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Criminal Convictions, Equitable Estoppel, and Intentional Acts Exclusions in New York Insurance Law

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IMG_0297-300x225The law aspires to be fair, though it may not always appear that way.  Often that means enforcing fair procedures to try to reach a just outcome.  A recent New York Insurance Law case makes this point.  State Farm Fire and Casualty Company v. Chauncey McCabe, 2018 NY Slip. Op.04416 (3rd Dept., June 14, 2018), distills criminal law through the equitable doctrine of collateral estoppel to determine whether an intentional acts exclusion of a New York Homeowner’s Insurance Policy bars coverage for a liability claim for personal injuries arising from what appears to be an intentional act.  Though you may not agree with the decision, the way it is reached is fair, to all involved.

In the case, two insureds made a claim to be defended and indemnified under their Homeowner’s Policy of Insurance against claims that their negligence caused another person serious personal injury.  A Girlfriend alleged she hit her head on a cement wall after she tripped over a hazard left on the floor of the house her Boyfriend lived in with his mother, and the Boyfriend did not help her get medical attention. The Girlfriend sued them both, and they each made a claim for liability coverage.

The Insurance Company alleged there was no coverage for the Boyfriend because the loss was not an accident and the policy provided liability coverage for an “occurrence,” which was defined, basically, as an accident.  It also alleged that a policy exclusion applied, which bars coverage for injuries caused by willful or malicious acts of an insured.

The Boyfriend had been convicted of intentionally assaulting the Girlfriend in this same incident.  The Girlfriend did not remember what exactly occurred because she evidently had been so badly hurt.  The Boyfriend testified at the Criminal Trial that the Girlfriend was hurt when she tripped and fell over something on the floor and hit her head on the wall. The Boyfriend was convicted and the Girlfriend used the Boyfriend’s testimony as the basis for her negligence claims in the Personal Injury Action.

So that it would not have to defend or indemnify the Boyfriend in the Personal Injury Action, the Insurance Company started a declaratory judgement action in which it asked the court to find that there was no coverage under the policy for the Boyfriend.

The Insurance Company argued that the Boyfriend’s criminal conviction for assault meant that it already was determined that he intentionally injured the Girlfriend, and there could be no coverage for that intentional act; and, that since the Boyfriend had a full opportunity, and every reason, at his Criminal Trial to try to establish that he did not intentionally hurt the Girlfriend, he was Collaterally Estopped from challenging that finding in the Declaratory Judgement Action.

The trial court in the Declaratory Judgement Action accepted the Insurance Company’s argument, held that the Insurance Policy did not provide coverage to the Boyfriend against the Girlfriend’s claims in the Personal Injury Action, and granted the Insurance Company’s motion for summary judgement.  That decision, however, was overturned on appeal; and this is where the element of fairness comes in.

Collateral Estoppel was defined, in State Farm Fire and Casualty Company v. Chauncey McCabe, supra, as:

Collateral estoppel is an equitable doctrine “grounded on concepts of fairness” (D’Arata v New York Cent. Mut. Fire Ins. Co., 76 NY2d 659, 664 [1990]). The two requirements of the doctrine are “that the identical issue was necessarily decided in the prior action and is decisive in the present action,” and that “the party to be precluded from relitigating an issue must have had a full and fair opportunity to contest the prior determination” (id.). “[I]n appropriate situations, an issue decided in a criminal proceeding may be given preclusive effect in a subsequent civil action” (id.; see Allstate Ins. Co. v Zuk, 78 NY2d at 45).

 

In order to convict the Boyfriend of assault, the jury in the Criminal Trial had to determine whether the Boyfriend slammed and choked the Girlfriend.  It did not have to decide whether the Girlfriend suffered additional injuries after the assault and whether those injuries were caused by his negligence. As the Appellate Court held, there was at least a factual basis to determine that some of the Girlfriend’s injuries were due to the Boyfriend’s negligence, and therefore due to an occurrence as defined by the policy and that coverage was not barred by the policy’s intentional acts exclusion.  The Insurance Company had not shown otherwise, because the jury in the Criminal Trial, upon which it relied, had not decided those issues. The Boyfriend therefore should have a chance to prove this, and he was not collaterally estopped from doing so.

This case points out that fair outcomes are based on fair procedures which deserve to be followed closely as the facts and applicable law are scrutinized. There are no guaranties that the Insurance Company will have to defend or indemnify the Boyfriend or that the Girlfriend will be able to prove that she suffered any injuries due to the Boyfriend’s negligence rather than his intentional acts.  This decision did not end the Declaratory Judgement Action.  It is fair, though, that every person be given one full and fair opportunity to defend themselves against the specific allegations on which their liability rests; two might be too many, but none is just not enough.

 

Go raibh maith agat.

 

Tar ar ais. 

 

Ray Grasing