The son of homeowners was involved in an argument during a party. The argument ended with the son throwing another into a swimming pool and that person suffering a fractured clavicle. The homeowners were sued but their insurer, claiming that the incident was an intentional act, declined to even defend the lawsuit. The injured party, after settling with the homeowners based on an assignment of their rights, sued the insurer for coverage. The insurer appealed after a lower court ruled that coverage was due.
Below is the court’s opinion on whether a deliberate action relieved the insurer’s coverage obligation.
DEFENSE STILL OWED FOR DELIBERATE INCIDENT
The Lint Family was covered by a homeowners policy issued by State Farm during an incident involving their son and a friend (last name Wright) while at a party. During the party, the two argued. Shortly after, Lint followed Wright outside and threw him into a pool’s shallow end. Wright struck the pool’s concrete step and was hospitalized for four days due to a fractured clavicle. Wright sued over his injuries.
State Farm began investigating the loss under a reservation of rights. Afterwards, the insurer, twice, told the Lints that it would neither defend nor indemnify the loss. From its viewpoint, the incident involved an intentional act and was excluded. The company’s position was unchanged even after the Lints sent a transcript of their son’s deposition stating that he was involved in horseplay and didn’t intend to harm Wright.
The Lints filed a declaratory motion, asking that State Farm be required to respond to the loss which, in the Lints’ opinion, involved their son’s nondeliberate (negligent-to-less than willful) actions toward Wright. Wright and the Lints agreed to a $60,000 judgment, based on Wright’s amended complaint that asserted only negligence, and the Lints assigned their policy rights to the plaintiff. After a trial court found State Farm obligated to defend against the suit, the insurer appealed.
The appellate court reviewed the core issue of whether there was an obligation to defend Lint. The court acknowledged that the defense obligation was broader than the coverage obligation. However, it also acknowledged that an insurer could properly deny a defense obligation if it established that coverage did not exist. Therefore, it proceeded by comparing what was alleged in the suit to the policy wording. The court found that the policy obligated the insurer to respond to accidents since the policy referred to “occurrences” and that the definition of that term included accidents. The court stated that, while there is no final definition of accident within insurance law, it’s plainly understood to refer to acts that are unexpected or unintended including their consequences.
State Farm argued that regardless whether Lint intended to hurt Wright, the original act of throwing Wright was deliberate, so the incident was excluded. Further, the insurer referenced additional policy language that excluded acts done maliciously. Since, in its opinion, the act was excluded, it was within its rights to deny any defense obligation. The insurer supported its argument with citations of court cases it felt were relevant.
In the court’s view, State Farm cited cases that did not support its argument. The court cited a number of cases involving deliberate acts accompanied by either unforeseen or unintended consequences that still qualified as accidental occurrences. It also cited several cases where accidental consequences had no bearing. In the latter area, the cases involved consequences that were related to inherently dangerous acts, such as deliberate firearm use, where an intent to harm is implicit in such acts.
The court disagreed with the insurer’s contention that deliberate acts nullified consideration of consequences and it offered an analogy to demonstrate its position. It wrote that in baseball, batters always have the intent to hit pitched balls, often striving for home runs. However, due to the angle of contact with the ball, the force used or other factors, different consequences arise, such as breaking windows in nearby buildings. While it is plain that a batter intends to hit a ball, it is not reasonable to assume that the goal was to damage property. The court reasoned that, taken to its extreme, State Farm’s position would never allow for response to losses with any element of deliberate action.
Based upon the disposition record that Lint’s action did not intend harm and since the accidental landing created Wright’s injury, the court ruled that the lower court decision that State Farm owed an obligation to defend the Lints was correct.
State Farm Fire and Casualty Co. et al., Petitioners, v. The Superior Court of Los Angeles County, Respondent: Joshua Wright, Real Party In Interest. CALCTAPP 2nd District, B202768, Filed 6/26/08. Petition Denied. http://login.findlaw.com/scripts/case_login?dest=http://caselaw.lp.findlaw.com/data2/californiastatecases/ b202768.pdf (downloaded 07/06/08)
Acts Have To Be Clearly Explained
Insurance companies are experts on their coverage intent. They create or adopt forms for use with the various lines of business that make up their stable of products. One might assume that the constant challenge is to make sure that policies are updated to meet new exposures. However, more instances involving maintaining coverage intent is dealing with how claimants and courts continuously interpret existing language and assumptions.
Policies are intended to respond to a set of sources of accidental loss. With regard to liability coverage, covered losses are intended to respond to damage that arise from certain acts. Policy wording usually makes this clear by defining what is meant by coverage. The defining language may be in parts of the policy with special headings such as “Insuring Agreement” or “What Is Covered” or it may refer to a section of defined terms.
Here is an excerpt of wording on covered acts found in the Homeowners section of Gordis on Insurance found in Advantage Plus.
All homeowners forms contain a separate section on personal liability insurance. This section, which is built into every homeowners policy, is designed to protect the insured household against its liability arising out of personal (non-business) activities. The coverage does not extend to automobile liability.
The liability section consists of two parts—the first (Coverage E) provides liability insurance; the second (Coverage F) provides coverage for certain medical expenses incurred by persons who come on the insured location or are injured by an activity of the insured. Each of these coverages is discussed separately.
Coverage E–Personal Liability
WHAT IS COVERED
Bodily Injury and Property Damage
The policy will pay, up to its limit, damages for which the insured is liable, arising out of bodily injury or property damage due to an occurrence (covered incident).
Bodily injury is defined as bodily harm, sickness or disease, including required care, loss of services, and resulting death.
Property damage means physical injury to, destruction of, or loss of use of tangible property.
Occurrence means an accident that includes continuous or repeated exposure to substantially the same general harmful conditions, which results during the policy period in bodily injury or property damage.
The policy will pay for such claims arising out of the insured premises, and also for occurrences that give rise to claims, as defined, from personal acts of any insured away from the premises, e.g., on a golf course. It also extends to injuries caused by a residence employee of the insured or an animal owned by the insured.
The policy covers claims arising out of any of the following:
- The premises shown in the declarations
- Any premises acquired during the policy period by the insured for use as a residence
- Any premises not owned by the insured where he or she is residing temporarily
- Vacant land (other than farm land) owned by or rented to the insured
- insured as a residence
- Any part of the premises rented occasionally to an insured for non-business use
- individual or family cemetery plots or burial vaults of an insured
In addition, the policy will pay for the cost of providing a legal defense. These expenses will be paid by the company, even if the suit against the insured is groundless, false, or fraudulent. This expense is payable in addition to the claim that the company may pay. The company retains the right to settle any claim or suit it decides is appropriate.
The policy will pay for first-aid expenses incurred by others (but not any insured under the policy) for bodily injury covered under the policy.
The policy will pay the expenses incurred in the defense of any suit under the policy and any costs taxed against an insured. Payment is also available for the:
- Premiums on any bonds required in a suit defended by the company, subject to the limit of liability under the policy
- Reasonable expenses incurred by an insured at the company’s request, including actual loss of earnings up to $250 per day incurred in assisting in an investigation or defense or suit
- Interest on the entire judgment that accrues after the judgment is entered and before the company has paid the part of the judgment for which the policy is liable
- Prejudgment interest awarded against the insured
DAMAGE TO THE PROPERTY OF OTHERS
The policy will pay up to $1,000 per occurrence for damage to the property of others caused by an insured. This section does not apply to any amount recoverable for property damage under Section I of the policy (discussed above).
The policy will pay up to $1,000 towards an assessment charged to the insured by a corporation or association of property owners when the assessment is made as a result of a loss to which the liability section of the policy applies.
Getting the Wording Right
Insurers do take steps to make clear what they wish to cover by their various products. Doing so is particularly important in personal lines products such as Homeowners Policies where consumers do not, generally, have special coverage knowledge, at least compared with many commercial insurance purchasers. However, it is critically important that HO coverage intent is well-known since, by volume, it makes up a large portion of the entire insurance market that is accompanied by many potential claims.
HO liability claims are composed primarily from losses that occur to those who visit residences and to persons with home property owners interact.
Below is an excerpt of wording concerning what is meant to be covered found in the MPL 01 – MSO Common Provisions Form Analysis in PF&M.
- Endangerment or Harm Exclusion
When an insured’s willful, harmful act results in bodily injury or property damage there is no coverage. There is also no coverage if the insured knowingly endangers another. This applies regardless of whether the resulting injury or damage was intended by the insured.
|Example: Juan Pablo is a prankster. He sets a trap for Maria to momentarily frighten her. When the trap is sprung, instead of merely startling her, it causes her to fall and break her hip. Even though Juan Pablo did not want to injure Maria, his prank caused the injury, so the loss is excluded.|
The only exception is for the bodily injury that occurs when any insured is using force in a reasonable manner to protect persons or property.
|Example: Kelly hears sounds outside and sends his trained guard dog out to stop the activity.
Scenario 1: The sounds were laughter of children. This is not a reasonable use of force and any injury would not be covered.
Scenario 2: The sounds were of adults with metal tools and the time was around midnight. This would be considered reasonable force, so the injuries could be covered.
Some Property Ownership Carries Special Exposures
Homeowner liability exposures are quite varied. Some exposures are related to what property owners do such as injuring another person while jogging. Some exposures are related to conditions of premises that are owned or controlled. Consider a guest at a summer picnic whose leg is broken when he falls into a hole in the host’s backyard. Still other exposures may involve the combination of something property owners do with their possessions. One instance that involves precarious loss exposure are firearms.
Here is an article on gun liability from Emarketing for Agents found in Advantage Plus.
Consider this true incident. Once, during a party that involved minors drinking alcohol, one guest was shot and killed when a gun, being played with by its owner (another party attendee) went off. The parents of the deceased sued the parents of the gun handler. The latter requested coverage from their homeowner insurance company. The company denied coverage and, later, a court ruled that no obligation existed under the insurance policy. The company was released from the lawsuit.
Homeowners coverage, like other insurance policies, is intended to protect against losses that are accidental. Often, accidental losses can be readily determined, but incidents involving firearms are complicated.
When one person injures another, both the act and the intent are considerations of whether an incident is an accident. In the shooting incident mentioned above, it was determined that the gun handler was guilty of negligently handling the gun and was jailed. Since a court determined the incident was a crime, it did not qualify as an accident. A loss caused by a crime is ineligible for coverage.
When a loss involves firearms, it is often treated far differently than other circumstances. Consider the following:
Jim is hosting a party at his house for a bunch of high school friends and Fran is one of the persons attending it. Jim, well known to his friends as the group’s clown, is fooling around with an item. Fran, who is nearby, is seriously injured. Later, Fran’s family sues Jim’s parents and they file the lawsuit with their insurance company.
Scenario one – Jim recently became interested in tennis. He brings out a very expensive tennis racket he just received. He brags about how light and powerful it is and he demonstrates strokes. When he demonstrates a backhand, Fran is passing behind him and she is hit, suffering a broken nose and several shattered teeth!
Scenario two – Jim recently became interested in firearms. He brings out a very expensive pistol he just received. He brags about how light and powerful it is and he demonstrates how it is supposed to be handled. When he demonstrates how to aim it, the gun fires and Fran is struck. The bullet hits and fractures her shoulder.
In both scenarios, the injuries are a result of Jim’s immature and careless action. In both situations, no harm was intended. In both instances, Fran is seriously injured. In all likelihood, the losses will not be handled similarly. A tennis racket is a piece of equipment that is intended to be used for a particular sport. It is used for hitting tennis balls and other uses are considered unusual and, for the most part, not dangerous. This loss has a very high chance of being treated as an accident.
A gun is a weapon. It is used for both defensive and offensive purposes and, by nature, is capable of extremely serious, often deadly harm. It is considered to be a dangerous instrument. Therefore, the stakes are far higher whenever a gun or other firearm causes a loss. In many instances, even when harming another party is completely unintended, acts involving firearms also involve far more accountability and may not be classified as accidental. In the shooting scenario, the chance is very high that the loss would be denied.
Because of the danger inherent in guns, it’s important to be aware that losses involving them are often ineligible for insurance protection. That makes it critical that their ownership be treated seriously and every possible precaution against unintended injury be taken.