The Standout Firm For

Insurance, Malpractice
And Business Litigation

In California

Just what counts as an accident for insurance purposes?

On Behalf of | May 17, 2022 | Insurance Law

Nearly every homeowner pays for a homeowner insurance policy. Such policies tend to cover certain types of damage to the home and the surrounding property. Some even cover the costs of certain lawsuits that follow accidents. However, insurance companies and homeowners do not always agree which things are or are not “accidents.”

We were recently reminded of this fact by a case that made its way to a California state appeals court. The case saw a homeowner sue her insurance company for failing to cover the cost of a suit her neighbors filed against her. The homeowner claimed the insurance company should have covered the damages because they resulted from an accident. However, the insurance company, and the court, disagreed.

Here’s how intent matters

By upholding the trial court’s summary judgment in favor of the insurance company, the appeals court also reinforced several decades of established precedent. Its opinion acknowledged that the homeowner may not have intended to damage her neighbor’s property, but that didn’t matter. She had acted with intent. Therefore, her actions were no accident and were not covered by her insurance policy.

In short, the woman had hired contractors to clear out trees and dig into a hill. The problem was that her actions carried into her neighbors’ property. The digging and cutting damaged the neighbors’ trees and drainage. The woman’s neighbors sued her, and the woman filed a claim with her insurance, saying the damage to the property had been accidental. She thought she had been working on her land.

The woman and her attorneys argued that a 2018 opinion from the California Supreme Court supported her definition of “accident.” Naturally, the idea of intent sat squarely at the center of the argument.

In the 2018 case of Liberty Surplus Ins. Corp. v. Ledesma & Meyer Construction Co., the California Supreme Court dealt with a somewhat similar situation. An employer faced a lawsuit after one of its employees molested a third party. The employer filed an insurance claim. The insurance denied the claim, arguing that the molestation was not an accident. However, in Liberty Surplus, the Supreme Court ruled in favor of the employer.

Because the homeowner invoked this ruling as part of her argument, the appeals court clarified the ways Liberty Surplus resembled and differed from the homeowner’s case:

  • In both cases, the insurance company denied a claim, arguing they weren’t accidents.
  • In both cases, a third party suffered damages. In the homeowner’s case, it was her neighbors. In the employer’s case, it was the party the employee had molested.
  • In both cases, the homeowner and the employer had argued the damages were unintended and, therefore, accidental.
  • However, the Liberty Surplus case involved an employer one step further removed from the damages. The employer had been negligent in its hiring. That negligence tied the employer to an employee who then damaged someone.
  • Simultaneously, the Supreme Court noted the definition of “accident” was more comprehensive than “negligence.” Therefore, the definition of “accident” could include “negligence.”
  • Accordingly, the court interpreted the employer’s negligent hiring of the employee as an accident. The employer did not take the action, the molestation, that led directly to harm. Instead, it accidentally hired someone who caused harm the employer did not expect.
  • In the homeowner’s case, the contractors performed the exact work the homeowner had intended. It didn’t matter if the homeowner didn’t expect the action to cause damage because the homeowner was directly responsible for the action.

To further clarify the role of intent, the appeals court quoted another case from 1989:

“An accident… is never present when the insured performs a deliberate act unless some additional, unexpected, independent, and unforeseen happening occurs that produces damage.”

Intentional actions can lead to unintentional harm

The case is a valuable reminder of the legal definition of “accident.” Since insurance policies frequently refer to “accidents,” it’s important for both insurance companies and policy holders to understand the term.

This case reminds us that actions aren’t defined as accidents by their consequences. Rather, deliberate actions only lead to accidents when something unexpected and independent separates them from the result. That unexpected and independent happening may be hard to identify at times, but it’s the golden standard for separating accident from not-accident.