Whether the medical treatment was a butterfly bandage or the dreaded stitches,
one (or all) of us had acted intentionally, but truly did not intend the outcome
(the inevitable scolding—we were less concerned with the injury—but we didn't
intend that, either). Was this an accident? Who knew that my brother would bounce
forward and not straight up? Of course, my parents always said they expected
it, in retrospect, of course! It was an accident waiting to happen, they said,
and we were old enough to expect this sort of thing too.
Why is any of this important? How the Insurance Services Office, Inc. (ISO)
commercial general liability (CGL) insurance policy applies to intentional acts
or to deliberate harm or to bodily injury or property damage that is expected
are often threshold questions as to whether coverage exists. There is no "right"
answer for all situations. Certain jurisdictions interpret the same words differently.
Moreover, a slight change of facts may completely change a court's view as to
the application of coverage.
Occurrence
The Coverage A Insuring Agreement of the CGL has, for quite some time, required
that any bodily injury or property damage be caused by an "occurrence." While
a great deal of caselaw exists on what constitutes an "occurrence," most jurisdictions
require some degree of fortuity. Despite sports broadcasters' continual butchering
of this term, most insurance professionals know fortuity is generally defined
as accidental. Black's Law Dictionary
(8th edition) states:
Fortuitous—Occurring by
chance. A fortuitous event may be highly unfortunate. Literally, the term is
neutral, despite its common misuse as a synonym for fortunate.
However, the above does not address a very fundamental question. What is
it that must be fortuitous? Does the act itself need to be unintentional, or
does the result of the act—the injury or damage—need to be unintentional?
On one end of the spectrum is a Utah case, Fire Ins.
Exch. v. Rosenberg, 930 P.2d 632 (Utah App. 1997), in which the court
declared that any injury caused by an intentional
act cannot be an occurrence. In contrast, the New York Court of Appeals case
of Agoado Realty Corp. v. United Int'l Ins. Co.,
95 N.Y. 2d 141 (2000), quoting from the Miller v. Continental,
40 N.Y. 2d 675, 677 (1976), case stated:
As we have noted in Miller,
true "accidents," taken literally, may be rare occurrences. Indeed, "in the
strictest sense and dealing in the region of physical nature, there is no such
thing as an accident." Thus, we concluded that, in deciding whether a loss is
the result of an accident, it must be determined from the point of view of the
insured, whether the loss was unexpected, unusual, or unforeseen.
The focus of this article is on Exclusion a.—Expected
or Intended Injury and not the broader issues involved with an occurrence.
This is not to suggest that there is not a profound connection between the two;
there most certainly is. Further, it is difficult if not impossible to completely
separate "occurrence" and Exclusion a. Nonetheless, the subject of this article
is what is and what is not excluded by the CGL Exclusion a.
Exclusion a—Expected or Intended Injury
Unlike "occurrence," Exclusion a. is concerned with whether the bodily injury
or property damage is either expected or intended. And the view of "expected
or intended" is from the standpoint of the insured
that is alleged to be liable for bodily injury or property damage. Put another
way, in order to rely on this exclusion, the insurer must demonstrate bodily
injury or property damage was expected or intended by the insured—whether the
act itself was intentional is not the measure
of this exclusion.
Divergent Views
Similar to "occurrence," courts have put forth different views on how to
apply Exclusion a. of the CGL policy. For example, some courts have focused
almost exclusively on whether the insured intended to cause harm. The Second
Circuit Court of Appeals in City of Johnstown, NY v.
Bankers Standard Ins. Co., 877 F.2d 1146 (2d Cir. 1998), illustrates
this view:
It is not enough that an insured was warned that damages might
ensue from its actions, or that, once warned, an insured decided to take a calculated
risk and proceed as before. Recovery will be barred
only if the insured intended the damages,
or it can be said that the damages were, in a broader sense, "intended" by the
insured because the insured knew that damages
would flow directly and immediately form the intentional act. [Emphasis supplied.]
Although Exclusion a. clearly states it applies to exclude coverage if the
bodily injury or property damage is either
expected or intended, disallowing insurers
to rely solely on "expected" has been justified by the potentially broad application
of "expected." The City of Johnstown, NY, case
addresses this issue very directly:
To exclude all losses or damages which might in some way have been expected
by the insured could expand the field of exclusion until virtually no recovery
could be had on insurance.
Other courts have echoed this belief and have stated excluding "expected"
injury or damage may eliminate even foreseeable losses—removing coverage for
negligent acts which generally are meant to be covered and for which the CGL
has been purchased.
Following along the lines of intended harm as the deciding factor is the
Kentucky case of James Graham Brown Found., Inc. v.
St. Paul Fire & Marine Ins. Co., 814 S.W.2.d 273 (Ky. 1991):
If injury was not actually and subjectively intended or expected
by the insured, coverage is provided even though
the action giving rise to the injury itself is intentional and the injury foreseeable.
While the activity which produced the alleged damage may be fully intended,
recovery will not be allowed unless the insured
intended the resulting damages. [Emphasis supplied.]
Expected or Intended
Not all courts have ignored "expected" in Exclusion a. For example, the Supreme
Court of Ohio in Physicians Ins. Co. v. Swanson,
569 N.E.2d 906 (Ohio 1991), stated:
To avoid coverage under the expected or intended exclusion,
the insurer must show that the insured's act was intentional
and he expected the injury itself.
In the above case, the exclusion would apply even if the insured did not
intend harm by virtue of an intentional act—provided the intentional act resulted
in expected injury or damage. The Supreme Court of Ohio also commented that
they were following the majority view as respects this issue.
In applying "expected" as a litmus test of the exclusion, most courts will
look to whether the resulting injury or damage was practically or substantially
certain to occur as a result of the insured's actions. As can be seen, this
is a significantly higher standard than foreseeable injury or damage. In the
California Appeals case of Armstrong World Indus. v.
Aetna Cas. & Sur., 52 Cal. Rptr. 2d 690 (Cal. App. 1996), the court discussed
"expected or intended":
Several out-of-state courts have determined that the two words
"expected" and "intended" within the phrase "neither expected nor intended"
language cannot be treated as synonymous. These courts have reasoned that the
purpose of adding the phrase "neither expected nor intended from the standpoint
of the insured" was to broaden the class of excluded injuries beyond intentional
injuries. Accordingly, the courts have concluded that unless the terms are given
different meanings, "expected" would serve no purpose within the exclusionary
clause. In light of these authorities, we conclude that in the present case
the exclusion within the Commercial Union policy for "expected" injuries applies
to injuries that the insured subjectively knew
or believed to be practically certain to occur even though the insured did not
act for the purpose of causing injury. [Emphasis added.]
Other courts may have a different standard. "Expected" may be judged by whether
the natural and probable consequences of the act result in injury.
In the Kansas Supreme Court case of Harris v. Richards,
867 P.2d 325 (Kan. 1994), a defendant fired two shotgun blasts into the back
window of a pickup truck he knew was occupied. Instead of hitting his ex-wife
(who he apparently intended to shoot), the shots hit another person, who the
insured maintained was shot by accident. The courts found coverage was not provided
as the injury was the "natural and probable consequences" of the insured's actions.
Subjective or Objective Standard
In determining whether injury or damage was expected or intended, two approaches
are generally applied, but usually with a caveat.
Objective Standard
This standard would determine whether the insured intended injury or expected
injury not from the view of the insured, but from the view of a "reasonably
objective person." In other words, the question is not what the insured actually
intended or expected, but rather what an objectively reasonable person would
have intended or expected in the same circumstances.
One of the obvious advantages to the objective standard is avoiding self-serving
testimony by an insured after the injury or damage has taken place. However,
Exclusion a. is quite clear and does not support the objective standard—the
injury or damage must be expected or intended from the standpoint of the insured.
Due to this wording, the majority view of the courts is the subjective standard
is to be applied.
Subjective Standard
Simply put, and consistent with the Exclusion a. wording, the actual, subjective
intent, or expectation of the insured is the chief consideration.
Caveat
In general, the law will infer intent to cause harm or injure for certain
types of acts. For example, most states will consider child molestation or sexual
assault as acts of intentional injury or harm, subjective intent of the insured
to the contrary.
Coverage for Other Insureds
It is not unusual for a claim to be made not only against one insured, such
as an employee, who did commit an act in which injury was intended, but also
against the employer of that employee, also an insured under the CGL insurance
policy. For example, in the New York Appeals Court case of
RJC Realty Holding Corp. v. Republic Franklin Ins. Co.,
2 N.Y. 3d 158 (N.Y. 2004), a masseur of a spa was alleged to have committed
a sexual assault against a customer of the spa. Claim was made against both
the masseur and the employer, RJC. The court reasoned:
… the alleged perpetrator of the assault was the insured's employee. If,
as we must assume for the present purposes, the assault occurred at all,
it was obviously expected or intended by the masseur, and not an accident
from his point of view. Thus, the critical question is whether the masseur's
expectation should be attributed to his employers, RJC. The parties here
have agreed that the policy would cover only an "accident" and would not
apply to certain acts "expected or intended" by RJC. When they did so, they
could reasonably have anticipated that the rules of respondeat superior
would govern the question of when a corporate entity is deemed to expect
or intend its employee's actions. Since the masseur's actions here were
not RJC's actions for the purposes of the respondeat superior doctrine (the
masseur departed from his duties for solely personal motives unrelated to
the furtherance of RJC's business), they were "unexpected, unusual and unforeseen"
from RJC's point of view, and were not "expected or intended" by RJC. Accordingly,
they were an "accident," within the coverage for the policy, and were not
excluded by the "expected or intended" clause.
The above case also implicitly recognizes the "Separation of Insureds" condition
of the CGL policy, which states that:
Except with respect to the Limits of Insurance, and any rights and duties
specifically assigned in the Coverage Part to the first Named Insured, this
insurance applies:
b. Separately to each insured against whom claim is made or "suit" is brought.
In other words, a CGL exclusion may apply to one insured but not to another
insured for the same incident or event, as was the ruling in the RJC case. It
is also worth noting that the RJC court determined that the masseur had "departed
from his duties for solely personal motives unrelated to the furtherance of
RJC's business." Should the courts have found that RJC had participated in,
condoned, or allowed such actions, the decision may have been very different
with respect to whether the courts would attribute the intentional act to RJC.
Exception to the Exclusion
Intentional harm to others may still be covered by the CGL in some limited
circumstances. A close reading of exclusion reveals an express exception—Exclusion
a. does not apply to bodily injury:
1) resulting from "reasonable force"
2) while protecting persons or property
Both of the above elements must be present—the intentional harm must be caused
by an act to protect persons or property and
the bodily injury is covered only if "reasonable force" was used. Damage to
property is not an exception to Exclusion a.
Black's Law Dictionary addresses the
concept of "reasonable force" by defining it as:
Force that is not excessive and that is appropriate for protecting
oneself or one's property. The use of reasonable force will not render a person
criminally or tortiously liable. [Emphasis
supplied]
The inference that can be drawn from Black's
is that an insured would not be liable in tort for the use of reasonable force.
Therefore, the major benefit of the exception to Exclusion a. is the insurer
will likely be required to provide a defense. If it is ultimately determined
the insured used reasonable force in self-defense, the insured will not be liable
and therefore the insurer will not be obligated to pay damages; if it is ultimately
determined that the insured used excessive force in self-defense, the exception
does not apply (and thus Exclusion a. does apply), and no damages will be paid
by the insurer on behalf of the insured.
Conclusion
The scope of Exclusion a. Expected or Intended
Injury varies greatly not only with the facts of the situation but also
with the jurisdiction interpreting the CGL policy.
Some jurisdictions will require that the insured subjectively intended to
harm others for the exclusion to apply. Other jurisdictions will also consider
whether the insured "expected" the injury or damage, but will deem injury to
be "expected" only if the insured subjectively knew that the injury or damage
was substantially certain to result from
their acts. Still other jurisdictions will take into consideration whether the
injury or damage was the natural and probable consequence of the actions of
the insured. And certain acts, such as sexual abuse or molestation, are often
presumed to be acts of intentional harm, subjective intent notwithstanding.
Finally, whether the intentional harm will be attributed to other insureds,
such as an employee's employer, depends heavily on the facts of the incident.
For example, if the employer instructs their employees to use force in the performing
their job (such as a bouncer in a bar), intentional injuries will likely be
attributed to such an employer. Of course, the
RJC case facts are such that the court determined the employee was not
furthering the purpose of their employer's business and thus the intentional
harm was not attributed to the employer. And the CGL separation of insurance
condition does require the insurer to view the exclusions on the policy separately
for each insured.