Opinion ID: 1297320
Heading Depth: 1
Heading Rank: 4

Heading: Whether Objective or Subjective Standard Applies [1]

Text: The Maryland Casualty and Central National policies provide for coverage for personal injury and bodily damage caused by or arising out of an occurrence, which is defined as an accident or happening or event or a continuous or repeated exposure to conditions which unexpectedly and unintentionally results in personal injury, property damage .... Clerk's Papers (Appellant) vol. 1, at 448, 466, 495, 519. The dispute focuses on whether expectation is determined by a subjective or objective standard. The Court of Appeals ruled that a subjective standard applies, relying upon Rodriguez v. Williams, 107 Wn.2d 381, 729 P.2d 627 (1986). We agree. We note at the outset that courts in other jurisdictions which have considered this issue in the context of claims for coverage for damage resulting from pollution have split on the question whether the unexpected and unintended requirement is determined by a subjective or an objective standard. Some courts hold a subjective standard applies. E.g., Broderick Inv. Co. v. Hartford Accident & Indem. Co., 954 F.2d 601, 606 (10th Cir.), cert. denied, 121 L.Ed.2d 133 (1992); Hatco Corp. v. W.R. Grace & Co.  Conn., 801 F. Supp. 1334 (D.N.J. 1992). Other courts hold that an objective standard applies. E.g., Sylvester Bros. Dev. Co. v. Great Cent. Ins. Co., 480 N.W.2d 368 (Minn. Ct. App.), review denied (Mar. 26, 1992); Lane Elec. Coop., Inc. v. Federated Rural Elec. Ins. Corp., 114 Or. App. 156, 834 P.2d 502, review denied, 314 Or. 727, 843 P.2d 454 (1992). Similarly, comment is split. Commentators state as general rules that expectation and intendment are judged by an objective reasonable man standard, Barry R. Ostrager & Thomas R. Newman, Insurance Coverage Disputes § 7.03[c] (4th ed. 1991), and, in contrast, that most courts require an element of subjectivity as opposed to the objective reasonable person standard, Thomas A. Gordon & Roger Westendorf, Liability Coverage for Toxic Tort, Hazardous Waste Disposal and Other Pollution Exposures, 25 Idaho L. Rev. 567 (1988-89). [4-6] We apply Washington law. Construction of an insurance policy is a question of law for the courts, the policy is construed as a whole, and the policy `should be given a fair, reasonable, and sensible construction as would be given to the contract by the average person purchasing insurance.' Grange Ins. Co. v. Brosseau, 113 Wn.2d 91, 95, 776 P.2d 123 (1989) (quoting Sears v. Grange Ins. Ass'n, 111 Wn.2d 636, 638, 762 P.2d 1141 (1988)). Undefined terms should be given their plain, ordinary, and popular meaning. Boeing Co. v. Aetna Cas. & Sur. Co., 113 Wn.2d 869, 881, 784 P.2d 507, 87 A.L.R.4th 405 (1990). The language in standard form policies is interpreted in accord with the understanding of the average purchaser even if the insured is a large corporation with company counsel. Boeing, at 882-83. [7, 8] The policies provide that an occurrence is covered which unexpectedly and unintentionally results in damage. Queen City Farms, at 854. The policies do not define the term unexpectedly, nor do they contain language expressly indicating whether a subjective or objective standard applies. The plain, ordinary, and popular meaning of the term unexpected may be said to involve state of mind, but that does not resolve the inquiry whose state of mind  the insured's, or a reasonable person's, as the Court of Appeals noted. Queen City Farms, at 855. However, the average purchaser of insurance would understand that the policy language provides for coverage for damage resulting from most acts of ordinary negligence. As the Court of Appeals in this case recognized, an objective standard is inconsistent with insurance coverage for damage resulting from ordinary negligence. Thus, the driver who intentionally backs a car up, but does so negligently into the path of a vehicle having the right of way, has acted intentionally in a manner where it can be said that objectively an accident may occur. The average purchaser of insurance would reasonably understand from the policy language that coverage was provided under the occurrence clause. We recognized in Rodriguez the difficulty that results if an objective standard were to apply to the unexpected and unintended requirement in Rodriguez. There, this court was faced with the question whether incest was within the scope of a homeowner's insurance policy exclusion for personal injuries expected or intended by the insured. The court rejected the insurer's argument that objectively if the injury could be expected as the result of an intended act, then it would fall within the exclusion, reasoning that [w]hile doubtlessly the average purchaser of insurance would believe that incest would harm a child, the policy specifically states that the insured must expect or intend harm. Thus, the policy language itself is inconsistent with a blanket objective person standard, and the policy language must control. Moreover, if an objective standard is used, virtually no intentional act would ever be covered. Intentional acts which result in injury generally can be expected to result in injury. An objective standard, especially provided after the fact, would seem to render meaningless the plain language providing for coverage for certain intentional acts. (Italics ours.) Rodriguez, at 386. In light of public policy considerations, the court held that it did not matter whether the insured subjectively intended the harm, because intent would be found as a matter of law. Nonetheless, the reasoning in the opinion emphasized above is sound. Because the average purchaser of insurance would understand that coverage is provided for ordinary acts of negligence, the more reasonable construction of the unexpected and unintended requirement is that it is determined under a subjective standard. We recognize that some courts have employed an analysis requiring some higher degree of foreseeability than the reasonable foreseeability applicable to ordinary negligence. E.g., Carter Lk. v. Aetna Cas. & Sur. Co., 604 F.2d 1052, 1057 (8th Cir.1979) (substantial probability). The insurers urge a test of whether damage was more likely than not to occur; they maintain such a standard will resolve the problem of coverage for ordinary negligence. We do not find this argument persuasive. Despite the insurers' claim that an objective standard applies, the policy language simply does not set forth such a standard. Nothing in the occurrence clause says that an objective standard applies, nor does it hint at any objective standard which requires some heightened degree of foreseeability in applying an objective standard of expectation. As QCF correctly notes, if the insurers wanted an objective standard to apply, they could easily have drafted language to that effect. See Aetna Cas. & Sur. Co. v. Dichtl, 78 Ill. App.3d 970, 398 N.E.2d 582 (1979). [2] We conclude the policy language is at the least ambiguous as to whether an objective or a subjective standard applies. Unresolved ambiguities are resolved against the drafter-insurer and in favor of the insured. Greer v. Northwestern Nat'l Ins. Co., 109 Wn.2d 191, 201, 743 P.2d 1244 (1987). Under this rule, a subjective standard applies, as the insured has offered this reasonable construction of the policy language. Finally, many of the cases relied upon by the insurers concern the meaning of the term accident, and not specifically the issue whether expectation of harm should be determined under an objective or subjective standard. The determination of what constitutes an accident, i.e., whether injury or damage has resulted from an accident, is not dispositive on the standard for expectation of the damages. Thus, this court's holding in Roller v. Stonewall Ins. Co., 115 Wn.2d 679, 801 P.2d 207 (1990), that whether an accident has occurred is an objective determination, does not control the question whether the expectation of injury or damage is to be decided under an objective or subjective standard. Some of the cases relied upon by the insurers involve the rule that an accident is an unusual, unexpected and unforeseen happening, and that where the insured acts deliberately, no accident occurs unless there is an additional unexpected, independent and unforeseen happening which caused the harm. E.g., Grange Ins. Co. v. Brosseau, 113 Wn.2d 91, 776 P.2d 123 (1989); Safeco Ins. Co. of Am. v. Butler, 118 Wn.2d 383, 823 P.2d 499 (1992). Again, these cases do not concern the standard for expectation of the resulting harm. [3] We note, though, that some Court of Appeals cases seem to apply an objective standard of expectation, e.g., Palouse Seed Co. v. Aetna Ins. Co., 40 Wn. App. 119, 697 P.2d 593 (1985); Medina v. Transamerica Ins. Co., 37 Wn. App. 360, 680 P.2d 69, review denied, 102 Wn.2d 1004 (1984), and that some language in some of this court's cases may suggest an objective standard. Nevertheless, this court has not previously addressed the issue before us other than in Rodriguez v. Williams, 107 Wn.2d 381, 729 P.2d 627 (1986), where the court considered the effect of applying an objective standard. We conclude that a subjective standard applies, based upon examination of the policy language, the lack of any objective standard set out in the policy (and the ease with which one could have been drafted if that is what the insurers intended), and the meaning which the average purchaser would give to policy language, i.e., that injury or damage resulting from acts of negligence, even though precipitated by an intentional act, would be covered under the occurrence clause. Finally, in deciding whether an insured subjectively expected or intended the damage, circumstantial evidence is, of course, admissible. One commentator has suggested that the difference between an objective standard and a subjective standard may not be a substantial one: Since proof of state of mind normally is indirect or circumstantial, even a subjective test must rely on facts from which an inference about the insured's state of mind must be drawn, such as the obviousness of already-occurring harm. Kenneth S. Abraham, Environmental Liability Insurance Law 134 (1991). The jury has concluded that QCF neither subjectively nor objectively expected or intended the leakage from the pits into the groundwater prior to December 31, 1968. Thus, it necessarily follows from the jury finding that QCF did not subjectively expect or intend the harm, the groundwater contamination, prior to that date. However, the jury did not determine, solely under a subjective standard, whether the leakage was expected or intended on or after that date. As the Court of Appeals correctly concluded, the insurers presented considerable evidence which tended to show that objectively a reasonable person would have expected the damage. QCF presented considerable evidence that subjectively leakage (and thus resulting damage) was not expected. The factual determination under a subjective standard must be resolved on remand.