Court Holds Grocery Store’s CGL Policy Provides Coverage for Employee Who Was Shot in the Store

In a recent decision, Pennsylvania National Mutual Casualty Insurance Company v. Doscher’s Super Markets, issued on May 7, 2012, the Charleston Division of the South Carolina District Court held that Doscher’s CGL policy provided coverage for injuries related to the shooting of Doscher’s employee, Burton Thorne, Jr., who was shot by another Doscher’s employee in the break room.

In the underlying complaint, Thorne asserts a cause of action for negligence based on negligent hiring, training, retention, management, and supervision and alleges that Doscher’s failed to make the workplace safe.  Although Penn National initially argued that the shooting was not an occurrence and that the shooting was an intentional act (and thus not covered by the policy), Penn National eventually conceded these arguments and they were not discussed in the opinion.

The Court held that the Employer’s Liability Exclusion in the policy does not apply given the facts.  The Employer’s Liability Exclusion excludes coverage for bodily injury to an “employee of the insured arising out of and in the course of . . . employment by the insured.”  All parties agreed that Thorne alleges bodily injury, that he was an employee at the time of his injuries, and that the shooting occurred in the course of employment.  The only question was whether Thorne’s injuries arose out of his employment.  Noting that it is well settled in South Carolina that the term “arising out of” when used in an insurance policy exclusion should be construed to mean “caused by,” the Court held that Penn National did not show that Thorne’s injuries were caused by his employment.

Finally, the Court held that the Worker’s Compensation Exclusion does not apply, because Doscher’s “currently has no obligation under a worker’s compensation law.”  Although Thorne initially filed a worker’s compensation claim, he voluntarily dismissed it.  In addition, the state court in the underlying action denied Doscher’s summary judgment motion in which Doscher’s argued that Thorne’s claims were barred by the workers’ compensation exclusivity doctrine.

Therefore, the Court found there was coverage under the Penn America policy for Thorne’s injuries relating to the shooting that occurred in Doscher’s.

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Court of Appeals Extends the Breadth of the Duty to Defend

In late January, 2011, the Georgia Court of Appeals entered its opinion in the case of Landmark American Insurance Company v. Kahn (2011).  This recent opinion supports the argument that insurers have a duty to defend based on plaintiff’s pleading in their complaint.  Kahn involved a case in which a bar employee shot Kahn in the back six times.  The bar’s general liability policy had an intentional/criminal act exclusion with an exception for an employee acting to protect person or property.

Despite the absence of any evidence the employee acted to protect person or property, the trial court held there was a duty to defend, and entered summary judgment for the insured.

In affirming the trial court, the Court of Appeals held the allegations contained in the complaint, liberally construed, could be covered under the policy.  The grant of summary judgment was on the duty to defend only.  It appears from the opinion the Court was critical of the insurer for not using the safe harbor for coverage.

An application for certiorari has been filed with the Georgia Supreme Court.  It is common for plaintiff’s attorney to draft complaints broadly in a way that may bring the claim within coverage.  If Kahn is upheld, insurers in Georgia have to think even harder about denying coverage outright.

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Does Coverage Depend Upon the Court as Opposed to the Policy Language?

As an insurer confronting coverage for faulty workmanship, federal court is preferred over the Georgia state courts, as there is a divergence in decisions determining coverage under a CGL policy arising from faulty construction.  The divergence involves interpretation and application of the terms “occurrence” and “accident,” as contained within a CGL policy.

The Supreme Court’s recent decision, American Empire Surplus Lines Insurance Co. v. Hathaway Development Co., Inc., clearly highlights the divergence.  While the Supreme Court, in American Empire,held that negligent construction can constitute an occurrence within a CGL policy, Justice Melton, citingOwners Ins. Co. v. James, authored a strong dissent.

Hathaway Development was a general contractor who sued its plumbing contractor Whisnant Contracting Company for negligent plumbing work at three job sites.  Hathaway sought recovery of its costs of repairs caused by Whisnant’s faulty workmanship, which included costs associated with water and weather damage to surrounding properties.  Whisnant failed to answer after its insurer, American Empire, denied coverage and Hathaway obtained a default judgment.  Hathaway then sought payment from American Empire.

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