When a third party sues an employer for the negligent hiring, retention, and supervision of an employee who intentionally injured that third party, does the suit allege an “occurrence” under the employer’s commercial general liability policy? The Supreme Court finds that it can, and the answer turns on whether the injury can be considered “accidental.”
Here, Appellants Ledesma & Meyer Construction Company, Inc., (“L&M”) contracted with the San Bernadino Unified School District to manage a construction project with a middle school. L&M hired Donald Hecht and assigned him to a project. A student at the middle school, Jane Doe, sued in state court alleging Hecht sexually abused her. Jane Doe brought a cause of action against L&M for negligently hiring, retaining, and supervising Hecht.
L&M tendered the defense to its insurers, Liberty Surplus Insurance Corporation and Liberty Insurance Underwriters, Inc. (collectively “Liberty”). Liberty defended L&M under a reservation of rights and sought declaratory relief in federal court, contending it had no obligation to defend or indemnify L&M. The commercial general liability policy at issue provided coverage for “bodily injury” caused by an “occurrence.” “Occurrence” was defined as “an accident.” The district court granted summary judgment to Liberty, finding Doe’s injury was not caused by an occurrence because the negligent hiring, retention and supervision were acts antecedent to the sexual molestation, and were too attenuated from the injury-causing conduct by Hecht. The question for the Supreme Court was whether Liberty had a duty to defend L&M against Doe’s lawsuit.
The Supreme Court noted the distinction between an intentional act of molestation and merely negligent supervision. The court stated that L&M may be covered even though Hecht’s intentional acts were beyond the scope of Liberty’s policy, and found that L&M’s allegedly negligent hiring, retention, and supervision were independently tortious acts which formed the basis of its claim against Liberty for defense and indemnity.
In an assault and battery, it is the use of force on another that is closely connected to the resulting injury. To look to acts within the causal chain that are antecedent to and more remote from the assaultive conduct would render legal responsibilities too uncertain. The Supreme Court found that Hecht’s molestation was the act directly responsible for the injury, while L&M’s negligence in hiring, retaining, and supervising him was an indirect cause.
Since an injury may be the result of more than one cause, a finder of fact could conclude that the causal connection between L&M’s alleged negligence and the injury inflicted by Hecht was close enough to justify the imposition of liability on L&M. L&M’s acts must be considered the starting point of the sequence of events leading to Doe’s molestation. L&M does not rely on any event preceding its own negligence to establish potential coverage.
The Supreme Court further found that even though the hiring, retention, and supervision of Hecht may have been deliberate acts by L&M, the molestation of Doe could be considered an unexpected, independent, and unforeseen happening that produced the damage from L&M’s point of view.
Finally, the Supreme Court recognized that insurance does not generally cover intentionally inflicted injuries. However, the public policy against insurance for one’s own intentional sexual misconduct does not bar liability coverage for those whose mere negligence contributed to the acts of abuse. In such cases, there is no overriding policy reason why a person injured by sexual abuse should be denied compensation from insurance coverage purchased by the negligent facilitator.
To find that L&M does not have a duty to defend L&M would leave employers without coverage for claims of negligent hiring, retention, or supervision whenever the employee’s conduct is deliberate. Such a result would be inconsistent with California law, which recognizes the cause of action even when the employee acted intentionally.
Liberty Surplus Insurance vs. Ledesma stands for the proposition that, absent an applicable exclusion, employers may expect coverage for claims of negligent hiring, retention or supervision even when the hired employee commits an intentional act.
[Opinion modified on July 25, 2018. Holding not affected by modification.]
For a copy of the complete decision, see: Liberty Surplus Ins. Corp. v. Ledesma & Meyer Construction Co., Inc