Lowered Expectation: How Courts Treat Expected Injury Exclusions
February 2010
Commercial general liability (CGL) policies
cover occurrences. The recent versions of the Insurance Services Office, Inc.
(ISO), CGL coverage form define "occurrence" as "an accident, including continuous
or repeated exposure to substantially the same general harmful conditions."
by R. Steven
Rawls and Rebecca C. Appelbaum
Butler Pappas
Weihmuller Katz Craig, LLP
The definition of "occurrence" formerly included the phrase "which is neither
expected nor intended from the standpoint of the insured." Upon deletion of
that language from the definition of occurrence, an exclusion was added eliminating
coverage for "'[b]odily injury' or 'property damage' expected or intended from
the standpoint of any insured."
General liability policies do not provide coverage for harm caused intentionally
by the insured according to the policy language and the states' public policies
against permitting such insurance. However, in most cases, the insured must
actually intend to cause harm, absent an intentional or criminal act exclusion
in the policy. See e.g.,
State Farm Fire & Cas. Co. v. CTC Dev. Corp.,
720 So. 2d 1072 (Fla. 1998) (undefined term "accident" encompasses not only
accidental events but also injuries or damage neither expected nor intended
from the standpoint of the insured).
Courts generally treat whether the insured intends to cause harm as a subjective
matter (to which the insured can typically respond, "But I didn't mean to!").
However, courts differ about how to analyze whether an insured subjectively
expects to cause harm.
CGL Policies Do Not Define "Expected"
Courts give terms left undefined in insurance policies their plain and ordinary
meaning. Whittaker Corp. v. American Nuclear Insurers,
WL 4342512, 3 (D. Mass. 2009) (words in an insurance policy are construed in
their usual ordinary sense) (citation omitted).
Courts will also look at surrounding policy language when determining how
to construe undefined insurance policy terms. In recent CGL policies, the policy
separates the terms intended and expected by the conjunction "or." The word
"or" is, by its nature, disjunctive and, when used in a statute or rule, normally
indicates that alternatives were intended. United States
v. Garcia, 718 F.2d 1528 (11th Cir. 1983),
aff'd, 469 U.S. 70 (1984).
See also Judicial
Watch, Inc. v. State, 892 A.2d 191 (Vt. 2005) (applying the normal rules
of construction, the use of the word "or" suggests alternative and distinct
items).1
The courts in Florida, for example, have recognized that words separated
by the word "or" are intended to have different meanings.
See Osceola County
School Bd. v. Arace, 884 So. 2d 1003, 1005 (Fla. 1st Dist. Ct. App. 2004).
In Sparkman v. McClure, 498 So. 2d 892, 895 (Fla.
1986), the Supreme Court of Florida noted that the word "or" is generally construed
in the disjunctive when used in a statute or rule. The court had to determine
whether the phrase "written or recorded order of denial" meant that, to trigger
the running of the speedy trial period, the order denying discharge need not
be "written" so long as it was otherwise "recorded."
Id. The Supreme Court based its decision
on the fact that the use of the word "or" between "written" and "recorded" required
the court to consider each word in its own right.
The word "or" is normally disjunctive "and establishes a relationship of
contrast." Parrish v. District of Columbia, 718
A.2d 133, 136 (D.C. 1998). Despite this, only a few courts have addressed whether
an insured expected the harm, even if unintended, and some recognize no distinction
between the terms. See e.g.,
Grange Mut. Cas. Co. v. Thomas, 301 So. 2d 158,
159 (Fla. Dist. Ct. App. 1978) (finding "no difference in substance between
the language of the exclusionary provision here and that in the policies limiting
the exclusion simply to 'intentional' injuries").
Those courts that do recognize a distinction appear to only agree that expected
injury involves a lesser standard of the certainty of a harmful outcome than
the standard used for intended injury.
The Plain Meaning of Expected
The Supreme Court of Illinois recognized that unless the terms "intended"
or "expected" had different meanings, there would be no point in having both
terms within the exclusion. Bay State Ins. Co. v. Wilson,
451 N.E.2d 880, 882 (Ill. 1983). See also
Balandran v. Safeco Ins. Co. of Am., 972 S.W.2d
738, 741 (Tex. 1998) (Texas courts attempt to give effect to the policy as written
and disfavor discarding policy terms as redundant or mere surplusage);
see also Galli v.
Metz, 973 F.2d 145, 149 (2d Cir. 1992) (applying N.Y. law) and
Klapp v. United Ins. Group Agency, Inc., 663
N.W.2d 447, 453 (Mich. 2003).
"Expected" is not typically defined in the insurance contract. Accordingly,
this word taken on its ordinary meaning. The definition of "expect" in
Black's Law Dictionary is "'to await;
to look forward to something intended, promised, or likely to happen."
State Farm Lloyd's v. Jones, 2008 WL 5424093,
3 (E.D. Tex. 2008). Similarly:
Merriam-Webster defines "expect" as
follows: "2. to anticipate or look forward to the coming or occurrence of
... 4a. to consider probable or certain."
Id.
The Jones court opined that these dictionary
definitions indicate that "expect" can have a pair of distinct, unambiguous
meanings:
One meaning involves the anticipation that a particular result will occur.
The other meaning involves the appreciation that a result is more likely
to occur than not to occur.
Id.
The Jones court explained that using the dictionary
definition of "expect" as:
waiting for a result, particularly one that is "intended" or "certain" to
occur would be to interpret "expected" to mean "intended."
Jones, supra
at 3.
Therefore, the court determined that:
a result ... is "expected" ... if the insured considered its occurrence
to be more likely to happen than not to happen.
Id.
A greater degree of proof is required to establish intent than to establish
expectation. ... Injuries which are of such a nature that they should have
been reasonably anticipated by the insured are "expected" injuries.
Wilson, supra,
at 882 (citations omitted).
Recklessness Does Not Necessarily Mean Expectation
Jones deals with a civil wrongful death action
which took place after the insured was criminally charged with manslaughter.
A jury convicted the insured of manslaughter. Under Texas law, manslaughter
was defined as an act that recklessly causes the death of an individual. The
criminal jury was further instructed that:
A person ... is reckless ... when she is aware of but consciously disregards
a substantial and unjustifiable risk that the circumstances exist or the
result will occur ... [the risk must be such that] its disregard constitutes
gross deviation from the standard of care that an ordinary person would
exercise under all the circumstances as viewed from the actor's standpoint.
Jones at 1.
State Farm argued that the jury's finding of recklessness triggered the expected
or intended exclusion on the face of the wrongful death complaint. The court
previously held that a finding of recklessness did not equate to intended. Thus,
at issue in this decision was whether recklessness equaled expected as a matter
of law. The court held that whether the insured expected the result (considered
the occurrence of the result likely) was a question of fact for the jury.
In determining that the issue could not be decided as a matter of law, the
court explained that:
The actor may, however, understand the substantial and unjustifiable risk
and disregard it, thus acting recklessly, without considering the resulting
consequences to be probable. In such a case, the exclusionary language is
not implicated.
Id. at 4.
The court also recognized that "[a]t some point, the insured's belief in
the probability of an outcome crosses from expectation to intent" but in jurisdictions
that recognize a separate standard for expect, the distinction is irrelevant
as both trigger the application of the exclusion. Jones
at 3.
The Wilson facts are similar to
Jones, except that in the
Wilson coverage action:
The parties stipulated that Johnson intentionally shot the defendant with
a reckless and wanton belief that he was acting in self-defense (self-defense
was not raised in connection with the criminal proceedings against Johnson).
Wilson at 881.
To the Illinois Supreme Court, there was no fact question for the jury:
Johnson, in being consciously aware that defendant's injuries were practically
certain to be caused by his conduct, must have reasonably anticipated or
"expected" the injuries which resulted.
Wilson at 883.
The Wilson court found that the insurer properly
denied coverage because the injuries in this case were "an intended and expected
result of an intentional act [and not ...] the unintended result of an intentional
act." Wilson at 882.
In Wilson, the insured's recklessness was
sufficient for the court to determine that coverage was precluded because the
insured expected harm to result from his conduct. Jones
held that although the insured was criminally reckless, whether the insured
expected the result under a liability insurance policy was a fact question.
In PSI Energy, Inc. v. Home Ins. Co., 801
N.E.2d 705, 728 (Ind. App. 2004), the Indiana court found that:
Even if the evidence demonstrates a [reckless] disregard for safety, such
evidence is not enough to warrant exclusion under
either the lesser "expected injuries"
standard or the greater "intended injuries" standard.
Id.
A Two-Part Test To Determine Expectation
Jenkins v. Koester, 2007 WL 2429846, 2 (Mich.
App. 2007) applied a subjective standard and two-part test for determining whether
an injury is expected. "Expected" refers to the "foreseeable, expected, or anticipated"
nature of the harm, and:
In the absence of explicit instructions in the policy itself, the standard
is essentially subjective, but tempered by a determination of whether the
insured's subjective expectations are so absurd and unrealistic that they
cannot possibly be taken seriously.
Koester at 2.
In Koester, the insured-defendant shot the
plaintiff with a paintball gun, causing a severe eye injury. In determining
whether the exclusion applied, the court engaged a two-part analysis.
First, did the insured actually foresee, expect, or anticipate that plaintiff
would sustain an eye injury? Second, was the eye injury so overwhelmingly
and obviously likely to occur under the circumstances that the insured's
claims that he did not foresee, expect, or anticipate the eye injury fly
in the face of all reason, common sense, and experience?
Koester at 4.
The Koester court, just like those in Texas
and Illinois, explained that expected and intended are not synonyms. "Expected
injury" means "that the injury was the natural, foreseeable, expected, and anticipatory
result of an intentional act." Koester at 3 (citing
State Farm Fire & Cas. Co v. Jenkins, 382 N.W.2d
796 (Mich App. 1985)).
Although the Koester standard relies on the
subjective expectations of the insured, "courts do not necessarily merely take
the insured's word for it." Koester at 3. While
the test is subjective:
There may be circumstances under which an individual's protestation that
he or she did not think the injury would result is simply so ridiculous
that it cannot be given credence. This is merely a matter of using objective
evidence to help determine a party's subjective mental state.
Id.
In Koester, the court found that the exclusion
did not apply because the insured did not "actually expect that he would cause
plaintiff any injury, let alone a permanent
eye injury" particularly where the facts revealed that the plaintiff's eyes
were not in the line of fire and plaintiff was wearing a helmet.
Id. at 4 (emphasis in original). In light
of the facts, the court found that coverage was not excluded. Neither part of
the two-prong test was satisfied because:
Koester's failure to anticipate, expect, or foresee an eye injury to plaintiff
is not so unrealistic that it "flies in the face of all reason, common sense,
and experience."
Id.
Delaware courts also apply a two-part inquiry to the application of the exclusion,
but the inquiry differs from the Michigan analysis. Under Delaware law:
Where the tortfeasor clearly lacks the intent to inflict any damage or injury,
and it is not foreseeable that damage or injury will occur, the exclusion
will not apply.
Keystone Ins. Co. v. Walls, 2006 WL 1149143,
5 (Del. Super. 2006).
As applied to exclusion clause:
Intended denotes that the actor desire[d] to cause the consequences of his
act or believes that consequences are substantially certain to result from
it. Walls at 5 (citation omitted). However,
an injury is expected "if the actor knew or should have known there was
a substantial probability that a certain result would take place but more
than a "reasonable foreseeability" is required.
Id.
Conclusion
While some courts disagree, the policy language clearly uses two different
terms so that expected injury and intended injury are two different things.
There is little dispute as to the meaning of intended injury; there appears
to be no consensus as to what expected injury means.
The cases above define expected injury as injury that is "more likely than
not to occur," "reasonably anticipated," "practically certain," and "substantially
probable." Courts have not analyzed whether or under what circumstances a subjectively
certain expectation of some definite probability of an adverse outcome (and
the degree of adversity) may in some situations fall within the policy exclusion
for expected injury. The only apparent commonality is that the insured's subjective
expectations govern the interpretation "unless [of course] the insured's subjective
expectations are so absurd and unrealistic that they cannot possibly be taken
seriously." Koester at 3.
Contributing author
Rebecca C. Appelbaum is a senior associate
practicing in the area of third-party coverage at the firm of Butler Pappas
Weihmuller Katz Craig, LLP.
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