Farm Bureau loses bid to exclude coverage alleging "intentional act"
Farm Bureau has been very aggressive in denying coverage and in exploiting the highly political Michigan Supreme Court for advantageous rulings. This week it lost an aggressive attempt to deny coverage. Richard Frederick was forced to sue Farm Bureau, his insurer, after he accidently caused flooding to occur on his neighbor's property. Farm Bureau denied coverage alleging that his efforts to change the grade of his property by adding fill voided his coverage because his actions were alleged to be illegal and intentional acts excluded from coverage. Farm Bureau also alleged that the flooding of the neighbor's property was not an insured "accident".
The trial court dismissed Frederick's effort to secure coverage at Farm Bureau's request, but its decision was overturned by the Court of Appeals. The higher court noted that the flooding which occurrred six months after Frederick placed fill on his property was an "accident" as defined in the policy because it was an "undesigned contingency". The court noted that the insured was told by local government authorities that he did not need a formal permit or survey, and the contractor never warned him of a risk of injury to the neighbor. The owner/insured thought surface water would flow, as he was told, into a contiguous ditch and did not think that the neighbor's property was lower than his own.
Under the proper analysis as dictated by Farm Bureau's policy language, Frederick's actions must be assessed from his own subjective expectations, and not from the perspective of the adjoining landowner, or even from the perspective of a "reasonable person". Under the facts of this case, there was no legitimate argument that the insured either acted criminally, or acted intentionally to create a "direct risk of harm" to the neighbor. None of the exclusions raised by Farm Bureau were applicable to deny coverage.