A federal court in Georgia held that a conversion – whether intentional or negligent – does not constitute an “accident” under a CGL policy, and thus is not an “occurrence.” Spivey v. Am. Cas. Co. of Reading, Pa., 2015 WL 5157755 (S.D. Ga. Sept. 1, 2015).
The underlying plaintiffs, former contractors, sued the insured, the present contractor, for conversion of traffic control equipment that they had left at a project site. The insured sought coverage from its liability insurer, which denied coverage and refused to provide a defense. The underlying plaintiffs obtained a consent judgment against, and assignment of rights from, the insured. In their capacity as assignees, the underlying plaintiffs then sued the liability insurer, alleging bad faith denial of coverage and breach of a statutory duty to indemnify a claim. The underlying plaintiffs argued that the insurer wrongfully refused to cover the potentially covered negligent conversion claim against its insured and that negligent conversion would be an “occurrence.” The insurer moved to dismiss on the theory that the event for which the underlying plaintiffs sought coverage – conversion – does not constitute an “occurrence.”
The policy provided that the insurer would pay for covered property damage caused by an “occurrence,” which the policy defines, in pertinent part, as an “accident.” The district court granted the insurer’s motion to dismiss, finding that conversion – whether intentional or negligent – does not constitute an “accident” and is therefore not an “occurrence” under the policy. The district court found that the underlying complaint alleged a “willful and malicious” conversion and did not seek a remedy for the unintentional consequences of an intentional act so as to qualify as an “accident.” The district court also noted that even if the alleged conversion were based in negligence, negligent conversion is still not an “accident” under Georgia law.