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Court of Appeals Holds That Public Policy Does Not Shield Insurer From Potential Liability For Heroin Overdose

Tags: declaratory judgment, accident or occurrence, insurance coverage, four corners, public policy

Author: Sara C. Mills

A tragic series of events, most of them disputed, led to a recent published decision from the Court of Appeals on insurance coverage issues related to intentional conduct, occurrences, and the application of public policy. See Oddsen v. Henry, 2015AP000765 (recommended for publication).

On February 2, 2010, Jason Oddsen went to a party at a friend’s home. During the course of the party, Oddsen, who was a regular abuser of drugs, consumed a mixture of heroin, methadone, oxycodone, and alprazolam that proved fatal early the next morning. At some point during the evening, Oddsen became incoherent but then regained consciousness. Another party guest, Elizabeth Henry, became concerned and brought Oddsen to her mother’s house sometime between 1:00 a.m. and 1:30 a.m.  It was there that Oddsen “began to show signs of having overdosed.” Oddsen was pronounced dead at the hospital at 7:28 a.m.

Oddsen’s parents and his estate brought suit against Henry (and other party guests), alleging that she was negligent in failing to render or obtain aid for Oddsen. The suit also named State Farm, because Oddsen ended the night at Henry’s mother’s home, and State Farm had issued a condominium unit owner’s insurance policy to Henry’s mother. The trial court held that State Farm had no continuing duty to defend or indemnify Elizabeth Henry, and Oddsen’s estate appealed. The appeals court sided with the estate and reversed, because the material facts—Henry’s knowledge and actions—were disputed and thus summary judgment was not proper.

The circuit court’s ruling in favor of State Farm was based on public policy and the lack off an “occurrence.” It held that Henry had intentionally done nothing over a period of several hours and concluded that Henry’s “failure to obtain aid was not an accident.” The appellate court reversed on the basis that those facts were disputed.

The Estate’s complaint alleged that Henry noticed Oddsen’s difficulty breathing around 4:00 a.m. but called acquaintances instead of the authorities. The complaint alleged that at some point, Henry drove Oddsen’s car to pick up one of these acquaintances and then the pair “negligently attempted to render aid to Oddsen.” The Estate’s claim against Henry was based on her “negligent attempt to render aid.” ¶ 6. State Farm accepted Henry’s tender of defense under a reservation of rights.

State Farm conceded in its appellate brief that there were “two distinct versions of the events” that led up to Oddsen’s death. Henry’s story differed from the Estate’s complaint allegations: “she did not notice anything wrong with Oddsen until 5:45 a.m., when he abruptly stopped snoring. She woke him, and he was groggy but responsive.” Henry convinced Oddsen to go to the hospital but as he was putting on his shoes, “he slumped over and was unresponsive.” Henry then called 911. (The decision outlines the various disputed facts, which were developed through depositions of people who attended the party, including Henry.)

The State Farm policy defined an “occurrence” as “an accident, including exposure to conditions, which results in: a. bodily injury … during the policy period.” Coverage, however, is excluded for bodily injury when it is “either expected or intended by the insured; or … which is the result of willful and malicious acts of the insured.” State Farm argued in its motion for summary judgment that Henry had committed a series of volitional acts that led to Oddsen’s death and therefore, there was no “occurrence” or “accident.” It also argued that an intentional acts exclusion would apply and that public policy and the principle of fortuity would preclude coverage.

Because State Farm had provided a defense under a reservation of rights, the court was not confined to the four corners of the complaint to determine whether coverage existed. ¶ 27. Because “accident” was not defined in the State Farm policy, the Court of Appeals applied the term’s common everyday meaning: “‘an unexpected, undesirable event’ or ‘an unforeseen incident’ which is characterized by a ‘lack of intention.’” ¶ 31. The intentional or expected acts exclusion precludes coverage only where the insured acts intentionally and intends some harm or injury to follow from that act. Intent can be subjective or objective, and this determination is ordinarily a question of fact. ¶ 31.

The “accident” alleged in the Estate’s complaint is that Henry’s negligent failure to render aid resulted in his death. Central to the court’s determination that Henry’s actions were intentional, and not negligent, was its finding that Henry did “nothing over a period of several hours as her friend, who had consumed a large amount of illegal drugs in her presence earlier in the evening, perished before her very eyes.” These are disputed issues of material fact that must be resolved by the trier of fact.

¶ 32.

The fact finder at trial may believe the allegations in the complaint, if supported by the evidence presented at trial; the fact finder may believe Henry’s testimony; or it may find that the facts lie somewhere between those two versions, given the testimony of others.

 ¶ 35.

State Farm could not obtain a declaration of no coverage by relying only on the allegations of the complaint. State Farm justified its approach by arguing that “if Henry’s account is to be believed, the Estate would not have brought this lawsuit because she would have been entitled to immunity under the Good Samaritan law.” ¶ 36. “In effect, State Farm asks us to determine indemnity coverage for Henry based on a hypothetical outcome on liability, rather than on the evidence submitted on summary judgment.” ¶ 37.

Neither State Farm nor the Estate provide any authority for us to determine coverage for the insured based on the insurer’s and the plaintiff’s preferred hypothetical outcomes on liability when the facts are disputed. The parties provide no authority for their suggestion that we could pick and choose which allegations and facts to rely on to either find no coverage for the insured as a matter of law, or no underlying liability of the insured as a matter of law, when the allegations of the complaint are not evidence and the facts of record on summary judgment create disputed issues of material fact.

¶ 38 (emphasis in the original).

The opinion also includes a dissent, in which Judge Reilly opined that public policy precluded liability against Henry because she was not the proximate cause of Oddsen’s death. ¶ 44. The majority rejected this approach, because “No one ever asked for that relief.” ¶ 42. “Even when a court sees a dispositive issue that the parties neglected, intentionally or otherwise, the better course is to permit the parties additional briefing.” ¶ 42. The language used by the majority suggests that the public policy factors could have eliminated coverage but it was unwilling to reach that holding without fully developed arguments from both sides.

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