In Shepperson, the court held that an insured homeowner cannot be denied coverage for a fire loss even if the fire was set by another household member who is an insured on the homeowner’s policy, as long as two conditions are met. First, the homeowner did not participate in the arson. Second, the household member was made an insured by the operation of the policy language, such as a definition of insureds that includes any relatives who are household members, rather than by a conscious decision to make them an insured listed by name on the policy.
The federal judge in Shepperson predicted that even though a 1951 decision of the Massachusetts Supreme Judicial Court held that there was no coverage for the innocent coinsured under similar facts, if the case were before the SJC today it would hold that there is coverage.
A judge of the Massachusetts Superior Court has now addressed the innocent coinsured doctrine, in the context of a coinsurered who intentionally set the fire who, unlike in Shepperson, is a named insured on the policy.
In Aquino v. United Property & Cas. Ins. Co., 2018 WL 5532541 (Mass. Super.), Wenda Aquino sought coverage under a homeowner's policy issued by UPC after a fire in her home. UPC denied coverage. It asserted that the fire was intentionally caused by Aquino's fiance, Kelly Pastrana, who was a named coinsured on the policy, and that in those circumstances there was no coverage for any insured.
Both Aquino and Pastrana were listed on the deed and mortgage for the property. Aquino was innocent of any involvement in Pastrana's intentional setting of the fire. Pastrana died in the fire.
The Superior Court addressed the policy provision stating that intentional loss means "any loss arising out of any act an 'insured' commits or conspires to commit with the intent to cause a loss. In the event of such a loss, no 'insured' is entitled to coverage, even 'insureds' who did not commit or conspire to commit the act causing the loss."
Aquino argued that that provision was broader than the provisions allowed by the Massachusetts Standard Form of Fire Policy statute, Mass. Gen. Laws ch. 175 §99. The statute sets policy language for fire insurance policy. Under the statute, such language includes a provision that the insured "shall not be liable for loss occurring . . . while the hazard is increased by any means within the control or knowledge of the insured" and that the insurer "shall not be liable for loss by fire . . . caused . . . by . . . neglect of the insured to use all reasonable means to save and preserve the property at and after a loss."
Aquino argued that the statute used the phrase "the insured," but the UPC policy used the phrase "an insured." The Superior Court agreed with Aquino that that change had impermissibly broadened the policy exclusion.
UPC argued that Aquino should be allowed to recover only half of the amount due under the policy because of Pastrana's intentional setting of the fire. The court agreed, holding that Pastrana's intentional act forfeited his share of recovery available under the policy. The court construed his share to be one half of the damages, noting that he and Aquino were tenants in common. The judge also held that under the same logic Aquino was entitled to only one half of her additional living expenses (for example, rent while the house is being rebuilt).