Intentional-Acts Exclusion Inapplicable to Innocent Abuse Victim (PA)

In a recent case of first impression, the Pennsylvania Superior Court held that the Commonwealth’s Unfair Insurance Practices Act prohibits carriers from relying on intentional-acts exclusions to disclaim coverage of claims under a property policy arising out of domestic abuse by another insured.  The Superior Court also held that the unauthorized and fraudulent cancellation of a couple’s homeowner’s policy by one spouse as part of a pattern of domestic abuse against the other cannot effectively cancel the policy.

In the case of Lynn v. Nationwide Insurance Company, an insured presented property damage claims under his homeowners policy following a failed murder-suicide in which his co-insured wife attempted to kill herself and her children by burning down the family home.  She left a disturbing suicide note to her estranged husband that stated  “Have a great fucking life knowing that the kids will always be with me now.  I leave you absolutely nothing.”

Following Nationwide’s disclaimer of coverage on the basis of an intentional-acts exclusion contained within the policy, the insured filed suit alleging breach of contract and bad faith.  Specifically, the insured argued that while the exclusion would ordinarily bar coverage, Pennsylvania’s Unfair Insurance Practices Act nonetheless prohibits carriers from denying claims under a property policy that arise out of incidences of domestic abuse by an insured.  To this end, the insured presented evidence demonstrating a systematic pattern of abuse by his wife that culminated in arson as a means of forever depriving him of his children.  Still, the trial court was unconvinced and granted Nationwide summary judgment on the basis that the Act proscribes only those disclaimers that intentionally discriminate against victims of abuse.

On appeal, however, the Pennsylvania Superior Court reversed, holding that the relevant portion of the UIPA was enacted specifically “to create a statutory prohibition against an insurance company’s refusal to pay a homeowners policy/casualty claim arising out of abuse to an innocent claimant when an abusive spouse caused the property damage.” Further, the Court explained that the lower court’s interpretation would run afoul the statute’s clear purpose by virtually guaranteeing that innocent co-insured’s would never be paid for intentional acts of abuse.  As a matter of law and policy, therefore, the Superior Court readily concluded that traditional intentional-acts exclusions are largely inapplicable to those claims stemming from purposeful abuse.

While the decision in Lynn v. Nationwide Insurance Company clearly illustrates that Pennsylvania’s public policy favors insurance coverage for those innocent insureds who have suffered losses as the result of domestic abuse, the Superior Court was also quick to caution that the UIPA does not create per se coverage of the abused.  To the contrary, the Lynn Court found that the Act’s structure and history expressly reject the notion of “a special class of insureds who would be automatically covered solely because they are victims of abuse,” reaching instead only those claims derived directly from the abuse.

Thanks to law clerk (and soon to be law school graduate and attorney) Adam Gomez for his contribution to this post.  If you have any questions, please email Paul at pclark@wcmlaw.com