Liberty University Inc. v. Citizens Ins. Co. of America (Lawyers Weekly No. 15-01-0708, 32 pp.) (Thacker, J.) No. 14-2254, July 10, 2015; USDC at Lynchburg, Va. (Moon, J.) 4th Cir.
Holding: An insurance company has no duty to defend Liberty University under its CGL or educators’ legal liability policies against a complaint alleging the school participated – directly and vicariously – in a scheme to kidnap plaintiff’s daughter with her former lesbian partner in a legal civil union in order to defy visitation orders by Vermont and Virginia courts and abscond with the child to Nicaragua; the 4th Circuit reverses summary judgment for Liberty and vacates the award of defense costs.
The policy at issue contains two coverage forms: commercial general liability coverage and school and educators legal liability (SELL) coverage. The CGL policy has an “Expected Injury Exclusion” for bodily injury or property damage that is expected or intended from the standpoint of the insured. The policy’s “Criminal Acts Exclusion” excludes any personal and advertising injury arising out of a criminal act committed by or at the direction of the insured. Its “Knowing Violation Exclusion” excludes any personal and advertising injury caused by or at the direction of the insured with the knowledge that the act would violate the rights of another and would inflict personal and advertising injury. The SELL policy contains an “Intentional and Criminal Acts Exclusion.”
The insurance policy also includes a Separation of Insureds provision which states the insurance applies as if each named insured – potentially employees, volunteer workers, student groups and executive officers – was the only named insured. The district court granted summary judgment and awarded defense costs to Liberty. We conclude otherwise. Because the complaint does not allege an “occurrence,” and because it triggers the policy’s coverage exclusions, the carrier has no duty to defend.
We conclude Virginia’s highest court would hold that an allegation of a principal’s liability under the theory of respondeat superior for the intentional acts of an agent does not state an “occurrence.” Virginia holds that an agent’s state of mind is ordinarily imputed to the principal. Here, the pivotal issue is whether the Separation of Insureds’ provision alters Virginia’s rule that the expectations and bad intentions of Liberty’s agents are imputed to Liberty. The district court concluded the provision alters Virginia’s rule. We disagree.
The complaint at issue names a Liberty student worker as a defendant, so we must analyze Liberty’s coverage claim separately. Even if we imagine that Liberty was the only party sued in this case and the only insured requesting a defense under the policy, the complaint still frames Liberty’s liability in terms of respondeat superior. We have ample reason to anticipate that Virginia courts would impute the intent of Liberty’s agents accordingly.
The complaint at issue here does not allege that Liberty was responsible for its agents’ intentional acts because it was negligent. Rather, the complaint alleges Liberty is directly liable for harm arising from its intentional participation in conspiracies and vicariously liable for the intentional acts of its agents. The Separation of Insureds provision unambiguously would not displace the ordinary rule in Virginia that a complaint alleging a principal’s liability solely in respondeat superior for the acts of its agent does not state an “occurrence.” Even if the Separation of Insureds provision was ambiguous, the district court’s interpretation contradicts the clearly stated intent of the parties. The district court’s interpretation enlarges the insurer’s obligation beyond what it anticipated.
We conclude the Separation of Insureds provision does not displace Virginia’s rule that an insurer has no duty to defend against a suit alleging the insured is liable for the intentional acts of its agents under a theory of respondeat superior. Because the complaint alleges only intentional acts, we hold that it does not allege Liberty’s liability for damage arising from an “occurrence.”
The complaint clearly alleges facts and circumstances demonstrating that Liberty is liable in respondeat superior for kidnaping and racketeering through its agent, the student employee.
The carrier had no duty to defend Liberty against the complaint. Summary judgment for Liberty is reversed, the award of fees and costs is vacated and the case remanded for further proceedings.