Allstate Ins. Co. v. Schmitt

• Decision Date: 27 February 1990
• Citation: 238 N.J.Super. 619,570 A.2d 488
• Parties: ALLSTATE INSURANCE COMPANY, Plaintiff-Respondent, v. Peter SCHMITT and 5738 Corporation, d/b/a Smiles Cocktail Lounge and Restaurant, Defendants-Appellants, and Joseph Scalera, Defendant.
• Court: New Jersey Superior Court — Appellate Division

Page 619

238 N.J.Super. 619

570 A.2d 488

ALLSTATE INSURANCE COMPANY, Plaintiff-Respondent, v. Peter SCHMITT and 5738 Corporation, d/b/a Smiles Cocktail Lounge and Restaurant, Defendants-Appellants and Joseph Scalera, Defendant.

Superior Court of New Jersey Appellate Division.

Argued Jan. 31, 1990.

Decided Feb. 27, 1990.

Richard M. Chisholm, for defendant-appellant Peter Schmitt (Sellar, Richardson, Stuart & Chisolm, attorneys, Richard M. Chisholm, Roseland, of counsel and on the brief).

Gregory Helfrich, for defendant-appellant 5738 Corp. d/b/a/ Smiles Cocktail Lounge and Restaurant (O'Donnell, McCord & Leslie, attorneys, Paul A. Woodford, Morristown, of counsel and on the brief).

John Haschak, II, for plaintiff-respondent Allstate Ins. Co. (Leary, Bride, Tinker & Moran, Cedar Knolls, attorneys, John Haschak, II, on the brief).

Before Judges KING, BAIME and KEEFE.

The opinion of the court was delivered by

BAIME, J.A.D.

This appeal requires us to construe exclusionary language contained in a homeowners policy barring coverage for bodily injury "reasonably expected to result" from the insured's criminal acts. At issue is whether this provision relieves the insurer from its obligation to defend and indemnify its insured with respect to harm that is said to be the unintended result of his reckless criminal conduct. An ancillary question is whether a clause excluding coverage for losses caused by the insured's criminal acts, without reference to his intent, is contrary to public policy. Finally, we must determine the preclusive effect, if any, of a criminal judgment in collateral civil proceedings.

I.

We need not recount the facts at length. It is undisputed that sometime in the early morning hours of January 20, 1984 at Smiles Cocktail Lounge and Restaurant (Smiles), Joseph Scalera struck Peter Schmitt's face with a glass. The record is somewhat unclear with respect to the circumstances that precipitated this incident. Apparently, Scalera believed that Schmitt's date, Susan Crane, had inadvertently spilled a drink on him earlier in the evening. When Scalera later confronted Crane, Schmitt attempted to intervene. In their deposition testimony, both Crane and Schmitt stated that, without any menacing movement or provocation by Schmitt, Scalera suddenly thrust his glass into Schmitt's face, causing multiple and severe lacerations. Scalera's account of the incident, as related to the police after his arrest, did not differ markedly from that of Schmitt and Crane. According to Scalera, he struck Schmitt with the glass because "he thought a fight was going to start between the two...."

An indictment was later returned charging Scalera with aggravated assault by "recklessly caus[ing] bodily injury to another with a deadly weapon." N.J.S.A. 2C:12-1b(3). Scalera entered a plea of guilty to the charge. In providing a factual basis for the plea, see R. 3:9-2, Scalera, for the first time, claimed that Schmitt had struck him and that he had merely retaliated by hitting him in the face. According to Scalera, he didn't realize that he had a glass in his hand until it shattered. Scalera was subsequently sentenced to 364 days in the Morris County jail.

On January 17, 1986 Schmitt filed a complaint against Scalera and the 5738 Corporation, the owner of Smiles. In his complaint, Schmitt sought compensatory damages, claiming that Scalera had assaulted him and that Smiles had failed to provide its patrons with adequate security. Scalera immediately notified Allstate Insurance Company (Allstate), asserting that Schmitt's claim was covered under the homeowners policy issued to his mother. Allstate then instituted a declaratory judgment action to resolve the issue of coverage, naming as defendants Scalera, Schmitt and Smiles. Schmitt's action against Scalera and Smiles was stayed pending resolution of the coverage issue.

In its declaratory judgment action, Allstate contended that it was under no obligation to defend or indemnify Scalera for losses resulting from his criminal act. Allstate argued that the homeowners policy issued to Scalera excluded coverage for losses resulting from criminal behavior, without reference to whether or not it was the insured's conscious object or intent to cause the injury sustained by the victim. Schmitt, Scalera and Smiles all claimed that the policy exclusion does not encompass losses that were the unintended results of criminal conduct. They argued that the exclusionary language was applicable only if the injury resulting from the criminal act was one specifically contemplated by the insured. Alternatively, they asserted that any interpretation of the exclusion that did not require the injury be intended by the insured violated public policy.

We need not describe the somewhat unusual procedural context in which the issue of coverage was considered and decided. Suffice it to say, the Law Division judge treated the parties' respective arguments as motions for summary judgment. In an oral opinion, the judge determined that the exclusionary language barred coverage with respect to the insured's criminal acts, whether or not intentional, and whether or not the injury inflicted was specifically contemplated by the attacker. Based upon this construction of the policy exclusion, the Law Division judge deemed Scalera's criminal conviction wholly dispositive of the coverage issue. Allstate was granted summary judgment on this basis.

II.

We first consider whether the policy exclusion bars coverage for unintended bodily injury resulting from an insured's criminal act. The operative language reads as follows:

Exclusions--Losses We Do Not Cover

We do not cover any bodily injury or property damage which may reasonably be expected to result from the intentional or criminal acts of an insured person or which is in fact intended by an insured person. [Emphasis in original].

Both Schmitt and Smiles contend that this clause excludes coverage only with respect to injuries that are the intended result of either a criminal or intentional act. Stated somewhat differently, they claim that the policy exclusion is confined to instances where the insured intentionally injures his victim and subjectively desires to cause the type of harm actually inflicted. In support of their argument, they heavily rely upon Ambassador Insurance Company v. Montes, 76 N.J. 477, 388 A.2d 603 (1978), and Lyons v. Hartford Ins. Group, 125 N.J.Super. 239, 310 A.2d 485 (App.Div.1973), certif. den. 64 N.J. 322, 315 A.2d 411 (1974).

We find no basis for construing the policy language so narrowly. Initially, we note that both Ambassador Insurance and Lyons are inapposite. The principal issue presented in Ambassador Insurance was whether "public policy prohibits indemnity for the civil consequences of [an insured's] intentional wrongdoing." 76 N.J. at 481, 388 A.2d 603. Despite the disarming simplicity of the question posed, Ambassador Insurance was decided by a divided court, and the appeal produced three opinions.

Emphasizing that none of the parties relied upon any exclusionary clause or other pertinent limitation in the policy, id., 76 N.J. at 482, 388 A.2d 603, the majority concluded that there was no public policy prohibition against indemnity where the wrongdoer is not benefitted and an innocent third person receives the protection afforded by the insurance. Id. at 482-483, 388 A.2d 603. The majority held that when a comprehensive general liability insurance policy does not have an exclusion provision for the insured's intentional acts, the insurance company is responsible to an injured person for those sums which the insured is legally obligated to pay such person for causing him personal injuries, provided the insured in no way benefits. Ibid.

Justice Pashman filed a concurring opinion in which Justice Handler joined. Id. at 486, 388 A.2d 603. They agreed that public policy was not offended where an innocent party obtains the benefit of policy coverage accorded to an insured who has intentionally harmed him. Id. at 486, 388 A.2d 603. In addition, however, they found that language contained in the policy barred coverage only with respect to where the "injury was the intended result of an intentional act." Id. at 489, 388 A.2d 603. In that respect, they pointed to the policy definition of the word "occurrence" as meaning "an accident ... which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured." Id. at 487, 388 A.2d 603. The concurring Justices construed this definition as excluding coverage only where the insured intends to injure, i.e., where the insured "subjective[ly] desire[s]" to inflict injury. Id. at 489, 388 A.2d 603.

Justice Clifford filed a dissenting opinion. Id. at 492, 388 A.2d 603. Like Justices Pashman and Handler, the dissent criticized the majority for ignoring the definitional section of the policy. Id. at 493-494 n. 11, 388 A.2d 603. However, Justice Clifford departed from the concurring Justices based upon his view that the definition of "occurrence" excluded coverage for injuries intended by the insured and those that "are substantially certain to result from [the insured's intentional acts]." Id. at 494, 388 A.2d 603, quoting Restatement, Torts 2d, § 8A (1965).

Whatever else may be said about the reach of Ambassador Insurance, it is plain that none of the three opinions rendered concerned an exclusion in any way similar to that contained in the Allstate policy in this case. As we have stressed, the only question decided by the majority was whether public policy prohibited an innocent third party from obtaining the benefit of an insured's policy in the context of the insured's wrongful intentional acts. Id. at 482 n. 2, 388 A.2d 603. While the concurring and dissenting opinions went further and considered whether the policy language barred coverage for the unintended consequences of the insured's intentional wrongful acts, id. at 482,...