Tanner v. Nationwide Mut. Fire Ins. Co., No. 07-0760 (Tex. April 17, 2009), see Tanner Opinion.
You would think that an exclusion of intentional acts in a policy that covers only accidents would be easy to figure out, but, as this case shows, the intentional-acts exclusion is one of the most contentious features of a standard liability policy. If read superficially, this case reiterates a well-established principle of Texas insurance law that what is excluded is the intent to cause the injury, not the intent to do the act that causes the injury. Reading between the lines, however, the decision may be a warning to insurance companies not to try to broaden the exclusion to eliminate negligent or reckless conduct.
The insured led police in central Texas on a dangerous high-speed chase that ended with a collision that seriously injured the Tanner family. The insured apparently skipped bail and was never prosecuted. The Tanners submitted a claim under the miscreant's auto coverage. The Nationwide policy excludes the following:
Property damage or bodily injury caused intentionally by or at the direction of an insured, including willful acts the result of which the insured knows or ought to know will follow from the insured's conduct. [Emphasis added]
Nationwide denied coverage arguing that the insured ought to have known that driving at speeds between 80 and 100 mph would result in bad things. As the dissenting justice in this case observed, "[A]nyone who drives a huge 4-ton pickup at 100 miles an hour through city streets during rush hour 'ought to know' that someone is going to get hurt."
A jury diagreed and found that the insured did not intentionally cause the collision. The trial court threw out the verdict and ruled as a matter of law that the exclusion applied. The intermediate applellate court sided with the trial judge, but the Texas Supreme court in this opinion reversed and rendered in favor of the Tanners, holding:
[W]e emphasize this critical point: "intentionally" as used in the exclusion speaks to the resulting damage or injury, not to the actions that led to it. That is, the language is effect-focused and not cause-focused, voiding coverage when the resulting injury was intentional, not merely when the insured's conduct was intentional. [Emphasis in original]
The majority noted that the insured tried to brake and avoid the collision; he didn't intend to cause the injury. Admittedly, this critical point would end the argument in most standard intentional-act exclusions, but the Nationwide exclusion is broader than usual. (The most common standard exclusion is for "bodily injury and property damage expected or intended from the standpoint of the insured."). The Nationwide policy also excludes "willful acts the result of which the insured knows or ought to know will follow from the insured's conduct."
"Ought to know" is short hand for negligence. You ought to know something if an ordinary person under the same or similar circumstances would know it. That is the negligence standard. In other words, Nationwide might be trying to shoe-horn ordinary negligent conduct into its intentional-acts exclusion. What does the majority say about this? The opinion focuses on the words, "will follow." Taken literally, the "ought to know" part kicks in only when a person is capable of absolute certainty that injury will result. Can that ever happen? The ancient Greek sceptic philosophers demonstrated that it is impossible to truly know anything, especially the future (thus giving an early boost to the science of probabilities).
What the Court is really saying, I think, is that no insurer in Texas should be allowed to broaden this type exclusion to include less than intentionally caused injury. Earlier in the opinion, the majority observed:
A contrary reading of the exclusion -- that reckless acts absent deliberate injury are sufficient to forfeit coverage-- would render insurance coverage illusory for many of the things for which insureds commonly purchase insurance. For example, Texas mandates liability coverage for drivers, but if ordinary Texans are unprotected from those who intentionally run red lights, but intend no harm to to others by doing so, then Texas is replete with noncoverage notwithstanding its mandatory-coverage requirement.
The dissent argues for a police-chase exception that would deem as intentional any injury caused in the course of the chase. But that seems arbitrary.
But what if an insurer comes out with an exclusion similar to Nationwide's that excludes "willful acts the result of which the insured knows or ought to know would likely follow (or "could follow")? Under the reasoning above, the high court would (I should say, likely would) refuse to enforce it as a matter of public policy.
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