A federal court in Alabama denied an insured’s motion to dismiss an insurer’s declaratory judgment complaint where it found that the “misuse of funds” constitutes “deliberate business decisions” and is not an “occurrence.” Acadia Ins. Co. v. SouthernPointe Grp., Inc., 2017 WL 5890350 (N.D. Ala. Nov. 29, 2017).

The insured had a CGL policy providing insurance for “bodily injury or property damage … caused by an occurrence.” The insured had an agreement with a developer to develop restaurants. The developer contributed significant capital, but the relationship quickly soured, and the developer sued the insured asserting claims for breach of contract, fraud and breach of fiduciary duty arising out of the insured’s alleged misuse of funds contributed by the developer. The insurer defended the insured subject to a reservation of rights and sought a declaratory judgment on the grounds that the alleged misuse of funds was not an “occurrence” and that damages due to negligence were economic losses not covered by the policy. The insured filed a motion to dismiss the insurer’s complaint on the basis that the underlying complaint did not include any allegations bearing on its intent to damage the developer’s property, and that the developer “backed out of the parties’ agreement unexpectedly, creating an unforeseen circumstance” meeting the policy’s definition of “occurrence,” which was an “accident, including continuous or repeated exposure to substantially the same general harmful conditions.”

The court disagreed, finding that even if there were no specific evidence of intent, the insurer’s complaint alleged that the insured took specific actions solely for its benefit and that the underlying complaint alleged violations of Alabama commercial laws. Accordingly, the court found that the lawsuit arose from “deliberate business decisions” which do not qualify as “accidental conduct” to meet the policy definition of “occurrence.”