Innocent co-insureds looking for protection

Advocates in Indiana fighting for “innocent co-insured” protections say they will continue to ask the Legislature to create a new law.

Kerry Hyatt Blomquist, legal director for the Indiana Coalition Against Domestic Violence, said the problem of innocent co-insureds being denied coverage happens every day. However, the denials are seldom challenged because oftentimes the victims are “so used to being held down that sometimes they are not very good at sticking up for themselves.”

The term “innocent co-insured” refers to individuals who had nothing to do with an intentional act that caused a loss. Yet they are refused payment because they hold the insurance policy jointly with the person who is responsible for the damage.

Crider

A complaint filed in May 2013 was thought to be a lawsuit that would set precedent in favor of the innocent co-insured. That case was settled, and another dispute involving an innocent co-insured indicated the courts were likely to find for the insurance companies.

Consequently, those championing the innocent co-insured issue have decided to try a legislative approach. One attempt has already failed in the Indiana General Assembly, but they say they’ll be back.

A bill introduced by Sen. Michael Crider during the 2013 session would have added a new section to state law prohibiting denial of coverage to an innocent co-insured. The measure did not get a hearing in committee. But Crider, R-Greenfield, is optimistic the Legislature will eventually act.

Advocates thought Womack v. Allstate Property & Casualty Insurance Company, et al., 3:13-CV-00495, might be the case that would set precedent.

The plaintiff, Gwendolen Womack of LaPorte County, lost her home to a fire set by her estranged husband. Her insurance provider refused to cover the damages because, the insurance company said, the fire was an intentional act by one of the insured parties and the policy expressly did not cover intentional acts.

To the Indiana Coalition Against Domestic Violence, Womack was an innocent co-insured. Blomquist was able to enlist Angela Krahulik, partner at Ice Miller LLP, to take the case pro bono.

Krahulik and her colleagues, Elizabeth Timme and Sarah Murray, filed the complaint in U.S. District Court for the Northern District of Indiana. The case was settled in January 2014 with the terms remaining confidential.

Allstate declined to comment about the Womack settlement or on its policy, in general, regarding innocent co-insureds.

Krahulik said she and her client feel very fortunate to have settled because another innocent co-insured lost his lawsuit in court. In Deeter v. Indiana Farmers Mutual Insurance Company, 43A04-1305-PL-229, the Indiana Court of Appeals in December affirmed summary judgment for the insurance company based on a plain reading of the insurance contract.

A petition to transfer the Deeter case is pending before the Indiana Supreme Court.

The decision, Krahulik said, indicates the innocent co-insured issue will likely have little traction in the courts. Blomquist says the Deeter case has key differences from Womack’s situation but the coalition is still turning to a legislative approach.

“We actually did think we could find the remedy from the courts,” Blomquist said.

Crider was not working with the coalition when he introduced his innocent co-insured legislation, Senate Bill 170. The former police officer authored the measure after a friend destroyed his ex-wife’s home as part of his suicide and the insurance company refused coverage, which left the ex-wife and children struggling.

“I’m big on fairness,” Crider said. “This just does not feel right to me.”

Provisions in Crider’s bill would have prohibited property and casualty insurers from denying or limiting payment on a claim from an innocent co-insured. Also, insurers could not refuse to issue or renew a policy with an innocent co-insured.

In addition, the bill allowed for stiff penalties – a fine between $25,000 and $50,000 for each act and a revocation of license – for insurance providers who were found to have engaged in unfair and deceptive acts.

When he introduced the bill, Crider said he encountered many people who were interested in the issue which leads him to believe, like Blomquist, that denials to innocent co-insureds are more common than many realize.

The Legislature, Crider said, will have to be educated on the issue, so getting a bill passed may take several tries.

“The cause needs to be addressed,” he said. “If there is somebody else who is a better champion of this issue, I am willing to step aside to get it done.”•