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Accident or Not? Insurance Coverage for Unintended Consequences

Daily Journal
07/21/11

On July 13, the 2nd District Court of Appeal, Division Seven published an opinion authored by Justice Laurie D. Zelon, which appears to turn the clock back on a pivotal decision that rocked the world of insurance coverage, Gray v. Zurich Ins. Co. (1966) 65 C. 2d 263.  In this case, the state Supreme Court found that Zurich had an obligation to defend Dr. Vernon Gray even though he was sued for assault and battery and related intentional torts under a "comprehensive personal liability" policy. 

Gray was apparently a victim of "road rage." Gray narrowly avoided a collision with a car driven by John Jones. Jones responded by pulling over, and approaching Gray in a menacing manner.  Jones then opened Gray's car door, which is when Gray struck Jones.  Jones sued Gray.  Zurich, however, refused to defend Gray claiming that its intentional acts exclusion barred coverage.  Gray thus defended himself at trial, claiming self-defense, but the jury awarded only $6,000  (rejecting Jones' claim for punitives). 

Under these circumstances, the state Supreme Court determined that Zurich should have defended because there was a potential for coverage.  The Court found the insuring language uncertain, looked at the reasonable expectations of the insured and established the basic principles that the defense duty is broader than the duty to indemnify, among other seminal doctrines. 

Basic to this discussion, the Court determined that: "The defendant who acts in the belief or consciousness that he is causing an appreciable risk of harm to another may be negligent and if the risk is great his conduct may be characterized as reckless or wanton, but it is not classified as an intentional wrong.  In such cases the distinction between intent and negligence is obviously a matter of degree."  The Court continued,  "an act which under the traditional terminology of the law of torts is denominated "intentional" or "wilful" does not necessarily fall outside insurance coverage."

Yet in State Farm General Ins. Co. v. Frake, 2011 DJAR 10583 (July 13, 2011), the appellate court found that claims of negligence based on the insured's obviously volitional act, which resulted in unintentional injury was in fact so "intentional" as to not be an "accident," and released the insurer of any obligation to defend.  Admittedly the insuring language was written differently that the Zurich policy..   The State Farm "renters policy" provided that there was coverage for "damages because of bodily injury caused by an occurrence."  The coverage issue turned on the standard definition of occurrence as "an accident which results in bodily injury…during the policy year."  So the focus was whether the underlying defendant's conduct was an "accident."

The claim was brought against State Farm's insured, Patrick Frake, by his long time friend, John King.  Since childhood, King and Frake in a particularly inane form of "horseplay," which included hitting each other in the groin area.  At the time of the incident, King, Frake and two high school friends were  drinking and "horse-playing."  Horses would actually behave better.

While they were drunk, King tried to strike Frake in the groin, but Frake blocked the blow.  Then Frake retaliated by throwing his arm out to the side, hitting King directly in the groin.  King was later found to have sustained serious injury to his testicles. He sued Frake for several intentional torts, including negligence. The complaint asserted that King repeatedly asked  Frake to stop the "horseplay" and that Frake did not and instead struck a direct blow with a closed fist in a rather callous manner. Frake explained that he aimed not at the groin but at the abdomen, with a general open handed swing. He consistently stated (including at trial) that he had no intent to harm King or to even make bodily contact. 

Frake tendered the lawsuit to State Farm under his renter's policy, claiming that he did not intend to hit King directly in the groin, generally aimed for the abdomen and never used a closed fist.  State Farm refused to defend.  A week before trial, State Farm relented and agreed to defend under a reservation.  The case went to trial purely on  negligence claims. The jury found negligence and awarded King $450,000 in damages.

State Farm, however, refused to pay the judgment and Frake assigned all assignable claims to King in return for an agreement not to execute on the judgment.  State Farm brought a declaratory relief suit against both of them and Frake and King cross-complained.  Ultimately, the trial court decided summary judgment motions in favor of the insured.  The trial court was convinced by the definition of "accident" in State Farm Fire and Casualty v Superior Court (Wright) (2008) 164 Cal. App. 4th 317, which included instances where "an injury is an unexpected or unintended consequence of the insured's conduct."  Based on this, the court determined that there was a duty to defend where the insured asserted that he did not intend to injure.  Further, State Farm's investigation revealed extrinsic facts supporting the notion that King suffered an accidental injury. 

The appellate decision reversed the trial court and found no coverage relying in part on the recent California Supreme Court case of Delgado v. Int. Exch. of the Auto. Club (2009) 47 Cal. 4th 302 which found no coverage for an assault and battery claim where the insured had an unreasonable belief in self defense. 

Notwithstanding the Gray v. Zurich seminal decision, the Frake Appellate Court avoided all reference to that stalwart decision, but instead focused on the series of cases looking at whether any intentional acts which lead to an injury might be an "accident".  The Frake Court commented that "Our courts have repeatedly held that "the term ‘accident' does not apply to an act's consequences., but instead applies to the act itself." and further quoted the California Supreme Court in Delgado, "[a]n accident does not occur when the insured performs a deliberate act unless some additional, unexpected, independent, and unforeseen happening occurs that produces the damage."

Of course, this leaves the coverage decision turning on such abstractions as may occupy a theoretical physicist.  Were there any intervening events between the intentional or volitional action, and the resulting injury, such as would satisfy an insurer that the injury was fortuitous, an accident?  What if Frake's blow caused King to fall backwards and the injury included his head cracking on the ground? 

Indeed, it seems that Newton's law (for every action there is an equal and opposite reaction) has been injected into a coverage analysis!  As a matter of reality, one could likely argue there are always an infinite number of intervening acts or events between a defendant's first swing and the resulting injury to the plaintiff.  After all, Frake's drunken swing may have landed on the injured area because King drunkenly stumbled or fell into the swing, or  maybe Frake himself lost his footing: how can we ever know what single act is the direct cause to an unintended consequence?  The actual reality is that there was not one single act in any case. 

Perhaps the state Supreme Court can shed further light on this dilemma.  In the meantime, standing back, it is surprising that the appellate court determined that King's lawsuit, which went to trial on the sole claim that Frake was negligent, asserted no potentially covered claims, so that State Farm had no coverage obligations at all including the duty to defend!

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