WAS ASSAULT ON EMPLOYEE "EXPECTED"?

Commercial General Liability	Separation of insureds Clause
Expected or Intended Exclusion	Duty to Defend

Jose Padilla (Padilla), an employee of Key Star, was assaulted by Cecil Reiners (Reiners), the sole shareholder, officer and director of Bloomington Steel& Supply Company (Bloomington). Padilla sued Reiners and Bloomington.

Bloomington had a commercial liability insurance policy with Travelers Indemnity Company (Travelers) and an umbrella liability policy with Charter Oak Fire Insurance Company, a unit of Travelers (Charter Oak). Travelers defended Bloomington but did so under a reservation of rights. When the court in the Padilla lawsuit found in favor of Padilla, Travelers brought a declaratory judgment action seeking the court's determination that it did not owe Bloomington a duty to defend or indemnify it.

The named insured on the policy was Bloomington Steel & Supply Company. The lower court found that this exclusion barred coverage for Padilla's injuries because of the expected and intended exclusion. The court of appeals affirmed. Padilla then petitioned the Supreme Court for further review. Travelers argued that, because Reiners was the sole shareholder, director, and officer of the company, his control was so complete that the intent and expectation must be imputed to the corporation.

The Supreme Court of Minnesota disagreed. It stressed that both the Travelers policy and the Charter Oak policy contained a "separation of insureds" clause that provided in relevant part: "[T]his insurance applies: [(1)] As if each Named Insured were the only Named Insured; and [(2)] Separately to each insured against whom claim is made or 'suit' is brought." According to the court, the effect of this clause was to require that coverage exclusions be construed only with reference to the particular insured seeking the coverage. Because Bloomington was the party seeking coverage, the exclusion was limited to bodily injury expected or intended by Bloomington itself. The court stated that the policy language did not require that Reiners' intent be automatically imputed to the corporation.

Travelers argued that Reiners should not be allowed "to hide behind a corporate form to protect himself from the economic consequences of his violent assault." The court acknowledged the legitimacy of this concern but concluded it was not a reason to override the terms of an insurance policy.

The court concluded that Reiners' intent could not be automatically imputed to Bloomington but reversed and remanded the case for a determination on unresolved factual issues.

Travelers Indemnity Company vs. Bloomington Steel & Supply Company-No. A04-1713-Supreme Court of Minnesota-August 3, 2006-718 North Western Reporter 2d 888