'No contest' plea & criminal acts insurance exclusions

The Connecticut Supreme Court concluded that a “no contest plea” in a criminal case cannot be used by an insurance company to deny coverage under a policy’s criminal acts exclusion.

The case was filed by Allstate Insurance Co., which sought a determination on whether it was obligated to defend and indemnify Donte Tenn, who was charged with criminal assault. The victim filed a separate civil case against Tenn and his mother’s insurance company for damages for personal injuries, according to the Connecticut Supreme Court’s opinion filed Feb. 23.

Tenn’s mother was the policyholder of homeowner’s insurance through Allstate and the insurance company conceded that Tenn qualified as an “insured person,” according to the court’s opinion. Allstate further conceded that the terms of that policy “generally obligated it to pay because of bodily injury or property damage arising from an occurrence,” the opinion said.

However, after Tenn entered a plea of nolo contendere to a first-degree assault charge, Allstate filed a motion for summary judgment, claiming Tenn’s no contest plea relieved the insurance company’s duty to defend and indemnify him in the civil action under a criminal acts exclusion in the policy.

Allstate claimed that Tenn’s actions were both intentional and criminal and therefore aren’t covered under the criminal act exclusion, according to the opinion. Additionally, the insurance company argued that Tenn’s no contest plea “precludes any argument that he did not commit [a] crime.”

U.S. District Judge Janet Bond Arterton of the District of Connecticut denied Allstate’s motion for summary judgment pending the resolution of the question certified to the state Supreme Court to determine whether a nolo contendere plea can be used by an insurance company in a declaratory judgment action to prove criminal conduct that would trigger a contractual exclusion to coverage, the opinion said.

“[W]e conclude that Tenn’s plea of nolo contendere is inadmissible to prove the occurrence of a criminal act, and, therefore, cannot be used to trigger the policy’s criminal acts exclusion,” Justice Maria Araujo Kahn wrote on behalf of the majority, further adding that under common law, as codified in §4-8A (a) of the Connecticut Code of Evidence, a plea of nolo contendere cannot be used as proof of criminal conduct.

Allstate argued that “the general rule against using pleas of nolo contendere can be adequately safeguarded by simply enforcing that rule in [the victim's] civil action before the Superior Court,” and “excluding proof of Tenn’s nolo contendere plea will allow him to benefit from his own illegal conduct,” the opinion said.

“We disagree on both points. First, we see no principled reason to rigorously enforce the restrictions imposed by § 4-8(a) of the Connecticut Code of Evidence on the victim of a crime in a tort case while simultaneously ignoring that rule for a corporation in a declaratory judgment action arising out of the very same set of facts,” Khan wrote. “The continued, uniform application of that rule ensures that the prospect of civil liability does not control the course of related criminal proceedings.

Second, although we wholeheartedly endorse the well established legal maxim that no one should be allowed to profit from his or her own wrongdoing, the exclusion of Tenn’s plea of nolo contendere in no way precludes Allstate from vindicating that principle by seeking to enforce the criminal acts exclusion on the basis of the evidence that led to Tenn’s prosecution and conviction. Indeed, Allstate is no less able to enforce the exception in this case than it would be in a case in which it declined to pursue a criminal prosecution of the insured party in the first instance.”

Chief Justice Richard A. Robinson, as well as Justices Raheem L. Mullins, Steven D. Ecker and Christine E. Keller concurred.

There are a number of reasons why a defendant may enter a no contest plea in a criminal case, such as it provides a means for defendants to resolve a case against them while avoiding harsher penalties at a trial, the financial cost of litigation, and as a “psychological crutch,” Kahn wrote for the majority.

“Whatever the case, there are a litany of reasons why a criminal defendant may accept a nolo plea and it should not be casually assumed that a defendant has sufficient incentive to litigate merely because she is charged with a serious offense,” Kahn wrote. “Even innocent defendants may have a broad range of motivations for entering a plea of nolo contendere rather than contesting a charge.”

At the same time, such a plea doesn’t always shelter a defendant from consequences. For example, a defendant may enter a no contest plea in a driving under the influence case, but it could still result in a driver’s license suspension.

“The present case does not, however, require us to engage in a lengthy or detailed discussion of the permissible collateral impacts of convictions resulting from pleas of nolo contendere under Connecticut law because, quite simply, the contractual exclusion at issue does not turn on the existence of a criminal conviction,” Kahn wrote. “To the contrary, the policy expressly states that this exclusion, ‘applies regardless of whether or not such insured person is actually charged with, or convicted of a crime.’ The provision, instead, is triggered by the commission of the ‘intentional or criminal acts of [an] insured person.’ Tenn’s plea of nolo contendere is inadmissible as proof of criminal acts under §4-8A(a) of the Connecticut Code of Evidence and our case law. See Lawrence v. Kozlowski, supra, 171 Conn. 711-13 (proof of nolo contendere plea and resulting conviction were inadmissible to support factual finding of criminal conduct).”

The majority looked to similar findings in other jurisdictions, including Safeco Ins. Co. of Ill. v. Gasiorowski, in which the U.S. District Court for the Eastern District of Pennsylvania held in July that an insured’s plea of nolo contendere did not trigger criminal acts exclusion in homeowners insurance policies; Safeco Ins. Co. of America v. Liss, in which the Supreme Court of Montana held in 2000 that a previous nolo contendere plea to a crime of assault did not preclude insured from contesting insurer’s assertion that the incident fell within policy’s criminal acts exclusion; and Elevators Mutual Ins. v. J. Patrick O’Flaherty’s, a 2010 case where the Ohio Supreme Court found that evidence of an insured’s no contest plea and subsequent convictions for arson and insurance fraud was inadmissible in civil action to trigger criminal acts exclusion, according to the opinion.

The majority rejected Allstate’s references to two 2001 California cases, 20th Century Ins. v. Schurtz and Century-National Ins. v. Glenn, because they are felony cases and “the legislature of that state has, by statute, provided that a plea of nolo contendere to a felony ‘shall be the same as that of a plea of guilty for all purposes,’” Kahn wrote.

Michele C. Wojcik of Nuzzo & Roberts declined to comment on Thursday and Ronald Johnson of the Law Office of Ronald S. Johnson could not immediately be reached for comment.

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