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Town of Cumberland v. Rhode Island Interlocal Risk Management Trust11/24/2004
luding the tort at issue, a civil rights violation.
Rhode Island Public Policy
The motion justice found that Rhode Island public policy did not bar the town's recovery for the malfeasance of its officials. The defendants assert that the motion justice erred by narrowly construing the cases on point, ignoring the fortuity principle, and rejecting precedent from other jurisdictions.
The defendants contend that insureds should not be allowed to recover for damages resulting from intentional acts because they are non-fortuitous losses. The defendants argue that insurance companies can only manage risk of fortuitous events and an insured's intentional acts are non-fortuitous. The defendants rely on Koppers Co. v. Aetna Casualty and Surety Co., 98 F.3d 1440, 1447 (3d Cir. 1996), which applies the fortuity principle, noting that this Court cited Koppers with approval in Insurance Co. of North America v. Kayser-Roth Corp., 770 A.2d 403, 413-14 (R.I. 2001). However, in Kayser-Roth, we cited Koppers for the principle that "non-settling insurers are entitled either to a setoff of settlement amounts received by the insured or to a proportional credit for those shares that would have been allocated to the settling insurers." Kayser-Roth, 770 A.2d at 413 (citing Koppers, 98 F.3d at 1443). We did not cite Koppers as it pertains to the fortuity principle, nor have we held that insureds are precluded from coverage for damages resulting from intentional acts.
The defendants further attempt to link the fortuity principle to our holding in Kayser-Roth by asserting that it is a "variant" of the known loss doctrine, which we recounted in that case. The known loss doctrine bars recovery "when the insured has knowledge, before the inception of an insurance policy, that the insured has suffered the threat of an immediate economic loss, as a result of some event, and that the reality of that loss occurring is a certainty." Kayser-Roth, 770 A.2d at 415. (Emphasis added.) Clearly there is a difference between an insured making a claim for a covered intentional tort occurring within the policy period and an insured purchasing insurance with an eye toward recovering for damages arising from a past event of which he has full knowledge.
Similarly, the motion justice properly distinguished the current controversy from Morin v. Aetna Casualty and Surety Co., 478 A.2d 964 (R.I. 1984). In Morin, this Court concluded that the parties were barred from recovering homeowner's insurance for fire damage because they had set the fire that resulted in the loss. Id. at 966-67. We held that " o permit such recovery * * * would violate all standards of public policy and defy the administration of justice." Id. at 967. The motion justice limited Morin to its facts, finding that the town was not barred from recovery because its actions "were not conducted with an eye towards illegal insurance recovery."
The defendants argue that such a limited view of Morin cannot be squared with this Court's holding in Peerless because there was no indication in Peerless that the insured committed sexual assault on a child with the intent to defraud his insurance company. As noted, the insured in Peerless was barred from recovery because his homeowner's policy precluded coverage for intentional acts and could not reasonably be read to provide coverage for sexual molestation. The question whether the insured acted with intent to defraud his insurer was never raised because, unlike the claim in Morin for loss due to fire, the policy in Peerless did not provide coverage for the injury suffered.
The defendants also rely on Foxon Packaging Corp. v. Aetna Casualty and Surety Co., 905 F.Supp. 1139
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