What is an accident/occurrence?  It is the ageless question in general liability coverage.  As I’ve pointed out many times, the issues discussed by courts today have not changed much since 1869 when the Wisconsin Supreme Court had the “accident” question before it in Schneider v. The Provident Life Insurance Company.  [Schneider is a life insurance case, but the court’s analysis is the same as in a liability policy scenario.] 

In September 2021, James Kandu and Kandu Construction hosted an illegal underage drinking party at their warehouse located in Skokie, Illinois.  There was a $10 entry fee and it was a BYOB.  Get ready for this:  They hired off-duty police officers to help maintain order.

Dilan Durakovic and Adrian Alic, both underage, attended.  The Kandus allegedly encouraged Alic to consume alcoholic beverages and become intoxication.  The party was shut down at 11:00 p.m. due to overcrowding and Dilan and Adrian were ordered to vacate the premises. The Kandus allegedly required Alic, visibly intoxicated, to drive away with Dilan as his passenger.  A short time later, Alic’s automobile slammed into a tree, killing Dilan.

The estate of Dilan Durakovic filed suit against the Kandus.  The Kandus were insured by Westfield, which filed an action seeking a declaration that it had no duty to defend or indemnify them.

The underlying complaint alleged six ways to Sunday that the Kandus’ conduct, giving rise to the tragedy, was negligent.  Consider just these few examples:

Permitted conditions to exist whereby Defendants assisted, encouraged, aided and abetted minors, including Adrian Alic, to consume alcoholic beverages; Permitted Adrian Alic to drive off of their premises while visibly intoxicated and after being encouraged to consume alcoholic beverages at The Party; Negligently selected off-duty Skokie, Illinois police officers who breached their duty of ordinary and reasonable care as it pertained to the minor invitees present at The Party on September 5, 2021; Failed to remove Adrian Alic from the Kandu Construction premises once it became apparent that he was intoxicated after consuming alcoholic beverages.

Clearly the complaint was drafted by someone who understood how a commercial general liability policy works.

Westfield argued that coverage for Dilan’s death was precluded based on the “expected or intended” exclusion.  Expected or intended is not the exact same issue as no “occurrence,” but courts often treat them interchangeably (as did the court here).

As Westfield saw it, “the Kandus provided the forum for Alic to become intoxicated and ordering him to vacate the premises in his automobile with his passenger, Durakovic, thus propelling him on the fatal trip ending in a collision with a tree.  According to Westfield, these actions and inactions of the Kandus would be expected to result in the accident and death of Durakovic and was therefore intentional.” 

But the court in Westfield Premier Ins. Co. v. Kandu Constr., Inc., No. 22-5354 (N.D. Ill. Aug. 17, 2023) disagreed. 

With no Illinois cases on point, the federal court described its job as one to anticipate how Illinois courts would rule.  For that, the court principally relied on a dissenting opinion from a decision of West Virginia’s highest court:

“It appears to the Court that, if faced with the facts of this case, Illinois courts would determine from the standpoint of the insured, that serving alcoholic beverages to minors to the point of intoxication, is, as the dissent argued in Corra, extremely ‘careless’ and the victims of his carelessness should not suffer the denial of insurance coverage. It was the opinion of the dissenting West Virginia judge that ‘the homeowner did not intentionally serve alcohol to children intending for them to drive off the side of the road and get killed.’”

This is the classic issue in an “accident” case.  The insured acted intentionally -- but did not intend to cause injury.  However, as the insurer sees it, the injury was substantially certain to occur (or some other similar sounding causation test depending on the state).  So the court is called upon to address the likelihood that the act would lead to the injury. 

This situation places a lot of discretion in the court’s hands, gives rise to all manner of arguments on both sides, there is a large body of case law to draw from and the causation standards can vary.  Translation – it is an issue that can be difficult to predict.

For more on this issue, go back to 1869.