Unigard Mutual Insurance v. Spokane School District No. 81
579 P.2d 1015, 1978 Wash. App. LEXIS 2414, 20 Wash. App. 261 (1978)
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Rule of Law:
An intentional act exclusion clause in an insurance policy that is phrased in terms of 'the insured' creates a severable obligation, meaning the wrongful act of one insured does not bar coverage for other insureds who did not engage in the excluded conduct.
Facts:
- Ruth Winkler Hensley held a homeowner's insurance policy with Unigard Mutual Insurance Co.
- The policy covered Hensley, her spouse, and her 11-year-old son, William Winkler, as 'insureds.'
- On July 8, 1973, William Winkler broke into Wilson Elementary School.
- Winkler intentionally set fire to the contents of a trash can inside the school.
- After trying unsuccessfully to get water to extinguish the fire, he became frightened and fled the building without notifying anyone.
- The fire spread, causing approximately $250,000 in damage to the school building and its contents.
- Winkler testified that while he intended to light the fire, he did not intend or expect to cause extensive damage to the school building.
Procedural Posture:
- School District No. 81 sued William Winkler for negligence and his parents, the Hensleys, for negligent supervision in state trial court.
- Unigard Mutual Insurance Co., the insurer for Winkler and the Hensleys, filed a separate action for declaratory judgment in Superior Court (a court of first instance) to determine its coverage obligations.
- The Superior Court granted judgment for Unigard, ruling it had no duty to defend or indemnify either Winkler or the Hensleys.
- The insurers for School District No. 81, as appellants, appealed the Superior Court's judgment to the Court of Appeals of Washington.
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Issue:
Does an intentional act exclusion in an insurance policy, which denies coverage for damage 'expected or intended from the standpoint of the insured,' bar coverage for innocent co-insureds based on the intentional act of another insured under the same policy?
Opinions:
Majority - McInturff, J.
No. An intentional act exclusion that refers to 'the insured' creates a severable contract, meaning the wrongful act of one insured does not automatically bar coverage for other innocent insureds who did not engage in the excluded conduct. The court affirmed that the boy, William Winkler, was not covered because his act of starting the fire was deliberate, and the resulting damage was an expected or intended result of that act, thus falling under the policy's exclusion. However, the court reversed the lower court's finding regarding the parents, the Hensleys. It reasoned that the policy language 'the insured' must be read as creating separate, or severable, contracts with each individual insured. The parents' potential liability stems from their own alleged negligence in supervising their son, not from his intentional act. Therefore, the son's excluded conduct cannot be imputed to the parents to deny them coverage for their own distinct potential liability.
Analysis:
This decision establishes the 'severability of interests' doctrine as applied to intentional act exclusions in Washington insurance law. It clarifies that when an exclusion refers to 'the insured' (singular), courts will treat the policy as a collection of separate contracts for each insured person. This precedent protects innocent co-insureds, such as parents or spouses, from losing their liability coverage due to the intentional misconduct of another family member covered under the same policy. The ruling distinguishes between vicarious liability for the intentional act itself and direct liability for an independent tort, such as negligent supervision, ensuring coverage can exist for the latter even when it is denied for the former.
