Defense Digest

New Hampshire Indemnity Company heard a "who" loud and clear on September 28, 2007, when the Florida Second District Court of Appeals found that their exclusionary clause was not applicable in certain instances because of the use of the word "who."

The case stems from a dispute between Taisyer Kattoum and his wife Saadia. It seems after an argument, Mrs. Kattoum deliberately crashed her husband's Lincoln Town Car into the wall of their family-owned car wash. The insurer of the building paid for the damage to the building and sought to be repaid by the Kattoums. The Kattoums made two separate claims under their New Hampshire Indemnity Company ("NHIC") automobile policy. One claim was under their liability coverage and the other claim, filed by Mr. Kattoum, sought to have his car repaired under the collision portion of the policy.

NHIC countered by denying all of the claims and filing for a declaratory judgment by the court. NHIC's position was that the claims were not covered because of the exclusionary clause found in Part A of their policy and pointed to the language which allowed them to deny coverage for any damage intentionally caused by "any insured."

Mr. Kattoum claimed that he was an "innocent co-insured" and the actions of his wife were not attributable to him. NHIC disagreed and filed for a summary judgment with respect to Mr. Kattoum's ability to use the "innocent co-insured" defense, claiming that the words "any insured" in the intentional acts exclusion clause in Part A of the policy rendered the entire policy joint rather than several. If the court found that the policy was joint, then it could be applied to the actions by "any insured." If the policy was found to be several, then the terms of the policy could be applied to each insured individually and would not necessarily bar all claims made under the policy. Based on their contention that the intentional acts exclusion made the entire policy joint as opposed to several, NHIC further argued that Mrs. Kattoum's intentional act of driving the car into the wall could be imputed to her husband; thus, any claim under the entire policy was barred based on the intentional acts exclusion found in Part A of the policy.

The trial court agreed with NHIC with regard to allowing Mr. Kattoum to pursue his collision claim under the "innocent co-insured" theory and granted the summary judgment in favor of NHIC on his claims. This left the only question in the declaratory judgment action for the jury to determine was whether Mrs. Kattoum's actions were intentional. Such a finding by the jury would justify NHIC's denial of the liability claim based on the exclusion clause. The jury did find that Mrs. Kattoum's actions were intentional, and the trial court entered judgment for NHIC on the liability claim.

After the trial Mr. Kattoum moved for summary judgment on his collision claim. This time he argued that, although the jury determined that his wife had acted intentionally when damaging the car, the intentional acts exclusion clause did not apply to the collision portion of the policy. The trial court disagreed and found that the intentional acts exclusion policy barred the Kattoums from any claim under the entire NHIC policy.

The Kattoums' appealed to the Second DCA in Tampa claiming that the trial court misconstrued the policy. The crux of their argument was that Part A (Liability) of the policy (where the intentional acts exclusionary clause is located) states, "We do not provide Liability Coverage for any 'insured' ... [w]ho intentionally causes ... 'property damage'" and, thus, applies only to the insured that performs the intentional act that resulted in the damage.

In reversing the trial court's ruling, the Appeals Court found that this language in the policy plainly excludes liability coverage for any insured who intentionally causes property damage, but they also found that it plainly did not take away the "innocent co-insured's" claim. While NHIC was confident that the "any insured" portion of the policy provided them a valid basis to deny any claim made on the policy, the court found that the exclusion clause was very careful to limit the exclusion only to the insured that intentionally causes the damage. This holding allows the "innocent co-insured" to maintain a claim under the policy for damages that they did not intentionally cause.

The Appeals Court focused its conclusion on the way that the word "who" is used in the intentional act exclusion clause. The court found that the way it is used and its location within the clause limits the exclusion policy to only the person that intentionally caused the damage. The court noted that this interpretation is consistent with those policies that do not provide coverage for "any insured who has intentionally concealed or misrepresented any material fact..." (emphasis added). NHIC was counting on the words "any insured" to cover literally any insured and allow them to deny all coverage as a result of an intentional act.

The court also held that because the exclusion clause was found only in Part A (Liability), absent any language specifically applying it to other sections of the policy, it is limited to only Part A of the policy. Mr. Kattoum was seeking coverage under Part D (Collision) of the policy which did not include an exclusion clause. However, bear in mind that, even if a wording identical to the exclusion clause found in Part A was present in Part D, the Appeals Court would have invalidated it as applied to Mr. Kattoum's collision claim.

How do you write your policy to make sure the "any insured" intentional acts exclusion clause does what it is intended to do? In a different case, the Fourth DCA found that USAA had drafted a valid "any insured" clause by making a separate exclusion section. This section included the statement that the company does not insure for, among other things, "Intentional Loss." USAA further went on to define "intentional loss" as "meaning any loss arising out of any act committed ... by or at the direction of any insured."

So before putting full reliance in the "any insured" portion of an intentional acts exclusion clause, make sure you know who's who.

*Tom is an associate in the Fort Lauderdale, Florida, office. He can be reached at (954) 847-4929 or tjcrowder@mdwcg.com.