Renters Insurance Claims

The San Antonio Court of Appeals issued an opinion in USAA Texas Lloyd’s Company v. John Doe and Jane Doe, and as next friends of XXX, a Minor.  The case is an appeal from a motion for summary judgment in a declaratory judgment action filed by USAA seeking a declaration that it had no duties under a renters policy insuring the Doe’s.

The Doe’s thirteen year old son had sexually assaulted a five year old and the Doe’s were sued by the parents of the five year old and the Doe’s sought to have USAA defend them under the renters policy.

USAA claimed there was no coverage for the incident, pointing to the liability section of the policy which read:

LIABILITY

If a claim is made or a suit is brought against an insured for damages because of bodily injury or property damage by an occurrence to which this coverage applies, we will:

…

2. Provide a defense at our expense by counsel of our choice, even if the suit is groundless, false, or fraudulent.

…

Occurrence means an accident, including continuous or repeated exposure to substantially the same general harmful conditions, which results, during the policy period, in:

*2 a. Bodily injury; or

b. Property damage.

…

LIABILITY AND MEDICAL PAYMENT EXCLUSIONS

1. LIABILITY and MEDICAL PAYMENT TO OTHERS do not apply to bodily injury or property damage:
2. Caused by the intentional or purposeful acts of any insured, including conduct that would reasonably b expected to result in bodily injury to any person or property damage to any property.

USAA alleges the intentional act exclusion excludes coverage in this situation and the definition of occurrence is not met under the facts in this case.

USAA contends that the use of the phrase “any insured” in the exclusion provision excludes coverage for any claim that involves bodily injury caused by the intentional conduct of any insured under the policy.  USAA does not deny Doe’s actions were unintentional; rather, USAA argues XXX’s conduct was intentional, and because the claim submitted by the Does arose out of XXX’s intentional conduct, the claim was excluded from coverage.

The Doe’s renters insurance policy excludes coverage for claims in which the bodily injury was “caused by intentional or purposeful acts of any insured, including conduct that would reasonably be expected to result in bodily injury to any person or property damage to any property.”  The policy also contains a severability clause, which provides, “This insurance applies separately to each insured.  This condition will not increase our limit of liability for any one occurrence.”

As pointed out by the Does, a severability clause generally serves to provide coverage to an “innocent” insured who did not commit the intentional conduct excluded by the policy.  Each insured against whom a claim is brought is treated as if he or she is the only insured under the policy, and thus, stands alone with respect to exclusion provisions.  However, when, as in this case, a policy includes a severability clause and an exclusion provision that refers to “any insured,” the court finds the severability clause has no effect on the exclusions clause.

This case discusses the intentional nature of the conduct complained of in detail and is a good read for those wanting to know more about how the court interprets the policy as it relates to these sexual assault claims and homeowners / renters policies.