Intentional act or lack of capacity?
Logan Foreman, the then 16-year-old son of Brent and Kathleen Foreman, was living at home with them when he set fire to the family home in a suicide attempt. In a disturbed mental state only a few days after his release from a psychiatric hospital, while his family slept, Logan piled his schoolbooks onto a couch in the basement of the family home and doused the couch and books with gasoline before returning to his bedroom on the second floor. Early the next morning before the family arose, he returned to the basement, set the couch ablaze, and returned to his upstairs bedroom to await the outcome. Logan later admitted to investigators that he started the fire to take his own life. The resulting fire damaged the home to the point that it was uninhabitable for an extended period.
Brent and Kathleen made a property damage claim under their homeowners policy with Auto Club Property-Casualty Insurance Company, and Auto Club denied payment, relying on the intentional acts exclusion in the policy.
The exclusion read:
EXCLUSIONS
We do not insure under Part 1 [Property Insurance Coverages] – Property Insurance Coverages for loss caused directly or indirectly by any of the following, regardless of the cause of the excluded event or damage; other causes of the loss; whether any other cause or event acts produce the loss; or whether the loss or event occurs suddenly or gradually, involves isolated or widespread damage or occurs as a result of any combination of these.
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9. Any action by or at the direction of an insured person committed with the intent to cause a loss, or that could be reasonably expected to cause a loss
However, this exclusion does not apply to loss to the covered property of an innocent co-insured if the loss:
a. arose out of a pattern of domestic violence; and
b. the perpetrator of the loss is criminally prosecuted for the act of causing the loss.
Brent and Kathleen sued Auto Club for a declaration of rights under the terms of their policy. When Logan reached the age of majority while the suit was pending, Auto Club asserted a separate indemnity claim against him. Logan then asserted his own claim against Auto Club, denying any liability.
All three Foremans moved for summary judgment, and the trial court granted it, focusing on Logan’s lack of mental capacity to form the intent to be responsible for intentionally causing damage to the property. Auto Club appealed the judgment, and the court of appeals reversed and remanded the case to the trial court for further proceedings. From there the case was appealed to the state supreme court.
On appeal, the Supreme Court of Kentucky held that the court of appeals had correctly reversed and remanded the case for examination of the insured’s reasonable expectation of loss. According to the supreme court, the court of appeals correctly concluded that, when viewed objectively, Logan’s act of setting fire to the couch he soaked with gasoline was an intentional act that “could reasonably be expected to cause” some physical damage to or destruction of tangible property. Further, the court found the policy language to unambiguously exclude coverage for acts that, when judged objectively, could be reasonably expected by the insured to cause a loss. As a result, the supreme court found, as the court of appeals found, that an insured would reasonably expect that igniting a gasoline-soaked couch, as Logan unquestionably did, could reasonably be expected to burn it. Summary judgment in favor of the Foremans was error.
Despite that error in granting summary judgment to the Foremans, the supreme court said, they still might be able to pursue payment under their policy. Courts generally hold that intentional acts exclusions do not apply if the insured was suffering from a lack of mental capacity at the time of the act.
Summary judgment was erroneously granted by the trial court, but the supreme court stated that because it found that an insured’s mental incapacity defense applies to intentional acts exclusion provisions, summary judgment in favor of Auto Club might be inappropriate at this juncture. The record reflected evidence that would permit an inference that Logan was aware of the nature of his actions. For example, as the court of appeals noted, Logan told the official arson investigator that he obtained gasoline from the basement earlier in the evening, poured the gas around the couch, and placed his books on it. A fact finder could reasonably infer that Logan was able to understand the nature of his actions and had either the subjective intent to start a fire to end his life in a way that would cause damage to the home or that it was at least reasonably foreseeable that damage to the couch could happen, if not destruction of the family home.
The supreme court affirmed the court of appeals’ decision reversing the trial court’s grant of summary judgment in favor of the Foremans, and it remanded the case to the trial court to allow the insureds an opportunity to litigate a lack of capacity defense consistent with the standard set forth in this opinion.
Foreman v. Auto Club Property-Casualty Insurance Company—Supreme Court of Kentucky—February 18, 2021—No. 2018-SC-0618-DG.
