Towing The Line On ‘Expected And Intended’


10 No. 15 Westlaw Journal Insurance Bad Faith 3

Westlaw Journal Insurance Bad Faith


November 26, 2014



By Steven Plitt, Esq., Kunz Plitt Hyland & Demlong aa1

Copyright © 2014 Thomson Reuters .

Steven Plitt, Esq., of Kunz Plitt Hyland & Demlong, discusses expected and intended injuries exclusions in commercial general liability policies in light of a recent decision by the Missouri Supreme Court.

Liability coverage in standard CGL and homeowner policies is typically triggered by an occurrence. Those policies utilizing an occurrence trigger routinely define the term “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.”

The term “accident” contains an element of fortuity, which focuses on something different than the intentional character of the damages. 1 The unexpected, in essence, is the heart of the fortuity requirement. “Accident” typically means “unexpected.” 2 As it is used within the definition of an occurrence, “accident” connotes a happening or event which is undersigned, unintended, unforeseen, or unexpected or cannot otherwise be reasonably anticipated. 3 Courts have defined the term “accident” in various ways. 4

Liability policies also routinely contain intentional injury exclusions. 5 The typical intentional injury exclusion excludes coverage for bodily injury or property damage “expected or intended from the standpoint of the insured.”

Courts are split on the question of whether the “neither expected nor intended from the standpoint of the insured” language is ambiguous. 6 “[M]ost courts agree that intentional injury exclusions may or may not be ambiguous depending upon the particular factual circumstances under which the insurance company has sought to apply the exclusion.” 7 The majority view holds, based on the construction of the word “intended,” that the insured must have intended the act as well as intended to cause some kind of bodily injury or property damage in order for an intentional injury exclusion to apply. 8 The term “expected” has been found to denote that the actor knew or should have known that there was substantial probability that certain consequences would result from his actions. 9

Intentional-injury exclusions generally deny coverage where the insured has intended to act and specifically intended to harm a third person. 10 Where an act is “intentional” within the meaning of the policy exclusion, if the actor desires to cause the consequences of his act or believes that the consequences are substantially certain to result from it, the exclusion will be applicable. 11

*2 The Missouri Supreme Court, en banc, in Allen v. Continental Western Insurance Co. 12 held that an “expected or intended” injury exclusion barred coverage for damages that arose from a wrongful repossession of a vehicle. In Allen, plaintiff Stephanie Whipple filed the underlying lawsuit against Franklin Quick Cash LLC for wrongfully repossessing her vehicle. 13

Franklin, in turn, tendered the lawsuit to its insurer, Continental Western Insurance Co. 14 The Continental Western policy provided liability coverage for “accidents” but excluded coverage of liability for property damage “expected or intended” by the insured. 15 Continental Western declined the tender of defense.

The original underlying lawsuit alleged that Franklin unlawfully took possession of Whipple’s Plymouth Voyager on two separate occasions. The original underlying complaint contained two counts of conversion alleging that Franklin “intended to exercise control over” her Voyager and “deprived [her] of possession and control” without her authorization. 16 After Continental Western declined the tender of defense, Whipple then amended her complaint to add two counts of negligence.

Both the newly added negligence counts re-alleged and incorporated by reference the allegations of the two conversion counts. 17 The incorporation included the allegation that Franklin “intended to exercise control over” Whipple’s Voyager. 18 After the amended complaint was filed, Franklin retendered the defense of the lawsuit to Continental Western. The tender was declined a second time. In the ensuing coverage litigation, the trial court granted Franklin’s motion for summary judgment, finding that Continental Western owed a duty to defend. The Missouri Court of Appeals reversed.

The Missouri Supreme Court began its analysis by recognizing that under Missouri law an insurance company’s duty to defend arises only from potential coverage based on facts:

Alleged in the petition;

That the insured knows at the outset of the case; or

That are reasonably apparent to the insurer at the outset of the case. 19

Under Missouri law, where there is no potential for coverage based on those facts, the insurance company has no duty to defend. 20

After citing the general principles governing the insurer’s duty to defend, the court then found there was no potential for coverage at the outset of the Whipple case. 21

Notwithstanding that Franklin appeared to make a mistake about Whipple’s default and whether Franklin had a valid security interest to support the repossession, the Missouri Supreme Court found there was no potential for coverage under the Continental Western policy because Whipple sought recovery only for damages that Franklin intended, which the policy unambiguously excluded. 22

*3 The court had previously held that the purpose of a commercial general liability policy is for business owners to “protect against the unpredictable, potentially unlimited liability that can be caused by accidentally causing injury to other persons or their property.” 23 CGL policies were not intended to protect the insured from every risk of operating a business. 24 CGL policies typically excluded coverage for injury or damage intended or expected from the insured because insurance companies had a vested interest in being certain that the insurance company would not be liable for the insured’s deliberate acts. 25

The court rejected Franklin’s argument that Whipple’s loss of her Voyager was caused by an accident because Franklin allegedly incorrectly determined that it had a right to repossess the Voyager and did not intend to do so unlawfully. 26 The court found that the question of whether Franklin’s acts constituted an “accident” or whether the loss of the Voyager itself could constitute “property damage” would not change the court’s opinion because the “expected or intended injury” exclusion in Continental Western’s policy unambiguously barred coverage since Franklin intended to repossess the Voyager. 27

Analyzing whether an “expected or intended injury” exclusion bars coverage, the Missouri Supreme Court had previously held that the insured must intend not only the act causing the property damage but also the resulting harm. 28 The record reflected that Franklin intended both the act of repossession and the resulting harm, i.e., the loss of Whipple’s Voyager. Franklin acknowledged during the proceedings that Whipple’s claim was based on Franklin’s intentional exercise of control over the Voyager and its statement of uncontroverted facts in support of the motion for summary judgment. 29

Based on the record, the Missouri Supreme Court found that “[b]y actually taking possession with intent to do so, Franklin also demonstrated its intent to deprive her of possession, which is the only harm asserted by Whipple.” 30 That finding also applied to any loss of use property damage. The court observed that even if the loss of the Voyager itself could constitute a “loss of use” within the meaning of the policy, the exclusion barred coverage because Franklin intended both the act that caused Whipple’s harm and also the harm itself. 31

Assuming for purposes of argument that Whipple’s loss of the Voyager could constitute a “loss of use” and therefore “property damage” under the policy, the court found that “Franklin necessarily intended to deprive Whipple of the vehicle’s use by taking possession with the intent to exercise control.” 32 Whipple’s loss of the Voyager was the only harm she asserted in the underlying lawsuit and the only harm that could arguably constitute “property damage” under the policy. Because Franklin intended both the act that caused Whipple’s harm (repossession) and the harm itself (loss of the Voyager) the exclusion barred coverage for Franklin’s intentional acts at the outset of Whipple’s lawsuit and, therefore, Continental Western did not have a duty to defend. 33



See Steven Plitt & Jordan R. Plitt, Practical Tools for Handling Insurance Cases, § 5:2, p. 5-2, 5-3 (Thompson Reuters 2011).


See, e.g., SnyderGeneral Corp. v. Cont’l Ins. Co., 133 F.3d 373, 28 Envt’l L. Rep. 20, 607 (5th Cir. 1998) (applying Minnesota law).


Resource Bankshares Corp. v. St. Paul Mercury Ins. Co., 407 F.3d 631, 637 (4th Cir. 2005); Lamar Homes Inc. v. Mid-Continent Cas. Co., 335 F. Supp. 2d 754, 758 (W.D. Tex. 2004), vacated and remanded on other grounds, 501 F.3d 435 (5th Cir. 2007).


Plitt & Plitt, § 5:2, pp. 5-4 through 5-9 (where the authors cite numerous different permutations of the meaning of accident adopted by various courts).


Plitt & Plitt, § 5:3.


Plitt & Plitt, § 5:3, p. 5-13.


Plitt & Plitt, § 5:3, pp. 5-13, 5-14.


Plitt & Plitt, § 5:3, p. 5-15.


Allstate Ins. Co. v. Freeman, 432 Mich. 656, 443 N.W.2d 734 (1989); Plitt & Plitt, Practical Tools for Handling Insurance Cases, § 5:3, p. 5-19.


See Plitt & Plitt, Practical Tools for Handling Insurance Cases, § 5:3, p. 5-19.




2014 WL 2191034 (Mo. May 27, 2014).


Id. at *1.












Id. at *3, citing Zipkin v. Freeman, 436 S.W.2d 753, 754 (Mo. banc 1968); see also, McCormack Baron Mgmt. Servs. v. American Guar. & Ins. Co., 989 S.W.2d 168, 170 (Mo. banc 1999) (finding that facts adduced at trial that the insurer could not have known at the outset of the case did not give rise to a duty to defend); Trainwreck West Inc. v. Burlington Ins. Co., 235 S.W.3d 33, 39 (E.D. Mo. App. 2007) (finding that facts adduced solely from deposition testimony were not reasonably apparent at the outset of the case and did not give rise to a duty to defend).


Id., citing Marshall’s U.S. Auto Supply v. Md. CA’s. Co., 354 Mo. 455, 189 S.W.2d 529, 531 (1945).




Id. at *4.


Id. at *4, citing Columbia Mutual Ins. Co. v. Schauf, 967 S.W.2d 74, 79 (Mo. banc 1998).


Id., citing Schauf, 967 S.W.2d at 77.


Id., citing 7A Couch on Insurance, § 103: 23 (3d Ed. 2013).


Id. at *5.




See, e.g., Columbia Cas. Co. v. HIAR Holding, 411 S.W.3d 258, 268-69 (Mo. banc 2013); American Family Mut. Ins. Co. v. Pacchetti, 808 S.W.2d 369, 371 (Mo. banc 1991).


Id. at *6.




Id., citing Landers Auto Group No. One Inc. v. Cont’l W. Ins. Co., 621 F.3d 810, 815 (8th Cir. 2010) (holding that an identical “intended or expected injury” exclusion prevented coverage of the insured’s wrongful repossession of an automobile); Massachusetts Bay Ins. Co. v. Vic Koenig Leasing, 136 F.3d 1116, 1125 (7th Cir. 1998) (holding that the exclusion prevented coverage of the insured’s wrongful repossession of an automobile); American Family Mut. Ins. Co. v. Mission Med. Group, 72 F.3d 645, 648 (8th Cir. 1995) (holding that substantially identical exclusion prevented coverage of the insured’s intentional burning of a particular business even though the insured was mistaken in believing it performed abortions).


Id. at *6.




Steven Plitt is the current successor author of “Couch on Insurance, 3d.” A practicing attorney, Plitt is a founding partner of the coverage boutique law firm Kunz Plitt Hyland & Demlong in Phoenix, where he serves as chairman of the insurance practice group and maintains a national practice. He is frequently called on as an expert witness in insurance-related cases on subjects including bad faith, coverage issues, insurance agent errors and omissions, and legal malpractice. He can be reached at [email protected].
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