The U.S. District Court in Oregon recently found that an insurance company had a duty to defend its insured in a lawsuit alleging that their minor child intentionally assaulted another minor. In the case, captioned Norgren v Mut. of Enumclaw Ins. Co., No. 14-cv-01591-SB, 2015 WL 3948145 (D. Or. June 29, 2015), the insureds had a homeowners policy that provided that the insurance company had a duty to defend the insureds against claims for bodily injury or property damage, but not for any claims arising from intentional acts. The insureds’ minor child attended school with another minor child, referred to in the case as J.H. The insureds were sued in a lawsuit alleging that their child had, over a period of time, physically assaulted J.H. with the intent to harm her. The insureds sued seeking a declaration that the insurance company had a duty to defend them in the underlying lawsuit.
The underlying lawsuit alleged claims for, among other things, battery and negligent infliction of emotional distress (“NIED”). The court initially noted that the NIED claim is not based on intentional conduct and is therefore covered under the policy. The insurance company responded that NIED is not a cognizable claim under Oregon law and thus could not trigger the insurance company’s duty to defend. The court rejected the insurance company’s position, noting that under Oregon law a party can recover for NIED, but only if he or she is also “physically injured, threatened with physical injury, or physically impacted by the tortious conduct.” In the underlying suit, J.H. alleged that she was physically injured or impacted by the allegedly tortious conduct. Based on those allegations, the court concluded that J.H. appeared to have asserted a claim based in negligence.
The insurance company responded that although the underlying suit may have included a negligence claim, the allegations underlying the claim include only intentional conduct. Under Oregon law, when subjective intent to harm is the only reasonable inference to be drawn from the allegations, the court may make that inference and hold that the duty to defend is not triggered. The court also rejected this argument, finding that J.H.’s allegations of negligent conduct in the underlying lawsuit precluded the court from drawing an inference that the insureds’ child had a subjective intent to harm that was sufficient to find there was no duty to defend.
Finally, the court rejected the argument that the exception in the policy for damages “arising out of, or resulting from, actual, alleged, or threatened … physical or mental abuse” applied to bar coverage. The applicable policy did not define abuse, but the court concluded that the term required a showing of willful conduct. Again, the court found that the allegations of negligence precluded application of the exception.
Maloney Lauersdorf Reiner represents clients in insurance coverage actions relating to the duty to defend. Please contact us with any questions about this case or any other matter you see addressed on the MLR Insurance Coverage Blog.