The federal district court, District of Hawaii, found the insurer had a duty to defend allegations which included a claim for negligent infliction of emotional distress. AIG Prop. Cas. Co. v. Judgment, 2020 U.S. District. LEXIS 143485 (D. Haw. Aug. 11, 2020).  

    The underlying complaint alleged that plaintiff Mrs. Ross entered a private dressing area of the clothing store to try on clothes she considered purchasing. Neil Anenberg wanted to try on a shirt, and attempted to enter the dressing area where Ross was located. The underlying complaint alleged that Anenberg engaged in assaultive conduct by rummaging, feeling and grabbing the curtain attempting to make physical contact with Ross. A store employee then showed Anenberg another dressing room. After trying on the shirt, however, Anenberg passed by Ross' dressing room, placed his cell phone beneath the curtain, and took photos of Ross while she was changing clothes. A store video captured the events described in the underlying complaint. 

    Ross sued, alleging, among other things, Negligent Infliction of Emotional Distress (NIED). In discovery, Ross stated she tried to make a joke with Anenberg, telling him she "didn't want to spoil his breakfast."

    Anenberg tendered his defense to AIG, who had issued him a homeowner's policy. AIG accepted the defense under a reservation of rights and filed suit for a declaratory judgment. AIG moved for summary judgment that it had no duty to defend. The primary focus was two exclusions in the policy: the intentional act or expected injury exclusion and the sexual molestation/misconduct exclusion.

    The court noted that under Hawaii law, AIG had to establish it was impossible for Anenberg to be found liable to Ross for any claim requiring indemnification from AIG. The court agreed with Anenberg that it was at least possible for a fact finder to find Anenberg liable for negligently inflicting damages that were not caused "intentionally' or that were not "expected" within the meaning of the exclusion. 

    The exclusion barred coverage for acts that were "intended to result in, or would be expected by a reasonable person," suggesting an objective standard. But it was possible that Anonberg would not have expected to harm Ross (at least in the time frame before he changed his shirt). 

    The policy also excluded coverage for personal injury arising out of "social molestation, misconduct or harassment," or "sexual physical or mental abuse." The policy did not define these terms. It was possible Anenberg committed other torts (e.g., NIED)l that would not constitute "sexual molestation, misconduct, or harassment," and thus would not be excluded from coverage.

    Therefore, AIG had a duty to defend.