Question

Gary and Ila Fedderson owned and operated Whiskey Flow, a restaurant and bowling alley located in Howard, South Dakota. After operating the business for some time, the Feddersons purchased a $1 million insurance policy from Columbia Insurance Group (Columbia) that covered damages to the business caused by fire. The policy included a “Concealment or Fraud Condition” that voided the insurance policy if “any insured” intentionally concealed or misrepresented a material fact or committed fraud or false swearing in connection with the insurance contract. One month after taking out the insurance, the Whiskey Flow was destroyed by fire. Gary and Ila submitted a $1 million claim to Columbia. In their proof of loss statement, Gary and Ila swore that an “unknown party started the fire.” After the investigation, Gary was convicted of the crimes of conspiracy to commit arson and insurance fraud. Ila was not involved in the arson and did not have knowledge of Gary’s involvement in the arson. Ila sued Columbia to recover 50 percent of the insurance proceeds as an “innocent insured.”

Can Ila collect half of the insurance proceeds?

Did Gary act ethically in this case?

Did Ila act unethically in trying to recover half of the insurance proceeds?

Fedderson v. Columbia Insurance group, 824 N.W.2d 793, 2012 S.D. Lexis 164 (2012)

Answer 1

No Ila cannot collect half of the insurance proceeds since under Concealment or Fraud Condition of insurance contract if any insured intentionally concealed or misrepresented a material fact or committed fraud or false swearing in then this policy will be void.

No Gary had not acted ethically in this case since he had intentionally cause fire in order to claim the $1 milion from Columbia insurance group(Columbi)

No actually Ils was an innocent coinsured and was trying to recover her part of interest/loss or 50% of her part of interest because she had not cause fire in Whiskey flow and it was rather Gary who did that.