Slayko v. Security Mutual Insurance Co., 98 N.Y.2d 289 (2002)

A criminal activity exclusion in a homeowner’s insurance policy is enforceable unless a strong public policy requires coverage, especially when the insured is convicted of a crime arising directly from the act causing liability.

Summary

Ryan Slayko sued Joseph France for injuries sustained when France recklessly fired a shotgun, resulting in a felony assault conviction for France. Security Mutual, France’s homeowner’s insurer, disclaimed coverage based on intentional act and criminal activity exclusions. The New York Court of Appeals held that while the intentional act exclusion didn’t apply, the criminal activity exclusion was enforceable. The Court reasoned that absent a strong public policy dictating otherwise, insurers can exclude coverage for criminal acts, especially where the insured is convicted of a felony directly related to the injury.

Facts

Ryan Slayko and Joseph France were drinking and smoking marijuana at France’s cabin. France pointed a shotgun at Slayko, believing it was unloaded, and pulled the trigger. The gun didn’t fire. After Slayko warned France about gun safety, France pumped the gun and pulled the trigger again, this time injuring Slayko. France pleaded guilty to second-degree assault. Slayko then sued France for negligence.

Procedural History

Slayko sued Security Mutual, seeking a declaration that the insurer had a duty to defend and indemnify France. Supreme Court granted summary judgment to Slayko. The Appellate Division affirmed, finding the criminal activity exclusion unenforceable as against public policy. Security Mutual appealed to the New York Court of Appeals.

Issue(s)

1. Whether the intentional act exclusion in the homeowner’s insurance policy applies to France’s conduct.
2. Whether the criminal activity exclusion in the homeowner’s insurance policy is unenforceable as against public policy.

Holding

1. No, because France did not intend to injure Slayko, and the act was not inherently harmful.
2. Yes, because no strong public policy requires coverage for liability arising from criminal acts, especially when the insured is convicted of a crime directly related to the injury.

Court’s Reasoning

The Court of Appeals first addressed the intentional act exclusion. It distinguished this case from cases where the harm is inherent in the act, such as child molestation (citing Allstate Ins. Co. v. Mugavero). Because the gun could have been unloaded, the Court found France’s conduct, though reckless, not inherently harmful. Therefore, the intentional act exclusion did not apply.

Turning to the criminal activity exclusion, the Court noted that it facially applied because France’s liability stemmed directly from an act for which he was convicted. The Court rejected the argument that the exclusion was too broad, reasoning that it left coverage for noncriminal acts of negligence intact. The Court highlighted that the exclusion was part of a “New York Amendatory Endorsement” created after Allstate Ins. Co. v. Zuk, which suggested an intent to broaden the scope of criminal activity exclusions.

The Court addressed public policy arguments, stating that while accident victims should generally have recourse to financially responsible defendants, this principle is strongest in the context of automobile insurance, where coverage is often mandated by law. The Court emphasized the principle that “no one shall be permitted to take advantage of his own wrong” (citing Messersmith v. American Fid. Co.). Furthermore, the Court cited Insurance Law § 3425(c)(2)(B), which permits insurers to cancel policies if the insured is convicted of a crime that increases the hazard insured against, indicating a legislative policy of facilitating insurers’ efforts to remove criminals from the general risk pool.

The Court distinguished Royal Indem. Co. v. Providence Washington Ins. Co., where a truck liability exclusion was struck down because it conflicted with the mandatory coverage required by Vehicle and Traffic Law § 388. No similar statute mandated coverage in this case.

Finally, the Court rejected the “reasonable expectations” doctrine adopted by some other jurisdictions, finding the effect of the exclusion neither surprising nor unfair. The Court noted that most jurisdictions have upheld similar criminal activity exclusions. Ultimately, the Court concluded that the criminal activity exclusion was enforceable, reversing the Appellate Division’s order.