## Facts

- Allstate Insurance Company insured sixteen-year-old Robert McCarn and his grandparents, Ernest and Patricia McCarn, under a homeowners policy.
- The policy provided liability coverage for an “occurrence,” but excluded coverage for bodily injury that might reasonably be expected to result from an insured’s intentional or criminal acts.
- Ernest kept a shotgun stored under his bed; it normally was not loaded.
- While Robert and a friend were engaging in horseplay at the McCarn home, the boys had smoked marijuana.
- Robert removed the shotgun and pointed it at his friend’s head.
- Robert believed the shotgun was unloaded, but it was loaded.
- Robert squeezed the trigger, the gun fired, and the friend died from the gunshot.
- The friend’s estate filed a tort action seeking damages against Robert and his grandparents.
- Allstate filed a declaratory-judgment action seeking a ruling that it had no duty to defend or indemnify, relying on the policy’s criminal-acts exclusion.
- The trial court ruled for the McCarns; appellate proceedings followed, and the case reached the Michigan Supreme Court after remand to address the exclusion’s application.

## Issues

1. Whether Allstate’s criminal-acts exclusion bars coverage for the shooting death where the insured’s conduct could be treated as criminal but the death was claimed to be accidental.
2. Under Michigan’s two-part test for criminal-acts exclusions, whether the death was a harm a reasonable person in the insured’s position would have expected to result from the insured’s criminal act.

## Decision

- The Michigan Supreme Court reversed the Court of Appeals.
- The Court held that the criminal-acts exclusion did not preclude coverage on these facts because the death was not a reasonably expected result under the policy standard.
- The Court remanded the case to the trial court for further proceedings consistent with its opinion.

## Legal Principles

- Courts first determine whether the event falls within the policy’s basic grant of coverage (e.g., an “occurrence”); only then do they decide whether an exclusion removes coverage.
- Under Michigan law addressing criminal-acts exclusions (as applied through the Freeman framework), an insurer must show both: (1) the insured committed a criminal act within the meaning of the exclusion, and (2) the injury was a reasonably expected consequence of that criminal act.
- The “reasonably expected” inquiry uses an objective standard tied to the insured’s position and the circumstances shown by the undisputed record; a criminal label alone does not automatically establish reasonable expectation of the resulting injury.
- When the record supports that the insured believed a firearm was unloaded and the injury resulted from a mistaken discharge, the exclusion’s second requirement may fail even if the conduct could be charged as a crime.

## Conclusion

Allstate Insurance Co. v. McCarn holds that even if an insured’s handling of a firearm could qualify as a criminal act, Allstate’s criminal-acts exclusion does not bar homeowners liability coverage unless the resulting injury was a reasonably expected consequence of that criminal act under an objective standard applied to the insured’s position; because the fatal discharge occurred while the insured believed the shotgun was unloaded, the exclusion did not apply and the Court of Appeals was reversed and the matter remanded.


Allstate Insurance Co. v. McCarn, 683 N.W.2d 656 (2004)