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Policyholder Wins The "Artfully Drafted" Complaint Game
Coverage Owed: Just Because

Policyholder Wins The "Artfully Drafted" Complaint Game

What I'm about to say is not exactly a state secret buried at Langley. Plaintiff's lawyers, in cases involving intentional torts, often draft complaints to include allegations of negligence. Since the duty to defend is tied, at least, to the allegations in the complaint, their hope is that the insurer -- which must treat the allegations as true, even if groundless, etc. – will be forced by the negligence allegation to acknowledge a defense obligation.

Sometimes this works and sometimes it doesn't. In some cases, the allegations against the insured so clearly involve intentional conduct, that the court rejects the negligence allegations, despite the rule that the allegations in the complaint control. Essentially, the court is saying that it will not allow itself to be snookered into concluding that a defense is owed, when it knows the real story, and knows that the complaint was "artfully drafted" -- a term that some courts use – to trigger a defense.

There is strong Pennsylvania case law that rejects plaintiffs' efforts (and insureds' to capitalize on them) to so-call "plead into coverage." Essentially, Pennsylvania courts have looked at the situation and concluded – We see what's going on here. And not on our watch.

This is why I found this week's Pennsylvania Superior Court decision in D'Imperio v. Nationwide, No. 1474 EDA 2020 (Pa. Super. Ct. July 13, 2021) to be surprising (and confusing). The Pennsylvania appeals court, using what looks to be a very slender reed, allowed a plaintiff to get away with pleading into coverage.

Michael D'Imperio sought coverage from Nationwide, for a suit filed against him by Anthony DiBello, who alleged that D'Imperio, during a confrontation outside a club, shot him in the abdomen. 

In his complaint, DiBello included an assault and battery claim, alleging as follows: The intentional conduct of [Imperio] consists of, but is not limited to the following: attempting, by violence, to hurt the Plaintiff; b. firing a firearm at and striking Plaintiff in his body; c. recklessly endangering Plaintiff's life; d. acting in a violent manner; e. intentionally inflicting harm upon Plaintiff; and f. such other and further intentional acts that will be developed by future discovery in this case.
The complaint also included a negligence claim, alleging that D'Imperio "carelessly 'fired] a gun in the vicinity of a crowd of people; b. [created] a trap and/or nuisance and/or dangerous condition"

Putting aside procedural issues and how it got there, one of the issues before the Superior Court was whether the complaint alleged an accident/occurrence to trigger a defense for D'Imperio under his homeowner's policy issued by Nationwide. Nationwide's position was that it "strains common sense" that D'Imperio shot DiBello by accident when he aimed his gun at him and fired it.

The Superior Court turned to the state's not insignificant body of case that has addressed whether a complaint, involving what is obviously intentional conduct, can give rise to a defense, on the basis of allegations that the insured acted negligently. Pennsylvania case law abounds that, simply describing intentional conduct as negligent, does not make it so to trigger coverage. Thus, when allegations of negligent conduct strains common sense, Pennsylvania courts have not bought what was being offered. 

But that wasn't the result here. The court was not willing to conclude that the complaint contained artfully pleaded allegations. This appears to fly in the face of other Pennsylvania decisions. The decision is certainly not crystal clear. The court seemed to explain its decision this way: "The courts of this Commonwealth have discussed artful pleading in terms of the causes of action, not the factual allegations in the complaint." Here, as the court saw it, the negligence cause of action alleged negligent conduct. 

What I think the court is saying is that you cannot artfully plead a "negligence" cause of action when the allegations at issue are intentional. But you can artfully plead a negligence cause of action by artfully pleading negligent conduct. In essence, the court in D'Imperio explained to plaintiffs how they can now artfully plead an artfully pleaded complaint.    

Again, the decision in D'Imperio could use more explanation. At a minimum, it seems to muddy what had been clear waters in Pennsylvania when it comes to an insurer's duty to defend an artfully drafted complaint. 

Coverage Owed: Just Because

I have been saying this for a very long time -- a general liability policy does not provide coverage for damages for "bodily injury" or "property damage." When I speak these words, sometimes people are taken aback. What do you mean? That's exactly what a CGL policy provides coverage for.

But, in fact, a general liability policy provides coverage for damages "because of" "bodily injury" or "property damage." In other words, while it is often said, in conversational terms, that a CGL policy provides coverage for damages for "bodily injury" or "property damage," the coverage is in fact for damages "because of" BI or PD. 

And several courts of late have used this difference in language as the basis for concluding that CGL coverage is owed, despite an insurer maintaining otherwise.

Earlier this week, a California appeals court pointed to the use of "because of," in the CGL insuring agreement, as a basis to reverse a trial court and conclude that coverage was owed.

At issue in Stewart v. USAA General Indemnity Company, No. D076992 (Cal. Ct. App. July 13, 2021) was coverage for Joseph Stewart, under the liability section of a renter's policy issued by USAA, for his apartment in San Diego. 

A grease fire took place in Stewart's kitchen. USAA concluded that its cause was accidental and provided coverage – presumably his first party losses.

But then it got more complex. The owner of the apartment filed an unlawful detainer complaint against Stewart, alleging that he caused the fire and damage to the apartment, thereby committing a non-curable breach of the lease. The owner sought damages for each day that Stewart remained in possession. Stewart sought a defense from USAA. The insurer declined – three times.

Judgment was entered against Stewart in the unlawful detainer action. The owner retook possession and a judgment was entered against Stewart in the amount of $6,469.33. Stewart offered USAA an opportunity to reimburse him the costs of his defense, but it again denied coverage. Stewart sued USAA.    

As USAA saw it, the unlawful detainer action did not seek damages for bodily injury or property damage. The trial court agreed.

But the appeals court reversed, making much of the fact that the policy provided coverage "because of" property damage. And the damages at issue, in the unlawful detainer action, were "because of "property damage." The court explained its reasoning:

"There is no doubt the unlawful detainer action would not have occurred if not for the accidental fire: the fire triggered the breach of lease and the ensuing unlawful detainer action. The phrase 'because of' in the policy denotes a causal connection. The policy in this case does not define the phrase 'because of,' and it introduces an ambiguity as to whether the unlawful detainer action or even the damages in that action were because of property damage caused by an occurrence (the accidental fire, treated as an occurrence by USAA). . . . Under the unique circumstances of this case (an underlying occurrence that caused the landlord to file the unlawful detainer action, a suit for damages) there is a plausible construction of the policy that triggered."

Add Stewart v. USAA to the list of courts that have concluded that coverage is owed – just because.

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