January 21, 2019 In a recent decision, the U.S. Court of Appeals for the Ninth Circuit has reversed the district court's decision and in doing so answered the question as to whether a commercial general liability policy covers an employer-insured for negligently failing to prevent an employee's intentional misconduct. The Ninth Circuit sent this as a certified question to the California Supreme Court that stated “When a third party sues an employer for the negligent hiring, retention, and supervision of an employee who intentionally injured that third party, does that suit allege an 'occurrence' under the employer's commercial general liability policy? The case is Liberty Surplus Ins. Co. v. Ledesma & Meyer Construction Co., Inc., 418 P.3d 400 (Cal. 2018).

Ledesma & Meyer Construction (Ledesma) was sued because its employee sexually abused a minor student while Ledesma was overseeing the construction of a middle school. The student sued Ledesma alleging claims of negligent hiring, training and supervision of the employee that committed the intentional tort.

Ledesma had a CGL policy in place from Liberty Surplus Ins. Co. and Liberty Surplus Underwriters, Inc. (together, Liberty). When Ledesma filed a claim with Liberty, Liberty sought declaratory relief contending that they had no obligation to defend or indemnify Ledesma, its principals, and the San Bernadino Unified School District, against the claim because the claim was premised on an intentional act which would be excluded from coverage under the CGL policy. Liberty reasoned that, since the policy covered “bodily injury” that was caused by an “occurrence” and an “occurrence” is defined as an “accident” the claims for negligent hiring, training and supervision were too distanced from the intentional injury-causing conduct to trigger coverage. The district court granted summary judgment in favor of Liberty.