ a diffe

rent rule may need to be fashioned where the guilty spouse survives.” Id . at 144. by the State of New Jer sey

in Howell , a majority of the jurisdictions considering the issue as one of first impression had followed or expanded upon its principles. Id . at 143.

We make final observation here of one such ca se cons id ering t he issue o n first impression, McCracken v. Government Employees Insurance Co. , 325 S.E.2d 62 (S.C. 1985), as the decision we r each herein is in accord. I n McCracken , the alternate approaches taken by the jurisdictions consider

ing the i ssue wer

e elucid ated as f

ollows: some courts deny r ecovery where the interes ts in the pro

perty are nons everab le; other s emphasi ze whethe r the oblig ations of

th e co-insure d
as set forth in the insurance contract are joint or sever able (the court cited Ryan here as supporting this position); and a third group focuses upon whether the liability for the fraudulen t a ct can be considered

sep arate o r jo int (

Howell ). McCracken , 325 S.E.2d at 63-64. The South Carolina Supreme Court then concluded that the public policy of its state was not contravened in allowing an innocent spouse to recover inasmuch as “t he uni ty of spouses and the disability of coverture as affecting litigation [had] been abolished,” and held:

We de cl in e t o m ak e a ny d istin ction bet ween pr operty which is he

ld jointly or se ve ra bl y an d h ol d t ha t i n t he ab se nc e o f a ny s tatu te or specific policy lan guage deny

ing coverage to a c o-insured for the arson of another co-insured, the

innocent co-insured shall be entitled to recov er his or

her shar e of the insuranc e proce eds.

Id
. Accord Mc Gory v. Allstate Ins. Co. , 527 So.2d 632 (Miss. 1988). We agree with the holding in McCracken and adopt it as our own.

We are p ersua ded that the better reasoned approach is to permit an innocent coinsured to recov er under

an insura nce policy f

or the los s to jointly ow ned property , provided the specific language of the insuranc e contract do es no t expressly exclude such covera ge so that the
reasona ble person purchasing insurance would expect to be c overed in the eventof prope rty loss caused intentionally by

a co-insured. We note that in the case at bar, the possibility of an indirect benefit to the guilty insured ha s been g reatly min imized by the Finch divorce a nd Ms. Finch’s relinquishment

of any interest in the insur ed pr oper ty or ins urance pr

ocee ds. We

are not u nmindful,however, of the possibility under

other fa ctual situ ations. Ta

king our lead fr om Liggett

and Kulubis , we are of the opinion that this concern can best be addressed by

the trial court in making a factual determination as to the true “innocenc e” of the co-insured. Under those circumstances whe re the potential for deception is clearly found to exist, recovery should be de nied.

The insur ance contract in question does not expressly exclude coverag e to an innocent co-insured

for loss to

jointly held pr op er ty. Thus, it is within the reasonable expectation of Finch that he would be covered under the p olicy for his loss. We hol d that he i s theref ore entitled to
covera ge under

the policy for his loss to jointly owned property , provided his “innocence” is proven in the trial court. Consequently, we remand this matter to the trial court for the taking of evide nce to determine whether Finch is an innocent

co-insured under the policy . If established, the trial court should additionally hear evide nce on damages.

As to the amount of damages recovera ble, we find guidance from the Michigan Court of Appeals in Lewis v. Ho meowners Insura nce Co ., 432 N.W.2d 334 (Mich. Ct. App. 1988), from which we quote as f

ollows:

The sole issue raised in this appeal is a legal one: whether an innocent coinsu red spouse, who holds property as a tenant by the enti rety , may rec over insurance proceeds of more tha n one-half the amount of property da

mage, but not exceeding policy limits, caused by the wrongful acts of the other coinsured spouse. . . . The vast majority

of jurisdi ctions whi ch have address ed this issue, and which have a

llowed an y r ecover y a t all, have held that the innocent spouse ma

y on ly r ecover one-half of the in surance

procee ds, up to the policy limits. See, e .g., Nationwide Mut Fire Ins. Co. v. Pit tma n , 82 N.C.App . 756, 348 S. E.2d 350 ( 1986); Maravich v. Aetna Life & Casua lty Co. , 350 Pa.Super. 392, 504 A.2d 896 (1986); Republic Ins. Co. v. Jernigan , 719 P.2d 331, 334 (Colo.App. 1985); Krupp v. Aetna Life & Casualty Co. , 103 A.D.2d 252, 479 N.Y.S.2d 992 (1984); Fuston v. Nat’l Mut. I ns. Co. , 440 N.E.2d 751 (Ind.App.1982); Commercial Union Ins. Co. v. St ate Farm Fire & Casualty Co. , 546 F.Su

pp. 543 (D .Colo. 1982 ); S t. Paul F ire & Marine Ins. Co. v. Molloy , 291 Md. 139, 433 A.2d 1135 (1981); Lovell v. Rowan Mut. Fire Ins. Co. , 302 N.C. 150, 274 S.E.2d 170 (1981); Economy Fire & Casualty Co. v. Warren , 71 Ill.App.3d 625, 28 Ill.Dec. 194, 390 N.E.2d 361 (1979); Winter v. Aetna Casualty & Surety Co. , 96 Misc.2d 49 7, 409 N.Y .S.2d 85 (1 978); Steiglerv. Ins. Co. of North America , 384 A.2d 398 (Del., 1978). . . . Un fo rt un at el y, most of the ab ove- cited ca ses, while adequa tely expla ining why a

n innocent coinsured should not be precluded from any rec overy, have

been deficient in explaining why12Lewis mentions Liggett as the exception in allowing the innocent co-insured’s recove ry of the wh ole of the

insuranc e proce eds, but c oncludes , as does t his Court, t

hat Liggett’s ruling on the issue is limited on its facts. See Lewis , 432 N.W.2d at 337.

the recove

ry should be limited to one-half the property damage (or the amount of the pol icy , whichever is less). However, in Molloy, supra , the Maryland Court of Appe als gave the following expl anation, whic h we find persuasive:

“Sin ce ‘[w]e have regarded the rig hts of husband and wife

[to be] sepa

rate under the contr act,

. . . both lo gic and justice require that the amount recove rable be likewise allocated,’ so t hat the innocent spou se be compensated for one-half the damages withinthe limits of the policy. Steigler, supra , 384 A.2d at 402. Permitting recovery of more would necessitate reliance on the ‘oneness’ le gal fiction of marita

l proper ty w hich we r

ejecte d in determining that the p arties he re enjoy and assum

e seve ral, not joint, c ontract ual rights and obl

igation s. Moreover, an award greater than one-hal f would allow the innocent spous e t o recove r in exces s of that to which sh e would be entitled upon severance of the tenancy by the e nt irety, whether

by divorce or

other action of the parties.” 291Md. 153-154, 433 A
. 2d 1135.

. . . .

. . . we believe the better ru le is that an innocent coinsured spouse, who owns property a s a tenant by the e ntirety, may

recover one-half the am ount of the prope rty damage (not to exceedthe policy limits) caused by the

fire deliberately

set by the

other co insured spouse.

Lewis , 432 N.W.2d at 3 35-37 (footnotes omitted) (some citations omitted). 12 We agree with the result reached in Lewis and conc lu de that in the event damages are aw arded by the trial court, the amount should be limit

ed to one- half of th

e proper ty lo ss within po licy

limits.

The judgment of the trial court is reversed and t his cause remanded for further procee dings as hereinabove set forth. Costs are assessed against the appellee, for which execution
ma y is su e i f n ec es sa ry.

___________________________________ FAR MER , J.

______________________________CRAWFORD, P.J., W.S. (Conc urs)

______________________________ HIG HERS, J. (Conc

urs)