Commercial general liability (CGL) policies cover unforeseen risks. Public policy prohibits an insurer from indemnifying an insured for a loss resulting from the insured's own true intentional acts. 1
A primary reason against insuring for intentional or willful acts is a concern that such coverage extends to the insured "a license to commit harmful, wanton, or malicious acts." 2
It is not sufficient that the insured's intentional, albeit unlawful, acts have resulted in unintended harm; the acts must have been committed for the purpose of inflicting the injury and harm before either a policy provision excluding intentional harm applies or the public policy against insurability attaches.
Nielsen v. St. Paul Cos., 583 P.2d 545 (Or. 1978).
An insured will not be allowed through intentional or reckless acts to consciously control the risks covered by the policy.
Rohrer v. Rick, 529 N.W.2d 406, 409 (Minn. Ct. App. 1995) (citation omitted).
Policy Language
CGL policies cover "occurrences." The older (1973 edition) Insurance Services Office, Inc. (ISO), forms defined occurrence as "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." Later (1986 and subsequent) forms also defined occurrence as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." Although the coverage grant does not expressly use the terms "unexpected" or "unintentional," these concepts appear in Exclusion 2.a., Expected or Intended Injury, which states that the policy does not cover "'bodily injury' or 'property damage' expected or intended from the standpoint of any insured." Some policies contain intentional acts exclusions, which also preclude coverage for harm caused by the insured.
Courts consider whether the insured's conduct constitutes an accident and/or whether the resulting harm is accidental from the perspective of the insured or, in some cases, from the perspective of a reasonable person.
Occurrence
In determining whether an insurance policy must respond to a particular claim, courts generally read the policy to first determine whether the facts of the claim fall within the coverage grant. 3 Accordingly, the first question is often whether the facts show an occurrence, or accident, to which the policy would respond. The policy, however, leaves "accident" undefined. Different jurisdictions use different concepts to determine whether an accident that qualifies as a covered occurrence under the policy has taken place.
The Supreme Court of Alabama uses Black's Law Dictionary definition of accident:
[a]n unintended and unforeseen injurious occurrence; something that does not occur in the usual course of events or that could be reasonably anticipated.
St. Paul Fire & Marine Ins. Co. v. Christensen Marine, Inc., 893 So. 2d 1124, 1136 (Ala. 2004).
Missouri looks at whether the injury or damage was "caused by accident" which:
is satisfied where the insured did not intend that damage result from his act although the act itself was intentional and did so result.
M.L.P. Invs., L.L.C. v. Quanta Specialty Lines Ins. Co., 2009 WL 4940999, 7 (E.D. Mo. 2008) (citation omitted).
The Supreme Court of Florida determined that the undefined term "accident" is ambiguous and should, accordingly, be construed in favor of the insured. Thus, "accident"
encompasses not only "accidental events" but also injuries or damages neither expected nor intended from the standpoint of the insured.
State Farm Fire & Cas. Co. v. CTC Dev. Corp., 720 So. 2d 1072, 1076 (Fla. 1998).
However:
the question of whether the injury or damages were unintended or unexpected will be a question of fact; in some cases, the question will be decided as a matter of law, such as in cases where the insured's actions were so inherently dangerous or harmful that injury was sure to follow.
Id.
The Supreme Court of Michigan similarly defines accident as:
an undesigned contingency, a casualty, a happening by chance, something out of the usual course of things, unusual, fortuitous, not anticipated, and not naturally to be expected.
Frankenmuth Mut. Ins. Co. v. Masters, 595 N.W.2d 832, 838 (Mich. 1999).
Importantly, the Supreme Court of Michigan has also made clear that:
the insured's injury-causing act or event and its consequences are evaluated from the standpoint of the insured, not the injured party or "a reasonable person."
Frederick v. Farm Bureau Ins. Co., 2008 WL 5046869, 2 (Mich. App. 2008) (citations omitted).
Essentially:
… [I]f both the act and the consequences were intended by the insured, the act does not constitute an accident. On the other hand, if the act was intended by the insured, but the consequences were not, the act does constitute an accident, unless the intended act created a direct risk of harm from which the consequences should reasonably have been expected by the insured.
Allstate Ins. Co. v. McCarn, 645 N.W.2d 20, 23 (Mich. 2002).
Thus in Michigan, whether facts constitute an occurrence under the policy depends on a subjective standard. However, the policy also precludes coverage:
when the acts of the insured rise to the level of a "direct risk of harm intentionally created"—a level of culpability only slightly lower than intentionally acting to produce an intended harm—
... where the insured reasonably should have expected the harm, as the situation is virtually indistinguishable from intentionally causing the harm. Further, the 'direct risk of harm' must have been "intentionally created by the insured's actions."
McCarn at 24.
The McCarn court discusses problems with using an objective standard to determine the insured's intent:
If courts are to review the acts of insureds for "objective reasonableness," as the dissent proposes, the very purpose of insurance would be compromised as insureds would find it increasingly difficult to recover on claims arising from injuries set in motion by foolhardy conduct on their own part or on the part of their families. However, the impetus for insurance is not merely, or even principally, to insure oneself for well thought out and reasoned actions that go wrong, but to insure oneself for foolish or negligent actions that go wrong. Indeed, it is obviously the latter that are more likely to go astray and to precipitate the desire for insurance. Under the dissent's approach, however, only the former actions would be clearly covered "accidents," or, at least, would clearly avoid disputes over coverage with insurers.
Id. at 26.
Nevertheless, despite the insured's subjective percepts, courts will infer an intent to cause harm from certain actions by the insured. Acts "so inherently dangerous or harmful" as to present a "direct risk of harm intentionally created" are not accidental as a matter of law and, therefore, are not covered.
Inferred Intent
When an intent to injure is not specifically pled, the question of intent typically goes to the fact finder. 4 However, virtually every jurisdiction recognizes certain facts that can never qualify as an "accident" and thus, courts infer an intent to injure as a matter of law. Courts typically determine whether to infer an intent to harm as a matter of law on a case-by-case basis. 5 Although there is no uniform standard for inferring an intent to cause harm, circumstances courts consider in finding conduct to be injurious or harmful as a matter of law are often similar.
The Supreme Court of New Hampshire applies an objective standard:
[Test] of inherently injurious conduct ... is that an insured's intentional act cannot be an "accident" when it is so inherently injurious that "it is certain to result in some injury, although not the particular alleged injury."
Green Mountain Ins. Co. v. Foreman, 641 A.2d 230, 232 (N.H. 1994) (internal citations omitted).
Under this objective standard, the court "may infer that the actor's state of mind was the same as a reasonable person's state of mind would have been" under the circumstances. 6
The Ohio inferred intent rule extends only to cases where "injury is virtually inevitable" or "the act and the injury are virtually inseparable." 7 Unless the facts reveal sexual molestation of children or when the insured fires a gun at the victim at point blank range, "the intent to injure or its expectation are questions of fact." 8 Similarly, intent to injure can be inferred:
when the insured acted in a calculated and remorseless manner or when the insured's actions were such that the insured knew or should have known that a harm was substantially certain to result from the insured's conduct.
American Family Ins. Co. v. Walser, 628 N.W.2d 605, 613 (Minn. 2001).
The mere fact the ultimate harm is a natural and probable consequence of the insured's action is not enough to infer intent. 9 Courts should only infer the intent to cause harm "when such subjective intent is the only reasonable inference that may be drawn from the insured's conduct." 10
No matter what standard is applied, jurisdictions almost universally agree that "injury inheres in and inevitably flows from an act of sexual molestation; the act and the harm cannot be separated. 11 More interesting are the non-molestation situations in which the intent to cause harm has been inferred, as a matter of law or on a case-by-case basis, by the insured's conduct. Firing a gun at a person at point blank range and fraud 12 are not accidents. 13 Intentional religious discrimination 14 and sexual harassment 15 are not occurrences. Repeated, harassing phone calls throughout the night do not constitute "ordinary negligence" and is not an occurrence. 16 The intent to cause damage has been inferred in cases of environmental contamination. 17
Conclusion
Insurance policies typically do not provide coverage for an insured's intentional, harmful acts. Coverage is excluded where the insured's acts were intended. Some jurisdictions apply an objective standard and consider what a reasonable insured would have believed under the circumstances. Most jurisdictions evaluate the issue in light of the insured's subjective belief, for instance, affording coverage when the insured accidentally killed someone by shooting them with a gun believed to be unloaded. 18
Even those jurisdictions applying a subjective standard recognize circumstances in which the intent to harm can be inferred from the insured's conduct. The challenge lies in determining, on a case-by-case basis, when such injuries or damages are substantially certain or virtually certain to occur so that the only reasonable inference is that the insured's conduct is inherently injurious.
Contributing author Rebecca C. Appelbaum is a senior associate practicing in the area of third-party coverage at the firm of Butler Pappas Weihmuller Katz Craig, LLP.
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