Parsons v. Continental National American Group

Michael Smithey assaulted his neighbors, Ruth, Dawn, and Gail Parsons (plaintiffs). Smithey’s parents had an insurance policy with Continental National American Group (CNA) (defendant). This policy contained an exclusion that excluded liability for injuries caused by an intentional act. The plaintiffs filed a tort action against Smithey and his parents alleging that Smithey had assaulted the plaintiffs and that his parents were negligent because they had failed to restrain him. CNA’s retained counsel, who was handling Smithey’s and his parents’ defenses, obtained Smithey’s file. This attorney told CNA that he believed, based on his reading of the file, that Smithey had deliberately committed the assaults against the plaintiffs. CNA sent a letter to Smithey’s parents notifying them that CNA would investigate and defend against the plaintiffs’ claim but that CNA did not waive its rights under the policy because intentional acts were excluded under the policy. The CNA attorney interviewed Smithey. The attorney then told CNA that, based on this interview, Smithey made it obvious that his acts were willful and criminal. A trial was held, and a $50,000 judgment was entered against Smithey. The plaintiffs filed a garnishment action against CNA. CNA defended the garnishment action successfully because, it claimed, coverage for damages resulting from Smithey’s assault were excluded under the intentional-act exclusion. The same law firm that defended Smithey at the tort trial also defended CNA in the garnishment. The trial court entered a judgment in favor of CNA. The plaintiffs appealed. The appeals court reversed the trial court’s judgment. The Supreme Court of Arizona accepted a petition for review.