Accident Means Accidental Conduct Says The California Supreme Court

Posted on August 11, 2009 by Sara Thorpe

In reviewing whether there has been an “occurrence,” where occurrence is defined as an accident, California (unlike many jurisdictions) makes a distinction between whether the act was intended versus whether the resulting damage or injury was intended. The latest unanimous decision from the California Supreme Court reiterates that even if the consequence of the action is different from what was intended, or there was a mistake as to the reason for the conduct, where the conduct is intentional it cannot be recast as having been an accident for purposes of obtaining insurance coverage. Delgado v. Interinsurance Exchange of Automobile Club of Southern California (2009) __ Cal.4th __ (2009 WL 2356908).

Interinsurance Exchange of the Automobile Club of Southern California issued a homeowners policy to Craig Reid providing liability coverage of $100,000 per occurrence.  The policy covered damages for bodily injury caused by an occurrence. An occurrence was defined as “an accident . . . which, during the policy period, results in bodily injury . . .”

During the policy period, Reid repeatedly hit and kicked Jonathan Delgado (a 17 year old), causing serious and permanent injury. Delgado sued Reid claiming in the alternative that the physical attack was unprovoked and without justification, and that the conduct was a negligent and unreasonable act of self defense. Interinsurance Exchange denied coverage and refused to defend Reid on the basis that there was no occurrence.

Reid and Delgado dismissed the intentional tort cause of action and settled. They stipulated that Reid negligently believed he was acting in self defense. They stipulated to judgment of $150,000. Reid paid $25,000 and assigned his claims against Interinsurance Exchange for a covenant not to execute on the rest of the judgment. Delgado then sued Reid’s insurer.

At the trial court level, the insurer successfully demurred.  Delgado filed a first amended complaint which alleged Reid’s actions were not willful or malicious, but overreactions to a threat of harm to him and his family, and thus an accident under the policy. The insurer again successfully demurred. No further leave to amend was granted as the court found the stipulation between the settled parties to be “contrived” to expose the insurer to liability and “disingenuous at best.” Delgado appealed. California’s appellate court reversed, holding the amended complaint alleged “nonintentional tortuous conduct” that were potentially an accident covered by the policy.

Before the California Supreme Court, Delgado argued that Reid’s actions were an accident because the actions were unexpected from the perspective of the injured party. The court rejected this argument, explaining that the injured party’s perspective is not taken into account when determining whether an event qualifies as an accident. If Delgado’s argument were accepted, any intentional act (even child molestation) would be rendered an accident simply because it was not foreseen by the injured party. 

The court also rejected Delgado’s argument that the insurer could have included language clarifying that accident was to be defined from the perspective of the insured, like when policies included in the occurrence definition “neither expected nor intended from the standpoint of the insured.” However, the court clarified that accident refers to the insured’s liability-causing conduct, and not the resulting damage or injury, the latter which was to be neither expected or intended by the insured.

Delgado argued the insured’s unreasonable, subjective belief in the need for self defense transformed an intentional act into an accident. The court also rejected this argument, holding that an insured’s mistake of fact or law does not transform a knowing and purposeful act into an accident. And the court rejected the suggestion that a provocative act by the injured party could convert the insured’s intentional physical response into an accident.

California’s highest court’s decision provides clarification to an issue that had been muddied by some recent decisions, including the appellate court’s decision in this case.
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60 Day Notice Provision in Expanded Coverage was Enforceable; California's Notice-Prejudice Rule Did Not Apply

Posted on July 2, 2009 by Sara Thorpe

The insured had to comply with the notice provision in the “special” “expanded” coverage under a “pollution buy-back” endorsement to a policy, which policy otherwise excluded coverage for property damage or bodily injury caused by pollution. In Venoco, Inc. v. Gulf Underwriters Ins. Co. (2009) __ Cal.App.4th __ (2009 WL 1875640), California’s appellate court held there was no coverage for claims by students and administrators at Beverly Hills High School who claimed injuries from oil wells drilled at what became the site of their school.

Gulf Insurance Company’s policy excluded coverage for pollution. The policy was endorsed with pollution coverage if the claims stemmed from an accident and the claim was reported to Gulf within 60 day of discovery of the accident. (Provisions with similar timing requirements are also found in automobile liability policies and in other coverage add-ons.)

The insured did not report any accident nor did it report any such accident within the 60 day time requirement. The court found the policy provision to be conspicuous and reporting requirements like this one to be enforceable. The court further held there was no requirement that the insurer show prejudice due to late notice of the claim. The notice-prejudice rule, the court explained, pertained to late reporting of a claim otherwise covered by the policy. Here the timing requirement was one of the conditions for coverage, as was that there be an accident that caused the pollution.

Nonetheless, the insured argued there was a duty to defend because the policy provided the insurer would defend “groundless” claims. Not so, explained the court. “Groundless” claims must still be claims potentially covered by the policy, and this claim was not.

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Significant California Decisions in 2008: What is an "Accident" and Whether an Excess Insurer Must Pay Where the Primary Settled for Less Than Policy Limits

Posted on January 8, 2009 by Sara Thorpe

In reviewing California appellate decisions issued in 2008, my vote for the most significant decisions are on the issue of what constitutes an “accident” (State Farm) because it is a departure from prior law on the issue, and the issue of whether an excess insurer must pay when the primary settled for less than policy limits (Qualcomm) because it is on a subject for which there was a dearth of law.

 

Accident

Prior to 2008, California courts consistently held an insured's intentional or deliberate act is not an accident for purposes of the “occurrence” definition of a general liability policy, regardless of whether the insured intended to cause the resulting harm. See, e.g., Merced Mutual Insurance Company v. Mendez (1989) 213 Cal.App.3d 41 (sexual battery); Collin v. American Empire Ins. Co. (1994) 21 Cal.App.4th 787 (conversion); Ray v. Valley Forge Ins. Co. (2000) 77 Cal.App.4th 1039 (professional advice). California courts distinguished between the act and the resulting harm.

That analysis was called into question by State Farm Fire and Casualty Company v. Superior Court (2008) 164 Cal.App.4th 317 (review denied). In State Farm, during an argument, the insured intentionally threw the plaintiff into a swimming pool. The plaintiff sustained injuries when he landed on the pool's concrete step rather than in the water. State Farm declined to defend the ensuing lawsuit because the insured acted intentionally and not accidentally, regardless of whether the insured intended to harm the plaintiff or not.

The appellate court disagreed. While it acknowledged there were authorities holding an insured's deliberate or intentional conduct negates an accident, the court construed California authority as requiring that the harm also be intended. Id. at 328 (construing the test developed in Merced Mutual Insurance Company v. Mendez (1989) 213 Cal.App.3d 41 which found no coverage for a claim of sexual battery even if the insured did not intend to harm the claimant). 

The Mendez court had explained that:

An accident, however, is never present where the insured performs a deliberate act unless some additional, unexpected, independent and unforeseen happening occurs that produces the damage. Clearly, where the insured intended all of the acts that resulted in the victim's injury, the event may not be deemed an "accident" merely because the insured did not intend to cause injury. Conversely, an "accident" exists when any aspect in the causal series of events leading to the injury or damage was unintended by the insured and a matter of fortuity. Id. at 50.

 

State Farm distinguished Mendez and other authorities as involving situations where "the insured intended all of the acts in the causal chain, including the injury." State Farm, 164 Cal.App.4th at 328. Thus, the court held that, because the insured had not intended the plaintiff to land on the pool steps and had miscalculated the force needed to clear the steps, there was unintentional conduct satisfying the accident requirement. 

 

The State Farm decision confuses the analysis and focuses on the resulting injury, when the focus should only be on the action taken by the insured. But, the debate is not over. The new year may bring additional decisions on the issue. Another accident case, Delgado v. Inter-Insurance Exchange, etc. (2007) 153 Cal.App.4th 571 (review granted), is presently pending before the California Supreme Court. Delgado focuses on whether unreasonable self-defense can create an accident, but the Supreme Court may clarify the accident rules and comment upon State Farm.

 

Excess Insurer Liability Where Primary Settles

As previously reported, the California appellate court held that full primary insurance limits must be paid prior to excess coverage attaching where the excess policy requires that the underlying policy “have paid or have been held liable to pay the full amount” of underlying limits. Qualcomm v. Certain Underwriters at Lloyd’s, London (2008) 161 Cal.App.4th 184 (review denied).

The primary insurer, with $20 million in liability limits, settled with Qualcomm for $16 million. Qualcomm then sued London, its excess insurer, for declaratory relief and breach of contract for the remaining $9 million owed on the claim. London successfully demurred to Qualcomm’s complaint. The appellate court affirmed this decision, finding that the “have paid or have been held liable to pay” language in the policy [the “attachment” clause], meant only actual payment of the $20 million of primary limits would suffice to meet that policy requirement. The appellate court ruled that public policy considerations, including those favoring settlements, could not supersede plain and unambiguous policy language.

 

The case is consistent with the literary approach taken by California’s appellate courts (or most of them) in analyzing insurance policy language. While insurers have made these arguments before, until this decision there was little published authority upon which to buttress the argument. One perhaps unfortunate ramification of the decision is that, depending on the strength of the coverage defenses and other issues that factor into settlement, it may be more difficult for primary insurers to settle for less than policy limits where there is a larger than limits potential exposure. The case has it s limits since not all excess insurance policies have the same “have paid or have been held liable to pay” requirement.
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When An Intentional Act Is An "Accident"

Posted on July 16, 2008 by Sara Thorpe

In a decision that does not differentiate between an act and the result of an act, the California Court of Appeal, Second District, ruled that because the insured did not throw the plaintiff far enough, there was an “accident.” In State Farm Fire & Cas. Co. v. Sup. Ct., __ Cal.App.5th __ [08 CDOS 8156], the insured threw plaintiff into a pool, intending to get him wet. However, instead of landing in the pool, plaintiff landed on the pool’s cement step. The insured was arrested for the incident and pled no contest to a charge of misdemeanor battery.  The appellate court concluded this conduct involved an "accident."

The insured’s policy covered damages because of “bodily injury... caused by an occurrence.”  It defined “occurrence” to mean “an accident … which results in … bodily injury or … property damage.”  The policy also excluded from coverage “bodily injury … which is either expected or intended by the insured … or the result of willful and malicious acts of the insured.”  The insurer denied coverage on several grounds, including that the claim did not fall within the insuring agreement because the insured’s misconduct did not involve an “accident.” The insurer also raised the intentional acts exclusion.

The trial court (in the subsequent coverage litigation) concluded the insurer owed a defense, finding the insured did not intend to cause injury to plaintiff and, therefore, the injury was neither expected nor intended. The insurer filed a petition for writ of mandate, arguing the term “accident’ referred to the injury-producing act, and it was irrelevant whether or not the insured intended the injury that flowed from the act. The appellate court disagreed, noting the meaning of “accident” in insurance law was not settled and had been used to refer not only to the alleged conduct but also to unintended or unexpected consequences. The appellate court concluded an “accident” could occur “when either the cause is unintended or the effect is unanticipated.” Additionally, “… an ‘accident’ exists when any aspect in the causal series of events leading to the injury or damage was unintended by the insured and a matter of fortuity.” Accordingly the appellate court determined the claim involved a potentially covered occurrence and triggered a duty to defend under the insurance policy.

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Multiple Shootings Are Single Occurrence

Posted on January 2, 2008 by Kevin Merriman
In a coverage dispute arising from a negligence claim brought by victims of a shooting spree, the Pennsylvania Supreme Court considered whether multiple shootings resulting in five deaths and one serious injury qualified as an “accident” under a homeowner’s policy, and whether the shootings constituted a single “occurrence.” In Donegal Mut. Ins. Co. v. Baumhammers (Pa. Dec. 27, 2007), the court held that negligence claims asserted against the perpetrator’s parents qualified as an accident, and that the multiple shooting arose from a single, not multiple occurrences. The claim arose from a shooting spree that took place within a period of just two hours. The insureds’ son drove to four nearby townships and shot and killed or injured six victims. He was later convicted of first degree murder with respect to the five victims who had died, and aggravated assault and attempted homicide for the victim who had been seriously injured. The victims and their representatives then sued the family, alleging the parents were negligent in failing to procure adequate mental health treatment for their son; failing to take possession of his handgun; and, failing to notify authorities.

The court was unanimous in its holding that the claims against the insured parents, when viewed from their perspective, had the necessary degree of fortuity to qualify as an accident. The court explained, “[t]he extraordinary shooting spree embarked upon by [the insureds’ son] resulting in injuries to Plaintiffs cannot be said to be the natural and expected result of Parents alleged acts of negligence. Rather, Plaintiffs injuries were caused by an event so unexpected, undesigned and fortuitous as to qualify as accidental within the terms of the policy.” The court concluded that because the alleged negligence resulted in accidental injuries, the insurer was required to defend the parents.

The court, however, did not reach consensus on the number of occurrences. The majority chose to apply the “cause” test, focusing on the cause of the damage, rather than the number of resulting claimants or injuries, in determining the occurrence limits applicable to the claims. This approach, the court reasoned, “recognizes that the question of the extent of coverage rests upon the contractual obligation of the insurer to the insured. Since the policy was intended to insure Parents for their liabilities, the occurrence should be an event over which Parents had some control.” Applied to this case, the court concluded the parents' negligence in failing to remove the weapon and/or alert authorities was the occurrence that began the sequence of events that resulted in the injuries. Thus, the court held the parents' alleged negligence resulted from a single “occurrence.”

Two justices filed separate concurring and dissenting opinions. Although they agreed with the majority that the claims qualified as an accident, neither could agree (either with the majority or each other) as to the number of occurrences. In Chief Justice Cappy’s view, the number of occurrences should have been determined based on the number of unexpected or fortuitous events. He concludes in this case that the shooting spree resulted from six separate occurrences.

Justice Cappy does not define what qualifies as the unexpected or fortuitous event; it is either the shootings or the resulting injuries. If it is the unexpected or fortuitous injuries, he adopts the “effect” test rejected by the majority, and a majority of other jurisdictions considering the issue. On the other hand, he may have intended to apply a test similar to New York’s “unfortunate event” test, which focuses not on the number of victims or the negligent acts or omissions, but on the event for which the insured is ultimately held liable, in this case each separate shooting.

Justice Baer attempts to find middle ground by combining the approaches employed by the majority and Justice Cappy, concluding instead that the shooting spree produced four occurrences. Justice Baer would have had no trouble applying the “effect” test apparently approved by Justice Cappy, but for one sentence in the policy, which provided: “This limit is the same regardless of the number of ‘insureds,’ claims made[,] or persons injured.” If the number of occurrences was always determined by the number of victims, he reasoned, this unambiguous limit could never be applied. To give effect to the clause, he adopts an approach that attempts to account for both the negligent act and the bodily injuries, while acknowledging that the number of resulting injuries is irrelevant. Applied to this case, Justice Baer concludes that each stop on the shooting spree constituted a separate event uniting an allegedly negligent act and injury, triggering a completed act of negligence, and, therefore, a new occurrence.

Justice Baer’s approach seems unsatisfactory, since the number of stops has no relationship to either the negligent acts or resulting injuries. Interestingly, had Justice Baer applied the “unfortunate event” test, a finding of six occurrences would have been consistent with his attempts to produce a result that had some bearing on the insured’s actual liability, while still giving effect to the policy language.

The case highlights the conceptual difficulties in determining the number of occurrences potentially applicable to claims resulting in multiple injuries stemming from some common cause. The tests employed by the courts (“cause,” “effect” and “unfortunate event”) each focus on different points in the causal chain, from the negligent act or omission to the resulting injury, and all points in between. The question obviously continues to confound.
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The Utah Supreme Court Addresses "Accident" and the Reasonable Eight-Year Old Insured

Posted on October 29, 2007 by Diane Polscer

On October 26, 2007, the Utah Supreme Court reversed a trial court’s determination that injuries to a seven-year old boy that suffered brain injuries when the eight-year old insured swung a hockey stick at his head was an “accident” under the subject Safeco policy of insurance finding that “accident” must be viewed from the standpoint of a reasonable eight-year old insured. 

The eight-year old insured, Daniel Egan, was covered under a homeowners’ policy issued by Safeco.  The policy indemnified Daniel against liability for “damages because of bodily injury or property damage caused by an occurrence.”  The policy defined “occurrence” as “an accident, including conditions which result in: bodily injury; or property damage.”  Daniel testified that he intended to hit the injured claimant, Caleb, on the shoulder pad with his hockey stick after Caleb made fun of Daniel’s “inferior” hockey skills and that he had no intention of actually hurting Caleb.  The Supreme Court, in reversing the district court’s grant of summary judgment to Safeco, found that Daniel’s age was relevant in determining if Caleb’s injury was an “accident” under Utah law as “eight-year-old children lack the experience, maturity and reasoning skills of adults.”  The court found that focusing on the accidental nature of the injury and taking Daniel’s age into consideration, an average eight-year-old would not have expected to inflict substantial injury by swinging a hockey stick into the upper body of another child that was wearing hockey pads.  Accordingly, the court reversed the district court finding that an issue of material fact existed as to Daniel’s actual intent to cause nontrivial injury to Caleb. 

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