Insanity won’t negate intent for purposes of excluding coverage for “intentional acts”

By Joe Forward, Legal Writer, State Bar of Wisconsin

Feb. 3, 2011 – Where a criminally insane person does not know right from wrong but intends to cause injury, a homeowner’s insurance policy excluding coverage for “intentional acts” will be upheld, a Wisconsin appeals court recently held.

In June 2007, Mark Wright was setting up a backyard barbeque when Rene Stermole, his 56-year old neighbor, fatally shot him several times. A jury found Stermole guilty of first-degree intentional homicide but determined that he was insane at the time of the shooting. Thus, Stermole was committed to the Department of Health and Family Services for life.

Mark Wright’s wife, Elaine Wright, sued Rene his elderly mother (Maria), who lived in the same house, under Maria’s homeowner’s insurance policy with Allstate Insurance Company.

Elaine Wright (Wright) argued that Maria was negligent because she knew Rene was mentally unstable and kept guns and ammunition on the property, and the policy’s “intentional acts” exclusion clause did not preclude coverage for the harmful acts of a criminally insane person.

The Milwaukee County Circuit Court granted Allstate’s motions for summary and declaratory judgment, concluding that Allstate had no duty to defend and no coverage existed under the policy, in part because the policy included a mental capacity clause.

Intentional acts 

Wright appealed, arguing that Rene could not form the intent necessary to exclude coverage for “intentional acts” under Allstate’s exclusionary clause.

However, in Wright v. Allstate Casualty Co., 2010AP385 (Feb. 1, 2011), the District I appeals court followed a group of states that take the narrow view that “injury caused by a mentally ill insured who is incapable of distinguishing right from wrong is still intentional where the insured understands the physical nature of the consequences of the acts and intends to cause injury.”

“[W]hile cases in several states do in fact hold that insanity is a bar to applying the intentional acts exclusion, we observe that this is not universally followed,” wrote Judge Patricia Curley. “In this instance Rene’s mental illness did not prevent him from intending his actions.”

The court noted that Allstate’s policy, unlike the policy reviewed in the Minnesota Supreme Court case cited by Wright, included a provision that excluded coverage for acts despite the insured’s mental capacity to govern his or her conduct.

The court also rejected Wright’s argument that Allstate’s mental capacity clause is inapplicable because it does not track Wisconsin’s criminal insanity test, and held that the intentional acts exclusion does not violate public policy.

Relying on other state court decisions and an 1874 Wisconsin Supreme Court case, the appeals court concluded that insurance policies excluding coverage for intentional acts despite a person’s mental capacity do not violate public policy, especially where the policy is unambiguous.

The court also rejected Wright’s argument that summary judgment was inappropriate, concluding that Wright was collaterally estopped from raising the issue of Rene’s intent as a disputed fact because the criminal case determined Rene intended to shoot Mark Wright.

“There is no longer any question as to whether Rene’s acts were intentional,” Judge Curley wrote. “Indeed, Rene testified that he intended to shoot Mark Wright, but that he did so in self-defense. Wright is now collaterally estopped from raining the issue of Rene’s intent.”

Finally, Wright argued that Maria had a reasonable expectation of coverage because the acts alleged against her – allowing a dangerous condition to exist on her property – consisted of negligent acts, not intentional ones.

Again, the appeals court disagreed, concluding that Maria “could not have reasonably expected coverage for damages caused by her mentally ill son’s intentional homicide,” and the policy “excluded coverage for all insureds” for the intentional acts of one.