Ninth Circuit Court Of Appeals Addresses What The Word “Intentional” Means In A “Dishonest, Malicious, Fraudulent, Criminal Or Intentional” Acts Exclusion
Berns v. Sentry Select Ins. Co., 2016 U.S. App. LEXIS 13684 (9th Cir. July 27, 2016) Categories: Duty to Defend – Employment Practices Liability Insurance – Intentional Acts Exclusion
When a policy affords employment practices liability coverage for wrongful termination and harassment (among other things) but excludes coverage for any “dishonest, malicious, fraudulent, criminal or intentional” act, what does “intentional” mean? In Berns v. Sentry Select Ins. Co., the Ninth Circuit Court of Appeals held that it means more than any “voluntary” or “deliberate” act.
Berns Bros., Inc. was insured under a Sentry Select Ins. Co. commercial general liability policy. The policy included an Employment Practices Endorsement covering certain injury “caused by an ‘act’ of … ‘wrongful termination’ or ‘harassment’ that … [r]esults from [the insured’s] employment practices ….” The Endorsement also contained an exclusion stating that coverage does not apply to “[a]ny dishonest, malicious, fraudulent, criminal or intentional” act.
Berns Bros., Inc. and its president, Berns, were sued by a former administrative assistant who alleged that Berns had “[u]nilaterally and abruptly oust[ed]” her from the company’s offices “and then terminat[ed] her part-time employment … in order to deprive her of any salary, health insurance reimbursement and other benefits.” She further alleged that Berns “lit into [her] while they were in her office” in “a loud, angry, and abusive tone that embarrassed and frightened her.”
Sentry denied any duty to defend the claim, and Berns then initiated this litigation. Sentry prevailed in the district court, which entered summary judgment in the insurer’s favor based on the intentional acts exclusion, reasoning that the underlying “alleged actions can only be described as intentional.”
The Ninth Circuit Court of Appeals reversed. Applying the interpretive principle ejusdem generis, the court reasoned that when read in the context of “dishonest”, “malicious”, “fraudulent” and “criminal” -- which describe particularly blameworthy conduct -- “intentional” does not apply to any purposeful act, but only intentionally wrongful acts (i.e., acts committed with a specific intent to wrongfully inflict injury). Because evidence showed the insured’s actions may have been justified, the Ninth Circuit conclude that Berns may not have acted with the requisite intent to come within the exclusion. Thus, a duty to defend existed.
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