The Interpretation & Applicability (Or Inapplicability) of the Controlled Substance Exclusion of a Homeowners Policy (At Least in PA for the Time Being)

Although this decision is from the Pennsylvania Superior Court (intermediate appellate-level court), it's interesting enough (at least to me and hopefully to you casualty coverage peeps) to copy and paste from my LinkedIn post of earlier today: 

This decision befuddles me. 

Nationwide insured the parents of Adam Kramer, who, while they were out of town, had Michael Murphy over to their home. Murphy later died of a drug overdose while at that home. 

Murphy's mother, Laurie Cruz, filed a wrongful death and survival action against Adam and his parents. Cruz alleged that at the time Adam hosted her son, Adam was widely known to use and sell controlled substances. Cruz asserted further that Adam was negligent in supplying the decedent with the drugs that caused his overdose. Relatedly, Cruz alleged in both the survival and wrongful death claims that the parents negligently allowed their son to use their home for such illicit activities. 

The Nationwide HO policy pledged that Nationwide "will pay damages an insured is legally obligated to pay due to an occurrence resulting from negligent personal acts or negligence arising out of the ownership, maintenance or use of real or personal property."  (Bolding in original [meaning defined terms].)

The policy defined "occurrence" as "bodily injury or property damage resulting from an accident including continuous or repeated exposure to the same general condition." 

"Bodily injury" was defined as "bodily harm, including resulting care, sickness or disease, loss of services or death. Bodily injury does not include emotional distress, mental anguish, humiliation, mental distress or injury, or any similar injury unless the direct result of bodily harm." 

The policy excluded liability coverage, however, for "bodily injury or property damage ... resulting from the use, sale, manufacture, delivery, transfer or possession by a person of a controlled substance[.]" 

Based on that exclusion, Nationwide denied liability (defense and indemnification) coverage to the parents in the wrongful death/survival action. The policyholders sued and both parties moved for summary judgment. 

In granting the parents' MSJ, the trial court reasoned that the controlled substance exclusion did not apply because the parents’ alleged liability in the underlying action was rooted in negligence, which was distinct from the type of occurrence contemplated by the exclusion. [Huh?] 

On Nationwide's appeal a three-judge panel of the Pennsylvania Superior Court AFFIRMED the trial court's order, finding that the policy's controlled substance exclusion did NOT apply to negate coverage to the parents because: 

...the wrongful death claim against the parents in the underlying action is not limited to bodily injury, as such damages are defined in the policy. The decedent’s family is also potentially seeking other types of damages rooted in its “emotional distress, mental distress or injury, or any similar injury,” none of which would be the direct result of bodily harm to the decedent’s family itself. 

Since these are the types of damages that do not fall under the ambit of the policy’s "bodily injury" definition, the policy’s controlled substance exclusion would not apply to them.

Do you see the flaw in the court's reasoning?

Here's a hint: If the exclusion doesn't apply because the decedent's family's claim against the parents doesn't "fall under the ambit of the policy’s 'bodily injury' definition", then...[finish this sentence]. 

Here's another hint: What's makes for a covered claim in the first instance?

Last hint (for those who ever attended any of my annual/biennial New York insurance coverage seminars):  Is the light switch ON?

P.S. I think I figured it out. 

Really last hint: The answer lies in how the court interpreted (and limited by enlargement) the policy's BI definition. I've gone back and highlighted above some language from the court's opinion.  Get it now?

The Archdiocese of New York v. The 32 Insurance Companies and Groups That Issued Policies to the Archdiocese from September 1956 Through December 2000

Litigation over insurance coverage for CVA-revived (Child Victims Act) lawsuits apparently began even before the CVA went into effort on August 14, 2019.  On July 1, 2019, the New York Daily News reported:

The New York Archdiocese has sued its insurance companies to demand legal protection and coverage as it braces for exposure it will face once sex abuse victims begin filing lawsuits next month under New York’s Child Victims Act. 

The complaint by the archdiocese, filed last week in Manhattan Supreme Court, lists more than two dozen insurers as defendants, and claims "the insurers ... intend to dispute, limit and/or deny coverage for claims and lawsuits alleging sexual abuse and physical abuse.” Several of the defendants listed in the complaint are members of the Chubb Group of Insurance Companies.

Thirty-two insurance companies and groups are named as defendants in that New York County, Supreme Court declaratory judgment action, which seeks:

On Count I, the Archdiocese requests that this Court enter a declaratory judgment in favor of the Archdiocese against each of the Insurers;

On Count II, the Archdiocese requests that this Court enter a judgment awarding the payment of damages in an amount equal to the amount owed under the INA Insurance Policies, to be proven at trial, as well as pre- and post-judgment interest; [and]

On Count III, the Archdiocese requests that this Court enter a judgment awarding its attorneys’ fees, costs, and disbursements in connection with INA’s bad faith refusal to defend the Archdiocese against the Norman Suit, in an amount to be proven at trial, as well as pre- and post-judgment interest[.]

The predicate "justiciable controversy" for the Archdiocese's action relates to Chubb Insurance's declination of coverage for "the Norman Suit", which was commenced on April 18, 2019 against the Archdiocese and other religious corporations (a church, a school, and the Catholic School Region of Staten Island).  By letter dated May 14, 2019, Chubb had denied liability coverage under the INA policies to the Archdiocese for the Norman Suit based on (1) lack of an alleged "occurrence"; and (2) punitive damages not being covered.  Chubb also reserved its right to deny coverage based on: (1) possible late notice; and (2) the possible time-barred nature of the Norman Suit:

The INA Policies provide coverage where the insured shall become legally obligated to pay as damages because of "bodily injury" or "personal injury" to which this insurance applies caused by an "occurrence" as those terms are defined by the policies. The INA Policies generally define "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. 

In the Norman Action, Plaintiff alleges that the Archdiocese "knew and/or reasonably should have known, and/or knowingly condoned, and/or covered up, the inappropriate and unlawful sexual activities of Father Fernando and Monsignor Brennan[.)" Plaintiff alleges that "[a)t about the time" such alleged misconduct was occurring, the Archdiocese and other Defendants "were notified that Father Fernando was engaging in sexually inappropriate conduct with minor children parishioners[.)" Plaintiff further alleges that Defendants "were put on notice of Father Fernando and Monsignor Brennan's improper and inappropriate actions with minors" and that, "[a]t all times material hereto, Defendants[')...actions were willful, wanton, malicious, reckless, and outrageous in their disregard for the rights and safety of Plaintiff, which amount to conduct equivalent to criminality." 

Based on the foregoing, Plaintiff does not allege an "occurrence" under the INA Policies. Rather, Plaintiff alleges that the Archdiocese acted willfully, wantonly, maliciously, recklessly, outrageously and criminally with respect to the alleged abuse perpetrated against Plaintiff, a minor, by Fr. Fernando and Msgr. Brennan. Thus, Plaintiff alleges to have sustained injury that was expected and/or intended from the standpoint of the Archdiocese. These allegations do not give rise to an "occurrence" under the INA Policies. Therefore, Chubb has no defense and indemnification obligations in connection with the Norman Action and denies coverage accordingly. 

Similarly, Plaintiff seeks punitive damages for Defendants' alleged misconduct. Amounts that are punitive in nature do not constitute damages under the INA Policies. Furthermore, in New York, punitive damages are uninsurable as a matter of law. Accordingly, Chubb denies coverage under the INA Policies in connection with Plaintiff's claim for punitive damages in the Norman Action. 

With regard to the Archdiocese notice obligations under the INA Policies, the INA Primary Policies are amended via endorsement to provide that, in the event of an occurrence, written notice shall be given by or on behalf of the insured as soon as practicable after such notice is received by the "Archdiocesan Service Corporation." Plaintiff's complaint alleges that the Archdiocese had knowledge of the alleged abuse by Fr. Fernando, but does not allege or discuss whether such information was ever received by the Archdiocesan Service Corporation. Similarly, Plaintiff alleges that the Archdiocese knew or should have known of the alleged abuse by Msgr. Brennan, but Plaintiff's complaint contains no allegation that such information was ever given to or received by the Archdiocesan Service Corporation. The INA Excess Policies require notice thereunder when the Archdiocese became aware that those policies might be implicated, but Chubb does not currently possess that information. As a result, Chubb is not in a position at this time to assess whether the Archdiocese complied with the notice provisions under the INA Policies. Therefore, Chubb reserves the right to deny coverage if and when Chubb obtains information that demonstrates that the Archdiocese breached the notice provisions of the INA Policies in this matter. 

Finally, it is not apparent from Plaintiff's complaint whether Plaintiff's action may be barred by the current statute of limitations. As noted above, the INA Policies only provide coverage in connection with the insured's legal obligation to pay damages in circumstances specifically defined by the policies. To the extent that an insured settles a claim for which it has no legal liability, no indemnification would be provided under the INA Policies. Chubb reserves its rights accordingly.

The INA policies at issue spanned the period 1971 to 1974, and careful readers will notice that no policy exclusions are cited in Chubb's declination letter as grounds for denying coverage.  Coverage geeks will know the reason Chubb's declination letter did not cite the expected or intended injury exclusion:  it didn't exist in commercial liability policies in the 1970s.  Pre-1986 ISO CGL policies instead incorporated the "expected or intended" aspect into the policies' definition of "occurrence":

“Occurrence” means an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured.

According to Frederick J. Hunt, Jr.'s paper, Homeowners Insurance -- The First Decade, presented at the smoke-filled May 1962 meeting of the Casualty Actuarial Society,

The first true "Homeowners Policy," in the sense that the words are used today, was developed by the Insurance Company of North America. This policy was formally filed with the Insurance Department of Pennsylvania on August 11, 1950 and approved effective September 11, 1950. 

This policy, which was called "Homeowners Policy Multiple Form," was a true multiple line contract providing coverage previously available only under separate policies and described as Fire, Extended Coverage, Theft, Personal Liability, and Medical Payments. Since this was the first real answer to the problem of taking advantage of multiple line opportunities and at the same time coming up with a saleable product, the filing letter submitted with this policy represents a valuable document in any consideration of Homeowners rating.

If anyone has one of those INA policies lying around, please send it to me.  I'll pay the postage (and maybe a reasonable price).  I'm trying to nail down when multi-line homeowners policies began using the expected or intended harm exclusion.

Regardless, interested readers and coverage geeks like me can follow the progress of this DJ action at this NYSCEF docket.  I've set that e-docket to re-open in a Chrome tab one month for now.

09.17.19 Update ~~ Nothing new on the e-docket.  Rolling ahead another month. 

It's When the Alleged Harm, Not the Alleged Negligence, Occurs that Triggers Coverage Under an Occurrence-Based Business Liability Policy

CGL – TRIGGER OF COVERAGE – OCCURRENCE – EMOTIONAL DISTRESS CLAIMS
Empire State Shipping Serv., Ltd. v Hanover Ins. Co.
(1st Dept., decided 11/1/2011) 

Interesting trigger of coverage case. The insured plaintiff allegedly mishandled a corpse, but the deceased's mother did not learn of the mishandling of her son's remains until the fall of 2005, more than two years after the plaintiff had cancelled its businessowners insurance policies with Hanover.  The mother sued the plaintiff in an underlying action, alleging in several causes of action that plaintiff's negligence cause her to suffer "severe pain and suffering, severe emotional distress and harm, financial or economic loss, including but not limited to, present and future lost wages, and other damages."  The plaintiff tendered the complaint to Hanover for coverage presumably based on the fact that its alleged negligence occurred during the period of one or more of its business liability policies with Hanover.

Hanover declined coverage because the complaint alleged harm that occurred well after the plaintiff's policies were cancelled, and the insured commenced this declaratory judgment action.  The Supreme Court, Bronx County (Edgar G. Walker, J.) granted Hanover's cross motion for summary judgment, dismissing the complaint.

In unanimously AFFIRMING the motion court's order, the Appellate Division, First Department, held:

The Businessowners Policy provides coverage for "bodily injury" but "only if" it is caused by an "occurrence" and the bodily injury "occurs during the policy period." Supreme Court properly determined that the first and second causes of action in the underlying action, which allege negligent and intentional infliction of emotional distress, do not fall within the scope of "bodily injury" because the earliest that harm is alleged to have occurred is in the fall of 2005, when the plaintiff in the underlying action learned of the alleged mishandling of her son's remains. This was over two years after plaintiff Empire cancelled its policies with defendant, effective June 20, 2003 (see Melfi v Mount Sinai Hosp., 64 AD3d 26 [2009]) .

While we agree with plaintiffs that Supreme Court should not have characterized the only damages alleged in the underlying action as emotional distress, this error was harmless because coverage would not have been triggered in any event. The only causes of action for which this error could have triggered coverage are the third and fifth causes of action for negligence and negligent misrepresentation. It is alleged that the plaintiff in the underlying action "was caused, and shall in the future be caused, to suffer severe pain and suffering, severe emotional distress and harm, financial or economic loss, including but not limited to, present and future lost wages, and other damages." While these causes of action may contain allegations that Empire was negligent during the policy period, there is no allegation that the plaintiff in the underlying action suffered "bodily injury" during the policy period.

Excess Carrier Ordered to Indemnify Its Insured in Suit Seeking Damages for Murder Committed by Insured's 31-Year-Old Non-Resident Son

HOMEOWNERS – PERSONAL EXCESS INSURER – "OCCURRENCE" – LATE NOTICE – INTENTIONAL ACT EXCLUSION
Metropolitan Prop. & Cas. Ins. Co. v. Marshall
(Sup. Ct., Nassau Co., decided 7/6/2010)

Metropolitan Property and Casualty Insurance Company insured Jacqueline Marshall under a personal excess liability policy written to afford $300,000 in coverage in excess of Marshall's primary homeowners coverage.  Here's the chronology of facts salient to this case:

• August 17, 2007  -- Marshall's 31-year-old non-resident son, Evan Marshall, away from his upstate adult residential substance abuse and psychiatric facility and on Long Island on a weekend pass to visit his mother, brutally murders, decapitates and dismembers his mother's 57-year-old next-door neighbor, Denise Fox.  Marshall reportedly did not know her son had come to Long Island to visit her for the weekend.  Just over a year later, Evan Marshall pleaded guilty to Murder in the First Degree and other crimes in connection with that murder. 
• September 10, 2007 -- Counsel for the Fox family notifies Marshall by letter that they were contemplating an action against her and that she should so notify her homeowner's insurance carrier.  The Marshalls' criminal attorney, William Keahon, Esq., advised Ms. Marshall that she would not face liability for the August 17, 2006 incident.  Notwithstanding Mr. Keahon's statement, Marshall notified her primary homeowners insurer, State Farm, of the event. 
•  April 21, 2008 -- State Farm issues a letter to Marshall notifying her that State Farm believed she was not legally liable for Denise Fox's death and indicating in that letter that should an action be commenced against her, State Farm would provide her with a defense, and, if applicable, would pay for damages awarded against Marshall, subject to the terms, conditions, and coverage exclusions of her homeowners policy. 
• July 31, 2008 --  Denise Fox's surviving husband and children commence a personal injury and wrongful death action against various defendants, including Jacqueline Marshall.  All of the claims alleged in the Fox action against Marshall sound in negligence.  Attorney  Keahon immediately forwards the Fox summons and complaint to State Farm and asks Marshall about the existence of any State Farm's umbrella policies.
• August 18, 2008 -- Having located her personal excess policy with Metropolitan, Marshall places Metropolitan on notice of the incident and lawsuit for the very first time. 
• September 22, 2008 -- Metropolitan disclaims coverage to Jacqueline Marshall solely on the grounds of late notice. 
• September 24, 2008 -- Metropolitan issues another disclaimer letter, denying coverage to Evan  Marshall on several grounds, including:  (1) that Evan Marshall was not a resident of the named insured's household on August 17, 2006, and therefore, was not "an insured" under the Metropolitan policy; (2) that Evan Marshall's acts did not constitute an "occurrence" under Metropolitan's policy; and (3) that those acts nevertheless were excluded as an "intentional act."  In that letter, Metropolitan assessed Jacqueline Marshall's liability in the Fox action at zero percent.
• December 22, 2008 -- Metropolitan commences this action seeking a declaration that it owes no coverage to Jacqueline Marshall under her personal excess policy with Metropolitan.  Metropolitan subsequently moves for summary judgment.  

Metropolitan's policy with Ms. Marshall afforded coverage "for damages to others caused by an 'occurrence' for which the law holds an insured responsible . . . ." "An insured" was defined as "you or a relative residing in your household" and an "occurrence" was defined by the policy as "an accident . . . that results during the policy period in personal injury or property damage."  The policy provided that it did not apply, inter alia, to "personal injury or property damage resulting from any intentional act committed by an insured or at the direction of any insured."  Finally, the policy required that Marshall notify Metropolitan "as soon as practicable of an occurrence that may be covered by the policy."

In DENYING Metropolitan's motion for summary judgment,  Nassau County Supreme Court Justice Randy Sue Marber initially reiterated that a liability insurer's disclaimer is strictly limited to those grounds stated in teh insurer's disclaimer letter, which must clearly apprise the insured of the grounds on which the disclaimer is based:

"[A]n insurer's disclaimer is strictly limited to those grounds stated in the notice of disclaimer, which disclaimer must clearly apprise the insured of the grounds on which the disclaimer is based." Village of Brewster v Virginia Sur. Co., Inc., 70 AD3d 1239, 1242 (2nd Dept. 2010), quoting City of Kingston v. Harco Natl. Ins. Co., 46 AD3d 1320, 1321 (3rd Dept. 2007), lv dism., 10 NY3d 822 (2008), quoting Maroney v. New York Cent. Mut. Fire Ins. Co., 10 AD3d 778, 780-781 (3rd Dept. 2004), aff'd., 5 NY3d 467 (2005). However, "A disclaimer pursuant to Insurance Law § 3420 (d) is required when the denial of coverage is based upon a policy exclusion without which the claim would be covered". Ciasullo v. Nationwide Ins. Co., 32 AD3d 889, 890 (2nd Dept. 2006), citing Matter of Worcester Ins. Co. v. Bettenhauser, 95 NY2d 185, 188-189 (2000); Handelsman v. Sea Ins. Co., 85 NY2d 96 (1994). "[A] disclaimer pursuant to Insurance Law § 3420(d) is unnecessary when a claim falls outside the scope of the policy's coverage portion.' " Ciasullo v. Nationwide Ins. Co., supra, at p. 890, quoting Matter of Worcester Ins. Co. v Bettenhauser, supra, at p. 188, citing Zappone v Home Ins. Co., 55 NY2d 131, 134 (1982). "Where . . . the insurance policy does not contemplate coverage in the first instance, . . . requiring payment of a claim upon failure to timely disclaim would [impermissibly] create coverage where it never existed.' " Matter of Worcester Ins. Co. v. Bettenhauser, supra, at p. 188, quoting Zappone v Home Ins. Co., supra, at p. 138. 

Here, under the subject policy, occurrences are defined as "an accident." "[A]n incident is an occurrence, i.e., an accident, if from the point of view of the insured . . . [the incident resulting in the injury] was unexpected, unusual and unforeseeable (quotations omitted)." State Farm Fire and Casualty Company v. Whiting, 53 AD3d 1033 (4th Dept. 2008), quoting Miller v. Continental Ins. Co., 40 NY2d 675, 677 (1976), citing Automobile Ins. Co. of Hartford v. Cook, 7 NY3d 131, 137-138 (2006); Essex Ins. Co. v. Zwick, 27 AD3d 1092 (4th Dept. 2006). "[I]n deciding whether a loss is the result of an accident, it must be determined, from the point of view of the insured, whether the loss was unexpected, unusual and unforeseen." Agoado Realty Corp. v. United Intern. Ins. Co., 95 NY2d 141, 145 (2000), citing Miller v. Continental Ins. Co., supra, at p. 677 (emphasis supplied). 

Since the insured here, the Defendant, MARSHALL, obviously did not expect and could not foresee her son murdering Denise Fox, that act was in fact an "accident" from her point of view. See, RJC Realty Holding Corp. v. Republic Franklin Ins. Co., 2 NY3d 158 (2004). Accordingly, contrary to the Plaintiff's position, its denial of coverage may not be predicated upon a lack of inclusion and absent a proper disclaimer, Marshall's claim is covered under the policy. Village of Brewster v. Virginia Sur. Co., Inc., supra, at p. 1242, citing City of Kingston v. Harco Natl. Ins. Co., supra; Maroney v. New York Cent. Mut. Fire Ins. Co., supra. 

The Plaintiff's reliance on the policy's exclusion for intentional acts fails. The Plaintiff failed to disclaim on that ground and may not rely on that policy exclusion now. Village of Brewster v. Virginia Sur. Co., Inc., supra, at p. 1242, citing City of Kingston v. Harco Natl. Ins. Co., supra; Maroney v. New York Cent. Mut. Fire Ins. Co., supra. 

Finally, the Plaintiff's reliance on late notice by the Defendant, MARSHALL, which was the only grounds advanced by the Plaintiff for its disclaimer, also fails. "Typically, where notice to an excess liability carrier is in issue, the focus is on when the insured reasonably should have known that the claim against it would likely exhaust its primary insurance coverage and trigger its excess coverage, and whether any delay between acquiring that knowledge and giving notice to the excess carrier was reasonable under the circumstances.' " Ambra v. Awad, 62 AD3d 732 (2nd Dept. 2009), quoting Morris Park Contr. Corp. v. National Union Fire Ins. Co. of Pittsburgh, Pa., 33 AD3d 763, 765 (2nd Dept. 2006); see also, National Union Fire Ins. Co. of Pittsburgh, PA v. Connecticut Indem. Co., 52 AD3d 274, 276 (1st Dept. 2008). The Defendant, MARSHALL has clearly established that there is no evidence to suggest that she should reasonably believe that the claims advanced against her in the Fox action will likely exhaust her primary insurance coverage and trigger her excess coverage. Both her attorney and her primary insurer have steadfastly advised her that she is not liable for Fox's claims. In fact, the Plaintiff, METROPOLITAN even assessed her liability at zero percent. The Defendant, MARSHALL's notice to the Plaintiff was accordingly, timely.

It is hereby declared that under its policy with the Plaintiff as her excess carrier, the Plaintiff, METROPOLITAN is obliged to indemnify the Defendant, MARSHALL to the extent that she is held liable in the Fox action in excess of the coverage afforded under her primary policy held by State Farm.

Food Fighting Coverage -- Middle School Cafeteria Garbage Can Hurler Entitled To Defense & Indemnification

HOMEOWNERS – INTENTIONAL ACT – "OCCURRENCE" – EXPECTED/INTENDED HARM EXCLUSION
Medrano v. State Farm Fire & Cas. Co.
(2nd Dept., decided 9/2/2008)

While Medrano was working as a middle school aide monitoring students during lunch in the cafeteria, a "food fight" broke out among eighth-grade students. [The decision doesn't indicate at what volume and velocity of tossed food and number of combatants such a fracas qualifies as a "food fight" or whether the aide received battle pay for her station in the cafeteria.] The food fight escalated into the use of non-foodstuff, heavy artillery, when student Robert Filer threw a garbage can into the air, striking and injuring Medrano.

At the time of the incident, Robert qualified as an "insured" under his parents homeowners insurance policy with State Farm. Medrano and her husband sued Robert, alleging that he negligently, carelessly, and recklessly caused Medrano's injuries. State Farm denied liability coverage for the claims asserted against Robert in the personal injury action stating, inter alia, that the alleged incident did not qualify as an "occurrence," which the policy defined as an accident, and that the policy contained an exclusion for a claim for bodily injury that either was expected or intended by the insured or was the result of willful and malicious acts of the insured.

The Medranos then commenced this action for a judgment declaring that State Farm was obligated to defend and indemnify Robert in connection with the underlying personal injury action. Queens Supreme granted the Medranos' motion for summary judgment declaring that State Farm was so obligated, granted Filer's cross motion for the same relief, and denied State Farm's cross motion for summary judgment. The court reasoned, in part, that the complaint in the underlying action alleged negligence. It further based its determination on the deposition testimony of Filer, which indicated a lack of intent to injure Medrano, ruling that this was sufficient to bring the underlying personal injury action within the parameters of the policy, and to create a duty to defend. State Farm appealed.

In AFFIRMING the lower court's order, the Second Department held:

State Farm failed to demonstrate its entitlement to judgment as a matter of law since it did not show that the allegations of the complaint fell wholly outside coverage or within any valid policy exclusion. The allegations of negligence in the complaint implied an unintentional or unexpected event which potentially gives rise to a covered claim as against Filer (see Barry v Romanosky, 147 AD2d 605).

The plaintiffs and Filer demonstrated their prima facie entitlement to judgment as a matter of law by submitting evidence that Filer did not intentionally cause injury to the plaintiff, and that although such injury may have been the unintended result of Filer's conduct, it was not the result of a willful and malicious act (see Slayko v Security Mut. Ins. Co., 98 NY2d 289, 293; Allegany Co-op Ins. Co. v Kohorst, 254 AD2d 744, 745; Baldinger v Consolidated Mut. Ins. Co., 15 AD2d 526, affd 11 NY2d 1026). In opposition, State Farm failed to raise a triable issue of fact.

Middle school cafeteria + food fight + flying garbage can + injury- proof of intent to injure = coverage, at least in the opinion of the 2nd Department.

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".