CHAPTER 8

• Jurisdiction: United States

CHAPTER 8

Fortuity

A. Assault and Battery and Other Intentional Act Exclusions

Insurance involves the transfer from the policyholder to the insurer the risk of possible fortuitous losses. Insurance, by definition, cannot be available for losses that the policyholder knows of, plans, intends, or is aware are substantially certain to occur. That a loss must be fortuitous to be covered under a policy of insurance arises from the basic concept that insurance covers risks, not losses that were planned, intended or anticipated by the insured. The Restatement (First) of Contracts, § 291 (1932) states:

[A] fortuitous event is an event which, so far as the parties to the contract are aware, is dependent on chance. It may be beyond the power of any human being to bring to pass; it may be within the control of third persons, provided that the fact is unknown to the parties. The thrust of the definition is that the occurrence be unplanned and unintentional in nature.

Child molestation is a special type of intentional tort when considering the applicability of an insurance policy. As you read the case below, consider the special relationship between an insured and insurer and why insurance cannot be used to protect a child molester sued by the victim.

Miller v. Allstate Ins. Co.
489 F. Supp.2d 1133 (S.D. Cal. 2007)

Alison Miller and Cecily Callan (“Plaintiffs”) brought suit against Allstate Insurance Co. for failure to defend and indemnify their grandmother as several Allstate insurance policies provided. After removal from the San Diego Superior Court, Allstate moved to dismiss under Federal Rule of Civil Procedure 12(b)(6). The court decides the matter without oral argument. See Civil Local Rule 7.1(d.1). Because the grandmother’s potential liability stemmed from her husband’s sexual assault—intentional, not accidental, conduct—the insurance company owed no duty to defend. Accordingly, the court will GRANT Allstate’s motion.

I. Factual & Procedural Background

The facts giving rise to this case are undeniably abhorrent. David Combs molested his young granddaughters repeatedly and unremittingly over the course of their childhood. Myriam Combs, their grandmother, stood by either unaware of his conduct or unwilling to stop it. The granddaughters—having repressed the memories until adulthood, and having kept quiet, even to one another, about their common suffering—courageously came forward. They sought damages for sexual assault, battery, intentional infliction of emotional distress, and false imprisonment (against David), and negligence, negligent infliction of emotional distress, and breach of fiduciary duty (against Myriam). Allstate, Myriam’s insurer, denied her tender of defense. As part of an out-of-court settlement, Myriam assigned her rights against Allstate to the Plaintiffs.

Myriam held four insurance policies with Allstate during the years of abuse: a homeowner’s policy, a landlord’s policy, an umbrella insurance policy, and an automobile policy. In November 2006, the Plaintiffs, as assignees, filed this lawsuit in San Diego Superior Court for breach of contract, breach of the covenant of good faith and fair dealing, negligent misrepresentation, and declaratory relief against Allstate. After removal, Allstate moved to dismiss the entire complaint for failure to state a claim upon which relief can be granted.

II. Legal Standard

In ruling on a motion to dismiss, the court assumes the truth of all factual allegations and construes them in the light most favorable to the plaintiff. Gompper v. VISX, Inc., 298 F.3d 893, 895 (9th Cir. 2002). The court may dismiss if it “appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Levine v. Diamanthuset, Inc., 950 F.2d 1478, 1482 (9th Cir. 1991) (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). Under California law, the underlying complaint must suggest at least a potential for coverage to state a claim. Quan v. Truck Ins. Exchange, 67 Cal. App. 4th 583, 587, 79 Cal. Rptr. 2d 134 (1998).

III. Discussion

Plaintiffs argue that Allstate’s brief is merely a summary-judgment motion labeled as a motion to dismiss. (Pls.’ Opp’n at 5.) They believe Allstate has improperly invited the court to make factual determinations and untimely interpretations of insurance policy language. But they are mistaken. In ruling on the motion to dismiss, the court must assume the horrific truth of all the allegations in the underlying complaint—yet the court always retains the authority to determine the legal question whether a complaint states a claim. See Levine, 950 F.2d at 1482. Again, under California state law, the court compares the policy language with the underlying allegations and decides whether the policy provides a potential for coverage. See Waller v. Truck Ins. Exch., 11 Cal. 4th 1, 18, 44 Cal. Rptr. 2d 370, 900 P.2d 619 (1995). Because the policy unequivocally provided no coverage for intentional conduct, the court must dismiss the complaint.

A. The policy did not cover any liability arising from sexual molestation.

Allstate contends that David’s abuse—detestable though it is—simply cannot fall under a policy that covers only “accidents.” Plaintiffs respond that dismissal without discovery would be unfair and improper. The court certainly sympathizes with the Plaintiffs’ pursuit of justice and shares their outrage; however, it agrees that Allstate never contracted to indemnify Myriam for any liability she might bear for facilitating David’s vicious depredation.

An insurance policy, like any contract, effectuates the mutual intention of the parties when they enter into it. Cal. Civ. Code § 1636 (West 2000). Thus, the court must ascertain the plain meaning of the policy language, the meaning a layperson would ordinarily attach to it. Id. § 1638; Reserve Ins. Co. v. Pisciotta, 30 Cal. 3d 800, 807, 180 Cal. Rptr. 628, 640 P.2d 764 (1982). The same principle determines whether a particular insurance policy requires a liability insurer to defend a lawsuit against the insured. Waller, 11 Cal.4th at 19, 44 Cal. Rptr. 2d 370, 900 P.2d 619. While the duty to defend is broad, it is not unlimited. Id. If the language of the policy gives rise to no possibility for coverage, the insurer owes no duty to defend. Id.

Each of Myriam’s policies provides coverage for accidents that occur in relation to, or on the premises of, her property. As the California Supreme Court has declared, however, “child molestation is always intentional.” J.C. Penney Casualty Ins. Co. v. M.K., 52 Cal.3d 1009, 1025, 278 Cal. Rptr. 64, 804 P.2d 689 (1991). Thus, if child molestation is intentional as a matter of law, it cannot be considered an “accident” as a layperson would understand that term. Myriam’s liability—although pleaded as negligence—ultimately arises out of David’s intentional acts. Thus, the court concludes that the complaint suggested no potential for coverage. Accordingly, as the court will explain in more detail, the complaint’s first, second, and fourth causes of action must be dismissed.

1. The Deluxe Homeowners Insurance Policy (No. 432872).

The relevant portion of the Combs’ homeowner’s policy states as follows:

Losses We Cover:

Subject to the terms, limitations and conditions of this policy, Allstate will pay damages which an insured person becomes legally obligated to pay because of bodily injury or property damage arising from an accident and covered by this part of the policy.

Losses We Do Not Cover:

1. We do not cover bodily injury or property resulting from:

a) An act or omission intended or expected to cause bodily injury or property damage. This exclusion applies even if the bodily injury or property damage is of a different kind or degree, or is sustained by a different person or property, than that intended or expected. . . .

(Notice of Remand [“Notice”] Pt. 2 at 17.) (emphasis added) The policy language only covers bodily injury arising from an accident. It does not cover acts intended to cause bodily injury. Child molestation is always intentional. J.C. Penney Casualty Ins. Co., 52 Cal. 3d at 1025, 278 Cal. Rptr. 64, 804 P.2d 689. Thus, there was no potential coverage under the Deluxe Homeowners Insurance Policy.

2. The Personal Umbrella Insurance (Policy No. 014346047).

The relevant portion of the Combs’ umbrella policy states as follows:

When We Pay

Allstate will pay when an insured becomes legally obligated to pay for personal injury or property damage caused by an occurrence.

(Notice at 105.) (emphasis added) An “occurrence” is “an accident or a continuous exposure to conditions” (id. at 103) (emphasis added). By clear implication, the policy does not cover intentional acts. Because child molestation is intentional—not accidental—as a matter of law, see J.C. Penney Casualty Ins. Co., 52 Cal.3d at 1025, 278 Cal. Rptr. 64, 804 P.2d 689, the policy provides no potential for coverage.

3. The Automobile Insurance (Policy No. 099136624).

The relevant portion of the Combs’ auto policy states as follows:

Allstate will pay all damages an insured person is legally obligated to pay because of:

1. Bodily injury sustained by any person, and

2. Damage to, or destruction of, property.

Under these coverages, your policy protects an Insured person from claims for accidents arising out the ownership, maintenance or use, loading or unloading of an insured auto.

Allstate will not pay for any damages an Insured person is legally obligated to pay because of:

8. bodily injury or property damage which may reasonably be expected to result from the intentional or criminal acts of an Insured person or which are in fact intended by an Insured person.

(Notice at 30 (emphasis added).) The same analysis applies.

But Plaintiffs offer an additional argument regarding the automobile policy meriting discussion. Because David abused the Plaintiffs while driving, they not only sued him for battery but also Myriam for negligently...