Intentional Loss Exclusion Could Apply Even to Unintended Damage, Says the Tenth Circuit

Elliot Kerzner and Alycen Moss | Cozen O’Connor

The Tenth Circuit recently held that, under Kansas law, an intentional loss exclusion precludes coverage for damage caused by an intentionally set fire even if the actual resulting damage is unintended. In Taylor et al. v. LM Insurance Corp., Case No. 20-3166 (10th Cir. Jul. 11, 2022), the named insureds’ 18-year-old daughter (who was also an “insured” under the policy) was home alone and used a lighter to ignite her father’s side of her parents’ bedspread, intending to “make him mad.” Though she intended to, and believed she had, put out the fire, the fire spread and caused damage to the insureds’ home.

The insureds’ homeowners policy covered fire damage, but contained an “intentional loss” exclusion that excluded “any loss arising out of any act committed: (1) [b]y or at the direction of an ‘insured’; and (2) [w]ith the intent to cause a loss.” The Tenth Circuit held that the intentional loss exclusion applied because the insureds’ daughter intended to start the fire and understood the fire would damage the bedspread, even though she thought she had put out the fire and did not intend to cause any damage to the rest of the house.

The insureds argued that the phrase “intent to cause a loss” is ambiguous because it depends on the character and use of the property. For example, lighting a candle which causes unintentional fire damage to a home would not fall within such an exclusion even though the lighting of the candle is intentional.

Rejecting this argument, the Tenth Circuit distinguished between lighting a candle, which constitutes a candle’s ordinary use and does not necessarily result in fire damage to a home, and setting fire to a bedspread with the purpose of causing damage to the bedspread. Because setting fire to a bedspread is an act intended to cause damage, it constitutes an “intent to cause a loss” even if the resulting damage is different than the damage originally intended by the act of the insured. Thus, the court held the intentional loss exclusion is unambiguous and precluded coverage for the fire damage to the insureds’ home.

Under the Taylor decision, the intentional loss exclusion requires only an intent to cause damage, not an intent to cause the actual damage sustained by the insured property. Therefore, even if the actual damage resulting from an insured’s act is far greater than the damage intended by the insured, the intentional loss exclusion should still preclude coverage under the Tenth Circuit’s reasoning in Taylor.

It is important to note, however, that the intentional loss exclusion in Taylor involved a first-party claim under a homeowners insurance policy. The same analysis would not necessarily apply to a third-party claim under a general liability policy. See, e.g., Spruill Motors, Inc. v. Universal Underwriters Ins. Co., 212 Kan. 681, 687, 512 P.2d 403, 408 (1973) (recognizing a distinction between an intentional injury and an unintended injury resulting from an intentional act under a liability policy). Accordingly, when evaluating these claims, insurers should be cognizant of the precise nature of the claim and applicable policy before reaching a coverage determination.  

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email

Missouri Takes A Stand On Depreciation

Alycen A. Moss and Dakota Knehans | Property Insurance Law Observer

On June 28, the Missouri Court of Appeals upheld a lower court’s decision finding Lexington Insurance Company (“Lexington”) breached its policy with homeowner Cynthia Franklin. Franklin’s home has sustained damage in a May 2016 storm for which she submitted a claim with Lexington. Lexington utilizes a two-step adjusting process in which it first determines the ACV of a covered loss and issues an ACV payment. Then, if an insured requests additional reimbursement for repair and replacement costs over the amount previously paid, Lexington assesses the appropriateness of payment. In processing Franklin’s claim, Lexington withheld over $5,000 in actual cash value, citing to “depreciated labor costs.” Lexington, in a letter dated July 7, 2016, explained that Franklin could recover “applicable depreciation for dwelling/building items” if she submitted paid repair invoices. After completing additional repairs, Franklin failed to forward any invoices or receipts. The claim was then closed by Lexington in October of 2017.

In February 2018, Franklin sued, arguing that the policy itself was silent as to whether labor depreciation was included in the actual cash value of a claim, and as such she was entitled to recover the withheld amount. In his deposition, the desk adjuster for Franklin’s claim testified that he was unaware that the field adjuster had subtracted depreciated labor costs before suit had been filed, and if he had known, he would have requested correction from the adjuster and issued a higher ACV.

Bearing in mind this testimony, and citing to law around the country regarding policy ambiguity, the lower court and the Missouri Court of Appeals held that Lexington’s two step adjustment process meant Franklin was not required to elect between ACV and replacement costs. Further, in determining whether labor depreciation was included within the definition of depreciation allowed to be subtracted from the base ACV, the Court of Appeals agreed with the lower court that the policy’s failure to explicitly include labor depreciation within its definition of “depreciation” meant the insurer could not include it. Considering the policy’s silence and Lexington’s typical practices, the Court held Franklin was entitled to recover the withheld amount.

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email

Wildfire Insurance Coverage Series, Part 2: Coverage for Smoke-Related Damages

Scott P. DeVries and Yosef Itkin | Hunton Andrews Kurth

For many policyholders, smoke emanating from wildfire causes as much if not more damage than the fire itself.  In this post in the Blog’s Wildfire Insurance Coverage Series, we discuss damages caused by smoke emanating from wildfires.

Some insurers argue that policies are limited to fire damage to the insured property and do not include smoke damage associated with nearby fires. A treatise frequently cited by insurers states otherwise: “The concept that fire insurance covers non-fire damage which is the proximate result of fire finds application also when the fire occurs on other property and causes harm to the insured property. In such case, the harm to the insured property, even though it is a non-fire harm, has long been recognized to be the result of fire, and, therefore, within the policy coverage.”[3]

Case law is to like effect, finding that coverage for smoke loss exists under a commercial property policy that requires “physical loss or damage.” For example, a policyholder suffered direct physical loss or damage where a theater had to cancel outside performances because of “poor air quality caused by the wildfire smoke.”[4] There was no permanent damage; the performances were cancelled solely because of the poor air quality. The policyholder suffered “direct physical loss of or damage to” insured property because the smoke made the theater “uninhabitable” and “unusable for its intended purpose.”

Businesses like wineries and vineyards face unique challenges with respect to coverage for smoke loss. When smoke from nearby fires taints grapes, degrading their quality and decreasing their value, these businesses may seek coverage under property and business interruption policies. While insurers may acknowledge that property policies cover harvested grapes, the specific timing and location of the smoke taint can become an issue.[5] If smoke particles settle on the grapes while they are still in the field with the physical damage occurring before the grapes are harvested, coverage may also be available under the winery’s crop insurance policy.

*                      *                      *

This is the second post in the Blog’s Wildfire Insurance Coverage Series.

*This post is an excerpt from an article written by Scott DeVries and Yosef Itkin that originally appeared in the Journal on Emerging Issues in Litigation published by Fastcase Full Court Press, Volume 2, Number 3 (Summer 2022), pp. 213-222 (a comprehensive list of all references is provided in the published journal version). 

[3] 10A Steven Plitt, et al., Couch on Insurance 3d §149:34. (1995 updated 2019).

[4] Oregon Shakespeare Festival Ass’n v. Great Am. Ins. Co., 2016 WL 3267247, at *2 (D. Or. June 7, 2016), vacated on parties’ request, 2017 WL 1034203 (D. Or. Mar. 6, 2017).

[5] See e.g., Hoopes Vineyard LLC v. U.S. Fire Ins. Co., 21:cv-09755 (N.D. Cal. Dec. 17, 2021) (involving a claim by a winery for wine loss due to smoke damages and an issue of whether the damage occurred after the wine was harvested).

Subsidence Exclusion Bars Coverage for Damage Caused by Landslide

Tred R. Eyerly | Insurance Law Hawaii

    The Ninth Circuit affirmed the district court’s order granting summary judgment to the insurer who denied coverage based upon the policy’s subsidence exclusion. Atain Spec. Ins. Co. v. JKT Associates, 2022 U.S. App. LEXIS 6351 (9th Cir. March 11, 2022). 

    JKT was hired by Lora Eichner Blanusa in 2011 to perform landscape and hardscape work at her house. After selling the house to Richard Meese, a catastrophic landslide occurred in 2019. Portions of the rear of the property slid downhill by 15 feet. Meese sued JKG and others. The owner of an adjacent property, Kristi Synek, filed a separate action against JKT and others. JKT tendered both suits to Atain, who defended under a reservation of rights.

    Atain filed a coverage action in federal district court regarding both underlying suits. The district court granted summary judgment to Atain, ruling there was no duty to defend or to indemnify.

    The Ninth Circuit affirmed. The subsidence exclusion read:

This insurance does not apply and there shall be no duty to defend or indemnify any insured for any “occurrence”, “suit”, liability, claim, demand or cause of action arising, in whole or part, out of any “earth movement.” This exclusion applies whether or not the “earth movement” arises out of any operations by or on behalf of any insured.

    Because a landslide was an “earth movement,” the terms of the exclusion barred any coverage for any claim “arising, in whole or pert,” from the landslide or from any “settling” or “slipping” that preceded the landslide, and did so regardless of the case of the landslide.

    The Meese complaint did not allege any facts or claims concerning injuries that occurred independent of the occurrence of the landslide and the earth movement that preceded it. Nothing in the underlying complaint suggested that Meese suffered any relevant injuries that were independent of the landslide. Because all injuries connected to the Meese complaint “aris[e] in whole or part, out of . . . ‘earth movement,'” there was no possibility of coverage. 

    The same conclusion was reached as to the Synek complaint. JKT could not point to any allegation in the complaint that sought compensable damage flowing from the alleged encroachment apart from its subsequent contribution to the landslide.

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email

Prior Occurrence Exclusion Bars Coverage for Construction Defects

Tred R. Eyerly | Insurance Law Hawaii

       While the insured’s faulty work constituted an occurrence under Florida law, a prior occurrence exclusion barred coverage. Pro-Tech Caulking & Waterproofing v. TIG Ins. Co., 2022 U.S. Dist. LEXIS 12319 (S.D. Fla. Jan. 19, 2022).

    Pro-Tech was a waterproofing subcontractor for construction of a oceanfront condominium building and was responsible for the installation of waterproofing systems on the Project. Pro-Tech entered into a separate contract with the developer, BRE Point Parcel, LLC to install a traffic coating on the garage floors.

    BRE sued the general contractor, Pro-Tech and others for construction defects. The underlying action alleged that Pro-Tech, among other things, failed to wrap the filter fabric to protect the weep holes, improperly installed sealants between the stucco and the underside of the horizontal tile at the balcony slab edge, and failed to properly install traffic coating in one garage. The underlying complaint did not state exactly when the “property damage” resulting from Pro-Tech’s alleged defective work occurred.

    Pro-Tech tendered under its CGL policy to TIG. The policy excluded prior occurrences and pre-existing damage. The policy stated, in part, “It is agreed that this insurance does not apply to any ‘occurrence’ of incident, claim or ‘suit’ which first occurred prior to the inception date of this policy . . .” The tender was denied. Pro-Tech sued TIG. TIG moved for summary judgment,

    The court concluded that TIG was entitled to summary judgment. Coverage did not apply because the relevant “occurrences” were in the process of occurring at the inception of the policy period. Pro-Tech’s alleged defective work was fully performed prior to the start of the policy period. Accordingly, TIG did not have a duty to defend and summary judgment in TIG’s favor was warranted. 

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email