Homeowner's Insurance Coverage
Northern Security Insurance Co. v. Connors, No. 2010-152
(March 31, 2011)
Facts: Northern Security brought a declaratory judgment action against its insured, Michael Connors, seeking a determination that it had no obligation to defend him under his homeowner’s insurance policy against a civil action arising out of the murder of Jack Reid. The underlying writ alleged that five of Connors’ co-defendants, including John Brooks, conspired to trap, torture and kill Reid because they believed he had stolen property from Brooks. They lured Reid to Connors’ house where they murdered him.
The plaintiffs alleged that prior to the murder Brooks had informed Connors that he would be sending him a package and that if anyone asked about it to tell them it contained steak knives. Brooks then sent a package containing a stun gun, hand cuffs and pepper spray to Connors’ house. The plaintiffs also alleged that Brooks asked Connors if he and the other defendants could use Connors’ property. The writ did not allege that Connors knew of the actual contents of the package, agreed to let Brooks use his property, or knew of the plot to kill Reid. The plaintiffs admitted that Reid was not present during the murder and they did not claim that Connors intended to harm Reid. The claims against Connors were for civil conspiracy, wrongful death, intentional infliction of emotional distress and negligent infliction of emotional distress.
The Northern Security homeowner’s policy provided coverage for claims seeking damages for bodily injury caused by an “occurrence.” The policy defined “occurrence” as an accident which results in bodily injury. The policy contained an exclusion for bodily injury that is expected or intended by the insured (intentional acts exclusion) or that arises out of “physical or mental abuse” (physical abuse exclusion). The policy also included an Enhancement Amendment which expanded “bodily injury” to include “personal injury.” The policy defined “personal injury” as including false arrest, detention or imprisonment and provided that the intentional acts and physical abuse exclusions do not apply to “personal injury”.
Northern Security denied coverage, claiming that Connors’ conduct did not constitute an “occurrence” and that the acts were excluded by the physical abuse exclusion. Both parties filed motions for summary judgment, and the trial court ruled in favor of Connors based on its determination that: 1) negligent infliction of emotional distress and conspiracy to commit false imprisonment were acts covered by the policy; and 2) the covered acts were not inextricably intertwined with the non-covered acts.
Northern Security appealed, arguing that: 1) the claim for civil conspiracy to commit false imprisonment did not trigger coverage under the personal injury endorsement for false imprisonment claims; 2) the civil conspiracy claims involved non-covered intentional conduct and did not fall within the policy's definition of "occurrence"; 3) any false imprisonment claim was not covered because it was inextricably intertwined with the intentional plan to commit murder; and 4) the damages were for wrongful death and were not covered. Connors argued that the policy was ambiguous because the personal injury endorsement purported to cover claims for the intentional tort of false imprisonment while the underlying policy exclused coverage for intentional torts and, therefore, the policy should be construed in favor of coverage.
The Court held that even though the writ did not specifically allege a claim of false imprisonment, the policy covered claims based on civil conspiracy to commit false imprisonment under the personal injury endorsement, which did not contain an intentional acts exclusion. A reasonable insured would expect that if false imprisonment claims were covered, conspiracy to commit false imprisonment would likewise be covered.
The Court also rejected Northern Security’s argument that the intentional nature of a conspiracy tort precluded coverage because the policy’s intentional acts exclusion did not apply to personal injury claims. Furthermore, to the extent that the definition of “occurrence” as an “accident” created an ambiguity when applied to personal injury offenses, that ambiguity must be construed in favor of coverage.
Next, the Court considered Northern Security’s position that coverage was excluded because the alleged conspiracy to falsely imprison Reid and the claim for negligent infliction of emotional distress were “inextricably linked” to the murder, for which there was no coverage under the policy. Relying on State Farm Inc. Co. v. Bruns, 156 N.H. 708 (2008), the Court noted that it must look to “the overall intentional plan of the insured to determine coverage.” It must compare the policy language with the facts as pled, rather than the writ’s conclusory allegations, in order to determine whether the policy affords coverage. The Court found that the facts pled with respect to Connors’ conduct did not support the argument that his conduct was inextricably intertwined with the murder conspiracy. There existed a genuine dispute as to the interconnectedness of the claims and any doubts must be resolved in favor of the insured. This dispute was sufficient to give rise to a duty to defend the civil conspiracy and negligent infliction of emotional distress claims.
Finally, the Court declined to address Northern Security’s argument that since the damages all arose out of the murder, which was not covered by the policy, the claims were not covered under the principle that “where the alleged damages resulting from a claim arise entirely out of an act that would not be covered, the claim is likewise excluded.” The Court ruled that because this argument was not presented at the trial court level it could not be raised on appeal. The argument that the negligent infliction of emotional distress claims were barred by the physical abuse exclusion was also not properly preserved and, therefore, not addressed by the Court.
Stephen J. Schulthess