Intentional acts are NOT excluded by the commercial general liability (CGL) policy. Exclusion “2.a.” deletes coverage for only “Expected or Intended Injury,” not an expected or intended “Act.” An injury is the RESULT of an act; and only if the result is expected or intended, can the claim be excluded.
In support of this conclusion, the meaning of the word “accident” as used within the definition of “occurrence” refers to the outcome not the action leading to the outcome. If this were not the case, very few instances of “bodily injury” or “property damage” would ever be covered by the CGL.
Combine the legal definition of “accident” with the “expected or intended injury” exclusion and the intended breadth of the CGL’s protection is clear. In application, if the intentional action was expected to or intended to cause injury or damage, only then is such injury or damage NOT considered an accident and subject to the exclusion. Any approach to general liability coverage that applies a different view of the use of this exclusion/definition combination, as its logical conclusion, requires that the original action (act) itself be accidental before coverage applies.
As an example, consider a drywall contractor that misses the stud and instead drills a drywall screw into a water pipe (or electrical wiring or whatever). Six months after completing the job, the screw rusts away resulting in massive amounts of water damage. Is or should this be a covered completed operations “property damage” claim under the CGL?
Yes. Even though drilling in the screw was intentional; hitting the water pipe was accidental. The result of the intentional act is accidental damage which is covered by the policy. If the policy were not viewed and applied this way, the drywall contractor, in essence, would have had to accidentally drill the screw into the wall for coverage to apply, not just accidently drill it into the water pipe.
The difference is expectation and intent. The contractor intended to drill into the stud, but missed – an intentional act with an unexpected/unintended result. If, however, the drywall contractor drilled the screw into the water pipe on purpose following an argument with the GC, he obviously expects and intends some level of damage and any subsequent damage is excluded. The contractor intentionally drilled in a screw with the same result in both instances (water damage), but with differing original intents.
Misapplication of the Exclusion
Some insurance company claims adjusters apparently operate under the mistaken belief that the CGL does contain an “intentional acts” exclusion. A recent incident relayed to me from a professional friend evidenced this.
A pressure washing subcontractor was cleaning the exterior of a newly completed house in preparation for placing the house on the market. Following the cleaning process, the general contractor (GC) discovered that the chemicals used by the pressure washer severely marred and destroyed the appearance of several layers of bricks on one part of the house (not the entire house, just one part). The GC, of course, turned in a claim against the pressure washer requesting to have the bricks replaced.
You guessed it, the pressure washer’s insurance carrier denied the claim stating that the damage was the result of an intentional act (pressure washing the bricks with cleaning chemicals) and thus not “accidental.” The pressure washer was, understandably, livid. His question was the same as mine, if the carrier isn’t going to pay for damage caused by pressure washing because it’s an “intentional act,” why have the coverage (other than to satisfy a contract requirement)?
The chemicals applied were used for the purpose for which they were designed and the means of application were per instructions and industry standard. The pressure washer intended to clean the exterior of the house, but he did not intend the damage that resulted. Had the pressure washer used a chemical known to cause damage or knowingly acted in some manner such that injury or damage would be expected or intended; the denial would have been reasonable.
Does anyone agree with the carrier’s ruling? Can anyone say “bad faith?” (The carrier also denied coverage applying the “your work” exclusion (which is a discussion outside the scope of this article). That, too, is a fallacious argument as the damage was to bricks on the house which was someone else’s work (the mason’s), not the pressure washer’s.)
What is Excluded?
One court stated, “An intentional act exclusion precludes coverage only if the insured acts with specific intent to cause bodily harm or if the facts demonstrate that harm is substantially certain to result.” Two key phrases jump out, “specific intent” and “substantially certain.” A Florida court said, “We explained that an ‘occurrence,’ which is defined as an ‘accident,’ encompasses damage that is ‘neither expected nor intended from the standpoint of the insured.’”
Notice also that the phrase within the exclusion, “from the standpoint of the insured,” negates the “reasonable and prudent test” often applied to questions of negligence. The INSURED must reasonably expect or intend injury or damage for the exclusion to apply. This wording does not allow for any attempt to assert what someone else thinks is reasonable or was intended; only what the insured reasonably expected or intended.
Absent the insured’s specific intent to cause injury or damage or the substantial certainty that injury or damage will result, the unintended result of the insured’s actions meets the classical definition of an “accident” and is covered by the CGL. Remember, intentional injury or damage is excluded by the CGL; NOT an intentional act.
Actions can be intentional yet result in unintended injury or damage; such claims are covered by the CGL (See “Attacked in a Restaurant: The Insurance Implications of Assault and Battery“). Only when the injury or damage (result) is intended or expected does it no longer qualify as an “occurrence” or “accident.” Non-occurrences and non-accidents are excluded by the CGL policy.
Interesting coverage debates occur on several insurance-focused groups on LinkedIn. One debate several weeks ago involved an “auto-booting” company that placed a boot on the wrong vehicle. The vehicle owner (an attorney) sued the company for loss of use of the vehicle.
The insurance carrier denied the claim on the basis that there was no property damage. Well, the definition of “property damage” includes the loss of use of undamaged property; so that denial seems incorrect.
Several individuals partaking in this on-line debate asserted and held tightly to the idea that even though the loss met the policy definition of property damage, there is still no coverage because the insured’s act was intentional not accidental. The problem with this argument, as has been detailed here, there is no exclusion for an intentional action only for an expected or intentional injury.
If the contractor knew it was the wrong car and placed the boot out of spite, the resulting loss of use is intended “from the standpoint of the insured.” Once it moves away from a true “accident” to an intended injury or damage, coverage is excluded. But until it moves from unintentional to intentional, there is still coverage.
Based on the facts of the case as they were presented in the forum, the insured did not know it was the wrong car and was not being malicious in placing the boot. This was an intentional act with unintended injury.
However, the exclusion uses the conjunction “or” (see: “How to Read an Insurance Policy“). “Or” is an exclusive term meaning that if either of the conditions exists, there is no coverage (or coverage or whatever the particular section is intended to accomplish). Although the injury was not intended, the insured should reasonably expect that the owner of any car with one of its boots in place would lose the use of the vehicle.
Because the loss of use is expected by the insured, there may be no coverage available even though the target of the boot was unintentional. In effect, booting the wrong car is a business risk to which the boot placement company is exposed; and insurance is not generally intended to cover a business risk (See: “Six Reasons the Loss is Excluded“). Their business is to boot vehicles; if they boot the wrong one that’s a risk they take. Damaging a vehicle is a different story; the insured is not in the business of causing actual property damage.
Coverage is likely unavailable in this case, but not because of the intentional act. The loss will likely be excluded because of ability to foresee the loss of use inherent in the nature of the business.
When evaluating the CGL’s expected or intended injury exclusion in light of the entire policy (including the definition of “occurrence” and the legal definition of accident), remember it’s expectancy or intention that triggers the exclusion, not the act. Does the insured intend to cause injury to a particular person or entity? Should the insured reasonably expect his actions to cause injury or damage to another party? If the answer to both is “no,” then coverage exists.