Court Opinion

ID: 9730096
Source: CourtListenerOpinion
Date Created: 2023-08-26 15:01:10.928344+00
Date Added: 2024-06-11T18:26:04.122661
License: Public Domain

STATON, Judge,
concurring.
The appellant, American Economy Insurance Company, asks this Court to review the following issue:
Does the intentional burning of a house, which is held by husband and wife in a tenancy by the entireties, by one spouse bar the recovery by the innocent spouse from receiving the proceeds of a fire insurance policy which names both spouses as the insured?
The majority, by incorporating the opinion of the trial court judge as the opinion of this Court, resolves this issue in favor of the innocent spouse. I agree. However, the trial court opinion of Judge Beamer, who should be commended for his extensive survey of the law on this issue, is hardly conducive for adoption in toto as the opinion of this Court.1 To say that Indiana will follow the precedent of Howell v. Ohio Casualty Insurance Co. (1973), 124 N.J.Super. 414, 307 A.2d 142, modified (App.Div.1974), 130 N.J.Super. 350, 327 A.2d 240, and its progeny is to leave Indiana courts floundering in the quagmire of case law on insurance fraud. The cases cited in the majority opinion which permit the innocent spouse to recover the insurance proceeds speak with little unanimity in the rationale for reaching their conclusions and with an even more pronounced difference of opinions in the measure of damages to be awarded to the innocent spouse. The majority opinion, by incorporating these cases into the body of Indiana law, fails to develop an adequate framework of analysis for the issue of the present case and the multitude of correlative issues. I believe this issue should be resolved by applying the traditional rules of construction for insurance cases. The majority opinion touches upon these rules only tangentially.
A reiteration of the basic tenets of insurance law would assist in analyzing the insurance policy executed by the Liggetts and American Economy. An insurance policy is a contract between the insurer and the insured, and as such, the law of contracts controls their legal relationship. Cincinnati Insurance Co. v. Mallon (1980), Ind.App., 409 N.E.2d 1100, 1103; Stockberger v. Meridian Mutual Insurance Co. (1979), Ind.App., 395 N.E.2d 1272, 1277; American States Insurance Co. v. Aetna Life & Casualty Co. (1978), Ind.App., 379 N.E.2d 510, 516. The objective of this Court is to ascertain and enforce the parties’ intent as manifested in the insurance contract. Stockberger, supra, 395 N.E.2d at 1277; Meridian Mutual Insurance Co. v. Gulf Insurance Co. (1977), Ind.App., 366 N.E.2d 190, 192. This Court’s objective must be promoted with the following considerations in mind:
*146“An insurance contract is prepared and drafted solely by the insurance company subject to no real bargaining and, thus, is a contract of adhesion . . . Therefore, when a court is required to interpret an insurance contract, the ambiguities will be construed against the insurer and in favor of the insured . . . An insurance contract is ambiguous if reasonably intelligent men, upon reading the contract, would honestly differ as to its meaning . . . . ” (citations omitted)
Travelers Indemnity Co. v. Armstrong (1979), Ind.App., 384 N.E.2d 607, 613 (transfer pending).
An insurance contract must be construed to prevent the defeat of the insured’s indemnification for a loss when the general language of the contract is susceptible to two equally fair constructions. Freeman v. Commonwealth Life Insurance Co. of Louisville (1971), 149 Ind.App. 211, 217, n. 6, 271 N.E.2d 177, 181, n. 6, transfer denied (1972), 259 Ind. 237, 286 N.E.2d 396; Richmond Insurance Co. of New York v. Boetticher (1938), 105 Ind.App. 558, 562, 12 N.E.2d 1005, 1007. An exclusion in an insurance contract will be given effect only if it clearly and unmistakably brings within its scope the particular act or omission that will effectuate the provision. Huntington Mutual Insurance Co. v. Walker (1979), Ind.App., 392 N.E.2d 1182, 1185; American States Insurance Co. v. Aetna Life & Casualty Co., supra, 379 N.E.2d at 516-17. An insurer may limit its liability for a particular act or omission so long as the exclusion is plainly expressed in the insurance contract and it does not contravene statutory authority or public policy. Cincinnati Insurance Co. v. Mallon, supra, 409 N.E.2d at 1103.
American Economy denies liability for Mrs. Liggett’s loss by relying upon the following provision of the insurance contract:
“This entire policy shall be void if, whether before or after a loss, the insured has willfully concealed or misrepresented any material fact or circumstance concerning this insurance or the subject thereof, or the interest of the insured therein, or in case of any fraud or false swearing by the insured relating thereto.”
This standard policy provision operates to void the insurance contract only when “the insured” attempts to defraud the insurer by submitting a proof of loss form that states “the insured” did nothing to increase the risk or to cause the loss for which indemnification is sought. The critical issue thus becomes what meaning should be ascribed to the words “the insured.”
The words “the insured” are susceptible to two reasonable constructions: (1) Mr. and Mrs. Liggett as one collective entity, or (2) Mr. Liggett and Mrs. Liggett as independent entities who insured coextensive interests in the same piece of property. The insurance contract itself provides little assistance in determining which construction should be adopted. It denominates “LIGGETT DUWAINE & JOANN” as the “INSURED” and provides the following definition:
“(a) ‘Insured’ means
(1) the Named Insured stated in the Declarations of this policy;
(2) if residents of the Named Insured’s household, his spouse, the relatives of either, and any other person in the care of any insured: ...”
Keeping in mind that Indiana insurance law requires an ambiguous provision of an insurance contract to be strictly construed against the insurer, and if the provision is subject to multiple constructions, it should be construed to provide coverage to the insured; this Court should conclude that the insurance contract in the present case should be construed so as to award the insurance proceeds to the innocent spouse, Mrs. Liggett. The construction of the words “the insured” must be limited to the insured person who attempted to defraud the insurer. Such a construction was given to similar provisions in cases from other jurisdictions. In Ryan v. MFA Mutual Insurance Co. (1980), Tenn.App., 610 S.W.2d 428, cert. denied by Tenn.S.Ct., the court stated:
“We find that a reasonable person, reading the provisions in the policy at issue here which refer to fraud of ‘the *147insured,’ and neglect of ‘the insured,’ etc. would conclude that if an insured was guilty of fraud or neglect or increasing of hazard to property, then he or she may not recover under the policy. If the company wanted to assure its position, i. e. that misconduct of any insured would bar recovery by any other insured, it might have made it clear and unambiguous in the policy and it might have informed the prospective applicants for insurance of this position from the start. It did not do so in this case and it is bound by the language it unilaterally drafted into the ‘contract’ of insurance between the parties.” (emphasis original)
Ryan, supra, 610 S.W.2d at 437. In Morgan v. Cincinnati Insurance Co. (1981), 411 Mich. 267, 307 N.W.2d 53, the Michigan Supreme Court, addressing the effect of a contractual provision identical to the one in the present case, observed:
“The standard fire insurance policy prescribed by statute provides:
‘This entire policy shall be void if, whether before or after a loss, the insured has wilfully concealed or misrepresented any material fact or circumstance concerning this insurance or the subject thereof, or the interest of the insured therein, or in case of any fraud or false swearing by the insured relating thereto.’ M.C.L. § 500.2832; M.S.A. 24.12832.
“The insurer in this case would have us read this provision as if it stated ‘[t]his entire policy shall be void if * * * any person insured’ has committed fraud. We believe such a reading is unwarranted, and hold that the provision voiding the policy in the event of fraud by ‘the insured’ is to be read as having application only to the insured who committed the fraud and makes claim under the policy. The provision has no application to any other person described in the policy as an insured.
“To adopt the reading of the insurer would require ascribing to the Legislature an intent to impose a mutual obligation of suretyship on each of several persons insured: that each insured must not only undertake to forbear from fraud himself, but must also undertake to prevent each of the other persons insured from engaging in fraud on pain of losing all interests under the policy. Such an intent is unlikely; as this case aptly illustrates, an insured often has no control over the conduct of others.”
Morgan, supra, 307 N.W.2d at 54-55. Similar conclusions on the construction of the words “the insured” were reached in cases cited in the majority opinion. See, Steigler v. Insurance Company of North America (1978), Del., 384 A.2d 398; Economy Fire and Casualty Co. v. Warren (1979), 71 Ill.App.3d 625, 28 Ill.Dec. 194, 390 N.E.2d 361; Hildebrand v. Holyoke Mutual Fire Insurance Co. (1978), Me., 386 A.2d 329. I find the Court’s observations in Hildebrand, supra, which involved a contract provision identical to the one in the present case, to succinctly state the rule that this Court should adopt:
“We construe the term ‘insured’ in the first above quoted clause of the policy to mean a specific insured, namely, the insured who (1) is responsible for causing the loss and (2) is seeking to recover under the policy . . . We therefore conclude that the instant policy allows recovery by the ‘Named Insured’ for the loss despite the fact that it resulted from the intentional act of another ‘insured.’
“We reach this result irrespective of whether the interests of the plaintiff and her husband in the destroyed property are deemed to be joint or several.” (citations and footnote omitted)
Hildebrand, supra, 386 A.2d at 331. Those cases that resolve the issue of the innocent spouse’s rights in favor of the insurer because the destroyed property was held in a tenancy by the entireties, e. g., Rockingham Mutual Insurance Co. v. Hummel (1979), 219 Va. 803, 250 S.E.2d 774, and Short v. Oklahoma Farmers Union Insurance Co. (Okl.1980), 619 P.2d 588, have employed the anachronistic common law concept of the unity of the husband and wife to defeat the contractual rights of a party to an insurance contract. This line of reasoning has *148been subjected to extensive criticism. See, Note, “Spouse’s Fraud as a Bar to Insurance Recovery,” 21 Wm. & Mary L.Rev. 543 (1979). One court has circumvented the tenancy by the entireties argument by treating the insurance proceeds from intentionally destroyed entireties property as divisible personal property to which the innocent party is entitled. Lovell v. Rowan Mutual Fire Insurance Co. (1981), 302 N.C. 150, 274 S.E.2d 170. It is evident that relying upon property law to avoid liability under an insurance contract is a practice that is being looked upon by an increasing number of courts with disfavor. The innocent spouse’s rights must be determined by resorting to the traditional tenets of contract law.
The insurance contract failed to specifically delineate an exclusion of liability for the loss of the insured property under the circumstances of the present case. The wrongdoing of the husband cannot be imputed to the wife under the terms of the contract. She is entitled to recover the insurance proceeds.
It must be emphasized that the holding of this Court should be limited to the facts of the present case. The amount of damages recoverable by the innocent spouse if the wrongdoing spouse survives the incendiary act may need to be limited to prevent the wrongdoer from benefitting from the wrongful act. Furthermore, this Court’s holding may have precedential value for similar insurance cases involving parties with legal relationships other than husband and wife, such as partners, corporate officers, mortgagees, landlord-tenant, and joint venturers to name a few. However, this Court’s holding should not be construed as a hard and fast rule applicable to all insurance cases involving different legal relationships. It is important to remember that the resolution of such cases must turn on the language contained in the insurance contracts and the contract law to be applied to that language.

. I encourage trial court judges to research issues of law as thoroughly as Judge Beamer has done in the present case. A well-researched trial court opinion informs litigants and the reviewing court of the legal basis for the trial court’s judgment. However, the verbatim incorporation of a well-researched trial court opinion as the opinion of the appellate court should be done with caution because such a practice has certain pitfalls, such as the citation of a case that has been reversed by a higher court since the writing of the trial court opinion. E. g. Morgan v. Cincinnati Insurance Co. (1979), 91 Mich.App. 48, 282 N.W.2d 829, rev’d (1981), 411 Mich. 267, 307 N.W.2d 53. Fortunately, the majority has avoided this particular pitfall by detecting and noting the reversal of the Court of Appeals’ decision in Morgan.