June 15th, 2018

California Supreme Court holds that commercial general liability policy covers employer for negligent hiring, retention, and supervision of employee who intentionally injures third party

By, Mark A. Boyle, Esq.

In Liberty Surplus Insurance Corporation vs. Ledesma & Meyer Construction Company, Inc. (L & M), the California Supreme Court found that the standard commercial general liability (“CGL”) policy provides coverage when a third-party sues an employer for negligent hiring, retention, and supervision of an employee who intentionally injured that third-party.

L & M was sued by a third-party who alleged that they have been abused by an employee of L & M.  Specifically, L & M was sued for negligence by hiring, retaining, and supervising the employee that conducted the abuse.

The legal issue involved in the case was whether under the CGL policy issued to L & M, the claims constituted and “occurrence“ and “accident“ within the meaning of the CGL policy.  The CGL policy provided coverage for “bodily injury” caused by an “occurrence.”  The policy defines an occurrence as an “accident.”

The court found coverage even though the acts of one of the employees was clearly intentional, specifically noting:

Because liability insurance is a contract between an insurer and insured, and the policy is read in light of the parties’ expectations, the relevant viewpoint is of the insured rather than the injured party.

Thus, California, consistent with most jurisdictions, held that coverage is available under a CGL policy to an insured as long as the damages are not subjectively intended or expected from the standpoint of the insured.

In this respect, California law is in conformity with the overwhelming majority of jurisdictions who have decided this issue.  See Carylye King vs. Dallas Fire Ins. Co., 85 S.W. 3d 185 (Tex. 2002); Lamar Homes, Inc. v Mid-Continent Cas. Co., 242 S.W. 3d 1 (Tex. 2007); State Farm Fire and Casualty Co. v CTC Development Corp., 720 So.2d 1072 (Fla. 1998);  George Koikos v Travelers Ins. Co., 849 So. 2d 263 (Fla. 2003); and Travelers Indemnity Co. v PCR Inc., 889 So. 2d 779 (Fla. 2004) All of these cases hold that bodily injury and property damage claims are covered under the CGL policy unless the damage was intended or expected from the standpoint of the insured.  This is true even if the insured intend the conduct giving rise to liability.

The California ruling affirms the broad coverage which was intended to be provided under the standard commercial general liability policy.

 

 

 

 

 

 

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