If a member of a club sets intentionally sets fire to the club’s building, does that count as the insured setting fire and the Insurance Company being able to deny coverage?
First, there is the “named insured”. The “declarations page” or cover sheet on a policy of insurance identifies the named insured. In a commercial policy it will be the insured business and/or the principal or owner of the business. The named insured has all of the rights and responsibilities under the contract of insurance.
In the main body of the policy, there is usually a definitions section which covers the term “insured”. In commercial policies, the term is usually defined to include the owner(s), partner(s), director(s) and employees of the business. While this broad group may be included in the definition of an insured under a commercial policy, particular provisions of the policy may or may not apply to all definitional insureds. Some commercial policies exclude coverage for arson committed by any definitional insured, while others only prohibit arson by the owner(s) or principal(s) of the business. The statutes and case law in a particular jurisdiction may limit the individuals whose actions can be imputed to the business for the purpose of excluding coverage in the event of arson.
Many insurance policies, particularly commercial insurance policies, show an Additional Insured on the declarations page or on a “change endorsement”. Under most insurance policies issued today, an additional insured is subject to the defenses which may be asserted against the named insured, such as arson or fraud. http://www.interfire.org/res_file/knowins.asp#ins
Intentional Loss Exclusion – Most of the modern policy forms have a specific exclusion for a loss intentionally caused by the named insured. This is the contractual basis of an arson defense and has only been contained in most policies since about 1984. While arson by the insured is generally considered by the courts to be an absolute bar to recovery under an insurance policy, this exclusion spells it out in concrete language.
The intentional loss exclusion may also limit those circumstances where an intentional loss will be excluded from coverage. In some insurance policies, it must be an intentional loss caused for the purpose of collecting insurance proceeds. Thus, a fire set as an act of domestic violence or by a troubled child may be considered a covered loss for the insured(s) under the terms of that policy, while it may be excluded under the terms of a different policy. The intentional loss exclusion may also determine the right of recovery of other insureds under the policy where a loss has been caused by only one of the insureds. Some policies state that an intentional loss caused by any insured will exclude coverage for every insured. Other policy forms simply state an intentional loss is excluded without further specifying whether it excludes coverage for all other insureds. This raises the “innocent co-insured” issue.
Courts have held that where an insurance policy fails to specifically exclude coverage for all insureds in the event of a loss intentionally caused by any one insured, the claim of the other insured(s) must be paid. In several jurisdictions, recent court rulings have held the claim of an innocent co-insured must be paid regardless of the language in the intentional loss exclusion as a matter of public policy by the courts or because of insurance code provisions which prohibit such language in policy forms used in that state. This has also arisen in the context of insureds who have separated or are in the process of divorce when one of the parties sets fire to the marital residence as an act of spite or revenge. With the attention to domestic violence issues in recent years, courts have been increasingly inclined to rule an innocent co-insured should be paid under such circumstances, regardless of the wording of the policy. While insurance companies recognize the public interest in paying the claim of a truly innocent co-insured, there are many cases where the fire is planned and carried out primarily by one of the insureds with the acquiescence and approval of the other insured(s), providing little or no evidence directly implicating the other insured(s). In those cases, the co-insured may not be “innocent” at all and this issue may be a formidable challenge in fighting arson claims.
In some commercial insurance policies, the intentional loss exclusion has much broader language. In the case of a corporate insured, the general rule is that arson may only be imputed to the corporation when it is carried out by a person having control over the affairs of the corporation. For arson to serve as the basis of denying a claim, the arson must be a corporate decision. However, some of the recent policy forms have contained more expansive language excluding an intentional loss caused by any officer, director, partner or even any employee of the business. For most insurance companies to successfully assert the intentional loss exclusion, however, there will be some evidence indicating the loss was caused to benefit the business or the principals/owners of the business. http://www.interfire.org/res_file/knowins.asp#ile
This issue may also arise in relation to CGL endorsements that further define or limit “additional insured” coverage under the policy. In Wehner v. Weinstein,36 the court addressed the ambiguity between the named insured coverage for “members” and the limitations on additional insured coverage under an “Additional Insureds—Club Members” endorsement. Since fraternity members and pledges were already named insureds, their inclusion as additional insureds was unnecessary and could not be used to preclude coverage. “It is simply unreasonable and internally inconsistent to postulate that members and pledges are to be characterized as both named insureds with full coverage and additional insureds with limited coverage.”37
Even if the party seeking coverage is a “member” or “manager,” he or she must also be engaged in the right kind of activity to qualify for coverage. The policy language provides that coverage for “members” and “managers” will exist only if the conduct at issue related to the named insured’s business. A particularly interesting decision on this point is found in Laborde v. Scottsdale Insurance Co.38 There, the court held hunting was not the “business” of a hunting club and therefore a member of the hunting club was not entitled to coverage under the club’s CGL policy. “As a recreational activity, hunting is not the ‘business’ of the club. As with any country club, swimming club, or golf club, there are business activities, such as collecting dues, paying rent and utilities, and providing maintenance and upkeep for the purpose of supporting recreational activities of the club.” 39 Moreover, the party seeking coverage must be engaged in the proper activity at the right time. If an individual is arguably a “real estate manager” but is off work and watching television inside his or her home at the time of injury, the individual’s conduct is not within the scope of the CGL policy. (Page 16 http://www.babc.com/files/Uploads/Documents/Who%20is%20Insured.pdf)