An insured’s alleged negligence in supervising an employee does not constitute an “occurrence,” or “accident,” within the meaning of a general liability policy. ( L.A. Checker Cab Cooperative, Inc. v. First Specialty Ins. Co. (2010) 2010 WL 235430)
Facts
L.A. Checker Cab Cooperative, Inc. (Checker), a taxi cab company, employed Alexander Terminassian (Terminassian) as a cab driver. Terminassian was operating his taxi one evening when he got into a dispute with a would-be passenger, Marco Cifuentes (Cifuentes). In the course of the dispute, Terminassian, allegedly acting in “self-defense,” shot Cifuentes.
Cifuentes later filed a personal injury action against Checker, alleging that Checker had negligently supervised Terminassian. Checker tendered defense of the action to its liability insurer, First Specialty Insurance Company. First Specialty declined to defend Checker.
Checker later sued First Specialty for breach of contract and bad faith, alleging that First Specialty had wrongfully refused to defend Checker in the underlying personal injury lawsuit filed by Cifuentes. The trial court entered summary judgment in favor of First Specialty. Checker appealed.
Holding
The Court of Appeal affirmed, holding that First Specialty had no duty to defend Checker in the underlying personal injury lawsuit filed by Cifuentes. According to the appellate court, Checker’s alleged negligent supervision of its employee, Terminassian, did not constitute an “occurrence,” or “accident,” within the meaning of the First Specialty policy. The court reasoned that the term “occurrence,” or “accident,” refers to “the event causing damage, not the earlier event creating the potential for future injury….” Thus, “Checker’s alleged negligence in not adequately supervising Terminassian was not the direct cause of Cifuentes’s injury but, if anything, only a remote antecedent cause which does not qualify as an ‘occurrence’ under the policy.” Since Checker’s alleged liability did not arise from an “occurrence,” First Specialty had no duty to defend Checker.
Comment
Courts applying California law have split on the issue of whether an insured’s negligent supervision of another constitutes an “occurrence” within the meaning of a liability policy. The state appellate court in this case, along with the federal district courts in American Empire Surplus Lines Ins. Co. v. Bay Area Cab Lease (N.D. Cal. 1991) 756 F.Supp. 1287and Farmer v. Allstate Ins. Co. (C.D. Cal. 2004) 311 F.Supp. 884, have held that negligent supervision is not an occurrence. In contrast, the federal district courts in Keating v. National Union Fire Ins. Co. (C.D. Cal. 1990) 754 F.Supp. 1431, Westfield Ins. Co. v. TWT, Inc. (N.D. Cal. 1994) 723 F.Supp. 492 and Fireman’s Fund Ins. Co. v. National Bank for Cooperatives (N.D. Cal. 1994) 849 F.Supp. 1347 all held that negligent supervision can be regarded as an occurrence. (Oddly, the state appellate court in the present case did not mention any of the prior cases dealing with the issue.)
In any event, given the existing split in case authority, one can expect further litigation on the issue of whether negligent supervision is an occurrence within the meaning of a liability policy.