2006, 2007, 2008 - Looking Back Over The Decade

Posted on January 10, 2010 by Sara Thorpe

As we round out review of what happened over the past decade in the insurance coverage world, I agree with Mike’s inventory as it pertains to California.  (If you are interested in year by year summaries of California cases, please respond to this blog or send me an email as we collected those cases.)  I would add one notable case to the decade highlights. There is little appellate authority in the area of "number of occurrences" and thus this decision was very important.

In London Market Insurers v. Truck Insurance Exchange (2007) 146 Cal.App.4th 648, the California appellate court held that the policy language before it and common sense led to the conclusion that all of the asbestos claims were not one occurrence. This case had a significant impact on not only the primary insurers’ obligations in that particular case (because there were no aggregate limits in many of the primary policies), but on many pending asbestos coverage cases.

All decade long people pondered what would be the next asbestos, when it turns out that asbestos is the next asbestos. . .  Asbestos claims continue to cost companies and insurers millions, . . . make that billions of dollars, and the litigation is not only in the defense of the claims, but in the coverage litigation as insurers and insureds sort out who owes what to whom.

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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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Colorado Appellate Court Addresses Coverage for Resulting Damage

Posted on March 4, 2009 by Diane Polscer

In General Security Indem. Co. v. Mountain States Mut. Cas. Co., 2009 Colo. App. LEXIS 215 (February 19, 2009), the Colorado Court of Appeals addressed the definition of occurrence in the context of property damage to work done by a subcontractor and that company’s sub-subcontractors. The homeowners’ association for the Summit at Rock Creek filed suit against D.R. Horton for alleged construction defects. D.R. Horton in turn sued its subcontractors, including Foster Frames, for indemnity. Foster Frames in turn filed a fourth-party complaint against its sub-subcontractors. General Security insured Foster Frames. General Security then brought an action against the insurers of the sub-subcontractors for contribution and indemnity. General Security brought motions for summary judgment against the defendant insurers arguing that each had a duty to defend Foster Frames, as an additional insured, against the D.R. Horton complaint.

The central issue was the definition of “occurrence” and how it applied to property damage in construction defect claims. The Court of Appeals first found that the majority rule is that damage to an insured’s own work is not an occurrence because such damage is not unexpected. The Court also followed the corollary to this majority rule that damage to the work of other contractors is considered an occurrence. Based on the facts before it, the Court of Appeals found there was no occurrence because the damage did not extend beyond the work of Foster Frames and its sub-subcontractors. The Court of Appeals ruled that the insurers for the sub-subcontractors did not have a duty to defend because there was no indication in the complaint that “consequential damage” went beyond the work of the sub-subcontractors. To the extent the D.R. Horton complaint alleged damage to other parts of the structure, those damages were wholly unrelated to the work of Foster Frames and there was no allegation connecting Foster Frames’ work to the claimed damage. The Court of Appeals rejected the argument that simply because a complaint states generally that there was “consequential damage” there was a duty to defend. The fact that the Court of Appeals considered the work of the subcontractor and its sub-subcontractors to be all the work of the subcontractor for the purposes of whether there was an occurrence may also impact how the definition is applied to general contractors in future cases.
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Stringfellow: California Follows "All Sums," Allows Stacking, But Finds Only One Occurrence

Posted on January 9, 2009 by Sara Thorpe

The Stringfellow litigation has brought practitioners law on continuous trigger (see, Montrose Chem. Corp. v. Admiral Ins. Co. [1995] 10 Cal.4th 645), and now on “all sums,” stacking, and number of occurrences (State of Calif. v. Continental Ins. Co. (2009) __ Cal.App.4th __, discussed further below). In 2009, there may also be ruling on the pollution-coverage-related issues of the relevant release at a landfill, and the insured’s burden of proof on what caused the pollution) (State of California v. Underwriters at Lloyd's London). On Jan. 8th, the California Supreme Court heard oral argument on the pollution coverage issues. A decision should be out later in the year.

On the most recent decision (State of Calif. v. Continental Ins. Co.), we reported in October that the California appellate court had issued a tentative decision prior to oral arguments. The court’s final decision is consistent with the indication of its leanings. The lengthy decision contains the following rulings:

  • "All sums" rule applies - In a continuous loss situation, each insurer that covers any part of the claim has an obligation to pay the entire claim, and then seek reimbursement from other insurers.  This was suggested by earlier cases and is the approach taken by many courts around the country.
  • The insured can stack policy limits across policy periods (absent policy language on the issues) - There was nothing in the policies or law that precluded stacking of policies across applicable policy periods. This is a rejection of FMC Corp. v. Plaisted & Cos. (1998) 61 Cal.App.4th 1132.  
  • Self-insured retentions (“SIRs”) must be paid under each excess policy (dicta) - If multiple policies each with an SIR are implicated, the court should require each SIR to be paid prior to coverage being available under the excess policy.
  • Distinction between deductibles and SIRs (dicta) - Deductibles are typically found in personal liability policies whereas SIRs are found in commercial policies. In policies with SIRs, limits are paid after payment of SIR but deductibles reduce policy limits.
  • Only a single occurrence was at issue – There were not four occurrences (i.e., (1) escape of contaminants through fractures in the rocks; (2) escape through the barrier; (3) escape through the underground streambed; and (4) an overflow from the pit).  The single occurrence was the continuing exposure to the conditions (plural) at the site which combined to cause on-going contamination when the waste was put into the site.  The court likened the site to a sieve with multiple holes; each hole is not a separate occurrence.  The overflow from the pit did not constitute a separate occurrence because the State failed to show it resulted in separate damage.
  • No annualization of limits - There was no language in the multi-year policies indicating the limits were intended to apply annually.
  • The trial court's "set off" ruling is moot in light of the reversal of the trial court's no-stacking ruling and the size of the total loss.
  • Mitigation of damages doctrine did not apply - This defense is not available to insurers who claim the insured failed to take steps which would have reduced its damages (and inured to the insurer's benefit).
  • The trial court did not abuse its discretion in declining to apply the ancient documents or business records exceptions to the hearsay rule. Documents located in the excess insurers underwriting file could not be properly authenticated and presented in order to meet the requirements of those evidentiary rules.
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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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Stringfellow - A Continuing Coverage Saga

Posted on October 29, 2008 by Sara Thorpe

While it is often difficult these days to pay attention to any thing other than the upcoming elections and the roller-coaster economy, judges keep making decisions and lawyers keep lawyering.

On November 6, 2008, after the election results are in, the California appellate court, 4th district (appeal from Riverside County), will hear oral argument on one aspect of the ongoing litigation between the State of California and its insurers relating to the the Stringfellow site.  Part of the case is before the California Supreme Court (as we mention below). The appellate court hearing next week is on several issues including, importantly, “all sums” and “stacking.”

 

The Stringfellow litigation started as a pollution lawsuit in 1983, with the State of California being found in part responsible for the pollution in 1988. The coverage litigation started in 1993.

 

In an unusual move, in this latest phase of the case, the appellate court sent the parties an 88 page “tentative decision” in anticipation of the oral argument, thereby providing the parties with the court’s leanings so the parties could better prepare for each sides’ 30 minute arguments.

According to the tentative, the court is leaning towards confirming California follows an “all sums” approach to an individual insurer’s liability (once its policy is proven to provide cover) for property damage that continues over many years. The court is also inclined to rule the insured can “stack” the insurance policies. That is, the insured is permitted to stack policies across policy periods. The appellate court opined that FMC Corp. v. Plaisted & Cos. (1998) 61 Cal.App.4th 1132(which held multiple policies’ occurrence limits could not be stacked) was not well-reasoned. While not criticizing the trial court for feeling it was bound by the FMC decision, the appellate court intends (unless persuaded otherwise) to hold FMC was wrong.

On other issues, the appellate court appears inclined to rule for the insurers. The court’s tentative indicates it agrees with the trial court’s finding of only one occurrence and that policy limits for multi-year policies were per occurrence not annual.

 

Meanwhile, briefing has been completed on other important pollution-coverage issues pending before the California Supreme Court in the Stringfellow case. Before the Supremes are the following issues: (1) Does application of the pollution exclusion clause turn on when waste material was discharged from the Stringfellow Acid Pits waste disposal site or when the waste was initially deposited into the site? (2) If pollution is caused by both uncovered intentional actions and covered accidents, does the insured have the burden at trial to prove that all of the damages it seeks to recover were caused by a covered event, or is there a duty to indemnify when two concurrent causes are responsible for an injury even if one of the causes is an uncovered act?

The Court of Appeal had rejected the insurers' contention, based on Standun, Inc. v. Fireman's Fund Ins. Co. (1998) 62 Cal.App.4th 882, that the relevant release for purposes of applying the "sudden and accidental" pollution exclusion was the deposit of waste into the site. The Court distinguished Standun because the insured in Standun was held strictly liable as a waste generator that purposefully and regularly disposed of waste at the site.  Here, the court held, the State's liability for the negligent design, construction and operation of the Stringfellow Site shifted the focus from the initial deposit to subsequent releases from the site.

The Court of Appeal also concluded Golden Eagle Refinery Co. v. Associated Internat. Ins. Co. (2001) 85 Cal.App.4th 1300 and Lockheed Corp. v. Continental Ins. Co. (2005) 134 Cal.App.4th 184 are incompatible with the California Supreme Court's decision in State Farm Mut. Auto. Ins. Co. v. Partridge (1973) 10 Cal.3d 94. The court held, applying Partridge, that the State would be entitled to full coverage even if damage was partially caused by an excluded event and the damage was indivisible.

 

We will report further as these courts issue final rulings on the various aspects of the case.
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When is "knowingly" bad conduct still an "occurrence"? Apparently, more frequent than you thought in Texas.

Posted on July 5, 2008 by Chris Martin
Last Monday, a three-judge panel of the Fifth Circuit considered one of the implications of the Texas Supreme Court’s landmark decision last year in Lamar Homes, Inc. v. Mid-Continent Cas. Co., 22 S.W.3d 1 (Tex. 2007), in its decision in National Union Fire Ins. Co. of Pittsburgh, Pa. v. Puget Plastics Corp. --- F.3d ----, 2008 WL 2487054 (5th Cir. 2008).  In doing so, the Fifth Circuit considered a deceptively simple question: could an insured’s "knowing" violation of the Texas Deceptive Trade Practices Act still be an “occurrence” under a commercial umbrella policy?  In this case, the panel considered National Union’s claim it had no duty to indemnify its insured after the jury in the underlying tort case awarded the claimant $36 million against the insured after having found a “knowing” violation of the Texas Deceptive Trade Practices Act.  In the subsequent coverage case, National Union argued the insured’s actions, which the jury in the underlying suit found to be “knowing,” could not be an “occurrence” under the general liability policy because it could not constitute an “accident.”  Relying on Lamar Homes, the Fifth Circuit stated the “knowing” finding by the jury in the underlying lawsuit did not control the coverage issue because “knowing” in the context of the DTPA only meant “deliberate.”  And, as applied to the case at bar, the Fifth Circuit interpreted the Texas Supreme Court's recent holding Lamar Homes as holding that a “deliberate” act could still be an “occurrence” unless the injury was "highly probable" or the insured "intended or expected the harm that was suffered."  As such, the Fifth Circuit rejected National Union’s argument that a “knowing” violation of the DTPA could never constitute an “occurrence.”  The panel went on to instruct that the coverage lawsuit should include and seek to resolve issues that were not expressly adjudicated in the underlying lawsuit, such as whether the injury caused by the insured was "highly probable, expected or intended."

 

Lamar Homes was bad enough for the insurance industry, but this is getting ridiculous.  The Texas Supreme Court's treatment of the "occurrence" issue in Lamar Homes was in a totally different context than the one addressed by the Fifth Circuit in this case.  The statutory definition of "knowing" under the Texas DTPA puts the conduct on par with an intentional tort in order for it to be properly characterized as "knowing" conduct under the DTPA.  Under the statute, it's a necessary predicate to recover treble damages (the DTPA's own version of punitive damages.)  So, it's the antithesis of an insurable "occurrence."   The Fifth Circuit's decision further highlights the need of liability carriers in Texas to bring declaratory judgment actions when underlying tort cases involving their insureds generate material coverage questions,   Unfortunately, the Fifth Circuit's recent decision in Puget Plastics means that (at least in the federal courts) the resolution of the underlying tort case is just the beginning of the coverage case even when the underlying jury finds the insured's conduct to have been committed "knowingly."  
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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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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.
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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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