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Vol. 7 - Issue 8
November 7, 2018

 

Must Read For Insurers That Use A&B Exclusions – Court Finds It Ambiguous (For A Reason You Might Not Think)

I have no statistical proof of this, but, anecdotally, I can say with confidence that insurers win a lot more cases involving the Assault and Battery exclusion than they lose. Insurers tend to use broad A&B exclusions that cover both the act of the assault and battery, as well as claims against the insured for negligent hiring, negligent training, negligent supervision, etc. In other words, the exclusions preclude coverage for assault and battery and failing to prevent the assault and battery.

Given this, I read with interest the Nevada federal court’s decision in Atain Specialty Ins. Co. v. Reno Cab Co., No. 15-406 (D. Nev. Sept. 14, 2018) as the court found against the insurer in its attempt to apply an A&B exclusion. It is a serious decision for insurers that handle claims that, by their nature, invoke the A&B exclusion.

The case involves the potential availability of coverage, under a general liability policy, for a dispute over a cab fare that resulted in a death. Claims for wrongful death, battery and negligent training and supervision were asserted against Reno Cab Company. The cab company’s insurer, Atain Specialty, asserted that no coverage was owed, for defense or indemnity, on the basis of an assault and battery exclusion, which provided as follows:

This insurance does not apply under COVERAGE A BODILY INJURY AND PROPERTY DAMAGE LIABILITY and COVERAGE B PERSONAL AND ADVERTISING INJURY LIABILITY arising from:

1. Assault and Battery committed by any Insured, any employee of any Insured or any other person;
2. The failure to suppress or prevent Assault and Battery by any person in 1. above;
3. Any Assault or Battery resulting from or allegedly related to the negligent hiring, supervision, or training of any employee of the Insured; or
4. Assault or Battery, whether or not caused by or arising out of negligent, reckless or wanton conduct of the Insured, the Insured's employees, patrons or other persons lawfully or otherwise on, at or near the premises owned or occupied by the Insureds, or by any other person.

Reno Cab argued that the A&B exclusion was ambiguous, as to whether it applied to self-defense, since the Expected or Intended Exclusion contained a self-defense exception: “‘Bodily injury’ or ‘property damage’ expected or intended from the standpoint of the insured. This exclusion does not apply to ‘bodily injury’ resulting from the use of reasonable force to protect persons or property.”

The court rejected the insurer’s argument, among others, that exclusions operate independently of each other and should be read separately. The court sided with Reno Cab: “The Court agrees with Reno Cab that the Assault and Battery Exclusion conflicts with the Expected or Intended Injury Exclusion and creates ambiguity. An assault or battery is an intentional act, which brings it within the scope of both the Assault and Battery Exclusion and the Expected or Intended Injury Exclusion, yet only the Expected or Intended Injury Exclusion includes a carve-out for self-defense. Accepting Atain’s contention that self-defense necessarily constitutes an assault and battery, this inconsistency leads to two competing interpretations of the Policy: on the one hand, the Policy covers self-defense characterized as an intentional act, and on the other hand, the Policy excludes coverage for self-defense characterized as an assault and battery. An insurance policy is considered ambiguous if it creates multiple reasonable expectations of coverage as drafted. In light of this ambiguity, the Court must construe the Assault and Battery Exclusion in favor of coverage.”

This is a serious decision for insurers that handle claims that, by their nature, invoke the A&B exclusion. The reason being that the self-defense exception, contained in the Expected or Intended exclusion, is likely contained in their policies too. It is a standard exclusion in the ISO commercial general liability policy. Thus, the rationale for Reno Cab -- that the combination of an Expected or Intended Exclusion with a self-defense exception, and an A&B exclusion with no self-defense exception, is ambiguous -- is open to wide-spread applicability. Insurers that handle claims, that invoke the A&B exclusion, would be well-served to consider a possible response in their policies.

 

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