A co-owner set fire to his store, which was located in a shopping mall. Various insurers that paid claims to the shopping mall's owner and other mall tenants sued. They sought reimbursement from the arsonist/store co-owner’s general liability insurer.

The insurer denied the claims. Its position was that the arsonist/co-owner’s act was intentional. Both the original trial court and an appellate ruled that their claims should be covered. The insurer persisted that its denial was justified and, again, appealed.

Click below for the results of the high court’s review. What is particularly interesting is that the various courts, essentially, had to interpret the state of the mind of the fire starter.

The insuring public often holds the view that insurers battle claims far too frequently, and public cynicism may have some merit. Insurer reluctance is often directly related to the severity of damages sought in a given loss. When the stakes are high enough, policyholders and insurers look to the judicial system to weigh in.

In this featured situation, three different courts considered the opposing arguments. Whether coverage was owed to the shopping center owner and many retail tenants depended on whether the damage was intentional.

Insurance policies have varied in their approach to intentional acts over the decades. Deliberate injury and damage, while typically ineligible for recovery under a policy, may have exceptions.

Click here for information on various basics that are the foundation of most insurance policies. Though the mention is brief, pay close attention to the matter of fortuitous events. It is from Gordis on P&C Insurance found in Advantage Plus.

In the past, consideration was given to the actual intent of a person who meant to damage property or injure another. The debate revolved around the individual’s point of view. The arson at the shopping center was such a situation.

The applicable liability policy specifically referenced a person’s point of view concerning deliberate damage or injury was relevant. Due to the policy wording, the two lower courts found that, while the co-owner meant to destroy his own store, his desire to cause damage was limited to his business.

Today, results like the above are rarely the case. Click here for an article about the more common treatment of deliberate actions. It is from Emarketing for Agents found in Advantage Plus.

First, some closure. The highest court to review the arson loss came to a different conclusion. It was ruled that the damage to the property of the rest of the mall was foreseeable. It based its decision on what it considered to be an excessive amount of accelerant used to start the fire. Specifically, it held that a reasonable person would recognize that property outside of the arsonist’s store would easily be damaged or destroyed. So, was it all’s well that ends well?

Perhaps a different path should have been taken to handle this dispute. Recall that the insurer did not make their denial due to any form of intentional act exclusion. Rather, the claim was turned down based on a definition of a Covered Occurrence. The policy defined the term as "an accident...which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured...."

The process of handling this loss traveled through deliberations by three separate courts that involved trying to read someone’s mind. Ultimately, two courts reached conclusions that would have deemed the loss as eligible. Consider the time and expense created by treating the issue as involving an exclusion.

It may have been far more accurate to focus on the entire definition of “occurrence” instead of the phrase regarding “expected or intended” damage. The term refers to “accident” first. While accident does not appear to be separately defined, a common understanding of what it means would not apply to damage that originated with a decision to deliberately and criminally destroy property.

Click here for an excerpt from an article on the impact of a general liability policy when adding limitations via endorsements. It is from the July 2011 issue of Rough Notes Magazine found in Advantage Plus.