A punch to the wallet: sure, insurance covers assaults and beating, but what about fiscal hostility?My past columns have explored whether insurance covers intentional physical attacks; I've written about shootings and fist fights before. But what about the attack that is most painful--the financial attack? This was the subject of Home Insurance Co. vs. Colonial Cos., a February 2006 decision from the 11th United States Circuit Court The United States circuit courts were the original intermediate level courts of the United States federal court system. They were established by the Judiciary Act of 1789. They had both trial court jurisdiction over major federal crimes, and appellate jurisdiction over the United of Appeals, in which the court examined whether insurance covered a breach of contract. In Home vs. Colonial, an employee alleged that his employer committed fraud and breached a contract by taking away sales accounts--the basis for the employee's compensation--that had been previously assigned to the employee. The employee alleged that the employer "engaged in a series of willful, malicious, outrageous, deliberate and purposeful acts with the intention to inflict emotional distress emotional distress n. an increasingly popular basis for a claim of damages in lawsuits for injury due to the negligence or intentional acts of another. Originally damages for emotional distress were only awardable in conjunction with damages for actual physical harm. upon him." The employee claimed these acts caused many injuries; the medical records of the employee's doctor showed that the employee had been treated for a heart attack, depression, fatigue, alcoholism and impotence. The employee also claimed discrimination, humiliation and disparagement In old English Law, an injury resulting from the comparison of a person or thing with an individual or thing of inferior quality; to discredit oneself by marriage below one's class. . The employee's claim was ultimately settled for $2 million, and the employer sought insurance coverage for this settlement. The controlling insurance policy covered "bodily injury" and "personal injury" caused by an "occurrence." The term "occurrence" was defined to mean "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." Did this insurance policy cover the employee's breach of contract claim? Not quite. The court found that the policy did not cover the claim, recognizing several important insurance concepts. The policyholder argued that the employee's alleged injuries constituted "bodily injury" and "personal injury" within the meaning of the policy. The described injuries did indeed include items that might be "bodily injury" or "personal injury." But as the court noted, this argument was "misplaced mis·place tr.v. mis·placed, mis·plac·ing, mis·plac·es 1. a. To put into a wrong place: misplace punctuation in a sentence. b. ." For the insurance to apply not only must the injury be covered, the injury must be caused by an "occurrence." The causative caus·a·tive adj. 1. Functioning as an agent or cause. 2. Expressing causation. Used of a verb or verbal affix. caus event must be an accident, and harm must not be intended. "Accidental" and "intent": These two concepts have been the focus of countless insurance-coverage cases, and both concepts became the focus of this case. This court's analysis of causative acts should be helpful in other cases. The insured-employer in this case presented a favorite argument of policyholders,"myopia myopia: see nearsightedness. "--the policyholder may have intended the most immediate consequences of its act, but it did not foresee later consequences, despite the fact that the later consequences were inevitable. This court provided "corrective laser surgery" to reject the "myopia" argument, and recognized several important points: * The insured-employer had argued that while the employer surely intended to take away the accounts, the employer did not intend the many physical injuries that resulted. The court rejected this argument and found that if a policyholder intends harm there is no coverage, even if the policyholder did not intend the specific harm that resulted." [T]he inquiry of the court is whether harm was intended, not whether a specific type of harm was intended." * The policyholder's specific intent was rejected on another level. The court found that "inherently injurious in·ju·ri·ous adj. 1. Causing or tending to cause injury; harmful: eating habits that are injurious to one's health. 2. " acts are not accidental. To be considered accidental, an injury or death must "not ordinarily follow and 'cannot be reasonably anticipated' from the act of the insured." The court found that since the insured-employer's acts would surely cause harm, the acts are not accidental. * Finally and most importantly Adv. 1. most importantly - above and beyond all other consideration; "above all, you must be independent" above all, most especially , the court found that intent was to be judged under an objective standard." No reasonably prudent person could fail to know" that if you demote de·mote tr.v. de·mot·ed, de·mot·ing, de·motes To reduce in grade, rank, or status. [de- + (pro)mote. , take away income, and embarrass," noneconomic bodily injuries are most certainly going to result." The key words are "reasonably prudent person," and that a policyholder might truly not have expected the injury does not matter. If the classic "reasonable man" would have expected the result, the result is expected. Home vs. Colonial, as a decision from a federal appellate court A court having jurisdiction to review decisions of a trial-level or other lower court. An unsuccessful party in a lawsuit must file an appeal with an appellate court in order to have the decision reviewed. , represents a significant precedent. Policyholder advocates, however, will note that the decision is only applying the law of one state: South Carolina South Carolina, state of the SE United States. It is bordered by North Carolina (N), the Atlantic Ocean (SE), and Georgia (SW). Facts and Figures Area, 31,055 sq mi (80,432 sq km). Pop. (2000) 4,012,012, a 15. . The state-specific limitation is, of course, true. But the reasoning in this case should be noted by insurers in all states. Alan S. Rutkin, a Best's Review columnist, is a partner at Rivkin Radler LLP LLP - Lower Layer Protocol , Uniondale, N.Y. He may be reached at insight@bestreview.com. |
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