A federal district court in Virginia recently issued divergent opinions – a day apart from one another – as to whether claims of negligent hiring/retention arising from intentional sexual/physical assaults constitute an “occurrence” under Virginia law. Lark v. Western Heritage Ins. Co., 2014 WL 5563909 (W.D. Va. Oct. 31, 2014); Scottsdale Ins. Co. v. Doe, 2014 WL 5497701 (W.D. Va. Oct. 30, 2014).
In Lark, the plaintiffs were allegedly assaulted by the insured’s employees outside the insured’s restaurant and filed separate declaratory judgment actions against the insurer seeking declarations determining the extent of coverage available under the policy. The declaratory judgment actions were removed and consolidated, and the insurer moved for summary judgment that it had no duty to defend or indemnify the insured, or, alternatively, that any indemnity obligation was limited to the policy’s assault and battery sublimit.
Granting the insurer’s motion for summary judgment in part and denying the motion for summary judgment in part, the court held the alleged assaults of the plaintiffs were not “occurrences” under the terms of the insured’s policy, even where the plaintiffs had attempted to couch such allegations in terms of negligence. The court relied on AES Corp. v. Steadfast Ins. Co., 725 S.E.2d 532 (Va. 2012), where the Virginia Supreme Court noted that “allegations of negligence are not synonymous with allegations of an accident” and held that “the natural or probable consequence of [an] intentional act is not an accident under Virginia law.” The court concluded that the injuries were clearly the “natural or probable” consequences of the intentional acts alleged in their complaints, and therefore could not be converted into “accidents” notwithstanding allegations of negligent training, hiring and retention. However, the court found that coverage did exist under the policy’s assault and battery endorsement, which provided coverage separate and apart from the policy’s general liability coverage, holding that each plaintiff would be entitled to recover up to the assault and battery coverage “per event” sublimit.
Doe involved a slightly different set of facts: parents of a minor child sued a summer camp and a camp counselor for sexual assault by the counselor. The camp’s insurer sought a declaration that it had no duty to defend the camp or the counselor, and the parties cross-moved for summary judgment. The insurer invoked AES Corp. to argue that the alleged negligent retention and negligent failure to report were not “occurrences,” as the injuries suffered by the minor child were the “natural or probable” consequences of the intentional acts. However, the court rejected the argument, holding that the parents’ claims for negligent retention and negligent failure to report were separate and apart from the intentional battery claims that could constitute “occurrences” under Virginia law.
The court further held that the policy’s Errors and Omissions Coverage would be generally implicated by the negligence claims, holding the exclusion for “injury arising out of a dishonest, fraudulent, malicious or criminal act by any insured” did not apply. The insurer had argued that the insured’s failure to report the allegations of abuse constituted a violation of Virginia law requiring camps to report allegations of abuse; however, the court noted that this law did not come into effect until four years after the insured learned of the abuse.