In California, many liability insurance policies contain exclusions for injuries that result from intentional acts. This means that it can be difficult for injured victims to recover compensation when they are injured by the intentional actions of insured parties. In Liberty Surplus Insurance Corp. v. Ledesma & Meyer Construction Company Inc., Case No. S236765, the California Supreme Court recently addressed a case in which the employee of a construction company committed a sexual assault on a 13-year-old girl while he was working on a construction site at a school. The insurance company tried to assert that the exclusion for coverage applied because the act of the employee was intentional, and the company filed a lawsuit against the insurance company.
The Ledesma & Meyer Construction Company secured a contract from the San Bernadino Unified School District to complete a construction project at a middle school. The company hired a man named Darrell Hecht to serve as an assistant superintendent and assigned him to manage the construction project at the middle school. While Hecht was on site at the school, he sexually molested a 13-year-old girl. The girl’s family filed a lawsuit against the Ledesma & Meyer Construction Company alleging that the company negligently hired, supervised and retained Hecht.
The company asked its insurance company, Liberty Surplus Insurance Corp., to indemnify and defend it in the lawsuit. The insurance company refused, pointing to an exclusion in the company’s general commercial liability policy for coverage in the event of intentional acts instead of accidents. The company filed a lawsuit against the insurance company. The District Court granted the insurance company’s motion for summary judgment, and the construction company appealed to the U.S. Court of Appeals for the 9th Circuit. The 9th Circuit asked the California Supreme Court for its opinion on whether the exclusion applied.
Issue: When an injured third party files a lawsuit against a company for negligent hiring, supervision, and retention for an intentional act, will it be considered to be a coverable occurrence under a general liability policy?
Liberty Surplus argued that since Hecht’s sexual assault was an intentional act, it did not have to indemnify or defend Ledesma & Meyer in the third party lawsuit that was filed against the company by the young girl. The insurance company argued that its general liability policy only provided coverage for accidents that might occur. Since the intentional conduct of the employee was not an accident, the company reasoned that it did not have to provide coverage. The construction company argued that the District Court had misapplied California law when it granted the insurance company’s motion for summary judgment since the intentional conduct of the sexual assault was not made by the insured party. Instead, the company was sued for its negligent hiring, supervision, and retention of Hecht, which Ledesma & Meyer argued fell under the definition of accident as defined by California case law.
Rule: In some cases, an intentional act by an employee of an insured can be considered to be accidents that are coverable by insurance policies without exclusion
The Supreme Court of California first examined settled law in the state on what an accident includes. Under Delgado v. Interinsurance Exchange etc., 47 Cal. 4th 304 (2009) and Black’s Law Dictionary, the court first noted that the term accident in liability policies is broader than and includes negligence. The court then noted that the insured party only needs to be able to show that there is the potential that its negligence may fall under the policy’s coverage for the coverage to apply.
In this case, the Supreme Court noted that the third party lawsuit alleged negligent hiring, supervision, and retention by the company and did not seek to impose liability on the employee. The court then analyzed the facts of the case under the standard established in Minkler v. Safeco Insurance Corp., 561 F.3d 1033 (2009). In that case, a boy was molested by his Little League coach at the coach’s mother’s home. The boy and his family filed a lawsuit against the coach and the coach’s mother. The lawsuit against the mother alleged that she negligently supervised her son and failed to do anything to prevent the molestation from occurring. Her homeowner’s insurance company argued that the coverage should not apply because the coach’s conduct was intentional. The court found that in the lawsuit against the mother, her behavior was negligent, which was coverable under her liability policy.
The court applied this standard to its analysis of Ledesma and found that the company’s negligence in hiring, supervising and retaining Hecht was coverable under the insurance policy and that the insurance company should indemnify and defend the company against the girl’s lawsuit. This is important because it is often difficult to obtain compensation for acts that could be considered to be intentional and outside the course and scope of employment such as sexual assault or abuse.
The California Supreme Court’s ruling means that victims of sexual assaults that are committed by workers might be able to recover compensation from the companies’ general liability insurance policies. If you have been the victim of a sexual assault by a worker, it is important for you to talk to an experienced personal injury attorney. A lawyer may be able to uncover more potential sources of recovery beyond the perpetrator, including his or her employer. Contact Steven M. Sweat, Personal Injury Lawyers, APC today to schedule your free consultation.