King v. Dallas Fire Insurance Company: Is There Coverage for Intentional Acts?
In the last few years, both state courts and federal courts interpreting Texas law have addressed whether a liability insurance policy provides coverage to an individual or entity for alleged negligent conduct resulting solely from intentional actions of a third-party. The Texas Supreme Court has not directly dealt with this issue; however, recently, the court granted a petition for review and heard arguments in King v. Dallas Fire Insurance Company, 27 S.W.3d 117 (Tex. App. - Houston [1st Dist.] 2000, pet. granted).
In King, the First District Court of Appeals in Houston held that the insurer, Dallas Fire, had no duty to defend an employer under a commercial general liability policy for claims of negligent hiring, training and supervision arising out of the injuries sustained by the plaintiff due to an assault by an employee. The court of appeals ultimately concluded that the plaintiff's claims against the employer did not allege an "occurrence" under the Dallas Fire policy. The court principally based its reasoning on a line of federal cases holding that, if the allegations against the employer are related to and interdependent on the employee's intentional conduct, no "occurrence" is stated against the employer. In essence, the court found that the employee's intentional conduct was imputed to the employer.
The King court also considered the effect of the "separation of insureds" clause in the analysis of whether the negligence claims against the principal or employer are covered. The court of appeals, following a Fifth Circuit decision, concluded that the "separation of insureds" clause did not affect its conclusion that there was no duty to defend the employer.
During oral argument, the supreme court explored the theory of concurrent causation and whether there can be more than one proximate cause of an injury. The court also inquired as to whether negligent hiring and assault are separate occurrences, and whether there was a distinction between direct and indirect causes of injury. While it is difficult to gauge how the supreme court will rule in this case, the court's decision could have a far-reaching impact on liability insurers since the underlying claims often involve sensitive subject matters leading to large exposures.