Insurance Only Covers Contingent, Unexpected or Unintentional Losses
Because they live in the house with their parents children are insured’s of a homeowners policy. As insureds they are entitled to defense and indemnity for their negligent conduct. However, for coverage to apply the acts of the minors must be contingent, unknown, unexpected or unintentional. When they intentionally cause damage no liability insurance policy is designed to provide the child or his or her parents with coverage.
In Plum Properties, LLC v. North Carolina Farm Bureau Mutual Insurance Company, Inc., Sabaheta Selak, Matej Selak aka Matek Selak, Delisa L. Sparks, aka Delisa L. Thompson aka Delisa L. Tucker, Jeremy Tucker, No. COA16-1078, Court Of Appeals Of North Carolina, (August 1, 2017) Plum Properties, LLC (“Plaintiff”) appealed the order granting Defendants’ motion for summary judgment on Plaintiff’s declaratory judgment action.
This declaratory judgment action arose from an underlying claim brought by Plaintiff against Defendants, including M. Selak and J. Tucker (collectively “minor insureds”), for allegedly vandalizing and breaking into properties owned by Plaintiff.
During the late night and early morning hours between November 5 and 21, 2010, Plaintiff claims that the minor insureds vandalized four houses on Orville Drive in High Point, North Carolina (“Properties”) which are owned or managed by Plaintiff. The vandalism allegedly occurred on three separate occasions, causing approximately $58,000.00 in damages. In addition to the claims made against the minor insureds for “intentionally, willfully and maliciously” damaging and destroying the Properties, Plaintiff also brought claims against Sabaheta Selak, the mother of M. Selak, and Delisa Sparks, the mother of J. Tucker (collectively “parent insureds”), for negligence and negligent supervision of their minor children.
The parent insureds have homeowners’ insurance policies that contain the same relevant provisions for purposes of determining whether coverage exists for the damage caused by the minor insureds that contain specific exclusion clauses to the personal liability coverage where coverage is excluded if the property damage that occurs “is intended or may be reasonably expected to result from the intentional acts or omissions or criminal acts or omissions of one or more ‘insured’ persons.” The exclusion applies regardless of whether the insured is charged with or convicted of a crime.
On July 29, 2015, Plaintiff brought this declaratory judgment action against Defendant Insurance Company seeking a declaration that the alleged damages arising out of the underlying claim are covered under the Policies issued by Defendant Insurance Company. The trial court granted Defendant Insurance Company’s motion for summary judgment on the declaratory judgment action concluding that the damages sustained by Plaintiff were excluded from the insurance coverage of the Policies.
Summary judgment exists to eliminate the need for a trial when the only questions involved are questions of law. An issue is deemed genuine if it can be proven by substantial evidence and a fact is material where it constitutes or establishes a material element of the claim.
To determine whether to grant summary judgment North Carolina courts apply the “comparison test” which requires that the insured’s policy and the complaint be read side-by-side to determine whether the events alleged are covered or excluded by the policy. In applying this test, the question is not whether some interpretation of the facts as alleged could possibly bring the injury within the coverage provided by the insurance policy but rather, assuming the facts as alleged to be true, whether the insurance policy covers that injury.
Where an insurance policy’s language is clear and unambiguous, North Carolina courts, like courts across the country, will enforce the policy as written. When interpreting the language of a policy, non-technical words are given their ordinary meaning unless the evidence shows that the parties intended the words to have a specific technical meaning.
North Carolina courts must enforce the policy as the parties have made it and may not, under the guise of interpreting an ambiguous provision, remake the policy and impose liability upon the insurance company which it did not assume and for which the policyholder did not pay.
In the Policies at issue here, personal liability coverage extended to cover claims brought against an insured for property damage resulting from an “occurrence.” An occurrence is described by the Polices as “an accident.” Based on the nontechnical definition of “accident,” an “occurrence” is limited to events that are not expected or intended from the point of view of the insured. While acknowledging that it is possible to perceive ambiguity in determining the type of events that constitute an accident under a commonsense reading of the language it strains logic to do so. Accordingly, where the potentially damaging effects of an insured’s intentional actions can be anticipated by the insured, there is no “occurrence.”
The question properly raised by the trial court is not whether some interpretation of the facts could possibly bring Plaintiff’s injury within the coverage of the Policies but whether the facts, as alleged in the complaint and taken as true, are enough to bring the injury within the Policies’ coverage.
It strains logic to conjure ambiguity into the Policies’ language as applied to the facts at hand. The damages arising from the alleged vandalism of the Properties by the minor insureds do not qualify as unexpected or unintended from the viewpoint of the minor insureds.
In the present Policies, Section II(E) specifically excludes from coverage any property damage that “is intended or may be reasonably expected to result from the intentional acts or omissions . . . of one or more ‘insured’ persons.”
As children of policyholders residing in the policyholders’ households, both M. Selak and J. Tucker qualify as insured persons covered by the Policies. Accordingly, because the alleged damage to Plaintiff’s Properties occurred due to these minor insureds’ intentional, willful, and malicious acts, the damage is excluded from coverage under the Policies by Section II(E).
Under the Policies, the intentional acts by the minor insureds that allegedly damaged Plaintiff’s properties do not qualify as an ‘occurrence’ because the damage was not accidental, and are, therefore, not covered by the Policies’ personal liability coverage. Furthermore, intentional acts of the minor insureds are specifically excluded from coverage by Section II(E) of the Policies. Accordingly, the damages allegedly caused by the minor insureds were not covered by the parent insureds’ Defendant Insurance Company Policies.
It is a pleasure to read a court opinion that reads an insurance policy as written and refuses to stretch the language of the policy to find an ambiguity. As the court stated, it strains logic to conjure ambiguity into simple language that excludes intentional acts. The damages arising from vandalism can be nothing other than intentional. The actions of the minor insureds do not qualify as unexpected or unintended from the viewpoint of the minor insureds and cannot be an insured against event.
This article and all of the blog posts on this site digests and summarize cases published by courts of the various states and the United States. The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 49 years in the insurance business. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
Look to National Underwriter Company for the new Zalma Insurance Claims Library, at www.nationalunderwriter.com/ZalmaLibrary The new books are Insurance Law, Mold Claims Coverage Guide, Construction Defects Coverage Guide and Insurance Claims: A Comprehensive Guide The American Bar Association, Tort & Insurance Practice Section has published Mr. Zalma’s book “The Insurance Fraud Deskbook” available at http://shop.americanbar.org/eBus/Store/ProductDetails.aspx?productId=214624, or 800-285-2221 which is presently available and “Diminution of Value Damages” available at http://shop.americanbar.org/eBus/Store/ProductDetails.aspx?productId=203226972 Mr. Zalma’s three new e-books were recently added and are available at http://www.zalma.com/zalmabooks.html
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