In Liberty Surplus Ins. Corp. v. Ledesma and Meyer
Construction Co., Inc., ________ F.3d _______ (August 22,
2016), the Ninth Circuit Court of Appeals certified the following
question to the California Supreme Court regarding the issue of
whether a claim for negligent retention, hiring and supervision
qualifies as an "occurrence" under CGL policies:
Whether there is an "occurrence" under an
employer's commercial general liability policy when an injured
third party brings claims against the employer for the negligent
hiring, retention, and supervision of the employee who
intentionally injured the third party?
The Court of Appeals noted that the answer to the question is of
"exceptional importance" to claimants, employers and
insurance companies doing business in California.
The question arises out of an underlying lawsuit filed by a
minor for molestation committed by an employee of Ledesma and Meyer
Construction Company, Inc. ("L&M") while performing
work at a middle school in the San Bernardino County Unified School
District ("District"). The minor filed a lawsuit against
L&M and the District alleging various claims, including
negligent hiring, retention and supervision. The District and
L&M tendered the defense of the lawsuit to L&M's
insurer, Liberty Surplus Insurance Company ("Liberty").
Liberty agreed to defend L&M but declined to defend the
District based on the argument that it did not qualify as an
insured under the Liberty policy. Thereafter, while defending the
underlying lawsuit, Liberty filed a declaratory relief action
arguing that the claim was not covered by its general liability
Subsequently, Liberty filed a motion for summary judgment in the
United States District Court seeking a declaration that potential
coverage was not afforded under its policy to the District or
L&M. The District Court granted Liberty's motion and
entered summary judgment in its favor. The District Court reasoned
that a claim for negligent supervision was too remote from the
intentional conduct causing the minor's damages. Rather, the
District Court focused on the immediate intentional conduct of the
employee in determining that an occurrence had not been triggered
under the Liberty general liability policy.
Subsequently, the District and L&M appealed the District
Court's decision. In response, the Court of Appeals noted that
there are conflicting decisions addressing whether claims for
negligent supervision qualify as an occurrence under General
Liability policies. As such, the Court of Appeals has requested the
California Supreme Court to exercise its discretion and accept a
certified question of whether claims for negligent supervision
qualify as an occurrence under general liability policies.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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