Wisc. Supreme: No Coverage for Wife After Husband Torches House

Ismet Islami’s estranged husband burned down her house in 2013. All parties involved agreed that she played no part in the arson. In fact, she was out of the country at the time.

Nevertheless, a divided Wisconsin Supreme Court ruled Tuesday that Islami cannot collect on the $2 million insurance policy she had purchased to protect her home and belongings after legally separating from her husband. A state law that generally protects innocent insureds from wrongdoing by abusive spouses did not apply to Islami’s claim because there was no fear of domestic violence, the majority ruled in a 4-3 decision.

James Friedman, an attorney for the Wisconsin Insurance Alliance, said the high court correctly interpreted the policy language and a statute that “is pretty clear.”

Islami’s attorney, Joseph Owens, said the ruling upends long-held Wisconsin legal principles regarding the treatment of property owned by people who are divorced or legally separated.

“This is a triumph of insurance money over the rights of the insured,” Owens said.

Ismet married Ydbi Islami in 1978. In 1988, Ydbi was convicted of a number of crimes, including stalking and sexual assault of a minor. Ismet was not a victim of any of the crimes.

Ismet initially considered divorcing her husband, but decided on a legal separation instead because of her Muslim religion, Owens said. Under terms of the 1998 separation agreement, Ismet was awarded sole ownership of their home in Oconomowoc, a distant suburb of Milwaukee.

But the couple continued to live together even though they were legally separated. In 2012 Ismet purchased a property insurance policy from Kemper Independence Insurance Co. that covered her home and vehicles. Ydbi was listed as “Operator 2” for the vehicles. The martial status on the policy application was marked as “married.”Any spouse who resided at the home was an insured under the terms of the policy.

In June 10, 2013, Ydbi set fire to Ismet’s home while she was away on vacation in her native Macedonia. He initially denied any involvement, but later pleaded guilty and was sentenced to six years in prison.

Kemper denied Ismet’s claim seeking replacement of her home, which was totally destroyed by the fire. The insurer said the policy clearly bars coverage if any of the insureds fraudulently conceals facts. As a spouse who resided at the property, Ybdi was an insured even though he didn’t own the home, the carrier said.

A Waukesha County Circuit Court Judge agreed and granted summary judgment in favor of Kemper. The Court of Appeals affirmed the decision.

The Wisconsin Supreme Court upheld those decisions on Friday. In an opinion written by Justice Rebecca Grassl Bradley, the court said Ybdi lived in Ismet’s house and was listed as an operator of her vehicles. When Kemper’s claims adjuster questioned the couple, Ismet described Ybdi as her “husband.”

“Giving effect to the expectations of the parties, and applying the plain language of the contract, Ismet and Ydbi are ‘spouses’ and therefore insureds under the policy,” the opinion says.

A statute passed by the Wisconsin legislature in 2000, 631.95(2)(f), allows “innocent insureds” to retain coverage for damage caused by intentional acts if the loss resulted from acts or patterns of domestic abuse. The majority said the law did not apply in this case because there was no evidence that any domestic abuse had occurred.

Three Supreme Court justices disagreed. Justice Jill J. Karofsky said the majority misinterpreted the statute to create new hurdles that domestic abuse victims will have to overcome. She said the majority also erred in finding that Ismet could not have been a victim of domestic abuse while she was out of country.

The statutory language protects innocent insureds if they fear “imminent harm.” Karofsky said the majority misunderstood imminent to mean immediate.

“When we apply the correct objective standard to this case, it is clear that there is enough in the record for the question of whether the arson may have caused a person in Ismet’s position to reasonably fear imminent harm to go before a jury,” Karofsky wrote.

Owens said that until now, Wisconsin courts have always held that a legal separation is tantamount to a divorce in matters involving property. He said the Supreme Court’s ruling focuses on a single word in the policy that states there is no coverage if “any” insured commits a fraudulent act.

He said the effect of the ruling is that if Ybidi had admitted he torched his wife’s house, Ismet would be able to recover for her loss, but because he lied, she cannot. Owens said that’s exactly the type of situation that the state legislature tried to prevent when it passed the domestic abuse insurance statute in 2000.

Friedman said the majority correctly interpreted the law. He said while there are strong policy arguments to be made for protecting domestic abuse victims, the majority correctly decided that domestic abuse at issue in this case.

“How can this be spousal abuse when she’s thousands of miles away?” he said.

About the photo: The city of Oconomowoc is shown. Photo from the city’s website.