Negligent Criminal Acts Excluded from Yacht Policy, Court Rules in Case of N.H. Boating Death

A New Hampshire boater sued for wrongful death by the wife of a victim in an accident he caused was not covered under his yacht policy, the U.S. Court of Appeals for the First Circuit has ruled.

The insured, Daniel Littlefield, was convicted of criminally negligent homicide for the boating death. The court agreed with the insurance company in the case that a policy exclusion for criminal conduct embraces acts of negligence and not just intentional criminal acts.

The case, Littlefield v. Acadia Insurance Co., centered on whether a provision of a yacht insurance policy excluding coverage for “any loss, damage or liability willfully, intentionally or criminally caused or incurred by an insured person” is ambiguous as applied to an insured who was convicted of criminally negligent homicide after his involvement in a fatal boat collision, and, if not ambiguous, whether its enforcement would render coverage under the policy illusory.

The federal appeals court affirmed a district court’s order granting summary judgment to the defendant Acadia Insurance and denying summary judgment to plaintiff Littlefield who sought a declaratory judgment of coverage under the yacht insurance policy.

On August 11, 2002, Littlefield was operating a 36-foot motorized pleasure boat insured under an Acadia yacht policy on Lake Winnipesaukee in New Hampshire when it collided with another boat, killing one of that boat’s passengers, John H. Hartman. In January 2003 Littlefield was indicted by a grand jury on two counts of criminally negligent homicide. Also in January 2003, the victim’s widow, Karen K. Hartman, brought a wrongful death action against Littlefield in New Hampshire state court alleging negligence. On April 3, 2003, Littlefield, in turn, sought a declaratory judgment in New Hampshire state court that Acadia was obligated under the terms of the yacht policy to provide him with insurance coverage, including a defense in Hartman’s wrongful death suit.

Acadia asserted that it had no such obligation under two separate provisions of the yacht policy, the first contained in Section B of the policy, which governs “Protection and Indemnity Insurance,” and the second contained in Section G, which sets forth “General Conditions” applicable to the entire policy. The provision in Section B excludes from coverage “any loss, damage or liability willfully, intentionally or criminally caused or incurred by an insured person.” The provision in Section G excludes coverage for “any loss, damage or expense arising out of or during any illegal activity on your part or on the part of anyone using the insured’s property with your permission.”

In May, Acadia removed the case to federal district court, citing both diversity and possible admiralty jurisdiction.

On June 20, 2003, a Belknap County Superior Court jury found Littlefield guilty of “negligently caus[ing] the death of another while operating a boat . . . and fail[ing] to keep a proper lookout.”

Acadia moved for summary judgment on the ground that Littlefield’s criminal conviction rendered his potential liability in Hartman’s wrongful death action “criminally caused or incurred,” as well as “arising out of or during . . . illegal activity” within the meaning of the policy exclusions.

Littlefield brought a cross-motion for summary judgment, arguing that the language of the policy exclusion in Section B of the policy is ambiguous and should be construed to provide coverage despite his criminal conviction. Littlefield asserted that a reasonable insured would interpret “willfully, intentionally or criminally caused or incurred” liability or losses to refer only to those caused or incurred through the commission of willful or intentional crimes. Under Littlefield’s interpretation, liability incurred through the commission of unintentional crimes, including criminally negligent homicide, would not be excluded from coverage.

Littlefield also argued that enforcement of either the exclusion provision in Section B or Section G of the policy would leave so few claims actually covered as to render coverage under the policy illusory in contravention of public policy favoring compensation of innocent victims unintentionally harmed by an insured.

The federal district court granted Acadia’s motion for summary judgment and denied Littlefield’s cross-motion for summary judgment, finding that coverage was excluded under the provision in Section B regarding “any loss, damage or liability willfully, intentionally or criminally caused or incurred by an insured person.” The court stated:

“It is well understood that negligence can be criminal when it results in death. The policy does not limit the exclusion to intentional crimes and the mere fact that the phrase is grouped with exclusions for willfully and intentionally caused acts would not cause a reasonably informed insured to read a limitation into the exclusion that it does not contain.”

The appeals court rejected Littlefield’s view and upheld the district court, noting that to read the word “criminally” to incorporate the limitations Littlefield seeks would render the word extraneous. “Loss or liability caused through ‘intentional’ crimes is already excluded as ‘intentionally’ caused loss or liability. We decline to ignore the plain meaning of ‘criminally’ in favor of a reading that would render the word superfluous,” the judges wrote.

The judges also rejected Littlefield’s assertion that enforcement of the exclusion provision in Section B, even if the provision is unambiguous, would render Acadia’s promised coverage “illusory” in violation of New Hampshire public policy favoring compensation of innocent victims of an insured’s unintentional acts. Littlefield asserted that any negligent operation of a power boat could result in a criminal conviction under section 270:29-a, thereby triggering the exclusion provision for property damage or minor injuries. Exclusion of such a wide range of negligently caused loss or liability, he argues, would leave so few claims actually covered as to defeat the purpose of purchasing liability insurance in the first place.

But the judges said that the fact scenarios Littlefield raised were not present in his case.

Moreover, as Acadia pointed out, under New Hampshire state law, “a person cannot be convicted of a crime,” including a misdemeanor, “without proof that the unlawful act was accompanied by a culpable mental state. “Negligent operation of a watercraft, in the absence of the requisite culpable mental state, could not be a crime and would not trigger the exclusion provision in Section B of the policy. Hence, criminal negligence differs from civil negligence under New Hampshire law in important ways, and the yacht policy provides meaningful coverage for loss or liability incurred through the latter (as well as, Acadia notes, through ‘non-operational’ negligence such as negligent maintenance),” the decision stated.