State Farm Fire and Casualty Co. v. Doe ( 1997 )

Substitute Opinion

The Court’s Prior Opinion Dated January 3,1997, is Hereby Withdrawn.

SCHROEDER, Justice.

This is an appeal from a declaratory judgment issued by the district court holding that applicable insurance policies do not provide coverage for injuries sustained by a minor child as a result of sexual contact with a minor child of the insured. Jane and John Roe, individually and as guardian ad litem for their minor child, appeal the district court’s declaratory judgment, asserting that this conduct is not excluded from coverage by the insurance policies.

I.

BACKGROUND AND PRIOR PROCEEDINGS

John and Jane Doe operated a day care business in their residence in Boise from 1973 through August 1991. The facility operated under both city and state licenses authorizing care for up to twelve (12) children per day. The three year-old daughter of Jane and John Roe attended the day care from March 1988 to July 1991. She was never at the residence other than as a client of the day care.

The Does’ thirteen year-old son helped out at the day care. He acknowledged that sexual conduct with the Roes’ daughter occurred in the downstairs bathroom of the facility between late 1990 and July 1991. The Does’ son told the Roes’ daughter that a “green monster” would get her if she told anyone. In July 1991 she told her mother what had happened to her at the day care. State Farm Fire and Casualty Company (State Farm) insured the Does under succeeding homeowners and umbrella insurance policies. Homeowners Policy No. 12-15-0041-8 (“Homeowners I”) ran from April 11, 1989, through April 10, 1990. It was renewed for an additional year from April 11, 1990, through April 10, 1991. It was renewed in amended form (“Homeowners II”) for a third year from April 11, 1991, through April 10, 1992. State Farm also provided the Does with liability umbrella coverage under Policy No. 12-27-1823-3 from June 12, 1989 through June 11,1992.

The Roes brought suit against the Does alleging the legal theories of assault, breach of contract, negligent entrustment, negligent supervision, negligent misrepresentation, negligent failure to notify a business invitee of a dangerous condition, failure to report child abuse under section 16-1619 of the Idaho Code and civil claims for commission of a criminal act of lewd conduct, sexual abuse, sexual exploitation, or injury to a child (I.C. Section 6-1701). State Farm provided a defense for this action under a reservation of rights. The Roes’ action was grounded on the sexual abuse of their daughter and the alleged accompanying failure of John and Jane Doe to identify and to prevent their son’s conduct.

State Farm brought this declaratory judgment action seeking a determination that the sexual abuse is outside its policy coverage, asserting that the policies do not obligate it to defend or indemnify the Does against the allegations and claims in the Roes’ action. The Roes petitioned to intervene in the action, alleging that the Does did not have sufficient assets to cover the cost of defense or pay any judgment.

The district court granted summary judgment for State Farm, relying on Mutual of Enumclaw v. Wilcox, 123 Idaho 4, 843 P.2d 154 (1992). The district court held that the sexual abuse was not an “accident” or “occurrence” under the policy. The court cited Wilcox for the legal definition of “accident” as it is used in insurance policies:

An accident within accident insurance policies is an event happening without any human agency, or if happening through such an agency, an event which, under the circumstances, is unusual and not expected by the person to whom it happens. A more comprehensive term than “negligence”, and in its common signification the word means an unexpected happening without intention or design.

n. 1. an undesirable or unfortunate happening, unintentionally caused and usually resulting in harm, injury, damage, or loss; casualty; mishap; automobile accidents. 2. An event that happens unexpectedly, without a deliberate plan or cause

Memorandum and Order Granting Amended Motion for Summary Judgment (citing Wilcox, 123 Idaho at 9, 843 P.2d at 159 (1992) (citations omitted)). The district court referred to the conduct as “intentional acts of sexual abuse” and analogous to the conduct of Mr. Wilcox in Wilcox.

The district court also held, on alternative grounds, that the defense and indemnification of the Does were excluded under the Business Pursuits Exclusion of the homeowners policies, the Business Operations Exclusion of the umbrella policy and the Child Care Services Exclusion applicable to all the policies.

II.

STANDARD OF REVIEW

Summary judgment is appropriate if motions are based on the same evidentiary facts and on the same theories and issues, when parties effectively stipulate that there is no genuine issue of material fact. I.R.C.P. 56(c); Morrissey v. Haley, 124 Idaho 870, 865 P.2d 961 (1998). Summary judgment is proper when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Bunker Hill Co. v. United Steelworkers of America,, 107 Idaho 155, 686 P.2d 835 (1984). A motion for summary judgment must be denied if reasonable people could reach differing conclusions or draw conflicting inferences from the record of the case. Cates v. Albertson’s Inc., 126 Idaho 1030, 895 P.2d 1223 (1995). Upon motion for summary judgment, all facts and inferences must be drawn in favor of the nonmoving party. Perkins v. Highland Enters., Inc., 120 Idaho 511, 817 P.2d 177 (1991).

When questions of law are presented, this Court exercises free review and is not bound by findings of the district court, but is free to draw its own conclusions from the evidence presented. Automobile Club Ins. Co. v. Jackson, 124 Idaho 874, 876, 865 P.2d 965, 967 (1993).

III.

THE CONDUCT AT ISSUE DID NOT CONSTITUTE AN “OCCURRENCE” THAT WOULD CREATE LIABILITY UNDER THE POLICIES.

Under the coverage provision of the State Farm homeowner policy there is liability coverage for an insured when a claim is made or suit is brought against an insured based on an “occurrence.”¹ The policy defines an “occurrence” as an accident, including exposure to conditions, which result in bodily injury or property damage.² Under the umbrella liability policy, coverage is provided if the insured is legally obligated to pay damages for a “loss.”³ The policy defines “loss” as an accident that results in personal injury or property damage.⁴ Each policy limits liability coverage to “accidents;” however, the policies do not set forth definitions for “accident.”

Whether an insured acted wilfully, intentionally or maliciously, relieving the insurer of liability under the policy, is a factual determination. Farmers Ins. Group v. Sessions, 100 Idaho 914, 607 P.2d 422 (1980). The absence of such a determination precludes summary judgment for the insurer. Id. In this case the district court found that the conduct in issue constituted “intentional acts of sexual abuse” and was not an “accident” or “occurrence” under the applicable policies.

This Court defined “accident” in Wilcox, noting that, “[w]here a word or phrase used in an insurance contract has a settled legal meaning or interpretation, that meaning or interpretation must be given even though other interpretations are possible.” 123 Idaho at 8, 843 P.2d at 158 (1992) (quoting Stein-McMurray Ins. Inc. v. Highlands Ins. Co., 95 Idaho 818, 820, 520 P.2d 865, 867 (1974)); see also City of Chubbuck v. City of Pocatello, 127 Idaho 198, 201, 899 P.2d 411, 414 (1995). Insurance policies may contain words that have settled legal meanings or interpretations and are not ambiguous merely because the policy does not contain a definition. Id. at 8, 843 P.2d at 158.

The Wilcox Court referred to the following two definitions of “accident” as the “settled legal meaning or interpretation:”

Accident.

Insurance contract. An accident within accident insurance policies is an event happening without any human agency, or, if happening through such agency, an event which, under circumstances, is unusual and not expected by the person to whom it happens. A more comprehensive term than “negligence,” and in its common signification the word means an unexpected happening without intention or design.

... 1. an undesirable or unfortunate happening, unintentionally caused and usually resulting in harm, injury, damage, or loss; casualty; mishap: automobile accidents. 2. any event that happens unexpectedly, without a deliberate plan or cause....

123 Idaho at 9, 843 P.2d at 159 (citations omitted). Ms. Wilcox’s failure to report or warn the proper authorities of the child molestation perpetrated upon minors by her ex-husband was “not an ‘occurrence’ under the policies because it was not the conduct which caused injury.” Id.

The facts in this case clearly show that the abuser understood the sexual nature of his conduct as well as its wrongfulness. He threatened the child by telling her that a “green monster” would get her if she told anyone of his behavior. The conduct occurred in the downstairs bathroom of the residence in a location where his conduct would not easily be detected. The Does’ son’s conduct was not “without intention or design.” Wilcox, 123 Idaho at 9, 843 P.2d at 159. An accident is an unexpected event which is the result of unintentional conduct or an intentional act which results in unexpected consequences. The district court found the facts established “intentional acts of sexual abuse.” There is no other reasonable interpretation of the facts. This intentional conduct, with consequences that could be expected, cannot be characterized as an accident. Therefore, there was no “occurrence” within the meaning of the policy.

The policies in question do not afford coverage because there was no “occurrence.” It is unnecessary to consider the Business Pursuits Exclusion of the homeowners policies, the Business Operations Exclusion of the umbrella policy and the Child Care Services Exclusion applicable to all of the policies.

IV.

CONCLUSION

The district court’s grant of summary judgment is affirmed. Costs on appeal are awarded to State Farm. No Attorney fees are awarded on appeal.

McDEVITT, C.J.,^* JOHNSON and TROUT, JJ., and WOOD, J. Pro Tern., concur.

1 . COVERAGE L — PERSONAL LIABILITY

If a claim is made or a suit is brought against an insured for damage because of bodily injury or properly damage to which this coverage applies, caused by an occurrence, we will:

1. pay up to our limit of liability for the damages for which the insured is legally liable; and

2. provide a defense at our expense by counsel of our choice.

Policy No. 12-15-0041-8 (emphasis omitted).

2 . 7. "occurrence”, when used in Section II of this policy, means an accident, including exposure to conditions, which results in:

a. bodily injury; or

b. property damage during the policy period. Repeated or continuous exposure to the same general conditions is considered to be one occurrence.

Policy No. 12-15-0041-8

3 . 1. Coverage L — Personal liability. If you are legally obligated to pay damages for a loss, we will pay your net loss minus the retained limit. Our payment will not exceed the amount shown on the Declarations as Policy Limits — Coverage L — Personal Liability.

Policy No. 12-27-1823-3

4 . 6. "loss” means an accident that results in personal injury or property damage during the policy period. This includes injurious exposure to conditions.

Polity No. 12-27-1823-3