(Article from Insurance Law Alert, June 2020)
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Reversing a lower court ruling, the Supreme Court of Iowa ruled that allegations of gross negligence may satisfy the “occurrence” requirement in liability and excess policies. T.H.E. Insurance Co. v. Glen, 2020 WL 3022764 (Iowa June 5, 2020).
The coverage dispute arose out of an incident at an amusement park in which an employee was fatally injured. The decedent’s estate alleged that his death resulted from grossly negligent acts by the ride’s operator. The park’s insurer sought a declaration that it had no duty to defend or indemnify the suit on the basis that the complaint did not allege a covered “occurrence.” A lower court granted the insurer’s summary judgment motion, finding that the gross negligence claim could not be covered under the policies because it did not allege an “accident” that was “unexpected and unintended.” The Iowa Supreme Court reversed.
The Iowa Supreme Court ruled that a gross negligence claim is not necessarily incompatible with a covered occurrence. Under Iowa statutory law, gross negligence must amount to “wanton neglect for the safety of another.” The court explained that when an actor wantonly neglects another’s safety, it does not necessarily follow that he “knew or should have known that there was a substantial probability that certain consequences will result from his actions.”
Addressing a separate issue, the Iowa Supreme Court ruled that section II of the liability policy, entitled “WHO IS AN INSURED,” did not operate to expand the scope of coverage beyond that provided in section I of the policy. The decedent’s estate argued that Section II provided an independent basis for coverage because it covers acts of employees of the amusement park that are within the scope of their employment. The court rejected this assertion, stating:
The insuring clause in section I sets the parameters of the risks that are insured, while section II establishes who is insured. A person with a claim under the policy must satisfy the coverage requirements of the insuring clause in section I and be an “insured” under section II . . . . We find that they are not in conflict, but instead establish separate tests, both of which must be satisfied to give rise to a duty to defend and indemnify under the CGL policy.