Defense Digest

With Friends Like These, Who Needs Enemies?

The Pennsylvania Supreme Court recently affirmed the Superior Court's reversal of a Cumberland County declaratory judgment, which held that Minnesota Fire and Casualty had a duty to defend and indemnify a homeowner involved in a criminal enterprise, in the case of Minnesota Fire and Casualty Company v. Michael J. Greenfield, et al. 855 A.2d 854 (Pa. 2004)

Eighteen-year-old Angela Smith and a friend went to Greenfield's home to purchase heroin. Smith and Greenfield had used heroin together on previous occasions. Greenfield admitted that he "occasionally" sold drugs out of his home, mostly marijuana, and on limited occasions, heroin.

On this particular evening, Greenfield sold Smith a bag of heroin labeled "Suicide," which she took by injection. She spent the night at Greenfield's house, and when Greenfield left for work the next morning, she was responsive yet groggy. When Greenfield returned home that afternoon, he found Smith dead on the floor. Greenfield called a friend to help him dump Smith's body near a creek. Greenfield called the police and claimed that he found Smith's body near the creek. He later recanted, and was arrested for involuntary manslaughter, abuse of a corpse, and unlawful delivery of heroin. Greenfield pled guilty to all charges, and he spent time in prison.

Smith's parents filed wrongful death and survival actions against Greenfield. Greenfield's homeowner's policy defined an "occurrence" as "an accident which results in a bodily injury or property damage." However, the policy excluded coverage for bodily injury "which was expected or intended by the insured."

The Pennsylvania Supreme Court held that the trial court erred as a matter of law when it found that Minnesota Fire and Casualty was required to defend Greenfield under these circumstances. However, the Supreme Court’s holding was based on public policy alone. In short, an insurer cannot be expected to defend an insured when the insured participates in illegal activity that could foreseeably result in harm to an individual.

Although the Supreme Court affirmed the Pennsylvania Superior Court’s decision to reverse the trial court, the reasoning behind the decisions differs. The Superior Court based its decision on both the doctrine of inferred intent and public policy. The doctrine of inferred intent is triggered when there is an intentional act on the part of the insured and it is inherent in that act that harm will occur. However, the Supreme Court disavowed the analysis of inferred intent in this case because the doctrine only applied to child abuse cases.

The lesson to be learned, other than to avoid illegal narcotics, is that Pennsylvania courts are likely to inject public policy analysis into the interpretation of insurance policies, especially when illegal activity is at issue. Greenfield found this out the hard way, while he was behind bars.

*Laurie is an associate in our Philadelphia, Pennsylvania office. She can be reached at 215-575-2715 or lfalcone@mdwcg.com.