Defendants appeal as of right from the opinion and order of the Oakland Circuit Court which held that plaintiff was entitled to the full value of a home which defendants insured and which had been burned down by plaintiffs estranged husband (now ex-husband). We reverse.
The home in question was owned by plaintiff and Donald Szalay as tenants by the entirety and was insured by defendant Homeowners Insurance Company, a subsidiary of defendant Auto-Owners Insurance Company. Although they were married at the time of the fire (February 11, 1984), plaintiff and Szalay were legally separated and were in the process of obtaining a divorce. The house was vacant, as plaintiff was residing with her brother and Szalay was living with his parents. Szalay apparently set the fire intentionally, causing extensive damage to both the home and the personal property therein.
The parties stipulated that total damage to the real property was $21,221.60 and that total damage to the personal property belonging to plaintiff and her son was $16,779.10. Pursuant to a compromise settlement, defendants paid plaintiff fifty percent of the real property loss plus one hundred percent of the personal property loss. The compromise settlement acknowledged plaintiffs right to *445 file a supplemental claim for the remainder of the real property loss (i.e., $10,610.53), subject to any policy defenses.
On July 19, 1985, a judgment of divorce was granted to plaintiff upon Szalay’s default. The judgment provided that any proceeds from the sale of the home, less closing costs, would be divided equally. The judgment also provided that each party shall be awarded, free from claims of the other, the net proceeds received as a result of their respective efforts to collect on the fire loss.
Plaintiff commenced this suit in the Oakland Circuit Court on January 24, 1986. A later, first amended complaint alleged wrongful retention of insurance proceeds (count i), breach of the insurance contract (count ii), and two other claims which are not pertinent to this appeal. Thereafter, plaintiff moved for partial summary disposition under MCR 2.116(C)(9) and (10) as to counts i and ii. A hearing on the motion was held on October 15, 1986, at the conclusion of which plaintiff was granted partial summary disposition and awarded the whole of the insurance proceeds for the property damage to the home. An order to that effect was entered on October 17, 1986.
The sole issue raised in this appeal is a legal one: whether an innocent coinsured spouse, who holds property as a tenant by the entirety, may recover insurance proceeds of more than one-half the amount of property damage, but not exceeding policy limits, caused by the wrongful acts of the other coinsured spouse. 1 That question seems to be an issue of first impression in this state._
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The vast majority of jurisdictions which have addressed this issue, and which have allowed any recovery at all,
2
have held that the innocent spouse may only recover one-half of the insurance proceeds, up to the policy limits. See, e.g.,
Nationwide Mut Fire Ins Co v Pittman,
82 NC App 756;
Unfortunately, most of the above-cited cases, while adequately explaining why an innocent coinsured should not be precluded from any recovery, have been deficient in explaining why the recovery should be limited to one-half the property damage (or the amount of the policy, whichever is less). However, in Molloy, supra, the Maryland Court of Appeals gave the following explanation, which we find persuasive:
Since "[w]e have regarded the rights of husband and wife [to be] separate under the contract, . . . both logic and justice require that the amount recoverable be likewise allocated,” so that the innocent spouse be compensated for one-half the damages within the limits of the policy. Steigler, supra,384 A2d at 402 . Permitting recovery of more would necessitate reliance on the "oneness” legal fiction of marital property which we rejected in determining that the parties here enjoy and assume several, not joint, contractual rights and obligations. Moreover, an award greater than one-half would allow the innocent spouse to recover in excess of that to which she would be entitled upon severance of the tenancy by the entirety, whether by divorce or other action of the parties. [291 Md 153-154.]
In our research, we could find only one case involving tenants by the entirety wherein the plaintiff was adjudged able to recover the whole of
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the insurance proceeds.
3
In
American Economy Ins Co v Liggett,
If the innocent spouse were denied any recovery, one could visualize situations in which one spouse, the sole owner of a piece of property, might convert the title to tenancy by the entireties thinking himself insured and later suffer a devastating loss *449 due to the arson of the other spouse. By permitting the innocent spouse to recover one half, we are attempting to reduce his loss while denying any benefit to the guilty spouse. Furthermore, we are of the opinion that under the rule enunciated in Liggett, the trial court could determine on a case by case basis whether the guilty spouse will benefit and take measures to prevent it. [440 NE2d 754 .]
For the case at bar, we believe the better rule is that an innocent coinsured spouse, who owns property as a tenant by the entirety, may recover one-half the amount of the property damage (not to exceed the policy limits) caused by a fire deliberately set by the other coinsured spouse. Such a rule, which has been adopted in the vast majority of cases addressing the issue, is consistent with our Supreme Court’s holding in Morgan, supra, and avoids the disparate application of the "oneness” theory underlying tenancy by the entirety (i.e., denouncing the theory so as to preclude insurers from avoiding all liability but resurrecting it to allow full recovery to the innocent insured). Here, the trial judge erred in permitting plaintiff to recover the whole value of the property damage. Her recovery should have been limited to one-half the insurance proceeds.
Reversed.
Notes
Defendants do not claim that plaintiff is precluded from
any
recovery because the property was owned as a tenancy by the entirety. They recognize that our Supreme Court’s decision in
Morgan v Cincinnati Ins Co,
Many states apparently adhere to the position that no recovery can be had because the husband and wife hold the property as "one” —the acts of one spouse are therefore imputed to the other. See discussion in
Maravich v Aetna Life & Casualty Co,
350 Pa Super 392;
In
Howell, supra,
the plaintiff recovered the full amount of the property damage. However, the defendant apparently paid this voluntarüy and not because it was directed to do so by the court. The case of
Hildebrand v Holyoke Mut Fire Ins Co,