Montgomery Mutual Insurance v. Citadel Management; Duty to Defend Claims for Improper Burial

In Montgomery Mutual Ins. v. Citadel Management (November 22, 2013; WDNC) a federal court addressed coverage for and a duty to defend claims for improper burial. In the underlying tort action, the plaintiff alleged that thecemetery mishandled

desecrated, and abused the body of a relative and disturbed gravesites of other relatives. They asserted claims for negligence (e.g. negligent infliction of emotional distress), and numerous other claims for intentional and malicious conduct. The insurer issued a policy to the cemetery, with standard CGL language covering claims for "bodily injury" and "property damage" arising from an "occurrence," and excluding several types of injury and claims, including "bodily injury or property damage expected or intended from the standpoint of the insured." It also excluded "injury or damage arising out of dishonest or fraudulent acts or omissions or willful violations of any statute, ordinance or regulation committed by or with the insured's consent." The insurer filed a declaratory judgment (DJ) action to determine its duty to defend, and its duty to indemnify the insured.

The court essentially held that the complaint sufficiently alleged claims for "negligence," such that there was an occurrence, and the intentional acts (and other exclusions) did not apply as a matter of law. The insurer relied on several cases from North Carolina stating (in essence) that the mere allegation of "negligence" in a complaint against the insured is not sufficient to render the insured's conduct an "occurrence," where the insured's conduct viewed globally is clearly intentional. The court used an interesting point of reasoning, that the fact that the insured attempted to cover up the mishandling of the body showed that the insured did not intend to harm the claimants. The court thus concluded that the insurer had to defend all claims (i.e. covered and non-covered claims). (The duty to defend is typically determined by the allegations in the complaint against the insured.)

Regarding the duty to indemnify, the court held that it could not yet make this determination because the tort action was pending. The court stayed the federal action, to allow the pending tort action to proceed. (This is a fairly common dilemma when there is a pending tort action and a pending coverage action. It is often not clear which should take priority.)

John Kirby has represented parties in numerous CGL claims in North Carolina, including those involving the existence of an occurrence and the intentional acts exclusion, as well as the insurer's duty to defend.


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