Sager v. Farm Bureau Mutual Insurance Co.
2004 WL 1057822, 680 N.W.2d 8, 2004 Iowa Sup. LEXIS 148 (2004)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
An 'intentional loss' exclusion in a fire insurance policy that denies coverage to an innocent co-insured when another insured intentionally causes the loss is unenforceable if it provides less protection than the state's standard fire policy statute, which implies several, not joint, obligations.
Facts:
- Robert Sager and Ramona Sager were married, lived together, and were both named insureds on a homeowners policy issued by Farm Bureau Mutual Insurance Company.
- The policy contained an 'intentional loss' exclusion that barred recovery for any loss arising from an act committed by 'an insured' with the intent to cause a loss.
- After Ramona informed Robert that she was ending their relationship, Robert became angry.
- Intending to destroy his wife's property, Robert intentionally set fire to Ramona’s Christmas decorations and Beanie Baby collection in the basement of their shared home.
- The fire spread, causing approximately $100,000 in damage to the house and its contents.
- Following the fire, Robert and Ramona divorced.
Procedural Posture:
- Ramona Sager submitted a claim to her homeowners insurer, Farm Bureau Mutual Insurance Company, which Farm Bureau denied.
- Ramona Sager sued Farm Bureau in Iowa district court (the trial court) to recover under the policy.
- The district court dismissed Sager's case, ruling that the policy's 'intentional loss' exclusion barred recovery for an innocent co-insured spouse.
- Sager (as appellant) appealed to the Iowa Court of Appeals.
- The Court of Appeals reversed the district court, holding that the exclusion was unenforceable because it violated Iowa's standard fire insurance policy statute.
- Farm Bureau (as appellant) sought further review from the Supreme Court of Iowa, which was granted.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a homeowners insurance policy's 'intentional loss' exclusion, which denies coverage to an innocent co-insured spouse when another insured intentionally causes a loss, violate the minimum coverage requirements of Iowa's standard fire insurance policy statute, Iowa Code section 515.138?
Opinions:
Majority - Streit, J.
Yes, the policy's 'intentional loss' exclusion violates the statute and is unenforceable against an innocent co-insured. While a purely contractual analysis of the policy's use of 'an insured' would bar recovery for all insureds based on the act of one, this analysis is incomplete. Iowa Code § 515.138 requires that any fire policy provide coverage that is the 'substantial equivalent' of the state's standard fire policy. The standard policy consistently uses the phrase 'the insured' in its exclusions, which implies a several obligation, meaning each insured is responsible only for their own misconduct. By contrast, the Farm Bureau policy's use of 'an insured' creates a joint obligation, where the wrongful act of one insured voids coverage for all. This creates a substantive difference and provides less protection than the statutory minimum, rendering the exclusion unenforceable against the innocent co-insured, Ramona.
Analysis:
This decision establishes a significant limitation on the freedom of contract for insurance companies in Iowa, subordinating policy language to statutory mandates. It moves beyond the purely contract-based analysis from Vance v. Pekin Insurance Co. by adding a second, dispositive step: statutory comparison. The ruling aligns Iowa with a growing majority of jurisdictions that interpret standard fire policy statutes to protect innocent co-insureds, particularly in cases of domestic arson. This precedent forces insurers to draft policies that distinguish between the culpability of different insureds, effectively mandating a 'several liability' approach for intentional act exclusions in fire policies.
