The Importance of Intentional Act Endorsements to Your Liability Policy

11.20.2014

When companies purchase Commercial General Liability (“CGL”) policies, they have a sense of security.  They believe that it will cover them in the event of nearly any incident – whether negligent or intentional.  In fact, there is a common misbelief, even among attorneys, that so long as a lawsuit couches claims in terms of negligence – or even contains the term “negligent” – the insurer must get involved.  These misconceptions were recently dispelled by the District Court for the Western District of Virginia, and highlighting the importance of intentional-act endorsements.

In Lark v. Western Heritage Insurance Co.,  2014 WL 5563909 (W.D. Va. 2014) several employees of the Schooners restaurant assaulted two men in the parking lot causing serious injuries, including severely broken bones.  The two men sued for assault and battery, along with various negligence claims, including negligent training, negligent hiring, negligent retention, and simple negligence.  Schooner’s CGL policy protects against “bodily injury,” however excludes “‘bodily injury’ . . . [that is] expected or intended from the standpoint of the insured.”  In other words, intentional torts – like assault and battery – are not covered under Schooners general CGL policy.  The Court held that the general CGL policy did not afford coverage for the attacks, despite the plaintiff’s attempt to invoke insurance coverage through the claims of negligence specifically noting that “[t]he intentional actions of the Schooners employees, which are not covered by the general policy, cannot be converted into accidents which would be covered, merely by the manner in which the plaintiffs have pleaded their claims.”

In addition to their general CGL policy, Schooners had purchased two “Assault and Battery Endorsements” which provides limited coverage for “all sums [that the insured] become[s] legally obligated to pay as ‘damages’ because of . . . ‘bodily injury’ . . . to any person  arising out of an Assault and/or Battery.”  The endorsement provided for $100,000 in coverage per event and $300,000 in the aggregate.  While the general CGL policy did not cover these intentional attacks, the Court held that the exact purpose for this endorsement was the type of actions that occurred at Schooners and required the insurer to pay.

The final legal battle was whether the attacks on the two men constituted a single “occurrence” – thereby limiting the insurer’s obligation to $100,000 – or if each beating was a separate occurrence expanding the insurer’s exposure to $200,000.  Although the attacks occurred at the same time and were seemingly related – resulting in the parking lot whereby Schooner’s employees ejected a third member of the two victim’s party from the bar – each set of circumstances was separate, and each attack constituted a separate act or series of acts committed by the Schooner’s employees. 

While employers do not typically expect their employees to inflict beatings on patrons in the parking lot, in certain circumstances or businesses, such as nightclubs – especially where large amounts of alcohol are involved – it occurs.  The Lark case highlights the importance of risk-evaluation when purchasing your CGL.  You cannot expect every incident or claim – especially intentional – to be covered.  Additionally, you cannot expect your insurer to be implicated simply because a crafty attorney couches the claims as “negligent” when they were in fact they are excluded from coverage.  If there are doubts about the sufficiency of your CGL, legal audits are recommended to assess the sufficiency of coverage and recommendation of potential endorsements, which is critical.