In Safeco Insurance Company of America v. White, et al., 2009-Ohio-3718, the Ohio Supreme Court reviewed a situation where a 17 year old insured under a homeowner’s policy, Benjamin White, attacked and repeatedly stabbed a minor neighbor. Benjamin, who lived with his parents at the time of the attack, plead guilty to attempted murder and felonious assault. After the conviction, the parents of the victim sued Benjamin for multiple claims, including battery, and asserted claims against Benjamin’s parents for negligent supervision, negligent entrustment, and negligent infliction of emotional distress. This matter proceeded to trial where the jury made the following findings deemed relevant in the Supreme Court’s decision:
“First, the jury found that Benjamin committed a battery, an intentional tort, against Casey Hilmer and that his intentional acts also caused Steve Hilmer to suffer emotional distress. Second, the jury found that the Whites were negligent in their supervision of Benjamin, and that this negligence also injured Casey Hilmer and caused Steve Hilmer to suffer emotional distress. Third, the jury found that the Hilmers were owed $6,500,000 in compensatory damages for these combined torts. Fourth, the jury found that Benjamin was 30 percent responsible for the Hilmers’ injuries and that the Whites were 70 percent responsible. The jury also awarded the Hilmers $3,500,000 in punitive damages against Benjamin.”
Against this fact pattern, the Whites’ homeowner’s insurer and umbrella carrier sought to disclaim coverage in a declaratory judgment action. The trial court ruled in favor of the homeowners. This holding was subsequently affirmed by the First District Court of Appeals, which then certified the following conflict questions to the Ohio Supreme Court:
1. When an insurance policy defines an “occurrence” as an “accident” that results in bodily injury, does an “occurrence” include injuries that result from an intentional act when the insured[s] seeking coverage are claimed to have been negligent in relation to that intentional act?
2. When an insurance policy excludes an injury “which is expected or intended by [an or any] insured * * * “; injuries, “arising out of an illegal act committed by or at the direction of an insured”; or “ any injury caused by a violation of penal law or ordinance committed by or with the knowledge or consent of any insured,” do the exclusions become ambiguous when read in conjunction with (a) “severability of insurance” condition, in light of the announced expectation by policyholders that their negligence will be covered?
With respect to the first certified question, the Ohio Supreme Court, in a 4-3 decision, held that when a liability insurance policy defines an “occurrence” as an “accident,” a claim of negligence against an insured which is predicated on the commission of an intentional tort by another person, (e.g., claims negligent hiring, training, or supervision) qualifies as an insurable “occurrence”. In reaching this conclusion, the Supreme Court stressed that the determination of whether an insured’s conduct may be viewed as expected or intended to cause injury is determined from the perspective of the person seeking coverage, not the person who may have committed the intentional act.
With respect to the second certified question, the exclusion examined in the homeowner’s policy negated coverage for injuries that are “expected or intended by an insured” or that “aris[e] out of any illegal act committed by or at the direction of an insured”. The umbrella’s policy excluded injuries “caused by a violation of a penal law or ordinance committed by or with knowledge or consent of any insured” and for “[a]ny act or damage which is expected or intended by any insured”. The Safeco court noted that while these exclusions were worded slightly differently, the clear import was to preclude coverage arising from or caused by the intentional or illegal acts of an insured. The court agreed that these intentional act exclusions “plainly” applied to the intentional acts of Benjamin. The court determined, however, that these exclusions would not apply to the claims of negligent supervision and negligent entrustment asserted against Benjamin’s parents. In so holding, the Supreme Court relied upon the underlying jury verdict which reflected that Plaintiffs had established a separate injury from the negligent failure to monitor Benjamin which did not arise from the intentional or illegal actions as contemplated by the policy exclusions, stating:
“As the jury interrogatories reveal, separate injuries were alleged and proved in this case. The jury determined that the Hilmers were injured by both Benjamin’s intentional battery and intentional infliction of emotional distress and White’s negligent supervision and negligent infliction of emotional distress. These separate causes of action produced distinct injuries, for which Benjamin and the Whites were separately liable; the jury that Benjamin was responsible for 30% of the Hilmer’s compensatory damages for his intentional actions, whereas the Whites were responsible for 70% of the Hilmer’s damages for their negligence. Thus, the Whites were held separately liable for their own actions, which were neither intentional nor illegal; the injuries they caused were distinct from the injuries caused by Benjamin’s intentional and illegal acts. Therefore, the intentional-and illegal-act policy exclusion should not apply to the negligent claims against the Whites.”
The Safeco Court’s resolution of the first certified coverage question reaffirmed the Court’s prior holding in Doe v. Shaffer (2000), 90 Ohio St. 3d 88, that derivative claims such as negligent training, hiring, and supervision are not barred from coverage because such claims may arise from an uninsurable intentional act of another. The Court’s holding relative to the application of a policy’s intentional act/criminal acts exclusions is less clear. While the Supreme Court decision renders the intentional act/criminal act exclusions examined in that case ineffective to bar coverage for the derivative claim of negligent supervision, it is important to recognize the extent of the Supreme Court’s reliance on the actual jury interrogatories in that case to support its holding. It remains unclear if the majority of the Court would have reached the same conclusion if the jury interrogatories had not separated out an award of damages between the properly excluded intentional/criminal claim and potentially insurable derivative claim of negligence. The Supreme Court’s focus on the fact that the White’s negligent act gave rise to a separate injury may provide a basis to distinguish its application from tortuous conduct that cause one indivisible injury. If you should have any questions with respect to this decision and its potential impact on a situation, please feel free to contact a member of our Insurance Coverage Department.
