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Posted by on in Corporate and Business Law
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An employer was entitled to insurance coverage under its comprehensive general liability (“CGL”) policy for claims of negligent hiring, retention, or supervision of an employee even when the employee allegedly acted intentionally, according to a recent case decided by the California Supreme Court.


In the recent case of Liberty Surplus Ins. Corp. v. Ledesma & Meyer Construction Co., Inc., Ledesma & Meyer Construction (“L&M”) and its principals contracted with a school district to manage a construction project. L&M hired an assistant superintendent named Darold Hecht and assigned him to the project. Years later, a student sued Hecht and L&M in California state court alleging that Hecht intentionally sexually abused her and that L&M was negligent in hiring, retaining, and supervising Hecht.


L&M tendered its defense to its insurers, Liberty Surplus Insurance Corp. and Liberty Insurance Underwriters, Inc. (collectively “Liberty”), who defended under a reservation of rights. Thereafter, Liberty sued L&M in federal court claiming it did not have to defend or indemnify L&M. The federal court agreed holding that the student’s injuries were not covered under Liberty’s policies.


L&M appealed to the Ninth Circuit Court of Appeals which asked the California Supreme Court whether the student’s complaint alleged an “occurrence” under Liberty’s insurance policies so that Liberty would have to defend L&M.


The California Supreme Court found the complaint alleged an “occurrence” because, under California law, an occurrence included “an accident,” and the student’s injuries could he considered “accidental,” even though the student said that employee acted intentionally.


Although Hecht’s sexual misconduct was a “willful act,” and not covered by any of the Liberty policies, the court held that Hecht’s intentional acts did not preclude potential coverage for L&M especially since L&M argued, in its defense, that “Hecht’s acts were neither intended nor expected.”


Key Take Aways


First, get your CGL, surplus, excess, or umbrella policies, read them, and understand them. If you can’t get them, won’t read them, or don’t understand them, then retain knowledgeable counsel who will get them, analyze them, and advise you on your rights and remedies.


Second, if there is a potential for coverage under your CGL or any other insurance policy for a claim, tender early and often to each carrier who may provide coverage. If you don’t tender, you will never have coverage. But, if you do tender, there is always the possibility of coverage, even if a carrier reserves its rights to deny coverage later.


Third, work with your insurance broker, risk manager, or attorney to get the broadest coverage possible under all your policies.


Fourth, get a creative lawyer. The court found Liberty had to defend L&M, likely saving it tens of thousands of dollars in legal fees, in substantial part, through the unique and persuasive arguments of L&M’s attorneys.


Also, remember that the result in each case is dependent on its unique facts so the information in this post may not precisely apply to your situation.




The materials available at this web site are for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem. Use of and access to this Web site or any of the e-mail links contained within the site do not create an attorney-client relationship between Preovolos Lewin & Hezlep, ALC and the user or browser. The opinions expressed at or through this site are the opinions of the individual author and may not reflect the opinions of the firm or any individual attorney.

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Mark offers more than twenty-five years of experience in the areas of real estate, construction, construction defect, and commercial litigation. He has successfully tried numerous jury and bench trials, arbitrations, and administrative proceedings.