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Commercial General
Liability |
Definition Of Accident |
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Expected Or Intended By
The Insured |
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RJC Realty Holding Corporation
(RJC) obtained liability coverage for its business, "Pure Maximus
Spa/Salon," from Republic Franklin Insurance Company (Republic). Under the
policy, Republic agreed to indemnify and defend RJC against claims for
"bodily injury" caused by an "occurrence" as defined in the
policy. "Occurrence" was defined as "an accident, including
continuous or repeated exposure to substantially the same general harmful
conditions." This coverage was subject to two relevant exclusions. Coverage
did not apply to " '[b]odily injury' . . . expected or intended from the
standpoint of the insured" or to " '[b]odily injury' . . . arising
out of . . . [b]ody massage other than facial massage."
Marie and Thomas Harrison
brought an action against RJC and a masseur it employed. Their complaint
alleged that there was improper sexual contact during Marie's massage. When RJC
notified Republic of the suit, Republic disclaimed coverage, citing both of the
exclusions noted above. RJC sued Republic, seeking a declaratory judgment that
it was obligated to defend and indemnify RJC in the Harrison action. The New
York Supreme Court (the lower court) ruled in RJC's favor, stating that neither
of the exclusions applied. Republic appealed. The Appellate Division reversed,
holding that the "expected or intended" exclusion applied. RJC filed
a motion for leave to appeal.
In evaluating the case, the
Court of Appeals of New York stated, "In deciding whether a loss is the
result of an accident, it must be determined, from the point of view of the
insured, whether the loss was unexpected, unusual and unforeseen." In this
case, because the insured was the employer of the alleged perpetrator, it was
first necessary to decide whether the masseur's expectation and intention in
committing the assault should be attributed to the employer, RJC. The court
found the actions were not attributable to RJC. Assuming the allegations were
true, the court reasoned that the masseur departed from his duties for solely
personal motives unrelated to the furtherance of RJC's business. Because the
actions were not attributable to RJC as an employer, they were not expected or
intended by RJC, and were an "accident" within the meaning of the
policy.
The court briefly evaluated
the question of whether the "bodily injury" arose out of a "body
massage" and was excluded. The court read the policy language to include
only a bruise or similar injury inflicted on the customer by the massage
itself. As a result, the "body massage" exclusion did not apply.
The order of the Appellate
Division in favor of Republic was reversed and the Supreme Court judgment in
favor of RJC reinstated.
RJC Realty Holding v.
Republic Franklin-Court of Appeals of New York-April 1, 2004-808 North Eastern
Reporter 2d 1263