Opinion
Civ. No. 04-3102 (RHK/JSM).
March 31, 2005
Burke J. Ellingson, Brendel and Zinn, Ltd., Lake Elmo, Minnesota, for Plaintiff Illinois Farmers Insurance Company.
Eric J. Nystrom, Lindquist Vennum, PLLP, Minneapolis, Minnesota, for Defendant M.S., individually, and on behalf of her minor son, A.A.
MEMORANDUM OPINION AND ORDER
Introduction
This case involves the interpretation of an insurance policy under Minnesota law. Plaintiff Illinois Farmers Insurance Company ("Illinois Farmers") issued a renter's insurance policy to Defendants R.H. and J.S., who are mother and son. In 2001, J.S. sexually assaulted Defendant A.A., whose mother is Defendant M.S. Illinois Farmers initiated this declaratory judgment action to determine whether it has a duty to indemnify or defend R.H. and J.S. against a claim that R.H. negligently supervised J.S. It has now moved for summary judgment. For the reasons set forth below, the Court will grant Illinois Farmers's Motion.
Background
The facts are undisputed. Illinois Farmers issued a Broad Form Renters Package Policy 4th Edition, policy number 92020-61-62 ("the Policy"), to R.H. The Policy's "Personal Liability" section states that Illinois Farmers would "pay those damages which an Insured becomes legally obligated to pay because of bodily injury . . . resulting from an occurrence to which this coverage applies." (Ellingson Aff. Ex. A at A-14.) An "Insured" includes R.H. and her son J.S. (See id. at A-6.) A "bodily injury" means "bodily harm, sickness or disease, including care, loss of services and death resulting from that injury." (Id.) An "occurrence" means "an accident including exposure to conditions which results during the policy period in bodily injury. . . ." (Id. at A-7.)The Policy also contains two pertinent exclusions. First, the "Child Molestation Exclusion" provides:
We do not cover actual or alleged injury or medical expenses caused by or arising out of the actual, alleged, or threatened molestation of a child by:
1. any insured. . . .
Molestation includes but is not limited to any act of sexual misconduct, sexual molestation or physical or mental abuse of a minor.
We have no duty to defend or settle any molestation claim or suit against any insured. . . .
(Id. at A-5.) Second, the "Personal Liability and Medical Payments to Others" section provides:
We do not cover bodily injury . . . which: . . .
3. is either:
a. caused intentionally by or at the direction of an Insured; or
b. results from any occurrence caused by an intentional act of any Insured where the results are reasonably foreseeable.
(Id. at A-15.)
In April 2001, R.H.'s juvenile son, J.S., sexually assaulted A.A., also a juvenile male. In October 2002, A.A.'s mother, M.S., sued R.H. and J.S. in federal court individually and on behalf of A.A. on multiple claims arising out of the sexual assault. Illinois Farmers refused to provide a defense or insurance coverage. In Spring 2004, the parties entered into aMiller-Shugart settlement. Under the settlement agreement, R.H. stipulated to a $100,000 judgment against her and assigned to M.S. any claims she might have against Illinois Farmers. For her part, M.S. agreed to satisfy the judgment from Illinois Farmers and not R.H., and she determined that the $100,000 in damages is attributable to R.H.'s negligent supervision of J.S.
In a Miller-Shugart settlement, the insured, having been denied coverage for a claim by the insurer, agrees that the claimant may enter judgment against her for a sum collectible only from the insurance policy. Metro. Prop. Cas. Ins. Co. v. Miller, 589 N.W.2d 297, 299 n. 2 (Minn. 1999).
In Summer 2004, Illinois Farmers instituted this declaratory judgment action in state court, which was removed to this Court. Based upon the Policy's molestation and intentional act exclusions, Illinois Farmers seeks a declaration that it (1) has no duty to defend or indemnify R.H. and J.S. relative to claims arising out of J.S.'s sexual misconduct and (2) has no obligation to respond to any of M.S.'s or A.A.'s claims arising out of or related to J.S.'s sexual misconduct. (Compl. ¶ XVIII.) Illinois Farmers has now moved for summary judgment on its claims.
Prior to its summary judgment motion, Plaintiff filed a Motion to Amend Complaint (Doc. No. 16), apparently to add an allegation denying R.H.'s negligence and to add a request for a declaration that it has no obligation to respond to the demands made in the settlement agreement (see Proposed Am. Compl. ¶¶ XXI, XXIII(3)). That Motion is currently under advisement before the magistrate judge. (It should be noted that neither side informed the undersigned of Plaintiff's pending Motion to Amend.) Given the conclusion below, however, the Court will deny the Motion as moot.
Standard of Review
Summary judgment is proper if, drawing all reasonable inferences favorable to the nonmoving party, there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986). The moving party bears the burden of showing that the material facts in the case are undisputed. Celotex, 477 U.S. at 322; Mems v. City of St. Paul, 224 F.3d 735, 738 (8th Cir. 2000). The court must view the evidence, and the inferences that may be reasonably drawn from it, in the light most favorable to the nonmoving party.Graves v. Arkansas Dep't of Fin. Admin., 229 F.3d 721, 723 (8th Cir. 2000). The nonmoving party may not rest on mere allegations or denials, but must show through the presentation of admissible evidence that specific facts exist creating a genuine issue for trial. Anderson, 477 U.S. at 256; Krenik v. County of Le Sueur, 47 F.3d 953, 957 (8th Cir. 1995).
Analysis
The issue presented in this case is whether Illinois Farmers has a duty to defend or indemnify R.H. and J.S. against M.S.'s and A.A.'s claim that R.H. negligently supervised J.S. Illinois Farmers contends that it has no such duties based upon the Policy's molestation and intentional act exclusions. It principally relies on three cases, Allstate Insurance Co. v. Steele, 74 F.3d 878 (8th Cir. 1996) (applying Minnesota law),Redeemer Covenant Church v. Church Mutual Insurance Co., 567 N.W.2d 71 (Minn.Ct.App. 1997), and Amos v. Campbell, 593 N.W.2d 263 (Minn.Ct.App. 1999). But before considering these cases, it is necessary to first examine the development of the law regarding insurance policy exclusions and negligent supervision claims, starting with a 1973 decision of the Minnesota Supreme Court.In Republic Vanguard Insurance Co. v. Buehl, 204 N.W.2d 426, 427 n. 1 (Minn. 1973), the Minnesota Supreme Court examined a homeowner's policy that excluded coverage for "the . . . use . . . of . . . automobiles." The insured's son struck a pedestrian with a motorcycle and the pedestrian sued the insured for negligent supervision. Id. at 427-28. The insurer declined to defend the insured and initiated a declaratory judgment action, claiming that the policy excluded coverage. See id. Rejecting the insurer's argument, the Minnesota Supreme Court found that the insurer had a duty to defend the parents because the pedestrian's action was not based on the use of the motorcycle, but was based upon the parents' negligent supervision of the son's use of the motorcycle. Id. at 429.
In Faber v. Roelofs, 250 N.W.2d 817, 819-20 (Minn. 1977), the Minnesota Supreme Court considered a school district's general liability policy which excluded coverage for "bodily injury . . .arising out of the . . . use . . . of any . . . automobile." (Emphasis added). A student was injured by a school bus and his parents sued the school district for negligently establishing bus routes and bus loading procedures. Id. at 819-20. During the litigation, the insurer controlled the school district's defense without reserving its right to deny coverage. Id. at 820. When the school district was found negligent, the insurer attempted to deny coverage. See id. But the Minnesota Supreme Court found that the insurer was estopped from denying coverage because it controlled the defense and did not reserve its right to deny coverage. Id. While the insurer argued that it could not be estopped because it was required to defend the action underBuehl, the court disagreed and distinguished Buehl by noting that the exclusion in that case lacked the "arising out of" language that was present in the school district's policy at issue. See id. at 821-22. The court observed that "[i]t matters not that the [claim of negligent supervision] is a claim of general negligence; the injuries arose out of the use of the bus and the exclusion would apply." Id. Compared to the policy in Buehl, the court concluded the exclusion in the policy before it "[did] not apply merely to the use of an automobile, but to bodily injuries arising out of the use of an automobile and is thus distinguishable." Id. at 822 (emphasis in original).
In St. Paul School District No. 625 v. Columbia Transit Corp., 321 N.W.2d 41, 44 (Minn. 1982), the Minnesota Supreme Court again examined a school district's general liability policy that excluded coverage for "bodily injury `arising out of the . . . use . . . of any automobile.'" Similar to Faber, a student was injured by a school bus and the student's parents sued the school district for negligently establishing loading procedures and for negligent supervision.See id. at 43. The school district was found negligent and the insurer initiated a declaratory judgment action to determine whether it had to pay damages. Id. The Minnesota Supreme Court found that the exclusion applied and protected the insurer from liability. Id. at 47. The court noted that for the exclusion to apply "all that need be established is that a `but for' causal relation exists between the use of the vehicle and the injury."Id. at 46 (citing Faber, 250 N.W.2d at 822-23) (emphasis added). It also observed that "Faber provides that negligent supervision . . . [is] within the ambit of the language `arising out of the use' of a motor vehicle, whether that language is inclusive or exclusive of coverage." Id.
Similarly, in Fillmore v. Iowa National Mutual Insurance Co., 344 N.W.2d 875, 877 (Minn.Ct.App. 1984), the Minnesota Court of Appeals examined a homeowner's policy that excluded coverage for "bodily injury . . . arising out of the . . . use . . . of a motor vehicle." The insured's son caused a deadly automobile accident and the insured was sued for negligent supervision.Id. at 876. The insurer commenced a declaratory judgment action alleging that, based upon the exclusion's "arising out of" language, it had no duty to defend or indemnify the insured parents against claims of negligent supervision of their son.Id. at 877. Citing Faber and Columbia Transit Corp., the Minnesota Court of Appeals agreed and held that "where the policy provides that it excludes coverage for injuries arising out of the use of a motor vehicle, claims of negligent supervision . . . are excluded from coverage thereunder." Id. at 880 (emphasis in original).
This Court now turns to the cases upon which Illinois Farmers principally relies. In Steele, 74 F.3d at 880, the Eighth Circuit, applying Minnesota law, examined a homeowner's policy that excluded coverage for injuries or damages "resulting from" acts that are "intended or expected to cause bodily injury." The insured's son raped his stepsister and the stepsister's mother sued the insured for negligent supervision.Id. The insurer sought a declaratory judgment that the policy did not cover damages resulting from the sexual assault. Id. Relying on Fillmore and Faber, the Eighth Circuit agreed and found that the policy did not cover damages "resulting from" intentional misconduct. Id. at 881. Assuming the insured's negligent supervision, the court found that the stepsister "would not have been injured but for the [stepbrother's] intentional misconduct. Therefore, the harm `resulted from' an intentional act, and [the stepsister's mother] cannot circumvent the policy's intentional conduct exclusion by suing [the insured] for negligent supervision." Id. (citation and internal quotations omitted) (emphasis in original).
At one point in the opinion, the court states that the policy excluded "injuries" resulting from intentional acts, while it later states that the policy excluded "damages." See Steele, 74 F.3d at 880, 881.
The Eighth Circuit also held that the policy's "joint obligation" provision barred the defendants' negligence claims.See Steele, 74 F.3d at 880-81.
In Redeemer, 567 N.W.2d at 77, the Minnesota Court of Appeals examined a professional liability policy that excluded coverage for any "criminal . . . act or omission" or "[l]icentious . . . behavior." A pastor sexually abused minors at his church and the church was sued for negligent supervision. See id. at 74. Drawing a "critical distinction" between Buehl (where the policy exclusion did not contain the "arising out of" language) and Faber (where the policy exclusion contained such language), the Minnesota Court of Appeals found that the church's alleged negligent supervision was not excluded from coverage because the policy's exclusionary language did not contain the phrase "arising out of." Id. at 77. Rather, the exclusion "appl[ied] to certain activities: i.e., criminal acts and licentious behavior." Id. Although "[t]he distinction between exclusions that contain the words `arising out of' and those that do not may be a fine one," the court found such a distinction appropriate considering that the insurer could have drafted the exclusionary language to cover injury or liability arising out of criminal acts or licentious behavior. Id. at 77-78.
Finally, in Amos, 593 N.W.2d at 265, the Minnesota Court of Appeals examined a school district's insurance policy that excluded coverage for any "claims arising out of . . . assault or battery" or any "claim arising out of bodily injury." A teacher sexually assaulted a student and the school district was sued for negligent supervision. See id. After the student's parents entered into a Miller-Shugart settlement with the school district, the parents commenced a garnishment action against the school district's insurer. Id. The insurer argued that there was no coverage based upon the "assault or battery" and "bodily injury" exclusions. Id. The Minnesota Court of Appeals agreed that the exclusions barred the parents' negligence claims.Id. at 268. It noted that "[d]espite [the parents'] attempt to focus this case on the alleged negligence of the school district, the policy's `arising out of' language requires this court to instead focus on the direct cause of [the parents'] original claim — the sexual assault." Id. at 267. Focusing on the sexual assault rather than the alleged negligence, the court held that "[t]he case against the school district would not have existedbut for the assault and bodily injury [of the student]. As a result, the policy denies coverage because of exclusions to claims arising out of assault or battery or bodily injury." Id. at 269 (emphasis added).
The rule that emerges from these cases is that when an insurance policy excludes coverage for an injury "arising out of" or "resulting from" certain specified conduct (i.e., using a car, intentional acts, assault, battery, or bodily injury), and such conduct occurs, coverage is also excluded for the insured's negligent supervision if the injury would not have occurred but for the specified conduct. See Faber, 250 N.W.2d at 821-22;Columbia Transit Corp., 321 N.W.2d at 46; Fillmore, 344 N.W.2d at 880; Steele, 74 F.3d at 881; Amos, 593 N.W.2d at 269. For example, when an insurance policy excludes coverage for claims "arising out of" assault, battery, or bodily injury, and an insured's employee assaults someone, no coverage exists for the insured's negligent supervision of that employee because the injured party's claim would not have existed but for the assault.See Amos, 593 N.W.2d at 269. For another example, when an insurance policy excludes coverage for injuries or damages "resulting from" acts intended to cause bodily injury, and the insured's child intentionally causes bodily injury to someone, no coverage exists for the insured's negligent supervision of the child because the injury or damages would not have occurred but for the child's intentional misconduct. See Steele, 74 F.3d at 881.
Applying the rule distilled from the cases discussed above, it follows that Illinois Farmers has no duty under the Policy to defend or indemnify R.H. and J.S. against a claim that R.H. negligently supervised J.S. First, the Policy excludes coverage for bodily injury "arising out of" molestation or "resulting from" intentional acts. Second, J.S. molested, or intentionally caused bodily injury to, A.A. Thus, under Minnesota law, the Policy also excludes coverage for R.H.'s alleged negligent supervision of J.S. because A.A.'s injury would not have occurredbut for J.S.'s molestation or intentional act. See, e.g., Columbia Transit Corp., 321 N.W.2d at 46 (stating that "all that need be established is that a `but for' causal relation exists between the [excluded conduct] and the injury" and that "negligent supervision . . . [is] within the ambit of the language `arising out of['] [excluded conduct], whether that language is inclusive or exclusive of coverage"). In other words, A.A.'s injury "arose out of" molestation or "result[ed] from" an intentional act, and M.S. and A.A. cannot circumvent the Policy's molestation and intentional conduct exclusions by suing for negligent supervision. See Steele, 74 F.3d at 881; see also Metropolitan Property Casualty Insurance Co. v. Miller, 589 N.W.2d 297, 299 (Minn. 1999) (finding no coverage existed for an insured's alleged negligent failure to warn of or prevent sexual abuse under a policy that did not cover "the actual, alleged or threatened sexual molestation of a person").
Although it is not disputed that J.S. acted intentionally when he sexually assaulted A.A., Minnesota courts infer an intent to cause bodily injury whenever an insured party sexually assaults another person. See Steele, 74 F.3d at 880 (citing cases); but see B.M.B. v. State Farm Fire Cas. Co., 664 N.W.2d 817, 823 (Minn. 2003) (holding that the issue of an insured's intent must be submitted to the jury when there is a genuine issue of material fact as to whether the insured's acts are "unintentional" because of mental illness).
M.S.'s arguments to the contrary are unavailing. First, M.S. argues that this case is "indistinguishable" from Buehl andRedeemer, which held that the insurer had a duty to defend and indemnify. (Def. M.S.'s Mem. in Opp'n at 6.) The Court disagrees. As noted above, the policy exclusions in both Buehl andRedeemer lacked the critical "arising out of" language. Minnesota courts, including the Redeemer court, have consistently distinguished cases based upon the presence or absence of this language, see Faber, 250 N.W.2d at 821-22;Redeemer, 567 N.W.2d at 77, and have held that this language broadens the scope of an exclusion, see Fillmore, 344 N.W.2d at 879.
Second, M.S. attempts to distinguish the present case fromAmos and Steele by arguing that the Policy excludes "injury" arising out of molestation and "injury" resulting from intentional acts, whereas the policy in Amos excluded "claims" arising out of assault, battery, or bodily injury and the policy in Steele excluded "damages" resulting from acts intended to cause bodily injury. (See Def. M.S.'s Mem. in Opp'n at 7-8.) The Court is not persuaded. In none of the cases discussed above did the court's decision hinge upon whether "claims," "damages," or "injuries" were excluded from coverage. In fact, Faber, Columbia Transit Corp., and Fillmore all contained exclusions for "bodily injury." And, as noted above, it is unclear whether the policy inSteele excluded "injuries" or "damages." See Steele, 74 F.3d at 880, 881. In these decisions, the presence or absence of the words "injury," "claims," or "damages" has had no impact on the courts' analysis. While the courts have drawn distinctions when necessary (i.e., in the context of "arising out of"), they have not done so in this context and M.S. offers no persuasive reason to do so.
Third, relying on the concurring opinion in Amos, which interpreted the Minnesota Supreme Court's decision in Rausch v. Beech Aircraft Corp., 277 N.W.2d 645 (Minn. 1979), M.S. argues that the "arising out of" and the "resulting from" language is not outcome determinative. (Def. M.S.'s Mem. in Opp'n at 4.) Rather, she asserts that the Court must pay "primary attention to the earliest cause" of A.A.'s injury, which she views as R.H.'s alleged negligent supervision. (Id. (quoting Amos, 593 N.W.2d at 271, Crippen, J., concurring specially).) M.S.'s reliance on the Amos concurrence is misplaced. The concurring opinion failed to persuade the Amos majority to focus on the school district's alleged negligent supervision and to overlook the teacher's sexual abuse of students. In fact, the Amos majority expressly rejected such an approach: "Despite appellants' attempt to focus this case on the alleged negligence of the school district, the policy's "arising out of" language requires this court to instead focus on the direct cause of appellants' original claim — the sexual assault." Amos, 593 N.W.2d at 267. This Court is similarly unpersuaded and it will not focus on R.H.'s alleged negligent supervision and overlook J.S.'s intentional molestation of A.A., especially in light of the decisions in Faber, Columbia Transit Corp., Fillmore, and Steele.
Finally, M.S. relies heavily on Mork Clinic v. Fireman's Fund Insurance Co., 575 N.W.2d 598 (Minn.Ct.App. 1998). In Mork Clinic, the Minnesota Court of Appeals examined a clinic's general liability policy that covered claims of bodily injuries caused by an "occurrence," which was defined as "an accident."Id. at 599-600. The policy also contained an exclusion for bodily injury "arising out of [t]he rendering or failure to render medical . . . services or treatment." Id. at 600. The policy did not, however, contain a molestation or an intentional act exclusion. See id. at 601. After patients accused a physician of sexual abuse and sued the clinic for negligent hiring and supervision, the clinic settled all claims. Id. at 599-600. The clinic then brought a declaratory judgment action against its insurer to determine the insurer's responsibility for defense costs and indemnity. Id. at 600.
The insurer argued that the patients' injuries were not covered "occurrences" because they were caused by the physician's intentional sexual abuse. Id. But the Minnesota Court of Appeals disagreed, stating that "the immediate cause of the victim's injuries is not the only cause, and the victims had a legitimate cause of action against the employer if they could establish, as they claimed, that [the clinic] was negligent in the hiring, supervision, or retention of their employee." Id. The court noted that "[t]he injuries would not have occurred if [the clinic] had not hired the employee and offered him as its agent to provide professional medical services to the victims."Id. The insurer also argued that coverage was defeated by the exclusion for injuries arising out of the rendering of medical services. Id. at 602. But the court found the exclusion inapplicable because "the sexual contact of [the clinic's physician] was not required for the medical services he was rendering." Id. at 602-03.
Mork Clinic is distinguishable. In contrast to the instant case, the policy in Mork Clinic did not contain a molestation or an intentional act exclusion. Thus, the court had no occasion to consider whether such exclusions would bar coverage for negligent supervision. Although the policy contained a medical services exclusion, the court found it inapplicable only because the physician's sexual contact was not required for the medical services he was rendering. Furthermore, the primary issue inMork Clinic was whether the sexual contact was a covered "occurrence." But in this case Illinois Farmers does not argue that R.H.'s alleged negligent supervision was not a covered "occurrence" as defined in the Policy. Rather, Illinois Farmers argues that such negligent conduct is excluded from coverage by the molestation and intentional act exclusions.
M.S's reliance on American Employers Insurance Co. v. Doe, 165 F.3d 1209 (8th Cir. 1999) is also misplaced becauseAmerican Employers relied upon Mork Clinic and the policy inAmerican Employers did not contain an intentional act exclusion. See American Employers, 165 F.3d at 1211-12.
Conclusion
Based on the foregoing, and all of the files, records, and proceedings herein, IT IS ORDERED:1. Plaintiff Illinois Farmers Insurance Company's Motion for Summary Judgment (Doc. No. 25) is GRANTED and the Court DECLARES:
a. Plaintiff Illinois Farmers has no duty to defend or indemnify Defendants R.H. and J.S. on any claim that R.H. negligently supervised J.S. arising out of J.S.'s molestation of A.A. or resulting from A.A.'s bodily injury caused by J.S.'s intentional acts; and
b. Plaintiff Illinois Farmers has no obligation to respond to any claim of Defendants M.S., individually, and on behalf of her minor son, A.A., that R.H. negligently supervised J.S. arising out of J.S.'s molestation of A.A. or resulting from A.A.'s bodily injury which was caused by J.S.'s intentional acts.
2. Plaintiff's Motion to Amend Complaint (Doc. No. 16) is DENIED as MOOT.