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State Farm Insurance Company v. Raymer (3/26/99), 977 P 2d 706
<![CDATA[
Notice: This opinion is subject to correction before publication in
the Pacific Reporter. Readers are requested to bring errors to the attention of
the Clerk of the Appellate Courts, 303 K Street, Anchorage, Alaska 99501, phone
(907) 264-0608, fax (907) 264-0878.
THE SUPREME COURT OF THE STATE OF ALASKA
STATE FARM AUTOMOBILE )
INSURANCE COMPANY, ) Supreme Court Nos. S-8296/8315
)
Appellant/ ) Superior Court No.
Cross-Appellee, ) 3AN-94-9706 CI
)
v. )
) O P I N I O N
TAMMY L. RAYMER, )
) [No. 5102 - March 26, 1999]
Appellee/ )
Cross-Appellant. )
______________________________)
Appeal from the Superior Court of the State of
Alaska, Third Judicial District, Anchorage,
Peter A. Michalski, Judge.
Appearances: Joe M. Huddleston, Hughes
Thorsness Powell Huddleston & Bauman LLC, for
Appellant/Cross-Appellee. David Karl Gross, Law Offices of Murphy
L. Clark, Anchorage, for Appellee/Cross-Appellant.
Before: Matthews, Chief Justice, Compton,
Eastaugh, Fabe, and Bryner, Justices.
EASTAUGH, Justice.
I. INTRODUCTION
In Alaska, an innocent co-insured may recover insurance
proceeds for his or her interest in property even if the other co-
insured is responsible for its destruction. But Alaska law also
requires an insured to have an "insurable interest"in the property
to recover insurance proceeds. The superior court granted summary
judgment to Tammy Raymer on her contract claim against State Farm,
concluding that she was an innocent co-insured who had an insurable
interest in a truck her husband, Michael Raymer, may have burned.
It awarded Tammy one-half the value of the truck and attorney's
fees and costs. Because we conclude that there are no genuine,
material fact disputes about whether Tammy Raymer had an insurable
interest in the truck, we affirm and remand to require the fact
finder to determine the extent of that interest.
II. FACTS AND PROCEEDINGS
On April 30, 1994, Michael Raymer drove his 1988
Chevrolet pickup truck to the Sam's Club parking lot at the
Northway Mall in Anchorage. Michael parked the truck in the
parking lot with "For Sale"signs in the window. Around 9:15 p.m.
passers-by noticed that the truck was on fire and attempted to
extinguish the fire. Someone had intentionally set fire to the
truck by attaching a time fuse to a plastic gasoline can placed in
the passenger compartment.
On May 2 Michael and Tammy Raymer filed a claim with
their State Farm agent, Ronald Vea. After State Farm wrote the
Raymers several letters stating that the investigation was not
complete, State Farm lawyers asked for additional information and
scheduled examinations under oath for Michael and Tammy in August
1994. State Farm rescheduled the examinations for September 3.
After examining the Raymers under oath, State Farm requested
additional information and additional examinations under oath from
the Raymers.
Rather than attend the second set of examinations under
oath, the Raymers sued State Farm, Ronald Vea, and other State Farm
representatives, asserting various breach of contract claims and
bad faith claims.
In 1996 Tammy moved for partial summary judgment on her
breach of contract claim. She argued that even if Michael were
responsible for the arson, she was an innocent co-insured. Michael
also moved for summary judgment on the breach of contract claim.
The superior court granted Tammy's motion, concluding that she was
an innocent co-insured under Atlas Assurance Co. of America v.
Mistic; [Fn. 1] it awarded her one-half of the insurance proceeds
plus attorney's fees and costs. But it concluded that there were
genuine issues of material fact about Michael's involvement in the
truck's destruction and denied Michael's motion. [Fn. 2]
State Farm appeals the grant of partial summary judgment
to Tammy Raymer. Tammy's cross-appeal argues that she should have
received the full value of the truck, enhanced attorney's fees, and
all requested costs.
III. DISCUSSION
A. Standard of Review
"In reviewing a grant of summary judgment, this court
must determine whether any genuine issue of material fact exists
and whether on the established facts the moving party is entitled
to judgment as a matter of law."[Fn. 3] We review de novo an
order granting summary judgment. [Fn. 4]
B. Is There a Genuine Fact Issue about Whether Tammy Raymer
Had an Insurable Interest in the Truck?
State Farm argues that the superior court erred in
finding as a matter of law that Tammy had an insurable interest in
the truck. State Farm asserts that there is no evidence that Tammy
had a legal or equitable interest in the truck. It argues that the
truck was the separate property of Michael and that there is no
evidence that Michael and Tammy intended to make the truck marital
property. Tammy argues that although she was not on the truck's
title, she had an insurable interest in the truck because she
suffered loss when the truck was destroyed. She also argues that
State Farm is estopped from raising "the insurable interest
defense,"and that State Farm waived this defense by not raising it
in its answer.
Alaska Statute 21.42.030(a) provides: "A contract of
insurance of property . . . may not be enforced as to the insurance
except for the benefit of persons having an insurable interest in
the things insured at the time of the loss." The statute defines
"insurable interest"as "an actual, lawful, and substantial
economic interest in the safety or preservation of the subject of
the insurance free from loss, destruction, or pecuniary damage or
impairment."[Fn. 5]
Applying this statutory definition, the superior court
concluded that Tammy had an insurable interest in the truck:
The Court finds no authority which states that
the co-insured's name must appear on the title
of the property. Furthermore, there is no dispute that Tammy
Raymer would suffer financially if a loss were not covered by the
insurance policy. Therefore, Tammy Raymer has an insurable
interest in the pickup, even though her name was not on the title.
We first note that if it were marital property, [Fn. 6]
Tammy would unquestionably have an insurable interest in the truck.
[Fn. 7] But we conclude that there is a genuine fact issue about
whether the truck was marital property. Michael purchased the
truck in Colorado in September 1993, before he and Tammy married.
He insured the truck through the United Services Automobile
Association (USAA). Michael and Tammy married on February 11,
1994. Michael dropped his USAA insurance coverage and Michael and
Tammy purchased insurance for the truck from State Farm, effective
February 12, 1994; State Farm had been Tammy's insurance company
for several years. Michael did not add Tammy to the truck's title.
Tammy and Michael point to other evidence that supports their
argument that they intended the truck to be marital property.
State Farm relies heavily on the fact that Michael did
not add Tammy to the title of the truck even though Tammy added
Michael to the title of her Chrysler LeBaron in December 1993.
State Farm argues that this shows that the Raymers did not intend
to make the truck marital property.
Property acquired by one spouse prior to marriage is the
separate property of that spouse. [Fn. 8] "Separate property can
become marital property where that is the intent of the owner and
there is an act or acts which demonstrate that intent."[Fn. 9]
Although there is ample evidence, including the joint insurance
policy, that Michael and Tammy intended to treat the truck as
marital property, the fact that they changed the title of the car
and not the truck raises a genuine fact issue about whether they
intended the truck to become marital property. It is also unclear
from the record whether Michael made payments on the truck with
marital funds before the fire. Although Tammy argues that she also
paid for the truck, the only supporting evidence she offered was a
check used to pay off the truck loan several days after the Raymers
sued State Farm.
Notwithstanding these fact disputes, we conclude that
Tammy had a sufficient beneficial interest in the truck to give her
an insurable interest, even though she was not a legal owner of the
truck.
[T]itle is not the sole test for determining
an insurable interest. It may be a special or limited interest,
disconnected from any title, lien or possession, whereby the holder
of the interest will suffer loss by its destruction, etc., and that
will entitle him to protect the interest by insurance.[ [Fn. 10]]
We agree with the Utah Supreme Court that "insurable interest"is
a fairly broad concept and can encompass contingent and beneficial
interests:
Generally speaking, a person has an insurable
interest in property whenever he would profit by or gain some
advantage by its continued existence and suffer some loss or
disadvantage by its destruction. If he would sustain such loss, it
is immaterial whether he has, or has not, any title in or lien
upon, or possession of, the property itself.
. . . Any interest in property, legal or
equitable, qualified, conditional, contingent,
or absolute, or merely the right to use the property, with or
without the payment of rent, is sufficient.[ [Fn. 11]]
Other courts, in determining whether an insurable interest exists,
have also considered whether a party has an equitable or contingent
interest. [Fn. 12]
In Overton v. Progressive Insurance Co., [Fn. 13] which
is most directly on point and on which Tammy heavily relies, the
wife alone had an insurance policy on the husband's car, which the
husband intentionally burned. Relying on a Florida statute similar
to AS 21.41.030, the court found that the wife had an insurable
interest in the car:
As a general principle, a wife who has a
pecuniary or beneficial interest in her husband's property, or
would have some disadvantage from its loss, has an insurable
interest therein. The fact that appellant did not own the insured
vehicle does not preclude her an insurable interest and coverage
under the policy.[ [Fn. 14]]
The court did not analyze the basis of the beneficial interest,
suggesting that the mere fact that the wife was the owner's spouse
was enough. [Fn. 15] The court remanded the case for a
determination of the extent of the wife's insurable interest. [Fn.
16]
Both parties cite Error v. Western Home Insurance Co.
[Fn. 17] The Utah Supreme Court there held that a husband who was
not on the title of the house still had an insurable interest:
Julie's ownership of the property gave Ray an
insurable interest since the property's continued existence could
possibly provide him with a more advantageous divorce settlement.
At the very least, upon his second marriage to Julie, Ray gained an
equitable interest in the property sufficient to constitute an
insurable interest.[ [Fn. 18]]
But the court went on to conclude that because no evidence was
offered concerning the value of that interest, the lower court did
not err in valuing Ray's interest as "zero."[Fn. 19]
Both cases support a conclusion that Tammy had an
insurable interest in the truck as Michael's spouse. Even if the
truck was Michael's separate property, it may be that its
replacement would have to be purchased with joint or marital
assets. We also agree with the reasoning of the Error court and
hold that even if the truck was exclusively Michael's, it was an
asset which, in the event of divorce, a court might invade in order
to divide the couple's property equitably. This interest was
sufficient for us to conclude that Tammy had an insurable interest
satisfying AS 21.42.030.
Concluding that Tammy had an insurable interest in
Michael's truck, albeit an equitable and contingent interest, does
not conflict with the public policies behind the insurable interest
doctrine. Statutes requiring an insurable interest were enacted to
prevent insurance contracts from being used as a means of wagering,
to prevent societal waste by discouraging unproductive contracts,
and to reduce the incentive for the destruction of property to
obtain insurance proceeds. [Fn. 20] The superior court determined
that Tammy was an innocent co-insured. There is no evidence that
these public policies are implicated in this case.
Notwithstanding the genuine fact issue about whether the
truck was marital property, we conclude that, at a minimum, Tammy's
status as Michael's wife gave her an insurable interest in the
truck. Because we so decide, there is no reason to address Tammy's
estoppel and waiver arguments.
C. Is There a Genuine Issue of Material Fact about Whether
Tammy Raymer Is an Innocent Co-Insured?
State Farm argues that there is a genuine fact issue
about whether Tammy Raymer was an innocent party in regard to the
arson. It asserts that Tammy's mere knowledge that Michael burned
his truck would be sufficient to preclude recovery by Tammy.
Furthermore, State Farm contends that it has not been able to
complete its investigation in this case, and that discovery has
been inadequate to uncover such evidence. It also argues that the
burden of proof on this issue should be shifted to Tammy.
Tammy correctly asserts that this is the first time that
State Farm has raised these arguments. We will not consider new
arguments not raised in the trial court, unless the issues
establish plain error, or the issues (1) do not depend on new
facts, (2) are closely related to other arguments at trial, and (3)
could have been gleaned from the pleadings. [Fn. 21] State Farm's
argument that Tammy was not an innocent party does not meet this
standard, and will not be considered here.
D. Is Tammy Raymer's Interest in the Truck Equal to One-half
of the Insurance Proceeds?
State Farm argues that the superior court erred in
awarding Tammy one-half of the insurance proceeds and that the
amount of any interest is a fact question for the jury. Tammy
argues in her cross-appeal that because she was an innocent co-
insured, the court erred in not awarding her the total value of the
truck.
The superior court relied on Atlas in awarding Tammy one-
half of the insurance proceeds. We held in Atlas that "the
innocent co-insured in this case is entitled to recover one-half of
the damages or one-half of the contract limits, whichever is less,
in accordance with the terms of the contract of insurance."[Fn.
22] But the innocent co-insured in Atlas owned the house jointly
with her husband; they were tenants in common. [Fn. 23] The
evidence here does not permit us to say as a matter of law that
Tammy's interest in the vehicle was equal to Michael's.
Alaska Statute 21.42.030(b) provides that "[t]he measure
of an insurable interest in property is the extent to which the
insured might be indemnified by loss, injury or impairment." We
conclude that there is no basis on which the amount of Tammy's
interest can be determined as a matter of law based on the record
before us. If a fact finder concludes that the truck was marital
property, then an award of one-half of the insurance proceeds may
be correct. [Fn. 24] Similarly, if the truck's replacement must be
paid for from joint or marital assets, an award of half of the
proceeds may also be justified. But Tammy has only established at
this point that she had an insurable interest in the truck; the
extent of that interest and the extent of her loss is unclear and,
given the evidence in the record, must be determined by the fact
finder. [Fn. 25]
E. Do Any Genuine Issues of Material Fact Relevant to
Michael Raymer Preclude Summary Judgment for Tammy Raymer?
State Farm contends that the genuine issues of material
fact that precluded summary judgment for Michael also should have
prevented entry of partial summary judgment for Tammy. Beyond
State Farm's arguments -- addressed separately -- that Tammy may
not be innocent and that public policy demands that she should not
recover because her award may benefit Michael, State Farm's only
remaining contention is that the superior court should have denied
summary judgment to Tammy on her contract claim for the same reason
it denied summary judgment on the Raymers' bad faith claim.
The superior court found that, "[i]n view of the ongoing
investigation of Mr. Raymer, the Court finds that it is a material
question of fact whether State Farm's failure to pay Tammy Raymer's
claim amounted to bad faith." State Farm does not explain why
genuine disputes about State Farm's alleged bad faith were material
to the breach of contract claim. A mere absence of bad faith is
not in itself a defense to a contract claim. State Farm does not
elaborate on this argument, and we see no merit in it.
F. Did the Superior Court Err by Not Holding Tammy's Award
in Constructive Trust for Michael?
State Farm argues that any insurance proceeds payable to
Tammy should be held in a constructive trust for Michael, and that
she should not be allowed to receive them because it would violate
the public policy against allowing a wrongdoer to benefit from his
bad act. Tammy does not address this argument.
We have described the constructive trust doctrine as
follows:
The constructive trust may be defined as a
devise [sic] used by chancery to compel one who unfairly holds a
property interest to convey that interest to another to whom it
justly belongs. When a court of equity finds that a defendant is
the holder of a property interest which he retains by reason of
unjust, unconscionable, or unlawful means, it takes such interest
from the defendant and vests it in the wronged party.[ [Fn. 26]]
State Farm's argument is meritless. The case State Farm
cites, Ginsberg v. Goldstein, [Fn. 27] does not support imposing a
constructive trust on any proceeds paid to Tammy. In Ginsberg, an
ex-wife tried to garnish her ex-husband's bank account. [Fn. 28]
The bank account contained insurance proceeds collected for a
statue that had belonged to the ex-husband's current wife. [Fn. 29]
The court held that the ex-wife could not garnish the proceeds
because they actually belonged to the current wife and were being
held in trust for her. [Fn. 30] Although the court stated that the
ex-husband had an insurable interest in the statue, his interest
did not affect the question of who, as between himself and his
current wife, actually owned the proceeds. [Fn. 31]
In this case, no third parties are trying to collect the
insurance proceeds from Tammy. And Michael has not cross-appealed,
and does not argue that Tammy had no insurable interest in the
truck or had less than one-half interest in the insurance proceeds.
Because she had an insurable interest in the truck, Tammy is
entitled to the insurance proceeds to the extent of that interest.
[Fn. 32] There is nothing "unfair"about allowing her to receive
those proceeds, such that they must be held in constructive trust
for Michael. We conclude that the superior court did not err in
declining to impose the award with a constructive trust.
G. Does Public Policy Preclude an Award to Tammy Raymer?
State Farm argues that Tammy's partial summary judgment
violates public policy because the superior court may be rewarding
a wrongdoer. State Farm argues that because Michael and Tammy are
still married and functioning as one economic unit, any award to
Tammy will benefit Michael. State Farm seems untroubled by the
obvious inconsistency of this argument with its contention that
Tammy's proceeds should be held in trust for Michael. Tammy argues
that we decided the public policy issue in Atlas.
Although the husband and wife in Atlas had divorced after
their house burned, we did not rely on that fact in concluding that
the innocent co-insured could recover on fire insurance after her
co-insured intentionally burned the property. [Fn. 33] We first
noted that public policy precludes recovery by one who burns his or
her own property:
Public policy dictates that an insured who
intentionally sets fire to property covered by the insurance
contract may not recover thereon. See Dairy Queen v. Travelers
Indem. Co., 748 P.2d 1169, 1172 (Alaska 1988). We have not
addressed whether an innocent co-insured is likewise precluded from
recovery.[ [Fn. 34]]
We agree with these authorities. We noted in Atlas that, "[a]t
least one court has allowed the innocent spouse to recover one-half
of the proceeds even where she continued to live with the wrongdoer
spouse after the fire, reasoning that any benefit to the wrongdoer
was indirect."[Fn. 35]
Other courts have also concluded that although there may
be additional policy concerns when the innocent co-insured and the
wrongdoer remain married, the equities favor the innocent spouse's
recovery. [Fn. 36] The Supreme Court of Georgia, in Richards v.
Hanover Insurance Co., [Fn. 37] addressed these concerns by placing
the burden on the co-insured claiming coverage to prove her
nonparticipation in the alleged wrongful conduct. There may be
merit to this approach. But we need not decide whether to adopt
it, given the procedural context of this case.
We conclude that Tammy's recovery is not barred by public
policy even though she remains married to Michael.
H. Attorney's Fees and Costs
Because we remand for determination of the extent of
Tammy's interest in the truck, it is not necessary to decide
whether she should have been awarded enhanced attorney's fees and
all requested costs.
IV. CONCLUSION
We AFFIRM in part because the superior court did not err
in granting partial summary judgment to Tammy Raymer holding that
she was an innocent co-insured party who had an insurable interest
in the truck. But we must VACATE the judgment and REMAND for
determination of the extent of that interest.
FOOTNOTES
Footnote 1:
822 P.2d 897 (Alaska 1991).
Footnote 2:
We assume for purposes of discussion that Michael Raymer did
set fire to his truck. See Thoma v. Hickel, 947 P.2d 816, 818
(Alaska 1997) ("In reviewing grants of summary judgment, the facts
are to be viewed in the light most favorable to the losing party,
and reasonable inferences are to be resolved in favor of the losing
party.") (citing Walt v. State, 751 P.2d 1345, 1348 n.2 (Alaska
1988)).
Footnote 3:
Nielson v. Benton, 903 P.2d 1049, 1051-52 (Alaska 1995)
(citing Wright v. State, 824 P.2d 718, 720 (Alaska 1992)).
Footnote 4:
See id. at 1052 (citing Tongass Sport Fishing Ass'n v. State,
866 P.2d 1314, 1317 (Alaska 1994)).
Footnote 5:
AS 21.42.030(c).
Footnote 6:
"Marital property"is property owned by one or both of the
parties to a divorce which the court may divide without making a
special finding that the balancing of the equities between the
parties so requires. In contrast, "separate property"is property
owned by one of the parties to a divorce which the court may not
invade without such a finding. See AS 25.24.160(a)(4).
Footnote 7:
This interest would be contingent, because whether property is
"marital"normally becomes relevant only in context of divorce or
dissolution.
Footnote 8:
See AS 25.24.160(a)(4); Wanberg v. Wanberg, 664 P.2d 568, 570-
71 (Alaska 1983).
Footnote 9:
Chotiner v. Chotiner, 829 P.2d 829, 832 (Alaska 1992).
Footnote 10:
Republic Ins. Co. v. Martin, 355 S.E.2d 694, 696 (Ga. App.
1987) (holding that ex-husband who had deeded property to ex-wife
still had equitable interest in property because of continuing
liability to lien holder sufficient for an insurable interest).
Footnote 11:
Error v. Western Home Ins. Co., 762 P.2d 1077, 1081-82 (Utah
1988) (quoting Hill v. Safeco Ins. Co., 448 P.2d 915, 916 n.2 (Utah
1969), (internal quotation marks omitted) quoting G. Couch,
Cyclopedia of Insurance Law sec. 24.13 (2d ed. 1960)).
Footnote 12:
See Employers Nat'l Ins. Co. v. Holliman, 248 So. 2d 717, 721
(Ala. 1971) ("[W]hat constitutes an insurable interest under an
automobile liability policy involves a determination as to whether
the named insured would be liable for injury to persons or property
which might arise out of the operation of the described
automobile."); Alberici v. Safeguard Mut. Ins. Co., 664 A.2d 110,
113 (Pa. Super. 1995) ("Upon execution of an agreement of sale, a
purchaser of real estate has an equitable title to property and may
insure his or her interest therein. A purchaser's insurable
interest is in the entire property . . . ."(citation omitted)).
Footnote 13:
585 So. 2d 445, 446 (Fla. App. 1991).
Footnote 14:
Overton v. Progressive Ins. Co., 585 So. 2d 445, 448 (Fla.
App. 1991) (citations omitted).
Footnote 15:
See id.
Footnote 16:
See id. at 449.
Footnote 17:
762 P.2d 1077 (Utah 1988).
Footnote 18:
Error, 762 P.2d at 1082.
Footnote 19:
Id.
Footnote 20:
See Robert E. Keeton & Alan I. Widiss, Insurance Law sec.
3.1(c)
(1988).
Footnote 21:
See Arnett v. Baskous, 856 P.2d 790, 791 n.1 (Alaska 1993)
(citing O'Callaghan v. State, 826 P.2d 1132, 1133 n.1 (Alaska
1992)).
Footnote 22:
822 P.2d at 901. The claimant in Atlas did not ask for more
than one-half of the policy limits. See id. at 900.
Footnote 23:
See id. at 898.
Footnote 24:
See Brown v. Brown, 914 P.2d 206, 209 (Alaska 1996) ("A 50/50
property split is presumptively just and is the starting point for
application of the [Wanberg] factors the court must consider.").
Footnote 25:
See Overton, 585 So. 2d at 449 (remanding case for lower court
to determine extent of insurable interest); Error, 762 P.2d at 1082
(concluding that because no evidence was offered concerning value
of insurable interest, lower court did not err in valuing husband's
interest as "zero").
Footnote 26:
McKnight v. Rice, Hoppner, Brown & Brunner, 678 P.2d 1330,
1335 (Alaska 1984) (quoting G. Bogart, Trust and Trustees sec. 471,
at
3 (rev. 2d ed. 1978)).
Footnote 27:
404 So. 2d 1098 (Fla. App. 1981).
Footnote 28:
See id. at 1099.
Footnote 29:
See id.
Footnote 30:
See id. at 1100-01.
Footnote 31:
See id.
Footnote 32:
See AS 21.42.030.
Footnote 33:
See 822 P.2d at 899-900, 902.
Footnote 34:
Id. at 899.
Footnote 35:
Id. at 901 (citing Maravich v. Aetna Life & Casualty Co., 504
A.2d 896, 907 (Pa. Super. 1986)).
Footnote 36:
See Knupp v. Aetna Life & Cas. Co., 479 N.Y.S.2d 992, 998
(App. Div. 1984); Commercial Union Ins. Co. v. State Farm Fire &
Cas. Co., 546 F. Supp. 543, 547 (D. Colo. 1982).
Footnote 37:
299 S.E.2d 561 (Ga. 1983).
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