Opinion ID: 31551
Heading Depth: 3
Heading Rank: 1

Heading: Definition of Occurrence in the Insurance Policy under Mississippi Law

Text: 13 The core of this dispute is the proper test for determining whether an occurrence took place under these set of facts. It is uncontested that the leaks developed because the installation of the waterproofing membrane was faulty. The controversy stems from whether the installation of the waterproofing membrane or whether the consequential leaks constitute an occurrence under the CGL insurance policy. The CGL policy defines occurrence as an accident but does not explicitly define accident. We must therefore determine whether, under Mississippi law, an accident refers to the unintended consequences of installing the waterproofing membrane or whether an accident refers to the underlying act of the installation itself. 14 CGU contends that the definition of accident proffered under Moulton applies; whereas, ACS contends that the definition proffered in Southern Farm Bureau Casualty Ins. Co. v. Allard, 611 So.2d 966 (Miss.1992) applies. The Moulton test is whether the insured intended the underlying action. The Allard test appears to be whether the insured intended the consequences of his actions. In U.S. Fidelity & Guar. Co. v. Omnibank, the Mississippi Supreme Court resolved the so-called tension between Allard and Moulton and reaffirmed its holding in Moulton. 812 So.2d 196 (Miss.2002). For these reasons, the Moulton test is dispositive of the dispute over the interpretation of an occurrence in the CGL policy. 15 In Moulton, the Mississippi Supreme Court held that the term accident refers to [the insured's] action and not whatever unintended damages flowed from that act. 464 So.2d at 510. The issue was whether Allstate had a duty to defend the insured, Moulton, under the insurance policy in an action for malicious prosecution. 464 So.2d at 508. Moulton filed a complaint alleging that Anthony Walls had stolen her dog. Walls was subsequently arrested and brought to trial but the charges were dismissed. Walls then filed a malicious prosecution suit against Moulton. Moulton expected Allstate to defend her under her comprehensive dwelling policy. The language in her insurance policy provided coverage in the event of bodily injury or property damage resulting from an occurrence. Under the policy, an occurrence was defined as: 16 an accident, including injurious exposure to conditions, which results, during the endorsement period, in bodily injury or property damage neither expected nor intended from the standpoint of the Insured. 17 Id. Acknowledging that under the terms of the policy, an occurrence is defined as an accident, the Mississippi Supreme Court defined accident. Id. at 509. The Mississippi Supreme Court adopted the following meaning of an accident in an insurance policy: 18 The only relevant consideration is whether ... a chain of events leading to the injuries complained of was set in motion and followed a course consciously devised and controlled by appellant without the unexpected intervention of any third person or extrinsic force. 19 Id. (quoting Winkler v. Ohio Casualty Ins. Co., 51 Md.App. 190, 441 A.2d 1129, 1132 (1982)). The Mississippi Court then explicitly rejected the theory that an accident refers to the unintended consequences of the act. Id. at 510. 20 Applying Moulton to the present case, the faulty workmanship of the waterproofing membrane resulting in the leaks does not constitute an occurrence under the policy. Just as Moulton intended to file a complaint against Wall but may not have intended to cause him embarrassment, ACS intended to hire Chamberlin/Southern to install the membrane but did not intend for the work to be faulty or result in a leak. Although neither the policy, nor the policy language in Moulton were identical to the language in the policy at issue here, Moulton defined the term occurrence as it relates to coverage under an insurance policy. See 464 So.2d at 510; Omnibank, 812 So.2d at 200-01 (applying the Moulton test to determine whether an act was an occurrence in a CGL insurance policy). 21 Although ACS concedes that Moulton remains the Mississippi Supreme Court's, seemingly complete analysis, of [the] insurance Policy dispute herein, ACS's brief at 40, ACS, nevertheless argues that the law changed when the Mississippi Supreme Court decided Southern Farm Bureau Casualty Ins. Co. v. Allard, 611 So.2d 966 (Miss.1992). ACS asserts that the Mississippi Supreme Court, in Allard, suggested that such an accident refers to the unintended consequences of the initial act. We are not persuaded that Allard has changed the law. In Allard, the Mississippi Supreme Court relied on the holding of Coleman v. Sanford, 521 So.2d 876, 878 (Miss. 1988) which stated that an act is intentional if the actor desires to cause the consequences of his act, or believes that the consequences are substantially certain to result from it. Allard, 611 So.2d at 968. The Mississippi Supreme Court focused on the language requiring intent from the standpoint of the insured and determined that the facts of the case created a question for the jury on intent. Because the jury in Allard found that the insured's actions were unintentional, the Mississippi Supreme Court affirmed that the insurance policy provided coverage to the insured. Because the language of the insurance policy in Allard is similar to the language of the CGL policy in the present case, ACS asserts that under this theory, from the standpoint of the insured, ACS's actions were not intentional because it did not desire to cause the consequent leaking. 22 Notwithstanding the apparent conflict that Allard created when it was decided, the Mississippi Supreme Court very recently reaffirmed its holding in Moulton and resolved the tension between Allard and Moulton. U.S. Fidelity & Gy Co. v. Omnibank, 812 So.2d 196 (Miss.2002). In Omnibank, the Fifth Circuit certified the following issue to the Mississippi Court: 23 [W]hether, under Mississippi law, an insurer's duty to defend under a general commercial liability policy for injuries caused by accidents extends to injuries unintended by the insured but which resulted from intentional actions of the insured if those actions were negligent but not intentionally tortious. 24 812 So.2d at 197; See Ramsay v. Omnibank, 215 F.3d 502, 504 (5th Cir.2000) (certifying the question to the Mississippi Supreme Court in part, to resolve the tension between Allard and Moulton ). The Mississippi Supreme Court answered by restating the test it promulgated in Moulton and further clarifying it. 25 In Omnibank, the Mississippi Supreme Court analyzed the identical policy language at issue in this case and addressed the identical arguments proffered by ACS. 2 The Mississippi Supreme Court answered that according to the policy language, even if an insured acts in a negligent manner, that action must still be accidental and unintended in order to implicate policy language. Id. Under similar circumstances in the present case, even though the installation of the membrane was done negligently, the action of installing the membrane was not accidental nor unintended to implicate coverage under the policy. 26 The Mississippi Supreme Court reconciled its decisions in Allard and Moulton concluding that the cases are consistent in that they both address the nature of the insured party's conduct, not the resulting damages of that conduct. 812 So.2d at 201. The Mississippi Supreme Court, however, was explicit that  Allard does not constitute a change in the law and reaffirmed its holding in Moulton. Id. 27 Nonetheless, ACS further contends that in construing occurrence in the CGL policy, the district court overlooked that the exclusions language in the policy renders the coverage language ambiguous. We disagree. Like ACS, the insured in Omnibank contended that the policy language which implicates coverage for `occurrences' or `incidents' is rendered ambiguous by exculpatory language which exempts from coverage for `bodily injury' or `property damage' `expected' or `intended' from the standpoint of the insured. 812 So.2d at 198. The Mississippi Supreme Court specifically rejected this argument and categorically determined that the exception language in the policy does not create ambiguity so as to liberally construe coverage in favor of the insured. Id. at 200. Thus, the district court did not err by not creating ambiguity through the exclusion language of the contract. 28 This Court construed Moulton for the first time in Berry v. McLemore, 795 F.2d 452 (5th Cir.1986). In Berry, the insured was injured by a third-party, McLemore. McLemore was a police officer who made a custodial arrest of Berry. When Berry resisted the arrest a fight ensued resulting in McLemore shooting Berry. Berry filed suit and a jury returned a verdict against McLemore awarding punitive and compensatory damages to Berry. When McLemore failed to pay the judgment against him, Berry filed suit against the Town's liability insurer for breaching its duty to defend and for failing to indemnify McLemore against the judgment. 29 This Court was faced with substantially similar language as the insurance policy in dispute in Moulton. The insurance policy in Berry defined an occurrence as an accident, including continuous and repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured. 795 F.2d at 456. This Court relied on Moulton to determine that the incident was not an occurrence under the policy by construing the definition of an occurrence as follows: 30 [A]n act fell outside of the terms of the policy if whether prompted by negligence or malice, (1) defendant's acts were committed consciously and deliberately, without the unexpected intervention of any third force, and (2) the likely (and actual) effect of those acts was well within the defendant's foresight and anticipation. 31 795 F.2d at 457 (quoting Moulton, 464 So.2d at 509). Applying this definition to the facts of the Berry-McLemore incident, this Court found that McLemore intended to fire his gun and therefore, it was not an accident as referred to in the policy's definition of an `occurrence.' 795 F.2d at 458. This Court rejected the theory that although McLemore intended to fire his gun, he did not intend to cause injury to Berry so as to fall within the terms of coverage under the policy. Instead, as this Court explained [t]he focus is ... not on the harm caused, but upon the act that caused the harm. The act was the firing of the gun. The gunshot wound was the resulting harm. Id. at 458. 32 Applying Berry to the facts of this case, no occurrence took place. The negligence in installing the waterproofing membrane in the roofs was the foreseeable cause of the leaks that developed. The act of installing the waterproofing membrane fell outside of the terms of the policy because regardless of whether prompted by negligence (1) ACS's acts were committed deliberately and the intervention of Chamberlin/Southern to complete the work was expected; and (2) the likely (and actual) leaking that developed as a result of faulty workmanship was within ACS's foresight. 3 The faulty workmanship of Chamberlin/Southern unfortunately amounts to negligence. Hiring the subcontractors and installing the waterproofing membranes were not accidents under the terms of the policy. 33 Applying the foregoing Mississippi law, the installation of the waterproofing membrane is the underlying act referenced in occurrence which does not trigger coverage under the policy. 34