Insured vs. Insurer – Who Bears the Burden in an Arson Case?
Consider a fire claim under a homeowner’s policy where the carrier believes the insured, or someone at their direction, burned their home. When suit is eventually filed after denial of the claim, what burden does the insured bear? What about the insurer? Obviously, fire itself is typically a covered cause of loss, but it is certainly not covered when the insured intentionally burns the home to recover insurance proceeds.
Tennessee law clearly provides an insured has the initial burden to prove by a preponderance of the evidence that a loss comes within terms of the policy. Se. Mental Health Ctr., Inc. v. Pac. Ins. Co., Ltd., 439 F. Supp. 2d 831, 835 (W.D. Tenn. 2006); Johnson v. Allstate Ins. Co., 2000 WL 1156642, *7 (Tenn. Ct. App. Aug. 16, 2000). Most homeowner policies provide coverage pursuant to a provision requiring an “accidental direct physical loss” to covered property. Thus, coverage would only apply in the event of an accidental loss – not an intentionally set fire.
So what must the insured prove? In Tennessee, “there is a presumption that the burning of property is the result of an accidental cause.” Johnson, at *7 (citing Ricketts v. State, 241 S.W.2d 604 (Tenn.1951)). An insured meets this presumptive burden by simply testifying he did not set the fire and does not know who did it. Id. However, even though such a presumption exists, it can be extinguished if the insurance company comes forward with sufficient rebuttal evidence. Much like a “bursting bubble,” if an adverse party comes forward with sufficient rebuttal evidence, any initial presumption disappears. Farace v. Indep. Fire Ins. Co., 699 F.2d 204, n. 4 (5th Cir. 1983). Thus, it is possible that the insurance company can come forward with sufficient rebuttal evidence to defeat any presumption that the fire was “accidental.” In such a case, the insured should be required to otherwise prove they suffered an accidental physical loss by a preponderance of the evidence. HCA, Inc. v. Am. Prot. Ins. Co., 174 S.W.3d 184, 188 (Tenn. Ct. App. 2005).
This burden may or may not be easily met by the insured, but it is nonetheless an initial burden of proof which is separate and apart from the carrier’s burden to prove the arson defense or an intentional act. However, once the insured meets his burden, how can the insurer defend?
To succeed on an arson defense in Tennessee, an insurer “must show by a preponderance of the evidence that the loss was due to a fire of incendiary origin, that the insured had an opportunity to set the fire, and that he had a motive to do so.” McReynolds v. Cherokee Ins. Co., 815 S.W.2d 208, 211 (Tenn.Ct.App.1991); see also Walters v. Tennessee Farmers Mut. Ins. Co., 873 S.W.2d 691, 693-94 (Tenn. Ct. App. 1993); Sowards v. Grange Mut. Cas. Co., 3:07-CV-0354, 2008 WL 3164523 (M.D. Tenn. Aug. 4, 2008). “The rule as to admissibility of circumstantial evidence is liberal in such a case.” Id. Arson may be proved by simple preponderance of the evidence and may be by circumstantial evidence. Id. Tennessee law provides an insurer succeeds or “prevail[s]” in the arson defense by proving the above three elements by a preponderance of evidence. Guess v. Grange Mut. Cas. Co., 4:05-CV-40, 2007 WL 2897892 (E.D. Tenn. Sept. 28, 2007) referencing McReynolds v. Cherokee Insurance Co ., 815 S.W.2d 208, 211 (Tenn.Ct.App.1991).