Sexual Abuse an “Accident” (CA Supreme Ct.)

From employer’s point of view, employee’s crime unintentional

The California Supreme Court ordered Liberty Surplus Insurance Corp. (“Liberty” is a Liberty Mutual affiliated company) to provide a defense to Ledesma & Meyer Construction Co. (“L & M”) for a complaint that alleged it had negligently hired and failed to supervise an employee that sexually assaulted a student at a middle school where the company was performing work.

The opinion was in response to a Ninth Circuit certified question.  The California Supreme Court rephrased the original question as follows: “When a third party sues an employer for the negligent hiring, retention and supervision of an employee who intentionally injured that third party, does the suit allege an “occurrence” under the employer’s commercial general liability policy?”  The California Supreme Court commented that “(t)he answer turns on whether the injury can be considered “accidental.”

The court characterized the meaning of “accident” in a liability insurance policy as “settled” law in California.  An “accident” is “an unexpected, unforeseen, or undesigned happening or consequence from either a known or an unknown cause.”  California law provides that “accident” refers to the “conduct of the insured.”  Thus, “accident” cannot be ambiguous.  Because the construction company did not anticipate that its employee would commit the crime, it was an “accident” under California law.  In the absence of an applicable exclusion, “employers may legitimately expect coverage for such claims under comprehensive general liability insurance policies, just as they do for other claims of negligence,”

The case was on appeal to the Ninth Circuit after a federal District Court granted Liberty summary judgment finding that the claim was “too attenuated from the injury-causing conduct” to be an occurrence.  In responding to the certified question, the California Supreme Court characterized its opinion in Minkler v. Safeco as providing support for the view that intentional acts of molestation are distinct from claims of negligent supervision.  The court noted that “L&M’s allegedly negligent hiring, retention, and supervision were independently tortious acts, which form the basis of its claim against Liberty for defense and indemnity.”  It also addressed its ruling in Delgado v. Interinsurance Exchange as providing that the conduct of the insured is the principal focus in determining whether an “accident” is alleged.  Because the abuse was the “unexpected consequence of L&M’s independently tortious acts of negligence,” it was an “accident” requiring Liberty to defend.  Liberty Surplus Ins. Corp. v. Ledesma & Meyer Construction Co. Inc., No. S236765 (Cal. June 4, 2018).