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  • WisBar News
    May 14, 2018

    Supreme Court: No Insurance Coverage for Security Guard Altercation with Customer

    Joe Forward

    Store Security

    May 14, 2018 – The Wisconsin Supreme Court has ruled that a business liability policy covering a convenience store did not cover a negligent supervision claim arising from a physical altercation between the store’s security guard and a store customer.

    The incident occurred in 2009 at a convenience store owned by Mustafa Mustafa. A customer, Archie Talley, visited the store to buy beer and later alleged that the store security guard, Keith Scott, punched him in the face and broke his jaw.

    The lawsuit asserted a negligent supervision claim – that Mustafa breached a duty to properly train and supervise Scott, resulting in injuries to Talley. The lawsuit named Mustafa and Mustafa’s insurer, Auto Owners Insurance Company, as defendants.

    The circuit court granted a motion to bifurcate the issue of whether Mustafa’s business insurance policy covered a negligent supervision claim. Ultimately, the circuit court ruled that the insurance policy did not cover the incident because it was an intentional act.

    An three-judge panel for the Wisconsin Court of Appeals court reversed (2-1), concluding an insured would expect to be covered for this type of negligent supervision claim and the circuit court should have let the case proceed to resolve disputed issues.

    But in Talley v. Mustafa, 2018 WI 47 (May 11, 2018), the state supreme court reversed (4-3) the appeals court, concluding the policy did not provide coverage.

    “When the negligent supervision claim pled rests solely on an employee’s intentional and unlawful act without any separate basis for a negligence claim against the employer, no coverage exists,” wrote Justice Rebecca Bradley for the majority.

    Three justices dissented: Justice Ann Walsh Bradley, Justice Shirley Abrahamson, and Justice Daniel Kelly. They would have affirmed the appeals court decision. “I believe the court of appeals got this case exactly right,” Justice Kelly wrote in a dissenting opinion.

    Insurance Policy

    Mustafa’s business insurance policy covered sums the business was legally obligated to pay as damages because of “bodily injury,” caused by an “occurrence,” including bodily injury “resulting from the use of reasonable force to protect persons or property.”

    The policy covered employees within the scope of employment. “Occurrence” meant an “accident.” Auto Owners argued that Scott was not an employee, an intentional act was not an “occurrence,” and there was no coverage for a negligent supervision claim.

    The majority framed the argument a different way: “This is the first time we have been asked to decide whether coverage exists based on an allegation that the employer should have trained the employee not to punch a customer in the face.”

    The majority said punching someone in the face is not an “occurrence,” which only covers accidents, and only a separate act by Mustafa could trigger coverage.

    “The only specific assertion Talley made in this regard is that Mustafa should have trained Scott not to hit people,” R. Bradley wrote. “There are no facts alleging that Mustafa himself acted in a specific way that led Scott to commit the act causing the injury. Talley does not present any separate basis for Mustafa’s negligence. …”

    However, the majority rejected the argument, presented by Mustafa and Auto Owners, that when the parties agree no coverage exists, that agreement controls.

    “While an insured’s belief that no coverage exists may be considered, courts follow established principles of law applicable to insurance coverage determinations.”

    Dissenting Opinions

    Justice Ann Walsh Bradley wrote a dissenting opinion, joined by Justices Abrahamson and Kelly, concluding the policy provides coverage for a negligent supervision claim.

    “The majority’s legal analysis suffers from tunnel vision,” A.W. Bradley wrote. “It focuses on the assault by the security guard, thereby misconstruing the injury-causing event alleged in the negligent supervision claim. Additionally, [Talley] alleges as an injury causing event that Mustafa failed to properly supervise his store’s security guard.”

    From Mustafa’s perspective, “the assault was unintended and therefore an accident, constituting an ‘occurrence’ under the policy,” Justice A.W. Bradley wrote.

    The dissent also challenged the majority’s conclusion that Talley’s negligent supervision claim was weak and thus it was not covered by Mustafa’s business liability policy.

    “At a coverage trial, the court’s task is to determine if the language of the policy requires the insurance company to indemnify its insured if the plaintiff’s claims against the insured are successful,” Justice A.W. Bradley explained.

    Justice Kelley wrote a separate dissent, joined by Justices Abrahamson and A.W. Bradley, arguing that the majority did not properly frame the legal analysis.

    “The purpose of the coverage phase is not to decide whether the plaintiff has stated a good cause of action (the pleading phase), nor is it to try the merits of the plaintiff’s claim (the merits phase,” Justice Kelly wrote. “The purpose of the coverage phase is to do nothing but authoritatively construe the insurance contract.”

    Justice Kelly noted that the supreme court has previously held that a business liability policy “with terms functionally equivalent” provided coverage for negligent supervision.

    “So maybe the point of this case is to overrule Doyle’s holding that negligent supervision of an employee qualifies as an occurrence within the meaning of [commercial general liability] policies like the one at issue here,” Justice Kelly wrote.

    “If that is what we are doing, we should just say so.” Kelly was referring to the supreme court’s ruling in Doyle v. Engelke, 219 Wis. 2d 277, 580 N.W.2d 245 (1998).

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