Opinion ID: 2382231
Heading Depth: 1
Heading Rank: 4

Heading: The judgment n.o.v. in favor of Donna Maravich

Text: Upon completion of the evidence and before the case went to the jury, a motion for directed verdict was made on behalf of Donna Maravich. In support thereof, it was argued that the insurer had failed to offer evidence of her complicity in the setting of the fire. The trial court denied the motion and instructed the jury that there could be no recovery by either party if David Maravich had intentionally set the fire. In response to a post-trial motion, however, the trial court determined that there had been no evidence of Donna Maravich's complicity and entered judgment n.o.v. in favor of Donna Maravich for one-half of the fire loss. Aetna appealed from the entry of this judgment n.o.v. This is a difficult issue. It is particularly difficult because Donna and David Maravich continue to reside together as husband and wife. Aetna argues that David will have access to any recovery awarded to his wife and, therefore, will benefit from his wrongful act in violation of public policy. As a general rule, whether an innocent co-insured will be allowed to recover on a fire insurance policy after another co-insured has intentionally burned the insured property depends on whether the interests of the co-insureds are joint or severable. See: Annot., Right of Innocent Insured to Recover Under Fire Policy Covering Property Intentionally Burned by Another Insured, 11 A.L.R.4th 1229 (1982). A majority of the courts, but not all, have made this determination, i.e., whether the interests of co-insureds are joint or severable, by examining the terms of the contract of insurance to determine the nature of the coverage provided. See: Spezialetti v. Pacific Employers Insurance Co., 759 F.2d 1139 (3d Cir. 1985); Bryant v. Allstate Insurance Co., 592 F.Supp. 39 (D.Ky. 1984); Commercial Union Insurance Co. v. State Farm Fire and Casualty Insurance Co., 546 F.Supp. 543 (D.Colo. 1982); Opat v. State Farm Fire and Casualty Insurance Co., 542 F.Supp. 1321 (W.D. Pa. 1982); Hosey v. Seibels Bruce Group, 363 So.2d 751 (Ala. 1978); Steigler v. Insurance Co. of North America, 384 A.2d 398 (Del. 1978); Auto-Owners Insurance Co. v. Eddinger, 366 So.2d 123 (Fla.Dist.Ct.App. 1979); Richards v. Hanover Insurance Co., 250 Ga. 613, 299 S.E.2d 561 (1983); Economy Fire and Casualty Co. v. Warren, 71 Ill.App.3d 625, 28 Ill.Dec. 194, 390 N.E.2d 361 (1979); Fuston v. National Mutual Insurance Co., 440 N.E.2d 751 (Ind.App., 1982); Hildebrand v. Holyoke Mutual Fire Insurance Co., 386 A.2d 329 (Me. 1978); St. Paul Fire and Marine Insurance Co. v. Molloy, 291 Md. 139, 433 A.2d 1135 (1981); Morgan v. Cincinnati Insurance Co., 411 Mich. 267, 307 N.W.2d 53 (1981), reversing, 91 Mich.App. 48, 282 N.W.2d 829 (1979); Krupp v. Aetna Life & Casualty Co., 103 A.D.2d 252, 479 N.Y.S.2d 992 (1984); Winter v. Aetna Casualty & Surety Co., 96 Misc.2d 497, 409 N.Y. S.2d 85 (Supreme Court, Nassau Co. 1978); Lovell v. Rowan Mutual Fire Insurance Co., 302 N.C. 150, 274 S.E.2d 170 (1981); McCracken v. Government Employees Insurance Co., 284 S.C. 66, 325 S.E.2d 62 (1985); Ryan v. MFA Mutual Insurance Co., 610 S.W.2d 428 (Tenn.Ct.App. 1980); Hedtcke v. Sentry Insurance Co., 109 Wis.2d 461, 326 N.W.2d 727 (1982). Other courts have held that where a dwelling is owned jointly by husband and wife, their insurance interest, i.e., the right to receive insurance proceeds upon destruction of the property, is necessarily joint and indivisible. See: Fuselier v. United States Fidelity and Guaranty Co., 301 So.2d 681 (La.App. 1974); Kosior v. Continental Insurance Co., 299 Mass. 601, 13 N.E.2d 423 (1938); Short v. Oklahoma Farmers Union Insurance Co., 619 P.2d 588, 11 A.L.R.4th 1217 (Okla. 1980); Cooperative Fire Insurance Association of Vermont v. Domina, 137 Vt. 3, 399 A.2d 502 (1979); Rockingham v. Hummel, 219 Va. 803, 250 S.E.2d 774 (1979); Klemens v. Badger Mutual Insurance Co. of Milwaukee, 8 Wis.2d 565, 99 N.W.2d 865 (1959), overruled by, Hedtcke v. Sentry Insurance Co., supra . Where spouses have owned property by the entireties, these courts have disallowed recovery of insurance proceeds by the innocent spouse because it would be impossible to separate the interest of the innocent spouse in view of the fact that each owned the whole and not merely part of the whole, see Cooperative Fire Insurance Association of Vermont v. Domina, supra 137 Vt. at 5, 399 A.2d at 503, and because compensating the innocent spouse would destroy the fictional oneness of a tenancy by the entireties, see Rockingham v. Hummel, supra 219 Va. at 806-07, 250 S.E.2d at 776. This unity of interest in property owned by the entireties is firmly established in the law of Pennsylvania. Thus, in Werner v. Quality Service Oil Co., 337 Pa.Super. 264, 486 A.2d 1009 (1984), this Court, being asked to apply the Pennsylvania Comparative Negligence Law [2] to separate acts of contributory negligence by spouses owning property by the entireties, said: A tenancy by the entireties is an estate per tout et non per my. Maxwell v. Saylor, 359 Pa. 94, 96, 58 A.2d 355, 356 (1948). The incidents of such an estate are unity of interest, title, time and possession. . . . Berhalter v. Berhalter, 315 Pa. 225, 227, 173 A. 172, 173 (1934). Each spouse has title to the whole of the property and not to any share or divisible part thereof. Zipperlein Estate, 367 Pa. 622, 624, 80 A.2d 817, 818 (1951); Gallagher Estate, 352 Pa. 476, 478, 43 A.2d 132, 133 (1945). Where, as here, husband and wife are seeking to recover damages for destruction of property owned by the entireties, the claimant is, in effect, the tenancy by the entireties. Therefore, the negligent acts of the spouses must be combined for purposes of applying the Comparative Negligence Law. Id., 337 Pa.Superior Ct. at 270, 486 A.2d at 1012. Consistently with this analogy, the Court of Common Pleas of Washington County, in Matyuf v. Phoenix Insurance Co., 27 D. & C.2d 351 (1933), denied the recovery of insurance proceeds by an innocent spouse whose husband, a co-tenant by the entireties, had burned the jointly owned home. The court said: When a policy insures joint owners, and contains a condition that the insurance shall not embrace damage resulting from a voluntary increase of hazard, or neglect to use reasonable means to preserve the property, committed by the insured, this condition manifestly is intended to apply to the joint tenants, as together constituting the insured, and to impose upon them, by construction, or by implication, whichever expression may be preferred, a joint duty and obligation to observe good faith toward the insurer. Id. at 361. However, in Bowers Co. v. London Assurance Corp., 90 Pa.Super. 121 (1926), a different analogy was used. There, a vehicle had been sold pursuant to a bailment lease. A policy of insurance had been issued in the names of the dealer and the purchaser as their interests may appear. In an action by the dealer against the insurer for fire damages, the insurer offered to show that the vehicle had been fraudulently burned by the purchaser. The trial court rejected the offer because the interests in the vehicle were separable and it had not been alleged that the dealer had been aware of the fraudulent burning. The Superior Court reversed. Regardless of the respective interests of dealer and purchaser in the vehicle, the Court held, the contract of insurance was joint. An action on the policy was joint, therefore, and the fraudulent burning of the vehicle by one of the assureds would prevent recovery by either. This suggests, as a majority of jurisdictions have held, that it is not the respective interests in the insured property but the interests in the policy of insurance which determine the rights of a co-insured. Similar reasoning was followed in McDivitt v. Pymatuning Mutual Fire Insurance Co., 303 Pa.Super. 130, 449 A.2d 612 (1982). In that case, where a residence was owned by husband and wife as tenants by the entireties, the owners had separated and were living apart. Following separation, the wife purchased fire insurance on the home, paid the premiums and was named as insured in the policy. After the home had been destroyed by fire, the husband claimed a portion of the insurance proceeds. The insurance company interpleaded the two tenants by the entireties, and, following hearing, the trial court awarded the entire proceeds to the wife. This Court affirmed. Judge Popovich, writing for a unanimous panel, said: Property ownership. . . is of minimal importance in determining entitlement to the proceeds of insurance, since the nature and extent of the various rights and obligations of the parties are governed by the terms of the insurance contract. Id., 303 Pa.Superior Ct. at 135, 449 A.2d at 615. He quoted with approval from Lovell v. Rowan Mutual Fire Insurance Co., supra, 302 N.C. at 154-55, 274 S.E.2d at 173 as follows: The unity of person of husband and wife [expressed through the tenancy by the entirety] gives no clue to the relationship that ought properly to obtain between the owners of the proceeds of insurance. . . . McDivitt v. Pymatuning Mutual Fire Insurance Co., supra, 303 Pa.Super. at 136, 449 A.2d at 615. It is the contract of insurance and the nature of the interests which have been created by the terms thereof which is determinative of the right of a co-insured to recover indemnity. This indemnity is provided for an insured according to the terms of the policy; it is not necessarily payable to all owners of the property. Another Court, in a factual scenario similar to that in the instant case, said: [T]he legal fiction of the entireties' estate in real estate is designed for the protection of the spouses and the marriage. It was initially designed to prevent the individual creditors of either spouse from taking the marital home. The courts generally, and divorce courts in particular, find no difficulty in dividing an entireties estate. [It is] a perversion of this legal fiction, designed to protect the spouses' rights and marital property, to use it to destroy the property rights of an innocent spouse. American Economy Insurance Co. v. Liggett, 426 N.E.2d 136, 140 (Ind.App., 1981). [3] And, in Krupp v. Aetna Life & Casualty Co., supra , a New York Court said: The more modern dominant rule focuses on the contract of insurance rather than the property rights of the parties thereto. Pursuant to this modern rule, the courts have generally looked to the language of the insurance policy and used traditional rules of contract construction to determine whether the rights of the insured are joint or severable, for example, construing the policy in the manner it would be comprehended by the reasonable man and interpreting ambiguous language in the contract most strongly against its insurer-author. Thus, given the reasonableness of the expectation of an insured that his individual interest would be covered by a policy naming him as insured without qualification, a homeowners' policy which nowhere specified whether the interests of a named insured husband and wife in property held by both as tenants by the entirety were joint or several, would be construed as covering the interests of each separately, and alleged arson by the husband would not defeat the wife's right to recover on her interest, namely one-half of the total damages. Id. 103 A.D.2d at 258, 479 N.Y.S.2d at 997 (citations omitted). This view was followed by the United States District Court for the Western District of Pennsylvania in Opat v. State Farm Fire and Casualty Insurance Co., supra . The court, by looking to the terms of the policy, determined that the interests of the co-insureds in entireties property had been insured separately and that, therefore, the fraud of one co-insured did not bar recovery by the other who was innocent of such fraud. In Spezialetti v. Pacific Employers Insurance Co., supra , (rehearing denied May 22, 1985), the Court of Appeals followed a similar line of reasoning. In that case, however, the Court found exclusionary language in the policy which excluded coverage in the event of a dishonest act by any insured. The Court held, therefore, that an act of arson by one co-insured excluded coverage and prevented recovery by an innocent, co-insured tenant by the entireties. It is a cardinal principle of insurance law that a policy or contract of insurance is to be construed liberally in favor of the insured and strictly against the insurer. 44 C.J.S. Insurance § 297(c)(1). [A]ny ambiguity in the language of insurance contracts must be resolved in favor of the insured and against the insurer. Knauber v. Continental Insurance Companies, 291 Pa.Super. 57, 59, 435 A.2d 217, 218 (1981). The named insured in the policy issued by Aetna was David G. Maravich and Donna M. Maravich. The policy did not further define their interests in the policy. A substantial majority of those courts which have looked to the terms of the policy to determine the rights of co-insureds have held, under similar policy terms, that the rights of an innocent spouse are separate from those of a spouse who intentionally burned jointly owned property. See, e.g., Commercial Union Insurance Co. v. State Farm Fire and Casualty Insurance Co., supra ; Opat v. State Farm Fire and Casualty Co., supra; Hosey v. Seibels Bruce Group, supra ; Steigler v. Insurance Co. of North America, supra ; Auto-Owners Insurance Co. v. Eddinger, supra ; Richards v. Hanover Insurance Co., supra ; Economy Fire and Casualty Co. v. Warren, supra ; Fuston v. National Mutual Insurance Co., supra ; Hildebrand v. Holyoke Mutual Fire Insurance Co., supra ; St. Paul Fire and Marine Insurance Co. v. Molloy, supra ; Morgan v. Cincinnati Insurance Co., supra ; Krupp v. Aetna Life & Casualty Co., supra ; Winter v. Aetna Casualty & Surety Co., supra ; Lovell v. Rowan Mutual Fire Insurance Co., supra ; McCracken v. Government Employees Insurance Co., supra ; Ryan v. MFA Mutual Insurance Co., supra ; Hedtcke v. Sentry Insurance Co., supra . Our research discloses that only two courts applying the contract construction analysis have denied recovery to an innocent spouse. See: Spezialetti v. Pacific Employees Insurance Co., supra ; Bryant v. Allstate Insurance Co., supra . In Spezialetti, a policy exclusion voided the policy upon the commission of a wrongful act by any insured, and in Bryant, the policy excluded coverage to an insured who failed to take reasonable efforts to save and preserve the property. The language in these policies, the courts held, unequivocally excluded coverage for both spouses in the event of a wrongful act by either. [4] The relevant exclusion clause [5] in the Aetna policy issued to the Maravichs provided as follows: We do not cover loss resulting directly or indirectly from: . . . . 5. Neglect, meaning neglect of the insured to use all reasonable means to save and preserve property at and after the time of a loss, or when property is endangered by a Peril Insured Against. In St. Paul Fire and Marine Insurance Co. v. Molloy, supra , the Maryland Supreme Court construed an identical exclusionary clause. The Court observed that [n]owhere in the policy is the precise nature of either the named insured's interest in the insurance contract or the insured's obligations under that contract specifically defined to be either joint or several. Id., 291 Md. at 152-54, 433 A.2d at 1142. To alleviate the ambiguity, the Court adopted a rule of construction, which had first been espoused by the New Jersey Superior Court, as follows: [With respect to a fire insurance policy covering the interests of more than one insured] `there is much to commend the view that, unless the terms . . . [thereof] are plainly to the contrary . . . the obligation of the carrier should be considered several as to each person insured, and the fraud or misconduct of one insured should not bar recovery by the innocent coinsureds to the extent of their respective interests in the property involved.' St. Paul Fire and Marine Insurance Co. v. Molloy, supra at 152-54, 433 A.2d at 1142, quoting Howell v. Ohio Casualty Insurance Co., 130 N.J.Super. 350, 356-57, 327 A.2d 240, 243 (1974). The Maryland Court held, therefore, that the exclusion clause voided only the coverage provided to the insured who had been responsible for causing the loss. Id. See also: Commercial Union Insurance Co. v. State Farm Fire and Casualty Co., supra (court reached same conclusion after considering identical exclusionary provision). We adopt this reasoning. The insured in Aetna's policy was defined as husband and wife. The policy did not define whether the interests of husband and wife in the policy were joint and indivisible or separate. The exclusionary language did not unequivocally exclude coverage for an innocent spouse in the event the property was burned by one of them. We construe this ambiguity in favor of the insured. It was reasonable, under such a policy, that an innocent spouse would expect to be indemnified against a loss which, as to her was fortuitous, and which was not excluded and, therefore, covered by the terms of the policy. In many of the decisions which have reached the same or a similar result, the spouses were either separated or divorced, or the guilty spouse had died in the fire. In the instant case, however, the spouses are alive and are living together as husband and wife. Aetna argues that to allow the wife to recover one-half of the loss would be contrary to that public policy which prevents a person from benefitting from his own criminal act. The husband will have access to the insurance proceeds because of the marital relationship, Aetna contends, and will thereby be allowed to benefit from his own wrongdoing. This argument is based upon a well settled public policy consideration which prohibits recovery to an insured who has fraudulently set fire to property covered by a policy of fire insurance. 18 Couch, Couch on Insurance 2d § 74:663 (1984). See: General Electric Credit Corp. v. Aetna Casualty & Surety Co., 437 Pa. 463, 473, 263 A.2d 448, 454 (1970). Indeed, this policy consideration has caused at least one court to suggest that different rules may be necessary in cases where the guilty spouse survives. See: American Economy Insurance Co. v. Liggett, supra 426 N.E.2d at 144. However, the major concern of the cases denying recovery seems to be a substantial potential for collusion between the spouses. As one court has noted, [p]articularly in the husband and wife cases, an equally guilty spouse might recover policy proceeds because of the difficulty of proving participation in or knowledge of the arson committed by the other spouse. Spezialetti v. Pacific Employees Insurance Co., supra at 1141. However, other courts which have considered this public policy dilemma have not allowed it to defeat recovery by an innocent spouse. See, e.g., Commercial Union Insurance Co. v. State Farm Fire & Casualty Co., supra; Fuston v. National Mutual Insurance Co., supra ; Hildebrand v. Holyoke Mutual Fire Insurance Co., supra ; Krupp v. Aetna Life & Casualty Co., supra . The Federal District Court in Colorado summarized the reasons for resolving this dilemma in favor of the innocent spouse as follows: It is the Court's view that in balancing the equities of the case at bar, the facts and circumstances favor the payment to the innocent spouse and children. They have lost indemnified property from an event that is fortuitous as to them. Prevention of this unforseeable [sic] event by any of them was not possible since there was apparently no precedent for this act of arson in Julian Oxford's life. Nor is there any profit to the wrongdoer in the sense of advantage or gain. As the Court stated in Erlin-Lawler Enterprises, Inc. v. Fire Insurance Exchange, 267 Cal. App.2d 381, 73 Cal.Rptr. 182, 186 (1968): Mere family relationship to the arsonist which does not bestow a property right or other direct financial benefit in the proceeds of insurance does not bar a recovery. Here the only benefit to the arsonist is an indirect one whereby his spouse and children recover what the spouse and children had already owned and insured. The wrongdoer has no gain, advantage or recovery of what he owned prior to the fire. Commercial Union Insurance Co. v. State Farm Fire & Casualty Co., supra at 547. We conclude that this is the better view. In the last analysis it is much to be preferred that we depend upon the efficacy of the judicial process to ferret out the meritorious from the fraudulent rather than using a broad broom to sweep away a class of claims, a number of which are admittedly meritorious. Hack v. Hack, 495 Pa. 300, 315, 433 A.2d 859, 867 (1981), quoting Falco v. Padas, 444 Pa. 372, 381, 282 A.2d 351, 355-356 (1971). Although the Supreme Court of Pennsylvania has not had occasion to consider this precise issue, there is reason to believe that it would follow the majority view. In Giacobetti v. Insurance Placement Facility of Pennsylvania, 500 Pa. 447, 457 A.2d 853 (1983), the Court was faced with a dilemma similar to but not the same as that which has arisen in the instant case. There, a grocery store owned and operated by a family trust had been burned intentionally by one of the trustees. The store was insured by a policy which named the insured as follows: Manusov Family Trust, Harry Kracoff, Trustee, and Harry Kracoff, A.T.I.M. A., the initials being shorthand for as their interests may appear. Three additional trustees had been innocent of any part of the arson. The Supreme Court held that the wrongful act of Harry Kracoff did not excuse the insurance company from its contractual obligation to the beneficiaries of the family trust but did justify the insurer's retention of the share of insurance proceeds to which Harry Kracoff and his issue would otherwise have been entitled as beneficiaries of the trust. The insurer's right to retain proceeds payable to Kracoff, the Court concluded, gave full effect to `the common law principle that a person will not be permitted to profit by his own wrong, particularly his own crime.' Id., 500 Pa. at 454-455, 457 A.2d at 857, quoting Greifer Estate, 333 Pa. 278, 279, 5 A.2d 118, 119 (1939). [A]bsent evidence that the other beneficiaries assisted in or approved of Harry Kracoff's wrongful conduct, the Court held, there is no basis for prohibiting recovery by the other beneficiaries. Id., 500 Pa. at 455, 457 A.2d at 857. The Court remanded for the entry of a judgment which would permit recovery by the innocent beneficiaries of the trust while, at the same time, denying any benefit to the wrongdoer. The evidence in this case was that David Maravich had intentionally set the fire which damaged the home and contents owned by husband and wife as tenants by the entireties. There was no evidence that Donna Maravich had had prior knowledge of her husband's intention to burn their home or that she had assisted in any way in causing the fire. As to her, the fire was fortuitous. By allowing Aetna to retain one-half of the loss, we give effect to the common law principle that David Maravich should not be permitted to profit from his own wrong. There is no public policy consideration, however, which prevents the innocent spouse from recovering the indemnity which Aetna had agreed to pay for the loss which she sustained. A mere family relationship with the arsonist is inadequate to defeat the recovery of such indemnity. Judgment affirmed. SPAETH, President Judge, concurs in the result. (This vote was entered before the expiration of President Judge SPAETH's term on the court).