Auto-Owners hired counsel to represent Mr. Mustafa under a reservation of rights. It later asked the trial court to declare that its insurance policy did not provide coverage, arguing, among other things, that there could be no coverage for a negligent supervision claim based on an assault.

The trial court dismissed the insurer from the case and a divided court of appeals reversed.

The dispute reached the Wisconsin Supreme Court.

Auto-Owners contended that only an “occurrence” triggered coverage and that there had been no occurrence. It insisted that Mr. Talley's attempts to “bootstrap negligence into the case” as a separate tortious act by alleging that Mr. Mustafa had been negligent in training and supervising Mr. Scott should be rejected.

For his part, Mr. Talley insisted that his negligent supervision cause of action against Mr. Mustafa involved a separate act of negligence that was covered under the Auto-Owners insurance policy.

In an amicus brief, the Wisconsin Insurance Alliance contended that an injured party could not obtain insurance coverage by creatively pleading a cause of action for negligent supervision against the insured employer.

The Auto-Owners Insurance Policy

The Auto-Owners policy provided:

This insurance does not apply to:

a. “Bodily injury” or “property damage” expected or intended from the standpoint of the insured. 

The court reversed the decision of the court of appeals and held that there was no coverage under the Auto-Owners insurance policy

In its decision, the court explained that the Auto-Owners policy applied only to bodily injury caused by an “occurrence,” which was defined in the policy as an accident. In the court's view, intentionally punching someone in the face two times was “not an accident under any definition.”

Accordingly, the court continued, the negligent supervision claim against Mr. Mustafa could qualify as an occurrence only if facts existed showing that Mr. Mustafa's own conduct had accidentally caused Mr. Talley's injuries. Because there were no facts in Mr. Talley's complaint (or in any extrinsic evidence) alleging any specific separate acts by Mr. Mustafa that had caused Mr. Talley's injuries, there was no occurrence triggering coverage for the negligent supervision claim, the court ruled.

The court noted that the only specific assertion Mr. Talley made in this regard was that Mr. Mustafa should have trained Mr. Scott not to hit people. The court declared that:

when a negligent supervision claim is based entirely on an allegation that an employer should have trained an employee not to intentionally punch a customer in the face, no coverage exists.

According to the court, a plaintiff could not “simply add the word 'negligence' to a complaint and expect that a supervision claim against an employer will create an accident out of the employee's intentional assault and battery.” In other words, the court said, it considered whether Mr. Talley had alleged facts against Mr. Mustafa that showed that Mr. Talley's bodily injury had been caused by an accident, which would be an “occurrence” triggering insurance coverage. “Simply inserting the word 'negligence' into a complaint” did not create coverage if the complaint failed to allege “specific facts to establish an occurrence,” the court said

Because Mr. Talley's allegations asserting negligent supervision were entirely dependent on the intentional act giving rise to the injury – the alleged punching – the court concluded that there was no coverage under the Auto-Owners insurance policy.

The case is Talley v. Mustafa, No. 2015AP2356 (Wisc. May 11, 2018). Attorneys involved include: For the defendant-respondent-petitioner, there were briefs filed by Justin F. Wallace, William R. Wick, and Nash, Spindler, Grimstad, & McCracken, LLP, Manitowoc. There was an oral argument by Justin F. Wallace. For the plaintiff-appellant, there was a brief filed by George E. Chaparas and Carlson, Blau & Clemens, S.C., Milwaukee. There was an oral argument by George E. Chaparas. An amicus curiae brief was filed on behalf of The Wisconsin Insurance Alliance by James A. Friedman, Mark W. Hancock, and Godfrey & Kahn, S.C., Madison. 

FC&S Legal Comment

Courts in other jurisdictions also have decided that an allegation of negligent supervision by an employer did not trigger coverage when an employee caused injuries to another by intentionally violating the criminal law. See, e.g., U.S. Underwriters Ins. Co. v. Val-Blue Corp., 647 N.E.2d 1342, 1344 (N.Y. 1995) (holding no coverage for employer based on negligent supervision claim when employee security guard shot a person who entered the nightclub) (applying assault and battery exclusion); Smith v. Animal Urgent Care, Inc., 542 S.E.2d 827, 831-32 (W. Va. 2000) (holding no coverage for employer when employee sexually harassed another employee).

Courts also are rejecting plaintiffs' attempts to create coverage under commercial general liability insurance policies by simply inserting negligence claims into complaints when employees' intentional acts caused the injuries giving rise to lawsuits. See, e.g., Mt. Vernon Fire Ins. Co. v. Dobbs, 873 F. Supp. 2d 762, 766 (N.D. W. Va. 2012) (agreeing that plaintiff could “not mischaracterize intentional acts as negligence claims in order to avoid the exclusions contained within the insurance policy”).