- Negligent Supervision Claim Covered by CGL Policy
- July 29, 2005 | Author: Collin J. Hite
- Law Firm: McGuireWoods LLP - Richmond Office
The U.S. District Court's recent ruling in Great Northern Insurance Company v. Paino Associates held that an insurer had a duty to defend and indemnify an additional insured under a CGL policy for negligent security services and negligent hiring practices. The Massachusetts Turnpike Authority's ("MTA") contract with Transcore called for the latter to obtain a CGL policy and have the MTA added as an additional insured. Transcore's employee subsequently set fire to the office space leased by the MTA. No surprise that the MTA became a named defendant in an action brought by the building's owner. The insurer refused to defend the MTA in the civil action or to indemnify it.
The insurance policy provided coverage to the MTA as an additional insured if liability arose out of an operation performed for the MTA by or on behalf of Transcore. Of course, the insurance company claimed that arson was not an operation performed for the MTA. The Court held that the complaint raised claims of negligence by Transcore in failing to supervise its employee, which were duties arising under the contract with the MTA. In short, the insurer had a duty to defend.
As for indemnification, the Court noted that in Massachusetts a claim of negligent provision of security services is covered by a CGL policy unless excluded. As for exclusions regarding intentional torts, in Massachusetts the law maintains the conceptual separation between the intent of the employee and that of the employer. The exception to this exclusion for intentional acts is if the act is so routine that it can be classified as a policy of the employer. In this case there was no specific exclusion, and arson clearly did not qualify as a routine act. Thus, the insurer was obligated to indemnify the MTA for the loss.
Just because an insurance carrier refuses to honor its obligations does not foreclose the door to an insured business ultimately getting coverage. Many companies find success similar to the MTA by using proactive litigation to challenge such denials of coverage.
Great Northern Insurance Company v. Paino Associates, 369 F.Supp.2d 177 (D. Mass. 2005).