Concussions Aren’t Just a Risk for NFL Players: Hardhats versus Safety Helmets

Fisher Phillips | August 25, 2018

While recently meeting with a group of contractors, I noticed that three large general contractors were requiring their employees to wear safety helmets instead of traditional hardhats, despite the approximately $120 cost per helmet. Futuristic Kask helmets were the helmet of choice. Kask states that the helmets satisfy ANSI Z89.1-2014. Technical specs. Arguably the most important aspect of the helmet was the chin straps.

I also had recently noticed a LinkedIn post by Flintco’s Flint Howard, championing helmets versus traditional hard hats:

In the spirit of the Flintco Ethos: “I believe that mediocrity is unacceptable”, Flintco is launching a pilot program that will introduce the use of helmets to help champion positive changes in our industry.

A week later I was teaching a masters class at Georgia Tech and learned from an attendee that his large specialty contractor had switched to helmets because a number of their large GCs demanded them.

While this seemingly sudden surge in helmet usage may seem abrupt, interest in helmets has been steadily growing since NIOSH posted on March 21, 2016 that 25% of Construction injuries between 2003 and 2010 resulted from Traumatic Brain Injury (TBI). (The full study was published in the March 2016 issue of the American Journal of Industrial Medicine.

United Rental described in a November 15, 2017 article why some contractors are moving away from traditional hardhats, and quoted Jason Timmerman, EHS director for Skanska Commercial Development:

[A traditional hardhat] is only good for something being dropped and hitting you directly on top of your head. It has nothing to do with slips, trip and falls on the same level, where your head snaps backs, or falling off ladder, falling off a wall form. With any type of fall you have, the traditional hard hat will more likely than not fall off.”

While adding a chin strap to a hard hat could help it stay put, helmets being tested and used by Skanska and other construction companies, which come with straps, also offer frontal, rear and side impact protection thanks to foam padding.

The article also quoted Seth Randall, a division safety director for Clark Construction on why their self-perform group was rolling out approximately 3500 helmets:

“We’ve already seen positive results in a couple of incidents that have occurred, that the helmets have potentially saved an employee from any type of head trauma,”

In talking with contractors who have started using such helmets, they said that construction workers are a conservative lot and some employees carped about the new helmets, claiming they were too hot or that the strap annoyed them. One employee said that workers at another contractor teasingly said they looked like bicycle couriers, although there may have been a few more adjectives thrown in.

As Randall acknowledged,

“for some employees, the helmets, which are larger than hard hats, took some getting used to. “It’s a different type of fit, and some people prefer one or the other, but we are getting positive feedback about the fit,”

Randall explained that Clark educated employees on the importance of wearing the helmets for their safety and advised that as “they wear it, they’re finally realizing that it’s also a lot more comfortable as well.”

Bruce Rolfsen’s July 2017 article, Safety Helmets are replacing Hardhats on Construction Sites explained that helmet purchase costs could be an issue for small builders and subcontractors.

For head protection, an OSHA rule (29 C.F.R. 1926.100) requires employers to provide head protection equipment that meets or exceeds the industry consensus standard ANSI Z89.1 issued 2009. The agency also requires employers to provide safety equipment free to workers.

Hard hats meeting the consensus standard can be bought for less than $20 each.

Advertised prices for most helmets meeting the standard start at around $110, depending on the specific model. Adding a flip-up visor could be an additional $50. Bulk discounts would reduce costs, but competition also has the potential to lower costs. Kask and the French-based Petzl are among the few companies offering helmets meeting the ANSI Z89.1 requirements.

The cost is an understandable issue for contractors, but to some specialty contractors, they regard the cost as inevitable because most of the GCs to whom I talked are requiring subs to use helmets at their sites.

As to the price, one assumes that other manufacturers will ramp up their own helmets and challenge Kask, who seems to be the gold standard by which the others are being judged.

Before the Slip and Fall: Lease Drafting Guidance for Tenants

Scott R. Kipnis | ICSC

Some of the most prevalent, mundane, and time- and money-consuming claims that tenants find themselves litigating stem from slip-and-fall accidents in shopping center common areas. The lease between landlord and tenant, specifically the allocation of maintenance obligations as well as indemnification and insurance provisions, is often the determining factor of the outcome in such cases. It is determinative of which party’s insurer is obligated to defend the claim. As demonstrated by the analysis of the Second Judicial Department of the Appellate Division of the Supreme Court of the State of New York in Atlantic Ave. Sixteen AD, Inc., v. Valley Forge Insurance Company (“Atlantic”)[1], specificity in drafting can be key to shielding tenants from liability and effectuating the intent of the parties.

Atlantic Ave. Sixteen AD, Inc., v. Valley Forge Insurance Company — Procedural background

The tenant, Linea 3 Corporation d/b/a Marilena Imports (“Tenant”), leased space in a commercial building in Rockland County, New York, from Atlantic Ave. Sixteen AD, Inc., (“Landlord”) in which it operated a wedding and party supplies store. In the underlying personal injury suit[2], Tenant’s employee was allegedly injured after falling on black ice in the building’s parking lot while walking from his car to work. The injured employee brought an action to recover damages for his injuries in the Kings County Supreme Court against the Landlord and Universal Strapping Corp. (“Universal”), which operated a business in the same building and was owned by the same principals as the Landlord.[3]

Tenant maintained a commercial liability insurance policy with Valley Forge Insurance Company, and Landlord and Universal had a commercial liability insurance policy from Citizen Insurance Company of America. Landlord tendered the defense of the claim to Valley Forge, which denied the tender. Thereafter, Landlord impleaded Tenant and Tenant moved for, and was granted, summary judgment. Landlord then commenced an action seeking a declaratory judgment action in the Rockland County Supreme Court that Valley Forge and Tenant were obligated to defend and indemnify it in the personal injury action as required by Tenant’s insurance policy and by the indemnification language in the lease.

The Rockland County Supreme Court granted summary judgment in favor of Valley Forge and dismissed the complaint, finding that under the terms of the governing lease neither Tenant nor its insurer had any duty to defend or indemnify Landlord in the personal injury action. Landlord then appealed the decision and sought a judgment declaring that Tenant’s insurance company was obligated to defend and indemnify Landlord in the personal injury action. The Second Judicial Department of the Appellate Division of the Supreme Court of the State of New York affirmed the order of the Rockland County Supreme Court.

Case analysis

In evaluating the merits of the Landlord’s appeal, as well as Valley Forge’s motion to dismiss the action brought in the Rockland County Supreme Court, the courts addressed the following:

  1. which party was responsible for the maintenance of the parking lot under the lease,
  2. the indemnification language under the lease and
  3. the insurance coverage in effect at the time of the alleged slip and fall.

Maintenance and indemnification issues

The lease between Landlord and Tenant provided that the parking lot was a common area outside of the leased Premises and that Tenant had no obligation to maintain the common areas; Tenant’s only obligation was to contribute toward the expense of common area maintenance. Under the lease, Landlord was responsible for common area maintenance, including the removal of snow. The lease further provided that Tenant would “defend, indemnify and hold Landlord harmless from and against any and all suits, claims, actions, damages, loss, expense or liability, including reasonable attorneys’ fees arising out of or in connection with any act or omission of Tenant…arising out of, or in connection with, Tenant’s use and possession of the [leased] Premises.”[4]

Therefore, the Rockland County Supreme Court held that Tenant neither leased the parking lot nor had any responsibility for snow and ice removal. Additionally, Tenant only indemnified the Landlord for Tenant’s acts and omissions in connection with the leased premises, and this indemnification did not extend to the common areas.

Insurance coverage and additional insured status issues

The lease required both Landlord and Tenant to obtain commercial liability insurance. Tenant’s insurance policy included an endorsement covering the Landlord as an additional insured for “liability arising out of the ownership, maintenance or use of that part of the premises leased to [Tenant] and shown in the Schedule”.[5] The schedule stated the specific unit of the building leased by Tenant and did not reference the common areas.

While the Supreme Court Appellate Division held that a party named as an additional insured is entitled to the same coverage as the policyholder,[6] because the additional insured endorsement was limited to liability “arising out of” the “ownership, maintenance or use” of the “premises leased” to Tenant, and since Tenant neither leased nor maintained the parking lot, the insurance policy did not provide coverage for the alleged injury. Therefore, Tenant’s insurance company had no duty to indemnify or defend the Landlord for the slip and fall.

Key points of analysis

Here, the lease was clear that Tenant was not responsible for parking lot maintenance. Further, because Tenant only indemnified Landlord for claims related to Tenant’s use and possession of the premises, which did not include the parking lot, Tenant had no liability for the incident. In addition, Tenant’s liability policy naming Landlord as an additional insured only covered the premises and did not extend to the common areas. Based on the foregoing, and the absence of any allegation that any wrongful act or omission by the Tenant in the common areas contributed to the injury, Tenant and its insurer had no obligation to defend the injured party’s claim.

This case offers practical drafting guidance for tenants to ensure that they are likewise protected, either when sued directly by an injured party or are otherwise forced to defend such claims. By using practical common sense and narrowly defining the premises, setting forth each party’s maintenance obligations with specificity and tailoring the insurance and indemnification clauses as described below, tenants can take steps to protect themselves from the pitfalls of having to litigate personal injury claims.

Lease considerations when drafting

Define what you are leasing. The lease should expressly identify what constitutes the premises as distinct from the common areas. “Common areas” should be defined comprehensively to account for all existing improvements, and should also be broad enough to encompass all areas provided by the landlord for the common use of the tenants of the shopping center and their customers. Especially significant in the context of slip and falls, the lease should specifically define sidewalks as part of the common area, and not part of the premises. The differentiation between common areas and premises and narrowly defining what constitutes the “leased premises” is critical when it comes to each party’s insurance coverage, even where the tenant may be responsible for maintenance and repairs, as further discussed below.

Maintenance and repair obligations. The lease should unambiguously set forth the maintenance obligations of each party with respect to the common areas and the premises. Unless the parties have negotiated for the tenant to be responsible for performing certain common area maintenance or repairs, the lease should state that the landlord shall be solely responsible for maintaining the common areas. It should further discuss in detail what such common area maintenance entails, i.e., routine sweeping, seasonal plowing and snow and ice removal from both parking and sidewalks adjacent to or in front of the storefront. By including such details, it leaves little room for allowing the landlord or the injured party to advance the argument that such items are the responsibility of the tenant or impose obligations on the tenant that were not contemplated by the lease. To further protect a tenant from unbargained-for liability, the lease should expressly state that the tenant shall have no obligations with respect to maintaining the common areas, other than to reimburse Landlord, or, as applicable, that any reimbursement obligations are captured in the base rent.

Indemnification. As demonstrated in Atlantic, courts will look at the indemnification provisions of a lease to determine whether either party has agreed to indemnify or defend the other in such actions. When maintenance of the common areas is a landlord responsibility, a tenant will want to make sure that the landlord holds the tenant harmless and agrees to indemnify the tenant from and against all claims that arise in such common areas. The indemnification language should be clear that the landlord is responsible for anything that occurs outside of the premises or within the common areas of the shopping center, and that the tenant can in turn indemnify the landlord for claims arising inside the premises. While there can be a carve-out for claims resulting from one party’s negligence or, preferably, gross negligence, where a tenant is not responsible for common area maintenance, it would have to take some action that contributes to the condition causing the party’s injury in order for a negligence claim to prevail.

Insurance coverage and additional insured status. Under the lease, both parties should carry commercial general liability insurance parallel to their respective indemnification undertakings. In accordance with the above, the landlord should be responsible for insuring the shopping center, including the common areas, and the tenant should insure the narrowly defined premises. Most significantly for the foregoing, and equally as important as having insurance coverage in the first place, is making sure that each party names the other as an additional insured in its respective policy. As noted by the court in Atlantic, a party named as an additional insured is entitled to the same coverage under the policy as though it were the named insured. Simply put, the landlord should name tenant as an additional insured for the common areas, with such coverage being primary and noncontributory other than for gross negligence; and a lawsuit can be avoided.

Landlord insuring tenant’s risk. Where the tenant is responsible for common area maintenance, it should still attempt to have the landlord insure the common areas in order to limit its exposure to liability. Other than with regard to New York’s unique vicarious liability rule, the landlord will want to carry its own commercial general liability insurance covering perils unrelated to the tenant’s negligence, such as negligent design of the parking lot.[7] In situations where the tenant is in care, custody or control of the common areas but the landlord is insuring the risk, to avoid any doubt that the tenant is entitled to such coverage, the lease should expressly state that the landlord’s policy is intended to cover any common area maintenance that the tenant is required to perform. To further ensure that the tenant has an enforceable claim to coverage, the lease should be clear that the cost of such insurance is either included in the base rent or is otherwise being paid by the tenant to the landlord. The lease should also clarify that the tenant is required to be named as an additional insured and should specify that such coverage is primary and noncontributory. Having primary and noncontributory coverage in place eliminates the question of who is negligent, analogous to the waiver of subrogation (a concept born in New York to effectuate the public policy that landlord and tenant should not fight among themselves concerning an insurable loss). This also prevents the tenant from being deprived of coverage for which it has bargained due to a reconciliation process between the parties’ insurance carriers as to whose negligence caused the accident. Having the “primary and noncontributory” language in the lease related to the common areas protects the tenant as an additional insured, since the landlord’s carrier cannot seek contribution from any other policy unless the claim exceeds the amount of landlord’s coverage.

Conclusion

The facts of each specific case may ultimately determine the tenant’s liability. However, tenants can take steps toward limiting their exposure to claims resulting from slip-and-fall accidents in shopping center common areas by negotiating the provisions described above.


[1] Atlantic Ave. Sixteen AD, Inc., v. Valley Forge Insurance Company, 150 A.D.3d 1182 (2d 2017).

[2] Raven v. Universal Strapping Corp., Supreme Ct. Kings Co. Index No. 4126/2011.

[3] Workers’ compensation laws would have prohibited the plaintiff from directly suing his employer.

[4] Atlantic Ave. Sixteen AD, Inc., v. Valley Forge Insurance Co., Supreme Ct., Rockland Co. Index No. 033887/13. Decision and Judgment dated Oct. 3, 2014.

[5] Atlantic Ave. Sixteen AD, Inc., v. Valley Forge Insurance Company, 150 A.D.3d 1182 (2d 2017).

[6] Ibid.

[7] Likewise, the tenant should also insure the common areas against comparable perils.

California Supreme Court Rules Broadly in Favor of Insureds

David E. Weiss and Kerry Roberson | ReedSmith | June 11, 2018

On Monday, June 4, 2018, the California Supreme Court ruled that an insurance company must provide liability coverage to its corporate insured against claims of negligent hiring, retention, and supervision of its employee, who allegedly sexually assaulted a 13-year-old child. The case is Liberty Surplus Ins. Corp. v. Ledesma & Meyer Construction Co., Inc., Case No. S236765 (June 4, 2018). This decision is “of exceptional importance to injured parties, employers, and insurance companies doing business in California,” wrote the U.S. Court of Appeals for the Ninth Circuit, in an order certifying the issue to the California Supreme Court.

In 2002, Ledesma & Meyer Construction Co. (L&M) entered into a contract with the San Bernadino School District for a construction project at a local middle school. L&M hired Darold Hecht to work on the project. In 2010, a 13-year-old student at the school (Jane Doe), filed suit asserting numerous claims against L&M, alleging that she was sexually abused by Hecht. One of Doe’s claims against L&M alleged negligent hiring, retention, and supervision of Hecht. L&M’s insurer, Liberty Surplus Insurance Corporation, agreed to defend L&M under a reservation of rights.

Liberty sought declaratory judgment in federal court that Liberty was not obligated to defend or indemnify L&M against Doe’s lawsuit, arguing that L&M’s negligence did not constitute an “occurrence” under the commercial general liability policy. The policy provided L&M coverage for liabilities arising from “bodily injury” caused by an “occurrence.” The policy defined “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” The District Court held that Liberty was not obligated to defend or indemnify L&M in the underlying action because L&M’s negligent hiring, retention, and supervision of Hecht was “too attenuated from the injury-causing conduct” of Hecht to fit the policy definition of “occurrence.”

L&M appealed to the United States Court of Appeals for the Ninth Circuit, which then issued an order certifying the issue to the Supreme Court of California. The Ninth Circuit sought guidance because “California law [wa]s unsettled in this area,” and because of the “significant precedential and public policy importance” of the outcome. The Supreme Court of California agreed to answer the following question: “When a third party sues an employer for the negligent hiring, retention, and supervision of an employee who intentionally injured that third party, does the suit allege an ‘occurrence’ under the employer’s commercial general liability policy?”

The Court explained that the term “accident” in liability insurance policies in California is a settled matter. “[A]n accident is ‘an unexpected, unforeseen, or undersigned happening or consequence from either a known or unknown cause” and refers to the conduct of the insured. Additionally, the term “includes negligence,” which indicates that a policy that provides coverage to the insured for injuries caused by an “accident” includes coverage for injuries resulting from the insured’s negligent actions.

The Court also analyzed the District Court’s decision and determined that the court engaged in faulty reasoning both in terms of causation and its reading of the relevant case law. The District Court determined that L&M’s alleged negligent actions were “too attenuated” from Hecht’s actions to be considered the “cause” of Doe’s injuries. However, this line of reasoning runs contrary to California cases that have recognized that negligent hiring, retention, or supervision can be a substantial factor in causing the harm to a third party due to the actions of an employee.

Additionally, the District Court misplaced reliance on a number of cases to support its proposition that L&M’s allegedly negligent actions do not qualify as “accidents” simply because they did not anticipate the injury to occur. However, the cases that the District Court cited were distinguishable from the case at hand in various critical ways and thus did not support the District Court’s proposition.

Minkler v. Safeco Ins. Co. of America is the controlling authority on this issue (Minkler v. Safeco Ins. Co. of America (2010) 49 Cal.4th 315.) In Minkler, a Little League coach was sued by a player for sexual molestation. The player also sued the coach’s mother for negligent supervision and failure to prevent the molestations in her home. The coach and the mother committed independent torts, but the coach’s intentional actions did not preclude the mother from coverage. Although insurance does not usually cover intentional injuries, the Court stated, “[t]here is no overriding policy reason why a person injured by sexual abuse should be denied compensation for the harm from insurance coverage purchased by the negligent facilitator.”

If the Court had decided in Liberty’s favor, employers would not be covered for claims of negligent hiring, retention, or supervision in situations where employees engage in intentional actions, a result that would be fundamentally inconsistent with existing California case law. For that reason, the court ruled in favor of L&M, stating that, “absent an applicable exclusion, employers may legitimately expect coverage for [claims of negligent hiring, retention, or supervision whenever the employee’s conduct is deliberate] under comprehensive general liability insurance policies, just as they do for other claims of negligence.” This holding protects the reasonable expectations of policyholders and makes clear that the coverage analysis should be focused on the conduct alleged against the particular insured seeking coverage. Thus, if there are claims against multiple actors, the specific claims against each individual actor need to be analyzed separately.

The California Supreme Court’s decision will have implications beyond the employment situation dealt with in the case; for instance, the Court ordered briefing deferred in Travelers Property Casualty Co. of America v. Actavis, Inc., Case No. S245867, pending this decision. In that case, the Court will consider whether Travelers owed its pharmaceutical company insured a duty to defend or indemnify in an action involving underlying claims involving liabilities arising from the sale and marketing of opioids. We will report on that decision as soon as it comes down.

Say What? The Rise Of Criminal Liability For Construction Accidents

Christopher D. Myers and Cheri T. Gatlin | Best Practices Construction Law | May 18, 2018

“To err is human; to forgive divine.” – Alexander Pope, “An Essay on Criticism.”

Last week marked the end of Construction Safety Week 2018, a combined effort by the Construction Industry Safety (CISI) group and the Incident and Injury Free (IIF) CEO Forum. Together these entities are comprised of 80 national and global construction firms, with a goal of promoting safety in the construction industry. Concern for safety is apparent on construction projects throughout the country and world, as evidenced by daily/weekly construction briefings and the familiar “___Days Since a Lost Work Accident” signs. People that work in the Construction Industry know firsthand the dangers and want to see their co-workers go home safely to their families after a long day. In addition, time is money in this business. Safe projects are more likely to be profitable projects due to lack of delays and prevention of claims for jobsite injuries. For employers, criminal liability for job site construction accidents is more and more a concern. Mainstream headlines highlight several cases where construction accidents = criminal charges.

From the well-publicized October 21, 2016 drowning of two construction workers in Boston after a trench in which they were working collapsed, to the March 18, 2018 pedestrian bridge collapseat Florida International University (FIU), which killed 6 and injured 9 more, construction accidents that result in loss of life are commonly viewed as more than “accidents.” There appears to be a trend toward construction incidents being investigated by various agencies for criminal liability. Inevitably, accidents happen in every area of life, from “fender bender” automobile accidents to high profile construction accidents, which result in extensive property damage and, unfortunately at times, loss of life. When, though, is an accident something more?

With regard to the Boston trench collapse, the Suffolk County District Attorney’s office presented evidence of manslaughter against the employer—both as a corporate entity and the company’s owner—related to the accident. There, the deceased were killed when underground materials supporting a hydrant in an allegedly unshored hole they were digging gave way and the hydrant burst, flooding the trench. Prosecutors claim the employer was pushing the men to work faster because the project was behind schedule. Motions to Dismiss manslaughter charges were considered and denied, leaving the employer and its owner subject to criminal prosecution. In an industry where liquidated damages and other pressures lead to acceleration, this is a headline of note.

In Florida, we await all the facts on the FIU bridge collapse, a decision by the Dade County State Attorney’s office on possible criminal action. However, a charge of “Culpable Negligence” could be in play. In Florida, the crime of Culpable Negligence is defined as a course of conduct “showing reckless disregard for human life, or for the safety of persons exposed to its dangerous effects, or . . . which shows wantonness or recklessness . . . [or] an indifference to the rights of others as is equivalent to an intentional violation of such rights.”

As Construction Safety Week concludes, Burr congratulates all our clients that participated in the activities. Focusing on safety is critical to the industry’s success and the life and livelihood of those who rely upon it.

When Should an Accident be an Accident?

Charles P. Edwards | Barnes & Thornburg LLP | November 27, 2017

Standard commercial general liability (CGL) insurance policies provide coverage for damages the policyholder is legally obligated to pay because of property damage or bodily injury caused by an “occurrence.” CGL policies typically define “occurrence” as an “accident.” Courts define an accident as “an unexpected happening without an intention or design.” Auto-Owners Ins. Co. v. Harvey, 842 N.E.2d 1279, 1283 (Ind. 2006).

Simple, right? Unfortunately, a trilogy of cases from the Indiana Supreme Court have caused confusion on this issue, particularly where the policyholder may have errors and omissions (E&O) coverage.

In Harvey, a 16-year-old girl, Brandy, fell into a river and drowned after being intentionally pushed during an altercation with a boy, Toby. Toby admitted that he intended to push Brandy, but denied that he intended to harm her. Brandy’s parents filed a wrongful death action alleging Toby’s conduct was negligent and reckless and a declaratory judgment action against Toby’s homeowner’s insurer, Auto-Owners. Auto-Owners denied it had any duty to defend or indemnify Toby, arguing that Toby’s conduct was not an “occurrence” and that it fell under the exclusion for “intended and expected harm.”

The Indiana Supreme Court concluded that, “[u]nder the facts of this case … the meaning and application of this [occurrence] provision is unclear.” Id. at 1284. If judged by Toby’s conduct, there clearly was no accident; but if judged by the result – Brandy’s fall and drowning – then there was an accident, because Toby did not intend for that to happen. The court specifically rejected the rule applied by other courts that “a volitional act – which is always intended – does not constitute an accident, even where the results may be unexpected or unforeseen.” Id. at 1285. The court called such a rule “unclear, potentially confusing, and likely to result in subjective and unpredictable judicial applications.” Id. at 1285–86.

In discussing what constitutes an “occurrence,” the court mentioned, but did not expressly follow, a number of cases applying the definition “to circumstances remote from instances of specific personal physical conduct, but rather arising from claims based on commercial or professional conduct.” Those cases included R.N. Thompson & Assoc. v. Monroe Guar. Ins. Co., 686 N.E.2d 160, 164–65 (Ind. Ct. App. 1997), in which the Court of Appeals held that economic losses from construction defects are not an occurrence.

In 2009, the Indiana Supreme Court addressed the occurrence issue in Tri-Etch, Inc. v. Cincinnati Ins Co., 909 N.E.2d 997, 999 (Ind. 2009). That case involved a liquor store clerk (Young) who was abducted shortly before midnight, tied to a tree in a local park, and beaten. He was found the next day alive, but later died of his injuries. Young’s estate sued the alarm company (Tri-Etch) alleging it negligently failed to notify the store’s manager within 30 minutes of closing that the night alarm had not been set, and that if Tri–Etch had acted promptly, Young would have been found earlier and would have survived. The jury in that case found against Tri-Etch and awarded $2.5 million to Young’s estate.

In the coverage case, the Indiana Supreme Court considered whether Tri-Etch’s failure to notify the store manager after the alarm had not been set constituted an occurrence. In holding it was not, the court distinguished Harvey by noting that, “in Harvey, we noted the distinction between an ‘occurrence’ as the term is used in CGL policies, and claims based on ‘commercial or professional conduct.’” Id. at 1284. One of those cases, as mentioned, was R.N. Thompson.

The Tri-Etch court went on to note that, “[c]laims based on negligent performance of commercial or professional services are ordinarily insured under ‘errors and omissions’ or malpractice policies. For this reason, CGL policies typically exclude claims arising out of professional or other business services.” Id. Indeed, the court ultimately held that in addition to not being an “occurrence,” the claim was excluded by the professional services exclusion.

What the Tri-Etch court did not discuss, because it was not presented, is that most E&O and malpractice policies exclude coverage for bodily injury or property damage, because those damages are covered by CGL policies. As in Tri-Etch, a professional services exclusion may be added to a CGL policy, but that is usually a specific endorsement, which applies only to specific excluded services. Moreover, the mere offering of this exclusion in the insurance marketplace suggests insurers do intend to provide coverage for bodily injury and property damage caused by a professional error or omission in the absence of the exclusion.

One year later, the Indiana Supreme Court again visited the “occurrence” issue in Sheehan Const. Co. v. Cont’l Cas. Co., 935 N.E.2d 160 (Ind.), opinion adhered to as modified on reh’g, 938 N.E.2d 685 (Ind. 2010). In Sheehan, the court overturned R.N. Thompson and held that faulty workmanship was an “accident” and “occurrence” under a CGL policy “so long as the resulting damage is an event that occurs without expectation or foresight.” Id. at 169. The court explained:

As applied to the case before us, if the faulty workmanship was the product of unintentional conduct then we start with the assumption, from Sheehan’s viewpoint, that the work on the Class members’ homes would be completed properly. The resulting damage would therefore be unforeseeable and constitute an “accident” and therefore an “occurrence” within the meaning of the Insurers’ CGL policies.

Id. at 170. This holding was consistent with the court’s earlier holding in Harvey, in that it focused on whether the act was intended to cause the result.

Sheehan should have put an end to any confusion caused by Tri-Etch and returned us to the clear rule of Harvey and clear focus on whether the act – even if intentional – was intended to cause the result. Unfortunately, it appears from a recent decision that Tri-Etch’s reliance on Harvey’s reference to pre-Sheehan cases and speculation about E&O policies may still have some traction.

In Allstate Ins. Co. v. McColly Realtors, Inc., No. 2:16-CV-00142, 2017 WL 4938154 (N.D. Ind. Oct. 31, 2017), a family died as a result of carbon dioxide emitted from a generator in the garage of a home they were renting. The estate filed suit against the realtor (McColly) for failure to warn of latent or concealed dangers and failure to register the home as a rental in McColly’s dealings with the owner of the home. McColly sought coverage under its CGL policy. The court concluded that Allstate did not have a duty to defend or indemnify McColly, following Tri-Etch’s discussion of E&O insurance. The court concluded that, “[t]his claim alleges a professional error or omission, rather than an accident or occurrence.” Id. at *8. The court’s conclusion likely means little to McColly if its E&O policy contains exclusions for bodily injury or property damage.

The interplay between CGL coverage and E&O coverage is illustrated by Wayne Twp. Bd. of Sch. Comm’rs v. Indiana Ins. Co., 650 N.E.2d 1205, 1207 (Ind. Ct. App. 1995). That case involved a school that was sued for its negligence in connection with its principal’s alleged molestation of a student. The school sought coverage under both its CGL policy and its E&O policy. The court held that the allegations against the school did allege an occurrence, noting that “Indiana Insurance has not designated any evidence demonstrating that the school’s alleged conduct was not an accident: there is no evidence that the school intended or expected Barger’s misconduct or that the molestation was the result of the school’s intent or design.” Id. at 1209. The court held that the claims against the school were, however, excluded under the E&O policy, which excluded “any damages, whether direct, indirect or consequential, arising from, or caused by, bodily injury, personal injury, sickness, disease or death.” Id. 1211–12.

Wayne Township reflects the correct “occurrence” analysis when evaluating CGL coverage for a company sued for negligently inflicted bodily injury or property damage. Courts should not speculate about what is or is not covered by any E&O policy. Nor should they determine the “occurrence” issue based on whether the claim is based on commercial or professional conduct, or alleges a professional error or omission. Many companies do not have E&O coverage (because they do not engage in professional services), and many E&O policies contain exclusions for bodily injury or property damage (precisely because those items of damage are covered by CGL policies). The sole focus, instead, should be on whether the complaint alleges an accident, which should be governed by Harvey/Sheehan rule – whether the conduct unintentionally results in bodily injury or property damage.