Coverage under most commercial general liability (CGL) policies applies only to liability arising from an “accident.” As such, injury or damage that an insured “expected or intended” to occur is not covered. But whether an insured subjectively intended to cause injury may be difficult to determine, even when the conduct itself was clearly intentional. In a recent decision by the Supreme Court of Iowa, the court examined a related, if not potentially more difficult, issue: When does an insured’s “gross negligence” reach a point at which the resulting injury is no longer an “accident” for purposes of CGL coverage? Although the short answer is that “it depends,” the allegations in this particular case were deemed sufficient to trigger a duty to defend.
The Underlying Action
The decision stems from an underlying lawsuit by the estate of Stephen Booher against Stuart Glen, an employee of amusement park owner, Adventure Lands Inc. (Adventureland). Booher was fatally injured while working as a loading assistant on an Adventureland water ride, Raging River. Glen worked as the ride operator at the time of the incident, during which Booher fell onto the ride’s moving conveyer belt and was pinned between the ride and a concrete sidewall. Booher passed away several days later.
In the complaint filed in the underlying action, the Boohers alleged that Glen’s gross negligence both before and after starting the ride proximately caused Booher’s injuries. Among other things, it was alleged that Glen failed to follow proper protocols before starting the ride, including failing to confirm that Booher was not standing on a boat. He also allegedly failed to stop the ride by various means, even after seeing that Booher had fallen into the ride while it was running and was in distress.
The Coverage Action
The insured sought coverage for the underlying action from Adventureland’s general liability insurer, T.H.E. Insurance Co., which had issued both a CGL policy and a follow-form excess liability policy. In response, T.H.E. commenced this action seeking a declaration that it had no defense or indemnity obligations for the Booher action under either of its policies. T.H.E. alleged that the Boohers’ gross negligence claim was inconsistent with the “accident” and “unexpected” requirements of the CGL policy, thus obviating any possibility of coverage.
T.H.E. and the Boohers cross-moved for summary judgment on that issue, and the lower court granted T.H.E.’s motion. Focusing primarily on the events after Booher fell into the ride, the lower court reasoned that Booher’s injuries could not have been accidental, unexpected, or unintended from Glen’s standpoint. Rather, the court held, the essence of the gross negligence claim was that the injuries were the natural and expected result of Glen’s conscious failure to stop the ride after learning that Booher fell in. For this reason, the court ruled that the gross negligence claim could not possibly involve an injury caused by an “accident,” and even if it did, that coverage would be barred by the CGL policy’s expected or intended injury exclusion.
The primary issue on appeal was whether a gross negligence claim generally, and specifically the claim asserted here, can ever implicate section I of the CGL policy. A focal point of the dispute was an Iowa statute that limits suits between co-employees to claims for gross negligence. The law requires showing that the defendant, here, Glen: (1) knew of the peril at hand; (2) knew that injury was a probable, not merely possible, result of the danger; and (3) consciously failed to avoid the peril.
T.H.E. argued that the accident requirement and the expected or intended exclusion in the CGL policy were inherently at odds with the elements of a prima facie gross negligence claim under Iowa law. By definition, T.H.E. argued, such claims involve an injury that was expected and not accidental, thus foreclosing any possibility of coverage for the gross negligence claim in the Boohers’ lawsuit.
The Iowa Supreme Court disagreed. Like most standard CGL policies, the T.H.E. policy did not define “accident.” Iowa courts have defined the term as “an unexpected and unintended ‘occurrence’ so long as the insured does not expect or intend both it and some injury.” As used in a policy exclusion, Iowa courts have held that the term “expected” similarly denotes that the actor knew or should have known that there was a substantial probability that his or her actions would have certain consequences. In other words, the court explained, that injury is “expected,” and thus not an “accident,” if it was “practically certain” to flow from the insured’s acts or omissions. By comparison, the conduct required to establish gross negligence need not involve an intent to injure, nor a practical certainty of injury; knowledge that injury is “more likely than not” is sufficient.
Based on the above, the court could not agree that CGL coverage is inherently unavailable for claims of gross negligence. Rather, the court concluded, it is possible to “thread the needle” by showing that the insured’s acts or omissions gave rise to an expectation that an injury was more likely than not to occur, thus amounting to gross negligence, while also showing that the injury was not highly likely or practically certain to occur, thus qualifying as an “accident.” While noting that this balance may not be possible in all situations, the court found the broad allegations in the underlying complaint here sufficient to do so. The court therefore reversed the lower court order granting T.H.E. summary judgment with respect to section I because it could not say at the early stage of this particular case that there was no possibility of coverage under the CGL policy.