469_c251

---

DEFENSE DUTY SURVIVES FIRE LOSS’ CRIMINAL PLEA AND SEMANTICS

---

AQ Chicken, a restaurant owned by Bradley Ventures, Inc. (Bradley), suffered a fire loss. One of the persons identified as being involved with that event was a son of J. Trybulec Jr., son of J. J. Sr. and M.B. Trybulec who were insured under a homeowners policy issued by Farm Bureau Mutual Ins. Co. of Arkansas (Bureau). Bradley was insured by Cypress Insurance Company (Cypress).

 

The Trybulecs’ son was arrested and charged with trespass and arson. He later accepted a plea to a charge of “Reckless Burning,” a lesser class felony and was placed on probation. Later, Bradley filed suit against the Trybulecs, seeking damages for the loss of their restaurant. The initial court also accepted a request from Cypress as an intervening party in the action due to their stake in any decision. Farm Bureau filed a summary motion. The insurer asked the court to rule that they owed no duty to respond to the claim or to defend the Trybulecs. Bureau based its request upon two, separate parts of its HO policy. One part excluded loss involving intentional acts and the other excluded losses arising out of illegal purpose. Further, Bureau asserted that the Trybulecs were estopped from arguing that intent was not involved in the loss as the “Reckless Burning” charge includes an element of intent. The court granted Bureau’s motion and the decision was appealed by both Cypress and Bradley.

 

Bradley argued to the higher court that the initial decision was in error since, in its opinion, matters of fact existed that required proper hearing. Particularly, Bradley pointed out that, since the Trybulecs son accepted a plea, his actions were not part of an act of litigation. Bradley also disagreed with Bureau’s position regarding the fact that their claim included a request for punitive damages. It claimed that a request for punitive damages did not justify Bureau’s denial of, at minimum, a legal defense of the Trybulecs. In other words, they disputed the notion that it was settled that the loss was the result of an intentional act and for an illegal purpose.

 

The higher court review precedent cases as well as state law. That court did find a relevant case that justified denying a civil action due to the finding of a criminal procedure. However, the court believed that, in the instance they reviewed, a criminal finding barred a civil action only because the prior finding was the result of a jury decision. The court agreed that accepting a plea was not the same thing. The court pointed out that plea bargains typically involve agreeing to a level of punishment in order to avoid the possibility of facing a harsher legal sentence. Therefore, a party is motivated to avoid litigation in order to minimize possible consequences.

 

With regard to existing, applicable, state law, the court shared that, while damages may involve a sole request for punitive awards, courts and juries often have discretion to consider compensatory damages. Therefore, the legal action against the Trybulecs could have resulted in a type of damage that does qualify for coverage under a HO policy.

 

The higher court decided that, since a material matter existed regarding intent, and that possible, eligible damages could be involved; the Trybulecs may well be owed, at least, a leglal defense against the Bradley suit. The lower court decision was reversed and remanded to the lower court for further action.

 

Bradley Ventures, Inc., d/b/a/ AQ Chicken; Cypress Ins. Co. Appellants v. Farm Bureau Mutual Ins. Co. Of Arkansas, Appellee. SPCTAK, No. 06-1494. Filed October 4, 2007. Reversed and Remanded. http://courts.state.ar.us/opinions/2007b/20071004/06-1494.pdf (downloaded April 7, 2008)