Unintended Consequences of an Intentional Act Can Constitute an Occurrence

The New York Appellate Division, Fourth Department, recently reiterated the well-established insurance principle that there can be liability coverage for an insured's liability arising out of his own intentional act if the resulting injury or damage was unintended. In Allegany Co-Op Insurance Co. v. Kohorst, 254 A.D.2d 744, 678 N.Y.S.2d 424 (4th Dep't 1998), the insured set fire to his own property. There was no reasonable doubt that he started the fire deliberately, since he was convicted of attempted arson in the second degree. The fire burned Michael King. Mr. King commenced a personal injury action against the insured. In a declaratory judgment action, the trial court granted summary judgment in favor of the liability insurer, holding that there was no "accident," and consequently no "occurrence," because the insured had intentionally set the fire. 678 N.Y.S.2d at 425.

The Appellate Division reversed. The court ruled that Mr. King's injury was an accident because the insured did not intend to hurt him, even though he did purposely start the fire. The court reasoned that

"Accidental results can flow from intentional acts. The damage in question may be unintended even though the original act or acts leading to the damage were intentional."

Id. (quoting Salimbene v. Merchants Mut. Ins. Co., 217 A.D.2d 991, 994, 629 N.Y.S.2d 913, 915-16 (4th Dep't 1995). The court distinguished decisions holding that injuries sustained as a result of rape and child molestation were not accidental, because in those cases the injury "flowed directly from and was inherent in the acts allegedly committed by the insured." Id.

The court's decision was in accord with established New York law. Courts applying New York law have long held that there can be a covered occurrence where the original act was intended, as long as the resulting injury or damage was unintended. Results of negligence and calculated risks may be unintended or unexpected. See, e.g., City of Johnstown v. Bankers Standard Ins. Co., 877 F.2d 1146, 1150 (2d Cir. 1989)("It is not enough that an insured was warned that damages might ensue from its actions, or that, once warned, an insured decided to take a calculated risk and proceed as before"); McGroarty v. Great Am. Ins. Co., 36 N.Y.2d 358, 368 N.Y.S.2d 485, 489 (1975); Gen. Accident Ins. Co. v. Manchester, 116 A.D.2d 790, 497 N.Y.S.2d 180, 182 (3rd Dep't 1986).

[Although we do not as a rule comment editorially on the decisions we report, it is at least noteworthy that the insured, who committed arson and was as a result subject to criminal penalties as well as (presumably) the loss of any first-party coverage protection, was nevertheless as a result of this decision entitled to coverage for liability to third parties injured by the very same arson.]