Innocent Spouse - What has the Tennessee Supreme Court signaled with respect to the innocent spouse or innocent co-insured doctrine?
Brandon has written a couple of excellent posts on the recent Tennessee Court of Appeals opinion of Tuturea v. Tennessee Farmers Mutual Insurance Company and whether the opinion calls the ability of an insurer to “end-around” (as he puts it) the innocent spouse or innocent co-insured doctrine.
I think we must look to the pronouncements of our state’s highest court, the Tennessee Supreme Court. The most in depth discussion of these doctrines came in the case of Spence v. Allstate Ins. Co. , 883 S.W.2d 586, 591 (Tenn. 1994). In the case, Allstate relied upon the following provisions to deny recovery to the allegedly innocent spouse:
DEFINITIONS.
“You” or “Your”-means the person named on the declarations page as the insured and that person's resident spouse.
“Insured person”-means you and, if a resident of your household: (a) any relative; and (b) any dependent person in your care.
. . . . .
INSURING AGREEMENT.
The terms of this policy impose joint obligations on persons defined as an insured person. This means that the responsibilities, acts and failures to act of a person defined as an insured person will be binding upon another person defined as an insured person.
. . . . .
CONCEALMENT OR FRAUD
This policy is void if it was obtained by misrepresentation, fraud or concealment of the material facts or if you intentionally conceal or misrepresent any material fact or circumstance, before or after loss.
Allstate contended that the policy unambiguously sets forth its intention to prevent an innocent co-insured from recovering for losses caused by the wrongdoing of an insured. The Tennessee Supreme Court disagreed, but stated:
Although we would be inclined to agree if these were the only provisions applicable to this case, other relevant provisions introduce a substantial amount of ambiguity into the status of an innocent co-insured under the policy. For example, in addition to the “CONCEALMENT OR FRAUD” provision, Allstate relied upon the following provision in its denial letters to James and Pamela Spence:
LOSSES WE DO NOT COVER
We do not cover loss to the property ... resulting in any manner from:
. . . . .
6. Intentional or criminal acts of an insured person, if the loss that occurs: (a) may be reasonably expected to result from such acts; or (b) is in fact the intended result of such acts.
Spence, 883 S.W.2d at 591. I would simply note that this case seemingly signals that our highest court would allow an insurance company to avoid the innocent spouse or innocent co-insured doctrine if the policy were clear, and its provisions did not create the ambiguity discussed in Spence.
Can An Insurance Company "End Around" the Innocent Spouse Doctrine . . . Maybe Not
Yesterday, I wrote a bit about the recent Tuturea v. Tennessee Farmers Mutual Insurance Company case that was decided last week by the Western Section of the Court of Appeals. Remember, this is the case where the plaintiff's allegedly insane husband set fire to the house in an unsuccessful effort to commit suicide. I saved the best part for today . . .
One of Mrs. Tuturea's arguments in favor of coverage was that the innocent co-insured doctrine should allow her to recover. However, like pretty much all policies I read these days, Tennessee Farmers had contracted around that doctrine to prohibit an innocent insured from recovering when another insured intentionally causes the loss. Accordingly, Mrs. Tuturea lost.
What's intriguing about this this case is that the Court of Appeals stepped outside of its scope of review and considered, without deciding, an issue that was not presented by Ms. Tuturea, i.e., whether the policy language excluding recovery by an innocent co-insured is enforceable at all. The Tuturea court stated,
We recognize that insurance companies have written policies in response to the proliferation of the innocent co-insured doctrine that often expressly exclude recovery by an innocent co-insured or, at the very least, more clearly impose joint responsibility on the co- insureds. An argument exists that these carefully written provisions return the relationship between insureds and the insurer to the former status quo previously deemed unacceptable, but it is not the duty of the judiciary to impose liability where none exists. See Certain Underwriter's at Lloyd's of London v. Transcarriers Inc., 107 S.W.3d 496, 499 (Tenn. Ct. App. 2002) (citations omitted) (recognizing that courts are not at liberty to rewrite an unambiguous insurance policy simply to avoid a harsh result). While courts in other jurisdictions have reformed or held unenforceable policies excluding recovery by an innocent co-insured where the policies did not comply with legislative limitations on liability exclusions, e.g., Sager v. Farm Bureau Mutual Insurance Co., 680 N.W.2d 8, 9 (Iowa 2004); Watson v. United Services Automobile Ass'n., 566 N.W.2d 683, 692 (Minn. 1997). Mrs. Tuturea has not argued that similar limitations govern the enforcement of insurance agreements in Tennessee. Because the specific language of the policies before us clearly excludes recovery by an innocent co-insured, the trial court’s decision is affirmed.
Needless to say, I'll be taking a hard look at the cases cited above as the Court's dicta seems to be a clear invitation for someone to present the issue. A favorable ruling would certainly be advantageous for policyholders, and I see plenty of opportunities to give the Court an opportunity to do just that.
