It seems that some judges believe that insurance is an entitlement rather than a contract that can be interpreted beyond reason to provide benefits to victims of persons insured even if that person intentionally causes injury. In so doing they forget that insurance is a contract that provides indemnity only for fortuitous actions and can never provide coverage for intentionally caused injury.

In Kentucky Farm Bureau Mutual Insurance Company v. Conley, Not Reported in S.W.3d, 2015 WL 4040058 (Ky.App., 7/25/2015) the Kentucky Court of Appeal was faced with an appeal from a trial court decision that required coverage for defense and indemnity of an insured who was convicted of the crime of murder.

FACTS

This appeal arises from a homeowner’s insurance coverage dispute between Kentucky Farm Bureau Mutual Insurance Company (Farm Bureau) and Keith Justin Conley (“Conley”), and coverage for any judgment that might be entered against Conley, resulting from a wrongful death action filed against him based upon his shooting and killing of Jessica Newsome.

In 2006, Keith Justin Conley (“Conley”) was convicted of murdering his girlfriend, Jessica Newsome, who he fatally shot in the home of his father, Keith E. Conley. Conley and Jessica were living in Keith E. Conley’s home at the time of the shooting. Gregory and Loretta Newsome (“the Newsomes”) brought a wrongful death cause of action against Conley for damages arising from their daughter’s death.

At the time of the shooting, Keith E. Conley’s home was insured through a homeowner’s insurance policy issued by Kentucky Farm Bureau. Subject to a reservation of rights, Kentucky Farm Bureau provided a defense to Conley for the Newsomes’ claims against him. Kentucky Farm Bureau also intervened in the action for the purpose of seeking a declaration that the homeowner’s insurance policy issued to Conley’s father did not provide coverage to Conley for the claims arising from Jessica Newsome’s murder.
After Conley’s conviction became final in 2007, Kentucky Farm Bureau moved the trial court for a ruling on its petition for a declaratory judgment. On June 23, 2011, the trial court ruled that the homeowner’s insurance policy provided coverage for Conley’s acts, and ordered Kentucky Farm Bureau to satisfy the judgment or provide a defense in the claim against Conley.  The trial court entered an order on August 30 denying Kentucky Farm Bureau’s motion.

THE ISSUE

The overarching issue presented in this matter is the interpretation of an insurance policy. The argument that Farm Bureau raised before the circuit court regarding the insurance policy at issue accurately summarized the relevant provisions of the insurance policy. Its argument was, in pertinent part: “The policy of insurance issued to Keith E. Conley clearly provides that the personal liability coverage under that policy is limited to coverage or damages because of a “bodily injury” or “property damage” caused by a “covered occurrence”. Excluded from coverage is “bodily injury” which is expected or intended by one of its insured’s [sic]. The policy, therefore, included an exclusion that recorded the fortuity doctrine.

ANALYSIS

Keith Justin Conley has been found guilty of murder and as defined by Kentucky law murder is an intentional act and as such those actions are not covered under the homeowner’s policy of Keith E. Conley. However, Farm Bureau’s argument, noted above, clearly indicated and put the circuit court on notice that an “occurrence” was a defined term under the policy and that its definition does not include what Kentucky has statutorily defined as murder.

In its review, the circuit court took notice of—and found dispositive to its review—an endorsement which it acknowledged was never a part of Keith E. Conley’s policy. Specifically, the circuit court determined that the endorsement contained an alternative definition of the word “intent”; and, based upon that alternative definition of intent (which the circuit court apparently believed conflicted with the ordinary meaning of the word “intent”) the circuit court determined that the policy’s use of the word “intent” was ambiguous. As such, it mandated coverage under the circumstances.

The Kentucky Court of Appeal concluded that the circuit court manufactured an ambiguity by looking beyond the four corners of the contract. This was impermissible.

The rules of contract interpretation dictate that the parties’ intentions are to be discerned only from the four corners of the contract itself. Absent ambiguity, extrinsic evidence should not be considered, and a court is required to interpret the contract terms by assigning language its ordinary meaning.

With this in mind, “intent” or “intention” is not ambiguous as used in Keith E. Conley’s policy. The statute’s use of “intent” is consistent with the general definition of the word. As described elsewhere in the definitions section of Kentucky’s penal code, a person acts “intentionally” “with respect to a result or to conduct described by a statute defining an offense when his conscious objective is to cause that result or to engage in that conduct.” KRS 501.020(1). When read with the definition of “intentionally” in KRS 501.020, KRS 507.020(1)(a) designates as murder a homicide that results from conduct of a person whose conscious objective is to cause another’s death.

Simply put, when the jury in Conley’s criminal trial found him guilty of murder it determined beyond a reasonable doubt that Jessica Newsome’s death resulted from Conley’s act of shooting her, and that Conley’s conscious objective in shooting her—his reason for acting in that way—was to cause her death.

Therefore, under either the statute or the policy, Jessica Newsome’s death was the result of Conley’s intentional act.

In light of the foregoing, the Court of Appeal reversed the trial court and directed the circuit court to enter judgment in favor of Farm Bureau finding that Keith E. Conley’s homeowner’s insurance policy does not obligate Farm Bureau to either provide a defense for Conley or satisfy any judgment that might be entered against him as a result of the Newsomes’ wrongful death action.

ZALMA OPINION

Murder, by definition, is an intentional act. Insurance, by definition, only insures the liability of the insured against loss, damage, or liability arising from a contingent or unknown event. Murder, being an intentional act is neither contingent nor is it unknown to the murderer. The appellate court slapped the trial court judge who tried to change the meaning of insurance and the insurance contract to provide benefits to the victim of the crime rather than limit the benefits in accordance with the terms of the contract. In simple language, murder cannot be accidental.

Barry Zalma, Esq., CFE, has practiced law in California for more than 42 years as an insurance coverage and claims handling lawyer. He now limits his practice to service as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes.

He founded Zalma Insurance Consultants in 2001 and serves as its only consultant.

Look to National Underwriter Company for the new Zalma Insurance Claims Library, at www.nationalunderwriter.com/ZalmaLibrary. The new books are Insurance Law, Mold Claims Coverage Guide, Construction Defects Coverage Guide and Insurance Claims: A Comprehensive Guide.

The American Bar Association, Tort & Insurance Practice Section has published Mr. Zalma’s book “The Insurance Fraud Deskbook” available at  http://shop.americanbar.org/eBus/Store/ProductDetails.aspx?productId=214624, or 800-285-2221 which is presently available.

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