Ryan v. MFA Mut. Ins. Co.

Annotate this Case

610 S.W.2d 428 (1980)

James RYAN, Plaintiff-Appellant, v. MFA MUTUAL INSURANCE COMPANY, Defendant-Appellee.

Court of Appeals of Tennessee, Middle Section.

April 25, 1980.

Certiorari Denied June 23, 1980.

Clyde W. Richert, III, Springfield, for plaintiff-appellant.

John M. Baird and William H. Crawford, Jr., Nashville, for defendant-appellee.

Certiorari Denied by Supreme Court June 23, 1980.



The sole issue in this appeal from the granting of a motion to dismiss is whether an innocent co-insured can collect on a joint insurance policy where the other co-insured destroyed the insured property, and where the innocent co-insured's interest in the property is severable from that of the other co-insured. In this case, appellant James Ryan's wife set fire to their house, and Ryan sought a recovery from appellee MFA Mutual Insurance Company for the value of certain destroyed contents of the house which he claimed belonged to him. A copy of Ryan's policy with the relevant provisions underlined is attached to this opinion as an appendix.

Appellant filed his complaint on July 21, 1979, in the Robertson County Circuit Court, alleging that he and his wife Betty were insured for fire loss to their residence in the amount of $20,000.00 and for loss and damage to the contents of their house in the amount of $10,000.00 under a policy of insurance issued by appellee MFA Mutual Insurance Company; that on June 5, 1978, his wife set fire to their house after he and she had had an argument and after he had left the house for a short visit to a relative's home; that he was innocent of any participation in or encouragement of his wife's act; that he, being an insured under the aforementioned insurance policy, was a proper party to recover under the policy; that the great majority of items listed in the proof of loss he submitted to appellee were purchased either by him directly or with income derived from his employment; that appellee had denied his claim under the policy; and seeking a recovery from appellee in the amount of $8,958.15, which was the value of the estimated loss to "his contents that were in the damaged dwelling." It was also stated in the complaint that the loss payee on the policy for any structure *429 loss was the Investors Savings & Loan Association of Springfield, Tennessee, the first mortgagee on the real property and house. It is unclear whether the mortgagee has been paid under the policy for fire loss to the house; in any event, as has been indicated, appellant's claim is only for coverage under that portion of the policy pertaining to contents and not for coverage of the house itself.

Appellee on September 11, 1979, filed a motion to dismiss appellant's complaint, alleging, inter alia, that the complaint failed to state a cause of action upon which relief could be granted.

Oral argument was heard on appellee's motion on September 26, 1979, and on October 26, 1979, the trial court issued a memorandum opinion in which it found that under the facts which had been "practically agreed to" (meaning, presumably, the facts as alleged in the complaint), this case was "on all fours" with those of a Wisconsin case, Klemens v. Badger Mutual Insurance Company, 8 Wis.2d 565, 99 N.W.2d 865 (1959), which case was "representative of the majority rule in the United States" (under which rule recovery is denied in cases such as this); and sustained appellee's motion to dismiss. An order incorporating this memorandum opinion by reference and dismissing this case was entered on November 1, 1979. An appeal from this order was perfected by appellant.

Appellant urges that we reverse the decision of the trial court and remand this case for a trial on the merits of the case, both on the issue of his own innocence as to the burning of the house, "if [appellee] wishes to raise this point," and on the question of damages.

This being a case of first impression in this state, appellant bases his arguments on a line of cases from other jurisdictions which hold generally that an innocent co-insured in a case such as this may recover when insured property is destroyed by another co-insured. Appellant insists that the authorities he presents represent a "better reasoned" approach to the issue at hand than do the cases cited by appellee, which cases appellee alleges represent the dominant line of authority in the United States.

It is true that until recently the cases upon which appellee bases its argument did represent the majority rule in the United States. As we shall hereinafter illustrate, this old majority rule has been supplanted by a new majority of jurisdictions which would allow recovery in a case such as this. However, in the interest of showing how and on what grounds this supplanting has occurred, we shall begin our discussion of the relevant law in this case with an examination of those authorities which would arguably deny recovery in this case.


Appellee has cited for us cases representing this "old" "dominant line of authority" from Alabama, Louisiana, Massachusetts, Michigan, Texas, Vermont, Virginia, and Wisconsin. See Home Insurance Company v. Pugh, 51 Ala.App. 373, 286 So. 2d 49, 50 (1973); Fuselier v. United States Fidelity and Guaranty Company, 301 So. 2d 681, 682 (La. App. 1974); Kosior v. Continental Insurance Company, 299 Mass. 601, 13 N.E.2d 423, 424 (1938); Ijames v. Republic Insurance Company, 33 Mich. App. 541, 190 N.W.2d 366, 369 (1971); Bridges v. Commercial Standard Insurance Company, 252 S.W.2d 511, 512 (Tex.Civ.App. 1952); Cooperative Fire Insurance Association of Vermont v. Domina, 399 A.2d 502, 503 (Vt. 1979); Rockingham Mutual Insurance Company v. Hummel, 219 Va. 803, 250 S.E.2d 774, 776 (1979); Klemens v. Badger Mutual Insurance Company of Milwaukee, 8 Wis.2d 565, 99 N.W.2d 865, 866 (1959).

In Klemens, the case cited by the trial court in its memorandum opinion, the husband of a couple who were jointly insured against fire loss to their house set fire to the house. The wife sought a recovery against the insurance company for the loss. The policy contained provisions stating that the insurer was not liable for loss caused by neglect of the insured to save and preserve the property at and after a loss, and that the policy should be void in any case of fraud by the insured, provisions similar to *430 ones in the policy in this case. The Supreme Court of Wisconsin essentially held that since the insurance policy was written in the joint names of Mr. and Mrs. Klemens, they had a joint obligation to comply with the terms of the policy, i.e. to save and preserve the property; that the breach of this obligation by Mr. Klemens in intentionally burning the house was thus chargeable to Mrs. Klemens; and that she therefore could not recover under the policy. We note that the Supreme Court in reaching its decision cited a rule taken from 45 C.J.S. Insurance § 822, according to which "where ... property is jointly owned, or where there is a joint obligation on the part of the owners to save and preserve the property, an innocent owner cannot recover on the policy where a coowner willfully set the property on fire." The court also specifically concurred in the trial court's decision which was based in part on Mrs. Klemen's "position as a joint owner of property." Klemens, supra, 99 N.W.2d at 867.

In Kosior, supra, a woman whose husband had intentionally burned buildings owned by the couple as tenants in common conceded that, at law, her husband's act rendered the fire insurance policy in both their names void, but asked for recovery for the value of her interest in the property under the equity powers of the court. The Supreme Judicial Court of Massachusetts denied her claim, basing its decision on the finding that the policy was joint and that the "act of her husband in burning the insured buildings was an act of the `insured,' and as such it was fraud upon the [insurer] which rendered the policies void in accordance with their terms." Kosior, supra, 13 N.E.2d at 425.

In Bridges, supra, a man who had a fire insurance policy on a house which was intentionally burned by his wife was denied recovery on the policy. The Court of Civil Appeals of Texas held that "where two persons have a joint interest in property which is destroyed by being intentionally burned by one of them, the other, though innocent, cannot recover on a fire insurance policy," and specifically included in the holding both the homestead and household goods which in Texas were considered community property of the couple. Bridges, supra at 512.

In the Domina case, the husband of the couple who had insured their property against loss by fire burned the property and later plead guilty to second degree arson in connection with the burning. The insurance company denied coverage. Husband and wife sued the company, claiming that the innocent wife at least should be permitted to recover to the extent of her interest in the property. The Supreme Court of Vermont considered and refused to follow the New Jersey case of Howell v. Ohio Casualty Insurance Co., 130 N.J. Super. 350, 327 A.2d 240 (1974), which had held that "fraud or misconduct of one insured should not bar recovery by innocent co-insureds to the extent of their respective interests in the property involved." Howell, supra, 327 A.2d at 243, quoted in Domina, supra at 503. The court stated that even assuming that the misconduct of the husband would not bar recovery of the innocent wife, "nevertheless her interest in the property as tenants by the entirety is such that the extent thereof cannot be determined," and then held that the wife "cannot be permitted to make a burning, fraudulently done by her co-insured husband, the basis of recovery in this action of the total proceeds of the policy," and "further, permitting a recovery by the wife of one-half the proceeds of the policy, as suggested by the appellees, would be to substitute another contract in place of the one made to protect the indivisible ownership by the entireties." Domina, supra at 503.

In Rockingham, supra, a husband intentionally burned a dwelling jointly owned and insured by both husband and wife and the innocent wife claimed entitlement to a share of the insurance proceeds. The policy contained provisions regarding the fraud or neglect of the insured similar to those in the policy in the Klemens case and to the policy herein at issue. The Supreme Court of Virginia cited the Klemens case, held against the wife, stating that "in this case, the legal interest in the subject matter of *431 the policy was joint and not severable," being owned in tenancy by the entirety, and "furthermore, the form of the insurance contract was joint; the `Named Insured' was [husband and wife] ... if either spouse breached [the duty to save and preserve the property or the duty not to defraud the insurer], the breach was chargeable to the `Named Insured' preventing either spouse from recovering any amount under the policy." Rockingham, supra, 250 S.E.2d at 776.

It is apparent that the Klemens case from Wisconsin, Kosior from Massachusetts, Bridges from Texas, Domina from Vermont, and Rockingham from Virginia all hold in essence that an innocent co-insured may not recover on a fire insurance policy where another co-insured has intentionally set fire to the insured property. In all but the Kosior case, the fact that the couples jointly owned the insured property was mentioned by the courts, and even though such facts did not constitute the sole basis for the holdings, being based also (or mainly, in some of the cases) as they were on the joint nature of the insurance "contract," we regard such consideration by the courts to be noteworthy.

In the Fuselier case, also cited by appellee as being in the (old) "dominant line of authority" referred to above, the Third Circuit Court of Appeal of Louisiana did not in so many words consider the issue facing us here. In Fuselier, the husband of a couple who had insured their house against fire loss burned the house. Both husband and wife sued the insurance company to recover under the policy. On the issue of whether the arson of the husband precluded recovery on the policy, the court noted that the insurance company maintained "that [the husband] caused the fire, and that, as a consequence he cannot recover," and held that even though the policy did not specifically state "that the insured may not recover if he burns his house," the law of Louisiana "does not allow one to profit from his wrongdoing," and that "arson or incendiarism has been recognized in Louisiana for many years as a defense to a claim on a fire insurance policy." (emphasis added) Fuselier, supra at 682. The court never referred to the issue of whether the presumably innocent wife might recover, essentially treating her as if she did not exist or as part and parcel of her husband's identity.

In Home Insurance Company v. Pugh, supra, the Alabama case cited by appellee in support of its argument, the court actually held that although they agreed with the "general principle" of the Klemens and Kosior cases "as it applies in [those] cases," this general rule, that a co-insured cannot recover for destruction of insured property by another insured, did not apply where the latter was insane and could not therefore entertain fraudulent intent. Pugh, supra, 286 So. 2d at 50-51.

In the more recent case of Hosey v. Seibels Bruce Group, S.C. Ins. Co., 363 So. 2d 751 (Ala. 1978), the Alabama Supreme Court noted that Alabama had not previously directly addressed the issue, and resolved it in that case against the "general rule" referred to in Pugh. Noting that "some courts" have followed the rule that "an innocent coowner [may not] recover on a policy of insurance where his co-owner/co-insured has wilfully set the jointly owned and insured property on fire," the court recognized that this rule "has long been criticized as harsh and poorly reasoned." Hosey, supra at 754, citing 5 Appleman, Insurance Law and Practice (Rev.Ed. 1969), § 3594.

In Hosey, the Alabama court could have limited the rationale for its holding for the insured to the fact that the wife, who burned the insured property and filed a false proof of loss statement, was not a named insured, but merely a "defined insured," according to a provision in the policy which defined "insured" as the name insured's spouse and certain others, if residents of the named insured's household. (The policy at issue herein contains the same provision.) The court did not, however, so limit its holding. It did, we note, cite a Wisconsin case subsequent to Klemens, supra, in which the holding was so limited; the case was cited for the proposition that "where the property of an insured *432 is tortiously destroyed by his or her spouse, the wrongful conduct is not attributed to the insured solely by virtue of the marital relationship." Hosey, supra at 753 (citing Shearer v. Dunn County Farmers Mutual Ins. Co., 39 Wis.2d 240, 159 N.W.2d 89 (1968).)

The court also stated that:

It has been accurately noted that: "The ordinary person owning an undivided interest in property, not versed in the nice distinctions of insurance law, would naturally suppose that his individual interest in the property was covered by a policy which named him without qualification as one of the persons insured...." (citing Hoyt v. New Hampshire Fire Ins. Co., 92 N.H. 242, 29 A.2d 121, 123 (1942).)

and noted that such an assumption was "even more reasonable" where, as in the case before it, the innocent insured was the only named insured. Hosey, supra at 754.

However, the Alabama court also cited, with approval, the New Jersey case of Howell, supra, which, like Hoyt, supra, dealt with co-insureds who were both named, quoting therefrom as follows:

... With respect to a fire insurance policy covering the interests of more than one insured ... the obligation of the carrier should be considered several as to each person insured, and the fraud or misconduct of one insured should not bar recovery by the innocent co-insureds to the extent of their respective interests in the property involved.

Howell, supra, 327 A.2d at 243, cited in Hosey, supra at 754. The court also cited the case of Simon v. Security Ins. Co., 390 Mich. 72, 210 N.W.2d 322 (1973), discussed infra, which involved an innocent co-insured wife who was allowed to recover despite the misconduct of her (named) co-insured husband.

We note that the court in Hosey did specifically in its holding limit recovery "to the extent of [the innocent co-insured's] interest in the property," noting that in the case before it the insured interests of the couple were severable. Id. The insured property included a house which was wholly owned by the innocent husband, and personal property, some of which was owned jointly and some of which was owned by the parties separately.

The last of the cases cited by the appellee as supportive of the "dominant" rule, Ijames, supra, involved the issue of the fraud of a co-insured wife in making a false statement under oath regarding an item of claimed fire loss, and whether such fraud should bar any recovery at all by the husband and wife under their fire insurance policy. The Court of Appeals of Michigan held that recovery was barred, relying on an earlier Michigan case, Monaghan v. Agricultural Fire Ins. Co., 53 Mich. 238, 18 N.W. 797 (1884), which, the Ijames court stated, stood "for the proposition that if recovery is barred as to one of the named insureds, it is barred to them all." Ijames, supra, 190 N.W.2d at 369.

The Ijames court noted that the "rule of law may be harsh and inequitable [and that it] may be in need of re-examination," but stated that such re-examination and or change in precedent was for the Michigan Supreme Court to do. Id.

In Simon v. Security Ins. Co., supra, decided in 1973, the Michigan Supreme Court considered a case of a woman claiming recovery under an insurance policy issued to her and her husband for items of hers which were stolen, possibly by her husband. The court held that such wrongful taking by her co-insured husband did not preclude her from recovering for her interest in the stolen property if she was innocent of any participation in her husband's wrongful act. Although the wife had separated from her husband and had filed for divorce, the court mainly based its holding on the fact that the wife did not participate in the wrongful taking and on the fact that her interest in the lost property was divisible from her husband's. The court noted that it was not overruling the Monaghan case, supra, but that it found only "that the conclusive presumption allegedly supported by that case [was] inapplicable to" the facts of the Simon case. Simon, supra, 210 N.W.2d at *433 324. The court distinguished Monaghan by pointing out that there, the only adult insured, who had assigned her interest and claim under a fire insurance policy to her children, was the party guilty of fraud, and that the holding there was based upon the finding that "the plaintiffs, by obtaining an assignment of Mrs. Monaghan's claim and interest in the policy, can stand in no better position than they would be had the action been brought in the names of all the joint contractors." Id., citing Monaghan, supra, 18 N.W. at 803-804.

The court also noted the statement of the Ijames court that it was up to the Supreme Court to make the necessary reexamination of the precedent. Id., 210 N.W.2d at 325. In making its reexamination, the (Supreme) court cited the statement from Appleman, supra as to "better reasoned cases" (than Monaghan and Ijames), the Hoyt case, supra, and other presumably "better reasoned cases." Id. The jury instructions given by the trial court which were based upon Monaghan were found to be "harsh, impractical, and outdated." Id. 210 N.W.2d at 326. The court concluded by holding that the wife there "should be afforded an opportunity to show that a loss occurred and that she had the sole or major and separable interest in the articles lost." Id., 210 N.W.2d at 327.

It is apparent that, of the eight cases appellee has cited to us as being of the "dominant line of authority," only six jurisdictions would arguably still follow this "authority," namely Massachusetts, Texas, Vermont, Virginia, Wisconsin, and Louisiana. In Wisconsin the rule does not apply where the party committing the fraud was not a named insured, see Shearer, supra, and in four of these six states, (all except Massachusetts and Louisiana) the respective courts noted that the property insured was "jointly" owned i.e., in the words of the Rockingham court, the claimants did not have "severable" interests in the respective pieces of property.

Appellee has also cited for us the case of Cox v. Vanguard Insurance Co., Middle Section Court of Appeals of Tennessee, unreported opinion filed December 1, 1978, a case with facts similar to the instant case except that in Cox, the company had been informed by the husband who later burned the insured property that he and his wife were divorced and that he wanted the policy cancelled, but the company, who was also informed of the wife's new address, did not notify the wife of the cancellation. This Court held that the cancellation was good as to the husband but not as to the (innocent) wife, because the company "was not justified in considering that Mr. Cox had any authority to speak for his wife at a time when he was representing that she was not longer his wife," and moreover because the wife received no notice of cancellation when the company had her new, correct address; that therefore at the time of the fire the husband and wife were not co-insureds; and that the wife was "entitled to recover as the sole remaining insured after cancellation of her husband's rights, and this, despite the arson committed by her husband, her former joint insured." Cox, supra at 4-5.

This Court noted that if it should be in error in its reasoning, it would "otherwise follow the dominant line of authorities which would deny recovery to one of two joint insureds where the other joint insured destroyed the property." Id. at 5. This "dominant line" presumably included authorities, cited by the appellant insurance company in that case, from California, Alabama, Massachusetts, Pennsylvania, Texas and Wisconsin.

In the case of Matyuf v. Phoenix Insurance Co., 27 Pa. D. & C.2d 351 (1933), the Washington County Court of Pennsylvania held that "when two joint owners of property (especially if they hold by entireties) are jointly insured by one policy, it is implied, by the very nature and fundamental purpose of the insurance contract, that both of the assured shall observe good faith toward the insurer, ... that a fraudulent and felonious burning by either of the joint owners who are jointly insured is not included *434 within the contemplated risks," and that an innocent insured wife would not therefore recover where her husband had wilfully burned the insured property. Matyuf, supra at 365.

In the case of Federal Insurance Co. v. Wong, 137 F. Supp. 232 (S.D.Ca. 1956), the court, presumably applying California law although no authority from California was cited, held that where one co-insured and "joint adventurer in the ownership and use of [a] truck" wilfully burned the truck, the other co-insured could not recover under the insurance policy. The court cited the provision from CJS, supra, cited in Klemens, supra, and further based its holding upon a provision in the policy therein at issue which stated that the policy insured against "direct and accidental loss of or damage to the automobile," observing that "to purposely and wilfully destroy a chattel by fire is not to bring about an accidental loss ... [the innocent co-insured] was not insured against damage flowing from the deliberate tortious action of his joint adventurer." Wong, supra at 233.

In the later California case of Erlin-Lawler Enterprises, Inc. v. Fire Insurance Exchange, 267 Cal. App. 2d 381, 73 Cal. Rptr. 182 (1968), which involved arson by corporate stockholders and officers and wherein the rule was stated that such arson does not necessarily preclude recovery on an insurance policy by the corporation if the arsonist(s) will not directly or indirectly benefit by the recovery, the Second District Court of Appeal cited with apparent approval the Klemens case, discussed supra, stating in reference thereto that "an innocent joint tenant has been denied recovery where the fire is set by the other joint tenant." Erlin-Lawler, supra, 73 Cal. Rptr. at 186. However, the court in reaching its holding, namely to remand for further facts on the issue of whether the arsonists therein would benefit by a recovery to the corporation, specifically stated that a factor to be taken into consideration was the nature of the property interest the remaining stockholders (the arsonist's ex-wives) had in the corporation i.e. were their interests separate from those of the arsonists? Id.

It would seem likely that a California court would, based upon Erlin-Lawler, in a case such as the instant one, allow recovery if the innocent co-insured could prove that his or her interest in the property for which recovery is sought was severable, or separate, from that of the co-insured who destroyed the property.

It appears from our analysis of what appellee calls the "dominant line of authority" that in some seven states (Wisconsin, Massachusetts, Texas, Vermont, Virginia, Louisiana, and Pennsylvania), appellant would most likely lose his case, although in some he might attempt to distinguish his case on the basis that his interest in the property for which he claims recovery was severable and not joint. In Alabama, Michigan, and California, he most likely could win, as our discussions of the Hosey, Simon, and Erwin-Lawler cases illustrate. Appellee has directed us to no other case law supporting its position nor are we otherwise aware of any. Let us now consider other case law from the "new" dominant line of authority which supports appellant's position.


Our research, along with that of the appellant, has brought to light ten jurisdictions, including Alabama, Michigan, and California, which would allow recovery under a policy such as the one herein at issue to an innocent co-insured whose interest in property, the loss of which was wrongfully caused by another co-insured, is severable from that of the other co-insured. In some of these jurisdictions, recovery would be allowed whether the property interest were several or joint, but we need not go so far in this case, as that issue is not before us. We find it sufficient to note that, as to the issue which is before us, a new "dominant line of authority" has emerged in the last *435 two years, at least six of the cases in this line having been decided since 1978.

The earliest case in this new line is the Hoyt case, supra, from New Hampshire, decided in 1942. In Hoyt one of three tenants in common intentionally burned the insured property. In holding that the two innocent co-insureds might recover under insurance policies each issued in all three names, the court considered how to construe the language in the policy:

The mere fact that the language employed may be sufficient to "express a joint covenant" is not conclusive ... whether the rights of obligees are joint or several is a question of construction ..., and in construing an insurance contract the test is not what the insurance company intended the words of the policy to mean but what a reasonable person in the position of the insured would have understood them to mean. ..... The ordinary person owning an undivided interest in property, not versed in the nice distinctions of insurance law, would naturally suppose that his individual interest in the property was covered by a policy which named him without qualification as one of the persons insured. And the fact that under such circumstances the insurance company may have had good reasons for preferring to issue a joint policy ... is unimportant unless those reasons were disclosed.....

(emphasis added) Hoyt, supra, 29 A.2d at 123.

The Erlin-Lawler case from California was decided in 1960, and as we have indicated, a reading of the case strongly suggests that in a case such as this one, where recovery is claimed for property which arguably belongs to the claimant alone, or for property in which the claimant has at least a severable interest, recovery would be granted in California.

Our discussion of the Simon case, supra, decided in 1973, likewise illustrates that in the case before us the Michigan courts would hold for the appellant innocent co-insured, and allow him an opportunity to show that he had "the sole or major and separable interest in the articles lost" in the fire which destroyed his (and his wife's) house.

The Howell case, supra, from which we have quoted in our discussions of the Domina and Hosey cases, supra, was decided in 1974. The Superior Court of New Jersey in Howell considered a case similar to the one we are herein considering, except that there, the husband set the fire to the couple's house; the policy included coverage for increased living expenses until the burned house was repaired or until new permanent quarters were found; in the policy the named insured was listed as "Gene K. Howell and/or Donna L. h/w;" and recovery was sought for lost contents and for living expenses. The court held that the fraud of the husband was no bar to recovery under the policy by the innocent wife, "irrespective of whether the interests of the wife and husband in the ... property, or in the contract rights under the policy are deemed to be joint or several." The "significant factor" was said to be that the responsibility for the fraud was "several and separate rather than joint, and the husband's fraud cannot be attributed or imputed to the wife...." Howell, supra, 327 A.2d at 244. The use of the ambiguous term "and/or" in the policy was said to support the court's conclusion although it was not deemed controlling. Id. In regard to the general use of language in the policy, the court stated:

With respect to a fire insurance policy covering the interests of more than one insured, however, there is much to commend the view that, unless the terms thereof are plainly to the contrary and in some fashion clearly called to the attention of the insureds, the obligation of the carrier should be considered several as to each person insured, and the fraud or misconduct of one insured should not bar recovery by the innocent co-insureds to *436 the extent of their respective interests in the property involved.

Id., 327 A.2d at 243. The innocent wife was awarded one-half the policy limit for personal belongings lost and all her living expenses.

We have discussed the Hosey case, supra, which was decided in 1978, and our reading of the opinion suggests to us that, in Alabama, a case such as the instant one would be resolved in favor of the innocent co-insured.

In Steigler v. Insurance Co. of North America, 384 A.2d 398 (Del. 1978), the Supreme Court of Delaware considered a case involving property owned by a couple as tenants by the entirety which was intentionally burned by the husband. The policy contained a provision regarding fraud by "the insured" similar to a provision in the policy at issue here. The court cited the Howell case with approval, noting that it represented a "more modern analysis of the problem and [produced] a fairer result." Steigler, supra, 384 A.2d at 402. The court also, we note, based its holding in favor of the innocent co-insured wife, on the ambiguous nature of the use of the words "the insured" in the fraud provision of the policy, noting that "where ambiguous, the language of an insurance contract is always construed most strongly against the insurance company which has drafted it," Id. at 400; and that "an insurance contract should be read to accord with the reasonable expectations of the purchaser so far as the language will permit." Id. at 401, citing various authorities including again, Hoyt, supra. The court found the word "insured" in the provision voiding the policy in case of fraud by "the insured" to be ambiguous "because the word `insured' is singular while two persons are named as the `insured'." Id. at 400.

In Hildebrand v. Holyoke Mutual Fire Insurance Co., 386 A.2d 329 (Me. 1978), the Supreme Judicial Court of Maine considered another case of an innocent co-insured wife whose husband had burned their house, which they owned as joint tenants. Although the husband was an "insured" at the time he burned the house, according to a definition clause similar to the one in the policy we are herein considering, the court held, citing Howell, supra, that "irrespective of whether the interests of the plaintiff and her husband in the destroyed property are deemed to be joint or several," the policy allowed recovery by the innocent wife "despite the fact that [the loss] resulted from the intentional act of another `insured'." Hildebrand, supra at 331. We note that the court did not base its holding upon the fact that the husband was merely a "defined" insured. The court construed the term "insured" in the voiding-for-fraud provision 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." Id.

In Winter v. Aetna Casualty and Surety Co., 96 Misc.2d 497, 409 N.Y.S.2d 85 (1978), the New York Supreme Court held in favor of an innocent co-insured wife whose husband was guilty of "materially and substantially [increasing] the risk of fire" to their house, which they owned as tenants by the entirety. The court followed the reasoning of the New Jersey Court in Howell, supra, stating that the wife had a one-half interest in the fire insurance policy and that she was "entitled to recover the proceeds paid pursuant to the policy to the extent of her interest." Winter, supra, 409 N.Y.S.2d 85 at 88.

In Economy Fire and Casualty Co. v. Warren, 71 Cal. App. 3d 625, 28 Ill.Dec. 194, 390 N.E.2d 361 (1979), the Appellate Court of Illinois held in favor of an innocent co-insured husband whose wife had burned their home which they owned as joint tenants. The court stated that it preferred the reasoning of Hoyt, supra, over that of Klemens, supra, and moreover stated that it did "not think the reasonable person in the position of [the innocent husband] would have supposed that the wrongdoing of his co-insured would be imputed to him. If the *437 [insurance company] intended such a result, it should have made the terms of the policy more express in this regard." Warren, supra, 28 Ill.Dec. at 197, 390 N.E.2d at 364.

Finally, in Auto-Owners Insurance Co. v. Eddinger, 366 So. 2d 123 (Fla.App. 1979), the Second District Court of Appeal of Florida held that an innocent co-insured wife whose husband had fraudulently burned the house which they owned as joint tenants could recover, citing Howell and Hoyt, supra, with approval and stating that:

... in construing the insurance policy, the question whether the coverage was joint or several [as to the two named insureds] must be construed in favor [of the innocent wife] since there is no clear indication to the contrary. The above policy language is capable of more than one possible interpretation. In such case the interpretation should be given which provides coverage to the insured.

Eddinger, supra at 124. The language to which the court referred is identical to language regarding fraud of "the insured," in the policy herein at issue.


Although, as we have indicated, this Court has stated that in a case such as this it would follow the "dominant line of authority," we have herein illustrated that a new "dominant line" has emerged since our decision in Cox, supra. We find this new majority rule to be better reasoned, and to produce a more equitable result.

We find that a reasonable person, reading the provisions in the policy at issue here which refer to fraud of "the insured," 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.

The law in Tennessee is that an insurance policy is construed more strongly against an insurer who has prepared it, and in favor of the insured. Harkavy v. Phoenix Insurance Co., 220 Tenn. 327, 417 S.W.2d 542, 545 (1967); Sturgill v. Life Insurance Co. of Georgia, 62 Tenn. App. 550, 465 S.W.2d 742, 745 (1972).

This being so, it necessarily results in this case that appellant Ryan should not be barred from recovery because of the misconduct of his wife in setting fire to their house, at least as to those items of contents in which he can show he had the sole or major and separable interest. As we have stated, we need go no further in our holding in regard to this case, since appellant seeks recovery only for items he claims belong to him.

This case is in conclusion remanded to the trial court for determination whether, if appellee wishes to raise the issue, appellant Ryan was indeed innocent of any participation in the wrongful burning of his house; whether and as to what items for which recovery is sought he had the sole or major and separable interest; and as to the proper amount of damages he should recover.

Reversed and remanded.

TODD and LEWIS, JJ., concur.