“Gross Negligence” Can be an “Accident” Triggering Coverage

The Iowa Supreme Court, applying Iowa law, reversed a trial court decision holding an insurer had no duty to defend or indemnify for allegations of gross negligence. The trial court opinion held that “gross negligence” fell outside of the scope of coverage of the applicable CGL policy because it could not constitute an “accident.” The Iowa Supreme Court disagreed and found that there are possible circumstances where gross negligence can also be an “accident” under Iowa law, implicating the duty to defend.

In 2016, while working at Adventureland Amusement Park, Stuart Glen started a water ride before his co-worker Stephen Booher was clear, and Booher was severely injured. Booher eventually died of his injuries, and his estate and widow sued Glen for, among other things, gross negligence. Glen sought coverage for the underlying lawsuit under Adventureland Amusement Park’s CGL policy issued by T.H.E. Insurance Company (“T.H.E.”).

T.H.E. filed a declaratory judgement action seeking a declaration that it had no obligation to defend or indemnify Glen because the allegations of gross negligence in the underlying complaint required a state of mind that is inconsistent with an “accident” as needed to trigger coverage of the insurance policy. On cross-motions for summary judgement, and after reconsidering its earlier decision denying summary judgement to both parties, the state court judge granted T.H.E.’s motion. The Booher plaintiffs appealed.

On appeal, the Iowa Supreme Court examined the insurer’s defense and indemnity obligations under the policy and addressed whether an act of “gross negligence” under Iowa law could also constitute an “accident” under the CGL policy. The Iowa Supreme Court examined Iowa precedent regarding what constitutes an “accident” under Iowa law, finding that for an “occurrence” to be considered intentional rather than an accident, the actor must have constructive knowledge of a “substantial probability that a certain consequence will result[.]”  The court found that gross negligence requires “knowledge that injury is a probable, as opposed to possible, result.”

The court found daylight between these two definitions, finding that “the allegations are sufficient to permit the plaintiff to attempt to sail between the rocks of immunity established by Iowa Code section 85.20 and the shoals of a coverage defense under Article I of the CGL policy.” Because the Iowa Supreme Court held that allegations of gross negligence did not automatically foreclose allegations of an accident, it reversed the lower court’s ruling of summary judgement and remanded the case for fact-finding to determine if Glen’s actions did, in fact, thread the needle of being both grossly negligent but also an accident. T.H.E. Insurance Co. v. Glen, Case No. 18-1550 (Iowa June 5, 2020).