The homeowner's policy defined an "occurrence" as "an accident, including continuous or repeated exposure to the same general harmful conditions." Similarly, the personal catastrophe policy defined a covered "occurrence" as "an accident, including continuous or repeated exposure to conditions, which results in personal injury or property damage which is neither expected nor intended." Both policies excluded bodily injury "expected or intended by anyone we protect".  The homeowner's policy further excluded expected or intended injury even if "the degree, kind or quality of the injury or damage is different than what was expected or intended," or "a different person, entity, real or personal property sustained the injury or damage than was expected or intended".

In deciding whether Erie had a duty to defend, the Pennsylvania Supreme Court focused only on the allegations of the complaint and compared them to the four corners of the applicable insurance policies in accordance with the rules set out in its prior precedent. The Court acknowledged that Carly's complaint alleged that McCutcheon intended to kill his wife, and then later, intended to pull Carly into the house and fight with him while wielding a firearm. Contrary to Erie's view, however, this surprise encounter with Carly was not part of McCutcheon's other intentional conduct for purposes of insurance coverage, and in fact, Carly did not seek damages for a fistfight or shoving match. Rather, Carly's lawsuit sought damages for being shot.

The Court further rejected arguments by Erie and its insurance industry amici that finding a duty to defend would undermine the concept of "fortuity" and would incentivize insureds to engage in criminal activity. The Court found the argument to be "beside the point" because the complaint's allegations do not preclude the possibility that McCutcheon accidentally shot Carly, despite the fact he intentionally shot Terry McCutcheon and intentionally pulled Carly into the house before the shooting. The Court found that "[d]enying a duty to defend under such circumstances would not serve as a crime deterrent, and would unnecessarily withhold compensation to tort victims".

In contrast, the dissenting three justices felt that, upon reading the Carly complaint as a whole, the discharge of the gun under the circumstances could not reasonably be interpreted as an unexpected or fortuitous event. The dissent viewed the facts as clear: "while in the process of effecting a murder-suicide, McCutcheon physically pulled Carly into the home, engaged in a physical struggle with Carly, while he, the aggressor, held and discharged a firearm".  The dissent rejected the allegations of negligence and carelessness as artful pleading, legal characterizations of conduct rather than factual allegations. The dissent explained, "We are tasked with looking at the facts, not speculating about scenarios that are inconsistent with common sense or experience".

The Pennsylvania Supreme Court's decision is consistent with its prior precedent and the typical rules relating to the duty to defend. If there is the possibility of coverage based on the allegations of the complaint, there is a duty to defend. If a jury had found, consistent with the allegations, that the injury to Mr. Carly was inflicted unintentionally, those damages would be covered. It would matter little that the injuries inflicted by McCutcheon on others were intentional because those were not the injuries that were the subject of the lawsuit.

Read the decision here.

Timothy P. Law is a partner in Reed Smith's Philadelphia office who represents policyholders in insurance disputes, focusing on general liability and professional liability insurance coverage litigation, arbitration, and mediation. Mr. Law represented United Policyholders as amicus curiae in this matter.