A mental capacity clause in an intentional acts exclusion does not violate public policy.
As a result, even if an insured is found not guilty by reason of mental disease or defect by a jury in a criminal trial, his insurer is not liable to the victim for damages.
In 2007, Rene Stermole shot and killed a neighbor, Mark Wright. At trial, the jury found Rene guilty of first-degree intentional homicide, but also found that he had a mental disease or defect which resulted in his lacking substantial capacity either to appreciate the wrongfulness of his conduct or to conform that conduct to the requirements of law.
Before the killings, Rene lived with his mother, Maria Stermole, who had a homeowners policy with Allstate Casualty Company.
Elaine Wright, Wright’s widow, sued Rene Stermole, Maria Stermole, and Allstate. Allstate cross-claimed, asserting that it had no duty to defend Rene or Maria.
The trial court agreed, and on Feb. 1, the Court of Appeals affirmed in an opinion by Judge Patricia S. Curley.
The court first held that the intentional acts exclusion applied, even though Rene was mentally ill.
The policy provided, “We do not cover any bodily injury or property damage intended by, or which may reasonably be expected to result from the intentional or criminal acts or omissions of, any insured person. This exclusion applies even if: a) such insured person lacks the mental capacity to govern his or her conduct.”
The court acknowledged that several states have held that an insured’s mental illness prevents application of an intentional acts exclusion. But the court joined the majority of jurisdictions that have considered the issue, and held that insanity is not a bar to an intentional acts exclusion, if the insured nevertheless understands the consequences of the acts and intends to cause injury.
Wright argued that this violates public policy, because a mentally ill person is unlikely to be deterred from acting because of the lack of insurance coverage for his acts, while a sane person is.
The court called the argument “intriguing,” but nevertheless found that the plain wording of the exclusion showed that the intent of the parties was to exclude intentional acts, even if mental capacity to govern conduct was lacking. Given the clear intent of the parties, the court found there was no public policy violation in enforcing the clause.
The court next held that summary judgment was proper, because there is no question of fact for a jury to decide. The court concluded that Wright is collaterally estopped from raising the issue of Rene’s intent, because Rene has already been found guilty by a jury of first-degree intentional homicide.
Curley wrote for the court, “In Crowall v. Heritage Mut. Ins. Co., 118 Wis. 2d 120, 122, 346 N.W.2d 327 (Ct. App. 1984), we held ‘that lack of mutuality of parties does not preclude the use of collateral estoppel when it is asserted defensively to prevent a party from relitigating an issue which has been conclusively resolved against that party in a prior case.’ Such is the case here.”
Finally, the court held that Allstate had no duty to defend Maria, even though the claim against her was negligence in not controlling her son, rather than an intentional tort by her.
The court cited case law holding that an intentional acts exclusion applies to all persons covered by a policy, if any one of them engages in excludable conduct.
Even assuming that the court’s analysis of the public policy question is correct, its discussion of collateral estoppel is not.
The court said that the lack of mutuality of parties is not a bar to collateral estoppel, because the issue “has been conclusively resolved against that party in a prior case.”
However, Wright was not a party in the criminal case; she is the widow of the victim in the criminal case. To the extent that Wright had any interest in the criminal case, she likely wanted the jury to find Rene guilty of intentional homicide, which it did.
The court cites Crowall v. Heritage Mut. Ins. Co., 118 Wis.2d 120, 346 N.W.2d 327 (Ct.App. 1984), for support, but the case is clearly distinguishable.
Crowall, the insured, was convicted of a operating a motor vehicle while intoxicated after a car accident. He then sued his own insurance company, claiming that another person had been driving his vehicle at the time he was injured.
The Court of Appeals held that he was collaterally estopped from making this argument, because a jury had already found beyond a reasonable doubt that he had been the driver.
In the case at bar, however, no jury has made any finding against the interests of Wright.
The court in Crowall concluded, “Crowall had an incentive to litigate the criminal charge of operating a vehicle while intoxicated, second offense. There is no evidence that Crowall did not fully use his opportunity to litigate the question of who was diving the vehicle. … Nevertheless, the jury found beyond a reasonable doubt that Crowall was operating the vehicle while intoxicated.” Crowall, 346 N.W.2d at 331.
In contrast, Wright had no opportunity to litigate the issue of Rene’s mental illness at the criminal trial. Only Rene and the State had that opportunity. As a result, Crowall is inapplicable, and Wright should not have been estopped from raising the issue of Rene’s intent.
Instead, the case of Kichefski v. American Fam. Mut. Ins. Co., 132 Wis.2d 74, 390 N.W.2d 76 (Ct. App. 1986), is directly on point.
In Kichefski, the Court of Appeals reversed a grant of summary judgment in favor of the insurer on collateral estoppel grounds. As in the case at bar, the plaintiff in Kichefski was a victim of the insured, not the insured who was a criminal defendant in the first action.
The court wrote, “The exception to the mutuality requirement which we adopted in Crowall does not govern here. In Crowall, the defendant, who was not a party to the first action, defensively asserted collateral estoppel against the plaintiff, who was a defendant in the first action. This court approved the use of collateral estoppel under those facts. Here, American Family, a nonparty to the criminal prosecution, seeks to invoke collateral estoppel against Kichefski, also a nonparty to the criminal prosecution.” Kichefski, 132 N.W.2d at 78.
The Court of Appeals’ reasoning in the case at bar is thus flatly contradictory to the binding precedent set in Kichefski.
What the Court Held
Issues: Is a mental capacity clause in an intentional acts exclusion contrary to public policy?
Is a plaintiff in a personal injury action barred by the doctrine of collateral estoppel from raising an issue that has been previously decided in a criminal case?
Holdings: No. The wording of the clause clearly reveals the intent of the parties to exclude intentional acts, even if the insured lacked the mental capcity to govern is conduct.
Yes. The absence of mutuality of parties is not a bar to collateral estoppel.
Attorneys: For Plaintiff: Kay N. Hunt, Minneapolis; Thomas R. Jacobson, Diane M. Odeen, Hudson; For Defendant: Christine M. Benson, Stephanie Hanold Anacker, Waukesha.
David Ziemer can be reached at firstname.lastname@example.org