Public Policy of State Requires Exclusion of Criminal Conduct

Innocent Wife Has No Right to Recover for Criminal Conduct of Husband Causing Damage

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On October 14, 2019-while the Safeway policy was in effect-Mr. Moon backed the Vehicle into a police vehicle while attempting to flee from the police (the “Incident”). In Kristen Moon v. Safeway Insurance Company Of Louisiana, No. 2022-CA-0455, Court of Appeals of Louisiana, Fourth Circuit (December 6, 2022) interpreted the innocent co-insured concept as it related to crime.

FACTUAL BACKGROUND

Safeway issued an automobile liability policy to Ms. Moon covering a vehicle that she personally owned (the “Vehicle”). Ms. Moon’s husband, Herbert Moon, was listed on the policy as a permissive user. The following day, the police informed Ms. Moon that her husband had been arrested and that the Vehicle had been towed. Thereafter, Ms. Moon filed a claim with Safeway for the property damages to the Vehicle that occurred as a result of the Incident. Safeway denied Ms. Moon’s claim based on the criminal and intentional acts exclusions (the “Exclusions”) in its policy.

Following Safeway’s denial of her claim, Ms. Moon sued Safeway. Ms. Moon prayed for not only property damages, but also penalties for bad faith refusal to pay her claim.

After answering the suit, Safeway filed a summary judgment motion based on the Exclusions. Safeway supported its summary judgment motion with an affidavit from its representative, Rhonda Marshall; and a copy of the deposition of the investigating officer, Christopher Bassil. Attached to Ms. Marshall’s affidavit was a certified copy of Safeway’s policy. The criminal charges included aggravated criminal damage to property, a violation of La. R.S. 14:55, for striking the police vehicle.

DISCUSSION

Whether an insurance policy provides for-or precludes-coverage as a matter of law is an issue that can be resolved within the framework of a summary judgment motion. In analyzing insurance policies, the following elementary legal principles apply:

An insurance policy is a contract between the parties and should be construed by using the general rules of interpretation of contracts set forth in the Civil Code.

The parties’ intent as reflected by the words in the policy determine the extent of coverage. Such intent is to be determined in accordance with the general, ordinary, plain and popular meaning of the words used in the policy, unless the words have acquired a technical meaning. LSA-C.C. Art. 2047.

An insurance policy should not be interpreted in an unreasonable or a strained manner so as to enlarge or to restrict its provisions beyond what is reasonably contemplated by its terms or so as to achieve an absurd conclusion.

Absent a conflict with statutory provisions or public policy, insurers, like other individuals, are entitled to limit their liability and to impose and to enforce reasonable conditions upon the policy obligations they contractually assume.

[I]f the policy wording at issue is clear and unambiguously expresses the parties’ intent, the insurance contract must be enforced as written. LSA-C.C. Art. 2046 (providing that when the words of a contract are clear, no further interpretation may be made to determine the parties’ intent).

When the language of an insurance policy is clear, courts lack the authority to change or alter its terms under the guise of interpretation. The determination of whether a contract is clear or ambiguous is a question of law.

THE POLICY

The Safeway policy language at issue provides that under Part IV-Physical Damages-the policy does not apply to, among other things, the following:

“(q) to damage intended by, or which may reasonably be expected to result from the intentional or criminal acts or omissions of, any Insured person or any other person residing with the Insured at the time of the loss. This exclusion applies even if: (1) such insured person lacks the mental capacity to govern his or her own conduct (2) such damage is of a different kind or degree than Intended or reasonably expected; or (3) such damage is sustained by a different person than Intended or reasonably expected. This exclusion applies regardless of whether or not such insured person is actually charged with, or convicted of a crime. … (s) to damage arising out of the ownership, maintenance or use of any automobile while being operated or used in the preparation to commit a crime, commission of a crime and/or flight from a crime, other than a traffic violation, regardless of whether or not such insured person is actually charged with, or convicted of a crime.”

The Incident was the result of Mr. Moon’s act of backing the Vehicle into a police vehicle in an attempt to flee from the police. Mr. Moon’s act was both criminal and intentional.

Mr. Moon was listed on the policy as a permissive user, and he was a resident relative. The Exclusions, as Safeway contends, apply regardless of who was operating the Vehicle when it was being used in the commission of a crime or to flee from the police. Ms. Moon’s damage claim arises out of her ownership of the Vehicle. Her claim is solely for property damages.

The Exclusions, as applied are clear and unambiguous; and the applicability of the Exclusions to the facts on which the suit is based – the Incident – is not in dispute. Rather, Ms. Moon’s contention is that the Exclusions are contrary to public policy and, for that reason, should not be enforced because she was innocent and had nothing to do with the criminal conduct of Mr. Moon.
Safeway’s Exclusions Do Not Violate Public Policy

Ms. Moon contends that the state’s jurisprudence has recognized a policy against excluding coverage for an innocent insured who acts in in good faith.

Although coverage exclusions generally do not comport with the policy of granting protection for injured persons, the exclusions here serve a separate public policy interest of prohibiting persons from insuring themselves against their own intentional or criminal acts. Withholding insurance coverage for intentional or criminal acts helps to disincentivize such conduct, which in turn serves the purpose of eliminating reckless and irresponsible drivers from the highways.

The exclusion is designed to prevent an insured from acting wrongfully with the security of knowing that his insurance company will pay the piper for the damages. The purpose of the exclusion is a recognition of a long-standing public policy against insuring illegal activities and thus, promoting their commission

Mr. Moon was a permissive user of the Vehicle that he was driving during the commission of a crime. The Court of Appeal found the Exclusions are clear, unambiguous, and enforceable-the Exclusions do not violate public policy.

ZALMA OPINION

The court of appeals dealt with the state’s public policy of not depriving an innocent co-insured of the right to recover for acts of a criminal co-insured and the public policy refusing to allow a person to insure against his or her criminal conduct. Finding that the public policy against encouraging criminal conduct trumps the policy of protecting the innocent co-insured. Mr. Moon’s conduct was clearly intentional and criminal and could not be encouraged by allowing his spouse to collect for the damage he caused to their vehicle. Other courts should emulate Louisiana and recognize that the public policy against insuring criminal or intentional conduct should trump the policy protecting innocent co-insureds and should not encourage crimes like arson.

(c) 2022 Barry Zalma

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Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and [email protected]

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