Well, What Did You Expect? the Utah Supreme Court Discusses Accidents

• Publication year: 2008
• Pages: 15

Utah Bar Journal Volume 21.

Vol. 21, No. 3, 15. Well, What Did You Expect? The Utah Supreme Court Discusses Accidents

Utah Bar Journal
Vol. 21, No. 3
May/June 2008

Well, What Did You Expect? The Utah Supreme Court Discusses "Accidents"

Well, What Did You Expect? The Utah Supreme Court Discusses "Accidents"

by Mark W. Dykes

If you borrow your neighbor's cabin, build an excessively festive fire in the hearth, and burn the place down, your liability insurer will defend you against the ensuing lawsuit and indemnify you against payment of any judgment.1 But if you intentionally torch the place, you are out of luck because liability insurance normally only applies to accidents, not the outcome of deliberate acts

The term used in most modern policies is "occurrence" (some policies say "event") a change made to ensure that damage that happens over a long period of time can still be accidental. Thus, we normally get something like this: "An 'occurrence' is an accident, including repeated exposure to the same or similar harmful conditions." Notwithstanding the use of the term "occurrence," however, the definition of "accident" remains the critical question.2 And therein lies the rub.3

The Utah Supreme Court has long held that the "natural and probable consequences" of an action cannot be an accident. If you roll a large rock toward a parking lot full of cars, it's not an accident when a fender is dented. If you aim a loaded gun at someone and pull the trigger, it's not an accident when bodily injury results. We are talking here of course about the results of intentional, not negligent actions, a distinction that is often difficult to draw, given that all acts are in some sense "intentional."4 But we presumably can all see the difference, for example, between the construction worker who fails properly to tap in that last nail that would have stopped the wall from falling down and crushing other property, and the insured who points a loaded gun into a crowd and pulls the trigger.

In N.M. ex rel Caleb v. Daniel E. & Safeco Prop. & Cas. Ins. Co., 2008 UT 1, 175 P.3d 566, (Safeco), the Utah Supreme Court revisited the definition of "accident," yielding a sometimes problematic decision.

Standing and Ripeness

Daniel, who was insured with Safeco, "swung a hockey stick at Caleb, striking him in the head and causing serious injuries." Id.¶ 1. Next, "Caleb filed a claim against the policy for his injuries, but Safeco denied coverage. Caleb then filed suit against Safeco, seeking a declaratory judgment that Safeco must provide coverage to Daniel for any legal liability arising out of the incident." Id.¶ 4. But under the standard "no-action" clause contained in most liability policies, a victim of an insured's act cannot sue the liability insurer (we have no "direct-action statute" in Utah) absent a final judgment against the insured after trial or a settlement to which the insurer has agreed.5 Given Safeco's reference to coverage for "any" legal liability, it is clear that Daniel's fate had not yet been decided when the opinion issued. Caleb thus had no standing to sue Safeco, at least without Safeco's consent, an issue on which the court's prior decisions have been abundantly clear.6

This is not just a standing issue: it's a ripeness issue, for as the court has previously noted, an insurer is not required to indemnify even its own insured until a judgment issues or the insurer agrees to a settlement,7 and there is normally no point in issuing an advisory opinion that, if there is liability, then the insurer must pay. Indeed, given that Daniel had yet to be adjudged liable, the only insurer duty at issue in Safeco was the duty to defend (the court's reference to "Safeco's duty to indemnify Daniel[,]" id.¶ 6, is premature), a duty that Caleb, who was not the insured, had no standing to enforce.

While there have been cases in other jurisdictions where a victim's declaratory judgment action against an insurer has been allowed prior to entry of an underlying judgment against the insured...