Allstate Ins. Co. v. Zuk

• Decision Date: 06 June 1991
• Citation: 574 N.E.2d 1035,78 N.Y.2d 41,571 N.Y.S.2d 429
• Parties: , 574 N.E.2d 1035 ALLSTATE INSURANCE COMPANY, Respondent, v. William R. ZUK et al., Appellants.
• Court: New York Court of Appeals Court of Appeals

Page 429

571 N.Y.S.2d 429

78 N.Y.2d 41, 574 N.E.2d 1035

ALLSTATE INSURANCE COMPANY, Respondent, v. William R. ZUK et al., Appellants.

Court of Appeals of New York.

June 6, 1991.

Joel Martin Aurnou, for William R. Zuk et al., appellants.

Michael E. Tockman, for Patricia Smith, appellant.

Gail M. Lolis and Richard J. Inzerillo, for respondent.

OPINION OF THE COURT

BELLACOSA, Judge.

Allstate Insurance Company seeks a declaratory judgment that it has no duty to defend or indemnify its insured, William Zuk, in a wrongful death action arising out of the death of Zuk's friend, Michael Smith, whom Zuk shot and killed. On November 2, 1985, Zuk was cleaning and loading a shotgun in a hunting lodge owned by his parents, Benedict and Margaret Zuk. The gun accidentally discharged and Smith, who was sitting a few feet away from Zuk, was shot in the thigh, severing his femoral artery. He subsequently bled to death. Zuk was charged with second degree manslaughter and was convicted on his guilty plea of recklessly causing Smith's death (Penal Law § 125.15[1]. Allstate argues that Smith's death is not covered under the homeowner's liability policy at issue because the policy excludes injuries that could "reasonably be expected to result" from criminal acts. Allstate contends that Zuk's conviction conclusively establishes this exclusionary element.

We hold that Zuk's criminal conviction does not collaterally block the civil litigation of the issue whether Smith's death could "reasonably be expected to result" from Zuk's acts. Under this policy provision, in the factual context of this dispute and its procedural framework, that issue cannot be resolved as a matter of law. We therefore reverse the order of the Appellate Division granting summary judgment to Allstate.

Respondent Patricia Smith, individually and as administratrix of the estate of Michael Smith, commenced a wrongful death action against Zuk alleging that he "carelessly, recklessly and negligently operate[d] [a] shotgun" causing Michael Smith's death. Zuk sought defense and indemnification from Allstate under a homeowners' liability policy issued to his parents, the owners of the premises where the accident occurred. The policy covered Zuk as a resident of his parents' household. Under the policy, Allstate agreed to "pay all sums arising from an accidental loss which an insured person becomes legally obligated to pay as damages because of bodily injury [or resulting death] or property damage covered by this part of the policy" (emphasis supplied). Excluded from coverage was "bodily injury or property damage which may reasonably be expected to result from the intentional or criminal acts of an insured person or which are in fact intended by an insured person" (emphasis supplied).

Allstate initially agreed to defend but not indemnify Zuk, based on the interplay of the policy exclusion and Zuk's criminal conviction. Allstate then commenced this action seeking a judgment against Zuk, his parents, and Patricia Smith, relieving it of its defense and indemnification obligations and declaring the rights, duties and obligations of the parties. Supreme Court denied Allstate's motion for summary judgment, concluding that a material issue of fact existed--namely, whether Smith's death could, as referenced to the insurance policy clause, "reasonably be expected to result" from Zuk's mishandling of the shotgun. The Appellate Division, 160 A.D.2d 971, 554 N.Y.S.2d 939, reversed and granted Allstate summary judgment. That court held that Zuk's guilty plea in the criminal proceeding established as a matter of law that Smith's death was caused by a criminal act and therefore Zuk was collaterally estopped from contesting that conclusively determined issue in this civil action. This Court granted leave to appeal and we now reverse.

An insurer has a duty to defend its insured in a pending lawsuit when the complaint alleges a covered loss or when the insurer has actual knowledge of facts establishing the reasonable possibility of coverage (see, Fitzpatrick v. American Honda Motor Co., 78 N.Y.2d 61, 571 N.Y.S.2d 672, 575 N.E.2d 90; Technicon Elecs. Corp. v. American Home Assur. Co., 74 N.Y.2d 66, 544 N.Y.S.2d 531, 542 N.E.2d 1048, rearg. denied 74 N.Y.2d 893, 547 N.Y.S.2d 851, 547 N.E.2d 105; Meyers & Sons Corp. v. Zurich Am. Ins. Group., 74 N.Y.2d 298, 546 N.Y.S.2d 818, 545 N.E.2d 1206,). The complaint in the underlying wrongful death action in this case asserts a cause of action based in part on negligence. Under the policy at issue, Allstate agreed to defend suits brought against its insured for "covered damages", i.e., arising from an accidental loss. Thus, the complaint alleges a potential basis for coverage and, consequently, gives rise to a duty to defend.

However, an insurer can be relieved of its duty to defend if it establishes as a matter of law that there is no possible factual or legal basis on which it might eventually be obligated to indemnify its insured under any policy provision (see, Villa Charlotte Bronte v. Commercial Union Ins. Co., 64 N.Y.2d 846, 848, 487 N.Y.S.2d 314, 476 N.E.2d 640; Spoor-Lasher Co. v. Aetna Cas. & Sur. Co., 39 N.Y.2d 875, 876, 386 N.Y.S.2d 221, 352 N.E.2d 139). The policy clause germane to the resolution of this case covered accidental losses unless they could "reasonably be expected to result" from a criminal act. Therefore, Allstate would be entitled to summary judgment declaring that it has no duty to indemnify Zuk, and consequently no duty to defend him in the pending wrongful death action, only if it established as a matter of law that Smith's death was, in the legal sense intended by the policy clause, reasonably expected to result from Zuk's actions which eventuated into a criminal charge and conviction.

Allstate argues that Zuk's second degree manslaughter conviction establishes as a matter of law that Zuk reasonably expected that his acts would cause Smith's death. In limited circumstances, a particular issue expressly or necessarily decided in a criminal proceeding may be given preclusive effect in a subsequent affected civil action (see, Matter of Nassau Ins. Co. [Bergen--Superintendent of Ins.], 78 N.Y.2d 888, 573 N.Y.S.2d 447, 577 N.E.2d 1039 [decided today]; D'Arata v. New York Cent. Mut. Fire Ins. Co., 76 N.Y.2d 659, 664, 563 N.Y.S.2d 24...