CHAPTER 8 FORTUITY

• Jurisdiction: United States

A. Fortuity

Insurance involves the transfer from the policyholder to the insurer the risk of possible losses. Insurance, by definition, cannot be available for losses that the policyholder knows of, plans on, intends to cause, or is aware are substantially certain to occur. That a loss must be fortuitous to be covered under a policy of insurance arises from the basic concept that insurance covers risks. The Restatement of Contracts, § 291, cmt. a (1932) states:

[A] fortuitous event is an event which, so far as the parties to the contract are aware, is dependent on chance. It may be beyond the power of any human being to bring to pass; it may be within the control of third persons, provided that the fact is unknown to the parties. The thrust of the definition is that the occurrence be unplanned and unintentional in nature. [Emphasis added.]

If the insured knows when he or she purchases a policy that there is a substantial probability that he or she will suffer or has already suffered a loss, the risk ceases to be contingent and becomes a probable or known loss (which is ordinarily uninsurable). Therefore, the fortuity doctrine holds that insurance is not available for losses that the policyholder knows of, plans on, intends to cause, or is aware are substantially certain to occur.¹

In Koppers Co., Inc. v. Aetna Cas. & Sur. Co., 98 F.3d 1440 (3d Cir. 1996), the Third Circuit was faced with a claim of lack of fortuity.

The rationale supporting the generally accepted rule against indemnity for non-fortuitous losses is succinctly explained in Robert E. Keeton & Alan I. Widiss, Insurance Law § 5.3(a), at 476-77 (student ed. 1988):

[The concept of fortuity], which expresses the concern that insurance arrangements should be limited to the transfer of economic detriments that are fortuitous, is generally regarded as a principle that is central to the basic determination of what risks may or should be transferred by an insurance arrangement. In most circumstances, it is contrary to public policy to permit the enforcement of an insurance contract if it would provide indemnification for losses that are not fortuitous. . . .

The [rule requiring fortuity] embodies a fundamental and significant public policy interest that in some contexts is sufficiently important to preclude coverage claims even when there are explicit agreements to the contrary, but in any case, is a very compelling public interest in regard to coverage questions when there is no applicable provision in the insurance agreement.

B. Assault and Battery and Other Intentional Act Exclusions

Insurance companies wouldn't want to insure a bar against assault and battery, because barroom fights causing injuries to patrons and employees are frequent. Some courts fall prey to the claim of a plaintiff that the assault or battery in question was a result of negligence. In Catlin Specialty Ins. Grp. v. RFB, INC., 2017 WL 2493125, No. 2:16-3135-RMG, (D.S.C. June 8, 2017), the defendant Jesse Bass alleged that on December 6, 2012, Cedrick Price, a bouncer at a bar owned by Frank Clyburn and RFB, Inc. (together, "Henry's"), struck him with force sufficient to knock him unconscious and to inflict serious brain injury. Mr. Bass filed a federal lawsuit seeking damages.

In that matter, claims against Elite Security have settled and Mr. Price is in default. Regarding Henry's, Mr. Bass asserts a claim of negligence, alleging Henry's breached its duty to exercise reasonable car in the hiring, supervision, and retention of Elite Security.

Plaintiff Catlin Specialty Insurance Group issued a commercial general liability ("CGL") policy to Henry's that was in effect at the time of the incident. Catlin is defending Henry's in the underlying lawsuit, subject to a reservation of rights. The policy limit is $1 million per occurrence. The policy, however, has an Assault and Battery Endorsement that sets a sub-limit of $25,000 per occurrence.

Catlin sued seeking a declaration that the Assault and Battery Endorsement applies to Mr. Bass' claim against Henry's. The underlying litigation has been stayed pending resolution of the present action.

The sole question before the Court is whether the CGL policy's assault and battery sublimit applies to the December 6, 2012 incident in which Mr. Bass was injured. The sublimit applies to claims for bodily injury arising from an assault and battery or out of any act or omission in connection with the prevention, suppression, or failure to protect or suppress such acts including the failure to warn, train, or supervise, whether caused by or at the instigation or direction of the insured, his employees, patrons, or other person.

In South Carolina, an assault is conduct that places another "in reasonable fear of bodily harm," and a battery is "the actual infliction of any unlawful, unauthorized violence on the person of another." Mr. Bass alleges he was struck in the head, knocking him unconscious by Mr. Price. There is no genuine dispute that Mr. Bass's alleges his injuries arise from an assault and battery.

Mr. Bass sued Henry's for negligence, not the intentional torts of assault and battery.

The court recognized that alleging negligence in a case where a patron was battered is a common pleading practice. Since insurers who insure bars are reluctant to insure the bar against liability for barroom fights or for the actions of bouncers. Plaintiffs often attempt to plead into coverage by asserting negligence—attempts federal and state courts routinely reject.

Although the injuries may have been caused by the negligent acts of the defendant, that does not necessarily mean that they did not arise out of an assault and/or battery. Plaintiffs cannot mischaracterize intentional acts as negligence claims in order to avoid the exclusions contained within the insurance policy. Even if Henry's was negligent, and even if that negligence proximately caused Mr. Bass's injuries, Mr. Bass's injury nonetheless arises out of a battery. Mr. Bass cannot avoid a policy sublimit by mischaracterizing Mr. Price's admittedly intentional act as negligence.

If a sublimit for injuries arising from an assault and battery does not apply to punching a man in the head intentionally during a fight at a bar, then it is difficult to imagine when it would ever apply. Mr. Bass argued that "assault and battery" is ambiguous because the insurance policy does not define those terms. That argument is without merit. The terms assault and battery are well defined under South Carolina law and Mr. Bass apparently agrees with Catlin about the definition of those terms.

Mr. Bass also argued that there is a question of disputed material fact about whether Mr. Bass's injuries arose from a battery. If Mr. Bass alleges Mr. Price acted in a lawful, legally authorized manner when he struck Mr. Bass, then he breached no duty owed Mr. Bass and neither Mr. Price nor his employer is liable for the resulting injury to Mr. Bass. If Mr. Bass does not allege Mr. Price acted lawfully, then there is no factual dispute.

Moreover, in the underlying litigation Mr. Bass has alleged Mr. Price acted unlawfully. alleging Mr. Price's actions were "done with reckless disregard for Plaintiff's rights." Mr. Bass is estopped from arguing the opposite position in this coverage litigation.

Henry's argues that summary judgment should be denied because it was not "adequately notified" of the assault and battery sublimit. Henry's does not argue that it did not have actual notice of the policy limitation. Rather, Henry's argues it was not "notified" that an assault and battery limitation on coverage could apply to claims arising from an assault and battery even if those claims are artfully pleaded as negligence. That argument is, of course, without merit.

The court, following the law, granted the plaintiff's motion for summary judgment and concluded that under the assault and battery endorsement of commercial general liability policy, Catlin Specialty Insurance Company was not obligated to indemnify RFB, Inc. and Frank Clyburn for any amount above $25,000 with respect to the claims in Bass v. RFB, Inc., Civ. No. 2:15-2410-RMG.

Child molestation is a special type of intentional tort when considering the applicability of an insurance policy. In J.C. Penney Cas. Ins. Co. v. M.K., 52 Cal. 3d 1009, 804 P.2d 689, 278 Cal. Rptr. 64 (1991), Justice Eagleson of the California Supreme Court put the issue to rest that abuse of a child is always an intentional act that may never receive defense or indemnity from a liability policy. Presented to the supreme court was the fact that a 39-year-old man sexually molested a 5-year-old girl on 20 to 25 separate occasions over a period of approximately 9 months. The man admitted that he intended to molest the girl and that none of his sexual acts with her were consensual nor were they accidents. He pleaded guilty to criminal charges (Pen. Code, § 288, subd. (a)) and was sentenced to prison. In a subsequent civil action, he was ordered to pay $500,000 to the child and her mother.

Presented to the California Supreme Court was the issue of:

. . . whether the insurer that issued a homeowner's policy to the molester is obligated under the policy to pay the $500,000 judgment. The insurer contends

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