Minnesota Supreme Court: Insufficient Evidence Of Workplace Violence Precludes Intentional Acts Exclusion

Travelers Indemnity Co. v. Bloomington Steel & Supply, 2006 WL 2167293 (Minn. August 3, 2006) is a tough coverage fight that, from what I can discern in the opinion, was very well argued by the attorneys for both sides.  I thought the court’s opinion made a leap in analysis that doesn’t fully make sense to me.  However, I’m trying to give the court the benefit of the doubt because the opinion was written by Minnesota Supreme Court Justice Alan Page, who was a star player for the Minnesota Vikings in the 1970s, one of the greatest defensive tackles and kick-blockers in NFL history, and a guy I idolized and watched every Sunday as a kid, and who is perhaps second only to the incomparable Fran Tarkenton in the Viking hall of heroes.  Still, as a coverage lawyer I must remain as objective as possible.

In the case, the issue was whether Travelers should provide coverage for the employer’s potential vicarious liability stemming from a manager’s assault on a worker.  The manager, Reiners, told the worker to stop speaking Spanish.  Later in the day, the manager found him again speaking Spanish and whacked him with a piece of wood, fracturing his skull.  No surprise, the employee sued the company on the ground that it was vicariously liable for Reiners’ conduct.  Travelers brought an action seeking a court declaration that no coverage existed because of the intentional acts exclusion.  The parties stipulated that Reiners had a history of violence, and Travelers argued Bloomington Steel should be charged with this knowledge, especially because he was the head of the company and its shareholder.  That is a powerful argument.

However, the court said the language of the Travelers policies showed that Reiners and the company must be considered separately: the exclusion applied to acts expected or intended from the standpoint of "the insured," not "any insured."  But the court, somewhat mysteriously, concluded merely that the "language of the Travelers’ policies does not require that Reiners’ intent be automatically imputed to Bloomington Steel." The word "automatically" kind of fuzzes things up.  Should it be imputed or not?

Apparently not, because the court then addressed the second Travelers argument: general corporate law principles charge a company with constructive knowledge of material facts its officers acquire in the course and scope of their employment.  This sounds like a winner, because are you going to tell me Bloomington Steel shouldn’t be held to know that its main guy had a history of attacking people in a work setting? If they don’t know, the corporate logo should be one of those See No Evil, Hear No Evil, Speak No Evil monkeys.  The trial court granted summary judgment to Travelers, and the Court of Appeals agreed, but the state Supreme Court reversed.  The Supreme Court first said that corporate law principles can’t override the language of the insurance contract, but then backtracked and said maybe the company could be charged with knowledge of Reiners’ violence; however, the record contained insufficient admissible evidence of that violence.  Excuse me?  I thought the parties agreed the history of violence was undisputed.  Isn’t that admissible evidence?  The case was remanded, but for what?  For further evidence of the violence to be developed?  That would make about as much sense as rooting for the Green Bay Packers.

7 Comments

Filed under Duty to Indemnify, Liability Policies

7 Responses to Minnesota Supreme Court: Insufficient Evidence Of Workplace Violence Precludes Intentional Acts Exclusion

  1. Scott Jonsson

    How many Super Bowls have the Packers won ? The Vikings ?

  2. Tex Mex

    Question:
    If a corporation can only act through its employees, and an employee’s intentional tort cannot be imputed to the corporation, can the intentional acts exclusion ever apply to a corporation?

  3. An employee’s intentional as well as negligent acts can often be imputed to the corporation and vicarious liability established. The key is not whether the employee acted intentionally, but whether the corporation acted intentionally. I often deal with situations like sex abuse where, both from a corporate law and insurance coverage standpoint, the organization and its insurer become liable for intentional conduct of an offender.

  4. Tex Mex

    Thanks
    I generally agree, except for the “…whether the corporation acted intentionally” part. I am somewhat familiar with the state of the law on this issue, but, theoretically, a corporation, although treated as a person under the law, cannot act with intent, or otherwise, without a live human acting with that intent. Which is why I am alarmed to read about the continued trend of finding corporations criminally liable.
    I assert that only a person, not a corporation is capable of commiting an intentional tort. If liability for that act can be imputed by law to a corporation (vicariously, as opposed to the corporation being negligent for failing to prevent the intentional tort for instance), then the intentional acts exclusion should preclude coverage for an action brought against the corporation.

  5. Well, perhaps. But I think the underlying case was only about civil liability, and the coverage case is about whether the corporation should be covered by the insurance policy. In these situations, almost always the coverage analysis is that one who commits an assault or sexual abuse is excluded from coverage by an intentional acts exclusion, or more simply in many so-called “occurrence” policies, that the person is never covered in the first place by the policy because his acts were not accidental and therefore are not an occurrence. Because the happening of an occurrence is a precursor to coverage, under the terms of an insurance contract, the offender never falls under the coverage grant at all. (This latter analysis is favored by coverage lawyers because it means the burden remains on the putative insured to prove coverage, while an insurer would have the burden of proving the applicability of an exclusion).
    But as the court pointed out, this policy (like most policies) separates consideration of each insured’s acts for coverage purposes. Remember that the purpose of a liability policy is to insure the insured against liability for all damages that fall within the policy’s coverage, unless otherwise excluded. So if corporate law or tort principles establish liability for one of the insureds, the coverage analysis must turn to whether that liability is within the coverage grant, and then, whether it is excluded.
    Here, it appears the underlying law says that the corporation can be vicariously liable for the acts of its agent. No surprise. Intentional acts, even assaults, committed in the workplace are usually found to arise out of employment and out of activities that are within the course and scope of employment. The coverage question is a distinct matter, however, because it is contractual, and tort theory can’t establish the meaning of a contract, which depends on the intent of the parties to the contract. Although an attacker is usually not covered because what he did was not an accident, that intent is not necessarily imputed to the corporation, which might be merely negligent or perhaps had no fault at all. Most often, a worker does something a company doesn’t know about, like takes drugs and then runs his truck into someone. Usually, the company is covered in that circumstance. This case is a little different. The corporation apparently would have had cause to know its officer had a history of violence such that they should have been substantially certain it would happen again. Perhaps not precisely when or where it would happen, but that it would happen. This argument has been brought out in sex abuse cases where an archdiocese had knowledge a priest was an abuser and moved him to another parish. Sometimes courts accept that the organization should be considered, for insurance purposes, to know the abuse would happen again. Other times, courts say the organization’s mental state did not rise to the level of intent. Stupidity yes, but not intent.

  6. Charles Slane

    This was my case, so I thought I would point some things out.
    First, this was about derivitive liability not vicarious liability. The issue was whether the coverage extended to the corporate insured for their own negligence in retaining an employee and failing to supervise an employee. There was obviously no coverage for the employee.
    Second, Travelers could have excluded this conduct very easily. Their policy was as broad as possible. They used a seperation of insureds clause rather than a joint obligations clause and excluded only injury expected or intended from the point of view of “the insured” rather than from the point of view of “any insured”.
    The “occurrence” in the case was the corporate decision to retain the employee or the corporate decision not to supervise the employee.
    The issue of whether the corporate insured had enough notice to have “expected” the injury is what is left for trial.

  7. It certainly is good to hear from the source, thanks for the insights.