INTENTIONAL ACTS; INTENTIONAL INJURIES
When and how they differ makes a big, well, difference
Confusion over coverage for intentional acts often leads insureds to walk
away from liability coverage they are entitled to … .
By Joseph S. Harrington, CPCU
There’s really no such thing as an “intentional acts exclusion” in a liability insurance policy. Yet the term keeps cropping up in casual discussions of insurance, and even occasionally in non-standard policy forms. The resulting confusion can cost policyholders the coverage they are entitled to.
As it is, most actions are undertaken consciously and deliberately, so any exclusion that eliminated coverage for all resulting injury or damage to others would leave a policyholder with very little coverage. However, actions taken deliberately can also be negligent and cause unintended harm and are thus insurable.
What’s uninsurable are damages, injuries, and other losses knowingly inflicted on another party without justifiable cause. This logic is embodied in the “Expected or Intended Injury” exclusions included in the homeowners and commercial general liability (CGL) forms developed by the Insurance Services Office (ISO) and used by most property and casualty insurers in the United States.
ISO’s CGL provision excludes coverage for bodily injury or property damage “expected or intended from the standpoint of the insured,” but it does not apply to bodily injury resulting from the use of reasonable force to protect persons or property. The ISO homeowners exclusion includes essentially the same language but extends the “reasonable force” exception to property damage, as well.
The ISO homeowners provision also specifies that the exclusion applies even if the bodily injury or property damage is different from what was intended or sustained by someone or something other than intended. So, if you punch someone who is not a threat, and he or she falls into another person who sustains a severe injury, you probably don’t have coverage.
For claims of personal and/or advertising injury, the equivalent ISO CGL provisions are exclusions for “Knowing Violation of the Rights of Another” (e.g., false detention, malicious prosecution, wrongful eviction, etc.) and “Material Published with Knowledge of Falsity” (e.g., libel, slander, violation of privacy, infringement of copyright, etc.).
In each case, it’s not the intentional nature of actions that trigger the exclusion, but a determination that the insured knew they were wrongful acts when they were undertaken.
Addressing intentionality is especially challenging in non-standardized professional and management liability policies, as decision-making by insureds is the primary focus of coverage. Again, we find that, for the most part, it is not the intentionality of an act that determines whether there is coverage, but indications that the insured knew that an act was wrongful and took action for purposes of harming another and/or deriving illicit benefit from it.
The disparate provisions in disparate policies described above share a common logic regarding the insurability of intentional acts. Generally speaking, for an act to be deemed uninsurable under a liability policy (and, hence, excluded), there must be two determinations:
- That it was undertaken intentionally; and
- That it was undertaken with knowing intent to harm another or derive unfair benefit.
If a malignant person inadvertently injures or causes damage to another, his or her maliciousness would not affect liability coverage; some indication of actual intent to cause injury or damage would be required to exclude coverage.
Conversely, if an insured intentionally fails to take a necessary and expected action—does nothing, in essence—out of malice or self-serving motives, coverage could be excluded. In the latter case, however, the insurer would bear the difficult burden of demonstrating the intention behind a non-action.
Defense and settlement
Confusion over coverage for intentional acts often leads insureds to walk away from liability coverage they are entitled to, according to Lynda A. Bennett and Eric Jesse, attorneys in the insurance recovery practice of the law firm Lowenstein Sandler. In a February 2023 podcast, Bennett and Jesse discuss several ways insureds can respond to liability claim denials that invoke “intentional acts.”
Regarding general liability claims for bodily injury or property damage, insureds should be prepared for denials claiming that an intentional action of the insured does not qualify as a covered “occurrence,” commonly defined as an accident. In most such cases, the very presence of exclusions for expected/intended injury would imply that there is coverage in the absence of an intent to cause damage or injury.
The facts of a claim and unique policy wordings could produce a surprising outcome, however.
Regarding management and professional liability claims, insureds should look to “final judgment” provisions in exclusions for fraudulent and criminal acts. In effect, final judgment clauses maintain coverage for an insured unless and until he or she is ultimately determined to be guilty of an offense that would deny coverage.
Unless there are policy provisions explicitly stating otherwise, insureds can argue that a “final judgment” provision be interpreted to refer to the final appealable judgment. Until the last possible court either rejects an appeal or confirms a judgment, insureds should have access to their defense costs coverage.
And as long as insureds have the benefit of defense coverage, they stand a better chance of arriving at a settlement funded by insurance.
Joseph S. Harrington, CPCU, is an independent business writer specializing in property and casualty insurance coverage and operations. For 21 years, Joe was the communications director for the American Association of Insurance Services (AAIS), a P-C advisory organization. Prior to that, Joe worked in journalism and as a reporter and editor in financial services.