Wife Unable To Gain Coverage As Innocent Insured

Homeowners	Intentional Loss
Innocent Insured

Michelle and David Postell were married for 31 years. Since 1989 they had lived in a house in Dixon, Iowa, that they owned as joint tenants. The Postells’ marriage included incidents of various abuse and a fire loss occurred while the couple was legally separated.

On February 14, David left a voice mail for Michelle indicating that he planned to burn down the home with him inside. A fiancée of one of the Postells’ sons had entered the house and reported to police that she smelled a strong odor of gasoline upon her entry. When she went further inside, she saw numerous large gasoline cans tipped over and observed that the carpet was soaked with gasoline. Later she claimed to see David with a lighter clenched in his right hand and heard him yell that she should get out of the house because he was going to “blow it!”

Another son, Justin, then arrived at the scene and witnessed his father lighting the curtains on fire. Medical records show that David said he had “[lit] his house on fire in an attempt to kill himself …” Elsewhere, the medical staff recorded how David attempted suicide by pouring gasoline on himself and in his house and setting himself on fire.

Medical treatment commenced only after hospital personnel informed David that he was mentally ill and they would restrain him if he did not cooperate. David died of his injuries three days after the fire.

On the day of the fire, an agent from the Iowa State Fire Marshal's office conducted an investigation at the house. He concluded that David had poured gasoline throughout the house and that the cause of the fire was arson.

It was uncontested that Michelle had no role in setting or contributing to the fire.

When they moved into the house, Michelle and David purchased a residential fire insurance policy from American Family Mutual Insurance Company with themselves as the named insureds. Michelle paid all the premiums, and the policy was in force on the day of the fire.

Section I of the policy provided replacement cost coverage for fire damage to the dwelling and personal property contained therein, as well as loss of use. The policy covered only damage from “accidental direct physical loss,” subject to exclusions which included “loss caused directly or indirectly” by intentional loss.

Michelle testified she was aware that the policy contained an intentional loss exclusion. She thought, however, that each person named in the policy was a separate insured.

On August 11, Michelle submitted a claim and proof of loss to American Family for recovery under the policy. Michelle reported losses in the amount of $195,902.28 for buildings, $44,140.96 for personal property, and $3,786 for loss of use.

On February 20, LaSalle Bank, the mortgage holder on the property, filed a petition for foreclosure on the damaged house. On December 11, Michelle filed a cross petition against third-party defendant American Family for denying her claim and refusing to pay under the policy. LaSalle Bank dismissed its petition with prejudice on June 3, 2010, because American Family paid off the mortgage under the policy.

American Family filed a motion for summary judgment. The insurer argued that because David intentionally set fire to the residence, Michelle could not recover under the policy's intentional loss exclusion. Michelle filed a cross motion for partial summary judgment.

The district court denied both American Family's motion for summary judgment and Michelle's motion for partial summary judgment. First, the court found there was no genuine issue of material fact that David intentionally lit the fire or caused a loss to the residence. Second, the court found that the policy’s intentional loss exclusion applied, and Michelle had no coverage for the fire started by David, a coinsured. Michelle appealed.

On appeal, Michelle asked the Supreme Court of Iowa to decide whether the suicidal coinsured, David, who set fire to the insured house, formed the requisite intent to cause a loss within the meaning of the policy's intentional loss exclusion; whether an innocent coinsured, Michelle, could recover under the policy, which excluded coverage when “any insured” causes an “intentional loss”; and whether an innocent coinsured, Michelle, could recover under the Iowa standard fire policy, which denies coverage when “an insured” “causes or increases” a hazard to the insured property.

The high court affirmed the judgment of the district court and stated: “[W]e find substantial evidence supports the district court finding that the coinsured, David Postell, who set fire to the insured dwelling in order to commit suicide, had the requisite intent to cause a loss under the policy; that under the language of the policy, the innocent coinsured spouse, who did not participate in the intentional acts of the other coinsured, cannot recover due to the intentional loss exclusion; and that an innocent coinsured cannot recover under the recently amended Iowa standard fire policy.”

Supreme Court of Iowa. Postell v. American Family Mut. Ins. Co. 823 N.W.2d 35. November 16, 2012