Divided New Jersey Supreme Court Upholds Intentional Acts Exclusion
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.
