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Are You Covered? Carlyle King owns Tiedown Construction Company, which removes excess materials from building sites. The business was a sole proprietorship, meaning any debts, liabilities, and such of the business, were all collectible from King personally. All of King's personal assets, and all of the assets of the business, were at risk in this case. So at the outset, King was fighting an uphill battle that could have been helped had King formed some sort of limited liability entity to operate the business (see our other web pages and booklets on this topic). Greg Jankowiak was employed by a separate business, but was working on the same job site one day, when Jankowiak discovered some missing and damaged electrical wiring. Jankowiak then "confronted" Carlos Lopez (that word always portends bad news when used in cases), I suppose to accuse Lopez of having something to do with it. Lopez took issue with Jankowiak, and kicked him in the face. Jankowiak's lawyer surely realized that Lopez wasn't worth suing because he had no assets to pay any judgment, so he followed the money right to King and his business. Jankowiak sued for "respondeat superior" which is Latin, meaning "let the master answer," lawyer-speak for holding a principal responsible for his agent. Jankowiak also sued King for King's own alleged negligence in hiring, training and supervising Lopez. Apparently, Mr. Lopez had a criminal record that showed a propensity for violence. So King was served with the lawsuit, and forwarded it to Dallas Fire Insurance Co., his commercial general liability insurer. To King's shock and dismay, Dallas Fire refused to cover this incident, claiming there was no "occurrence" as that term was defined in the policy. King then filed this separate lawsuit against Dallas Fire to obtain a court order requiring Dallas Fire to defend the case and cover the incident. The trial court ruled for Dallas Fire, and so did the Court of Appeals. Normally, two out of three is all you need to win, but not when the one is the Big One, the Texas Supremes. And so, the case ultimately went King's way. Here's why. The "duty to defend" is determined solely by the allegations in the pleadings (the petition) and the language of the insurance policy. If the petition alleges facts within the scope of coverage, the insurance company must get involved and defend the lawsuit. The allegations are considered without reference to their truth or falsity. And here is a very helpful key: all doubts regarding the duty to defend are resolved in favor of the insured, and against the insurance company. Smart plaintiff's lawyers are a double edged sword. On the one hand, they know these rules and keep them in mind as they draft lawsuit petitions. They want to make sure the allegations in the petition will be covered by the insurance policy, because collecting a judgment is so much easier that way. The down side is, if they're that experienced, they are typically savvy enough to have a better than average shot at winning the case. The insurance policy at issue in King's case excluded coverage for "intentional" acts. Since Jankowiak alleged that Lopez intended to kick him, and that was pretty obvious, Dallas Fire thought it was off the hook. But King argued that the lawsuit only alleged negligence against him (negligent hiring, training and supervising), which is not an intentional act. The only intentional act alleged, i.e. the kick, wasn't King's act. King therefore thought he was covered. The real dispute between Dallas Fire and King was whose perspective to use to determine coverage. If we look at this from Lopez's perspective, we see an intentional act, which is not covered. But if we look at this from King's perspective, we see an unintentional act (negligent hiring, training and supervising), which is covered. And the Texas Supremes said "we view the event from the insured's standpoint." The actor's intent is not imputed to the insured in determining whether there is an occurrence. Game, set, match. And to top it off, the Texas Supremes sent the case back to trial on the one issue of how much attorneys fees Dallas Fire would have the privilege of paying King in this case. On a tangential matter, the Texas Supremes, in this case, mentioned a prior case, where one Mr. Cowan took revealing photos of another individual and showed them to his friends. When the plaintiff found out and filed suit, Mr. Cowan actually argued that it was an "accident" because he didn't intend for the plaintiff to find out about the copies! Don't laugh too hard; that's a 1997 case and it went all the way to the Texas Supremes before Trinity Universal Insurance got off the hook. Since I regularly call the Texas Supremes on the carpet when I think they get it wrong, I should give credit where credit is due, too. I think this is a well reasoned case that reached the right result. And the bottom line to remember is this, and it is in keeping with the general 9-11 theme of this Email Alert. Because of 9-11 insurance companies are watching, closer than ever, whether they are liable for every claim filed, and they are changing their policies to exclude more events. If you have a claim that is denied, contact your business lawyer for advice. It 'aint over until it's over, and the insurance company 'aint "it." Don't just take what they say. Get an independent, disinterested analysis and, if necessary, take the insurance company to task. Close
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