Homeowners Insurer Ordered to Defend Teenager Who Allegedly Injured Another Teenager at a Party

HOMEOWNERS – EXPECTED OR INTENDED INJURY EXCLUSION – DUTY TO DEFEND
Rhodes v. Liberty Mut. Ins. Co.
(2d Dept., decided 11/17/2009)

The standard homeowners policy excludes liability coverage for bodily injury or property damage which is expected or intended by an insured.  With a liability insurer's duty to defend being broader that its duty to indemnify, the allegations of a complaint are what, in most cases, dictate whether the insurer must defend its insured notwithstanding facts that may indicate an intentionally caused harm.  It is only in cases where the insurer can establish that there is no possible factual or legal basis on which it might eventually be obligated to indemnify its insured under any policy provision that it can disregard complaint allegations and deny both the duty to defend and the duty to indemnify.

Although the facts underlying this decision are scant, it appears Devon Rhodes and Alava David were at a teenage party at which alcohol was being served.  Rhodes reportedly caused injury to David, and David brought a personal injury action against her.  Although the personal injury complaint alleged that Rhodes' "recklessness, carelessness, and negligence" caused serious personal injuries to David, Liberty Mutual Insurance Company apparently declined to defend or indemnify Rhodes under her parents' homeowners policy with Liberty, citing the policy's intended or expected harm exclusion.  Rhodes then commenced this declaratory judgment action for liability coverage in relation to the underlying personal injury action.

Suffolk Supreme denied Liberty's motion and granted plaintiff's cross motion for summary judgment on the issue of defense coverage owed with respect to the underlying personal injury action.  In AFFIRMING that order, the Second Department agreed that the underlying complaint's allegations triggered defense coverage and held:

Generally, it is the insured's burden to establish coverage and the insurer's burden to prove the applicability of an exclusion (see Consolidated Edison Co. of N.Y. v Allstate Ins. Co., 98 NY2d 208, 218-220; Barkan v New York Schools Ins. Reciprocal, 65 AD3d 1061). Moreover, an insurer's duty to defend is broader than its duty to indemnify, and arises whenever the allegations in the complaint in the underlying action, construed liberally, suggest a reasonable possibility of coverage, or where the insurer has actual knowledge of facts establishing such a reasonable possibility (see Frontier Insulation Contrs., v Merchants Mut. Ins. Co., 91 NY2d 169, 175; Burlington Ins. Corp. v Guma Constr. Corp.,AD3d, 2009 NY Slip Op. 07216 [2d Dept 2009]; City of New York v Insurance Corp. of N.Y., 305 AD2d 443). As such, the duty to defend arises if the claims against the insured arguably arise from a covered event, even if the claims may be meritless or not covered, either because the insured is not liable or because the event is later determined outside the policy's scope of coverage (see Automobile Ins. Co. of Hartford v Cook, 7 NY3d 131, 137; Fitzpatrick v American Honda Motor Co., 78 NY2d 61, 65-66; Physicians' Reciprocal Insurers v Loeb, 291 AD2d 541, 542). An insurer can be relieved of its duty to defend only "if it establishes as a matter of law that there is no possible factual or legal basis on which it might eventually be obligated to indemnify its insured under any policy provision" (Allstate Ins. Co. v Zuk, 78 NY2d 41, 45; see Continental Cas. Co. v Rapid-American Corp., 80 NY2d 640, 652; Physicians' Reciprocal Insurers v Giugliano, 37 AD3d 442, 444).

Here, the plaintiffs established that Devon Rhodes (hereinafter Rhodes) was entitled to coverage under the homeowner's insurance policy issued to her parents (see Consolidated Edison Co. of N.Y. v Allstate Ins. Co., 98 NY2d at 218, 220; Barkan v New York Schools Ins. Reciprocal, 65 AD3d 1061). In contrast, the defendant Liberty Mutual Insurance Co. (hereinafter Liberty) failed to establish that "there is no possible factual or legal basis on which it might eventually be obligated to indemnify its insured under any policy provision" (Allstate Ins. Co. v Zuk, 78 NY2d at 45). The complaint in the underlying action alleges, inter alia, that while attending a teenage party at which alcohol was served, Rhodes' "recklessness, carelessness, and negligence" caused serious personal injuries to Alava David, the plaintiff in the underlying action. Construing the complaint liberally, a possible legal or factual basis exists by which Rhodes's conduct may be deemed accidental and, therefore, a covered "occurrence" under the subject Liberty policy, and not excluded from coverage on the ground that the personal injuries allegedly sustained by David were expected or intended by Rhodes (see Frontier Insulation Contrs., v Merchants Mut. Ins. Co., 91 NY2d 169, 175; City of New York v Insurance Corp. of N.Y., 305 AD2d 443; see also Automobile Ins. Co. of Hartford v Cook, 7 NY3d 131, 137-138; Merchants Ins. of N.H., Inc. v Weaver, 31 AD3d 945).

In New York and other jurisdictions there are a number of a "harm inherent in the nature of the act" cases in which liability insurers have successfully argued that the nature of the intentional act itself is such that the insured must have expected or intended the harm, negating liability coverage.  See, e.g., Allstate Ins. Co. v. Mugavero, 79 NY2d 153 (1992).  This apparently was not such a case.