Mount Vernon Fire Insurance v. Creative Housing Ltd.
88 N.Y.2d 347, 645 N.Y.S.2d 433, 668 N.E.2d 404 (1996)
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Rule of Law:
An insurance policy exclusion for claims "based on" assault and battery precludes coverage for a negligence claim against the insured when the underlying cause of the injury is an assault, as the claim would not exist "but for" the assault.
Facts:
- Creative Housing Ltd. owned and managed an apartment building.
- Mount Vernon Fire Ins. Co. issued an insurance policy to Creative Housing that contained an exclusion for any claim 'based on Assault and Battery'.
- In April 1991, Lynette Hunter was criminally assaulted inside the apartment building.
- Hunter subsequently initiated a lawsuit against Creative Housing.
- Hunter's lawsuit alleged that Creative Housing was negligent in its supervision, management, and control of the premises, which allowed the assault to occur.
Procedural Posture:
- Lynette Hunter sued Creative Housing Ltd. in a civil lawsuit alleging negligence.
- Creative Housing sought a defense and indemnification from its insurer, Mount Vernon Fire Ins. Co.
- Mount Vernon filed a declaratory judgment action against Creative Housing in U.S. District Court, seeking a ruling that it had no duty to defend or indemnify.
- The District Court dismissed Mount Vernon's action, ruling the exclusion clause was ambiguous and holding that Mount Vernon had a duty to cover the claim.
- Mount Vernon (appellant) appealed the District Court's decision to the U.S. Court of Appeals for the Second Circuit.
- The Second Circuit, finding New York law on the matter to be unclear, certified two questions of law to the New York Court of Appeals (the court issuing this opinion).
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Issue:
Does an insurance policy exclusion for claims 'based on Assault and Battery' preclude coverage for a negligence claim against the insured property owner when the injury results from a third-party assault on the premises?
Opinions:
Majority - Simons, J.
Yes, the exclusion for claims 'based on Assault and Battery' precludes coverage. The phrases 'based on' and 'arising out of' in insurance exclusion clauses are legally indistinguishable and unambiguous. To determine if such an exclusion applies, the court uses a 'but-for' test: if no cause of action would exist but for the assault, the claim is considered 'based on' the assault and the exclusion applies. Here, Hunter's negligence claim cannot be established without proving the underlying assault; thus, the operative act giving rise to any potential recovery is the assault itself. Merely pleading a theory of negligence does not overcome a specific policy exclusion when the injury directly results from the excluded act. The identity of the perpetrator (a third party versus an employee) is immaterial, especially where the policy excludes claims based on assault 'whether or not committed by or at the direction of the insured.'
Analysis:
This decision solidifies the 'but-for' causation test for interpreting insurance policy exclusions in New York, significantly strengthening the position of insurers. It prevents policyholders from circumventing clear exclusions, like those for assault, by framing their claims in terms of negligence (e.g., negligent security, negligent hiring). By declaring the phrases 'based on' and 'arising out of' as legally synonymous and unambiguous, the court reduces litigation over policy language and establishes a clear precedent that prioritizes the underlying factual cause of an injury over the legal theory pleaded in the complaint.
