In the past week an Uber driver in Kalamazoo, Michigan went on a shooting rampage between picking up customers. It is not farfetched to believe that at some point Uber may be the target of lawsuits filed by the estates of the various decedents for the actions of its driver. While it may seem like a stretch, when an employee’s intentional actions – or in the case of Uber, arguably an independent contractor – causes bodily injury or property damage, those intentional actions may give rise to negligent hiring or retention claims.
When such claims are brought, the question then becomes whether the employer’s commercial liability policy requires the insurance company to defend and indemnify the employer. Commercial policies typically provide that they apply to “bodily injury” and “property damage” only where the injury or damage is caused by an “occurrence.” The term “occurrence” is usually defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.”
Not surprisingly, there are two schools of thought on the issue of whether the negligent hiring and retention of an employee can constitute an “occurrence” in the context of a general liability policy issued to an employer in a situation where an employee commits an intentional act.
While the facts in the Uber tragedy have yet to be flushed out, the facts in Westfield Ins. Co. v Tech Dry, Inc., 336 F. 3d 503 (6th Cir. 2003) illustrate how the intentional actions of an employee can lead to negligent hiring and retention claims against an employer. In Tech Dry, an employee of a carpet cleaning company cleaned the carpet of a customer’s home. A few days later the employee broke into the customer’s home and murdered her. The customer’s estate filed a wrongful death action against the carpet cleaning company alleging that it was negligent in hiring and retaining the employee. The carpet cleaning company requested that its insurance company defend and indemnify it for the claims asserted in the wrongful death action. The insurance company denied coverage arguing that the negligent hiring and retention of the employee was not an “occurrence” under the employer’s insurance policy.
In applying Kentucky law and deciding in favor of coverage for Tech Dry, the court rationalized that even if the employer’s conduct in hiring and retaining the employee was intentional and the injury to the customer was foreseeable, an insurer cannot deny coverage on the grounds that the employer’s conduct was intentional if the insured, i.e., the employer, did not possess the requisite intent to cause injury. In other words, in Tech Dry, the question of whether a negligent hiring or retention claim constitutes an occurrence was analyzed from the standpoint of the insured.
In many jurisdictions, however, the result could have been completely the opposite. In denying the employer’s request to defend and indemnify, courts in several jurisdictions rationalize that, because the decision to hire and retain an employee is necessarily intentional, rather than accidental, the employer’s hiring decision would not constitute an occurrence.
Ohio courts follow the Tech Dry analysis and analyze coverage from the standpoint of the insured and in favor of coverage. It appears that Michigan courts also follow the Tech Dry analysis. Having protection of the insurance coverage it paid for is at least a glimmer of good news for Uber in the wake of this horrendous event.