No Insurance Coverage for Intentional Assault or False Imprisonment; Different Claims and Proof in Trial Court May Have Led to Different Result

In July 2009, the Colorado Court of Appeals held on an issue of first impression that under a commercial general liability policy an intentional assault by employee was not an “occurrence” which triggered coverage, even though the injury, from the perspective of the victim, may not have been “intended.” Mountain States Mutual Casualty Co. v. Hauser, ___P.3d ___, 2009 WL 2182600 (Colo. App. 2009). The case was brought by a former restaurant employee who had obtained a default judgment against the restaurant corporation (“policyholder”) for negligent hiring, negligent supervision and negligent retention of a manager who had allegedly assaulted her. The former employee had then sued the insurer, which sought and obtained a declaratory judgment that no coverage existed.

The Court of Appeals first analyzed the issues under Coverage A, Bodily Injury and Property Damage Liability. The court noted this provided indemnity coverage to the policyholder for sums it becomes legally obligated to pay as damages because of bodily injury to which the insurance applied. The insurance applied to “bodily injury” only if caused by an “occurrence.” Thus, the court analyzed whether a sexual assault by a restaurant manager who was negligently hired by the policyholder was an “occurrence.” The court held there was no “occurrence” because the conduct was not “accidental.”

The Court of Appeals then analyzed coverage under Coverage B, Personal and Advertising Injury Liability. Coverage B provides coverage for sums the insured becomes legally obligated to pay as damages because of personal and advertising injury to which the coverage applies. The policy defines “personal and advertising injury” as “injury, including consequential ‘bodily injury,’ resulting from ... [f]alse arrest, detention or imprisonment.” The plaintiffs had argued that the victim’s hiding in a restaurant bathroom during the events leading to her assault fit within this definition.

However, the Court of Appeals found the district court had not made a finding of false imprisonment, but only held the evidence supported claims of negligence, negligent hiring, supervision, and negligent retention against the policyholder. The Court of Appeals held that, because there was no finding of false imprisonment or damages awarded for that tort, the insurer need not indemnify for damages actually awarded. The ruling leaves open the question of whether an insurer might be liable for damages for false imprisonment awarded in a case which pleaded and proved both false imprisonment against the manager and respondeat superior liability for the policyholder.

Post by Wesley B. Howard, Esq.