Divided New Jersey Supreme Court Upholds Intentional Acts Exclusion

Posted on June 20, 2008 by Mike Aylward

The availability of coverage for negligent supervision claims brought against the parents of troubled teenagers has been a persistent source of litigation and controversy under homeowner's policies.  As courts have increasingly found that independent theories of negligence against parents are an "occurrence" despite the intentional nature of their children's acts, homeowners' insurers have countered with new exclusions for intentional or criminal acts.  In true Clintonian fashion, the effect of such exclusions sometimes turns on whether the exclusion applies to the intentional or criminal acts or "an," "any" or "the insured.

The New Jersey Supreme Court has become the latest court to hold that an exclusion that applies to the intentional acts of "an" insured bars coverage for claims by "any" insured, including the claims of parents whose negligent supervision allegedly failed to prevent their son from sexually assaulting a neighbor's child.  In Villa v. Short, A-7-07 (N.J. June 10, 2008), the court ruled 4-2 that an exclusion for the criminal or intentional acts of an insured "plainly excludes coverage for all insureds when any insured commits an intentional or criminal act."  The court declined to find ambiguity in the policy based on the effect of a severability of interests clause Iwhich requires that each insured's rights be considered separately by the insurer).

Two dissenting justices argued that the insured's interpretation of the exclusion was reasonable, as evidenced by courts in other states that have held such exclusions not to apply to claims against "innocent insureds," and that the language must therefore be deemed ambiguous and should be interpreted in favor of coverage for the insured.
Tags: , , , , , ,

Washington Federal District Court Finds Pollution Exclusion Inapplicable to Property Held in Trust

Posted on February 8, 2008 by Diane Polscer

The U.S. District Court for the Western District of Washington has held that a pollution exclusion’s language was ambiguous as to its application to a bank that acted as trustee for, among other assets, a piece of property that is allegedly the source of environmental contamination. In Bank of Am. v. Travelers Indem. Co., 2008 U.S. Dist. LEXIS 4249 (W. D. Wash. 2008), the Bank of America trustee brought a coverage action against Travelers for coverage related to an underlying environmental coverage suit. Travelers had denied coverage on the basis of a pollution exclusion in the subject policy. The court however found that the exclusion was ambiguous in its application to the Bank which held the property in trust as it applied to contamination by pollutants “at or from premises owned by, rented to, or occupied by the insured.” Noting that in Washington, title and ownership are not necessarily the same thing, the court stated that holding title of the property may not confer any of the benefits of ownership and thus, in the trustee context, the trust did not actually “own” the subject property as it did properties such as its branch offices. Accordingly, the court found the “owned by” language ambiguous, construed it against Travelers and found it had a duty to defend in the underlying suit.

Tags: , , , ,

Sexual Molestation Exclusion Held to Preclude Coverage For Negligent Supervision Claims

Posted on November 4, 2007 by Mike Aylward

Over the years, insurers and tort lawyers have engaged in a cold war over whether homeowner's policies should cover intentional or criminal acts.   In the face of threshold contentions that such offenses were not "accidents" or "occurrences," plaintiffs learned to plead their claims under theories of neglligent hiring or supervision in the hopes of creating coverage.  Enough courts have come to accept coverage for these "negligence" theories that insurers have added new exclusions specifically directed at certain types of offenses that give rise to them, notably assault and battery and sexual molestation.

In the latest skirmish over these new wordings, the Supreme Court of New Hampshire (which has been very busy lately on the coverage front) ruled last week in Philbrick v. Liberty Mutual Ins. Co. that a trial court erred in refusing to apply a homeowner's exclusion for "bodily injury...arising out of sexual molestation" to negligent supervision claims against the parents of a teenage baby-sitter who had molested the plaintiff's children.  The court rejected the plaintiffs' argument that it was the parents' negligence that cause their injuries, holding instead that all of these claims clearly arose out of excluded molestation since, but for the molestation, there would not have been any claim of negligent supervision against the parents.  Writing for the court, Justice Duggan declared that "where, as here, the language of the exclusion explicitly ties the exclusion to the nature of the injury, the analysis should be directed towards the injuries suffered rather than the causes of action in the complaint."

The tragic nature of the njuries in cases of this sort place great moral pressure on courts to contort insurance policies to provide funds where none may otherwise exist to compensate the victims of criminal acts.  Increasingly, however, courts are resisting pressure to find coverage for "negligent" crimes and are looking beyond the headings in a plaintiff's complaint to determine whether the facts warrant coverage or not.
Tags: , , , , , , , , , ,