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Injury Not Covered Occurrence under Automobile Liability and Personal Umbrella Policies Because It Was "Intentionally Caused"

On May 11, 2018, the Second Circuit issued a decision in Hough v. USAA Casualty Ins. Co., Case No. 17-1073, holding that a collision between a driver and a “flagman” at a construction site was not a covered “occurrence” under the driver’s automobile liability and umbrella policies because the injury was “intentionally caused.”  The policies contained the standard definition of a covered “occurrence” as an “accident,” which under the case law connotes “unintended damage.”  Olin Corp. v. Insurance Co. of North America, 221 F.3d 307, 317 (2d Cir. 2000) (citing McGroarty v. Great American Ins. Co., 26 N.Y.2d 358 (1975)).  The Second Circuit affirmed the finding of the bankruptcy court, and the district judge that the underlying incident did not qualify as an “accident” under this standard. The Court summarized the facts as follows:

Margulies [the insured] was driving a car north on Sixth Avenue, on his way to a meeting with former Governor Mario Cuomo, and running late.  Hough was managing traffic.  Margulies was stopped by Hough, his car first in the line.  Hough continued to hold traffic, even though it seemed no vehicles were entering or exiting the construction site.  Margulies became increasingly impatient as he watched the traffic light at 23rd Street pass through two full cycles without seeing any trucks enter or leave the site.  Margulies testified he made eye contact with Hough to communicate his intention to proceed when the light turned green regardless of Hough’s instructions.  When the light changed to green, Margulies lifted his foot off the brakes and his car rolled forward slowly.  Hough was not in Margulies’s lane when the car started moving forward, but stepped back into the lane when the car was about a car length away.  Hough did not move, and the car continued to move forward.  Margulies testified that he expected Hough to move, and thought Hough was staying put “simply to annoy” Margulies.  Margulies continued to allow the car to move forward toward Hough, and did not apply the brakes until after the car hit Hough.  Margulies saw Hough fall and get back up, stated he assumed Hough was unhurt, and continued up Sixth Avenue to his meeting.  Margulies subsequently pled guilty to misdemeanor assault in the third degree. . . .

The Second Circuit held that this incident was not a covered occurrence, explaining:

Under New York insurance law, an injury is “intentionally caused” and thus not accidental if the “damages . . . flow directly and immediately from an intended act” rather than “a chain of unintended though expected or foreseeable events that occurred after an intentional act.” Brooklyn Law Sch. v. Aetna Cas. & Surety Co., 849 F.2d 788, 789 (2d Cir. 1989) (citation omitted). Hough’s injuries flowed directly and immediately from Margulies’s decision not to apply the car’s brakes until after the car struck Hough. The incident was not an accident within the meaning of New York law, and thus was not an occurrence as defined in the USAA policies.

Covered “accidents” can result from intentional acts, even where the ultimate harm is arguably foreseeable.  For example, in a case covered previously on this blog, the Second Circuit ruled that a car accident caused by a driver to whom the insured had served alcohol when he was visibly intoxicated was a covered accident, even though the insured acted intentionally in serving the alcohol.  What seems to have set Hough apart from other cases involving intentional acts is the “direct and immediate” connection between the insured’s act (i.e., his decision not to apply the brakes until after colliding with the flagman) and the foreseeable injury that followed.

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