By Bill Lipscomb

On Aug. 1, 2017 the North Carolina Court of Appeals issued a decision which provides two helpful takeaways for the insurance law practitioner. In Plum Properties, L.L.C. v. N.C. Farm Bureau Mut. Ins. Co., 2017 N.C. App. LEXIS 607, Plum Properties, L.L.C. (Plum) filed a tort action against two minors and their mothers, alleging that the minors “intentionally, willfully and maliciously” vandalized four houses owned or managed by Plum, causing $58,000 in damage and that the mothers were also liable for the damages based on negligent supervision of their minor children. Both mothers had homeowners insurance policies with Farm Bureau which provided personal liability coverage for “property damage caused by an occurrence” (occurrence defined as an accident), but contained the standard “expected or intended injury” exclusion, which excludes coverage for “property damage which is intended by or which may reasonably be expected to result from the intentional acts or omissions or criminal acts or omissions of one or more insured persons.” Plum filed a declaratory judgment action against Farm Bureau seeking a declaration that the damages alleged in the underlying tort action are covered by the mothers’ homeowners policies. The Court of Appeals affirmed summary judgment for Farm Bureau.

Regarding the occurrence issue, plaintiff relied on the deposition of a Farm Bureau Claims Director and argued that because “there are ‘occasions when there are shades of gray’ in determining whether an event should qualify as an occurrence,” a genuine issue of material fact existed and summary judgment was improper. The Court of Appeals disagreed and stated that the issue “is not whether some interpretation of the facts could possibly bring Plaintiff’s injury within the coverage of the Policies, but whether the facts, as alleged in the Complaint and taken as true, are enough to bring the injury within the Policies’ coverage.”  The Court stated that “[i]t strains logic to conjure ambiguity into the Policies’ language as applied to the facts at hand” and that the damages arising from the alleged vandalism by the minor insureds do not qualify as an accident. The first takeaway is that the insurer’s admission that there may exist some factual scenarios which create uncertainty (shades of gray) regarding the application of a particular policy provision, does not mean that the policy provision is ambiguous as applied to the facts of the claim in question.

Regarding the negligent supervision claims, and the second takeaway, the damages were caused by the minors’ intentional vandalism and the fact that other insureds (the mothers) did not intend the damages does not satisfy the insuring agreement’s requirement that the property damage must be caused by an occurrence (defined as accident).

The Court also held that the expected or intended injury exclusion clearly applied to exclude coverage because the damages were intended by or reasonably expected to result from intentional acts of the minor insureds.