Friday, June 18, 2010
Supreme Court Rules Against Insurer in Child Molestation Case
Intentional Acts Exclusion Held Not to Preclude Coverage of Negligence Claim Against Homeowner Who Is Perpetrator’s Mother
By KENNETH OFGANG, Staff Writer
A homeowner accused of negligently failing to supervise her adult son, thus enabling him to repeatedly molest a child at the mother’s home, may be entitled to coverage under her insurance policy, the California Supreme Court ruled yesterday.
In a unanimous decision, responding to a question certified by the Ninth U.S. Circuit Court of Appeals, the high court said that because the mother and the son were separate insureds, the claim against the mother might be covered, even though the “intentional acts” exclusion clearly precluded coverage for the claim against the son.
The underlying suit was brought in superior court in 2003. Scott Minkler alleged that his Little League coach, David Schwartz, molested him over a period of several years, beginning in 1987. He accused Betty Schwartz of negligent supervision, claiming she knew her son was molesting Minkler but did nothing to stop him.
The Schwartzes tendered their defense to Safeco Insurance Company of America under a series of policies naming Betty Schwartz as the named insured, with her son as an additional insured.
The policies included a common severability clause, stating:
“This insurance applies separately to each insured. This condition will not increase our limit of liability for any one occurrence.”
Safeco refused to defend either of the Schwartzes, citing the intentional acts exclusion. After Minkler obtained a default judgment against Betty Schwartz for more than $5 million, she entered a settlement with Minkler and assigned her claims against Safeco to Minkler.
Minkler then sued Safeco in the U.S. District Court for the Central District of California, claiming diversity jurisdiction. Minkler contended the severability-of-interests clause excepted Betty Schwartz’s coverage from the exclusion either expressly or because the policy was ambiguous.
The district judge dismissed the action, but Minkler appealed, leading the Ninth Circuit to certify the following question to the state high court:
“Where a contract of liability insurance covering multiple insureds contains a severability-of-interests clause in the ‘Conditions’ section of the policy, does an exclusion barring coverage for injuries arising out of the intentional acts of ‘an insured’ bar coverage for claims that one insured negligently failed to prevent the intentional acts of another insured?”
The state Supreme Court restated the question as: “Where a contract of liability insurance covering multiple insureds contains a severability clause, does an exclusion barring coverage for injuries arising out of the intentional acts of ‘an insured’ bar coverage for claims that one insured negligently failed to prevent the intentional acts of another insured?” and answered in the negative.
Justice Marvin Baxter, writing for the high court, said the policy language was ambiguous and had to be interpreted in line with the reasonable expectations of the insureds. He noted that the insurer “could easily have removed any uncertainty and made explicit that the severability clause had only the limited meaning Safeco now asserts”—that the severability clause refers only to the policy’s liability limits.
The justice wrote:
“We conclude that, in light of the severability clause, Betty would reasonably have expected Safeco’s policies, whose general purpose was to provide coverage for each insured’s ‘legal[ ] liab[ility]’ for ‘injury or ...damage’ to others, to cover her separately for her independent acts or omissions causing such injury or damage, so long as her conduct did not fall within the policies’ intentional acts exclusion, even if the acts of another insured contributing to the same injury or damage were intentional.”
Betty Schwartz, he elaborated, could not reasonably have been understood to have agreed to a narrowing of her own coverage based on her allowing her son to live with her, and thus become an additional insured on her policy.
The case was argued in the Supreme Court by Jeffrey Isaac Ehrlich of The Ehrlich Law Firm in Claremont for the plaintiff and Christina J. Imre of Sedgwick, Detert, Moran & Arnold in Los Angeles for the defendant.
The case is Minkler v. Safeco Insurance Company of America, 10 S.O.S. 3248.
Copyright 2010, Metropolitan News Company