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Intent of an Action Determines Insurance Coverage.

Byline: Staff Writer

At the heart of general liability insurance is coverage for a policyholder's liability for bodily injury and property damage caused by an "occurrence." Since 1986, an "occurrence" has been defined in standard-form language as an "accident, including continuous or repeated exposure to substantially the same general harmful conditions."

Disputes surrounding the meaning of "occurrence" often involve the question of whether it is the act of the policyholder or the resulting injury that must be accidental. In many instances, the act and injury are either both intentional or accidental. An example of the first is when someone intends to cause bodily harm and succeeds, such as in a murder. An example of the latter is a typical auto accident where, while the act of driving is volitional, both the collision and any resulting bodily injury and property damage are wholly unintentional.

One gray area occurs when the policyholder engages in intentional conduct that causes injury or damage of a type or extent that was unintended and unexpected by the policyholder. A majority of courts nationwide hold that the proper focus is on the damage or injury, i.e., whether the policyholder seeking liability coverage intended or expected the injury or damage to occur. As explained by the Minnesota Supreme Court, "[w]here there is no intent to injure, the incident is an accident, even if the conduct itself was intentional." [Am. Family Ins. Co. v. Walser.]

Historical background

The development of standard form general liability policies is instructive, reflecting that the policy language has consistently focused on whether the injury was intended. In the first standard-form general liability policy, drafted in 1940, a covered event was required to be "caused by accident." The policy excluded "bodily injury or property damage caused intentionally by or at the direction of the insured." [Eric Mills Holmes, Appleman on Insurance Law [sec] 117.1 (2d ed. LexisNexis 2009).] The "caused intentionally" language clearly modified the "bodily injury or property damage."

In 1966, the standard policy introduced the defined term "occurrence" as "an accident, including injurious exposure to conditions, which results, during the policy period, in bodily injury or property damage neither expected nor intended from the standpoint of the insured." The "standpoint of the insured" language was added because some courts considered whether the resulting injury was accidental from the standpoint of the victim -- which would typically be the case -- rather than the insured.

In 1973, the definition of "occurrence" was amended to "an accident, including continuous or repeated exposure to substantially the same general harmful conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured." Each of these formulations made clear that the focus was on the resulting bodily injury or property damage and whether it was expected or intended by the insured seeking coverage.

In 1986, the definition was amended to move the "neither expected nor intended from the standpoint of the insured" language into a stand-alone exclusion. The idea was to clarify the language by "making the negative implied exclusion [in the occurrence definition] into a positive, clearly worded, express exclusion" for injury or damage that is expected or intended from the standpoint of the insured. [Eric Mills Holmes, Appleman on Insurance [sec] 117.1 (2d ed. LexisNexis 2009).]

Analytical approaches to intent

Courts have taken divergent approaches to determining whether injury or damage is caused intentionally. Some older cases asked whether the injury or damage was the "natural and probable consequence" of the insured's intentional actions, but that approach was largely rejected.

Two alternative approaches gained greater favor: (1) whether the insured subjectively intended to inflict the very type of loss sustained; and (2) whether the insured intended some kind of loss as a result, even if the extent or type of loss is different in kind or quality.

Practical application

Placing the focus on the resulting bodily injury or property damage, rather than on the acts causing them, can be dispositive. In one recent case, the Pennsylvania Superior Court ruled that "[i]nsurance coverage is not excluded because the insured's actions are intentional unless he also intended the resultant damage." [Erie Insurance Exch. v. Moore.]

In Moore, it was undisputed that the policyholder, Harold McCutcheon, intended to kill his ex-wife Terry and himself. After McCutcheon killed Terry in her home, Richard Carly arrived and rang the doorbell. When nobody answered, Carly tried to open the door. McCutcheon pulled the door open, yanking Carly inside. A struggle for the gun ensued. Carly alleged that McCutcheon "carelessly, negligently and recklessly" caused the weapon to be fired around the room, with one round striking Carly in the face.

The court characterized the complaint as alleging a "chaotic brawl in which McCutcheon fired his gun wildly while trying to fight Carly off." The court recognized that "it may be that McCutcheon actually intended to shoot Carly in the face," but Carly's complaint alleged otherwise. While the complaint alleged certain intentional conduct -- that McCutcheon "yanked open" the door and "forcibly pulled" Carly inside -- the injury came from different conduct, the shooting. Even though the incident may have begun with an intentional assault, it did not transform the alleged accidental nature of the shooting, which caused the bodily injury. Thus, the court held that the conduct alleged by Carly fit the definition of a covered occurrence.

The analytical framework in the Moore case is similar to that applied many years earlier in Connecticut Indemnity Co. v. Nestor. There, an eight-year-old boy intentionally set fire to his neighbor's home to frighten them. Given his "tender years," the court found that the boy did not intend the property damage that resulted, noting that "[c]ourts have often drawn a distinction between intending an act and intending a result." The court found that distinction to be "not only proper but required in interpreting insurance policies." Like the actor's youth in Nestor, an insured's delusional state may preclude a formation of an intent to cause injury.

The drafting history of the occurrence definition and the "expected or intended" exclusion make clear that in determining whether there is a covered occurrence, the focus of inquiry should be on whether the bodily injury or property damage was intended by the insured seeking coverage, not on the act that caused the injury.

Reed Smith partner Brian Himmel ( represents policyholders in complex insurance coverage disputes, and also advises clients in analyzing and negotiating the terms of their insurance coverage. Reed Smith partner Timothy Law ( represents policyholders in insurance disputes, including litigation, international and domestic arbitrations, mediations, and insolvency proceedings.
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Date:Mar 1, 2018
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