The Sixth Circuit recently released a decision reversing the trial court's grant of summary judgment in favor of an insurance company, which declared that the criminal acts exclusion in the homeowner insurance policy precluded coverage for injuries sustained in a fireworks accident on the insured property. In Auto Club Property v. B.T, young children under the age of 10 were playing with bottle rockets when one child was hit in the eye causing extensive injuries. Leading to the decision, the injured child sought damages from the homeowner in state court. The homeowner's insurance company filed a declaratory judgment action in federal court seeking a declaration that the insurer was not liable to defend or indemnify the insured parties based on the criminal acts exclusion in the policy. The homeowners claimed the criminal acts exclusion was ambiguous.
The facts are fairly straight forward. When children asked the homeowner about lighting sparklers, the home owner remotely unlocked his vehicle so the children could grab sparklers stored inside. No one supervised the children, age 10 and 8. The children also took out bottle rockets and began lighting those. Before long, one bottle rocket was lit and struck the 10-year old child in the eye as it exploded. The resulting injuries required surgery. The child sought damages from the to be covered by the homeowner's insurance policy. The insurer, Auto Club Property-Casualty filed a declaratory judgment action in federal court seeking a declaration that it owed no duty to defend or indemnify the home owners. Auto Club argued that the acts of lighting and possessing fireworks triggered the criminal acts exclusion in the policy. Writing for the divided panel, the Sixth Circuit determined that the criminal acts provision was ambiguous. Applying Kentucky's reasonable-expectations doctrine, the court held that an average person would not include possessing and using fireworks into a category of criminal conduct that would have precluded coverage, criminal acts being more egregious acts such as murder, assault or armed robbery.
The case was remanded for trial to determine whether the homeowner was negligent in the supervision of the children for the purposes of determining whether the injuries were caused by an intentional act under the policy. Moving forward, insurers wishing to exclude the use of fireworks as criminal acts will have to be specific in drafting the exclusions. At least in Kentucky, Auto Club's homeowner insurance policies are about to get a bit longer.
