7ASR3d150

YHT, INC., an American Samoa

Corporation, Plaintiff,

 

v.

 

PROGRESSIVE

INSURANCE CO.  (Pago Pago), et al.,

Defendants.

 

High

Court of American Samoa

Trial

Division

 

CA

No. 92-00

 

August

18, 2003

 

[1] Public policy

dictates that if an insured sets fire to his property, either intentionally or

willfully, he shall be denied the right to collect from his fire insurance.

 

[2] The majority rule places the burden

on the insurer to prove a claim that an insured set fire to his property by a

preponderance of the evidence.

 

[3] There are three common elements to

an insurer’s defense that an insured set fire to his own property: (1)

incendiary fire, (2) motive on the part of the insured to destroy the property,

and (3) opportunity on the part of the insured to set the fire or to procure

the setting of the fire by another.

 

[4] In a case

where an insured seeks to prevent recovery of insurance funds due to suspected

arson, an insured may rely on circumstantial evidence to prove that the insured

was involved because direct evidence of arson is often elusive.

 

[5] In order to preclude an insured

from recovering due to a fire it set, an insurer need only show that the

insured had the opportunity to procure the setting of the fire, or in the case

of a corporate insured, that the fire can be traced to any of its corporate

officers.   

 

Before RICHMOND, Associate Justice,

SAGAPOLUTELE, Associate Judge, and MAMEA, Associate Judge.

 

Counsel: For Plaintiff, Paul F. Miller

and Marshall Ashley

For Defendants,

William H. Reardon and Dean Hansell, Pro Hac Vice

 

OPINION

AND ORDER

 

Plaintiff, YHT, Inc. (“YHT’”) seeks

payment from Defendant Progressive Insurance Company (“Progressive”), its insurer,

for damages caused by a fire at YHT’s office. 

We hold that YHT is not entitled to payment.

 

FACTUAL

FINDINGS

 

Based on all the evidence adduced at

trial, we make the following factual findings.

 

On February 23, 2000, a fire destroyed

the contents of YHT’ s office.  The cause

of the fire was undoubtedly arson.  The

signs were clear: an explosion was heard prior to the fire; gasoline containers

were found in two different rooms; gasoline residue was found in the bathroom;

YHT’s president, Yu Chun Yung      (“Yu”),

admitted that there were no flammable materials in the building; the extent and

speed of the fire indicated it was artificial; and the fire was at night, when

it was less likely to be detected and extinguished. 

 

Shortly thereafter YHT looked to cash

in on their policy, but Progressive balked. 

Among other things, Progressive suspected foul play.  Specifically, Progressive suspected that YHT,

through Yu, had a hand in the arson. 

Their own investigation, coupled with help of the local authorities,

produced several suspicious factors.

 

At trial, two experts helped put these

factors into perspective.  The first was

Peter Webb (“Webb”).  Webb is a claims

investigator and loss adjuster.       He is trained in basic fire cause and origin

investigation and investigation of arson insurance fraud.  Throughout his twenty-year career, Webb has

investigated hundreds of claims.  The

other expert was Gary Luff (“Luff”). 

Luff is a fire expert in New Zealand, and has 19 years experience in the

field of fire scene investigation.  He

has examined over 1,600 fire scenes. 

Together, their testimony illuminated the suspicious conduct that

implicates YHT. 

 

YHT had taken out a $6 million

insurance policy with Progressive just six weeks before the fire.  The policy only covered damage due to fire

and certain natural disasters; YHT did not seek any other coverage (e.g.,

theft).  Furthermore, the policy was

rather large, given that the office was modestly sized. 

 

In the weeks

leading up to the fire, Yu repeatedly asked a progressive underwriter, Tavita

Tamua, whether Progressive could cover a $6 million claim.  Also during that time, YHT’s business was

suffering.  It was financially strapped.  Yu had just learned that YHT would not be

able to export for sale elsewhere in the United States its recently acquired

stock of computer chips–which if they were actually in YHT’s office at the

time of fire, had been smuggled into American Samoa.  See YHT, Inc. v. Progressive Ins. Co.,

6 A.S.R.3d 108, 110-11 (Trial Div. 2002). 

Moreover, Yu seemed generally unfamiliar with electronics manufacturing.

 

After the fire, it was determined that

it was set from inside, with no signs of forced entry–the insinuation being

that the arsonist entered with a key. 

Yet the only people who had a key to the office were three YHT

principals: Yu, Francis Fomai’i (“Fomai’i”), the landlord of the YRT office

building who became a YHT Vice President after the fire, and YHT Vice President

Ki Seok Bae (“Sae”). 

 

When seeking payment, YHT was evasive

and inconsistent.  Yu failed to answer 19

questions put to him by Webb and failed to complete the Claim Form and Schedule

of Loss Form Webb furnished him. 

Furthermore, in the original contract, YHT claimed $60,000 for Plant and

Machinery Business Fixtures and Fittings. 

Yet, at trial, YHT submitted that much of the $60,000 was for leasehold

improvements.  But Yu could not produce

invoices or even details about these improvements.[1]  More importantly, Progressive’s policy with

YHT clearly did not cover leasehold improvements.

 

YHT also failed to provide much

documentation for the tangible property it claimed it lost,[2] the defense being that its

records were burned in the fire.  Many of

these items, such as office chairs and a television set, contained metal parts

that would have left discoverable remains. 

But there were no remains of this kind found at the scene of the fire. 

 

Finally, Luff’s testimony also ruled

out the possibility of vandalism or revenge. 

In his opinion, it would be unusual for a vandal or vengeful person to

set a fire from within, or even go through the trouble of buying gasoline.  And, as already noted, only three people

possessed keys to the building.  Without

evidence of forced entry, Luff was at a loss for how a vandal could have gained

access to the office.

 

DISCUSSION

 

[1-2] Public

policy dictates that if an insured sets fire to his property, either

intentionally or willfully, he shall be denied the right to collect from his

fire insurance.  See, e.g.,

Allstate Ins. Co. v. Dorothy McGory, 697 So. 2d 1171, 1174 (Miss. 1997); 18

George J. Couch, Couch on Insurance §

74:663 (2d ed. 1983) [hereinafter “Couch”];

A.S.C.A. § 29.1571 (“An insurer is not liable for a loss caused by the willful

act of the insured”).  The majority rule

places the burden on the insurer to prove its claim by a preponderance of the

evidence.  See Vexrastro v. Middlesex

Co., 540 A.2d 693, 695-97 (Conn. 1988); Rena Inc. v. Brien, 708 A.2d

747, 751 (N.J. Super. A.D. 1998); Couch,

§ 74.667; 44 AM. Jur. 2d Insurance § 2017 (1982) [hereinafter “Insurance”]. 

 

[3-4] There

are three common elements to this defense: “1) incendiary fire, 2) motive on

the part of the insured to destroy the property, and 3) opportunity on the part

of the insured to set the fire or to procure the setting of the fire by

another.”  Allstate, 697 So.2d at

1174, Rena Inc., 708 A.2d at 751 (citing Alexander V. Tenn. Farmers

Mut. Ins. Co., 905 S.W.2d 177, 179 (Tenn. Ct. App. 1995)).  As might be expected, direct evidence of

arson is often elusive; instead, an insurer may rely on circumstantial

evidence.  See Don Burton, Inc.

v. Aetna Life & Cas. Co., 575 F.2d 702, 706-07 (9th Cir. 1975); Elgi

Holding Inc. v. Ins. Co. of N. Am., 511 F.2d 957, 959 (2d Cir. 1975); Allstate,

697 So. 2d at 1174; Rena Inc., 708 A. 2d at 751; Insurance, §

2017; 34 Proof of Facts 3d 291, Arson Defense § 4 (1995) (“Arson

Defense”).

 

A. Incendiary Origin

 

As already alluded, we have no doubt

that the fire was caused by arson, i.e., that it had an incendiary origin.  We need only repeat our findings of facts: an

explosion was heard prior to the fire; gasoline containers were found in two

different rooms; gasoline residue was found in the bathroom; Yu admitted that

there were no flammable materials in the building; the extent and speed of the

fire indicated it was artificial; and the fire was at night, when it was less

likely to be detected and extinguished. 

The two experts, Webb and Luff, drew the same conclusion. 

 

B. Motive to Destroy Property

 

Our findings also show that YHT had

motive to destroy its property.  Among

other things, business was not good.  One

of their biggest investments, almost $6 million worth of computer chips, was

unmarketable.  YHT had also recently

taken out a hefty insurance policy.  We

find that the combination of these circumstances shows motive on the part of

YHT.  See, e.g., Beznco Sales

& Salvage Inc. v. Gulf Ins. Co., 759 S.W.2d 336 (Mo. App. 1988); Arson

Defense, §§ 6-12.

 

C. Opportunity

 

[5] The

final prong requires us to determine whether YHT had the opportunity to cause

the fire.  Two points should be

emphasized.  First, Progressive need not

demonstrate that the insured personally set the fire—though of course that

would suffice.  Instead, it need only

show that the insured had the opportunity to procure the setting of the

fire.  See Don Burton, Inc., 575

F.2d at 705; Allstate, 697 So. 2d at 1174; Rena Inc., 708 A.2d at

751.  Secondly, because YHT was a corporation,

it can be precluded from recovery on the policy if the fire can be traced to

any of its corporate officers.  See

Couch § 74.679.  Thus, YHT can find little solace in the fact

that Yu himself was not in the Territory the night of the fire, since its other

corporate officer was here.  Moreover,

Fomai’i testified that he himself was in the office building the night of the

fire and that, while Yu was away, Bae also had access to the building.

Therefore, we think the facts support

the finding that YHT had the opportunity to set the fire.  The most glaring fact is that the fire was

set from inside the building, without any evidence of a forced entry.  Logically, then, the culprit must have gained

access by key.  The only people who had a

key to office were Yu and Bae, two corporate officers, and Fomai’i.  While this evidence does not conclusively

show that one of these three started the fire, it at least proves by inference

that one of them was involved and had the opportunity to procure the setting of

the fire.  See Verrastro, 540 A.2d

at 696-98.

 

CONCLUSION

 

We conclude that Progressive has

proved, by a preponderance of the evidence, that the fire which burned down

YHT’s office had an incendiary origin, and that YHT itself had both motive and

opportunity to destroy the building. 

Accordingly, YHT’s claim for recovery on the policy is denied.  Because of our holding, we do not reach

Progressive’s other defenses.

 

ORDER

 

YHT’s action is dismissed with

prejudice.

 

It is so ordered.

 

**********