State Farm Fire v. Franklin

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
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No. 95-10261
Summary Calendar
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STATE FARM FIRE & CASUALTY
COMPANY,
Plaintiff-Appellee,
versus
JAMES L. FRANKLIN, ET AL.,
Defendants,
JAMES L. FRANKLIN and
TONYA JEAN FRANKLIN,
Defendants-Appellants.
_________________________________________________________________
Appeal from the United States District Court for the
Northern District of Texas
(6:94-CV-060-C)
_________________________________________________________________
(October 10, 1995)
Before JOLLY, JONES, and STEWART, Circuit Judges.
E. GRADY JOLLY, Circuit Judge:*
In this declaratory judgment action, we are presented with the
primary question of whether under Texas law an insurance policy
clearly excluding coverage of claims against the insured for bodily
*
Local Rule 47.5 provides: "The publication of opinions that
have no precedential value and merely decide particular cases on
the basis of well-settled principles of law imposes needless
expense on the public and burdens on the legal profession."
Pursuant to that Rule, the court has determined that this opinion
should not be published.
injury caused by the insured's intentional acts also precludes
coverage of any claim against the insured based on his alleged
sexual molestation of a minor and thereby releases the insurer from
its duty to defend such a claim.
I
On February 7, 1994, Tonya Jean Franklin filed suit in Texas
state court against her grandfather, James L. Franklin, alleging
that he sexually molested her while she was a minor. In this
action, Tonya Franklin contended that her injuries were caused by
her grandfather's intentional conduct and also his negligence in
failing to seek treatment for himself to prevent the molestation.
During the time of the alleged sexual molestation, State Farm
Fire & Casualty Company ("State Farm") provided homeowner's
insurance for James Franklin. The terms of this policy required
State Farm to "pay on behalf of the Insured all sums which the
Insured shall become legally obligated to pay as damages because of
bodily injury . . . and defend any suit against the Insured
alleging such bodily injury." Based on this provision, James
Franklin requested that State Farm provide his defense in the tort
suit filed by Tonya Franklin. His homeowner's insurance policy,
however, excluded coverage under this provision when the bodily
injury was "caused intentionally by or at the direction of the
Insured" and also released State Farm from defending the insured
against any claim caused by such acts.
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On October 26, 1994, State Farm filed the present suit in the
United States District Court for the Northern District of Texas
against James Franklin and Tonya Franklin, seeking a declaratory
judgment under 28 U.S.C. § 2201, that it had no duty to defend
James Franklin against Tonya Franklin's sexual molestation claims
because of the "intentional injury" exclusion in the policy. In
this action, State Farm additionally requested that it recover its
attorneys' fees associated with the declaratory judgment action.
On December 7, 1994, State Farm moved for summary judgment based on
the intentional injury exclusion in the homeowner's insurance
policy.1 On December 29, 1994, the district court entered an order
summarily granting summary judgment in favor of State Farm on the
issue of its duty to defend and stated that State Farm was entitled
to its attorneys' fees. The court, however, delayed final judgment
pending resolution of all issues with regard to State Farm's
attorneys' fees. On February 23, 1995, the court ordered that
James Franklin and Tonya Franklin pay State Farm $1,858.75 in
attorneys' fees and $429.21 in out-of-pocket expenses related to
the declaratory judgment and entered final judgment in favor of
State Farm.
On appeal, James and Tonya Franklin argue that the district
court erred in granting summary judgment in favor of State Farm
with regard to State Farm's duty to defend James Franklin in the
1
Neither James Franklin nor Tonya Franklin responded to this
motion.
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underlying state court suit and additionally erred in awarding
State Farm attorneys' fees and other expenses. James and Tonya
Franklin contend that an allegation of sexual abuse by a minor does
not constitute an intentional injury as a matter of law,
necessarily excluding coverage under the insurance policy. Thus,
they argue that Tonya Franklin's negligence claim against James
Franklin is a covered claim under the State Farm policy requiring
State Farm to defend James Franklin in the underlying state court
tort action.
II
A
We review the district court's grant of summary judgment de
novo. Davis v. Illinois Central R.R., 921 F.2d 616, 617-18 (5th
Cir. 1991). Summary judgment is appropriate if the record
discloses "that there is no genuine issue of material fact and that
the moving party is entitled to judgment as a matter of law." FED.
R. CIV. P. 56(c).
In Commercial Union Ins. v. Roberts, 7 F.3d 86 (5th Cir.
1993), an insured adult requested that his insurance company
provide a defense for him against a minor's allegation of sexual
molestation. Commercial Union Ins., 7 F.3d at 87. The insured's
insurance carrier brought suit against the insured and the minor
seeking a declaration that it had no duty to defend the insured
based on an intentional injury exclusion in the insurance policy--
identical to that found in James Franklin's policy. Id. Upholding
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the district court's summary judgment in favor of the insurer, we
held that an adult's "intent to injure may be inferred as a matter
of law in cases involving sexual contact between a child and an
adult" regardless of the subjective intent of the adult. Id. at
88; see Allen v. Automobile Ins. Co., 892 S.W.2d 198, 199 (Tex. Ct.
App. 1994) (holding "[s]exual molestation is an intentional injury
as a matter of law"). Thus, we concluded that the insured's
actions fell within the "intentional injury" exclusion in his
insurance policy, precluding coverage. Id.
Here, James Franklin is accused of sexually molesting a minor
and his insurance policy clearly excludes coverage for bodily
injury caused by intentional acts of the insured and also releases
State Farm from the obligation of defending the insured against
claims based on these intentional acts. Accordingly, we find this
case indistinguishable in all respects from Commercial Union
Insurance. We therefore hold that the allegations of sexual
molestation by the minor Tonya Franklin against James Franklin are
as a matter of law excluded under the "intentional injury"
exclusion from his insurance coverage and thus State Farm has no
duty to defend James Franklin against these allegations.2
2
Based on C.T.W. v. B.C.G., 809 S.W.2d 788 (Tex. Ct. App.
1991), James and Tonya Franklin argue that Texas recognizes a claim
for negligence based on the sexual molestation of a minor and thus
contend that Commercial Union Insurance was improperly decided
because it failed to consider C.T.W.. In essence, James and Tonya
Franklin are asking us to overrule Commercial Union Insurance. Not
only are we bound to follow this well-reasoned case, we find C.T.W.
inapplicable to the facts here as C.T.W. did not involve an issue
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Accordingly, we hold that summary judgment in favor of State Farm
is appropriate on the question of its duty to defend and affirm the
district court as to this issue.
We now turn to decide whether State Farm is entitled to its
attorneys' fees and other expenses from James and Tonya Franklin.
B
We review the district court's award of attorney's fees for
abuse of discretion and the supporting factual findings for clear
error. Watkins v. Fordice, 7 F.3d 453, 457 (5th Cir. 1993).
Here, State Farm filed suit and requested attorney's fees
under the Declaratory Judgments Act, 28 U.S.C. § 2201. The
Declaratory Judgments Act does not explicitly provide for payment
of attorney's fees to the prevailing party, but, under § 2202, does
award "[f]urther necessary or proper relief based on a declaratory
judgment." We have interpreted this provision to authorize
attorney's fees in a diversity action, such as here, where
applicable state law would otherwise allow them. Mercantile Nat'l
Bank v. Bradford Trust Co., 850 F.2d 215, 218 (5th Cir. 1988).
Section 37.009 of the Texas Civil Practice and Remedies Code
provides that in a declaratory judgment action, the court "may
award costs and reasonable and necessary attorneys' fees as are
of insurance coverage, but rather quite simply the liability of the
adult for sexually molesting the child. The issues of coverage and
liability are separate and distinct. See Hargis v. Maryland Am.
Gen. Ins. Co., 567 S.W.2d 923, 927 (Tex. Ct. App. 1978) (holding
that judgments of liability are not binding on insurer in
determining question of coverage).
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equitable and just." TEX. CIV. PRAC. & REM. CODE ANN. § 37.009 (West
19___). An award under § 37.009 lies within the sound discretion
of the trial court and will not be overturned absent a clear
showing that the decision was arbitrary or unreasonable. Oake v.
Collin Co., 692 S.W.2d 454, 455 (Tex. 1985).
The district court awarded State Farm attorneys' fees after
properly considering the factors and following the guidelines set
out in Johnson v. Georgia Highway Express, 488 F.2d 714, 717 (5th
Cir. 1974). For this reason, we hold that the district court's
award of attorneys' fees and expenses to State Farm in this case
was appropriate and reasonable.3
III
For the foregoing reasons, the judgment of the district court
is
A F F I R M E D.
3
In fact, James and Tonya Franklin do not contend that the
district court's award was arbitrary or unreasonable, but only
argue, however incorrectly, that § 37.009 of the Texas Civil
Practice and Remedies Code is a procedural, rather than a
substantive, provision of Texas law and as such has no application
in a federal diversity action. But see Gulf Union Ind., Inc. v.
Formation Sec., Inc., 842 F.2d 762, 766 (5th Cir. 1988) (holding
that award of attorney's fees is matter of substantive Texas law);
Shelak v. White Motor Co., 636 F.2d 1069, 1072 (5th Cir. 1981)
(characterizing issue of awarding attorney's fees under Texas law
as substantive).
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