In a first impression case, the Supreme Court of Kentucky recently ruled that a mental incapacity insurance policy was available to insured persons to combat the intentional exclusion of an insurance policy. 1 In that case, the insured teenage son, who was in a disturbed mental state, started a house fire in a suicide attempt. After the fire damaged the house so much that it became uninhabitable for a long time, the insured made claims for property damage according to their homeowners policy. The insurer denied the claim and relied on the intentional exclusion of insurance within the policy.
The trial court issued a summary judgment in favor of the insured on the basis that, from his son's subjective point of view, he lacked the mental ability to form the intention to harm the home when he lit a fire. The Kentucky Court of Appeals reversed, arguing that the intentional exclusion should be viewed objectively in order to exclude from coverage measures that can reasonably be expected to cause a loss.
The Supreme Court of Kentucky agreed with the lower court of appeal that action should be judged objectively, and that the son's act to start the fire was an intentional act that could reasonably be expected to cause a loss under intentional exclusion. However, the Supreme Court held that an insured person may still be able to make payment under an insurance policy if the insured suffers from a lack of mental capacity at the time of the act. To counteract the intentional exclusion based on a mental incapacity, the insured must show that at the time of the act, not only did they not know right or wrong, but they did not understand the nature and quality of their actions so that they could not understand their physical nature. Finally, the Court noted that this standard results in a high burden on the insured but provides adequate protection for the insured's reasonable expectations of insurance coverage for property damage.