Effect of “Assault & Battery” Exclusion: Entire Policy Must Be Read to Interpret Policy

Effect of “Assault & Battery” Exclusion: Entire Policy Must Be Read to Interpret Policy

Insurance policies, contrary to the belief of some members of the plaintiffs’ bar, are nothing more than a contract that needs to be interpreted like any other contract. In so doing the entire contract must be read to determine the intent of the parties to the contract.

In Certain Interested Underwriters at Lloyd’s, London v. Raymond C. LeMONS & others — N.E.3d —-, Mass.App.Ct. , 2014 Mass. App. LEXIS 60 (Mass.App.Ct. June 4, 2014), [enhanced version available to lexis.com subscribers], an insurance coverage dispute was presented to the Massachusetts Court of Appeal to resolve a dispute that arose after an altercation that occurred in a tavern.

The issue presented was whether a Superior Court judge properly granted summary judgment in favor of the insurer upon concluding that the assault and battery exclusion in the policy relieved the insurer from any duty to defend or indemnify the tavern.

BACKGROUND

On or about February 22, 2001, several unidentified people attacked and injured Raymond C. LeMons (Raymond), a defendant in this declaratory judgment action, while he was a patron of Luigi’s V, Inc., doing business as Gigi’s Pub (Gigi’s). Gigi’s was insured through a commercial general liability policy issued by Certain Interested Underwriters at Lloyd’s, London (Lloyd’s). The policy featured an assault and battery exclusion, which excluded coverage in the following situation:

“a. Bodily injury or property damage:
“(1) Expected or intended from the standpoint of any insured; or
“(2) Arising out of an assault or battery, provoked or unprovoked, or out of any act or omission in connection with prevention or suppression of an assault or battery, committed by any Insured or an employee or agent of the insured.” (emphasis added)

Raymond C. LeMons and his wife, Kathleen E. LeMons (Kathleen) (collectively, LeMonses), brought suit against Gigi’s to recover for bodily injuries and loss of consortium on a theory of negligent security by Gigi’s. Lloyd’s initially assumed the defense of Gigi’s under a reservation of rights, but during the course of the litigation, Lloyd’s disclaimed its duty to defend or indemnify Gigi’s, citing the assault and battery exclusion in the policy. Thereafter a Superior Court judge approved a settlement between the LeMonses and Gigi’s, which included a payment of $1.2 million on the underlying claim and assigned all of Gigi’s rights against Lloyd’s to Kathleen as litigation trustee.

Meanwhile, Lloyd’s filed this action seeking a judgment declaring that it had no duty to defend or indemnify Gigi’s with respect to the attack on Raymond. The parties filed cross motions for summary judgment. Following a hearing, the judge granted summary judgment to Lloyd’s, reasoning that the assault and battery exclusion relieved Lloyd’s from a duty to defend or indemnify the tavern.

DISCUSSION

Interpretation of an insurance policy is a question of law to be determined by the court. The interpretation of an insurance contract is no different from the interpretation of any other contract, and an appellate court must construe the words of the policy in their usual and ordinary sense.

If free from ambiguity, an exclusionary clause, like all other provisions of an insurance contract, must be given its usual and ordinary meaning. The interpretation of the particular phrasing of the insurance exclusion at issue here is a matter of first impression in Massachusetts. In particular, the parties dispute the effect of the final phrase of the exclusion: “committed by any Insured or an employee or agent of the insured.” They disagree about which of the antecedent phrases this wording restricts. The answer to that question determines whether the insurance coverage encompasses the claims pertaining to the injuries to Raymond.

Lloyd’s argues that the “committed by” language attaches only to the words “act or omission” that precede it. Lloyd’s reads the clause as excluding claims “arising out of an assault or battery, provoked or unprovoked”—no matter who committed that assault or battery—and as excluding an “act or omission” that was “committed by any Insured or an employee or agent of the insured.” Lloyd’s understands the “act or omission” language as excluding negligent security claims, which necessarily pertain to acts or omissions of the insured.

The LeMonses argued that the Assault and Battery Exclusion must apply only when an assault or battery is committed by an employee or agent of Gigi’s. According to this reading, claims arising from assaults or batteries by anyone other than an insured would be covered by the policy.

The court of appeal read the disputed exclusion clause to have two distinct parts. The first excludes coverage for injuries “[a]rising out of an assault or battery, provoked or unprovoked.” The second excludes coverage for injuries arising “out of any act or omission in connection with prevention or suppression of an assault or battery, committed by any Insured or an employee or agent of the insured.” Every word must be presumed to have been employed with a purpose and must be given meaning and effect whenever practicable.

The use of the words “arising out of” before assault and battery and, again, before any act or omission indicates that the two phrases are distinct and that words restricting the meaning of the former do not operate on the latter. The court read the comma before the words “committed by” as attaching the committed by language only to the words “act or omission.” Without the comma in that location, it might have appeared that the “committed by” wording applied to the words immediately before it, assault or battery. The comma confirms that the plain meaning of the part of the exclusion beginning with “act or omission” is to exclude negligent security claims from coverage.

The “act or omission” language was not necessary to exclude negligent security claims from coverage in Massachusetts. Moreover, given that the language of the exclusion originated in a standard insurance form, using the additional language ensured that negligent security claims would be excluded from coverage across jurisdictions regardless of the jurisdiction’s interpretation of “arising out of an assault or battery.” Since negligent security claims were excluded by the language the use of additional language specifically addressing negligent security claims confirms that such claims are excluded in this case as well.

Finally the Court of Appeal concluded that the LeMonses’ reading of the exclusion defies common sense. They argue that the insurance policy covers claims that arise out of assaults or batteries by customers or other third parties, but excludes claims arising out of assaults or batteries committed by an employee or agent. It is hard to imagine that Lloyd’s would have drawn this line in drafting the contract. Far more sensible is Lloyd’s’ understanding—that the policy excludes coverage regardless who committed the assault or battery.

There is no ambiguity in the assault and battery exclusion in the insurance policy provided by Lloyd’s. The plain language of the exclusion, bolstered by the context of the insurance policy as a whole where the underlying claims stemmed from an assault and battery, is effective regardless who committed that assault and battery.

ZALMA OPINION

Again, a plaintiff with a large jury verdict gave up the opportunity to collect that judgment in favor of a chance to collect from an insurance company. By so doing the plaintiff lost whatever portion of the $1.2 million judgment it earned against Gigi’s and ended up with nothing.

A large judgment and serious injury does not guarantee that an insurance company will pay the judgment. Clear and unambiguous exclusions will normally be enforced by courts and should be enforced by every court. The plaintiffs gambled that their interpretation of the policy was more accurate than the interpretation of the Underwriters at Lloyd’s. They were wrong.

    By Barry Zalma, Attorney and Consultant

Reprinted with Permission from Zalma on Insurance, (c) 2014, Barry Zalma.

Barry Zalma, Esq., CFE, is a California attorney who limits his practice to consultation regarding insurance coverage, insurance claims handling, insurance bad faith and fraud and acting as a mediator or arbitrator on insurance disputes. Mr. Zalma serves as a consultant and expert almost equally for insurers and policyholders. He founded Zalma Insurance Consultants in 2001 and serves as its only consultant. He recently published the e-books, "Zalma on Rescission in California - 2013"; "Random Thoughts on Insurance" containing posts from this blog; "Zalma on Insurance;" "Murder and Insurance Don't Mix;" “Heads I Win, Tails You Lose — 2011,” “Zalma on Diminution in Value Damages,” “Arson for Profit” and “Zalma on California Claims Regulations,” and others that are available at Zalma Books.

Mr. Zalma can be contacted at Barry Zalma or zalma@zalma.com, and you can access his free "Zalma on Insurance Fraud" newsletter at Zalma’s Insurance Fraud Letter.

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