INSURANCE LAW - CRIMINAL ACTIVITY
EXCLUSIONS - INTENTIONAL ACT EXCLUSIONS
Insurance companies have no
duty to defend or indemnify owners of insurance policies who commit criminal
acts when such policies contain exclusions for criminal activities. Insurance
companies do, however, have a duty to indemnify policy owners who injure others
so long as the act is not "inherently harmful" or the insured did not "intend"
to cause the resultant harm.
After a night spent drinking alcohol and smoking
marijuana in his grandmother's cabin, Joseph France picked up a shotgun, believing
it was unloaded, pointed it at Plaintiff, and pulled the trigger. The gun did
not fire and Plaintiff jokingly admonished France. France then pulled the trigger
again and the gun fired, injuring Plaintiff. France pleaded guilty to the felony
of assault in the second degree (Penal
Law " 120.05
(4)) and Plaintiff sued France for negligence. France claimed
that because Defendant, Security Mutual Insurance Company, had issued a homeowner's
policy for the cabin, it had a duty to defend France in the negligence action.
Defendant denied that it had a duty to defend or cover France and the Supreme
Court entered a default judgment for Plaintiff. Plaintiff then commenced an action
against Defendant and France, seeking a declaration that Appellant had a duty
to defend and indemnify France. Because the policy had exclusions for both intentional
and criminal acts, Defendant argued that France's act was not covered under the
policy. The exclusions specifically stated that the policy did not cover liability
for acts "caused intentionally by or at the direction of any insured."
or for liability "arising directly or indirectly out of instances, occurrences
or allegations of criminal activity by the insured." The Supreme Court granted
summary judgment for Plaintiff and the Appellate Division affirmed, holding that
the intentional act exclusion did not apply to France's act and that the criminal
activity exclusion was unenforceable on the grounds of public policy. The Court
of Appeals affirmed regarding the intentional act exclusion and reversed regarding
the criminal activity exclusion, holding that the exclusion was enforceable.
ISSUE & DISPOSITION
Whether an intentional act exclusion in a homeowner's
insurance policy should be enforced to deny coverage where the insured shot an
individual with a gun he believed to be unloaded.
2. Whether a provision in a homeowner's insurance policy excluding coverage
for injuries resulting from direct or indirect acts of criminal activity by
the insured is unenforceable as a matter of public policy.
1. No. For an insurer to be alleviated from liability for injuries resulting from an insured's intentional act, the act must be intentional or inherently harmful.
2. No. A contractual provision alleviating an insurer from liability from harm resulting from criminal activity by the insured is enforceable, as there is not a strong public policy or statute requiring such coverage.
Cases Cited by the Court
- Tower Ins. Co., Inc. v. Judge, 840 F.Supp 679 (D. Minn. 1993).
- Lane v. Sec. Mut. Ins.
Co., 96 N.Y.2d 1 (N.Y. 2001).
- Royal Indem. Co. v. Providence
Washington Ins. Co., 92 N.Y.2d 653 (N.Y. 1998).
- Allstate Ins.
Co. v. Mugavero, 79 N.Y.2d 153 (N.Y. 1992).
- Joseph R. Loring & Assoc., Inc. v. Contíl Cas. Co., 56 N.Y.2d 848 (N.Y.
- Pub. Serv. Mut. Ins. Co. v. Goldfarb, 53 N.Y.2d 392 (N.Y. 1981).
- McGroarty v. Great Amer. Ins. Co., 36 N.Y.2d 358 (N.Y. 1975).
- Messersmith v. Am. Fid. Co., 232 N.Y. 161 (N.Y. 1921).
- Suba v. State Farm Fire & Cas. Co., 114 A.D.2d 280 (N.Y. App. Div. 1986).
Creamery Co. v. W. Nat. Mut. Ins. Co., 366 N.W.2d 271 (Minn. 1985).
- Allstate Ins. Co. v. Juniel, 931 P.2d 511 (Colo. Ct. App. 1996).
Other Sources Cited by the Court
- Allstate Ins. Co. v. Burrough, 914 F.Supp. 308 (W.D.Ark. 1996).
- Allstate v. Norris, 795 F.Supp 272 (S.D.Ind. 1992).
- Pistolesi v. Nationwide Mut. Fire. Ins. Co., 223 A.D.2d 94 (N.Y.
- Monter v. CNA Ins. Companies, 202 A.D.2d 405 (N.Y.App. Div. 1994).
- Green v. Allstate Ins. Co., 172 A.D.2d 949 (N.Y.App. Div. 1991).
- Hooper v. Allstate Ins. Co., 571 So.2d 1001 (Ala. 1990)
- J.C. Penney Casualty Ins. Co. v. M.K., 278 Cal.Rptr. 64 (Cal.1991)
- Western Mutual Ins. Co. v. Yamamoto, 35 Cal.Rptr.2d 698 (Cal.App. 1994).
- Young v. Brown, 658 So.2d 750 (La.Ct.App. 1995).
- Graham v. James F. Jackson Assoc. Inc., 352 S.E.2d 878 (N.C.App. 1987).
- Allstate Ins. Co. v. Peasley, 910 P.2d 483 (Wash.App. 1996).