Pub. Serv. Mut. Ins. Co. v. Goldfarb - 53 N.Y.2d 392, 442 N.Y.S.2d 422, 425 N.E.2d 810 (1981)

Rule:

Whether coverage for civil liability arising from a criminal act is permissible depends upon whether the insured, in committing his criminal act, intended to cause injury. One who intentionally injures another may not be indemnified for any civil liability thus incurred. However, one whose intentional act causes an unintended injury may be so indemnified.

Facts:

Plaintiff Public Service Mutual Insurance Company, a multiline insurer, issued a "Dentist's Professional Liability Policy" to the Dental Society of the State of New York. Defendant, Saul Goldfarb, a member of the society, obtained coverage under that policy. Defendant Jacqueline P. Schwartz was a former patient of Dr. Goldfarb who received dental treatment from him on May 23, 1977. Defendant Schwartz claimed that in the course of receiving such treatment, she was sexually abused by Dr. Goldfarb. This claim, the subject of a pending civil suit, also formed the basis of professional disciplinary proceedings against Dr. Goldfarb and resulted in a criminal conviction of the crime of sexual abuse in the third degree. Plaintiff had asked the court in a declaratory judgment action to determine whether its policy of insurance provided coverage for the civil claim seeking compensatory and punitive damages. The policy required the insured to notify the company as soon as possible in the event of an accident, unusual occurrence or receiving notice of claim or suit, and provided that the insurer would pay damages resulting from any claim or suit based upon malpractice, error, negligence or mistake, assault, slander, libel, or undue familiarity. The trial court found no obligation on the part of the plaintiff to defend. The appellate court reversed the trial court’s decision. Plaintiff appealed. 

Issue:

Did the criminal consequences of the insured’s conduct preclude coverage under the insurance policy issued by the plaintiff? 

Answer:

No.

Conclusion:

The court modified the order and affirmed. The court held that determination of whether plaintiff was obligated to defend the insured depended on whether notice of the claim was given and whether the claim fell within the policy. The court found that notice was given and that the claim could be covered. The mere fact that the insured's conduct was criminal did not preclude coverage under the policy. However, it was important to look at whether harm was intended; if injury was intended then plaintiff was not obligated to indemnify. Furthermore, it was important to determine whether the injury occurred in the course of treatment. Plaintiff was not obligated to indemnify for any punitive damages.