St. Paul Fire & Marine Insurance v. Molloy

¹⁴¹ Digges, J., delivered the opinion of the Court. Petitioner St. Paul Fire and Marine Insurance Company raises divers issues emanating from the trial which culminated in a final judgment, entered in favor of respondents Charles and Diane Molloy, awarding benefits found to be due them under a homeowner’s insurance policy for damage suffered and expenses incurred as a result of a fire in the Molloy abode on January 22, 1978. 1 Although we agree with the trial court’s ruling that, even if the allegation of Mr. Molloy’s pyromania is proven to be true, the co-insured spouse may be indemnified for her share of the loss, we determine the circuit court erred in holding that St. Paul is precluded, by reason of waiver, from proving Charles Molloy intentionally set the fire, and therefore erroneously removed from jury consideration the petitioner’s defense of arson as to the husband’s claim. We now relate sufficient facts to give the reader the flavor of the extensive record in this case which is, to say the least, piquant. Charles Molloy was the only person present in the Bowie, Maryland home, owned by him together with his wife as tenants by the entireties, on the afternoon and evening of January 22nd.

According to Charles’ testimony below, the fire was started when the ember of his cigarette was dislodged, unknown to him, when he hung up a jacket upon returning home from a grocery store. As the fire smoldered in a pile of clothes on the floor of the closet onto which the ash dropped, Charles dozed off to sleep in front of the television. Late that afternoon, his story goes, the husband awoke to the sound of the family dog barking and a house full of smoke. His examination revealed open flames in the hallway, and, being unable to locate the telephone in the kitchen for the smoke, Mr. Molloy grabbed the dog and some clothes from elsewhere in the house, threw them into his automobile parked in the garage, gathered additional clothes piled on a ping-pong table near the vehicle, and ¹⁴² backed his auto out into the driveway, pausing to close the garage door behind him.

Mr. Molloy then drove down the street on which his house was situated, passing a number of his neighbors’ homes without stopping, and proceeded a total distance of four and one-half miles, again passing several business establishments at which a phone could have been utilized, to a McDonalds Restaurant from which he notified the fire department. Charles returned to his residence some time later to discover that the fire had been brought under control. There, he talked briefly with the fire chief, who informed him that investigators would want to speak to him when they arrived. Mr. Molloy, however, wanted to find his wife, and departed for the home of his mother-in-law where he believed he would find her along with the couple’s children.

Upon his arrival there a few minutes later, he stopped his automobile in the street, and blew the horn for ten or fifteen minutes, eventually provoking his in-law, with whom he was by his own description "on very poor terms,” to emerge from the house and to shout something from the driveway not audible to Charles. Apparently concluding from this unorthodox interaction that his wife was not there, he departed and eventually returned to his own residence at approximately 10:30 p.m., where, upon pulling up to the driveway, he observed his wife and Dewey Meadows, a long-time family friend, standing in the yard along with a large crowd of onlookers. Diane Molloy, together with the children, had spent the afternoon in a hotel five miles from the residence, and had been earlier alerted to the fire by a neighbor. Charles testified he was jealous of Dewey Meadows because Diane "confided in him on some things,” though he conceded that he had no reason to believe they had dated or were having an affair.

According to Charles’ testimony, the sight of Diane and Mr. Meadows together rendered him, at once, infuriated, disoriented and depressed, causing him to drive away at a normal rate of speed. Fire Investigator Robert Edwards’ account differed from that of Charles on this point, however, for his testimony reveals that when he and an assistant identified themselves to this respondent while he was seated in his car, Charles rolled up ¹⁴³ the window and sped off. The investigators pursued the respondent for some distance in their vehicles, and then abandoned the chase. It seems that Mr. Molloy headed back to his mother-in-law’s house, for police officer Freeman Kidwell testified that he approached Charles at around 10:45 p.m. in relation to a disorderly conduct complaint made by the mother-in-law.

Mr. Molloy responded to a request for identification by "yellLing] a couple of obscenities ... and drivfing] off.” Not surprisingly, this conduct gave rise to another chase, this one at high speeds, in which Charles apparently successfully ran two roadblocks, almost struck a police officer, and attempted to run several police vehicles off the road. Mr. Molloy was eventually apprehended, and the charge of arson of which he was later accused was nol prossed by the state’s attorney. The Molloys thereafter made a claim for benefits under the fire insurance policy issued by St. Paul, and submitted proof of loss, an inventory of damaged items and estimates for the substantial work needed to refurbish the house. Petitioner, through its counsel, however, informed the insureds by letter that it was not liable for this loss of January 22, 1978, by reason of the neglect of the insured to use all reasonable means to save and preserve the property at and after the loss.

(See lines 11 through 22 of the 165 line standard fire policy.) The insurance company, of course, reserves its right to invoke any other terms, conditions, or exclusions of the policy which may be applicable to this loss upon facts now known or which may later be discovered, [parenthetical in original. 2 ] The declination of liability resulted in the institution of this litigation by the respondents in the Circuit Court for Prince George’s County to enforce payment under the insurance ¹⁴⁴ contract. The matter was called for a jury trial on November 27, 1979, at which time, the respondents made a motion in limine to exclude any evidence tending to prove that either Mr. or Mrs. Molloy intentionally set the fire. In addition, the wife moved for summary judgment, urging that the only question as to her right to proceeds under the insurance policy was a legal issue: Whether a person, who holds property jointly as a tenant by the entirety, is chargeable with the improper conduct of the other spouse, so that the act of burning by the guilty insured would bar recovery under the policy by the innocent co-insured? Both motions were denied.

At the close of the evidence, however, the trial judge effectively modified these rulings — the first by instructing the jury that the defense of arson had as a matter of law been waived and that therefore the panel should disregard any evidence of an intentional burning, and the second, by informing the jury that it was to treat Mr. and Mrs. Molloy, and their interests in the property, separately, so that the wife would not necessarily be barred from recovering for her share of the benefits by the arson of her husband. With the issues limited by these instructions, the jury returned a verdict in favor of the respondents for $87,614.28, and upon the entry of final judgment, St. Paul noted an appeal to the Court of Special Appeals. That court affirmed the circuit court’s judgment, St. Paul Fire & Marine Insurance Co. v. Molloy, 46 Md. App. 570 , 420 A.2d 994 (1980), and we granted certiorari. Petitioner St. Paul initially argues that the trial court erred in determining the insurance company waived its arson defense, and therefore improperly removed from jury consideration the evidence indicative of an intentional burning.

So that Charles Molloy’s waiver argument as well as our disposition of it may be fully comprehended, we believe it helpful to set out a few general principles, the correctness of which is not disputed by either party before this Court. The law of this State is in alignment with its counterparts existing in most if not all other jurisdictions, that, in regard to at least certain types of insurance policy provisions, "the right of an insurer to forfeit or void the ¹⁴⁵ policy may be lost by the doctrine of waiver or estoppel.” Rubenstein v. Jefferson Nat’l Life, 268 Md. 388, 392 , 302 A.2d 49, 52 (1973). We have defined waiver as used in this context to be "the intentional relinquishment of a known right” existing for the benefit of the insurer, see Rubenstein v. Jefferson Nat’l Life, supra at 392-93, 302 A.2d at 52 ; Royal Insur. Co. v. Drury, 150 Md. 211, 230-31 , 132 A. 635, 643 (1926).

Equally well established is the fact that such a waiver need not be by express agreement, as it may also "be inferred from the acts and conduct of the company if those acts and that conduct are inconsistent with an intention to insist upon a strict performance of the condition.” The Spring Garden Insurance Co. v. Whayland, 103 Md. 699, 701 , 64 A. 925, 926 (1906); see also Rubenstein, supra; Food Fair v. Blumberg, 234 Md. 521, 531 , 200 A.2d 166, 172 (1964); Eastover Stores, Inc. v. Minnix, 219 Md. 658, 672 , 150 A.2d 884, 891-92 (1959). Moreover, we have indicated that conduct in the form of consistent reliance by an insurer on one condition or defense may have the effect of constituting a waiver of other possible known forfeitures. See Eastover Stores, Inc. v. Minnix, supra at 672, 150 A.2d at 891-92 ; Foard v. Snider, 205 Md. 435, 447-51 , 109 A.2d 101, 106 (1954); Md. Casualty Co. v. E. Balto. Driv.

Assn., 135 Md. 105, 112-13 , 108 A. 517, 520-21 (1919). Whether waiver exists in a given case is normally a question for the trier of fact, for the determination of its existence vel non turns on the intent of the party ostensibly waiving the right, a state of mind which is to be derived from the facts and circumstances surrounding the purported relinquishment. See Rubenstein v. Jefferson Nat’l Life, supra, 268 Md. at 395 , 302 A.2d at 53 ; Fidelity & Casualty Co. v. Riley, 168 Md. 430, 438-39 , 178 A. 250, 254 (1935); Continental Ins. Co. v. Burns, 144 Md. 429, 436-38 , 125 A. 232, 234-35 (1924).

Charles grounds his waiver argument solely on the legal effect of St. Paul’s reliance, both in the letter denying liability and the answer to the interrogatory, on the husband’s alleged breach of his contractual duty to save and preserve the property as a justification for its failure to pay. As the argument goes, since "[glood faith demands of an insurance ¹⁴⁶ company frank and open dealing with its policy holder,” Spring Garden Insurance Co. v. Whayland, supra, 103 Md. at 701 , 64 A. at 926 , St. Paul, by basing its declination of liability on one ground while possessing knowledge of facts giving rise to another, waived the uncommunicated defense. See 16C Appleman, Insurance Law and Practice § 9260 (1981). We do not agree.

It is unnecessary to delve deeply into waiver resulting from the failure of the insurer to promptly inform the insured of a known ground of forfeiture, for in our view, the non-preservation clause of the policy, identified by St. Paul to justify its position, encompasses the arson defense. The fire insurance policy involved in this case contains no specific exclusion for a burning caused by the intentional act of the insureds, and one express policy provision which incorporates a forfeiture of coverage for damage caused by arson is, in fact, the non-preservation clause paraphrased in the declination of liability letter, and cited in the answer to the interrogatory. 3 We are not the first to recognize that an intentional act of destruction manifestly constitutes neglect of the most heinous variety to save and preserve the insured property. See Rockingham Mutual Ins. Co. v. Hummel, 219 Va. 803 , 250 S.E. 774 , 776 (1979); Klemens v. Badger Mutual Ins.

Co., 8 Wis.2d 565 , 99 N.W.2d 865, 866 (1959). Nor are we convinced that greater specificity, absent an explicit request, in explaining the nature of the neglect claimed by the insurance company is either necessary to prevent a waiver or required by the "good faith” rule. The reasons furnished the Molloys in St. Paul’s denial of liability adequately notified the respondents of the grounds asserted in favor of noncoverage, and we accordingly hold that St. Paul did not waive its defense of arson. 4 ¹⁴⁷ We now review the propriety of one other ruling of the circuit court asserted by St. Paul to have been erroneous, which we must consider in order to fully dispose of this appeal. The insurance company urges that since the insured residence was owned by the couple as tenants by the entireties, their interests are joint, and not several, and therefore the arson of one, if it exists, is to be treated as the misconduct of both, defeating recovery by either.

As correctly noted by the circuit court, this is an issue of first impression in Maryland, although we observe that it has been a problem vexing the appellate courts of some of our sister jurisdictions for the past several years, and has resulted in discordant conclusions in these other states. Compare, Mercantile Trust Co. v. New York Underwriters Ins. Co., 376 F.2d 502 , 505-06 (7th Cir. 1967); Hosey v. Seibels Bruce Group, S.C. Ins. Co., 363 So.2d 751, 753-54 (Ala. 1978); Steigler v. Ins.

Co. of North America, 384 A.2d 398, 399-402 (Del. 1978); Economy Fire and Cas. Co. v. Warren, 71 Ill.App.3d 625 , 28 Ill.Dec. 194 , 390 N.E.2d 361, 363-64 (1979); Hildebrand v. Holyoke Mut. Fire Ins. Co., 386 A.2d 329, 331-32 (Me. 1978); Simon v. Security Insurance Company, 390 Mich. 72 , 210 N.W.2d 322, 323-26 (1973); Howell v. Ohio Casualty Insurance Company, 130 N.J.Super. 350, 327 A.2d 240, 242-43 (1974); Delph v. Potomac Ins.

Co., 95 N.M. 257 , 620 P.2d 1282, 1284-85 (1980); Winter v. Aetna Cas. & Sur. Co., 96 Misc.2d 497 , 409 N.Y.S.2d 85, 87-88 (1978); Lovell v. Rowan Mut. Fire Ins. Co., 274 S.E.2d 170, 171-74 (N.C. 1981); Ryan v. MFA Mut. ¹⁴⁸ Ins.

Co., 610 S.W.2d 428, 428-37 (Tenn. App. 1980); see also Arenson v. National Automobile & Casualty Ins. Co., 45 Cal.2d 81 , 286 P.2d 816, 818 (1955); Everglades Marina, Inc. v. American Eastern Dev. Corp., 374 So.2d 517, 518-19 (Fla. 1979); Auto-Owners Ins.

Co. v. Eddinger, 366 So.2d 123, 123-24 (Fla. App. 1979); Hoyt v. New Hampshire Fire Ins. Co., 92 N.H. 242 , 29 A.2d 121, 122-23 (1942) (permitting innocent co-insured spouse to recover), with such cases as Mele v. All-Star Ins. Corp., 453 F.Supp. 1338, 1341-42 (E.D. Pa. 1978) (applying Pennsylvania law); Short v. Oklahoma Farmer’s Union Ins.

Co., 619 P.2d 588, 589-94 (Okla. 1980); Matyuf v. Phoenix Ins. Co., 27 Pa. D.&C.2d 351, 355-66 (1944); Cooperative Fire Insurance Ass’n. of Vermont v. Domina, 137 Vt. 3 , 399 A.2d 502, 502-03 (1979); Rockingham Mut. Ins.

Co. v. Hummel, 219 Va. 803 , 250 S.E.2d 774, 775-76 (1978); Klemens