Opinion
Case No. 2:22-cv-03878-MCS-GJS
2023-02-22
GENERAL INSURANCE COMPANY OF AMERICA, a New Hampshire Corporation, Plaintiff, v. Stephen HALL, an individual; and Leshette Molette, as an individual, and as Guardian ad Litem for M.M., a minor, Defendants.
Mary E. Gregory, Frank Falzetta, Scott R. Sveslosky, Robert A. Sanders, Sheppard Mullin Richter and Hampton LLP, Los Angeles, CA, for Plaintiff. Herbert Hayden, Harris and Associates, Los Angeles, CA, John W. Harris, Harris and Hayden, Los Angeles, CA, for Defendant Stephen Hall. Theida Salazar, Law Offices of Theida Salazar, Burbank, CA, for Defendant Leshette Molette.
Mary E. Gregory, Frank Falzetta, Scott R. Sveslosky, Robert A. Sanders, Sheppard Mullin Richter and Hampton LLP, Los Angeles, CA, for Plaintiff. Herbert Hayden, Harris and Associates, Los Angeles, CA, John W. Harris, Harris and Hayden, Los Angeles, CA, for Defendant Stephen Hall. Theida Salazar, Law Offices of Theida Salazar, Burbank, CA, for Defendant Leshette Molette.
ORDER RE: PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT (ECF No. 34)
MARK C. SCARSI, UNITED STATES DISTRICT JUDGE
Plaintiff General Insurance Company of America moves for summary judgment. (Mot., ECF No. 32.) Defendants Stephen Hall and Leshette Molette filed separate untimely oppositions, (Molette Opp'n, ECF No. 38; Hall Opp'n, ECF No. 40; see Initial Standing Order § 9(b), ECF No. 11), and Plaintiff replied, (Reply, ECF No. 45). The Court deems this matter appropriate for decision without oral argument. See Fed. R. Civ. P. 78(b); C.D. Cal. R. 7-15.
I. BACKGROUND
The facts underlying this declaratory judgment action were initially stated in the Court's order denying Ms. Molette's motion to dismiss. (Order Den. Mot. to Dismiss, ECF No. 32.) Ms. Molette filed a lawsuit in Los Angeles County Superior Court (the "underlying action") on behalf of herself and her minor daughter M.M. alleging that Mr. Hall sexually molested M.M. (See Compl. Ex. A ("Underlying Action Compl."), ECF No. 1-1.) In the underlying action, Ms. Molette seeks to recover damages for 1) sexual battery in violation of California Civil Code section 1708.5, 2) violation of the Ralph Civil Rights Act of 1976, 3) battery, 4) assault, 5) false imprisonment, 6) negligence (premises liability), and 7) intentional infliction of emotional distress. (Id.)
On June 7, 2022, General Insurance filed a complaint for declaratory relief and restitution naming as defendants Mr. Hall and Ms. Molette in both her individual capacity and as guardian ad litem for M.M. (Compl., ECF No. 1.) General Insurance had previously agreed to defend Mr. Hall in the underlying action, subject to a full reservation of rights, under a homeowner's insurance policy (the "Policy") issued to Mr. Hall's wife. (Id. ¶¶ 9, 17.) General Insurance seeks a declaratory judgment that both the Policy's terms and exclusions, including the "molestation exclusion" and "intended acts exclusion," preclude coverage and eliminate any duty to defend or indemnify Mr. Hall in the underlying action. (Id. ¶¶ 19, 22-38.) General Insurance also seeks restitution and recoupment of all costs already incurred in the defense of Mr. Hall in the underlying action. (Id. ¶¶ 39-40.)
Ms. Molette filed a motion to dismiss the Complaint, arguing the Court should decline to exercise jurisdiction over this declaratory judgment action based on the factors articulated in Brillhart v. Excess Insurance Co. of America, 316 U.S. 491, 495, 62 S.Ct. 1173, 86 L.Ed. 1620 (1942). In its order denying Ms. Molette's motion, the Court concluded the exercise of jurisdiction was appropriate because the parties to this action are not the same as the parties in the underlying action, the issues presented in this case are different from those presented in the underlying action, and Plaintiff's claims for restitution and recoupment provided a jurisdictional basis independent of the Declaratory Judgment Act. (Order Den. Mot. to Dismiss 3-4.) The Court also determined that this case presents no threat of duplicitous litigation, does not turn on resolution of novel questions of state law, and does not represent an attempt by Plaintiff to engage in forum shopping. (Id. at 4-5.)
II. LEGAL STANDARD
Summary judgment is appropriate where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). A fact is material when, under the governing law, the resolution of that fact might affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A dispute is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. The burden of establishing the absence of a genuine issue of material fact lies with the moving party, see Celotex, 477 U.S. at 322-23, 106 S.Ct. 2548, and the court must view the facts and draw reasonable inferences in the light most favorable to the nonmoving party, Scott v. Harris, 550 U.S. 372, 378, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007). To meet its burden,
[t]he moving party may produce evidence negating an essential element of the nonmoving party's case, or, after suitable discovery, the moving party may show that the nonmoving party does not have enough evidence of an essential element of its claim or defense to carry its ultimate burden of persuasion at trial.Nissan Fire & Marine Ins. Co., Ltd. v. Fritz Cos., Inc., 210 F.3d 1099, 1106 (9th Cir. 2000). Once the moving party satisfies its burden, the nonmoving party cannot simply rest on the pleadings or argue that any disagreement or "metaphysical doubt" about a material issue of fact precludes summary judgment. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). There is no genuine issue for trial 3 where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party. Id. at 587, 106 S.Ct. 1348.
III. ANALYSIS
A. Declaratory Claims
"Starting with first principles, an insurance policy is a contract between an insurer and an insured, with the insurer making promises and the insured paying premiums, one in consideration of the other, against the risk of loss. Thus, while insurance contracts may have special features, the basic rules of contract interpretation still apply." Pac. Bay Masonry, Inc. v. Navigators Specialty Ins. Co., 561 F. Supp. 3d 881, 885 (N.D. Cal. 2021). "The construction of an insurance policy and the determination of rights and obligations pursuant to that policy are questions of law, and are appropriate for disposition by way of summary judgment." James River Ins. Co. v. Medolac Lab'ys, 290 F. Supp. 3d 956, 966 (C.D. Cal. 2018).
Whether an insurer owes a duty to defend is determined by "comparing the allegations of the complaint with the terms of the policy. If the terms of the policy provide no potential for coverage, . . . the insurer acts properly in denying a defense . . . ." Waller v. Truck Ins. Exch., Inc., 11 Cal. 4th 1, 26, 44 Cal.Rptr.2d 370, 900 P.2d 619 (1995) (citation omitted). Under California law, the "insured has the burden to show that that the underlying claim falls within an insurance policy's coverage." James River, 290 F. Supp. 3d at 966-67. If the insured "has made this showing, the burden is on the insurer to prove the claim is specifically excluded." Aydin Corp. v. First State Ins. Co., 18 Cal. 4th 1183, 1188, 77 Cal.Rptr.2d 537, 959 P.2d 1213 (1998). The parties do not dispute that the Policy covers Mr. Hall as an "insured." (Molette Statement of Disputed Facts ("MSDF") ¶ 2, ECF No. 39.)
Mr. Hall did not file a separate statement of disputed facts as required. C.D. Cal. R. 56-2. Accordingly, the Court assumes Mr. Hall does not dispute Plaintiff's statement of material facts. C.D. Cal. R. 56-3.
"When a policy defines [a] term, that definition controls." Tustin Field Gas & Food, Inc. v. Mid-Century Ins. Co., 13 Cal. App. 5th 220, 227, 219 Cal.Rptr.3d 909 (2017). The Policy states that General Insurance will provide coverage for "damages because of bodily injury . . . caused by an occurrence." (MSDF ¶ 3.) The Policy defines an "occurrence" as "an accident, including exposure to conditions which results in: (1) bodily injury; or (2) property damage." (Id. ¶ 5.) The term "bodily injury" includes coverage for a "personal offense." (Id. ¶ 6.) A "personal offense" includes injury arising from "false arrest, detention or imprisonment, or malicious prosecution." (Id.) The Policy also contains a "molestation exclusion" which expressly excludes coverage for any bodily injury "arising out of physical or mental abuse, sexual molestation or sexual harassment." (Id. ¶ 8.) Finally, the Policy contains an "intended acts exclusion" which excludes coverage for bodily injury "which is expected or intended by any insured or which is the foreseeable result of an act or omission intended by any insured." (Id. ¶ 7.)
General Insurance does not have a duty to provide coverage for the intentional conduct alleged in the underlying action because its obligations are only triggered when a covered "accident" results in either "bodily injury" or "property damage." (Id. ¶ 5.) "In the context of liability insurance, an accident is an unexpected, unforeseen, or undesigned happening or consequence from either a known or an unknown cause." Delgado v. Interinsurance Exch. of Auto. Club of S. Cal., 47 Cal. 4th 302, 308, 97 Cal.Rptr.3d 298, 211 P.3d 1083 (2009) (internal quotation marks omitted). "An intentional act is not an 'accident' within the plain meaning of the word." Albert v. Mid-Century Ins. Co., 236 Cal. App. 4th 1281, 1290-91, 187 Cal.Rptr.3d 211 (2015) (internal quotation marks omitted).
The assault and battery alleged in the underlying action cannot be considered an "accident" under the Policy. (See Underlying Action Compl. ¶ 55 (alleging Mr. Hall "acted with the intent to make a harmful and offensive contact with" M.M.); id. ¶ 69 (alleging Mr. Hall "intended to cause [M.M.] apprehension of an imminent harmful and offensive contact with her person").) See Delgado, 47 Cal. 4th at 317, 97 Cal.Rptr.3d 298, 211 P.3d 1083 (holding assault and battery allegedly committed by insured were not an "accident" within meaning of the policy). Nor can intentional infliction of emotional distress, as the name implies, constitute accidental conduct in this case. See Michaelian v. State Comp. Ins. Fund, 50 Cal. App. 4th 1093, 1107, 58 Cal.Rptr.2d 133 (1996) (concluding conduct giving rise to claim of intentional infliction of emotional distress was intentional for the purposes of insurance liability). Finally, violations of the Ralph Civil Rights Act cannot be accidental, as liability requires a showing that the defendant deliberately acted with "a prohibited discriminatory motive." Gabrielle A. v. County of Orange, 10 Cal. App. 5th 1268, 1291, 217 Cal.Rptr.3d 275 (2017).
Courts have also uniformly held that sexual molestation cannot be accidental. "[S]exual molestation, by its nature, is purposeful, not accidental, and therefore is not within the scope of coverage set forth by the policy." Morton ex rel. Morton v. Safeco Ins. Co., 905 F.2d 1208, 1211 (9th Cir. 1990) (interpreting California law to find acts of sexual molestation excluded from policy that contained virtually identical language to the policy at issue here); see also J. C. Penney Cas. Ins. Co. v. M.K., 52 Cal. 3d 1009, 1021, 278 Cal.Rptr. 64, 804 P.2d 689 (1991) ("[T]he intent to molest is, by itself, the same as the intent to harm."). In Northland Insurance Co. v. Briones, 81 Cal. App. 4th 796, 807, 97 Cal.Rptr.2d 127 (2000), Court of Appeal recognized "there is no such thing as negligent or even reckless sexual molestation." Consequently, Defendants have failed to satisfy their burden of showing that Mr. Hall's alleged conduct, including sexual battery, violation of the Ralphs Civil Rights Act, battery, assault, and intentional infliction of emotional distress, was accidental and therefore "falls within [the] insurance policy's coverage." James River, 290 F. Supp. 3d at 966-67.
Even if Defendants had met their burden, there is no triable issue that the conduct animating the underlying action is subject to Policy exclusions. With respect to claims that could arguably rest on accidental conduct, such as negligence and false imprisonment, General Insurance has established that coverage is precluded by the "molestation exclusion." This exclusion applies to any bodily injury "arising out of physical or mental abuse, sexual molestation or sexual harassment." (MSDF ¶ 8.) "Although exclusions are generally construed narrowly," in insurance disputes, "California courts interpret the term 'arising out of' broadly." Energy Ins. Mut. Ltd. v. Ace Am. Ins. Co., 14 Cal. App. 5th 281, 298, 221 Cal.Rptr.3d 711 (2017) (cleaned up). The term " '[a]rising out of' is a broad concept requiring only a slight connection or an incidental relationship between the injury and the excluded risk. Such language requires the court to examine the conduct underlying the lawsuit, instead of the legal theories attached to the conduct." Century Transit Sys., Inc. v. Am. Empire Surplus Lines Ins. Co., 42 Cal. App. 4th 121, 127 n.4, 49 Cal.Rptr.2d 567 (1996) (cleaned up). The parties do not dispute that "all causes of action" in the underlying dispute are based "on Mr. Hall sexually molesting" M.M. (MSDF ¶ 15). As a result, there can be no dispute that all claims, including those for negligence and false imprisonment, "aris[e] out of physical or mental abuse, sexual molestation or sexual harassment" and are therefore excluded from coverage under the "molestation exclusion." (MSDF ¶ 8).
Even without this admission, claims in the underlying action would not trigger General Insurance's duty to provide coverage. Under California law, where an insurance policy contains a "molestation exclusion," insurers are not required to provide coverage for "allegations of non-sexual conduct" when such conduct is "inseparably intertwined with the sexual misconduct" allegations." Jane D. v. Ordinary Mutual, 32 Cal. App. 4th 643, 653, 38 Cal.Rptr.2d 131 (1995) (internal quotation marks omitted). In Jane D., a minor plaintiff alleged that a priest used information he had obtained through counseling sessions to induce her into having sexual relations with him. Id. The plaintiff alleged the priest engaged in "negligent counseling," and claimed the defendant insurance company was obliged to provide coverage notwithstanding the policy's exclusions. Id. at 651, 38 Cal.Rptr.2d 131. The court concluded that allegations of the priest's "misuse of his counseling position resulted in the inducement for [Jane D.] to engage in sexual relations with him," and thus none of the allegations of "malfeasance in counseling [stood] separate from the allegation of sexual misconduct." Id. at 653, 38 Cal.Rptr.2d 131.
Here, the underlying action's claim for negligence turns upon allegations that Mr. Hall "sexually molested and assaulted" M.M., (Underlying Action Compl. ¶ 104), allegedly resulting in a breach of his duty to "act reasonably to control his property and guests to prevent injury from, among other things, foreseeable sexual assault by him," (id. ¶ 98). The underlying action's negligence allegations are therefore not "separate from the allegation of sexual misconduct." Jane D., 32 Cal. App. 4th at 653, 38 Cal.Rptr.2d 131. To the extent the false imprisonment claims could be characterized as an accidental "occurrence" under the "personal offense" provision of the Policy, they are likewise intertwined with the molestation claims. Defendants do not dispute that M.M. "became confined to the subject premises without an escape due to her status as an underage child," and Mr. Hall "took advantage of that fact" when he allegedly molested her. (MSDF ¶ 13 (internal quotation marks omitted).) As a result, the false imprisonment claim is inseparably intertwined with the underlying action's allegations of sexual molestation. See Lyons v. Fire Ins. Exch., 161 Cal. App. 4th 880, 888, 74 Cal.Rptr.3d 649 (2008) (declining to find insurance liability for false imprisonment claim where subject's "alleged sexual advances" lay "at the heart of all the allegations").
The underlying action clearly alleges intentional conduct. (See Underlying Action Compl. ¶¶ 90-91, 93 (alleging Mr. Hall's conduct giving rise to the false imprisonment claims was "willful, wanton, and malicious," that he acted with "conscious disregard of [M.M.'s] rights and feelings," and that he "intended to cause fear, physical injury and/or pain and suffering.").) The Court only considers it under this framework to demonstrate that even if the claims had been recast as false imprisonment through negligence, see Bocanegra v. Jakubowski, 241 Cal. App. 4th 848, 855, 194 Cal.Rptr.3d 327 (2015), there is still no "potential for coverage," Jane D., 32 Cal. App. 4th at 653, 38 Cal.Rptr.2d 131.
Finally, the Policy's "intended acts exclusion" excludes coverage for bodily injury "which is expected or intended by any insured or which is the foreseeable result of an act or omission intended by any insured." (MSDF ¶ 7.) Because the parties acknowledge that "all causes of action" are based on the intentional acts of Mr. Hall, (MSDF ¶ 15), the "intended acts exclusion" is a separate and independent basis upon which to conclude all claims in the underlying action fall within a policy exclusion.
In their untimely oppositions, Defendants fail to establish the conduct alleged in the underlying complaint "falls within [the] insurance policy's coverage," James River Ins., 290 F. Supp. 3d at 966-67, or rebut General Insurance's showing that the Policy's exceptions apply, Aydin Corp, 18 Cal. 4th at 1188, 77 Cal.Rptr.2d 537, 959 P.2d 1213. In her opposition, Ms. Molette argues that General Insurance remains under a duty to provide coverage because "separable acts occurred whereby Co-Defendant Hall harassed, continued in harassment and menacing conduct" following his alleged molestation of M.M., thereby resulting in "separable negligence." (Molette Opp'n 5.) Even assuming Mr. Hall engaged in the "separate acts" referenced in Ms. Molette's opposition brief, these acts are not alleged in the underlying action. (See generally Underlying Action Compl.) Additionally, even if the allegations had been made, Ms. Molette offers no authority showing how "harassment and menacing conduct" could constitute negligent or accidental conduct. Cf. Briones, 81 Cal. App. 4th at 807, 97 Cal. Rptr.2d 127 ("There is simply no such thing as . . . 'negligent harassment.' ").
The Court declines to consider arguments raised in Defendants' untimely opposition to the extent they are not addressed in this Order. C.D. Cal. R. 7-12.
Mr. Hall argues that the Court should abstain from exercising jurisdiction over this claim. The Court previously addressed and rejected this argument in the Court's prior order. (See generally Order Den. Mot. to Dismiss.) Mr. Hall also claims that M.M. "has clearly pled causes of action invoking the personal offenses coverage in the Policy." (Hall Opp'n 8.) As discussed above, the "personal offenses" coverage applies only when there has been an accidental "occurrence." (MSDF ¶¶ 5-6.) Because none of the alleged conduct could be considered accidental, this argument is inapposite.
The Court considers the sections of Mr. Hall's opposition that have some bearing on this dispute and ignores those which appear to have been inadvertently imported from an unrelated brief. (See, e.g., Hall Opp'n 4 ("The GICO's subsidence exclusion certainly does not apply to the pleaded theory of damages emanating from machinery vibrations which alone are alleged to have damaged the house, by causing violent jarring and shaking of the house."); id. at 10 ("Plaintiff refers the Court to Plaintiffs [sic] Motion for Summary Adjudication and all moving papers. (See Request for Judicial Notice filed concurrently with this Opposition.)"); id. at 11 ("GICO failed to fully investigate Mr. Shanahan's claim."); id. at 13 ("At the time GICO denied Mr. Shanahan's claim, GICO improperly interpreted coverage grants narrowly, while interpreting exclusions broadly.").)
Lastly, Mr. Hall urges the Court to conclude that General Insurance "cannot deny the claim 'without fully investigating the grounds for its denial.' " (Hall Opp'n 11 (quoting Wilson v. 21st Century Ins. Co., 42 Cal. 4th 713, 720, 68 Cal. Rptr.3d 746, 171 P.3d 1082 (2007)).) Setting aside the fact that Mr. Hall failed to submit evidence establishing this alleged failure as required by Local Rule 56-2, in determining its duty to defend, "[a]n insurer does not have a continuing duty to investigate the potential for coverage if it has made an informed decision on coverage at the time of tender." Am. States Ins. Co. v. Progressive Cas. Ins. Co., 180 Cal. App. 4th 18, 26, 102 Cal.Rptr.3d 591 (2009). "[I]n the context of a summary adjudication/summary judgment motion in a declaratory relief action," this obligation is satisfied when the insurer has "present[ed] undisputed facts that eliminate any possibility of coverage." Id. at 27, 102 Cal. Rptr.3d 591; accord D.R. Horton L.A. Holding Co. v. Am. Safety Indem. Co., No. 10CV443 WQH, 2012 WL 33070, at *12 (S.D. Cal. Jan. 5, 2012) (applying this proposition in Rule 56 context).
As discussed above, General Insurance has established that none of the alleged conduct could give rise to "any possibility of coverage" under the Policy. Id. General Insurance does not need to further investigate the factual basis for the allegations in the underlying action because, irrespective of whether Mr. Hall is adjudged liable, the Policy provisions would not provide for coverage of these claims. See Briones, 81 Cal. App. 4th at 806, 97 Cal.Rptr.2d 127 ("Whether the allegations are true or not, there was no duty to defend because . . . there was no potential for coverage.").
For all of the reasons stated above, Plaintiff's motion for summary judgment is GRANTED as to its claims for declaratory relief.
B. Reimbursement Claim
California law recognizes that an insurer has an implied-in-law right to be reimbursed for defense fees and costs incurred defending claims not covered under an insurance policy. Buss v. Superior Ct., 16 Cal. 4th 35, 51, 65 Cal.Rptr.2d 366, 939 P.2d 766 (1997). Mr. Hall does not address or dispute General Insurance's contention that it "has satisfied the prerequisites to seek reimbursement for Defense Costs under Buss" or that it is entitled to "prejudgment interest at a rate of seven percent per annum" under California Civil Code section 3287(a). (Mot. 25.)
Although "section 3287, subdivision (a), only applies to 'damages,' " this Court has "discretion in equity to award prejudgment interest as a component of restitution." Tufeld Corp. v. Beverly Hills Gateway, L.P., 86 Cal. App. 5th 12, 33, 302 Cal.Rptr.3d 203 (2022); accord Kivett v. Flagstar Bank, FSB, 506 F. Supp. 3d 749, 767 (N.D. Cal. 2020).
Accordingly, there is no triable issue of fact as to these issues. Plaintiff's summary judgment motion is GRANTED as to its claim for restitution and recoupment.
IV. CONCLUSION
Plaintiff's motion for summary judgment is GRANTED in its entirety. The Court will enter Plaintiff's proposed judgment.