Vol. 71, No. 9,
September 1998
The New Tort of Negligent Supervision
Insurance coverage
In Doyle v. Engelke,10 a claim for negligent supervision in the complaint was
sufficient to trigger the duty to defend. This case arose out of an anti-abortion
demonstration. One of the defendants, Ward Engelke, had allegedly accused
the plaintiff, Catherine Doyle, of cursing at and kicking at his daughter
in the face while his daughter was praying outside
of a clinic. Engelke's claims had been covered in the print media and by
a radio station owned by defendant Wisconsin Voice of Christian Youth Inc.
(WVCY). The complaint also alleged that two WVCY employees filed a false
security agreement with the Secretary of State encumbering the Doyle's assets
and also served a false subpoena at Doyle's residence. The insurance policy
at issue in the appeal was a commercial general liability policy issued
to WVCY.
Numerous causes of action were alleged against WVCY and its employees.
By the time the case reached the Wisconsin Supreme Court, the only claims
for insurance coverage were a slander of title claim and negligent supervision.
Doyle held the slander of title claim was not covered; hence, all
the underlying conduct alleged in the complaint was excluded by the insurance
policy. This left the negligent supervision claim against the employer,
and this allegation triggered the insurer's duty to defend.
The trial court and the Wisconsin Court of Appeals had both held that
the insurance company had no obligation to defend in Doyle. Both
courts stated that the intentional acts of employees acting within their
scope of employment were intentional acts of the employer. This brought
the employer within the intentional acts exclusion. The Wisconsin Supreme
Court did not deal directly with the respondeat superior issue, but
stated:
"We disagree with the form of the analysis offered by the Court
of Appeals. It is significant in this case that the coverage disputed by
the parties is not St. Paul's obligation to defend WVCY employees individually
for their intentional acts against Doyle. Rather, the coverage we are addressing
is WVCY's individual coverage as a protected person under the policy."11
In footnote, the supreme court noted the vicarious liability argument
of the insurance company:
"Moreover, St. Paul's objection to responsibility to defend WVCY
against the negligent supervision claim on vicarious liability grounds fails
to recognize that it is not a claim for vicarious liability. While negligent
supervision does require an underlying wrong to be committed by the employee
as an element, the tort actually focuses on the tortious, i.e., negligent,
conduct of the employer."12
There was no further analysis of respondeat superior theory nor
was there any discussion of cases where the employer-insured "knew
or should have known" of the employee's conduct.13
There also was no mention of cases such as Bankert v. Threshermens Mutual
Insurance Co.14 Bankert held there
was no obligation to defend an insured for negligent supervision of children
that culminated in damages caused exclusively by the use of an automobile
that was excluded by the policy.
Keep in mind that Doyle was a duty to defend case, and the complaint
was construed in favor of the insured. Doyle gave the allegation
of negligent supervision its narrowest meaning because this was most favorable
to the insured.
Checklist of issues
Since the Doyle approach was narrow, there remain issues that
will have to be considered when litigating an employer's conduct and matching
that conduct to an insurance policy to see if there is a duty to indemnify,
as opposed to a duty to defend. This section discusses some of those questions.
Was the employee acting within the scope of
employment? If an employee's conduct that gives rise to damages is within
the scope of employment, respondeat superior should apply. The conduct
of such an employee becomes the act of the employer.15
For example, the employee's intentional acts will also be the employer's
intentional acts and excluded by an insurance policy's intentional acts
exclusion. The insured employer will be acting intentionally due to respondeat
superior; thus, there should be no coverage for the employer.
How is the exclusion worded? Several exclusions in insurance policies
may apply to an employee and employer relationship. The court and counsel
will need to focus upon the exact wording of the exclusion. An exclusion
may apply to "the insured" or "an insured," or "any
insured." If the exclusion is worded to include "any" insured,
it is much easier for a court to find that the excluded conduct of an employee
also precludes coverage for an insured-employer. Doyle looked at
the insurance policy's wording that excluded intentional acts committed
by acts "intended by the protected person." Doyle was analyzing
coverage for the protected person - the employer. Western National
Insurance Co. v. Nemitz16 found the term
"an insured" in an exclusion to be ambiguous, and therefore the
exclusion did not apply to parents. In contrast to Doyle and Nemitz,
see Taryn v. Joshua M.C.,17 which found
that an exclusion covering acts of "any insured" precluded coverage
for the parents as well as the child who committed the act causing damages.
Did the insured-employer know about the conduct? Doyle
and Miller did not discuss the basis for negligent supervision applied
in L.L.N. While a plaintiff and insured-defendant may not want to
add another question to the verdict form, an insurer may want to establish
that the employer "knew or should have known" that the employee
would subject a third party to an unreasonable risk of harm. At least two
cases have held that the status of an insured-supervisor may preclude coverage
if that insured "knew or should have known" of the improper conduct.
In Jessica M.F. v. Liberty Mutual
Fire Ins. Co.18 the intentional act
exclusion precluded homeowner insurance coverage for a grandmother who knew
or should have known of her husband's sexual abuse of their grandchildren.
In Carney
v. Village of Darien19 a police officer's
conduct should have been expected or intended from the standpoint of village
officials. The complaint alleged the officials were aware and had notice
of prior incidents and had reason to anticipate such conduct. The allegations
that village officials were aware of numerous complaints against the officer
were sufficient to bring the village officials (supervisors) within the
intentional act exclusion.
Are damages solely a result of excluded conduct? Bankert
held that an insurance provision that excludes the act of the wrongdoer
also operates to exclude the coverage for an insured's negligent supervision
or control of the wrongdoer.20 When an insurance
company writes an exclusion in a liability policy, it generally directs
the exclusion at a risk, not a person's status.21
Doyle was a duty to defend case that left open
the question of whether the obligation to indemnify (versus duty of defense)
will apply when all of the damages flow from the excluded conduct of an
employee. If all damages arise out of the excluded acts of an employee,
subsequent cases will have to determine whether the Bankert rationale
applies to preclude insurance coverage for negligent supervision of the
employee.
|
Arnold Anderson, Marquette 1969, is the author of the recently
published Wisconsin Insurance Law, 4th Ed., corporate counsel with
Wisconsin Reinsurance Corporation, and a member of the firm of Mohr &
Anderson S.C., Madison. |
Can damages be separated? If there is a single act by an employee,
it may be relatively easy to attribute all of the employee's conduct
to an employer's negligent hiring, training, or supervising of the employee.
But what if there are multiple acts? In addition, what if a jury were to
find that the employee may have committed the wrongful acts even if the
employer had not been negligent? And what of instances where damages in
a negligent supervision case are not solely a result of the employee's conduct?
It may be difficult for a jury to distinguish between damages caused
by an employee (not covered) and damages arising out of negligent supervision
(covered). In Valley Bancorporation
v. Auto Owners Insurance Company22
the insurance company had the burden of establishing which damages were
not covered by insurance. The failure of the insurance company to clarify
that issue precluded its ability to limit recovery against it.
What does this burden of proof mean for insurance companies when there
is a negligent supervision claim? An insurance company will have to become
involved in the case and try to separate damages that are covered from those
that are not. In most cases insured-defendants will be reluctant to add
damage questions to a verdict when those questions ask a jury to specify
damages that flow from conduct of the employee versus employer. On the other
hand, an insurance company probably is not going to be able to separate
covered and uncovered damages without additional questions in the verdict.
There also may be cases where a jury cannot distinguish between covered
and uncovered damages. In that event, the insurance company may have to
pay all of the damages flowing from both covered and uncovered conduct.23
Conclusion
The recent Wisconsin Supreme Court decisions in Miller and Doyle
establish the elements of the tort of negligent supervision and its application
to a liability insurance company's duty to defend. In order to satisfy insurance
coverage, careful employers should provide and document employee training,
and provide adequate supervision. Still, much work remains before all the
ramifications of these decisions can be known.
Endnotes
1Miller v.
Wal-Mart Stores Inc., No. 96-2529 (Wis. June 24, 1998).
2Doyle v. Engelke,
No. 96-0680 (Wis. June 24, 1998).
3L.L.N. v. Clauder, 209 Wis. 2d 674,
698-99, n.21, 674 N.W.2d 434 (1997).
4Bryan v. Adler, 97 Wis. 124, 127,
72 N.W. 368 (1897).
5Arsand v. City of Franklin, 83 Wis.
2d 40, 264 N.W.2d 579 (1978).
6Id. at 45, 264 N.W.2d 579.
7L.L.N. at 699, 674 N.W.2d 434.
8Id.
9Id.
10Doyle v.
Engelke, No. 96-0680 (Wis. June 24, 1998).
11Id. at slip op. 12-13.
12Id. at slip op. n.6.
13L.L.N., 209 Wis. 2d 674, 698-99,
n.21, 674 N.W.2d 434.
14Bankert v. Threshermens Mut. Ins. Co.,
110 Wis. 2d 469, 329 N.W.2d 150 (1983).
15Bryan v. Adler, 97 Wis. 124, 72
N.W. 368 (1897), Arsand v. City of Franklin, 83 Wis. 2d 40, 264 N.W.2d
579 (1978).
16Western Nat'l Ins. Co. v. Nemitz,
135 Wis. 2d 245, 400 N.W.2d 33 (Ct. App. 1986).
17Taryn v. Joshua M.C., 178 Wis. 2d
719, 505 N.W.2d 418 (Ct. App. 1993).
18Jessica
M.F. v. Liberty Mut. Ins. Co., 209 Wis. 2d 42, 561 N.W.2d 787 (Ct.
App. 1997).
19Carney
v. Village of Darien, 60 F.3d 1273 (7th Cir. 1995)(applying Wisconsin
law). See also § 5.20 "Intentional Acts: Sexual Assaults"
and § 5.53 (Fortuity, Known Loss and Loss In Progress," Anderson,
Wisconsin Insurance Law, 4th Ed. (1998).
20Bankert, 110 Wis. 2d 469, 329 N.W.2d
150 (1983). See also, Taryn N. v. Economy Fire & Cas. Ins. Co.,
197 Wis. 2d 77, 540 N.W.2d 26 (Ct. App. 1995).
21See, Sprangers v. Greatway Ins. Co.,
182 Wis. 2d 521, 514 N.W.2d 1 (1994), and cases cited therein.
22Valley
Bancorporation v. Auto Owners Ins. Co., 212 Wis. 2d 609, 569 N.W.2d
345 (Ct. App. 1997).
23Id.
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