In Talley v. Mustafa (Wisc. App., Apr. 5, 2017), the Wisconsin Court of Appeals found coverage available in an underlying negligence suit against a store owner and reversed the circuit court’s grant of summary judgment in favor of Auto Owners Insurance Company. The court’s holding, in essence, was that a reasonable person in the insured’s position would have expected that his insurance policy would cover a customer’s negligence suit, including negligence in training/supervising an employee who contributed to the customer’s injuries.
The coverage dispute arose when the underlying plaintiff, Talley, entered Mustafa’s store was injured by Scott. Specifically, when Talley went to pay for his items, Scott approached Talley and punched him in the face, and then punched him again as he attempted to exit the store. Notably, there was contradicting evidence regarding Scott’s association with Mustafa’s store. Talley testified that Scott was an employee of the store, as Talley repeatedly observed Scott working in the store’s kitchen/deli and performing other tasks, such as providing security, shoveling snow, mopping floors, and even wearing a white apron and gloves while in the meat department. Others testified in support of Talley’s contention that Scott was in fact an employee of Mustafa’s store, as for several months, Scott was consistently seen helping out around the store. However, both Scott and Mustafa denied Scott’s employment at the store and stated that Scott never worked in the kitchen, provided security, stocked the shelves, or provided any type of work.
At the time, Mustafa was covered under an insurance policy with Auto Owners, which would be triggered by an “occurrence,” i.e., an accident. The policy excluded coverage for injuries that were expected or intended from the standpoint of the insured. Talley filed suit against Mustafa and Auto Owners, alleging that while he was at the store, an agent, employee, or representative of Mustafa struck him twice in the face and that Mustafa negligently trained and supervised Scott, which caused his injuries. After providing an initial defense to Mustafa under a reservation of rights, Auto Owners filed a declaratory judgment action, seeking a declaration that it had no duty to defend or indemnify Mustafa. Auto Owners then moved for summary judgment. The circuit court granted Auto Owners’ motion, holding that it did not owe Mustafa a defense or indemnification because the complaint alleged an intentional act, which barred coverage under the Policy.
The Court of Appeals disagreed. First, the court rejected Auto Owners’ argument that because the injury was caused by an intentional act, and not an accident, there was no coverage under the policy. The court reasoned that the circuit court and Auto Owners incorrectly focused on Scott’s conduct, rather than looking to Talley’s allegation that Mustafa was negligent in performing his duty to train and supervise Scott. The Court of Appeals reasoned that under Wisconsin law, the inquiry must focus on the actions of the insured, Mustafa here, not the alleged perpetrator, Scott. And, neither the complaint nor extrinsic evidence suggested that Mustafa committed any intentional wrongdoing, but rather was negligent in his training and supervision of Scott. Further, because a reasonable insured would expect that the policy provision defining ‘occurrence’ would include negligent acts, including negligent training and supervision, Mustafa should have expected that if he was sued in his capacity as the owner of a store for injuries caused by his negligent training and supervision of his employee, the policy would provide coverage for the claim. Thus, the Court of Appeals held Auto Owners owed Mustafa a duty to defend against Talley’s claim, whether or not Scott committed the underlying wrong intentionally.
Insurance coverage practitioners should be aware of this decision because it shows the limitations of an expected or intended injury exclusion as it applies to employees of insureds who injure third parties. Based on the language of the exclusion, it is necessary to consider the cause of the injury from the perspective of the insured seeking coverage, not by another insured or the subject insured’s agents or employees.