By: John F. Dobbyn
The problem of the payment of proceeds under a fire insurance
policy to an “innocent spouse” for damage caused by arson committed
by the guilty spouse still presents the courts with perplexing
conflicts in decision making. The basic problem is
simple. A fire insurance policy covers realty, usually a
family home, which is owned jointly or in tenancy by the entireties
by a husband and wife. One of the spouses deliberately burns
the property. Clearly, the arsonist is barred from collecting
proceeds by the common law of the jurisdiction or a specific
exclusion in the policy for deliberately caused loss. The
challenging issue is whether or not the “innocent” co-insured
spouse should be allowed to collect on the policy.
In deciding the issue, courts, through the years, worked their
way through at least five formulae for decision making in an
attempt to resolve the conflicts that trouble judicial minds.
At the heart of the issue are opposing pulls and tugs in the
sensitive areas of public policy, equity between the parties,
willingness to stray from the actual wording of the insurance
policy, and fear of opening the insurer and a court to fraud.
The three primary interests to be balanced are prevention of profit
to the arsonist, fairness to the innocent spouse, and protection of
the contracted interests of the insurer.
Courts generally find that they are constrained to choose
between two possible outcomes - either granting or denying recovery
of proceeds to the innocent spouse. Because of complicating
factors, courts are seldom satisfied with either result. If a
court grants recovery of proceeds to the innocent spouse, there
remains the realistic possibility that the guilty spouse will share
in the take. There is also the possibility that the
“innocent” spouse was actually in collaboration with the “guilty”
spouse, but the collaboration could not be proven. If a court
denies recovery to the innocent spouse, there is the possibility
that the innocent party is being made to suffer for the wrongs of
the guilty party. Either way, a decision for or against
recovery by the innocent spouse frequently leaves a court with an
unsatisfied feeling that total justice was not accomplished.
It is difficult to tell how many decisions have been swayed by the
prospect of those equivocal feelings.
It is the purpose of this article to discuss an alternative
option that would more completely satisfy a court’s sense of total
justice and leave a court free to grant the relief that it believes
is fair to the innocent spouse.
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