In May, the Massachusetts Superior Court granted summary judgment to Jonathan and Tammy Hall in a declaratory judgment action against Preferred Mutual Insurance Company. Hall v. Preferred Mut. Ins. Co., 2015 WL 4511760 (Mass. Super.).
The Halls owned residential property insured by Preferred Mutual. Their son Bryan intentionally started a fire that caused significant damage to the real and personal property of the residents in the home. The Halls did not know initially that Bryan had started the fire.
When it learned that Bryan had started the fire Preferred Mutual denied the claim of Jonathan and Tammy.
The policy defined the term "insured" to include "your relatives if residents of your household." It was undisputed that Bryan fell within this definition of insured.
The policy excluded coverage for fire damage where the "loss results from any act committed by or at the direction of any insured." The plain language of the policy therefore excluded the loss.
However, insurers may not limit coverage for fire damage beyond what is permitted by statute to make up a standard fire insurance policy. Mass. Gen. Laws ch. 175 §99. Mass Gen. Laws ch. 175 §99 (Twelfth) allows policies to exclude coverage if the insured neglects to use all reasonable means to save and preserve the property at and after a loss, or if the hazard is increased by any means within the control or knowledge of the insured. Under the statute a policy shall be void if before or after a loss the insured has willfully concealed or misrepresented any material fact or circumstance concerning the insurance or the subject thereof or the interest of the insured therein, or in a case of any fraud or false swearing by the insured resulting thereto.
The statutory language thus precluded coverage if Bryan fell within the definition of insured. The statute does not provide a definition of insured.
Preferred Mutual argued that under the statute "the insured" refers to all people entitled to coverage. Its argument relied on its assertion that insurers may deny coverage to an innocent co-insured in cases where the intentional misconduct of an insured causes damage to property covered by an insurance policy.
The Superior Court held that the innocent coinsured doctrine may not apply unless the guilty coinsured holds a joint, non-severable and co-extensive interest in the insured property. It also held that the legislature did not intend in Mass. Gen. Laws ch. 175 §99 that Bryan come within the definition of the insured in the relevant policy provisions.
The SJC has accepted the case for direct appellate review. It now requests amicus briefs on the issues of whether the policy defined insured beyond what is permitted by the statute, and whether the innocent coinsured doctrine should be revisited.