Can You Find The The Mistake?

HOMEOWNERS – INTENTIONAL ACT – CRIMINAL ASSAULT – DUTY TO DEFEND – DUTY TO INDEMNIFY
State Farm Fire & Cas. Co. v. Gloria
(Sup. Ct., Suffolk Co., decided 3/14/2016)

When I was blogging regularly I rarely blogged about decisions from trial-level courts.  Trial-level decisions are rarely significant enough to merit your time and my effort on these pages.  But I came across this decision today and decided to throw it on here as a sort of can-you-find-the-mistake exercise.

We all know that for liability insurers the duty to defend is broader than the duty to indemnify and is determined, in the first instance, by the allegations of the complaint.  You may also know that once that the liability insurer can establish that it will have no duty to indemnify, its duty to defend terminates.  And that collateral estoppel, when applicable, precludes the re-litigation in a subsequent action of an issue raised and decided against an insured in a prior action.

I think the court made a mistake in deciding State Farm's motion for summary judgment.  Can you find it?  Comment below if you can.

Negligence Allegations in Bouncer Assault Claim Held to Trigger Duty to Defend

CGL – ASSAULT & BATTERY EXCLUSION – DUTY TO DEFEND
WSTC Corp. v. National Specialty Ins. Co.
(Sup. Ct., Nassau Co., decided 6/19/2008)

We all know that the duty to defend is broader than the duty to indemnify, and that exclusions don't apply to negate the duty to defend unless they are unambiguous and the allegations of a complaint "cast that pleading solely and entirely within the policy exclusions, and further, that the allegations, in toto, are subject to no other interpretation." Automobile Ins. Co. of Hartford v. Cook, 7 NY3d 131, 137 (2006).

Transparent attempts to trasmogrify non-covered facts into covered ones are sometimes referred to as "pleading into coverage". Most courts see through such attempts, identifying instead the "operative act", core claim or "gravamen" of an action. See, e.g., Desir v. Nationwide Mut. Fire Ins. Co., 2008 NY Slip Op 3578, 1 (2nd Dept. decided 4/22/2008)("the inclusion in the underlying complaint of causes of action sounding in negligence and alleging carelessness does not alter the fact that 'the operative act giving rise to any recovery is the assault'"). Not this court.

National Specialty insures bars and clubs and issues a policy that, by endorsement, adds an Assault and Battery Exclusion, which provides:

[T]his insurance does not apply to " bodily injury" or "property damage" arising out of any assault, battery, fight, altercation, misconduct or similar incident or act of violence.

The exclusion applies whether the violence was: (a) caused by; (b) at the instigation of; or (c) at the direction of you, your "employee", your customers, patrons, guests or any other person or cause whatsoever. This exclusion also applies whether the insured may be liable as an employer or in any other capacity.

No coverage is provided under this policy if the underlying operative facts constitute an assault and/or battery irrespective of whether the claim alleges negligent hiring, training, supervision and/or retention against the insured, or for any other negligent actions of the insured.

Mr. Mello (real name) went to the insured's bar, VIBE, and, according to his own complaint in an underlying personal injury action, was "negligently" served several alcoholic beverages at VIBE while in an "obvious," "apparent," or "actual" (or maybe all three) state of intoxication and that after placing him in a "further state of intoxication" VIBE failed to protect him from the two bouncers who assaulted him. His complaint further alleged that VIBE "negligently and recklessly failed to supervise, manage and operate its premises in a safe and prudent manner" and "failed to afford (him) protection from the unlawful acts of other patrons or to stop or otherwise control the offensive and illegal conduct of other patrons and/or their own agents and/or employees including (their) own bartender and two unknown male bouncers."

National Specialty denied both defense and indemnification coverage based on the assault and battery exclusion, and WSTC commenced this DJ action. Notwithstanding the broad language of the exclusion, Nassau County Supreme Court Justice Joseph Spinola ruled that "in light of plaintiff Mello's first cause of action in which he advances a claim sounding in straightforward negligence which is covered by the policy, NSIC must defend VIBE in the Mello action. * * * Any further determination at this juncture as to whether the Assault and Battery Exclusion endorsement applies here would be premature."

Huh? What happened to the "irrespective of whether the claim alleges negligent hiring, training, supervision and/or retention against the insured, or for any other negligent actions of the insured" language of the exclusion? Drunk patron. No-neck bouncers. Physical escort/removal from the premises. Injuries to patron. Sounds exactly like the scenario to which the exclusion was intended to apply.

In light of the Second Department's decision in Desir, expect an appeal. And probably a reversal.

Punch Affirmed -- No Coverage for Party Punch

HOMEOWNERS – ASSAULT – INTENTIONAL ACT – NOT AN "OCCURRENCE" OR "ACCIDENT" – INSURANCE LAW § 3420(D) INAPPLICABLE
State Farm Fire & Cas. Co. v. Whiting
(4th Dept., decided 7/3/2008)

Matthew Whiting and Evan Lang were at a party at Whiting's home. A "visibly intoxicated and unruly" Lang pushed Whiting, knocking him off balance, and then charged at Whiting with fists clenched. Whiting responded by punching Lang in the face, injuring him.

State Farm denied coverage based on the lack of an "occurrence" and brought this DJ action for a declaration that it was not obligated to defend or indemnify Whiting in the underlying personal injury action. Orleans County Supreme Court Justice James Punch (no kidding) granted State Farm's cross motion for summary judgment, and Whiting appealed.

In AFFIRMING the Punch order, the Fourth Department's 3-2 majority concluded that State Farm was not obligated to defend or indemnify Whiting in the underlying personal injury action because the incident was not an "occurrence" within the meaning of the policy. The policy defined an occurrence as "an accident", and the Fourth Department noted than an incident is an occurrence, i.e., an accident, if, "from the point of view of the insured, . . . [the incident resulting in injury] was unexpected, unusual and unforeseen[.]'" Whiting had testified at his deposition that he intended to hit Lang, and that he knew when he hit Lang that Lang "could be hurt from the punch." On this evidence the Fourth Department rejected the dissenting justices' reliance on the Court of Appeals' 2006 decision in Automobile Ins. Co. of Hartford v. Cook (7 NY3d 131) and held that "there is no view of the evidence to support a conclusion that the result of defendant's intentional act of punching Lang in the face 'accidentally or negligently' caused Lang's alleged injuries[.]"

In rejecting the insured's contention that State Farm failed to disclaim coverage in a timely fashion, the Fourth Department also held that since the assault claim fell outside the scope of the policy's coverage because it was not an accident or "occurrence", a disclaimer pursuant to Insurance Law 3420(d) was not necessary.

Believing that the Cook decision was controlling, the two dissenting justices opined that because the complaint in the underlying action alleged that Whiting was negligent in hosting the party and providing alcoholic beverages to persons under the age of 21, and Whiting's description of the events and actions leading to Evan's injury supported the conclusion that the punch or its results were unexpected or unintended by Whiting, State Farm was required at least to defend Whiting in the underlying action.

Intentional Act Not an "Occurrence" -- No Duty to Defend or Indemnify

HOMEOWNERS – "OCCURRENCE" – INTENTIONAL ACT – ASSAULT
Desir v. Nationwide Mut. Fire Ins. Co.
(3rd Dept. decided 4/24/2008)

In Desir v. Nationwide Mut. Fire Ins. Co., 2008 NY Slip Op 3578, 1 (2nd Dept. decided 4/22/2008), the 2nd Department ruled that Nationwide was not obligated to defend or indemnify its insured because the assault alleged in the underlying action was an intentional act, which did not constitute an "occurrence" within the meaning of the policy at issue. The court also noted that the inclusion in the underlying complaint of causes of action sounding in negligence and alleging carelessness did not alter the fact that "the operative act giving rise to any recovery is the assault".