Liberty Surplus Ins. Corp. v. Ledesma & Meyer Construction Co., Inc.
233 Cal. Rptr. 3d 487
Cal.2018Background
- Ledesma & Meyer Construction Co. (L&M) employed Darold Hecht as an assistant superintendent on a middle‑school construction project.
- In 2010 a 13‑year‑old student (Doe) sued Hecht and L&M, alleging Hecht sexually molested her and asserting claims against L&M for negligent hiring, retention, and supervision.
- L&M tendered defense to its commercial general liability insurer, Liberty; Liberty defended under a reservation of rights and sued for declaratory relief in federal court, asserting no duty to defend or indemnify.
- The policy covered "bodily injury" caused by an "occurrence," defined as "an accident." Liberty argued the negligent‑hiring claim did not allege an "occurrence" because the employee’s intentional molestation was the operative act.
- The district court granted summary judgment to Liberty; L&M appealed and the Ninth Circuit certified the question to the California Supreme Court.
- The California Supreme Court held that a negligent hiring/retention/supervision claim can allege an "occurrence" (i.e., an accidental injury) for purposes of a duty to defend, depending on causation and the insured’s conduct.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a third‑party suit alleging negligent hiring/retention/supervision of an employee who intentionally injured the third party alleges an "occurrence" under a CGL policy that defines "occurrence" as an "accident" | L&M: Its independent negligence (hiring/retention/supervision) can be an "accident" and a substantial factor in causing the injury, giving rise to a potential for coverage and a duty to defend | Liberty: The employee’s intentional molestation is the immediate cause and not an "accident" of the insured; negligent hiring/retention merely set events in motion and is too attenuated to be an "occurrence" | Held: Reverse. The insurer must show no potential for coverage; negligent hiring/retention/supervision can be an "accident" if the insured’s conduct is a substantial factor in the injury such that a factfinder could impose liability on the insured, creating a duty to defend |
| Role of causation and precedent in determining "accident" when employee committed intentional tort | L&M: Tort causation (substantial factor) governs; cases recognize negligent hiring etc. can be substantial factors even when employee acted intentionally | Liberty: Precedent (e.g., Delgado, Merced, Longden/Maples) shows the focus should be on the immediate intentional act and that antecedent negligence only creates potential, not an "accident" | Held: California tort causation (substantial factor) applies; Delgado and related authorities do not categorically bar coverage where the employer’s independent negligence could be a proximate, substantial factor. Some cited cases were distinguished as inapposite. |
Key Cases Cited
- Delgado v. Interinsurance Exchange of Automobile Club of Southern California, 47 Cal.4th 302 (defines "accident" and holds the term refers to the insured's injury‑producing acts)
- Safeco Ins. Co. v. Robert S., 26 Cal.4th 758 (policy coverage for bodily injury caused by "an accident" includes negligence)
- Minkler v. Safeco Ins. Co. of America, 49 Cal.4th 315 (imposes coverage analysis distinguishing intentional actor from independent negligent third party)
- State of California v. Allstate Ins. Co., 45 Cal.4th 1008 (tort approach to causation in coverage disputes; substantial‑factor test)
- Geddes & Smith, Inc. v. St. Paul Mercury Indem. Co., 51 Cal.2d 558 (early definition of "accident" as unexpected or undesigned consequence)
- Hogan v. Midland Nat. Ins. Co., 3 Cal.3d 553 (distinguished: addressed deliberate acts of injured third party, not independent negligent liability of insured)
- Merced Mut. Ins. Co. v. Mendez, 213 Cal.App.3d 41 (discussed accidentalness of intentional sexual acts; court explained additional unexpected happening is required to treat deliberate conduct as an "accident")