The Ninth Circuit recently affirmed the application of an assault and battery exclusion and endorsement leading to the application of a $250,000 wasting limit, as opposed to a non-wasting $1,000,000 limit. See Century Sur. Co. v. Spurgetis, –F. App’x–, 2014 WL 6985627 (9th Cir. 2014) & 2013 WL 1003402 (W.D.Wash. Mar. 13, 2013).
The liability policy at issue excluded all claims for bodily injury that were in any way related to an actual, threatened, or alleged assault or battery. The policy also, however, included an endorsement granting limited coverage for “unlawful” assault and battery. But this endorsement had a $250,000 wasting limit. The general policy had a non-wasting $1,000,000 limit. Century Sur. Co. asked the court to declare that the $250,000 wasting limit applied, as opposed to the non-wasting $1,000,000 limit.
In the underlying litigation, the plaintiff was severely injured in a fight with another patron of the insured bar. The other patron involved in the fight was criminally charged, but the jury acquitted him because they found he acted in self-defense. The underlying plaintiff then sued both the bar and the other patron alleging the insured bar and the patron were liable for assault and battery. The plaintiff also alleged that the bar delegated certain responsibilities to the other patron and that this other patron acted “negligently, recklessly or otherwise tortiously.” The plaintiff additionally made claims against the bar for negligent hiring, training, policies, delegation of authority, and over-service. Century Sur. Co. defended under a reservation of rights.
Because the endorsement containing the $250,000 wasting limit only applied to unlawful assaults or batteries, the insured bar and patron argued in the declaratory action that until it was determined that parties to the assault acted unlawfully, Century Sur. Co. was required to defend its insured subject to the non-wasting $1,000,000 policy limit.
The District Court held that it was enough that the underlying plaintiff “alleges an unlawful assault and battery (which he surely does—he could not recover by alleging a lawful assault, if such a thing exists.)” The District Court then held that because all liability in the complaint rest upon the assault and battery allegation, the allegation of assault and battery was sufficient for the exclusion to apply. Based on this reasoning, the District Court applied the $250,000 wasting limit from the assault and battery endorsement and held that Century Sur. Co. had not breached its duty to defend by defending subject to the wasting limit.
The Ninth Circuit affirmed the District Court’s decision without significant comment. However, the Ninth Circuit noted that the dispute was a coverage dispute as opposed to a duty to defend suit. Therefore, the alleged use of extrinsic evidence appears to have been a non-issue. The Ninth Circuit noted that “Century properly agreed to defend the lawsuit under a reservation of rights, made a settlement offer based on what it reasonably believed to be the applicable policy limits, and then sought a declaratory judgment to determine the actual policy limits.”
Consistent with prior Washington opinions on duty to defend issues, it should come as no surprise that providing a defense under a reservation of rights and seeking declaratory judgment received court approval. The application of the lower limit without having to prove unlawful conduct is a great result for the insurer.
