Posted In: Insurance Recovery
A CGL Policy May Not Cover Your Liability Arising from Your Employee's Intentional Acts
on June 06, 2016
Neither the typical definition of “occurrence” nor the intentional-acts exclusion precludes coverage for the negligent actions of an insured that are predicated on the commission of intentional acts by another insured, such as claims for negligent hiring, negligent supervision, and negligent entrustment. The Ohio Supreme Court has held, for example, that a homeowner’s policy covered a claim for negligent supervision brought against parents whose son stabbed a classmate. See Safeco Ins. Co. of N. Am. v. White, 122 Ohio St.3d 562, 2009-Ohio-3718, 913 N.E.2d 426. A policyholder, therefore, may assume that it generally has coverage for these types of claims. Such an assumption may prove unfounded. The Ohio Supreme Court’s May 12, 2016, decision in World Harvest Church provides an example of when indemnity coverage is not available. See World Harvest Church v. Grange Mut. Cas. Co., Slip Op. No. 2016-Ohio-2913.
World Harvest Church
In World Harvest Church, the policyholder, a daycare provider, sought indemnity coverage from its insurer for its vicarious liability for claims arising from its employee’s physical abuse of a child. The insurer provided a defense to the policyholder, but reserved its right to later deny coverage. The commercial general liability policy at issue contained an “Abuse or Molestation Exclusion,” which excluded coverage for bodily injury “arising out of…[t]he actual or threatened abuse or molestation by anyone of any person while in the care, custody or control of any insured….” Id. at ¶13. It also “eliminate[d] coverage for damages awarded for claims of bodily injury arising from the insured’s negligence in employing, investigating, supervising, or retaining the bad actor, as well as from negligence in reporting, or failing to report, the abuse or molestation to the authorities.” Id. at ¶32.
In holding that the exclusion precluded “coverage for an award of damages based on the insured’s vicarious liability for a claim arising from its employee’s physical abuse of a child in the insured’s care and custody,” the Ohio Supreme Court focused on the “plain wording” of the exclusion, describing it as “broad.” Id. at ¶32-34. Even though the exclusion lacked an express denial of coverage for claims of vicarious liability, the court determined that the exclusion unambiguously eliminated coverage “for any injury arising from abuse or molestation.” Id. at ¶35. According to the court, to hold otherwise would require the policy to be written – a practice generally impermissible under Ohio’s rules of insurance contract construction. Id. As a result of the court’s decision, the policyholder correspondingly had no coverage for substantial attorney-fee and postjudgment-interest awards.
Takeaway
World Harvest Church underscores the critical importance of policyholders understanding the scope of coverage provided by their insurance policies at the time of procurement. By analyzing policy language at that juncture, policyholders can make informed decisions as to their coverage programs. They can ensure that they have coverage for certain types of claims or decide to forego such coverage, perhaps to avoid high premiums. What policyholders should avoid is being surprised by their coverage (or lack thereof) and, consequently, deprived of the opportunity to plan for uncovered claims.
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