Intentional Loss Exclusion Bars Coverage for Claim Per Washington Court

The Western District of Washington issued a published opinion on April 16, 2014, analyzing application of the intentional loss exclusion in an insurance policy in a case titled IDS Prop. Cas. Ins. Co. v Crawford, 2014 WL 1494080, — F.Supp.2d — (W.D. Wash. Apr. 16, 2014).  On October 31, 2011, the insured intentionally set fire to her automobile and garage in an aborted suicide attempt.  The fire caused substantial damage to the insured’s home and personal property, but the insured survived the incident.  During an investigation by the local authorities, the insured admitted intentionally setting the fire.

Five days after the fire, the insured submitted a claims under her automobile and homeowners insurance policies for the damage.  The insurance adjuster learned of the police investigation of the loss and contacted the detective assigned to the case who informed the adjuster that the insured admitted to setting the fire.  On November 17, 2011, the insurance company sent the insured a reservation of rights letter citing to the intentional acts clause in the insurance policy, which excluded from coverage “any loss arising out of any act an insured person commits … with the intent to cause a loss.”  The insurance company denied the insured’s claim on November 29, 2011, pursuant to the intentional loss exception.  The denial letter cited the policy provision and relevant Washington case law, along with the police report regarding the loss.  The insurance company brought a declaratory judgment action seeking to confirm its denial of the insured’s claim.

During the lawsuit, the insured argued that the intentional loss exception did not apply in this case because she “must have subjectively intended to cause a ‘loss’.”  In other words, the insured contended that the provision only applies if she set the fire with the intent to cause damage to her dwelling and personal property.  Here, according to the insured, the purpose of setting the fire was to cause damage to herself—not the insured property.

The court rejected the insured’s argument.  It first cited to Washington case law that holds intentional loss exclusions apply only if the insured intended the act and an injury.  Western Nat’l Assur. Co. v. Hecker, 43 Wn.App. 816, 825, 719 P.2d 954, 960 (1986).  The court also cited to Washington law recognizing that intent may be inferred from an insured’s actions when the act and the injury are indissolubly bound.  Safeco Ins. Co. v. McGrath, 63 Wn.App. 170, 173, 817 P.2d 861, 863 (1991).  Once intent is established under Washington law, it does not matter if the injury is greater than or different from that which was intended.  Hecker, supra.  With respect to the present case, the court found that based on her actions a reasonable jury could only conclude that the insured intended to damage the property.  It held that “[h]er motivation for starting the fire is irrelevant.”

The insurance coverage attorneys at Maloney Lauersdorf Reiner have handled numerous matters involving application of the intentional acts exception, including during the claims process and in litigation.  Please contact us if you have any questions about this case or any other matter you see addressed on the MLR Insurance Coverage Blog.

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