A Bar, an Injury, an Assault & Battery Exclusion and Coverage
In this space alone, there has been a plethora of cases in which coverage was denied based upon an assault and battery exclusion of a commercial general liability (CGL) policy. Recently, in a per curium opinion, the Court of Appeals of South Carolina demonstrated the court’s careful consideration of factual situations when faced with the responsibility of determining coverage. Three Blind Mice, LLC, d/b/a The Blind Horse Saloon v. Colony Insurance Company, 2018 WL 5733486, Unpublished Opinion No. 2018-UP-402, (October 31, 2018).
A patron of the Blind Horse filed an action against it alleging another, unknown patron inadvertently struck her, knocking her unconscious, as he was playing a boxing arcade game. The Blind Horse submitted the complaint to its insurer, Colony. Colony denied coverage based upon two contractual provisions: an exclusion for bodily injury or property damages arising out of an assault or battery and an exclusion for bodily injury arising out of or resulting from practice or participation in any athletic contest, activity game or sport. Because Colony denied coverage, the Blind Horse retained counsel who defended and settled the underlying action. Following settlement, the Blind Horse initiated this action for breach of contract and bad faith denial of coverage. The circuit court granted The Blind Horse’s motion for summary judgment on both claims and the matter came before the court upon Colony’s appeal.
The CGL policy issued to the Blind Horse required Colony to pay the Blind Horse for bodily injury or property damage arising from an accident, for which it became obligated. While the policy failed to define accident, our supreme court has provided a definition:
[a] unexpected happening or event, which occurs by chance
and usually suddenly, with harmful result, not intended or
designed by the person suffering the harm or hurt.
The injury here was not intended, therefore, the court found the policy initially covered the Blind Horse’s claim. Upon reaching that conclusion, the court turned to whether Colony could prove the damages were excluded.
Colony argued the unknown patron’s contact with the injured patron brought the underlying claim under the policy definition of battery, regardless of intent, and the plain and unambiguous language of the policy prohibits the interpretation of battery by limiting the exclusion to intentional acts. The court rejected that argument.
The definition of “act” within the definition of “battery” was unclear, rendering the exclusion ambiguous. The court recognized it must balance its duty to consider the entire policy and give effect to the whole document, including each of its provisions, with the obligation to give the policy its plain, ordinary and popular meaning. Acknowledging that duty, the court found it logical to conclude the assault and battery exclusion applies to intentional, unexpected acts. To construe the policy language otherwise would essentially deprive coverage for any harmful act.
Additionally, Colony argued construction of the policy in favor of the Blind Horse would render the exclusion meaningless, as the policy only covers accidents and an intentional act would never be covered in the first instance. The court likewise rejected this position, stating that intentional acts and accidents are not mutually exclusive. Had the unknown patron intentionally struck the injured patron, that would be an unexpected event, with a harmful result and initially covered. The event would then be excluded from coverage, however, by virtue of the assault and/or battery exclusion.
In another effort to persuade the court, Colony asserted there was improper reliance on common law in determining the inapplicability of the battery exclusion. Specifically, Colony attributed error to the application of case law construing battery as an intentional tort. Finding the assault or battery exclusion ambiguous for its failure to definitively state whether it applied to intentional or unintentional acts, the court could turn to extrinsic evidence that would otherwise be improper in the face of a clear definition. Because of its ambiguity, and the generally accepted common law classification of battery as intentional, the exclusion was construed against Colony. Thus, the assault and battery exclusion was determined inapplicable.
Turning next to the athletic or sport participation exclusion, it provides:
This insurance does not apply to “bodily injury” to
any person arising out of or resulting from practicing for
or participating in any athletic contest, exhibition
activity, game or sport.
Colony emphasized what it considered the broad exclusionary significance of “any person” in the first line of the exclusion. The Blind Horse successfully argued to the court below, however, that looking at the exclusion as a whole, it limits “any person” to those “practicing for or participating” in the activity. In apparent recognition of the potential for differing interpretations of this language, the exclusion was determined to be ambiguous, at best, and therefore, inapplicable.
Lastly, the court examined the Blind Horse’s bad faith claim. Bad faith requires 1) a mutually binding contact of insurance; 2) the insurer’s refusal to pay benefits due under the policy; 3) resulting from the insurer’s bad faith or unreasonable action in breach of the implied covenant of good faith and fair dealing, resulting in damage to the insured. If an insurer has a reasonable ground for contesting a claim, there is no bad faith. While it is established upon the record of this case that Colony breached the insurance contract resulting in damages to the Blind Horse, there was insufficient evidence to conclude that Colony unreasonably did so. Therefore, construing all inferences in favor of Colony, as the non-moving party, the issue of whether Colony acted unreasonably or in bad faith should be determined by the trier of fact. Thus, the court reversed the lower court’s order granting summary judgment to the Blind Horse on its bad faith claim.
While this author has examined and commented on a number of cases in which the court has determined an assault or battery exclusion defeated coverage, this case demonstrates the court’s commitment to consciously and carefully analyze the policy language at issue and carefully apply it to the particular facts before it. This case also appears to establish the court will not automatically accept somewhat standard policy language without critical examination but remains open to argument as to alternative interpretation.
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Cheryl D. Shoun is a trial attorney and certified mediator whose experience includes construction law, insurance defense, personal injury defense, employment litigation and medical malpractice. As a frequent writer, she serves as editor for Nexsen Pruet's TIPS: Torts, Insurance and Products Blog.
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