Title: Northern Security Insurance Co. v. Perron

State: vermont

Issuer: Vermont Supreme Court

Document:

Northern Security Insurance Co. v. Perron  (99-109); 172 Vt. 204; 777 A.2d 151

[Filed 4-May-2001]

       NOTICE:  This opinion is subject to motions for reargument under
  V.R.A.P. 40 as well as formal revision  before publication in the Vermont
  Reports.  Readers are requested to notify the Reporter of Decisions, 
  Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
  any errors in order that  corrections may be made before this opinion goes
  to press.

                                 No. 99-109

Northern Security Insurance Co.	                 Supreme Court

                                                 On Appeal from
     v.	                                         Washington Superior Court

Rose, Steven & Kyle Perron, Susan, Gregory, 
Timothy & Lindsay Dube, Jesse Durenleau, 
Susan Durenleau Stanhope, 
Helene & Augustin Parah, Jr.	                 December Term, 1999

Matthew I. Katz, J.

       Keith Aten of Downs Rachlin & Martin, St. Johnsbury, for
  Plaintiff-Appellee.

       Christina Reiss, R. Jeffrey Behm and Michael Drescher of Sheehey
  Furlong Rendall & Behm, P.C.,  Burlington, for Defendants-Appellants Dube.

       Martin A. Maley and Kathleen A. Yarnell of Kissane Associates, St.
  Albans, for Defendants-Appellants Stanhope, Durenleau and Parah.

PRESENT:  Amestoy, C.J., Morse, Johnson, Skoglund, JJ., and Jenkins,
          Supr. J., Specially Assigned

       SKOGLUND, J.  In this declaratory judgment action, the Washington
  Superior Court  granted summary judgement in favor of Northern Security
  Insurance Company (Northern Security),   holding that Northern Security had
  no duty to defend or indemnify Rose, Steven, and Kyle Perron  against
  claims brought by the other named defendants.  The claims in the underlying
  action alleged  that Kyle Perron, son of Rose and Steven Perron, sexually,
  physically and emotionally abused  Timothy and Lindsay Dube (son and
  daughter of Susan and Gregory Dube), Jesse Durenleau (son 

 

  of Susan Durenleau Stanhope), and Augustin Parah, Jr., son of Helene Parah. 
  We affirm in part,  reverse in part, and remand.

       For purposes of this appeal, the relevant facts are not in dispute. 
  Between 1984 and 1995,  Rose Perron ran a day care business from her house. 
  In May 1991, Susan and Gregory Dube entered  into a contract with Rose
  pursuant to which, in exchange for compensation, Rose agreed to provide 
  day-care services for the Dubes' children, Timothy, then three years old,
  and Lindsay, then ten  months old.  The Perrons' son, Kyle (D.O.B.
  7/21/83), was seven years old at the time.

       In 1996, Susan, Gregory, Timothy, and Lindsay Dube filed suit in
  Franklin Superior Court  against Rose, Steven, and Kyle Perron, alleging: 
  negligent supervision of Kyle against Rose and  Steven; liability under 15
  V.S.A. § 901 (parents' liability for damages); intentional infliction of 
  emotional distress (IIED) against Rose and Steven; IIED against Kyle; and
  breach of contract against  Rose, all based on alleged abuse of Timothy and
  Lindsay by Kyle while in the Perron's day care.

       Prior to May 1995, Jesse Durenleau and Augustin Parah, Jr. were, on
  several occasions,  invited to play at the Perrons' house.  In 1996, Susan
  Durenleau Stanhope and Jesse Durenleau filed  suit in Franklin Superior
  Court against Rose, Steven, and Kyle Perron, based on Kyle's alleged 
  sexual assault and abuse of Jesse.  The Durenleaus' (FN1) complaint
  presented counts of negligent  supervision against Rose and Steven; sexual
  assault and false imprisonment against Kyle; IIED  against Kyle; and
  negligence against Kyle.  In 1997, Helene Parah and Augustin Parah, Jr.
  filed suit  in Franklin Superior Court against Rose, Steven, and Kyle
  Perron, based on Kyle's alleged sexual  assault and abuse of Augustin. 
  Their complaint presented the same four counts as the Durenleaus' 

 

  complaint, except that the named victim is Augustin Parah.

       Northern Security, the Perrons' homeowner's insurance carrier, filed a
  declaratory judgment  action in Washington Superior Court,(FN2) naming all
  of the above-mentioned parties as defendants,  and asking for a ruling that
  the Perrons' insurance policy does not provide coverage for any of the 
  allegations.  Northern Security raised five defenses to coverage applicable
  to all three complaints:   (1) none of the counts allege an "occurrence,"
  and only occurrences are covered under the policy; (2)  the underlying
  lawsuits allege injuries "expected or intended" by the insureds, and
  injuries that are  "expected or intended" by the insured are not covered
  under the policy; (3) Steven and Rose  breached the terms of the insurance
  contract by misrepresenting a material fact and making a false  statement
  in the policy application, and thus the policy is unenforceable; (4) Rose
  breached the  insurance contract by failing to timely notify Northern
  Security of the conduct alleged in the  underlying complaints, and
  therefore the policy is unenforceable; and (5) coverage for the underlying 
  complaints would violate public policy, as the injuries were based on
  Kyle's intentional acts, and it is  against public policy to provide
  insurance coverage for an insured's own intentional conduct.   Further,
  Northern Security raised two defenses to coverage applicable solely to the
  Dubes' complaint:  (1) the allegations fall within the policy's
  business-pursuits exclusion; and (2) the complaint alleges  liability
  assumed by the Perrons under a contract, which is excluded from coverage
  under the policy. 
 
       Northern Security moved for partial summary judgment against the Dubes
  with regard to its  defense concerning the business-pursuits exclusion. 
  The Dubes filed an opposition and a cross-

 

  motion for summary judgment as to Northern Security's six remaining
  defenses.  The Parahs and  Durenleaus each filed a motion for summary
  judgment as to all of Northern Security's defenses  except those applicable
  solely to the Dubes.

       The court found in favor of Northern Security on summary judgment,
  concluding that  Northern Security had no duty to defend or indemnify the
  Perrons against any of the allegations  because the complaints did not
  allege an "occurrence" under the policy.  In deciding the issue, the  
  court held that the inferred-intent rule-under which intent to harm is
  implied in cases involving  sexual abuse of a minor-applied.  Therefore,
  the court concluded, because injuries that are expected  or intended cannot
  be the result of an "occurrence" as defined in the policy, and because all
  of the  claimed injuries stemmed from Kyle's alleged sexual abuse for which
  intent to harm would be  inferred, there was no coverage under the policy
  for any of the insureds.  The court further held that  the claims of false
  imprisonment and assault were excluded by policy language excluding
  coverage  for personal injury "caused by a violation of a penal law
  committed by an insured."  Finally, with  regard to the Dubes' complaint,
  the court concluded that, because both Dube children were at the  Perrons'
  home for day care purposes, and because day care is a business pursuit, the
  policy's  business-pursuits exclusion applied, and, for that independent
  reason, there was no coverage for any  of the allegations in the Dubes'
  complaint.  This appeal followed.

       In reviewing a grant or denial of summary judgment, we apply the same
  standard as the trial  court.  "Summary judgment is appropriate where there
  is no genuine issue of material fact and the  moving party is entitled to
  judgment as a matter of law, after giving the benefit of all reasonable 
  doubts and inferences to the nonmoving party."  City of Burlington v.
  National Union Fire Ins. Co.,  163 Vt. 124, 127,