“Assault And Battery” Exclusion Not Applicable To Negligent Hiring And Supervision Allegations
December, 2004
The New Jersey appellate court holds that an “assault and battery” exclusion does not relieve an insurer of its duty to defend and indemnify in connection with a negligent hiring and supervision count, even though the complaint also alleges excluded counts. L.C.S., Inc. v. Lexington Ins. Co., 853 A.D.2d 974 (N.J. Super. Ct. App. Div. 2004).
Facts
In L.C.S., employees of D’Jais Bar injured a patron, Thomas Cosgrove, while ejecting him from the bar. Cosgrove filed a three-count complaint against D’Jais, Larry Fore, a bouncer, and two other employees. Count I alleged that Fore assaulted Cosgrove. Count II, pled in the alternative, alleged that the three employees negligently injured Cosgrove. Count III alleged negligent hiring, training and supervision against the bar.
Lexington Insurance Company, D’Jais’ insurer, notified L.C.S., D’Jais’ corporate parent, that it was denying coverage based on the following “assault and battery” exclusion:
This insurance does not apply to “Bodily Injury,” “Property Damage,” “Personal Injury,” “Advertising Injury,” or “Medical Expenses” arising out of assault and battery or out of any act or omission in connection with the prevention or suppression of such acts, whether caused by or at the instigation of or direction of the Insured, his employees, patrons or other persons.
L.C.S. hired counsel at its own expense to defend the Cosgrove complaint. During trial, the parties settled Count II for $25,000. The remaining counts were dismissed.
L.C.S. then sued Lexington for breach of contract for refusing to defend the negligence counts of the Cosgrove complaint. L.C.S. submitted the certification of its counsel in the underlying action that he settled Count II because Cosgrove’s testimony was equivocal concerning whether he was intentionally assaulted or negligently injured.
The trial court found that the “assault and battery” exclusion did not bar coverage for the negligent hiring, training and supervision count, and awarded L.C.S. half its defense costs. The Appellate Division affirmed.
Analysis
The appellate court, noting that no New Jersey court has previously construed Lexington’s “assault and battery” exclusion, held that the exclusion did not clearly apply to the negligent hiring, training and supervision allegations. The exclusion must plainly indicate to the average reader that there is no coverage for negligent acts no matter who commits an assault and battery. The court cited the following exclusion as one it found unambiguously excludes coverage for negligent hiring and supervision:
In consideration of the premium charge, it is agreed that NO coverage of any kind (including but not limited to cost of defense) is covered by this policy for Bodily Injury and/or Property Damage arising out of or caused in whole or in part by an assault/battery. Further NO coverage is provided if the underlying operative facts constitute an assault and/or battery irrespective of whether the claim alleges negligent hiring, supervision and/or retention against the insured or any other negligent action.
Stafford v. T.H.E. Ins. Co., 706 A.2d 785 (N.J. Super. Ct. App. Div. 1998) (emphasis supplied).
The court rejected Lexington’s argument that the exclusion’s “arising out of” language encompassed the negligence counts. There was no “clear nexus” between the assault alleged in Count I and the negligent hiring, training and supervision alleged in Count III, as required to trigger the exclusion. If a claim is stated in two conflicting theories, one of which invokes coverage and the other which does not, the insurer must defend and may do so under a reservation of rights.
The court also approved the trial court’s apportionment of only 50% of defense costs to Lexington, even though L.C.S.’s trial counsel could not allocate his time between the negligence and assault claims. Although following the general rule that an insurer’s duty to reimburse defense costs is limited to covered allegations if apportionment between covered and non-covered claims is possible, New Jersey courts recognize that only “rarely” can this allocation be achieved with scientific certainty. Lack of certainty, however, “does not justify imposing all of the costs on the insurer by default."
Learning Point:
Insurers that issue policies with “assault and battery” exclusions similar to Lexington’s should be aware that intentional tort allegations alone may not be sufficient to trigger the exclusion. Such exclusions should clearly exclude coverage for an assault or battery no matter how the underlying complaint is pled. ?
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