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Intentional Acts Covered Under CGL Policy Where Insured Did Not Intend "Specific Harmful Result"

On December 21, 2018, Justice Sherwood of the New York County Commercial Division issued a decision in Zurich Am. Ins. Co. v Don Buchwald Assoc., Inc., 2018 NY Slip Op 33325(U), holding that an intentional tort could be a covered occurrence, triggering a CGL insurer’s duty to defend.

This insurance coverage case arose from a salacious lawsuit by professional wrestler Terry Gene Bollea (better known by his stage name, Hulk Hogan).  Bollea sued a talent agency (DBA) and its employee (Burton) in Florida state court for their alleged role in the dissemination of a sex tape through the gossip website, The complaint asserted claims against DBA for negligent retention of Burton and intentional infliction of emotional distress.  DBA’s CGL carrier (AZIC) disclaimed coverage and refused to provide a defense on the grounds that: (1) the complaint “did not allege ‘bodily injury’ caused by an ‘occurrence’ since all of DBA’s and Burton’s actions were allegedly intentional and not accidental”; and (2) an exclusion for "expected" or "intended" injuries precluded coverage.

In a coverage action filed by AZIC, Justice Sherwood granted partial summary judgment to the insured on the issue of defense coverage, explaining:

In determining whether "an occurrence" has been alleged and whether conduct falls within the "accident language" of a commercial liability policy, it is customary to look at the casualty from the point of the view of the insured to see whether or not, from his point of view, it was unexpected, unusual and unforeseen. In that context, New York courts assess whether the insured intended to cause harmful consequences, not whether the insured, as a general matter, intended to act.  Thus, even a murder committed by the tenant of an insured-landlord has been held to be a covered "occurrence" and an "accident" because from the insureds' standpoint, it was unexpected, unusual and unforeseeable.

Moreover, an otherwise "intentional" tort may still be "accidental," triggering a duty to defend, where the plaintiff in the underlying action can succeed on his or her intentional tort claim without actually proving intentional or knowing conduct—i.e., where something less than actual intent suffices to establish liability. . . .

Here, the negligent retention and intentional infliction of emotional distress causes of action asserted in the amended Bollea complaint both allege an "occurrence" within the meaning of the Primary Policies.

In his negligent retention claim asserted against DBA, Bollea alleges that DBA "knew or should have known" that Burton was "predisposed to committing wrongs," that DBA "failed to take reasonable actions to investigate, prevent and/or avoid" the alleged misconduct of Burton, and that by negligently retaining Burton as an employee and not terminating him, DBA directly and proximately caused Bollea to suffer damages, including "anxiety" and "severe emotional distress". These allegations unambiguously trigger AZIC's duty to defend under the Third Primary Policy because, from DBA's standpoint, Burton's acts in allegedly aiding and abetting the publication of the racist footage were unexpected, unusual and unforeseeable. Indeed, New York courts routinely hold that negligent retention claims allege an "occurrence" against an insured-employer because, from the employer's point of view, the intentional acts of its employee are not intended or expected. . . .

The IIED claim also alleges an occurrence. In his IIED claim asserted against DBA. and Burton, Bollea alleges that DBA and Burton acted with "reckless disregard of Bollea's rights" and caused him to suffer "severe emotional distress" Under Florida law, Bollea can succeed on this claim in one of two ways—he can demonstrate "deliberate or reckless infliction of mental suffering"

Accordingly, because Bollea has alleged that DBA and Burton recklessly disregarded his rights, and because it is possible for Bollea to succeed on his IIED claim without actually proving "deliberate" or "intentional" conduct, the IIED claim alleges an occurrence, and the "expected and intended acts" exclusion does not apply. Although AZIC argues that an intentional tort is never "accidental”, the court rejects this argument. It is well-settled that an "intentional" tort can still be "accidental" within the meaning of commercial liability policies, as long as the actor did not intend to achieve the specific harmful results.

As this decision illustrates, although insurance policies generally do not cover intentional wrongdoing, the unintended consequences of intentional acts frequently are covered. (See here and here.)

Another takeaway here: the insured was entitled to recover the legal fees it incurred in the coverage action. Fee shifting is not generally available in New York. But under the Court of Appeals decision in Mighty Midgets, Inc. v Centennial Ins. Co., 47 N.Y.2d 12, 21 (1979), an insurer that initiates a coverage action and loses must pay the insured’s attorneys’ fees.

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