State Farm Fire & Casualty v. Williams ( 2019 )

FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT June 17, 2019
_________________________________
Elisabeth A. Shumaker
Clerk of Court
STATE FARM FIRE & CASUALTY
COMPANY,
Plaintiff - Appellee,
v. No. 18-5080
(D.C. No. 4:17-CV-00656-CVE-FHM)
VICTORIA WILLIAMS, as personal (N.D. Okla.)
representative of the estate of Khalid
Jabara,
Defendant - Appellant,
and
DAVID SCOTT, as administrator of the
estate of Stephen A. Schmauss; STANLEY
VERNON MAJORS,
Defendants.
_________________________________
ORDER AND JUDGMENT*
_________________________________
Before BRISCOE, McKAY, and HOLMES, Circuit Judges.
_________________________________
This is a declaratory judgment action filed by State Farm Fire & Casualty
Company to secure a ruling that it was not obligated to defend or indemnify its
insureds in a state tort case Victoria Williams filed against them.
*
This order and judgment is not binding precedent, except under the doctrines
of law of the case, res judicata, and collateral estoppel. It may be cited, however, for
its persuasive value consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
The district court granted summary judgment in favor of State Farm, and
Ms. Williams appealed. We review de novo an order granting summary judgment,
viewing the facts in the light most favorable to the non-moving party and drawing all
reasonable inferences in her favor. DeWitt v. Sw. Bell Tel. Co., 845 F.3d 1299, 1306
(10th Cir. 2017).
In August 2016, Stanley Majors shot and killed his neighbor Khalid Jabara.
Mr. Majors was convicted of first-degree murder for the killing of Mr. Jabara. The
gun Mr. Majors used in the crime was purchased and owned by Stephen Schmauss,
Mr. Major’s husband.
In February 2017, Mr. Jabara’s sister, Ms. Williams, filed suit against
Mr. Majors and Mr. Schmauss in Oklahoma state court, placing Mr. Schmauss’s
liability for Mr. Jabara’s death in his ownership of the gun and accompanying
negligence or recklessness. Because Mr. Schmauss and Mr. Majors had insurance
policies with State Farm at the time of the murder, the insurance company filed a
complaint in federal court seeking a declaration that the policies did not cover
Ms. Williams’s claims.
The homeowners’ insurance policy Mr. Schmauss and Mr. Majors held
together provided that State Farm would defend and indemnify the insured “[i]f a
claim is made or a suit is brought against an insured for damages because of bodily
injury or property damage to which this coverage applies, caused by an occurrence.”
(Appellant’s App. at 157.) The policy defined “occurrence” as “an accident,
including exposure to conditions, which results in . . . bodily injury[] or . . . property
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damage . . . during the policy period.” (Id. at 143–44.) It excluded coverage for
“bodily injury or property damage . . . (1) which is either expected or intended by the
insured[,] or (2) which is the result of willful and malicious acts of the insured.” (Id.
at 158.) The policy also included a “Severability of Insurance” provision stating,
“This insurance applies separately to each insured.” (Id. at 161.)
Mr. Schmauss individually held an additional personal liability umbrella
policy issued by State Farm. That policy provided that State Farm would defend and
indemnify the insured “[i]f a claim is made or suit is brought against an insured for
damages because of a loss to which this policy applies.” (Id. at 187.) The policy
defined “loss” as “an accident, including accidental exposure to conditions, which
first results in bodily injury or property damage during the policy period.” (Id. at
183.) Like the homeowners’ policy, the umbrella policy excluded coverage for
“bodily injury or property damage which is . . . either expected or intended by the
insured[,] or . . . the result of any willful and malicious act of the insured.” (Id. at
190.) Neither policy defined the term “accident.”
In January 2018, State Farm brought this action for declaratory judgment and
soon thereafter filed a motion for summary judgment, arguing that intentional murder
was not an “accident” and therefore was not covered by the policies. In support of
this argument, State Farm cited to Farmers Alliance Mutual Insurance Co. v. Salazar,
77 F.3d 1291, 1294, 1297 (10th Cir. 1996), a diversity case arising out of Oklahoma
in which a panel of this court concluded that “intentional murder is not ‘an
accident.’” Ms. Williams filed a motion requesting that the district court certify a
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question of law to the Oklahoma Supreme Court, asking in essence whether Salazar’s
holding is an accurate statement of Oklahoma law or whether the perspective of the
insured—and each insured when a policy is held by multiple persons—is relevant to
determining the accidental nature of an event. Ms. Williams’s response to State
Farm’s motion for summary judgment also attempted to show that the reasoning in
Salazar was flawed, as well as to distinguish that case under the facts and policy
language at issue here. The following month, Ms. Williams filed her own motion for
summary judgment, which made several of the same arguments she had made in
response to State Farm’s motion.
In its order ruling on the motions, the district court concluded that it would be
inappropriate for it to certify Ms. Williams’s question to the Oklahoma Supreme
Court because it was bound by Salazar. It then concluded that Salazar’s holding that
murder can never qualify as an accident under an Oklahoma insurance policy dictated
summary judgment in State Farm’s favor. Ms. Williams appealed and filed a motion
asking this court to certify her question to the Oklahoma Supreme Court.
Ms. Williams’s argument on appeal, in addition to her motion to certify a
question of state law, revolves around the Salazar decision. In that case,
Ms. Salazar’s sixteen-year-old son Manuel Corrales and his friend Jacob De LaCruz
murdered another boy, Thomas Byus, by shooting him from a moving vehicle.
Salazar, 77 F.3d at 1293–94. The administratrix of the boy’s estate, Ms. Byus, filed
a wrongful death action in Oklahoma state court against Ms. Salazar and her son. Id.at 1293 & n.1. The claim against Ms. Salazar asserted that she had negligently
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supervised her son by allowing him to possess the gun he used in the shooting, as
well as the gun he gave to Jacob De LaCruz also to use in the shooting. Id. at 1293–
94.
Ms. Salazar had a homeowner’s insurance policy providing that Farmers
Alliance would defend and indemnify the insured for damages because of bodily
injury or property damage “to which this insurance applies, caused by an occurrence
and arising out of the ownership, maintenance or use of the insured premises and all
operations necessary or incidental thereto.” Id. The policy defined “occurrence” as
“an accident, including continuous or repeated exposure to conditions, which results
in bodily injury or property damage neither expected nor intended from the
standpoint of the insured.” Id. at 1294. The district court concluded that the murder
was not an “occurrence” as to Manuel Corrales because he intended and expected to
harm Thomas Byus. Id. As to Ms. Salazar, however, the district court concluded
that the murder was an “occurrence” because she did not expect or intend the harm,
and it arose out of her ownership and use of the house because that is where her
negligent supervision took place. Id.On appeal, a panel of this court first held that “when determining whether a
bodily injury was ‘caused by an occurrence’ the question of whether there was an
‘occurrence’ should be resolved by focusing on the injury and its immediately
attendant causative circumstances.” Id. at 1296. Thus, the potential “occurrence” at
issue in that case was the murder itself, as opposed to any negligent actions leading
up to it. Id. at 1297. From there, the Salazar panel considered whether the murder
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was an “occurrence” under the policy’s definition of that term, concluding that the
definition “indicate[d] a two-part requirement”: (1) “the incident at issue must have
been ‘an accident,’” and (2) “the resulting injury must have been ‘neither expected
nor intended from the standpoint of the insured.’” Id. Because the panel concluded
that “intentional murder is not ‘an accident,’” Salazar did not address the “expected
or intended” portion of the definition, nor did it address whether the murder arose out
of Ms. Salazar’s ownership or use of the house. 77 F.3d at 1297.
State Farm acknowledges that, a year after Salazar was decided, in Mayer v.
State Farm Mutual Automobile Insurance Co., 944 P.2d 288, 290 (Okla. 1997), the
Oklahoma Supreme Court observed, “In first-party uninsured motorist coverage
contests between the insured and the insurer, the term ‘accident’ is viewed from the
standpoint of the insured. It can include criminal acts arising from the uninsured
vehicle’s use.” In our case, State Farm contends that “Oklahoma only views the term
‘accident’ from the standpoint of the insured in first party insurance cases, i.e., where
the insured is the claimant.” (Appellee’s Br. at 11.)
This case does not give us occasion to revisit the decision in Salazar, which is
binding precedent on us. See Wankier v. Crown Equip. Corp., 353 F.3d 862, 866
(10th Cir. 2003) (“[W]hen a panel of this Court has rendered a decision interpreting
state law, that interpretation is binding on district courts in this circuit, and on
subsequent panels of this Court, unless an intervening decision of the state’s highest
court has resolved the issue.”). The Oklahoma Supreme Court’s decision in Mayer,
although issued after the decision in Salazar, did not in fact resolve the issue before
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us in this case. As State Farm has pointed out, Mayer dealt with the definition of
“accident” in the context of first-party uninsured motorist coverage and did not
involve a third-party insurance claim like the one at issue here. Nor did Mayer cite to
or discuss Salazar. See Wankier, 353 F.3d at 867.
Therefore, we must reject Ms. Williams’s arguments that merely criticize
Salazar’s reasoning. Ms. Williams does, however, make an effort to distinguish that
case on the basis that the policy language at issue there differed from the language at
issue in this case. Specifically, she observes that the Salazar definition of
“occurrence” included “from the perspective of the insured,” whereas the definition
here lacks that information. (Appellant’s Br. at 13.) According to Ms. Williams, this
“key difference” renders the policy language here ambiguous, requiring an
interpretation in favor of coverage. (Id.) Unfortunately for Ms. Williams, Salazar’s
holding precludes this argument because the Salazar court did not rely on the second
prong of the two-part test it identified, which would have considered the meaning of
“neither expected nor intended from the standpoint of the insured.” See 77 F.3d at
1297. Instead, Salazar broadly held that the term “accident” unambiguously
precludes coverage for murder from any perspective. See id. We additionally note
that it would be odd for us to conclude that a policy expressly distinguishing between
perspectives unambiguously did not allow coverage for murder but that a policy
without such a distinction could be read as allowing it.
Salazar also precludes each of Ms. Williams’s other arguments for coverage in
this case. First, she contends that the severability clause of the homeowners’ policy
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makes the murder an “occurrence” as to Mr. Schmauss even though it is not an
“occurrence” as to Mr. Majors. Second, she argues that the severability clause
interacts with the undefined term “accident” to create an ambiguity in the policy.
Salazar did not address the existence of a severability clause in that case, but the fact
that the district court there had found coverage for Ms. Salazar but not for her son
suggests that the policy included one. See id. at 1294. Either way, however, Salazar
concluded that murder could never be an “accident”—as in the definition of
“occurrence”—even when only one insured committed the murder and it was
allegedly unexpected from the perspective of the other insured. See id. at 1297.
Nothing about our decision in Salazar suggests that a severability clause would affect
this reasoning; under Salazar, a murder simply cannot be covered as an “accident” as
to any insured.
Similarly, Salazar undermines Ms. Williams’s contention that the terms “loss”
and “occurrence” in the policies are ambiguous because they do not define
“accident.” The policy at issue in Salazar apparently did not define “accident”
either, see id. at 1294, but again the Salazar court held that “accident”
unambiguously does not include murder, see id. at 1297.
Finally, Ms. Williams asserts that the policies’ exclusions for “bodily injury or
property damage[]” that is “either expected or intended by the insured; or . . . the
result of [any] willful and malicious act[] of the insured” (Appellant’s App. at 158,
190), only exclude coverage for Mr. Majors, who acted intentionally, but not for
Mr. Schmauss, who was merely negligent. As State Farm points out, however,
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exclusions only come into play after coverage has been found under an insurance
policy’s coverage terms. Because Salazar held that there is no coverage for any
murder, regardless of who committed it, the intentional-acts exclusions, like the
intentional-acts limitation in the Salazar policy’s definition of “occurrence,” need not
be reached. See 77 F.3d at 1297. At least as regards murder, the intentional-acts
exclusions are a nullity.
We turn now to Ms. Williams’s request that we ask the Oklahoma Supreme
Court whether murder can constitute an “accident” in a third-party insurance case
under Oklahoma law where the murder is unintended and unexpected from the
perspective of the insured. “In diversity cases, the Erie doctrine instructs that federal
courts must apply state substantive law” “in order to discourage forum shopping and
to avoid inequitable administration of the [law].” Racher v. Westlake Nursing Home
Ltd. P’ship, 871 F.3d 1152, 1162, 1164 (10th Cir. 2017). Nevertheless, as noted
above, each panel of this court is bound by stare decisis to follow the precedent of
earlier decisions. See Wankier, 353 F.3d at 866. Additionally, “[t]he decision to
certify ‘rests in the sound discretion of the federal court.’” Kan. Judicial Review v.
Stout, 519 F.3d 1107, 1120 (10th Cir. 2008) (quoting Lehman Bros. v. Schein, 416
U.S. 386, 391 (1974)). In our discretion, we decline to certify Ms. Williams’s
question to the Oklahoma Supreme Court.
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The district court’s order granting summary judgment in favor of State Farm is
AFFIRMED. Ms. Williams’s motion to certify a question of state law is DENIED.
Entered for the Court
Monroe G. McKay
Circuit Judge
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