Martin Renfroe v. USAA

FOR PUBLICATION

In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 24-13382
____________________

MARTIN D. RENFROE,
Plaintiff-Appellee-Cross Appellant,
versus

USAA GENERAL INDEMNITY CO.,
Defendant-Appellant-Cross Appellee.

____________________
Appeals f rom the United States District Court
for the Northern District of Alabama
D.C. Docket No. 4:21-cv-01649-SGC
____________________

Before B
RANCH and GRANT, Circuit Judges, and DAMIAN,
*
District
Judge.
G
RANT, Circuit Judge:

*
Honorable Melissa Damian, United States District Judge for the Southern
District of Florida, sitting by designation.
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2 Opinion of the Court 24-13382
A father and daughter owned a house together. But it was
not as idyllic as it might sound—each warned the insurance
company that the other would likely burn the house down.
Remarkably, the insurer issued and maintained the policy anyway.
Less remarkably, the house burned down a month later.
The father sought a payout. But the policy had a provision
that barred even an innocent insured party from collecting for a
loss caused by the intentional conduct of a not-so-innocent co-
insured party. When the insurer denied coverage under that
exclusion, the father sued for breach of contract and bad faith. In
another unexpected turn of events, the district court invalidated
the exclusion as void under Alabama public policy. That was error.
Neither Alabama’s code nor its courts have such a rule. But the
district court was correct to reject the father’s bad-faith denial
claim—the insurer had plenty of evidence that he may have
committed arson.
We therefore reverse the district court’s ruling against the
insurer on the enforceability of the exclusion and remand for a new
trial, but affirm its grant of summary judgment on the bad-faith
claim.
I.
Dennis Renfroe and his daughter Sherry Lambert owned
property in Centre, Alabama, including a house where Lambert
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24-13382 Opinion of the Court 3
was living.
1
The two were, to put it mildly, not getting along.
Lambert had taken out a restraining order against Renfroe several
years earlier and said they hadn’t spoken outside of a courtroom in
five years. Plus, the two tangled in court over both the Alabama
property and a half-million-dollar investment account they shared.
Both wanted complete control of the property; in fact, just two
weeks before the house burned down, a state court had ordered it
sold at auction so the proceeds could be divided.
The two “hated each other,” as Renfroe’s own briefing
admits, which fueled a mutual suspicion. In January 2020, before
he took out the policy, Renfroe warned USAA that he thought his
daughter was “in the process of setting things up to burn the
house” because she “had been moving furniture in and out.” For
her part, Lambert claims that she had moved “sentimental” items
out of the house after hearing that her father (along with her ex-
husband) was planning to burn it down.
Somehow undeterred, USAA insured the property,
providing $500,000 of coverage on the house. The policy identified
both Renfroe and Lambert as insureds. The policy also included a
provision entitled “LOSSES WE DO NOT COVER”:
1. h. Intentional Loss, meaning loss arising out of any
act any “insured” commits or conspires to commit

1
As the record reflects, Martin D. Renfroe goes by Dennis. Meanwhile, his
daughter’s last name is given variously as Lambert, Renfroe, and Renfroe-
Lambert. For the sake of simplicity, we refer to him as Renfroe and her as
Lambert.
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4 Opinion of the Court 24-13382
with the intent to cause a loss. Even “insureds” who
did not commit or conspire to commit the act causing
the loss are not entitled to coverage.
However, if you commit an act with the intent to
cause a loss, we will provide coverage to an innocent
“insured” victim of domestic abuse, as defined in the
“Domestic Abuse Insurance Protection Act”, to the
extent of that person’s interest in the property when
the damage is proximately related to and in
furtherance of domestic abuse.
This is known as an “innocent-insured exclusion” because it
generally prevents even an innocent party from collecting on a
policy if another insured intentionally causes a loss that would
otherwise be covered.
When Lambert learned that her father had taken out the
policy, she called USAA to share Renfroe’s long history with house
fires and warn them that she believed he was planning to burn this
house down, too.
2
The policy remained in effect.
A few weeks later—surprise!—the house burned down.
Renfroe filed an insurance claim. When USAA investigated,
Renfroe and Lambert continued to point the finger at one another
for arson. Although the final investigative report did not rule out

2
At trial, Renfroe admitted to two previous house fires. Lambert added
testimony about three other fires, including her own previous home (which
Renfroe had also co-owned). For those keeping score, that makes the fire in
this case number six for Renfroe, and he has already collected insurance
payments on several.
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24-13382 Opinion of the Court 5
an accidental cause, its analysis concluded that the fire’s
characteristics were consistent with arson. Believing that either
Renfroe or Lambert had set the fire, USAA denied coverage—no
matter which one was responsible, the policy’s innocent-insured
exclusion meant that neither could collect.
Renfroe sued, asserting state-law claims against USAA for
breach of contract and tortious bad faith. After discovery, the
parties both filed cross-motions for summary judgment. For the
breach-of-contract claim, the district court concluded that the
innocent-insured exclusion was “void under Alabama public
policy,” but sent the case to trial because payment could be denied
if Renfroe himself had caused the fire. As for the bad-faith claim,
the district court agreed with USAA that it failed as a matter of law.
Before opening statements, USAA again asked whether it
could argue that Lambert had set the fire, and that the innocent-
insured exclusion therefore prevented Renfroe from recovering
because she was also insured under the policy. Renfroe, too, asked
to present evidence implicating Lambert. The court allowed both
parties to offer evidence that Lambert was culpable, but barred
USAA from presenting the innocent-insured exclusion. Consistent
with its earlier decision that the exclusion was void, the court
allowed the policy itself and the denial letter to be submitted to the
jury only in redacted form, omitting any reference to the exclusion.
And that meant USAA’s only possible defense would be convincing
the jury that Renfroe alone was responsible for the fire—a task
complicated by the fact that its own evidence of arson tended to
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6 Opinion of the Court 24-13382
point inconclusively to either Renfroe or Lambert. Meanwhile,
Renfroe argued during closing that the evidence pointed to
Lambert setting the fire.
The jury returned a verdict of $425,000 in his favor. Both
parties filed post-trial motions: USAA, to reduce the verdict under
the terms of the policy, and Renfroe, to apply prejudgment interest
to the award. The district court granted USAA’s motion, denied
Renfroe’s, and entered judgment for Renfroe in the amount of
$226,727.85.
On appeal, USAA argues that the district court erred in
precluding USAA from invoking the innocent-insured exclusion in
its defense. Renfroe challenges both the district court’s denial of
his motion for prejudgment interest and its grant of summary
judgment to USAA on his bad-faith denial-of-coverage claim.
II.
The interpretation of an insurance contract, including
whether one of its provisions is contrary to public policy, is a
matter of law, so our review is de novo. State Farm Mut. Auto. Ins.
Co. v. Spangler, 64 F.4th 1173, 1178 (11th Cir. 2023). We also review
a district court’s grant of summary judgment de novo. Nehme v.
Fla. Int’l Univ. Bd. of Trs., 121 F.4th 1379, 1383 (11th Cir. 2024).
III.
The district court was wrong to find USAA’s innocent-
insured exclusion void as a matter of Alabama public policy.
Alabama courts leave policy to the legislature and read terms in
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24-13382 Opinion of the Court 7
insurance policies the way an ordinary person would. For that
reason, the exclusion in Renfroe’s policy is enforceable. But even
without that, USAA denied his claim in good faith because it had
evidence that he started the fire.
A.
Alabama courts, as a rule, do not reach out to void
contractual provisions for reasons of public policy. In fact, they are
“averse to holding contracts unenforceable” on that ground “unless
their illegality is clear and certain.” Grimes v. Alfa Mut. Ins. Co., 227
So. 3d 475, 490 (Ala. 2017) (emphasis omitted and quotation
omitted). And that is so only if a provision “contravenes some
positive statute or some well-established rule of law.” Id.
(emphasis omitted and quotation omitted). In justifying its light-
touch approach to public policy arguments, the Alabama Supreme
Court has explained that it defers to the state legislature as the body
that “has the exclusive domain to formulate public policy in
Alabama.” Ex parte Ankrom, 152 So. 3d 397, 420 (Ala. 2013)
(quotation omitted). If anything, this rule is even firmer for
exclusions in insurance contracts, because the court has specifically
held that such provisions “are permitted and are not against public
policy” so long as they “do not conflict with statutory law.” Grimes,
227 So. 3d at 491.
The Alabama Code does not prohibit innocent-insured
exclusions. See A
LA. CODE §§ 27-22-1 to 27-22-65. Nor does
Renfroe point to any conflict with a statute that the innocent-
insured exclusion in his policy would produce. It is true that at least
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8 Opinion of the Court 24-13382
one Alabama statute forbids innocent-insured exclusions in one
specific context: abuse. The Domestic Abuse Insurance Protection
Act requires an insurer to cover a claim by “an innocent co-insured
subject of abuse . . . when the damage or loss was proximately
related to and in furtherance of abuse.” A
LA. CODE § 27-55-3(f).
But that only proves the point—when the Alabama legislature
wishes to prohibit an innocent-insured exclusion, it knows how to
do it. See City of Montgomery v. Town of Pike Rd., 35 So. 3d 575, 584
(Ala. 2009). And Renfroe’s policy even carves out an exception to
its innocent-insured exclusion, explicitly offering coverage where
the Domestic Abuse Insurance Protection Act demands it.
In short, we see no evidence that USAA’s innocent-insured
exclusion is contrary to Alabama public policy—no statute or court
case comes close to suggesting as much.
The district court saw things differently. It read one
Alabama Supreme Court case, Hosey v. Seibels Bruce Group, as
holding that all innocent-insured exclusions are contrary to public
policy. See 363 So. 2d 751 (Ala. 1978). But that is not what Hosey
said. Instead, its holding was that the interests of co-insureds are
generally several rather than joint, which means that an innocent
insured can collect on a policy even if their co-insured would be
barred from doing so because they intentionally caused the loss.
Id. at 754. True, Hosey was also an arson case, but the only time it
mentioned “public policy” was to justify the well-accepted
common law defense of arson against an insurance payout to the
party who had set the fire. Id. at 753. The point of Hosey was that
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24-13382 Opinion of the Court 9
this defense did not automatically extend to bar payment to an
innocent person who was also insured under the policy—not that
parties had no way to contract around that rule.
The Hosey court, we note, also cited an earlier opinion,
Feibelman, in which the Alabama Supreme Court had rejected an
implied or imputed exclusion for innocent insureds, while still
allowing parties to contract for one with an explicit “clause or
condition.” Feibelman v. Manchester Fire Assurance Co., 19 So. 540,
548 (Ala. 1896). In line with that case, the Hosey court declined to
read an implied innocent-insured exclusion into a policy. Hosey,
363 So. 2d at 754. That is a far cry from declaring all innocent-
insured exclusions contrary to Alabama public policy.
According to the Feibelman-Hosey approach, the innocent-
insured exclusion in Renfroe’s policy is enforceable under Alabama
law. Renfroe argues that Hosey shows that Alabama law requires
courts to construe the interests of co-insureds separately unless
“express policy language” states otherwise. Maybe so, but that
does not help him because the exclusion here could not be more
express: the policy’s list of “LOSSES WE DO NOT COVER”
includes any “loss arising out of any act any ‘insured’ commits or
conspires to commit with the intent to cause a loss.” And it goes
on to emphasize that “[e]ven ‘insureds’ who did not commit or
conspire to commit the act causing the loss are not entitled to
coverage.” That language qualifies as express under any standard.
Renfroe retorts that the “express policy language” must
meet a magic words requirement by using technical terms like
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10 Opinion of the Court 24-13382
“collectively” or “jointly.” No. Neither magic words nor jargon
are required—an insurance policy “should be read as a layman
would read it and not as it might be analyzed by an attorney or
insurance expert.” Liggans R.V. Ctr. v. John Deere Ins. Co., 575 So. 2d
567, 571 (Ala. 1991) (emphasis omitted and quotation omitted).
Where, as here, the terms are unambiguous, “Alabama courts
enforce the insurance policy as written.” Robinson v. Liberty Mut.
Ins. Co., 958 F.3d 1137, 1140 (11th Cir. 2020) (quotation omitted).
As it is, the policy language clearly communicates that intentional
losses by any insured void coverage for all insureds. And that is
good enough under Alabama law. The explicit exclusion in
Renfroe’s policy is enforceable.
3

B.
We also consider the district court’s grant of summary
judgment to USAA on Renfroe’s bad-faith denial-of-coverage
claim. On that front, the court was correct.
A bad-faith claim “arises for an insurer’s intentional refusal
to settle a direct claim where there is either (1) no lawful basis for
the refusal coupled with actual knowledge of that fact or
(2) intentional failure to determine whether or not there was any
lawful basis for such refusal.” Chavers v. Nat’l Sec. Fire & Cas. Co.,
405 So. 2d 1, 7 (Ala. 1981) (quotation omitted).

3
Because we reverse the judgment against USAA, we need not consider
Renfroe’s argument that the district court abused its discretion in denying him
prejudgment interest.
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24-13382 Opinion of the Court 11
Under Alabama law, “all bad-faith claims fail on summary
judgment where the trial court expressly finds as a matter of law
that the insurer had a reasonably legitimate or arguable reason for
refusing to pay the claim at the time the claim was denied.” Walker
v. Life Ins. Co. of N. Am., 59 F.4th 1176, 1187 (11th Cir. 2023)
(alterations adopted and quotation omitted). Put simply, if even
“one reason for denial of coverage is at least arguable, this court
need not look any further.” Weaver v. Allstate Ins. Co., 574 So. 2d
771, 774 (Ala. 1990) (quotations omitted).
Here, USAA had at least an arguable reason not to pay out—
even without the innocent-insured exclusion—because it had
evidence that Renfroe himself had intentionally caused the loss by
committing arson. An insurer can establish a prima facie case of
arson by presenting “(1) evidence of arson by someone,
(2) evidence of motive on the part of the insured, and (3) evidence
implicating the insured.” Bush v. Ala. Farm Bureau Mut. Cas. Ins. Co.,
576 So. 2d 175, 179 (Ala. 1991). And the burden of proof in
mounting an arson defense “is not particularly heavy” under
Alabama law. Fondren v. Allstate Ins. Co., 790 F.2d 1533, 1535 (11th
Cir. 1986).
We agree with the district court that USAA offered enough
evidence at summary judgment to support a good-faith arson
defense. To begin, its investigator concluded that the fire may have
resulted from an “act of incendiarism.” And Lambert had told him
that she believed Renfroe had burned the house down “so that he
would have the ability to purchase the land back at the courthouse
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12 Opinion of the Court 24-13382
sale cheaper.” Cell tower data suggested that Renfroe may have
been near the house when the fire started. And on top of that, a
gas line was severed from a space heater before the fire—
something that Renfroe, as a former pipefitter, had the expertise to
make happen.
Because USAA had evidence that Renfroe had caused the
fire through arson, its denial of coverage was not in bad faith.
Summary judgment was appropriate.
* * *
Alabama law has no public policy bar against innocent-
insured exclusions like the one in Renfroe’s insurance policy. That
means USAA should have been able to defend its coverage denial
on that basis. For that reason, we VACATE the district court’s
judgment against USAA on the breach-of-contract claim and
REMAND for further proceedings.
As for the bad-faith denial-of-coverage claim, the district
court was correct that USAA had at least an arguable basis to deny
coverage, so we AFFIRM its grant of summary judgment to USAA.
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