Intentional Act Exclusion and Its Affect on the Duty to Defend
A Court of Appeals in Ohio addressed the issue of whether an insurer had a duty to defend and indemnify the insured after the insured pled to complicity to engage in arson. This case is Black v. Richards, 2010 WL 2546705 (Ohio App. 5 Dist.).
Hillyard and Richards went to property owned by Black and entered through a hole in the bottom of a rear wooden door. While in the house, Richards set fire to curtains at the bottom of a landing. After Hillyard pulled the curtains down, causing them to fall partly on a box, the two attempted to stomp the fire out, but the fire spread to three adjoining buildings. Richards and Hillyard entered a plea of admission to a charge of complicity to engage in arson and were adjudged delinquent by the county juvenile court.
Black filed a complaint against the Richards and the Hillyards, alleging that the juveniles were negligent and that their parents were liable for the actions and were negligent in their supervision. United Ohio Insurance Company was the insurer for the Richards and it filed a declaratory judgment action seeking a declaration that it did not owe defense or indemnity based on the intentional acts exclusion in the policy. State Automobile Mutual Insurance Company, the insurer for the Hillyards, filed a similar declaratory judgment action. The trial court ruled in favor of the insurers and this appeal followed.
The appeals court took up the Hillyard/State Auto case first and noted that the homeowners policy provided coverage for damages caused by an occurrence, meaning an accident. The trial court found that the fire started from Hillyard's intentional act, as opposed to an accident, and, therefore, the insurer had no duty to defend. The insureds countered that the youth did not commit an intentional act (the fire), but rather was negligent in the attempt to put out the fire. The appeals court also noted that Hillyard entered a plea of admission to, and was found guilty of, the crime of complicity to arson, which required acting knowingly. The court then cited other appellate decisions in the state that found that a conviction involving the mental state of “knowingly” is sufficient to establish an intent to injure and trigger an intentional acts exclusion, as long as the exclusion is not restricted only to intentional acts, but also includes the expected results of one's acts.
In this case, the court found, Hillyard admitted to complicity to engage in arson and so, from his perspective, the fire was intentional rather than an accident or the result of negligence. Therefore, there was no occurrence and Hillyard was not entitled to coverage based on the intentional acts exclusion. The opinion of the trial court was upheld.
As for Richards, the court said that while the insureds did not dispute that the youth intentionally set the fire, they claimed Richards did not intend to burn the building down and that he did try to put the fire out. The insureds claimed that this negligence in failing to put out the fire was an intervening cause of the fire and broke the causal connection between the intentional act of setting the fire and the resulting damages. The court cited an Ohio Supreme Court ruling that “an intervening cause is foreseeable to the original negligent actor if the original and successive acts may be joined together as a whole, linking each of the actors to the liability. By contrast, the original negligence is excused if there is a new or independent act which intervenes and breaks the causal connection. The term 'new' means the second act could not reasonably have been foreseen by the original actor, and the term 'independent' means the absence of any connection or relationship of cause and effect between the original and subsequent acts.”
In this case, the appeals court found a connection or relationship of cause and effect between the original fire and the subsequent acts. The resulting damages would not have occurred absent the original fire that Richards intentionally set; the building burning down was foreseeable. The judgment of the trial court concerning Richards was affirmed.
Editor's Note: Insureds and insurers many times argue over the intentional acts exclusion. Does it apply to the intentional act or the intentional result? The majority of courts find that in order to avoid coverage under the exclusion, the insurer must show that the insured's act was intentional and that he expected or intended the injury itself. But, since this is not the accepted unanimous opinion around the country, the facts and circumstances of each case have to be reviewed for an interpretation of the insurance policy language.
In this instance, the insureds pled guilty to a crime that carries with it a requirement that the actor have a “knowing intent” in order for the crime to be in effect. This helped the appeals court render its judgment and uphold the application of the intentional acts exclusion.