Intentional Act Exclusion not Applicable
September 24, 2012
The insurer sought a declaratory judgment that it is not obligated to cover a property damage claim made against its insured. This case is Allstate Property and Casualty Insurance Company v. Strand, 2012 WL 2004994.
Hathaway or his agents entered on the Strand property without the Strand's approval and removed three Douglas fir trees and one Western Red Cedar tree. During the removal, one tree struck the Strand house causing significant damage. The removal of the trees also resulted in soil exposure increases, increased erosion, and other disruptive destabilizing activities.
Hathaway had a homeowners policy and a personal umbrella policy with Allstate. When the Strands filed a lawsuit against Hathaway, Hathaway turned to Allstate for insurance coverage. The insurer denied coverage based on the intentional acts exclusion and filed for a declaratory judgment. The United States District Court for the Western District of Washington said that it would first examine whether the incidents at issue constitute an occurrence under the terms of the policy, and then examine whether the intentional acts exclusion applies.
Allstate contended that the losses at issue are not covered because Hathaway's actions were intentional and therefore cannot be considered an accident (an occurrence). The Strands argued that the damages due to Hathaway's conduct constitute an occurrence because his conduct resulted in unintended losses.
The court reviewed judicial opinions from the state of Washington and noted that the courts hold that an occurrence depends on the subjective state of mind of the insured with respect to property damage. Moreover, to be deliberate and thus not an accident, an intentional act must be done with awareness of the implications or consequences of the act. In this instance, Allstate did not submit sufficient evidence to demonstrate that Hathaway was aware of the implications or consequences of his actions, or that all the damages from the tree cutting could have been expected from his acts. Therefore, viewing all the evidence in the light most favorable to the non-moving party, the district court found that Allstate has not demonstrated that there is no genuine dispute of material fact whether the damage to the Strand home or the hillside could have been expected from Hathaway's acts.
As for the insurer argument that the intentional acts exclusion prevents coverage, the court found that the Washington Supreme Court has concluded that a subjective standard applies to the expectation of harm and expectation of damages. Also, the Washington Court of Appeals explained that the word “expected” in this context carries the connotation of a high degree of certainty or probability. So, in this incident, the insurer had to show that the damage could have been expected, that Hathaway had a high degree of certainty of the results of his acts in order for the exclusion to apply. The facts showed that Allstate did not demonstrate that Hathaway expected with a high degree of certainty or probability that the trees would damage the house or hillside. Hathaway intentionally cut down the trees, but there was no evidence that he intended to harm the house or hillside. Therefore, the court denied the insurer's motion for summary judgment.
Editor's Note: There have been many cases dealing with whether intentional tree cutting that causes unintentional damage is an occurrence or whether the expected or intended injury exclusion prevents coverage. Most courts hold that an intentional act is separate from an intentional result, and the key point is that the insured must have both intended to do the act and intended the result in order for the exclusion to apply.
The U.S. District Court in this case noted that an objective standard is inconsistent with insurance coverage for damage resulting from ordinary negligence; the subjective state of mind of the insured with respect to the property damage is the key. So, it is usually difficult for an insurer to rely on the expected or intended injury exclusion to prevent coverage since, as in this instance, the insurer has the burden of proving the insured intended the damage.