Frederking v. Cincinnati Ins. Co., 929 F.3d 195 (5th Cir. 2019).
Carlos Sanchez got drunk and crashed into Richard Frederking while driving his employer’s vehicle insured by Cincinnati Insurance Company. Seriously injured, Frederking sued Sanchez in Texas state court and was awarded $137,025 in compensatory damages and $207,550 in punitive damages. Cincinnati agreed to pay the compensatory damages owed by the employer, but refused to pay the punitive damages owed by Sanchez, arguing that drunk driving collisions are not “accidents” under their liability policy, because the decision to drink (and then later drive) is intentional—even though there IS admittedly no intent to collide with another vehicle. The jury found that Sanchez intentionally drove while intoxicated, with “actual, subjective awareness” of the “extreme degree of risk, considering the probability and magnitude of the potential harm to others.” (The standard for gross negligence under Tex. Civ. Prac. & Rem. Code § 41.001(11)). Therefore, Cincinnati argued that Sanchez’s subjective awareness of the risk he posed renders the collision intentional, rather than accidental.
Frederking sued Cincinnati as a third-party beneficiary of the employer’s automobile policy, alleging breach of contract and asking for a declaratory judgment. The policy covered “accidents” caused by the insured’s employees. Cincinnati moved for summary judgment arguing that (1) Sanchez was not a covered “insured” at the time of the collision, (2) gross negligence could not result in a covered “accident”, (3) punitive damages are uninsurable as a matter of public policy, and (4) it had no duty to indemnify Sanchez. The district court granted Cincinnati’s motion concluding that Sanchez’s intentional decision to drive while intoxicated meant that the collision was not an “accident” under Texas law.
On appeal, the 5th Circuit noted that the policy did not define “accidents”, so it looked to the plain meaning and common usage of the term and Texas has defined the term “accident” as a “fortuitous, unexpected, and unintended event”, something that does not occur in the usual course of events or that could not be reasonably anticipated. Put another way, the term “accident” is defined by what it excludes—intentional acts. An intentional tort is neither an “accident” nor “occurrence” within the terms of the policy. The 5th Circuit began its opinion with the following telling admonishment: “Only an insurance company could come up with the policy interpretation advanced here.” It held there is no reason to describe the automobile collision involving Sanchez as anything other than an “accident.” No one contended that Sanchez intended his vehicle to collide with Frederking’s vehicle. Nor did Cincinnati suggest that Sanchez drank hoping to cause an automobile collision. The court concluded that the collision fell within the common understanding of the term “accident.”
Had the 5th Circuit upheld the coverage denial by Cincinnati, the ramifications for auto accident liability coverage would have been cataclysmic. Cincinnati argued that drunk driving collisions are not “accidents,” because the decision to drink (and then later drive) is intentional—even where there was admittedly no intent to collide with another vehicle. Its position would render the phrase “drunk driving accident” an oxymoron. A collision caused by texting, eating, or putting on makeup while driving would also not be considered an accident. A driver has made an intentional decision that contributed to the accident.
Cincinnati was actually in good company with the position it took. The Texas Supreme Court has said that a claim does not involve an accident or occurrence when either the insured intended the injury (which is presumed in cases of intentional tort) or “circumstances confirm that the resulting damage was the natural and expected result of the insured’s actions, that is, was highly probable whether the insured was negligent or not.” Lamar Homes, Inc. v. Mid-Continent Cas. Co., 242 S.W.3d 1 (Tex. 2007). The logic is that collisions are not “accidents” if they are “highly probable” because they are the “natural and expected result of the insured’s action.”
The 5th Circuit was not persuaded. It doubled down, stating:
But the collision here was neither “highly probable” nor the “natural and expected” result of Sanchez’s intoxicated driving. “Probable” means “more likely than not.” Likewise, for something to be “natural and expected,” it must be so obviously foreseeable that courts may conclude that the tortfeasor intended it to happen. As dangerous as drunk driving is, it does not make collisions “more likely than not”—or the “expected” result of intoxicated driving.
The 5th Circuit pointed out that Cincinnati’s radical interpretation would defeat the widely held expectations of all insureds who purchase automobile insurance precisely to protect against these “accidents.” It further pointed out that the Texas Supreme Court has rejected the notion that if an actor intends to engage in conduct that causes an injury, there can be no “accident,” Trinity Universal Insurance Co. v. Cowan, 945 S.W.2d 819 (Tex. 1997), and has stated that for something to be “natural and expected” it must be so obviously foreseeable that courts may conclude that the tortfeasor intended it to happen.
The 5th Circuit concluded that drunk driving collisions are “accidents,” as a matter of common parlance and proper policy interpretation. For an excellent treatise on insurance coverage written by MWL, please see “Fundamentals of Insurance Coverage In All 50 States.” For questions on insurance coverage, please contact Gary Wickert at firstname.lastname@example.org.