Litigation Newsletter

Increasingly, plaintiff’s attorneys have been seeking to obtain insurance coverage for claims in a novel variety of ways.  Sometimes, in cases where a serious injury has occurred, they seek extensive discovery regarding the policy and take the position that a greater amount of coverage is available than is reflected on the declarations page.  Another tactic is to seek coverage for occurrences that are excluded by clear policy language, either by obfuscating the real issues in the case or by urging a change in public policy.  Brian W. Smith, our litigation supervisor, recently received a favorable ruling on this latter type of attack on insurance policies.

In the case of Martin Jones v. Penn America Insurance Company, the plaintiff sought to have a judgment obtained in an underlying personal injury action enforced against Penn America.  The plaintiff was injured after an employee of the insured drinking establishment intentionally assaulted the plaintiff, who had become involved in an altercation with another patron.  The defense of the employee and the bar was declined based upon an assault and battery exclusion endorsement, which reads as follows:

In consideration of the premium charged it is hereby understood and agreed that this policy will not provide coverage, meaning indemnification or defense costs for damages alleged or claimed for:

“Bodily Injury”, “Property Damage”< Personal Injury, Advertising Injury, Medical Payments or any other damages resulting from assault and battery or physical altercations that occur in, on, near or away from the insured’s premises;

1)     Whether or not caused by, at the instigation of, or with the direct or indirect involvement of the insured, the insured’s employees, patrons or other persons in, on, near or away from insured’s premises, or

2)     Whether or not caused by or arising out of the insured’s failure to properly supervise or keep the insured’s premises in a safe condition, or

3)     Whether or not caused by or arising out of any insured’s act or omission in connection with the prevention or suppression of the assault and battery or physical altercation, including, but not limited to, negligent hiring, training and/or supervision.

Neither the insured nor the employee sought counsel to represent them, and the plaintiff was awarded several hundred thousand dollars at a hearing in damages.  The lawsuit seeking enforcement of the judgment followed.

Attorney Smith filed a motion for summary judgment asserting that the exclusion was clear and unambiguous, and that Penn America was entitled to judgment as a matter of law.  In response, opposing counsel used both obfuscation and public policy arguments in an attempt to defeat the motion.

Plaintiff’s counsel’s first argument was that the exclusion endorsement was not part of the policy issued to the insured.  A substantial amount of time was spent educating the judge at oral argument about the cross-references on the declarations pages.  A less patient jurist may have been persuaded by the plaintiff’s tactic, but the judge came to understand that opposing counsel was misreading the policy.

The plaintiff conceded at oral argument that the language of the endorsement was clear and unambiguous.  However, two positions were then presented in an effort to derail the summary judgment.  The first was that the type of exclusion involved ion the case was against public policy.  Unfortunately for the plaintiff, Connecticut public policy on insurance coverage for intentional acts is very clear.  Language similar to that quoted above has previously been upheld on the Superior Court level.

The second argument was that the state’s public policy should be changed to disallow the assault and battery exclusion, at least as it is contained in general liability policies for drinking establishments.  The plaintiff presented no cases or treatises to support this proposed change.  The judge rejected all of the plaintiff’s arguments and granted our motion.  The plaintiff’s bar will continue to originate new ideas to obtain coverage, not only in grey areas, but in situations where the policy exclusion is clear and unambiguous.  We highly recommend a proactive stance by companies that decline coverage in pending litigation matters by filing their own declaratory judgment action.

If a lawsuit has been filed, and defense and indemnification is declined after a full review of the facts and circumstances, filing a declaratory judgment on the matter serves at least three purposes.  First, it provides companies with a ruling as to their obligations under the policy.  Second, if the court decides there is either an duty to defend and/or indemnify, the defense of the suit can be controlled.  (Note that the nature and extent of the damages for a personal injury case cannot be contested on an action to enforce a judgment.  A company is deemed to have waived the right to contest those issues when it declined to defend and indemnify the underlying suit.)  Finally, taking a proactive stance can potentially mitigate against punitive damages on a bad faith claim, since the company actively sought to clarify its rights under the policy.