Most liability insurance policies include a provision that requires the insurance company to defend the insured – that is, hire an attorney to represent the insured and pay the insured’s legal fees and expenses incurred in defense — when a lawsuit filed against the insured alleges a claim covered by the policy.  Insurers must also defend an insured against a lawsuit that alleges a claim which is potentially covered under the liability policy.  Liability policies often include a “criminal acts exclusion” that is intended to exclude coverage for certain incidents. Although the specific provisions of criminal acts exclusions may vary from one policy to another, they generally state that the policy does not provide coverage for intentional or criminal acts by the insured. An insurance company has the burden of proving that a criminal acts exclusion, or any exclusion, applies to a particular situation.  

The Connecticut Supreme Court recently concluded that an insured’s plea of “nolo contendere” – that is, “no contest” — to criminal charges could not be used by the insurance company to establish that a criminal act occurred and thus could not be used to exclude the insurer’s duty to defend the insured against a civil lawsuit on the basis of the policy’s criminal acts exclusion. The case, Allstate Insurance Co. v. Tenn, 342 Conn. 292 (2022), involved a dispute concerning insurance coverage under a homeowners’ policy arising from an incident in which Mr. Tenn allegedly assaulted a third party with a baseball bat. Tenn was arrested and charged with criminal assault. Tenn’s alleged victim filed a civil lawsuit against him seeking damages for personal injuries sustained in the alleged assault.  The victim alleged that Tenn was liable for assault, negligent assault, intentional infliction of emotional distress, and negligent infliction of emotional distress. Tenn’s insurance company, Allstate, agreed to defend him in the lawsuit under a homeowner liability policy it issued to Tenn, while reserving its right to later deny any obligation to provide coverage for the lawsuit. Allstate’s reservation of its right to deny coverage was based on a criminal acts exclusion in the homeowner insurance policy that provided, in part, that the policy did not cover “bodily injury or property damage intended by, or which may reasonably be expected to result from the intentional or criminal acts of the insured person.”

While the civil lawsuit was pending, Allstate’s insured pleaded nolo contendere to criminal assault charges. After the insured was convicted of the criminal charges on the basis of the nolo plea, Allstate filed a separate lawsuit in Allstate v. Tenn, in the District Court of Connecticut seeking a judgment declaring that Allstate was not obligated to defend and indemnify its insured in the civil lawsuit. The insurer sought summary judgment, arguing that the nolo plea by its insured triggered the criminal acts exclusion as a matter of law. The district court asked the Connecticut Supreme Court to decide whether the insurer could use the nolo plea to prove criminal conduct occurred that would relieve the insurer of its duty to defend. The Supreme Court held that the insurer could not use the plea. In so holding, the Court resolved divergent approaches previously taken by trial courts in Connecticut.

The Supreme Court first reviewed the well-established rule in Connecticut that a plea of nolo contendere is inadmissible in a subsequent civil or criminal proceeding to prove the occurrence of a criminal act. The Court acknowledged that the use of a nolo plea does not always shelter a criminal defendant from collateral consequences triggered by the resulting criminal conviction. The Court refused to decide as a general matter, however, whether a criminal conviction based on a nolo plea should trigger the collateral consequence of an insurance policy’s criminal acts exclusion. The Court reasoned that the language of the criminal acts exclusion in the Allstate policy stated that the policy did not cover bodily injury resulting from “intentional or criminal acts” of the insured, and also stated that the exclusion “applies regardless of whether or not such insured person is actually … convicted of a crime.”  The Court commented that while some policies are drafted to turn explicitly on the existence of a criminal conviction, the Allstate policy was not drafted that way. The policy’s language made a conviction irrelevant, and instead required proof that the insured had committed an intentional or criminal act.  Because the nolo plea was not an admission or factual finding that the insured committed a criminal act, the Court concluded that the insurer could not use the plea to avoid its duty to defend the insured in the civil lawsuit. 

Allstate v. Tenn is important news for insureds who may be faced with a civil lawsuit, criminal charges from an alleged criminal act and an insurance company which seeks to avoid an obligation to provide coverage to its insured under an insurance policy, because the insured’s use of a nolo plea to resolve the criminal charges will not necessarily trigger a loss of insurance coverage for the civil claim under Connecticut law.  The decision is a further reminder for all that the provisions of a particular insurance policy at issue are of critical importance to understanding the rights and obligations of the insured and the insurer when there is a question as to whether a particular claim is covered under an insurance policy.