Title: Co-operative Insurance Companies v. Woodward

State: vermont

Issuer: Vermont Supreme Court

Document:

Co-operative Insurance Companies
v. Denise Woodward, James Bennett, Individually, and as Administrator for the
Estate of Brooke Bennett (2011-158)
 
2012 VT 22
 
[Filed 30-Mar-2012]
 
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. 
 
 
2012 VT 22 
 
No. 2011-158
 
Co-operative Insurance Companies
Supreme Court
 
 
 
On Appeal from
     v.
Superior Court, Orange Unit,
 
Civil Division
 
 
Denise Woodward, James Bennett,
  Individually, and as Administrator for the Estate of Brooke Bennett
October Term, 2011
 
 
 
 
Harold
  E. Eaton, Jr., J.
 
Robin Ober Cooley of Pierson Wadhams Quinn Yates & Coffrin,
Burlington, for 
  Plaintiff-Appellee.
 
Paul J. Perkins of Plante &
Hanley, P.C., White River Junction, for Defendant-Appellant
  James Bennett.
 
 
PRESENT:  Reiber, C.J.,
Dooley, Johnson, Skoglund and Burgess, JJ.
 
 
¶ 1.            
REIBER, C.J.   James Bennett, the father of Brooke
Bennett and the administrator of her estate, appeals the trial court's
declaration of no coverage for the claims made in the lawsuit filed against
homeowner Denise Woodward for negligent supervision and damages arising out of
the abduction, assault, and death of his daughter, Brooke.  Homeowner was
formerly married to Brooke's uncle, Michael Jacques, who is alleged to have
kidnapped, sexually assaulted, and murdered Brooke.  Homeowner's insurer
brought a declaratory judgment action asking the trial court to hold that its
policy does not cover these claims.  The trial court decided the case on
summary judgment, holding that the insurance policy excludes coverage and
father now appeals.  We affirm.
¶ 2.            
On June 25, 2008, uncle allegedly kidnapped, sexually assaulted, and
murdered Brooke Bennett.  Father's complaint against homeowner alleges
uncle acted "with the intention to commit violent and devious harm, personal
injury, and criminal acts to said minor child."  The complaint alleges
that uncle had a "propensity for acting in a depraved, predatory, and harmful
manner towards women" and that homeowner knew or should have known that her
husband had a history of predatory behavior towards minor children and women,
and was a threat to Brooke.  
¶ 3.            
At the time of Brooke's death, uncle was married to homeowner. 
Both uncle and homeowner were the named insureds on a
homeowners' insurance policy issued by insurer for the period August 2007 to
August 2008.  The policy's personal liability coverage provision is as
follows:
 
Coverage LPersonal Liability.  "We" pay, up to
"our" "limit", all sums for which an "insured" is liable by law because of
"bodily injury" or "property damage" caused by an "occurrence" to which this
coverage applies.  "We" will defend a suit seeking damages if the suit
resulted from "bodily injury" or "property damage" not excluded under this
coverage.
 
¶ 4.            
The policy defined "bodily injury" as "bodily harm to a person and
includes sickness, disease, or death."  The policy specifically excluded
from the definition "bodily harm, sickness, disease, or death that arises out of . . . sexual molestation of any
person."   "Occurrence" was defined as "an accident, including
repeated exposures to similar conditions, that results
in bodily injury' or property damage' during the policy period."  The
definition of "insured" included the following sentence: "Each of the above is
a separate insured', but this does not increase our' limit'."  
¶ 5.            
The policy also contained the following intentional-acts exclusion
provision that applied to personal liability coverage: 
1.      Exclusions that
Apply to Coverages L and MThis policy does not apply
to: . . . 
i.       
"bodily injury" or "property damage":
(1)   which is
expected by, directed by, or intended by an "insured";
(2)   that is the result of a criminal
act of an "insured"; or
(3)   that is the result of an
intentional and malicious act by or at the direction of an "insured".
 
¶ 6.            
The trial court granted summary judgment for insurer, concluding that
insurer owed no duty of defense or indemnification in the underlying suit in
part because the policy bars coverage for intentional acts by "an insured" that
are not "occurrences."  The court rejected father's argument that the
separate insureds, or severability, clause provides
coverage for homeowner because the complaint alleges that uncle committed
intentional acts.  
¶ 7.            
On appeal, father reiterates his argument that uncle's alleged
intentional acts do not preclude coverage for homeowner because the policy
contains a severability clause.  He first contends that there was an
"occurrence" because, under the purported severability language, father focuses
on homeowner's negligent actions exclusive of uncle's intentional ones. 
His principal argument is that the clause creates ambiguity when read together
with the intentional-acts exclusion, and he invites the Court to construe
ambiguity against the drafter-insurer and create coverage.  Insurer
contends that uncle's alleged intentional acts caused Brooke's death, there was
no "occurrence," and the intentional-acts exclusion bars coverage. 
Insurer also claims that the policy does not contain a severability clause, and that even if it does, the clause does not create
ambiguity.  
¶ 8.            
We review a grant of summary judgment de novo and apply the same
standard as the trial court.  Bradford Oil Co., Inc. v. Stonington Ins.
Co., 2011 VT 108, ¶ 5, ___ Vt. ___, ___ A.3d ___.  The trial court's
judgment will be upheld if there are no genuine issues of material fact and the
moving party is entitled to judgment as a matter of law.  Id.; see
also V.R.C.P. 56(c)(3).  Furthermore, interpretation
of an insurance policy, like other contracts, is a question of law.  N.
Sec. Ins. Co., Inc. v. Doherty, 2009 VT 27, ¶ 7,
186 Vt. 598, 987 A.2d 253.  Our review is therefore nondeferential
and plenary.  Id.
¶ 9.            
We give effect to the plain meaning of the terms of the policy.  Id. ¶ 8.  Disputed terms are to be "read according to their
plain, ordinary and popular meaning."  Id. (quotation
omitted).  If we find ambiguity, we construe the language in favor of
coverage, which promotes the "protective purpose" of effectuating the parties'
intent that the insured be, in fact, insured.  Id.  Our
guiding principle requires us to "review the language of an insurance contract
from the perspective of what a reasonably prudent person applying for insurance
would have understood it to mean."  Towns v. Vt. Mut. Ins. Co., 169 Vt. 545, 546, 726 A.2d 65, 67 (1999) (mem.).  
¶ 10.         Insurers
have a duty to defend when the claim against the insured "might be of the type
covered by the policy."  Garneau v. Curtis & Bedell, Inc., 158
Vt. 363, 366, 610 A.2d 132, 134 (1992).  In determining whether
there is a duty to defend, we compare the language of the policy to the
language of the complaint.  Id. at 366, 610 A.2d 
at 133-34.  The most expansive duty under insurance liability
policies is the insurer's duty to defend, but there is no duty to defend when
there is no possible factual or legal basis on which the insurer might be
required to indemnify.  Id. at 366, 610 A.2d  at
134.  Thus, father's claims in the complaint control the analysis.[1]
¶ 11.         "If a claim is made or a suit is brought against an insured
for damages because of bodily injury that is caused by an occurrence, there is
coverage under the policy, unless an exclusion
applies."  N. Sec. Ins. Co. v. Perron,
172 Vt. 204, 210, 777 A.2d 151, 155 (2001).  Because the definition of
"occurrence" and the intentional-acts exclusion are so interrelated, we
consider those issues collectively.  See id. at 210 n.4, 777 A.2d 
at 155 n.4 (stating that, "in this case, we believe the better approach is to
infuse the definition of occurrence' with the policy's specific exclusion of
intentional acts to determine if there is coverage under the policy").
¶ 12.         The
policy provides that an "occurrence" is "an accident, including repeated
exposures to similar conditions, that results in
bodily injury' or property damage' during the policy period."  The
policy does not define "accident," but we have previously explained that its
plain meaning is "an event that is undesigned and
unforeseen" or an "unexpected happening."  Serecky v. Nat'l Grange Mut. Ins., 2004 VT 63, ¶ 17, 177 Vt. 58, 857 A.2d 775 (quotations omitted). 
The central question in determining whether an act constitutes an "occurrence"
is whether the actor intended or expected harm to result from the alleged
intentional acts.  Id. ¶ 19.  This is typically a factual question, though "[s]ome actions . . . are so likely to result in injury that, as a matter of law, the
court will find that the injury did not result from an accident regardless of
the actor's subjective intent or expectations."  Perron,
172 at 214, 777 A.2d  at 158.  Indeed, we may
"conclusively presume intent to harm as a matter of law based on the nature and
character of the insured's alleged acts."  Id.  In such cases,
"the intent to act is the equivalent of the intent to harm."  Serecky,
2004 VT 63, ¶ 24.  We have applied
this rule in a number of different factual scenarios, including cases of an adult's
sexual abuse of a minor.  See Allstate Ins. Co. v. Vose, 2004 VT 121, ¶ 19, 177 Vt. 412, 869 A.2d 97 (collecting
cases).
¶ 13.         We
look to the underlying complaint to determine whether there was an "accident"
and therefore an "occurrence."  Id. ¶ 15.[2]
  The complaint alleges that uncle
lured Brooke to his residence "with the intention to commit violent and devious
harm, personal injury, and criminal acts."  Uncle then allegedly "drugged,
sexually assaulted, and murdered Brooke." We presume
intent to harm based on uncle's alleged actskidnapping, drugging, sexually
assaulting, and killing Brooke.  These alleged acts are inherently harmful
and so certain to cause injury that we must conclude as a matter of law that
uncle had intent to harm.  It would "fl[y] in the face of all reason,
common sense and experience" to hold otherwise.  Serecky,
2004 VT 63, ¶ 24 (quotation omitted).  Because we conclude that the harm that resulted from uncle's actions was
intended, there was no "accident" and therefore no "occurrence" as defined in
the policy.
¶ 14.        
Where an insured's tortious acts are
intentional, a policy exclusion for intentional acts
by "an insured" generally bars coverage for claims made by any insured under
the same policy.  Perron, 172 Vt. at 220, 777 A.2d  at 163. 
If the exclusion precludes coverage for certain acts by "the insured," noncoverage of one insured does not affect coverage for
claims against other insureds.  Id. at 221-22, 777 A.2d  at 163.  To illustrate, the insurance contract
in Perron contained an intentional-acts
exclusion that precluded coverage for certain acts by "the insured."  Id.
at 220, 777 A.2d  at 162-63.  We held that when an exclusion uses the article "the," "the provision applies
only to claims brought against the particular insured named in the
claim."  Id. at 220, 777 A.2d  at 162. 
Had it used "an insured," we noted in dicta, the relevant act would have been
the intentional tortfeasor's abuse, and if no
coverage was found for those actions, the other insureds
were similarly uncovered.  Id. at 221-22, 777 A.2d  at 163-64.  We stated that where a policy excludes coverage
when "an insured" commits an intentional act, the exclusion applies to "all
claims which arise from the intentional acts of any one insured, even though
the claims are stated against another insured."  Id. at 220, 777 A.2d  at 163 (noting courts have uniformly concluded the same).  We later
pointed out that there is no "meaningful difference" between the terms "an
insured" and "any insured."  Vose, 2004 VT 121, ¶ 22.  In other words, such language has
a collective effect and bars all insureds from
coverage.  Having already concluded that uncle's actions were intentional under
the terms of the policy, homeowner would also normally be barred from coverage
because the policy at issue uses the collective term "an insured."
¶ 15.        
Despite this result, father contends that the
policy contains a severability clause which would allow homeowner to be covered
since uncle, not homeowner, committed an intentional act.  There is a
division among the jurisdictions that have considered whether a severability
clause conflicts with an intentional-acts exclusion, creating ambiguity and
thus, coverage.  One  court notes that "[c]ourts
nationwide are split on the general issue whether a severability-of-interests
provision in a policy covering multiple insureds
alters the otherwise collective effect of an exclusion for the acts of an' or
any' insured."  Minkler v. Safeco Ins. Co. of Am., 232 P.3d 612, 615 (Cal. 2010). 
In Minkler, the
Supreme Court of California held that an intentional-acts exclusion barring
coverage for acts by "an insured" precluded coverage only for the intentional tortfeasor, and not the coinsured who did not commit the
acts causing injury.  Id. at 624. 
The court reasoned that a severability clause can be read to apply the policy's
coverage and exclusions individually to each insured, creating ambiguity. 
Id.  Ambiguity was resolved in favor of the insured in Minkler, whom the court concluded would have had a
reasonable expectation "that the policies would cover her so long as her own
conduct did not fall within the intentional acts exclusion."  Id.
¶ 16.         Assuming, without deciding, that the provision at issue is
a severability clause, we conclude that this clause has no effect onand
cannot overridethe intentional-acts exclusion for certain acts committed by
"an insured."  The exclusion here bars coverage for " bodily
injury' . . . (1) which is expected by, directed by, or
intended by an insured'; (2) that is the result of a criminal act of an
insured'; or (3) that is the result of an intentional and malicious act by or
at the direction of an insured.' "  Even if each insuredin this
case, uncle and homeowneris treated as having separate coverage, the
exclusionary language remains unambiguous because "an" is collective.  Father's contention that the two provisions
"simply cannot be reconciled" is therefore without merit.  A majority of
courts reach the same result.  See, e.g., SECURA
Supreme Ins. Co. v. M.S.M., 755 N.W.2d 320, 329 (Minn. Ct. App. 2008) ("Use of the
phrase any insured' in [insurer's] severability clause does not create
ambiguity when applying the exclusion."); J.G. v. Wangard,
2008 WI 99, ¶¶ 46-49, 753 N.W.2d 475 (holding severability clause did not
render "any insured" exclusion ambiguous); Mut.
of Enumclaw Ins. Co. v. Cross, 10 P.3d 440, 444-45 (Wash. Ct. App. 2000)
(holding that "an insured" exclusion was "clear and specific language [that]
prevail[ed] over a severability clause, i.e., that an
exclusion is not negated by or rendered ambiguous by a severability clause"); Johnson
v. Allstate Ins. Co., 1997 ME 3, ¶¶ 8-9, 687 A.2d 642 (1997) ("An
unambiguous exclusion is not negated by a severability clause."); see also Safeco
Ins. of Am. v. White, 2009-Ohio-3718, 913 N.E.2d 426, ¶ 71, (O'Donnell, J., concurring and dissenting) (collecting cases
with majority view).  Because exclusions for "an insured" serve to
collectively bar all insureds, and because of the
weight of decisional authority, we conclude that the clause at issue does not
create ambiguity when read in conjunction with an intentional-acts exclusion
referring to "an insured."[3]
Affirmed.
 
 
 
FOR THE COURT:
 
 
 
 
 
 
 
 
 
 
 
Chief
  Justice
 

[1]  Importantly, the complaint claims fault
against homeowner for negligent supervision of her now ex-husband, but father
does not allege injuries that are "distinct from those associated with [uncle's] . . . intentional and criminal
conduct."  Korhonen v. Allstate Ins.
Co., 2003 ME 77, ¶ 15, 827 A.2d 833. 
Public policy weighs against coverage for such damages where the parties likely
did not contemplate that the insurance policy would cover sexual abuse of
children.  See id. ¶ 14 (noting that, conversely, public
policy might not prohibit coverage for an insured whose negligence caused
injuries to child distinct from those caused by a coinsured's
sexual abuse of child).
[2] 
The parties disagree about whose alleged
actshomeowner's negligence or uncle's abusewe look to in determining
coverage.  The relevant acts are those claimed in father's complaint,
which alleges uncle's abuse and murder of Brooke.  There are no
independent injuries claimed against homeowner.  The negligence claim against
homeowner "arises from, and is dependent on, the intentional acts" of
uncle.  Id. ¶ 23.
[3] 
Because we conclude that language of this clause does not turn an unambiguous
exclusion ambiguous, and therefore that uncle's intentional acts bar homeowner
from coverage, we do not address insurer's alternative argument that coverage
is barred because homeowner "expected" Brooke's injuries to occur. 
Similarly, having concluded that coverage is barred based on the definition of
"occurrence" and the intentional-acts exclusion, we do not reach father's
argument that coverage may be found based on the definition of "bodily injury."