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 policy.

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.

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