The Second Department recently held that there was a question of fact regarding whether a school district’s conduct in ignoring complaints of anti-Semitic harassment was a covered “occurrence” under the insurance policy.

In Graphic Arts Mutual Insurance Co. v. Pine Bush Central School District, plaintiffs in an underlying action alleged the Pine Bush Central School District violated their civil rights by being deliberately indifferent to anti-Semitic harassment.  The School District tendered their defense in the underlying action to Graphic Arts Mutual Insurance Company.  Graphic Arts Mutual initially defended the School District in the underlying action, but later disclaimed any duty to indemnify.  The School District ultimately settled for $3 million in compensatory damages and $1.48 million in attorneys’ fees.  Graphic Arts Mutual did not contribute to the settlement, and commenced a declaratory judgment action.  Graphic Arts claimed it was not obligated to indemnify the School District because the District’s conduct constituted intentional discriminatory conduct, and the claims did not constitute a covered “occurrence” or “loss.”

The Second Department found that for the claim to have been an “accident,” it would have to be unexpected, unusual, or unforeseen from the point of view of the insured.  The underlying plaintiffs alleged that the repeated nature of harassment gave rise to an inference that the District “intended for the harassment to occur” based on the District’s policies in dealing with reports of discrimination.  Ultimately, the court held that whether the incidents giving rise to the underlying complaint were “accidents” were questions of fact that could not be decided on a motion to dismiss.

Insurers should be mindful of the court’s discussion of “accidental results flowing from intentional causes.”  Specifically, the court held that “an act that is intentionally committed or performed may still be considered an accident within the meaning of an insurance policy, as long as the insured did not expect or intend the harm caused.”   Thus, even though the District’s conduct may be intentional, it would nonetheless be covered conduct because the consequences from that conduct were unexpected.  The outcome of this case remains unclear, but a decision on the underlying facts may shed light on how New York courts approach “accidental results flowing from intentional causes.”

Thanks to Douglas Giombarrese for his contribution to this post.