Liberty Surplus Insurance Corporation v. Ledesma & Meyer Construction Company, Inc.
In Liberty Surplus Ins. Corp. v. Ledesma & Meyer Construction Co., Inc., ___ Cal.5th ___ (June 4, 2018), the California Supreme Court held, in answering a question certified to it by the United States Ninth Circuit Court of Appeal, that the employer’s (“Ledesma” or “L&M”) negligent hiring, retention, and supervision of an employee (“Hecht”) who molested a student at a school construction site constitutes an “accident” as that term is used in the definition of “occurrence” in a general liability policy. In so holding, the Supreme Court essentially acknowledged that Ledesma’s conduct was intentional and the employee’s molestation of the student was also intentional. However, because Ledesma did not “expect” its employee to molest a student, an accident transpired as required by the definition of “occurrence” in the Liberty policy.
The Supreme Court interpreted the term “accident” as follows:
Under California law, the word ‘accident’ in the coverage clause of a liability policy refers to the conduct of the insured for which liability is sought to be imposed ….” (Id. At p. 311, italics added.) “[T]he term ‘accident’ is more comprehensive than the term ‘negligence’ and thus includes negligence (Black’s Law Dict. [(5th ed. 1979)] at p. 14, col. 2) ….” (Safeco Ins. Co. v. Robert S. (2001) 26 Cal.4th 758, 765 (Safeco).) Accordingly, a policy providing a defense and indemnification for bodily injury caused by “ ‘an accident’ “ “promise[s] coverage for liability resulting from the insured’s negligent acts.” (Ibid, italics added.)
The Supreme Court also reasoned that “tort principles” governed the interpretation of what constitutes an “accident” as used in the definition of “occurrence” in a liability policy. The Supreme Court stated as follows:
As to liability insurance coverage, tort principles govern the question of causation. “In analyzing coverage under a liability policy, a ‘tort approach’ [citation] to causation of damages is precisely what is called for ….When the insurer has promised to indemnify the insured for all ‘sums which the Insured shall be obligated to pay … for damages … because of’ nonexcluded property damage, or similar language, coverage necessarily turns on whether the damages for which the insured became liable resulted – under tort law – from covered causes.” (State of California v. Allstate ins. Co. (2009) 45 Cal.4th 1008, 1035 (Allstate).) This rule applies with equal force to a policy covering liability for personal injury. (See Delgado, supra, 47 Cal.4th at p. 315).
Using the above causation analysis, the Supreme Court reasoned as follows:
Here, Hecht’s molestation was the act directly responsible for the injury, while L&M’s negligence in hiring, retaining, and supervising him was an indirect cause. Nevertheless, Delgado’s analysis is applicable to our scenario, and supports L&M’s position. We noted that in Delgado that an injury may be the result of more than one cause. (Delgado, supra, 47 Cal.4th at p. 315) As discussed above, a finder of fact could conclude that the causal connection between L&M’s alleged negligence and the injury inflicted by Hecht was close enough to justify the imposition of liability on L&M. Under Delgado, L&M’s acts must be considered the starting point of the series of events leading to Doe’s molestation. L&M does not rely on any event preceding its own negligence to establish potential coverage. As alleged by Doe, the “ ‘occurrence resulting in injury’ ” began with L&M’s negligence and ended with Hecht’s act of molestation. (Id. At p. 316)
In summary, absent exclusion, the Ledesma decision establishes that an employer is entitled to coverage under a liability policy for claims of negligent hiring, retention or supervision so long as it did not expect the employee’s deliberate conduct in causing the claimant’s injuries.