May 10, 2012
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Illinois Appellate Court Holds That Insurer Has No Duty to
Defend for Insured’s Intentional Actions, Even Though
Allegations Labeled as “Negligence”
On April 20, 2012, an Illinois Appellate Court upheld a lower court’s decision holding that State Farm Fire and Casualty Company (“State Farm”) had no duty to defend its insured, Thomas Young (“Young”), in an underlying lawsuit for claims of battery, assault, and negligence. The court held that the State Farm’s duty to defend was not triggered because Young’s actions, although labeled as negligence in the complaint, were all intentional and could not be considered “accidents.”
In the underlying lawsuit, Young was sued by the estate of Gina Dominick after Young invited her over to share some heroin he had purchased. Gina later died from a combination of overdosing on heroin and being beaten by Young. The evidence in the underlying suit showed that Young failed to call 911, take Gina to a hospital, or seek medical attention, and that he subsequently carried Gina’s body to her car, which he drove to a local library parking lot and then abandoned. Gina’s estate sought damages for wrongful death, pain and suffering, and burial expenses based on Young’s assault and battery of Gina, but also for “carelessly and negligently fail[ing] to take [Gina] to a hospital.”
Young’s parents had a homeowners insurance policy and a personal liability umbrella policy, both with State Farm. The homeowners policy provided coverage for suits “for damages because of bodily injury or property damage . . . caused by an occurrence,” and defined “occurrence as “an accident, including exposure to conditions which results in . . . bodily injury.” The policy also contained an overlapping coverage exclusion for bodily injury or property damage “(1) which is either expected or intended by the insured; or (2) which is the result of willful and malicious acts of the insured.” The umbrella policy contained similar provisions regarding coverage for an “accident.”
While recognizing that an insurer’s duty to defend arises when “it is clear from the face of the underlying complaint” that the allegations state facts that bring a case within, or potentially within, the policy’s coverage, the court found that merely labeling Young’s actions as “negligence” in the complaint could not hide the fact that Young’s actions were obviously intentional, and not an “accident” as contemplated by the policies. The court noted that accident has been defined by other courts as an “unforeseen occurrence, usually . . . an undesigned sudden or unexpected event of an inflictive or unfortunate character.” While Young argued that his failure to call 911 when Gina was in trouble was “negligence,” the court held that the allegations supported “only one conclusion, that the defendant chose not to seek help for Gina.” The court noted that Young allowed Gina to die at his home and then moved her body in an attempt to distance himself from the crime; thus, Gina’s injuries and death were a “natural and ordinary consequence” of Young’s failure to get help, which could not be deemed an “accident.” Furthermore, the assault and battery counts of the complaint, which alleged that Young beat Gina with his fists, further suggested that his actions regarding Gina’s injuries and death were not accidental. Because none of Gina’s injuries resulted from an “accident,” the court held that the allegations in the complaint did not fall within the language of the policies, and that State Farm had no duty to defend.
Finally, the court noted that even if Young’s intentional conduct somehow fell within the definition of an “accident” under the policies, the intentional conduct exclusions would still preclude coverage. The court found that even if Young had not planned or intended to injure Gina in the manner in which he did, her injuries were of such a nature that they should have been reasonably anticipated by Young. In other words, even though Young’s failure to call 911 was labeled as negligence, the court found it clear that his failure to act was intentional, and that Gina’s injuries and death were an expected result of his intentional failure to act. Accordingly, the exclusions precluded State Farm from having to provide coverage for the underlying lawsuit.
For more information on this topic, please contact Jeremy Kerman,
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May 1, 2012
Illinois Federal Court Holds Arbitrator Decides Class Action
Status in First Instance
In light of the 2010 United States Supreme Court decision in Stolt-
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April 23, 2012
9th Circuit Leaves Open the Possibility that Class Action
Arbitration Waiver Could Be Unconscionable
In AT&T Mobility LLC v. Concepcion, the United States Supreme Court held that the Federal Arbitration Act preempted California state law classifying class action arbitration waivers in consumer contracts as substantively unconscionable. Undeterred by this decision, in Coneff, et al. v. AT&T Corp., 2012 WL 887598 (9th Cir. 2012) plaintiffs comprised of current or former customers of AT&T filed a putative class action case against AT&T alleging causes of action for unjust enrichment, breach of contract, violations of the Federal Communications Act, and various state consumer protection statutes. The plaintiffs were residents of 8 states, including Washington. Each had entered into a service contract with AT&T containing an arbitration agreement which required individual arbitration of all disputes and claims, and prohibited both class actions and class arbitrations.
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March 27, 2012
FTC Issues Its Final Report on Protecting Consumer Privacy
On March 26, 2012, the Federal Trade Commission ("FTC"), the nation's chief privacy policy and enforcement agency, issued its final report setting forth "best practices" for businesses regarding the collection and use of American consumers' personal data. See http://ftc.gov/os/2012/03/120326privacyreport.pdf. In the report, "Protecting Consumer Privacy in an Era of Rapid Change: Recommendations For Businesses and Policymakers," the FTC also recommends that Congress consider enacting general privacy legislation, data security and breach notification legislation, and data broker legislation. The final privacy report expands on a preliminary staff report the FTC issued in December 2010. The FTC notes that it received over 450 comments from businesses, privacy advocates, and consumers on the draft report.
