Opinion
3:22-cv-00019-JR
07-18-2022
AMERICAN ECONOMY INSURANCE COMPANY, AMERICAN FIRE AND CASUALTY COMPANY, AMERICAN STATES INSURANCE COMPANY, and THE OHIO CASUALTY INSURANCE COMPANY, Plaintiffs, v. WEST LINN FAMILY HEALTH CENTER, PC, Defendant.
FINDINGS AND RECOMMENDATION
Jolie A. Russo United States Magistrate Judge
Plaintiffs American Economy Insurance Company, American Fire and Casualty Company, American State Insurance Company, and The Ohio Casualty Insurance Company (collectively the “Insurers”) initiated this action regarding their contractual obligations arising out of 38 primary and excess liability insurance policies (“Policies”) that were issued to defendant West Linn Family Health Center, PC (“West Linn”) over the course of nearly 20 years. In particular, the Insurers seek a declaration that they have no duty to defend or indemnify West Linn against state court litigation currently pending in the Multnomah and Clackamas County Circuit Courts. The Insurers now move for judgment on the pleadings pursuant to Fed.R.Civ.P. 12(c). For the reasons set forth below, the Insurers' motion should be granted in part and denied in part.
BACKGROUND
This case emanates from sexual molestation claims made against West Linn's founder, David Farley, M.D. Specifically, between November 2020 and January 2022, three lawsuits were filed - i.e., Jane Coe, et al. v. David Farley, M.D., et al., (“Coe Lawsuit”); Lillian Ewing v. West Linn Family Health Ctr. (“Ewing Lawsuit”); and Mayson Elliott v. David Farley, et al. (“Elliott Lawsuit”) - alleging that Dr. Farley sexually abused patients, and West Linn knew or should have known of the abuse and Dr. Farley's propensity towards inappropriate behavior. First Am. Compl. ¶¶ 10-35 (doc. 10). The Coe Lawsuit involves over 100 plaintiffs and seeks $570 million in damages; the Elliott and Ewing Lawsuits each involve a single plaintiff and seek $1,000,000 and $300,000 in damages, respectively. First Am. Compl. Exs. A-B (doc. 10); Bierly Decl. Ex. 3B (doc. 17-4). The Coe and Elliott Lawsuits assert claims against West Linn for negligence, fraud/concealment, and/or intentional infliction of emotional distress, and the Ewing Lawsuit alleges a single claim for professional negligence. Id.
West Linn held both primary businessowners commercial liability policies (“Primary Policies”) and umbrella liability policies (“Umbrella Policies”) at all relevant times. Each of the Policies has an exclusion barring coverage for “bodily injury” due to the “rendering” of medical services (i.e., the “Professional Service Exclusions”). First Am. Compl. ¶¶ 36-71 (doc. 10). Some Policies also have an exclusion barring coverage for “bodily injury” arising out of sexual abuse or molestation, or negligence related to the employment, investigation, supervision, reporting (or failure to report), or retention “of a person for whom any insured is or ever was legally responsible and whose conduct would be excluded” (i.e., the “Molestation Exclusions”). Id.
The Insurers nonetheless agreed to defend West Linn against the underlying lawsuits, subject to a reservation of rights. Id. at ¶¶ 72-74. The Insurers, in turn, filed this action for declaratory relief to determine their obligations under the Policies. On April 18, 2022, the Insurers filed the present motion for judgment on the pleadings concerning all three underlying actions. On May 26, 2022, the plaintiffs from the Coe Lawsuit (“Coe Plaintiffs”) intervened in this action for the purpose of opposing the Insurers' motion. Briefing was complete in regard to that motion on June 17, 2022.
STANDARD
Under Rule 12(c), a party may seek judgment on the pleadings “[a]fter the pleadings are closed - but early enough not to delay trial.” Fed.R.Civ.P. 12(c). “Analysis under Rule 12(c) is substantially identical to analysis under Rule 12(b)(6) because, under both rules, a court must “determine whether the facts alleged in the complaint, taken as true, entitle the plaintiff to a legal remedy.” Pit River Tribe v. Bureau of Land Mgmt., 793 F.3d 1147, 1155 (9th Cir. 2015) (citation and internal quotations omitted). Accordingly, to survive a motion for judgment on the pleadings, “the non-conclusory factual content” of the complaint, and reasonable inferences derived therefrom, “must be plausibly suggestive of a claim entitling the plaintiff to relief.” Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009) (citation and internal quotations omitted). “Judgment on the pleadings is proper when the moving party clearly establishes on the face of the pleadings that no material issue of fact remains to be resolved and that it is entitled to judgment as a matter of law.” Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1550 (9th Cir. 1989).
DISCUSSION
The Insurers seek judgment on the pleadings in regard to their duties to defend and indemnify pursuant to two Policy exclusions. Specifically, the Insurers assert that the Professional Services Exclusion, a version of which is present in all 38 Policies, “bar[s] coverage for the Underlying Lawsuits because Dr. Farley's alleged misconduct occurred during the course of otherwise proper medical examinations . . . this is not a situation where, during the course of a visit to the dentist or chiropractor, the Underlying Plaintiffs were sexually abused.” Pls.' Reply to Mot. J. Pleadings 1, 5 (doc. 35). Additionally, the Insurers contend the Molestation Exclusion, which is present in the three most recent Primary and Umbrella Policies, precludes coverage for any direct allegations of sexual abuse, as well as West Linn's “negligence relating to [that] abuse,” “between June 1, 2015, and June 1, 2018.” Pls.' Mot. J. Pleadings 25-30 (doc. 22).
In contrast, West Linn and the Coe Plaintiffs argue that Dr. Farley's challenged conduct does not fall within the plain language of any Professional Services Exclusion. West Linn further argues that the Molestation Exclusions do not apply to the Coe and Elliott Lawsuits' allegations premised on West Linn's failure “to warn the public broadly, as well as the plaintiffs specifically.” Def.'s Resp. to Mot. J. Pleadings 14 (doc. 26). Alternatively, West Linn and the Coe Plaintiffs maintain the exclusions at issue are ambiguous and should be construed in favor of coverage.
I. Relevant Policy Terms
American Economy Insurance Company and American State Insurance Company issued Primary and Umbrella Policies, respectively, to West Linn from 1999 through 2014. First Am. Compl. Exs. D, F (doc. 10). American Fire and Casualty Company and The Ohio Casualty Insurance Company issued Primary and Umbrella Policies, respectively, to West Linn from 2015 through 2017. First Am. Compl. Exs. E, G (doc. 10). Each of the Policies provides coverage for any damages the insured is legally required to pay arising out of an “occurrence” that causes “bodily injury” and, “for purposes of the Motion, the Plaintiff Insurers presume that the Underlying Plaintiffs' alleged sexual abuse constitutes ‘bodily injury.'” Pls.' Mot. J. Pleadings 9, 12 (doc. 22).
A. Professional Services Exclusion
Each Policy contains one of three iterations of the Professional Services Exclusion. The most commonly used version, from the 2003-2017 Primary Policies and 2015-2017 Umbrella Policies, bars coverage for bodily injury “caused by the rendering or failure to render any professional service. This includes but is not limited to [m]edical, surgical, dental, x-ray or nursing services treatment, advice or instruction; [or] [a]ny health or therapeutic service treatment, advice or instruction.” First Am. Compl. Ex. D, at 134, 192, 247, 305, 362, 427, 523, 590, 657, 724-25, 793-94 (doc. 10-4); First Am. Compl. Ex. E, at 54, 129, 204 (doc. 10-5); First Am. Compl. Ex. G, at 21, 47, 73 (doc. 10-7). An earlier version of the Professional Services Exclusion uses the phrase “due to” in lieu of “caused by.” First Am. Compl. Ex. D, at 32, 55, 80 (doc. 10-4); First Am. Compl. Ex. F, at 41, 61, 75, 92, 107, 126, 144, 162, 180, 198, 216, 234, 252, 270 (doc. 10-6). And the 2015-2017 Primary and Umbrella Policies additionally exclude coverage for claims of negligent “supervision, hiring, employment, training or monitoring of others by an insured” if “the ‘occurrence' which caused the ‘bodily injury' . . . involved the rendering or failure to render any professional service.” First Am. Compl. Ex. E, at 55, 130, 205 (doc. 10-5); First Am. Compl. Ex. G, at 21, 47, 73 (doc. 10-7).
The Umbrella Policies from this time period include slightly differing language, but not to a degree that would alter the Court's analysis.
B. Molestation Exclusion
The 2015-2017 Primary Policies, along with the 2015-2016 Umbrella Policies, also contain a Molestation Exclusion which states:
This insurance does not apply to [bodily injury] arising out of: (a) The actual or threatened abuse or molestation by anyone of any person while in the care, custody or control of any insured; (b) The negligent: (i) Employment; (ii) Investigation; (iii) Supervision; (iv) Reporting to proper authorities, or failure to so report; or (v)
Retention; of a person for whom any insured is or ever was legally responsible and whose conduct would be excluded by (a) above.Compl. Ex. E, at 70, 144, 220 (doc. 10-5); First Am. Compl. Ex. G, at 20, 46 (doc. 10-7). The 2017 Umbrella Policy excludes coverage for:
Any liability, damages, loss, injury, demand, “claim” or “suit” arising out of, caused by, or allegedly caused by, in whole or in part by: 1. The actual, threatened, or alleged abuse or molestation of any kind or “sexual misconduct”; or 2. Any allegation relating thereto that are based on an alleged practice, custom or policy, including but not limited to any allegation that a person's civil rights have been violated. This exclusion applies even if the “claim” against any “Insured” alleges negligence or other wrongdoing in the supervision, hiring, employment, retention, referral, training, monitoring, investigation, supervision, or reporting to proper authorities, or failure to so report, of a person whose conduct would be excluded by 1. above ....
“Sexual misconduct” means any actual, alleged or threatened act of misconduct toward another person that is a sexual nature and includes but is not limited to: 1. Molestation, abuse; 2. Assault, physical touching, contact; 3. Harassment, advances; 4. Victimization, exploitation, requests for favors; 5. Coercion to engage in sexual activities; 6. Exhibitionism, voyeurism; 7. Verbal or non-verbal communication; or 8. Showing or sharing of text, pictures, drawings, audio, video or digital recording.First Am. Compl. Ex. G, at 72 (doc. 10-7).
II. Legal Analysis
An insurer's duty to defend an insured is dictated by the insurance policy and the complaint. Ledford v. Gutoski, 319 Or. 397, 399, 877 P.2d 80 (1994). “[I]f the complaint contains allegations of covered conduct[,] then the insurer has a duty to defend, even if the complaint also includes allegations of excluded conduct.” Abrams v. Gen. Star Indem. Co., 335 Or. 392, 400, 67 P.3d 971 (2003); see also Oakridge Cmty. Ambulance Serv. v. U.S. Fidelity & Guar. Co., 278 Or. 21, 24, 563 P.2d 164 (1977) (“[t]he insurer's knowledge of facts not alleged in the complaint is irrelevant in determining the existence of the duty to defend”). Essentially, “[t]he insurer has a duty to defend if the complaint provides any basis for which the insurer provides coverage,” such that the insurer may permissibly abdicate this duty only where the underlying lawsuits “clearly fall . . . outside the coverage of the policy.” Ledford, 319 Or. at 400-03 (emphasis in original).
In interpreting an insurance contract under Oregon law in regard to the duty to defend, the court first determines whether the provision at issue is ambiguous. Allianz Global Risks U.S. Ins. Co. v. Ace Prop. & Cas. Ins. Co., 367 Or. 711, 734, 483 P.3d 1124 (2021). In doing so, the court applies “any definitions contained in the policy and otherwise giv[es] words their plain, ordinary meanings.” Fred Shearer & Sons, Inc. v. Gemini Ins. Co., 237 Or.App. 468, 476, 240 P.3d 67 (2010), rev. denied, 349 Or. 602, 249 P.3d 123 (2011). A contractual term is ultimately ambiguous “if it has no definite significance or if it is capable of more than one sensible and reasonable interpretation.” Batzer Const., Inc. v. Boyer, 204 Or.App. 309, 313, 129 P.3d 773, rev. denied, 341 Or. 366, 143 P.3d 239 (2006) (citation and internal quotations omitted). For potentially ambiguous or flexible terms, “the court considers the context in which the term appears and then the context of the policy as a whole.” Allianz, 367 Or. at 734. “[I]f ambiguity remains, the term is construed against the drafter” and the insurer's duty to defend is activated. Id.; see alsoLedford, 319 Or. at 400 (“[a]ny ambiguity in the complaint with respect to whether the allegations could be covered is resolved in favor of the insured”).
An insurer's breach of the duty to defend does not, however, create liability “unless the underlying claim is covered.” Nw. Pump & Equip. Co. v. Am. States Ins. Co., 144 Or.App. 222, 226-27, 925 P.2d 1241 (1996) (as modified). That is, “the duty to indemnify is established by proof of actual facts demonstrating a right to coverage” and the “scope of an insurer's risk is determined by the terms of the policy.” Id. “To allow coverage beyond those terms - for example, to require an insurer to cover a loss that is otherwise subject to an exclusion - would be to allow the insured to obtain more than it bargained for: coverage for a noncovered claim.” Id. at 227.
A. Duty to Defend Under the Professional Services Exclusions
Under these exclusions, Dr. Farley's conduct would not be covered only if each and every one of the underlying plaintiffs' injuries were “caused” or “due to” the “rendering [of] any professional service.” First Am. Compl. Ex. D, at 32, 55, 80, 134, 192, 247, 305, 362, 427, 523, 590, 657, 724-25, 793-94 (doc. 10-4); First Am. Compl. Ex. E, at 54, 129, 204 (doc. 10-5); First Am. Compl. Ex. F, at 41, 61, 75, 92, 107, 126, 144, 162, 180, 198, 216, 234, 252, 270 (doc. 10-6); First Am. Compl. Ex. G, at 21, 47, 73 (doc. 10-7). The term “professional service” is not defined in the Policies, however, representative examples are given - e.g., “[m]edical, surgical, dental, x-ray or nursing services treatment, advice or instruction” or “[a]ny health or therapeutic service treatment, advice or instruction.” Id.
Accordingly, the Court must endeavor to interpret these terms as they are commonly understood. Fred Shearer & Sons, 237 Or.App. at 476. Black's Law Dictionary defines “professional” as “[s]omeone who belongs to a learned profession or whose occupation requires a high level of training and proficiency.” Black's Law Dictionary (11th ed. 2019). And “render” means “[t]o transmit or deliver.” Id. While Black's Law Dictionary does not define “services,” other textual sources uniformly suggest that this term describes “the action of helping or doing work for someone.” See, e.g., Def.'s Resp. to Mot. J. Pleadings 7 (doc. 26) (citing Webster's Third New International Dictionary). The parties do not cite to any other Policy terms or provisions that relate to or could be read in conjunction with the Professional Services Exclusions.
In the present context, the phrase “rendering [of] any professional service” thus describes those services that fall within the scope of Dr. Farley's medical practice, and for which Dr. Farley was trained and licensed to perform. In other words, the Professional Services Exclusions unambiguously bar coverage only for injuries generated by medical care furnished by Dr. Farley in his professional capacity as a doctor.
Even if the Court were to accept the Insurers proffered interpretation as plausible, that would merely necessitate construing the Policies against the drafter. Cf. Hoffman Constr. Co. of Ala. v. Fred S. James & Co., 313 Or. 464, 469-71, 836 P.2d 703 (1992) (“[f]or a term to be ambiguous in a sense that justifies [construing the policy against the insurer] there needs to be more than a showing of two plausible interpretations; given the breadth and flexibility of the English language, the task of suggesting plausible alternative meanings is no challenge to capable counsel”).
i. Coe and Elliott Lawsuits
The underlying Coe Lawsuit involves dozens of plaintiffs, many of whom put forward allegations of sexual touching that had no purported medical basis (and, in some circumstances, took place at Dr. Farley's home). See, e.g., First Am. Compl. Ex. A, at ¶¶ 50, 67, 73, 225 (doc. 10-1). For example, many of the minor Coe Plaintiffs allege Dr. Farley subjected them to (largely ungloved) vaginal and/or breast “exams” during routine “sports physicals.” Id. at ¶¶ 44, 59, 136, 184, 208, 228, 281-82. Similarly, the Elliott Lawsuit alleges that, in the course of seeking medical treatment related to anorexia, Dr. Farley “would find reasons and ways to caress Plaintiff's breasts [even though Dr. Farley] had no . . . medical reason to caress Plaintiff's breasts.” Bierly Decl. Ex. 3B, at ¶ 5 (doc. 17-4).
The purpose of a sports physical (also known as pre-participation physical examination) is to determine whether a student is healthy enough to participate in athletics and to minimize the risk of sports-related injuries. Sports physicals therefore emphasize cardiovascular and musculoskeletal systems, and not female genitalia. See People v. Paupore, 2010 WL 3184484, *2 (Mich. App. Aug. 12, 2010), appeal denied, 489 Mich. 895 (2011) (expert in osteopathic family medicine testifying “there was no medical reason to touch the genitals of 13-year old girls during a physical,” and that “he had performed thousands of sports physicals and never had to touch the genitals of a female athlete”).
The Insurers appear to take the position that the Professional Services Exclusions apply because: (1) Dr. Farley, in his capacity as a medical doctor, could appropriately provide vaginal, rectal, and breast exams, and (2) each underlying plaintiff encountered Dr. Farley while seeking medical care. Certainly the Court would agree that a doctor who performs physical examinations in the course of providing legitimate medical treatment is furnishing a medical service and, hence, a professional service. Here, however, the Coe and Elliott Lawsuits expressly disavow the medical necessity of Dr. Farley's acts, such that they cannot fairly be characterized as “rendering professional services.” Rather, the alleged wrongdoing was the use of Dr. Farley's status as a trusted doctor to sexually abuse and subjugate female patients for his own sexual gratification by, amongst other things, performing unwarranted and ungloved breast and vaginal “exams,” taking pictures of and filming patients during such “exams” with his personal cellphone, and hugging and kissing patients immediately post-“exam” while they were in a state of confusion and undress.
The fact that Dr. Farley effectuated these alleged misdeeds through, in the Insurers words, “the guise of medical care and treatment” does not transform his acts into a service of the medical profession. Pls.' Mot. J. Pleadings 24 (doc. 22); see also Cerrato v. Am. Home Ins. Co., 2001 WL 1911768, *1-2 (D. Conn. Apr. 2, 2001) (attorney's professional liability insurance policy did not cover a negligence claim for sexual assault that occurred while the attorney was preparing his client to testify in court, explaining that the “natural meaning of ‘professional services' . . . does not include assaulting a client in the guise of [providing legal services]”). Stated differently, the Court need not define the precise confines of the term “professional services,” as there is simply no set of circumstances where medically unnecessary fondling, groping, or digital penetration falls within the purview of the invoked exclusion.
Indeed, Oregon law is clear on this point (consistent with the majority of other jurisdictions). SeeAm. Med. Resp. Nw., Inc. v. ACE Am. Ins. Co., 31 F.Supp.3d 1087, 1092 (D. Or. 2014) (“[s]exual assault is not the rendering of professional services,” such that an analogous exclusion did not apply where “a licensed EMT allegedly sexually assaulted numerous patients in the back of an AMR ambulance . . . [his] alleged acts are determinative, not his status as an EMT or the fact that he performed the acts in an ambulance”); Hedmann v. Liberty Mut. Fire Ins. Co., 158 Or.App. 510, 514-15, 974 P.2d 755 (1999) (physician who prescribed medication to his non-patient girlfriend for the purpose of maintaining a sexual relationship with her was not providing “professional services”); see also Northfield Ins. Co. v. Derma Clinic, 440 F.3d 86, 94 (2d Cir. 2006) (noting the district court reasonably “refused to torture the meaning of ‘professional services' to include sexually assaulting a client in the guise of massaging her” in certifying a question to the Connecticut Supreme Court); St. Paul Fire & Marine Ins. Co. v. Engelmann, 639 N.W.2d 192, 198 (S.D. 2002) (“injury from sexual misconduct cannot be considered as having been incurred from the ‘providing or withholding of professional services'”).
Even the courts that follow the minority view articulated in St. Paul Fire & Marine Ins. Co. v. Asbury, 149 Ariz. 565, 720 P.2d 540 (1986), on which the Insurers rely, make clear “that the relation between the sexual assault and the type of medical service offered matters when determining whether an act constitutes a professional service.” See Nat'l Fire Ins. Co. v. Lewis, 898 F.Supp.2d 1132, 1145 (D. Ariz. 2012) (as modified on reconsideration) (denying summary judgment where “nothing provided by the Parties in the record demonstrates whether Dr. Lewis's examinations of the vaginal area [of this patients] were related to his professional work as a cardiologist”); see also B.A. v. Bohlmann, 2011 WL 13359268, *5 (W.D. Wis. Feb. 24, 2011) (“several courts have criticized Asbury's holding that a sexual assault during the performance of a seemingly legitimate medical examination brings the alleged tortious conduct within the scope of a medical services insurance policy . . . The clear majority rule among other jurisdictions is that outside the unique circumstance of mishandling the transference phenomenon in psychiatric counseling, sexual conduct is not a professional act or service”) (collecting cases). Significantly, the Coe Plaintiffs allege, in part, that Dr. Farley's invasive and inappropriate “examinations” of minor females were not in any way relevant or related to his provision of family medicine services.
And this is true irrespective of whether the alleged perpetrator is a doctor or otherwise may, in certain unrelated circumstances, have legitimate reasons for conducting breast or vaginal exams. See Am. Med. Resp. Nw., 31 F.Supp.3d at 1092 (“[i]n determining whether a particular act is of a professional nature, the act itself must be looked to and not the title or character of the party who performs or fails to perform the act”) (quoting Multnomah Cnty. v. Or. Auto. Ins. Co., 256 Or. 24, 28-29, 470 P.2d 147 (1970)); David Lerner Assoc., Inc. v. Phila. Indem. Ins. Co., 934 F.Supp.2d 533, 541-43 (E.D. N.Y.), aff'd, 542 Fed.Appx. 89 (2d Cir. 2013) (“courts have held that the question of whether one is engaged in a professional service depends on whether those individuals acted with the special acumen and training of professionals when they engaged in the [challenged] acts . . . [such that in] determining whether a particular act is of a professional nature or a ‘professional service' we must not look to the title or character of the party performing the act, but to the act itself”) (citations and internal quotations omitted); see alsoBohlmann, 2011 WL 13359268 at *4 (the defendant physician's “medical services could entail, even arguably require, genital and rectal examinations . . . But recognition [of this fact] does not bring plaintiffs' specific allegations [of sexual touching with no medical basis] within the scope of professional services”).
The Insurers therefore cannot avoid their duty to defend the Coe and Elliot Lawsuits under the plain language of the Professional Services Exclusions, as the underlying allegations sound, at least in part, in sexual assault, not improper medical treatment. Moreover, the Court finds any determination concerning the Insurers' duty to indemnify premature, as the Coe and Elliott Lawsuits are still underway such that the determinative facts have not yet been proven. Nw. Pump & Equip., 144 Or.App. at 226-27; see also Scottsdale Ins. Co. v. Ortiz & Assocs., Inc., 2014 WL 1883653, *3 (D. Or. May 9, 2014) (Oregon courts “typically wait until the underlying litigation is resolved and liability is determined before ruling on an insurer's duty to indemnify”) (collecting cases). The Insurers' motion should be denied in this regard.
ii. Ewing Lawsuit
Unlike the Coe and Elliott Lawsuits, the Ewing Lawsuit does not disavow a legitimate medical basis for Dr. Farley's physical examination. Rather, the Ewing Lawsuit sounds in medical negligence, alleging that, during two of plaintiff's “yearly PAP smears,” Dr. Farley failed to use gloves, which “was not appropriate medical care.” First Am. Compl. Ex. B, at ¶ 3 (doc. 10-2).
Thus, the injury, as alleged, does appear to fall within the scope of Dr. Farley's gynecological practice, even if such services were not rendered in accordance with the community standard of care. Cf. Sousa v. Hilsinger, 2005 WL 672857, *2 (D. Or. Mar. 23, 2005) (outlining the elements of a professional negligence claim). The Insurers' motion should be granted as to the Professional Services Exclusions' application to the Ewing Lawsuit.
B. Duty to Defend Under the Molestation Exclusions
Initially, the Coe Plaintiffs' opposition is silent as to the Molestation Exclusions. See generally Coe Pl.'s Resp. to Mot. J. Pleadings (doc. 32); see also Justice v. Rockwell Collins. Inc., 117 F.Supp.3d 1119, 1134 (D. Or. 2015), aff'd, 720 Fed.Appx. 365 (9th Cir. 2017) (“if a party fails to counter an argument that the opposing party makes in a motion, the court may treat that argument as conceded”) (citation and internal quotations and brackets omitted). Further, West Linn concedes “the allegations in the underlying state court complaints that Dr. Farley abused or molested plaintiffs fall within section (1) of the abuse exclusions” and “that some negligence claims specifically listed in the exclusion . . . are also excluded from coverage under section (2).” Def.'s Resp. to Mot. J. Pleadings 13-14 (doc. 26). West Linn nonetheless maintains that the Insurers possess a duty to defend regarding the allegations in the Coe and Elliott Lawsuits “related to a reckless or negligent failure to warn plaintiffs and the broader community.” Id. at 14-19.
West Linn's assertion that the duty to warn is “separate from the clinic's failure to investigate, supervise, or fire Dr. Farley, or to report Dr. Farley to authorities” is unavailing. Id. at 14. The Molestation Exclusions are clear that there is no coverage for West Linn's negligence emanating from or associated with Dr. Farley's sexual abuse of patients. That is, the first paragraph of the Molestation Exclusions exclude coverage for sexual abuse, and the second paragraph clarifies that any and all claims premised on respondeat superior and involving sexual abuse fall outside the applicable Policies. Compl. Ex. E, at 70, 144, 220 (doc. 10-5); First Am. Compl. Ex. G, at 20, 46, 72 (doc. 10-7). Although not dispositive, West Linn recognizes that “the Court of Appeals has construed ‘arising out of' to include claims with a causal connection to the underlying abuse.” Def.'s Resp. to Mot. J. Pleadings 16 n.8 (doc. 26); see also Clinical Research Inst. of S. Or., P.C. v. Kemper Ins. Cos., 191 Or.App. 595, 601, 84 P.3d 147 (2004) (in an insurance contract, “[t]he ordinary meaning of the words ‘arising out of' is very broad”) (citing Oakridge Cmty. Ambulance Serv., 278 Or. at 25); Ristine v. Hartford Ins. Co., 195 Or.App. 226, 231, 97 P.3d 1206 (2004) (“the term ‘arising out of' as used in [a molestation exclusion] generally is understood broadly to mean ‘flowing from' or ‘having its origin in,' thereby indicating that there need be a causal connection, rather than a proximate causal connection”) (citation and internal quotations omitted).
West Linn cites to two California cases in support of the proposition that “arising out of” should be interpreted narrowly in this context. Def.'s Resp. to Mot. J. Pleadings 17-18 (doc. 26). Yet neither of these cases undermine the well-established Oregon precedent addressed herein.
As such, West Linn's alleged failure to report Dr. Farley or otherwise warn the public (including the underlying plaintiffs) does not change the fact that the purported harm arises out of Dr. Farley's sexual abuse. See Davis v. Am. Preferred Ins. Co., 1993 WL 410451, *1 (9th Cir. Oct. 14, 1993) (rejecting the plaintiff's attempt to circumvent an exclusion by re-characterizing an otherwise precluded activity as a “failure to warn,” explaining that the plaintiff's fall necessarily constituted “bodily injury . . . arising out of a premises . . . rented to an insured”); Harper v. Gulf Ins. Co., 2002 WL 32290984, *5-8 (D. Wyo. Dec. 20, 2002) (denoting that a virtually identical exclusion “was first promulgated by the insurance Service Office, Inc. (‘ISO') in 1987” and that several “commentators have described the intent of the ISO clause as to deny all coverage for abuse or molestation incidents,” such that the defendant-insurer did not have a duty to defend or indemnify in relation to the plaintiff's “failure to warn” claim); see also Sentry Ins. v. Am. Nat'l Fire Ins. Co., 314 Fed.Appx. 916, 919 (9th Cir. 2008) (insurance policy excluded coverage for damages “arising out of” the product; insurer's failure to warn of a known risk fell within the scope of that exclusion).
West Linn attempts to distinguish these cases on the grounds that they did not concern “a clause with the additional list of modifiers present here” - however, those modifiers merely strengthen the conclusion that the Molestation Exclusions were intended to bar all claims premised on sexual abuse. Def.'s Resp. to Mot. J. Pleadings 16 n.8 (doc. 26). Accepting West Linn's argument would render other language within the Policies meaningless - namely, that which broadly excludes coverage for claims emanating from “abuse or molestation” itself, and any “negligence” associated with the “employment” or “retention” of the person who committed the “abuse or molestation.” Compl. Ex. E, at 70, 144, 220 (doc. 10-5); First Am. Compl. Ex. G, at 20, 46, 72 (doc. 10-7); see also Williams v. RJ Reynolds Tobacco Co., 351 Or. 368, 379, 271 P.3d 103 (2011) (“[t]he court must, if possible, construe the contract so as to give effect to all of its provisions”); Allstate Ins. Co. v. Florio, 2020 WL 4529618, *5-6 (N.D.Ga. Jan. 23, 2020) (enforcing a virtually identical exclusion, explaining “nothing in the plain language of Paragraph 1 indicates [an intent] to create a carve-out for certain types of negligence claims. The use of the disjunctive or indicates [that the insurer] intended for Paragraphs 1 and 2 to provide separate bases for denying coverage, and the plain language of Paragraph 1 evinces an intent to broadly exclude all claims arising from abuse or molestation. Paragraph 2 is arguably redundant because the claims excluded by Paragraph 2 are also excluded under Paragraph 1 [but even if redundant] they do not produce conflicting results in this or any other conceivable circumstance”).
In sum, the Molestation Exclusions are unambiguous: if the bodily injury results from any insured's sexual abuse, then no there is no coverage. The Insurers' motion should be granted as to the Molestation Exclusions.
RECOMMENDATION
For the foregoing reasons, the Insurers' Motion for Judgment on the Pleadings (doc. 22) should be granted as to the Ewing Lawsuit, as well as to the 2015-2017 Primary and Umbrella Policies as they relate to the Elliott and Coe Lawsuits, and denied in all other respects. The parties' requests for oral argument are denied as unnecessary.
This recommendation is not an order that is immediately appealable to the Ninth Circuit Court of Appeals. Any notice of appeal pursuant to Rule 4(a)(1), Federal Rules of Appellate Procedure, should not be filed until entry of the district court's judgment or appealable order. The parties shall have fourteen (14) days from the date of service of a copy of this recommendation within which to file specific written objections with the court. Thereafter, the parties shall have fourteen (14) days within which to file a response to the objections. Failure to timely file objections to any factual determination of the Magistrate Judge will be considered as a waiver of a party's right to de novo consideration of the factual issues and will constitute a waiver of a party's right to appellate review of the findings of fact in an order or judgment entered pursuant to this recommendation.