Where an employee of a company commits an intentional act, such as a battery or sexual molestation, the managers of that company are often named as defendants on a theory of “negligent supervision”, “negligent retention” or some other form of vicarious liability. While the company’s liability policy of insurance may contain exclusions which bar coverage for loss arising from the employee’s intentional act, the question arises whether the negligence claims against the managers or the company are nevertheless covered by liability insurance.

The threshold question is whether the managers’ or the company’s alleged negligent hiring or retention qualifies as an “occurrence” under the liability policy. In this regard, a number of California cases have found negligent hiring to be an “occurrence” separate from the action that caused the underlying bodily injury to a plaintiff. Chief among those cases is Liberty Surplus Ins. Corp. v. Ledesma & Meyer Constr. Co., 5 Cal. 5th 216 (2018), in which the California Supreme Court determined that even though an employee’s sexual assault was not an “occurrence” for which coverage applied (according to the policy, the occurrence had to be an “accident”), the insured company’s negligent hiring, retention, and supervision of the employee were independent “occurrences” for which coverage was owed.

Originally published in the Daily Journal - January 27, 2021.