Opinion ID: 3009785
Heading Depth: 1
Heading Rank: 4

Heading: New Jersey Law Before Morton.

Text: A. Atlantic Employers Ins. Co. v. Tots & Toddlers PreSchool Day Care Center, Inc.0 In Atlantic Employers, parents of children who had allegedly been sexually abused sued the owners and operators of a day care center where the abuse purportedly took place. The company that insured the center then brought a declaratory judgment action to determine its obligation to defend or indemnify the owners for any recovery the plaintiffs might win in their personal injury suits based upon negligence and intentional tort. The day care center's insurance policy insured against damage resulting from an occurrence. An occurrence included injuries or damage that was neither expected nor intended by the insured. Atlantic Employers, 571 A.2d at 303. The policy also contained an exclusion for violations of penal statutes or ordinances. The Appellate Division first noted the general rule that coverage does exist . . . 'for the unintended results of an intentional act, but not for damages assessed because of an injury intended to be inflicted.' Id. (citation omitted). The court stated: 0 571 A.2d 300 (N.J. Super. Ct. App. Div.), cert. denied, 584 A.2d 218 (N.J. 1990). 19 There seems to be no dispute that if, . . . Robert Knighton sexually molested the children, then he had the requisite level of intent to be found guilty of sexual molestation, based upon the criminal statutes of this State. But appellants insist that this does not necessarily mean that he intended the damages or injuries incurred by the children as a result of such actions. . . . Further, they insist that the existence of such intent cannot automatically be imputed to the other insureds under the policy so as to exclude coverage. . . . We reject this position. Id. The court then examined cases from other jurisdictions in order to analyze the insureds' argument in context with developing law. The court noted that some jurisdictions employed a subjective test in determining insurance coverage under these circumstances, and some rely upon an objective test. The court concluded that public policy mandated an objective approach. As a matter of public policy and logic we conclude that the better rule warrants application of the objective approach. A subjective test suggests that it is possible to molest a child and not cause some kind of injury, an unacceptable conclusion. . . . It is simply against public policy to indemnify a person for a loss incurred as a result of his[/her] own willful wrongdoing. Id. at 304. 0 B. Prudential Property & Casualty Ins. Co. v. Karlinski Within a year and a half of Atlantic Employers, the Appellate Division decided Karlinski. There, insured's 13 year old son (James) had engaged in a prearranged fight with a 14 year old (Mark) in which Mark had fallen and suffered a broken hip. 0 598 A.2d 918 (N.J. Super. Ct. App. Div. 1991). 20 The court was asked to determine if a homeowner's policy obligated the plaintiff insurer to defend and indemnify the defendant. The policy excluded coverage for 'bodily injury . . . which is expected or intended by the insured.' Karlinski, 598 A.2d at 919. The motion court granted the insurer's motion for summary judgment noting, that the son of the insured 'instigated the fight and threw the first blow and started the fight. As far as I am concerned, it is intentional conduct and the coverage doesn't apply.' Id. The motion judge also concluded that a broken 'leg' [Mark actually suffered a broken hip] was not an extraordinary consequence of the fight. Id. On appeal the court aptly noted, [t]his appeal requires that we again explore the frequently visited but still unclearly charted area of liability coverage for intentional torts which produce unintended results. Id. The court went on to observe: Our review of New Jersey authorities satisfies us that, . . . it is difficult to ascertain a clear weight of authority on the subject of liability insurance coverage for unintended results of intentional acts. Differing combinations of variables, such as the language of the exclusion clause, the nature of the harm and its relationship to the intentional act, and the availability of relief to the injured party, appear to influence the extent to which our decisions have inquired into the nature of the intent. Id. at 921. The court then stated: we hold that, when a coverage exclusion is expressed in terms of bodily injury expected or intended by the insured, and where the intentional act does not have an inherent probability of causing the degree of injury actually inflicted, a factual inquiry into 21 the actual intent of the actor to cause that injury is necessary. Id. Thus, after Karlinski, a fact finder did not have to inquire into the actual (i.e. subjective) intent of the insured unless the damage that resulted from the insured's actions was not inherently probable. Accordingly, absent this improbability of harm, the appropriate inquiry was the insured's objective intent. C. Voorhees v. Preferred Mutual Ins. Co.0 In Voorhees, a parent was sued for statements she had made at a public meeting questioning the competency of her child's teacher. The teacher claimed she had suffered emotional distress and mental anguish as a result of the parent's conduct. The teacher alleged that the parent had acted willfully, deliberately, recklessly and negligently, in making false accusations that had damaged the teacher professionally, and subjected her to public ridicule. Voorhees, 607 A.2d at 1257. Medical evidence established that the emotional distress the teacher complained of had resulted in 'an undue amount of physical complaints,' including 'headaches, stomach pains, nausea, . . . [and] body pains.' Id. at 1258. The parent had a homeowner's policy that provided coverage for liability arising from bodily injury caused by an occurrence. The policy defined an occurrence as an accident, and excluded coverage for bodily injury intentionally caused by the insured. The insurer relied upon this language and 0 607 A.2d 1255 (N.J. 1992). 22 refused to defend the insured against the teacher's suit, asserting that the claims were based on the insured's intentional act and that the complaint sought damages for a personal rather than a bodily injury. The parent eventually sued her carrier for damages resulting from its refusal to provide a defense and indemnify her. Both parties moved for summary judgment. The trial court granted the insurer's motion ruling that the complaint did not allege the kind of bodily injury that would be covered under the policy. A divided panel of the Appellate division reversed. The New Jersey Supreme Court noted that the duty to defend under the policy was not triggered absent a potentiallycoverable occurrence. Id. at 1262. In assessing whether the insured's statements constituted a potentially coverable occurrence, the court first held that the accidental nature of an occurrence is determined by analyzing whether the alleged wrongdoer intended or expected to cause an injury. Id. at 1264. As to what constitutes an intent to injure, the court noted that the general trend in the law appeared to require an inquiry into the actor's subjective intent to cause injury. We adhere to the prevalent New Jersey rule and hold that the accidental nature of an occurrence is determined by analyzing whether the alleged wrongdoer intended or expected to cause an injury. If not, then the resulting injury is accidental, even if the act that caused the injury was intentional. That interpretation prevents those who intentionally cause harm from unjustly benefitting from insurance coverage while providing injured victims with the greatest chance of compensation consistent with the need to deter wrong-doing. It also accords 23 with an insured's objectively-reasonable expectation of coverage for unintentionally-caused harm. Even if the operative question is the intent to injure rather than to act, the question of what constitutes an intent to injure remains. The key issue is whether the court must find a subjective intent to injure, or whether it can presume an intent to injure from the objective circumstances. In that regard, our inquiry parallels that taken in interpreting policy exclusions for intentional acts. Those exclusions preclude coverage for injuries expected or intended by the insured. Case law interpreting those policy exclusions, in addition to that interpreting the definition of occurrence, is thus relevant. The general trend appears to require an inquiry into the actor's subjective intent to cause injury. Even when the actions in question seem foolhardy and reckless, the courts have mandated an inquiry into the actor's subjective intent to cause injury. Id. at 1264. However, the court recognized that: [w]hen the actions are particularly reprehensible, the intent to injure can be presumed from the act without an inquiry into the actor's subjective intent to injure. That objective approach focuses on the likelihood that an injury will result from an actor's behavior rather than on the wrongdoer's subjective state of mind. Id. at 1265 (citing Atlantic Employers, supra). The Voorhees court reasoned that the insured's actions were a far cry from the type of egregious behavior that justified an objective approach in Atlantic Employers. The court held that [a]bsent exceptional circumstances that objectively establish the insured's intent to injure, the insured's subjective intent to injure must govern. Id. While the court felt that there was little evidence that the 24 insured subjectively intended or expected to injure the teacher, the court never had to address this question because the plaintiff had also alleged that the insured had acted negligently. The allegation of negligence presupposed the absence of a subjective intent to injure and stated a claim for a potentially coverable occurrence thus triggering the insurer's duty to defend. See id. Accordingly, the court affirmed plaintiff's award of summary judgment. 0 D. SL Industries, Inc. v. American Motorists Ins. Co. In SL Industries, an employee had filed suit against his employer alleging age discrimination and common law fraud as a result of the employer eliminating his position. The employee sought recovery for the alleged bodily injury that resulted. The employer was insured under a policy in which the insurer agreed to defend and indemnify the employer for all sums resulting from a bodily injury caused by an occurrence. Occurrence was defined as an accident . . . which results in bodily injury . . . neither expected nor intended from the standpoint of the insured. SL Industries, 607 A.2d at 1269-70. The employer settled the suit and then brought a declaratory judgment action against its insurer to establish its right to indemnification. The Law Division granted the insurer summary judgment, but the Appellate Division reversed, holding that although intended harm was not covered under the policy, the policy did provide coverage for the unforeseen results of 0 607 A.2d 1266 (N.J. 1992). 25 intentional conduct. The court then remanded the case to the Law Division to determine whether the employee's emotional distress had been intended or whether it was foreseeable. On appeal, the New Jersey Supreme Court had to determine if the general intent to injure that is inherent in a claim of fraud necessarily incorporates the intent to cause the specific injury (emotional distress), or whether proof of a subjective intent to cause the specific injury is required. Id. at 1277-1279. The court began its analysis of the required intent by examining the differing approaches taken by earlier cases. Our courts have taken different approaches to the question of how specifically the insured must have intended the resulting injury. Employing the Lyons test some courts have held that a subjective intent to injure ends the inquiry and precludes coverage. Under that approach, if there is a subjective intent to injure then any injury that results from the action will be deemed intentional, even if the injury is different from or greater than that intended. . . .0 On the other hand, some courts have indicated that to preclude coverage if the injury that actually occurred was not a probable outcome of the wrongful act is unfair. [citing Prudential Property & Casualty Ins. Co. v. Karlinski] . . . . However, in those circumstances in which the facts indicate that the acts in which the insured engaged were unlikely to result in the degree or type of injury that in fact occurred, an inquiry into the subjective intent to cause the resulting injury is in order. A third approach is even more likely to lead to coverage. In Hanover Ins. Group v. Cameron, the court rejected the insurance 0 The test derives its name from Lyons v. Hartford Ins. Group, 310 A.2d 485, 488-89 (N.J. Super. Ct. App. Div. 1973). 26 company's argument that to preclude coverage only the intent to harm need be demonstrated. The court indicated that intent would only be found when the actual consequences that resulted from the act were intended, or when the actor was substantially certain they would result. To determine which approach to adopt, we refer to the general principles underlying the interpretation of insurance-policy provisions involving intentional conduct. The Lyons test . . . precludes coverage in some cases in which an insured could reasonably expect coverage. When the injury caused significantly exceeds the injury intended or expected and is an improbable consequence of the wrongful act that caused it, then it is hard to characterize the injury as truly intentional. The injury, from the standpoint of the insured, is accidental, and could thus be deemed an occurrence. Moreover, if the tortfeasor did not intend or expect to cause the resulting harm, denying coverage will not deter the harmful conduct. In that case, there is no policy justification for denying the victim the possibility of additional compensation. As the Karlinski court noted, precluding coverage even if the actual harm far exceed[s] the consequences which might reasonably be expected by the insured . . . diminishes the injured party's realistic possibility of recovery more than it impacts upon the insured tortfeasor. On the other hand, an approach allowing coverage whenever the adverse consequences intended by the tortfeasor did not precisely match the actual consequences of their wrongful actions undermines the basic policy against indemnifying wrongdoers. We believe the Karlinski test presents the most reasonable approach. . . . Assuming the wrongdoer subjectively intends or expects to cause some sort of injury, that intent will generally preclude coverage. If there is evidence that the extent of the injuries was improbable, however, then the court must inquire as to whether the insured subjectively intended or expected to cause that injury. Lacking that intent, the injury 27 was accidental and coverage will be provided. Id. at 1277-78 (citations omitted). Accordingly, the court affirmed the Appellate Division's judgment remanding the case to the Law Division to determine whether the employee's emotional distress had been a probable outcome of the insured's general intent to injure, and if not, whether the insured subjectively had intended to cause the employee's actual injuries. See id. at 1279. V. Morton Int'l, Inc. v. General Accident Ins. Co.0 In Morton, the New Jersey Supreme Court had to apply the evolving law of occurrence based insurance policies to injuries to the environment. There, the insured, Morton International, sue_ 0 629 A.2d 831 (N.J. 1993), cert. denied, 114 S.Ct. 2764 (1994). 28