The Kincaid court considered whether a State Auto owed a duty to defend a claim alleging negligence arising out of sexual abuse of the underlying plaintiff under a business liability insurance policy issued to partners and their business.
Kincaid was convicted and sentenced to prison for manufacturing and possessing child pornography. The underlying plaintiff alleged that Kincaid’s partner (Collins), with whom Kincaid shared a residence, was negligent in failing to protect the plaintiff from Kincaid. He also alleged that their business was liable for negligently hiring, retaining and supervising Kincaid. The insurer argued that it owed no duty to defend because Collins knew of Kincaid’s behavior and “expected” his actions. It also argued that because the policy did not contemplate sexual abuse on the business premises, it owed no duty to defend the business.
As a general rule, insurance companies owe no duty to defend insureds that sexually abuse minors because the resulting harm is “expected,” and therefore is not an accidental “occurrence” under policies. Furthermore, one insured’s intent generally cannot be imputed to another in determining an insurer’s coverage obligations, but policy language coupled with the allegations in a complaint have resulted in denial of coverage to a non-abuser when the victim’s claims show that the non-abuser insured expected or intended the harm.
Here, however, the court held that because Collins was alleged to have negligently allowed abuse to occur, and that the business negligently hired and negligently supervised Kincaid, the insurer was obligated to defend the claim. Reasoning that there were no allegations that Collins “actively encouraged or facilitated Kincaid’s contact with children,” the court concluded that Collins “did not expect or intend Doe’s injuries,” which were then, “by definition ‘accidental.’” The court held that, because the policy insured against any “occurrence” that was “accidental,” Doe’s sexual abuse was an occurrence triggering State Auto’s duty to defend. The court also held that State Auto owed a duty to defend the business, rejecting State Auto’s unsupported contention that an insurer owes no duty to defend a business in a civil action predicated on criminal acts perpetrated by one of the business’ partners on the premises, reasoning that it was contrary to the policy language. . The court explained that the policy provided coverage to “Steve Collins and Paul Kincaid DBA The Hair Clinic,” and that The Hair Clinic were “one and the same” according to State Auto; accordingly, because State Auto owed a duty to defend Collins, so too it owed a duty to defend the business.