Foran Glennon Palandech Ponzi & Rudloff

February 2016

Deviation from Standard Fire Policy may void policy exclusions in Illinois.

Morgan Smith

Factual Background.   Insurers issued a homeowners policy to insureds insuring against risks of direct physical loss or damage to the insured’s residence.  While the policy was in effect, the insured’s residence sustained fire damage rendering it uninhabitable.  It was discovered that the insured’s son intentionally set the home on fire, later pleading guilty to aggravated arson.  Thereafter, the insureds submitted a claim to the insurance company under the policy for their losses and damages resulting from the fire.  The policy contained an amendment to the intentional loss provision stating that any loss arising out of any intentional or criminal act committed by a person named as a resident of the household in the declarations of the policy would be excluded from coverage.  Insurers denied the claim stating that the fire was caused by the insured’s son who was a resident of the household at the time of the fire, thus, the loss was excluded.  The insureds filed a motion for summary judgment against insurers contending that they were not involved in the intentional setting of the fire and were entitled to coverage under the policy.


Discussion.  The issue before the court was an issue of first impression in Illinois.  The insureds acknowledged that absent the Illinois Standard Fire Policy, the intentional acts exclusion of the contract would apply to deny them coverage for the loss by fire intentionally caused by their son.  However, the intentional acts exclusion was in conflict with the Standard Fire Policy, and insureds argued that they were innocent co-insureds able to recover for the fire damage.  Insurers countered that the contract unambiguously excluded coverage for the loss caused by insured’s son, and that the intentional acts exclusion did not conflict with the Standard Fire Policy.


Illinois courts have held that the Insurance Code encompasses rules and regulations disseminated pursuant to authority delegated by specific provisions of the Insurance Code and these regulations have the same force as that of a statute.  Thus, all Illinois fire insurance policies must be consistent with the Standard Fire Policy, and an insurer may not provide less coverage than the standard policy.  If an insurance policy conflicts with the Standard Fire Policy, the Standard Fire Policy controls.


The insured’s argued that their policy was in conflict with the Standard Fire Policy.  The Standard Fire Policy sets forth a limited number of exclusions restricting coverage and nowhere does the Standard Fire Policy exclude coverage for intentional conduct, including arson, therefore, fires caused by intentional conduct must be covered if all other conditions are met.  The court agreed and found that the policy at issue was in conflict with the Standard Fire Policy, thus, the intentional conduct provision was void and could not be used to deny the insured’s proportional interest in the property if they were proved to be innocent co-insureds.


The case is Streit v. Metropolitan Casualty Insurance Company, No. 15 CV 2461, 2015 WL 6736677 (N.D. Ill. Nov. 4, 2015).


Conclusion.  While the instant case is a decision rendering coverage possible even when a fire is intentionally started by a resident of a covered home, the larger issue is the consequences of a fire policy deviating from the standard policy issued by the state.  This decision reminds insurers and attorneys alike that while intentional acts are usually excluded, there are always exceptions.  Insurers must be diligent to ensure that fire policies are in conformity with standard policies approved by state regulators, otherwise they run the risk of having policy exclusions voided.