News about the California Supreme Court Ledesma Case.  Liberty Surplus Ins. Corp. v. Ledesma & Meyer Construction Co. S236765.

California Supreme Court holds there can be a duty to defend an insured for alleged negligent hire, supervision, or retention even if an employee commits intentional tort.

Courthouse photo credit: Wikipedia

On June 4, 2018 the California Supreme Court (hereinafter “the Court”), at the request of the U.S. Court of Appeals, 9th Circuit (9th Circuit) ruled in Liberty Surplus Ins. Corp. v. Ledesma & Meyer Construction Co. S236765 that when a third party sues an employer for the negligent hiring, retention, or supervision of an employee who has intentionally injured that third party, claims can allege an “occurrence” under the employer’s commercial general liability policy. The court indicated the answer depends on whether the injury can be considered “accidental.” In the context of an employee construction supervisor working on an elementary school site who molested a minor, the court held the injury could be an “accident” from the Employers perspective (even though the molestation conduct of the employee was intentional) and thus there was a duty to defend. It did not decide whether there was a duty to indemnify.

Please return to this site for further discussions, observations and comments on some of the implications that may follow from this ruling. For example, (1) if the plaintiff must prove that the employer had some knowledge of the employee’s propensity for intentional misconduct (e.g. molestation) to prove negligent hire, retention, or supervision, is the Employer’s conduct in sending the employee to an elementary school site with resulting injury, within the Courts definition of an “accident” so as to be an “occurrence” within the CGL policy language; or, is the injury not caused by and “accident” and thus not an “occurrence”? (2) What cases did the Court review, and either overrule or suggest that issues might be reviewed later; (3) What issues did the Concurring Opinion raise that are important for coverage consideration?

Under the circumstances that the 9th Circuit must now evaluate this case given the instructions it has received from the California Supreme Court on the law of California, it will be interesting to see if this ruling affects any other issue pending, such as indemnity and the applicability of any exclusions. It has been noted in one article by Jeff Sistrunk for Law 360 that there are documents in the file that indicate the employee was known to be a registered sex offender by the Employer. That fact was not mentioned in the Supreme Court opinion, probably because the issue before the court was the duty to defend based upon the allegations in the complaint, not the duty to indemnify based on evidentiary facts asserted at trial. But, if proven what is the impact on the evaluation of the conduct of the Employer in sending the employee to the elementary school job site?