Texas Supreme Court Holds That Insurer Has Duty to Defend Employer for Negligent Hiring, Training and Supervision of an Employee
September, 2002
In King v. Dallas Fire Ins. Co., 2002 Tex. LEXIS 141(Tex. Aug. 29, 2002), the Supreme Court of Texas found that King’s negligent hiring, training and supervision of an employee constituted an “occurrence” under a Dallas Fire Insurance Company (“Dallas Fire”) commercial general liability (“CGL”) policy, thereby imposing a duty to defend King.
Facts
Carlyle King owns Tiedown Construction Company, which removes excess materials from building sites. Dallas Fire insures King under a CGL policy. Jankowiak, an employee of another company who was working on the same construction site as King, claimed that Carlos Lopez, one of King’s employee’s, assaulted him. According to Jankowiak’s petition, after confronting Lopez about some missing and damaged electrical wiring, Lopez attacked him by kicking Jankowiak in the face. As a result of Lopez’s actions, Jankowiak sustained serious injuries and sued King. Jankowiak alleges that King is liable for his injuries on the basis of respondeat superior and because of King’s negligent hiring, supervision and training of Lopez. Specifically, Jankowiak alleges that King was negligent in failing to run a criminal background check, in failing to assess whether Lopez had a propensity for violence, or in failing to provide training on how to peacefully and responsibly handle situations that arise on the construction site.
Dallas Fire refused to defend King, claiming that Jankowiak failed to allege an “occurrence” within the meaning of the CGL policy. King brought this action to determine whether Dallas Fire was obligated to defend King. The trial court held that Dallas Fire did not have a duty to defend King and the appellate court affirmed.
Analysis
The sole question presented to the Supreme Court of Texas was whether, under the facts of this case, there was an “occurrence” triggering Dallas Fire’s duty to defend. Dallas Fire’s policy covers “bodily injury” or “property damage” “caused by an ‘occurrence’ that takes place in the ‘coverage territory.’” The policy further defines “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” Dallas Fire’s position is that there was no “occurrence” because the actions of King’s employee were intentional. King argues that he did not personally intend to injure Jankowiak and that his only potential role in Jankowiak’s injury was negligently hiring, training or supervising Lopez. As a result, King argues that Jankowiak’s injuries were accidental, resulting in an “occurrence” under the policy and triggering the duty to defend.
The first step taken by the Supreme Court of Texas in assessing whether there was an “occurrence” was to determine from whose standpoint to view the incident: the insured’s, the victim’s or the actor’s perspectives. Based on the language, Texas case law, and the history of the CGL policy, the court concluded that the insured’s standpoint controls in determining whether there has been an “occurrence” invoking the duty to defend. Id.
The court noted that the policy contains a separation-of-insureds provision that creates separate insurance policies for King and for Lopez, King’s employee. Therefore, the court analyzed the facts as if King were the only insured. Dallas Fire’s argument in opposition was that the employee’s intent should control in determining whether there was a duty to defend King. In other words, because King’s employee’s conduct was intentional, there was no “occurrence” under the policy and no duty to defend. The court rejected Dallas Fire’s argument because it ignores the policy language that delineates between separate insureds and ignores the intended injury exclusion, which excludes coverage for injuries that were intentional from the standpoint of the insured. The court noted that this exclusion would have no purpose if all intentional injuries were excluded from coverage at the outset because they would not qualify as “occurrences.”
The court found further support for its conclusion that the event should be viewed from the insured’s perspective in its prior decisions addressing this issue in the first-party context. The cases define coverage based on the insured’s view of the injury-causing incident and not from the actor’s perspective. The court noted that other jurisdictions are split on whether an employer’s negligent hiring, training and supervision is an “occurrence” when an employee’s intentional conduct caused the injury.
The court also found support for its conclusion in the evolution of the CGL policy. The CGL policy was modified in 1986 so that courts would not be forced to construe the definition of “occurrence” as if it were an exclusion; rather, the 1986 revision created an express exclusion for intentional acts from the standpoint of the insured.
The court rejected Dallas Fire’s interpretation of “occurrence,” stating that it is too narrow and would eliminate the need for other standard exclusions customarily included in CGL policies. For example, the court explained that under Dallas Fire’s construction of “occurrence,” there would be no need for exclusions covering assault and battery or sexual misconduct claims.
Viewing the matter from King’s standpoint, the court determined that Jankowiak’s allegations constitute an “occurrence” and Dallas Fire had a duty to defend.
Learning Point:
An employer may be held liable for negligent hiring, training and supervision based on its employee’s intentional acts. However, the perspective from which the court views the incident is instrumental in determining whether an insurer has a duty to defend. In King, the court viewed the injury-causing event as an “occurrence,” because -- from the employer’s perspective--the act was unintentional. The policy’s separation-of-insureds provision also supported this outcome because the court determined whether there had been an “occurrence” as if the employer had been the only insured.
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