Are Intentional Accidents Covered by Insurance?

By KRISTOPHER M. STOCKBERGER

Assume that a masonry contractor is sued for negligent hiring in a suit brought by a roofing contractor who was assaulted by the masonry contractor’s employee while working at the same site. If witnesses clearly establish that the assailant intentionally assaulted the roofer, should the masonry contractor be entitled to a defense and indemnity from its insurer? Or assume that an employment agency’s computer network is infected by a computer virus. The virus infects the network among statewide sites and damages individual computers beyond repair. Should the agency be entitled to reimbursement from its insurer for replacing its computer equipment? How about a man who copies revealing photographs of a woman and circulates them privately to a small group. If the woman sues the man for emotional distress, is the man entitled to a defense and indemnity if he never intended for the woman to receive or find out about the copies?
These examples all include a loss resulting from an intentional act. They also involve a claimant on an insurance policy who did not intend to cause the loss, but is forced to deal with the consequences. These and similar examples raise questions about the best definition of “accident” in the insurance arena. They also raise questions about the best legal point-of-view to use in determining whether or when an accident covered by insurance occurred. Texas courts have generally resolved these issues using a two-step test. The Texas test, however, may have at least one more phase of development before it reaches national maturity.

Where “Occurrence” Occurs
Most insurance policies meticulously describe the type of loss-causing event that is covered pursuant to the policy. The industry term “occurrence” is typically defined as an accident, thereby excluding intentional torts from coverage. For example, in one insurer’s homeowners’ policy, “occurrence” is defined as “an accident, including exposure to conditions that results in ‘bodily injury’ or ‘property damages’ during the policy period.”1 In another insurer’s Commer-cial General Liability policies, the following definition is used: “accident, including continuous or repeated exposure to substantially the same general harmful conditions.”2 But what qualifies as an “accident?” That is where the law comes into play

The Legal Test
The legal question arises when it must be determined whether a loss-causing event was an accident, and is therefore an occurrence covered pursuant to the policy. In addressing this issue, Texas courts use a two-step test.3 First, the court determines whether the alleged loss-causing event was voluntary and intentional. If so, then the court determines whether the alleged damages were a natural result of the events. If both of these issues are resolved in the affirmative, then the event is intentional and, therefore, not an accident covered by the policy.4
In the first example above, the alleged misconduct in the suit against the masonry contractor is not the actual assault, but inadequate supervision and hiring, which is considered accidental under the first step.5 In the second example, the hacker’s virus entering the agency’s network is the alleged loss-causing event, which we may assume was intentional and voluntary. The computer hacking also satisfies the second step because the network and personal computer damage is a natural result of the hacking. But Texas courts apply the test from the point-of-view of the insured (in this case, the agency).6 Because the agency’s conduct does not satisfy the two-step test, the event is determined to be an accident that is covered by the insurance policy.7 The last example indicates the importance of focusing on the correct loss-causing event. In that case, the loss-causing event (circulating copies of revealing photographs) was an intentional act. Despite the fact that the man specifically intended to prevent the woman from ever finding out, the loss was a natural result of his intentional conduct.8 Therefore, the man should not be entitled to a defense and indemnity pursuant to his policy.

Beyond the Texas Two-Step
Texas courts have yet to face any cases that push the limits of the Texas two-step test, but it is only a matter of time before they do. An example of what Texas courts may face can be found in a West Virginia case.9 Farmers and Mechanics Mutual Insurance Co. of West Virginia v. Cook involved facts that provide conduct that is more intentional than any case considered by Texas courts so far. In 2001, the West Virginia Supreme Court of Appeals considered a case involving an insured who was convicted of second-degree murder.10 The victim’s wife sued the insured for wrongful death. The insured demanded defense and indemnity from her homeowners’ insurance carrier, who denied coverage. The high court determined that the fatal shooting was not an intentional act upon which coverage could be denied because the insured shot the 6’4”, 300-pound victim to prevent him from killing her husband.
Because the insured was held to have acted in self-defense on appeal of her conviction,11 the high court held that she did not act with “an intent to bring about a result which will invade the interest of another in a way that the law forbids.”12 The Texas two-step approach would prevent coverage because the insured’s act was intentional and voluntary, and the victim’s death was a natural and probable result of it. But the denial of coverage under this scenario would ignore the important fact that the insured merely acted in a way that the law defines as reasonable and acceptable, as well as more attributable in terms of causation to another person.
For the time being, Texas cases permit coverage of intentional accidents that are not intentional or voluntary from the insured’s perspective. Texas cases also permit coverage of these occurrences if the damages involved do not naturally result from the insured’s conduct. At some point, however, Texas courts will have to decide whether to extend coverage in cases of self-defense similar to Cook and Takeda.
 
Endnotes
1. Trinity Universal Ins. Co. v. Cowan, 906 S.W.2d 124, 129 (Tex. App. – Austin 1995), rev’d, 945 S.W.2d 819 (Tex. 1997). 2. Western Rim Inv. Advisors, Inc. v. Gulf Ins. Co., 269 F. Supp. 2d 836, 839 (N.D. Tex. 2003). 3. Wessinger v. Fire Ins. Exchange, 949 S.W.2d 834, 837 (Tex. App. – Dallas 1997, no writ) (citing Argonaut Southwest Ins. Co. v. Maupin, 500 S.W.2d 633, 635 (Tex. 1973)). 4. Id. The two-step test was re-affirmed in Trinity Universal Insurance Co. v. Cowan, 945 S.W.2d 819, 828 (Tex. 1997). The court in Wessinger stated that an event found to be involuntary and unintentional ends the inquiry in favor of a covered accident. The decision did not address a case in which an event was either involuntary or unintentional but not both æ which is the true negation of the first step of the inquiry. 5. See King v. Dallas Fire Ins. Co., 85 S.W.3d 185 (Tex. 2002). In King, the insured’s employee assaulted another employer’s employee at a construction site. The Texas Supreme Court held that the insured was entitled to a defense and indemnity pursuant to its “comprehensive general liability” policy. 6. Actually, this development does not appear to have been acknowledged in Texas decisions yet. In Lambrecht & Assocs., Inc. v. State Farm Lloyds, 119 S.W.3d 16, 21-22 (Tex. App. – Tyler 2003, no pet.), the Court merely quoted the Heyward rule: “the injuries are nevertheless accidental within the terms of an insurance policy covering death by ‘accidental means’ if from the insured’s viewpoint his conduct was not such as to cause him to reasonably believe that it would result in his injury.” Republic Nat’l Life Ins. Co. v. Heyward, 536 S.W.2d 549, 557 (Tex. 1976). The plain meaning of the Heyward rule, however, excludes coverage for an insured’s conduct that is negligent, because having cause to reasonably believe conduct will result in injury is no different than having cause to reasonably foresee that connection, which is an element of negligence. 7. See Lambrecht, supra, note 6. 8. See Cowan, supra, note 4. 9. 557 S.E.2d 801 (W.Va. 2001). 10. Farmers and Mechanics Mut. Ins. Co. of W. Va. v. Cook, 557 S.E.2d 801 (W.Va. 2001). 11. An acquittal, however, may not be necessary. At least one decision, Allstate Insurance Co. v. Takeda, 243 F.Supp.2d 1100 (D. Haw. Jan. 14, 2003), shows the lengths to which a court can go to liberally construe insurance contracts in favor of the insured. The insured was accosted by his girlfriend’s jealous ex-boyfriend. Having been warned that the ex-boyfriend may have a gun, the insured pulled a pole out of his van and struck the ex-boyfriend, resulting in a personal injury suit and a conviction for first-degree assault. The conviction was evidence of intent but did not negate the insured’s claim of self-defense, leaving a fact question as to coverage under the policy. 12. See Cook at 809 (quoting W. Page Keeton, et al., Prosser & Keeton on the Law of Torts § 8 at 369 (5th ed. 1984)).

Kristopher M. Stockberger practices with the firm of Brown Sims, P.C. He is a member of The Houston Lawyer editorial board.

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