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# United States Court of Appeals For the Seventh Circuit

____________________ No. 16

- 3203

B ARBARA S TREIT and
W ESLEY S TREIT , Plaintiff s

- Appellees
,

v.

M ETROPOLITAN C ASUALTY I NSURANCE C OMPANY , Defendant

- Appellant

.

____________________ Appeal from the U nited States District Court for the Northern District of Illinois
, Eastern Division. No. 15 cv 2461

— Sharon Johnson Coleman
, Judge

.

____________________
A RGUED D ECEMBER 6, 2016

— D ECIDED J ULY 17, 2017

____________________

Before W OOD , Chief Judge
, R OVNER and S YKES , Circuit Judges

. S YKES , Circuit Judge

. On August 5, 2014, Wesley Streit Jr. set fire to the house where he lived with his parents, Barbara and Wesley Streit . At the time of the fire , the Streits’ home was insured by Metropolitan Insurance Company. Under the Streits’ insurance policy, Wesley Jr.’s act of arson triggered a2 No. 16

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contractual exclusion of coverage. T he Streits still submitted a claim, but pursuant to the polic y’s language
, Metropolitan refused to cover the fire damage

. Barbara and Wesley Streit sued, claiming that the exclusion in the Metropoli tan p olicy was inconsistent with the Illinois Standard Fire Policy. The district court granted partial summary judgment in favor of the Streits, ruling that the Metropolitan policy impermissibly narrowed the coverage mandated by the Illinois Stand ard Fire Policy

. We affirm

. The Illinois Standard Fire Policy sets a minimum threshold for what fir e

- insurance policies must

cov er, and Metropolitan failed to provide that coverage. I. Background Metropolitan Casualty Insurance Company issued a homeowner ’ s insurance policy to Barbara and Wesley Streit that was effective from November 25, 2013
, to November 25, 2014. The policy insured the Streits’ home against risk of fire damage but contained an exclusion for losses arising from intentional actions by the policy holders.

The ex cluded events are listed below:

A. Intentional Loss , meaning any loss arising out of any intentional or criminal act commi tted:
1. b y you or at your direction; and 2. with the intent to cause a loss. This exclusion applies regardless of whether
you are actually charged with or convicted of a
crime.
In the event of such loss, no one defined as you

or your is entitled to coverage, even people d e-No. 16

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fined as you or your who did not commit or conspire to commit the act causing the loss. The policy goes on to define “you” and “your” as: [T]he person or persons named in the Declar ations and if a residen t of the same household: A. the spouse of such person or persons; B. the relatives of either; or C. any other person under the age of twenty

one in the care of any of the above

. On August 5, 2014, We sley Jr. committed an intentional
act , which caused a los s, by se t t ing fire to his parent s ’ home. (He has since pleaded guilty to a charge of aggravated

arson. ) B ecause he is the son of Barbara and Wesley and resided in their household at the time of the fire
, Wesley Jr. was a “you” or “your” as defined by the insurance policy. So when the Streits submitted a claim to Metropolitan under the policy for losses and damages resulting from the arson, Metropolitan refused to pay.

The Streits sued Metropolitan in the Northern District of Illinois based on diversity ju risdiction. See 28 U.S.C. § 1332. Although the insurance policy itself excludes coverage for their son’s intentional act, the Streits argued that such an exclusion conflicts with the Illinois Standard Fire Policy

— a standard baseline policy promulgated by t he Illinois Dire ctor of Insurance pursuant to statutory authority

. The Streits moved for partial summary judgment
, which the district judge granted

. The judge held that the Metropolitan policy must conf orm to the Standard Fire Policy b ut that a material
qu estion of fact remained as to whether the Streits played any role in directing or consenting to the ir son’s arson. The4 No. 16

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Streits and Metropolitan then stipulated that the Streits were innocent of any wrongdoing related to the fire
, a nd based on that stipulat ion, the court entered judgment in favor of the Streits in the amount of $235,000. Metropolitan appeal ed

. II. Analysis

Under Illinois law the Director of Insurance is required to “promulgate such rules and regulations as may be necessary to effect uniformity in all basic policies of fire and lightning insurance issued in this State, to the end that there be co ncurrency of contract where two or more companies insure the same risk.” 215 I LL

. C OMP

. S TAT

. 5/397 (1978). Pursuant to this authority, the Director of Insurance promulgated the Illinois Standard Fire Policy.

The Standard Fire Policy insures “aga inst all direct loss by fire

... , except a s hereinafter provided.” Standard Fire Policy
, at 1, http://insurance.illinois.gov/prop_cas_is3_ checklists /statutes/StandardFirePolicy.pdf (capitalization omitted) (last visited July 1 7 , 2017)

. The Policy provides the following express limitations on cove rage: This Company shall not be liable for loss by fire or other perils insured against in this pol icy caused, directly or indirectly by: (a) enemy attack by armed forces, including action taken by military, naval or air forces in resisting an actual or an immediately impending enemy a ttack; (b) invasion; (c) insurrection; (d) rebellion; (e) revolution; (f) civil war; (g) usurped power; (h) order of any civil authority except acts of destruction at the time of and for the purpose of preventing the spread o f fire, provided thatNo. 16

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such fire did not originate from any of the pe rils excluded by this policy; (i) neglect of the i nsured to use all reasonable means to save and preserve the property at and after a loss, or when the property is endangered by fire in
nei ghboring premises; (j) nor shall this Co mpany be liable for loss by theft.

Id. at 2, lines 11

– 24.

The Standard Fire Policy also lists conditions that su spend insurance coverage. These include losses occurring (a) while the hazard is increased by any means within the control or knowledge of the insured;

or (b) while a described building, whether i ntended for occupancy by owner or tenant, is vacant or unoccupied beyond a period of sixty consecutive days; or (c) as a result of explosion or riot, unless fire ensue, and in that event for loss by fire only.

Id. at 2, lines 31

– 37. Though the Illinois Supreme Court has yet to address the question, both the statutory text and Illinois appellate courts make clear that in the event of a conflict between an insu rer’s policy and the Standard Fire Policy
, the latter controls

. The Director of Insurance is required by statute to promu lgate rules and regulations “t o effect uniformity” among fire

insurance policies and to ensur e “that there be concurrency of contract.” § 397. “R ules and regulations promulgated pursuant to authority delegated by specific provisions of the Insurance Code have the force of statute.” Lundquist v.6 No. 16

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Allstate Ins. Co. , 732 N.E.2d 627, 630 (Ill. App. Ct. 2000) (citing Margo lin v. Pub. Mut. Fire Ins. Co. , 281 N.E.2d 728, 733 (Ill. App. Ct. 1972 ) ); c f. Williams v. N ew York Cent. R. R. Co.
, 84 N.E.2d 399, 403 (Ill. 1949) (“The rules adopted by the Interstate Commerce Commission in the exercise of its authorit y to set standards of equipment are an integral part of the act and have the force of the statute.”). Furthermore
, “[a]ll policies written in th e State of Illinois must conform to the requirem ents of the Standard Policy.” Lundquist
, 732 N.E.2d at 630 (citing I LL

. A DM IN

. C ODE tit

. 50, § 2301.100 (196 1 ) ); s ee also D’Agostino v. #7 Zimmie’s, Inc. , 77 F. Supp. 3d 719, 727 (N.D. Ill. 2014) (“[T]he [Illinois Administrative] Code provisions can clarify statutory law

... .”).

The coverage provi ded by the Metropolitan p olicy fails to conform to that required by the Standard Fire Policy. Under the Metropolitan policy, an intentional loss caused by
any insured party suspends coverage for all insured pa rties

— even those who were innocent of any wrong doing. By contrast, the Standard Fire Policy suspends coverage if “the hazard is increased by any means within the control or knowledge of the insured.” Standard Fire Policy , at 2, lines 31

– 32 (emphasis added)

. The term “the insured” is not defined in the Standard Fire Policy. But as noted by many states interpreting ident ical language, the inclusion of the word “the” as opposed to “an” serves as a limitation. See, e.g., Osbon v. Nat’ l Union Fire Ins. Co. , 632 So. 2d 1158, 1159

– 60 (La. 1994) ( “[T]he phrase ‘the insured’ refers to a specific insured, namely, the insured who (1) is responsible for causing the loss and (2) is seeking to recover under the policy.” )

. If one insured party commits an intentional harm but another insured party is innocent ofNo. 16

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any wr ongdoing, then the insurance co verage is suspended only as to the insured who caused the loss. An innocent coinsured may still recover. See Icenhour v. Cont’l Ins. Co
., 365 F. Supp. 2d 743 , 751 (S.D. W. Va. 2004) (“The Standard Policy exclusion, as constru ed, permits an innocent co

insured to recover policy proceeds even when a fellow insured engages in arson that destroys the insured property and premises.”) ; Century

- Nat’ l Ins. Co. v. Garcia , 246 P.3d 621,
624 (Cal. 2011) (explaining that identical languag e found in California’s Standard Policy “protect[s] the ability of inn ocent insureds to recover for their fire losses despite neglec tful or intentional acts of a coinsured); Trinity Universal Ins. Co. v. Kirsling , 73 P.3d 102 , 106 (Idaho 2003) (“The great weight of persuasive authority shows that courts ha ve found language referring to ‘ the insured,’ such as that found in the standard policy exemptions, provides coverage to an inn ocent co

- insured.”) ; Nangle v. Farmers Ins. Co. of Ariz

. , 73 P.3d
1252 , 1257 (Ariz. Ct. App. 2003) (“The increased hazard provision in Arizona’s Standard Policy, by using the term ‘the insured’ rather than ‘any insured’ or ‘an insured,’ evidences an intent to allow recovery by innocent coi nsureds.”) ; see also Volquardson v. Hartfo rd Ins. Co. of the Mi dwest , 647 N.W. 2d 599 , 609 (Neb. 2002); Lane v. Sec. Mut. Ins. Co. , 747 N.E. 2d 1270 , 1272 (N.Y. 2001); Watson v. United Ser v s

. Auto. Ass’n , 566 N.W. 2d 683 , 691 (Minn. 1997); Osbon
, 632 So. 2d at 1160 ; Borman v. State Farm Fire & Cas. C o. , 521 N.W. 2d
266 , 268

– 70 (Mich. 1994) ; Fireman’s Fund Ins. Co. v. Dean
, 441 S.E. 2d 436 , 438 (Ga. Ct. App. 1994)

. Under the Illinois Standard Fire Policy, Wesley Jr.’s i ntentional act of arson suspended insurance coverage only as to him. Barbara and Wesl ey Streit may still recover. Any8 No. 16

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attempt by Metropolitan to proscribe their recovery is invalid and unlawful. Despite Metropolitan ’s contentions to the contrary, t his understanding of the Standard Fire Policy is not jeopardized by any public policy concerns

. True, Illinois p ublic policy holds that a n agreement “to indemnify against willful misconduct would, as a general rule, be

... unenforceable.” Davis v. Commonwealth Edison Co. , 336 N.E.2d 881, 885 (Ill. 1975). This is r ooted in the common

- sense pr inciple best stated by Judge Cardozo: “ [N] o one shall be permitted to take advantage of his own wrong.” Messer smith v. Am

. Fid. Co. , 133 N.E. 432 , 433 (N.Y. 1921). But under the Standard Fire Policy, the insured doe s not recover damages caused by his own w rong

. 1 The Standard Fire P olicy suspends cove rage for loss occurring “while the hazard is increased by any means within the contr ol or knowledge of the insured.” Standard Fire Policy , at 2
, lines 31

– 32

. Both public policy and the Standard Fire Policy prevent an insured party from intentionally destroying his property in order to reap the insurance profits. Barbara and Wesley Streit do not seek insurance coverage for damage caused by their own inte ntional actions but rather for the intentional ac tions of som e-

1 According to Metropolitan, the district court’s understanding of the Standard Fire Policy violates public policy . In support Metropolitan quotes from the district court’s opinion: “ N owhere does the Standard Policy exclude coverage for intentional conduct, including arson, and therefore fires caused by intentional conduct must be covered

... .” But Metropolitan cuts off the most crucial part of that sentence: “ [F] ires caused by intentional conduct must be covered if all other conditions are
met .” One of these “other conditions ” that must be met is that the hazard
may not be caused or increased by the insured.No. 16

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one else

— their son

. This does not conflict with Illinois public policy. Finally
, the Standard Fire Policy’s treatment of innocent coinsureds is not foreclosed by any Illinois statute. The only
statute cited by Metropolitan that even mentions i nnocent insureds provides the following:
(a) N o company issuing a policy of property and casualty insurance may use the fact that an applicant or insured incurred bodily injury as a result of a battery or other violent act commi tted against him or her by a spouse or person in the same household as a sole reason f or a ra ting, underwriting, or claims handling decision. (b) If a policy excludes property coverage for intentional acts, the insurer may not deny payment to an innocent co

- insured who did not cooper ate in or contribute to the creation of the loss if the loss arose out of a pattern of criminal domestic violence and the perpetrator of the loss is criminally prosecuted for the act causing the loss.

... 215 I LL

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. 5/155.22b (2004)

. This statute creates a baseline rule that applies to all types of insurance policies, not just fire insurance

. It pr ovides guidance if a policy excludes coverage for intentional acts. It does not explain when a policy must (or must not) exclude coverage for intentional acts. This question, left open by the statute, is answered by the Standard Fire Policy: The Standard Fire Policy suspends coverage for intentional10 No. 16

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losses only as to the acting insured

. Coverage for innocent insureds like Bar bara and Wesley remains intact

. Because the Metro politan p olicy fails to provide the mi nimum coverage outlined in the Standard Fire Policy, the judgment of the district court is

A FFIRMED

.