Liberty University, Inc. v. Citizens Insurance Co. of America
792 F.3d 520
4th Cir.2015Background
- In 2012 Janet Jenkins sued Liberty University alleging Liberty and its agents aided Lisa Miller in defying visitation orders and kidnapping Jenkins’s child to Nicaragua; claims included kidnapping, RICO conspiracy, and respondeat superior/vicarious liability.
- Liberty sought a defense from its insurer, Citizens Insurance (Appellant); Citizens refused and Liberty sued for a declaratory judgment and defense costs.
- The relevant Citizens policy (2009–2010) included CGL (Coverage A for bodily/property injury from an “occurrence”; Coverage B for personal/advertising injury) and a School & Educators Legal Liability (SELL) form, plus a Separation of Insureds (severability) clause.
- Policy exclusions: expected/intended injury exclusion (Coverage A), Criminal Acts and Knowing Violation exclusions (Coverage B), and an Intentional & Criminal Acts exclusion in SELL that disclaims coverage for intentional/criminal acts by insureds.
- The district court held Citizens had a duty to defend, reasoning the separation clause prevented imputing agents’ intent to Liberty and that the Jenkins complaint did not sufficiently plead vicarious liability.
- The Fourth Circuit reversed: it held the complaint alleged only intentional acts (including vicarious liability), so no “occurrence,” and the policy exclusions for criminal/intentional acts applied; Citizens owed no duty to defend.
Issues
| Issue | Plaintiff's Argument (Jenkins/Liberty) | Defendant's Argument (Citizens) | Held |
|---|---|---|---|
| Whether a complaint alleging vicarious liability for intentional torts pleads an "occurrence" under Coverage A | The separation-of-insureds clause forbids imputing agents’ intent to Liberty, so Liberty’s exposure could be viewed as unexpected and thus an "occurrence" | Imputation of agent intent to principal remains under Virginia law; respondeat superior allegations are not an "occurrence" | Held for Citizens: respondeat superior for intentional acts is not an "occurrence"; separation clause does not displace imputation rule |
| Effect of Separation of Insureds clause on imputing agent intent | Clause requires evaluating each named insured separately; Liberty argued its own subjective intent was distinct from its agents’ | Citizens argued clause does not nullify Virginia law imputing agent knowledge/intent to principal or erase intentional-act exclusions | Held for Citizens: the clause does not nullify imputation or convert intentional torts into accidents; would create an unintended windfall if read otherwise |
| Whether Coverage B (personal/advertising injury) is barred by the Criminal Acts / Knowing Violation exclusions | Liberty argued allegations didn’t sufficiently tie Liberty to criminal acts or show knowledge; so exclusions shouldn’t apply | Citizens argued the complaint affirmatively alleges criminal acts (kidnapping, RICO) by Liberty or at its direction and thus exclusions apply | Held for Citizens: Criminal/Knowing-Violation exclusions apply because the complaint alleges criminal conduct by or at direction of insured and causal link to injuries |
| Whether SELL coverage is triggered or excluded by the policy’s Intentional & Criminal Acts exclusion | Liberty argued its allegations could be read as negligence or non-criminal wrongful acts within SELL’s scope | Citizens argued the Jenkins complaint affirmatively pleads Liberty’s intentional and criminal conduct, which SELL expressly excludes for all insureds | Held for Citizens: SELL exclusion applies; claims arise from intentional/criminal acts and thus are excluded |
Key Cases Cited
- AES Corp. v. Steadfast Ins. Co., 725 S.E.2d 532 (Va. 2012) (defines “occurrence”/accident from insured’s viewpoint and explains duty-to-defend principles)
- CACI Int’l, Inc. v. St. Paul Fire & Marine Ins. Co., 566 F.3d 150 (4th Cir.) (insurance duty-to-defend standard; insured-friendly rules)
- Travelers Indem. Co. v. Obenshain, 245 S.E.2d 247 (Va. 1978) (occurrence/potentiality rule: complaint supporting a covered theory triggers duty to defend)
- Parker v. Hartford Fire Ins. Co., 278 S.E.2d 803 (Va. 1981) (when complaint supports alternative covered theories, insurer must defend entire suit)
- Fulwiler v. Peters, 20 S.E.2d 500 (Va. 1942) (general rule that knowledge/intent of agent is imputed to principal)
- Magco of Md., Inc. v. Barr, 531 S.E.2d 614 (Va. Ct. App.) (imputation of foreman/agent knowledge to employer)