Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-alnd-2_13-cv-00378/USCOURTS-alnd-2_13-cv-00378-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1441 Petition for Removal- Insurance Contract

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ALABAMA

SOUTHERN DIVISION

D.B.C., as mother and next friend )

of M.A.M., )

)

Plaintiff, )

)

vs. ) 2:13-CV-00377-LSC

)

JEFFREY G. PIERSON, et al., )

)

Defendants. )

T.A.H., as mother and next friend )

of S.L.H., )

)

Plaintiff, )

)

vs. ) 2:13-CV-00378-LSC

)

JEFFREY G. PIERSON, et al., )

)

Defendants. )

MEMORANDUM OF OPINION

Before the Court is Defendant State Farm Fire & Casualty Company’s(“State

Farm”) motion for summary judgment on all claims against it in these two

consolidated cases. (Doc. 21 in 13-377; Doc. 22 in 13-378.) Plaintiffs T.A.H. and

S.L.H., asrepresentatives of their daughters, who were minors at the time of the suit

(collectively, “Plaintiffs”),brought this action to compel State Farm topaystatecourt

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FILED

 2014 May-22 AM 11:55

U.S. DISTRICT COURT

N.D. OF ALABAMA

Case 2:13-cv-00378-LSC Document 33 Filed 05/22/14 Page 1 of 16
judgments that Plaintiffs previously obtained against Anita Pierson, Jeffrey (“Jeff”)

Pierson and BSM Publication (collectively, “the Piersons”). For the reasons stated

below, summary judgment is due to be GRANTED.

I. Factual Background

Jeff Pierson owned and operated BSM Publication, Inc., which ostensibly

operated as a modeling agency. Jeff Pierson was the photographer. Anita Pierson

worked with the clothing and makeup of the models, but was not an employee or

owner of BSM. Jeff and Anita Pierson had a homeowners’ insurance policy with State

Farm during the relevant period. In addition, “Jeff Pierson d/b/a Beautiful Super

Models” wasthe named insured on a businessinsurance policy issued by State Farm.

Both Plaintiffs’ daughters became clients of BSM, which photographed

Plaintiffs’ daughters separately in several sessions between 2003 and 2005. The

clothing worn by Plaintiffs’ daughters became skimpier asthe sessions continued, and

the poses in which they were placed became more provocative. Plaintiffs’ state court

suits alleged that the Piersons engaged in negligent and wanton conduct by 1

photographing and publishing on the Internet sexually explicit images of Plaintiffs’

daughters.

Plaintiffs also sued a company named Webe Web and two people associated with it, but 1

none of those entities are involved in the present suit.

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Jeff Pierson was also charged with violating federal child pornography statutes.

See 18 U.S.C. §§ 2252A(b)(1); 2252A(a)(1). Pierson pled guilty to these charges and

wassentenced to prison. In his plea, Pierson admitted to knowingly distributing child

pornography and to conspiring to do so. Plaintiffs’ lawsuits were stayed during the

pendency of the criminal proceedings. In 2012, both Plaintiffs filed for summary

judgment and obtained significant damage awards in their state-court suits.

In addition to humiliation and other reputational damage, Plaintiffs’ daughters

were diagnosed with post-traumatic stress disorder, anxiety, and depression; the

psychologist who made these diagnoses did not note any physical injuries. One child,

S.L.H., complained of headaches, nausea, and lack ofsleep,while the other, M.A.M.,

complained of throwing upand cutting herself. The summary judgments issued by the

state court in Plaintiffs’ suits includedlanguage stating that the minors were physically

and mentally injured by the Piersons.

The two insurance policies at issue here had several terms that will be important

to the resolution of this case. The basic liability provision of the business insurance

policy states that it applies “to bodily injury or property damage caused by an

occurrence . . . .” (Doc. 1-4 at 25.) The policy defines an occurrence as “an accident,

including continuous or repeated exposure to substantially the same general harmful

conditions which result(s) in bodily injury or property damage.” (Id. at 37.) No

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property damage has been alleged here, and the policy defines bodily injury as

“physical injury,sickness, or disease to a person, including required care . . . .” (Id. at

48.) The definition goes on to state that bodily injury does not include “emotional

distress, mental anguish, humiliation, mental distress, mental injury, or any similar

injury unlessit arises out of actual physical injury to some person.” (Id.) The business

policy also contains an exclusion that states that coverage does not apply to bodily

injury or property damages“expected or intended from the standpoint ofthe insured”

or to “any person or property which is the result of willful and malicious acts of the

insured.” (Id. at 21.)

The Piersons’ homeowners’ policy contained similar definitions of

“occurrence” and “bodily injury” found in the business policy. (Doc. 1-3 at 11-12.) 2

It also contained a similar exclusion for injury or damage “which is either expected or

intended by the insured” or “which is the result of willful and malicious acts of the

insured.” (Id. at 12.) The homeowners’ policy also included an additional exclusion

stating that the policy does “not cover loss arising out of business pursuits . . . .” (Id.

at 15.)Both policiesalso containedprovisionsthat required the insuredsto notify State

Though the format of the two policies is not identical, the wording is similar enough to

2

be treated the same by the Court. For example, the definition of occurrence in the homeowners’

policy is “an accident, including exposure to conditions, which results in a) bodily injury or b)

property damage.” (Doc. 1-3 at 12.)

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Farm of an occurrence within a reasonable time. The underlying events occurred

between 2003 and 2005, but the Piersonsdid not notify State Farm until after Plaintiffs

sued them in 2007.

II. Standard of Review

Summary judgment is proper “if the movant shows that there is no genuine

dispute as to any material fact and the movant is entitled to judgment as a matter of

law.” Fed. R. Civ. P. 56(a). The party moving for summary judgment “always bears

the initial responsibility of informing the district court of the basis for its motion, and

identifying those portions of[the evidence]which it believes demonstrate the absence

of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

The movant can meet this burden by presenting evidence showing that there is no

genuine dispute of material fact, or by showing that the nonmoving party hasfailed to

present evidence in support of some element of its case on which it bearsthe ultimate

burden of proof. Celotex, 477 U.S. at 322-23. In evaluating the arguments of the

movant, the court must view the evidence in the light most favorable to the nonmoving

party. Mize v. Jefferson City Bd. of Educ., 93 F.3d 739, 742 (11th Cir. 1996).

Once the moving party hasmet his burden,Rule 56(e)“requiresthe nonmoving

party to go beyond the pleadings and by her own affidavits, or by the ‘depositions,

answersto interrogatories, and admissions on file,’ designate ‘specific facts showing

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that there is a genuine issue for trial.’” Celotex, 477 U.S. at 324 (quoting Fed. R. Civ.

P. 56(e)). “Afactual dispute is genuine only if a ‘reasonable jury could return a verdict

for the nonmoving party.’” Info. Sys. & Networks Corp. v. City of Atlanta, 281 F.3d

1220, 1224 (11th Cir. 2002) (quoting United States v. Four Parcels of Real Property, 941

F.2d 1428, 1437 (11th Cir. 1991)).

III. Discussion

State Farm’s duties under the policy include the duty to defend the Piersons

against covered actions and to indemnify them against judgments that proceed from

those actions. Because the state-court proceeding has already ended, any issue

surrounding the duty to defend is moot, and the only issue is whether State Farm must

indemnify the Piersons by paying the judgment. See Ajdarodini v. State Auto Mut. Ins.

Co., 628 So. 2d 312, 313 (Ala. 1993). 

State Farm is entitled to summary judgment if it can show that no reasonable

jury could find that the insurance policies at issue provided coverage for the Piersons’

photography of Plaintiffs daughters and the distribution thereof. Inorder for coverage

to exist under either policy, the Piersons’ actions must constitute an occurrence. An

occurrence is defined as “an accident, including continuous or repeated exposure to

substantially the same general harmful conditions which result(s) in bodily injury or

property damage.” (Doc. 1-4 at 37.) If there was no occurrence, coverage does not

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exist. In addition, even if there was an occurrence, coverage cannot exist if an

exclusion in the policy applies, or if the Piersons’ failed to comply with the notice

provisions.

A. There was no occurrence under the policy.

Thepolicies’ definitionof occurrence beginsby requiring anaccident.Theword

accident is undefined in the policy. The Alabama Supreme Court, however, has

defined accident in the context of insurance policies as “[a]n unintended and

unforeseen injurious occurrence; something that does not occur in the usual course of

events or that could be reasonably anticipated.” St. Paul Fire & Marine Ins. Co. v.

Christiansen Marine, Inc, 893 So. 2d 1124, 1137 (Ala. 2004) (quoting Black’s Law

Dictionary 15 (7th ed. 1999)). Where the insured “may have made a mistake of fact

and/or an error in judgment, but it all times acted in a deliberate and purposeful

manner,” no accident has occurred. Hartford Cas. Ins. Co. v. Merchants & Farmers

Bank, 928 So. 2d 1006, 1013 (Ala. 2005)(quoting Mindis Metals, Inc. v. Transportation

Ins. Co., 209 F.3d 1296, 1301 (11th Cir. 2000).

Inthe present case,the Piersons“acted in a deliberate and purposeful manner”

in photographing Plaintiffs’ daughters. Hartford, 928 So. 2d at 1013. They made a

conscious decision, memorialized in a contract no less, to set up photo shoots and

distribute the resulting photographs. In addition, Jeffrey Pierson pleaded guilty to

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violating a statute that included as an element his knowledge that the photographs

were pornographic. Nonetheless, even if the Piersons “may have made a mistake” as

to whether the photographs were pornographic, every action they took was done

intentionally. Id. Plaintiffs present no evidence by which a reasonable jury could find

the Piersons’ actions to be anything but deliberate. Therefore, the taking and

distribution of the photographs cannot be considered an accident under Alabama law.

The policies’ definition of occurrence, however, goes on after the word

accident, “including continuous or repeated exposure” to a harmful condition.

Plaintiffs argue that their daughters’ numerous photographs by the Piersons

constituted repeated exposure to such a condition. Alabama law counsels for a broad

interpretation of this prong of the definition of occurrence. See United States Fid. &

Guar. Co. v. Bonitz InsulationCo. of Ala., 424 So. 2d 569, 573 (Ala. 1982)(holding that

a roof leak caused “continuous or repeated exposure to conditions”). The policy is at

least ambiguous asto whether the continuous or related exposure must be accidental,

or whether it creates a category of occurrence outside of accidents. Such ambiguities

must be resolved in favor of the insured. Twin City Fire Ins. Co. v. Alfa Mut. Ins. Co.,

817 So. 2d 687, 692 (Ala. 2001). Therefore, Plaintiff has raised a jury question as to

whether the taking of explicit photos and posting them on the Internet qualifies as

repeated or continuous exposure to a dangerous condition.

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Inorder for the Piersons’ actionsto constitute anoccurrence,however, another

element of the definition must also be met. The exposure to a dangerous condition

must cause bodily injury. “Bodily injury” is defined in the policy as “physical, injury,

sickness, or disease to a person,” and the definition “does not include emotional

distress, mental anguish, humiliation, mental distress, mental injury, or any similar

injury unlessit arises out of actual physical injury to some person.” (Doc. 1-4 at 25; see

also Doc. 1-3 at 11-12.) It is undisputed that neither child experienced bodily injury

during the photography sessions. Although Plaintiffs claim that their daughters

suffered headaches, nausea, and lack of sleep as a result of the taking and distribution

ofthe pictures,their complaintsin state court did not specifically seekdamages arising

“out of actual physical injury to some person.” (Doc. 1-4 at 25.) Rather, Plaintiffs

listed several categoriesof damagesincluding “extreme embarrassment and emotional

trauma,” “extreme emotional distress and mental anguish,” and past and future

treatment expensesfor these problems. (Doc. 21-13 at 40; Doc. 21-9 at 21); see Gunnin

v. State Farm & Cas. Co., 508 F. Supp. 2d 998, 1002-1003 (M.D. Ala. 2007) (finding

that the complaint did not allege bodily injury in similar circumstances).

Despite the fact that the complaints did not specifically allege physical injury,

the judgments entered by the trial courts stated that Plaintiffs’ daughters had suffered

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both mental and physical injury. (Doc. 1-1 in 13-377 at 18-19; Doc. 1-1 in 13-378 at 12- 3

13.) The state courts thusfound that physical injuries existed, but those courts made

no rulings on whether such injuries arose out of actual physical injury to some person.

Plaintiffs’ daughters’ insomnia, nausea, headaches, and self-mutilation were,

according to their own testimony, caused by the embarrassment and humiliation they

felt as a result of the distribution of the pictures and the reaction of their classmates.

Thus the mental injury caused the physical injury, rather than the reverse. 

There is no indication in the policy definition of bodily injury that it covers

physical injuriesthat arise out of mental injuries,without there first being some actual

physical injury. The Alabama Supreme Court has not addressed whether the bodily

injury policy term at issue covers physical injury or illness that arises out of mental

injury. Several other courts, however, have interpreted the identical language at issue

in this case and found that coverage does not exist where the physical injury was

caused by a mental injury. See, e.g., Geraci v. Conte, 2000 WL 1739294 at *6 (8th Ct.

App. Ohio, 2000); Pratchenko v. Fuller, 1997 WL 426968 at *4 (Wis. Ct. App. 1997);

 State Farm could only be liable for the portion of the damages covered by the policy, 3

which does not include pure mental or reputational damages. See American States Ins. Co. v.

Cooper, 518 So. 2d 708, 710 (Ala. 1987) (finding no duty to indemnify for damages caused by

uncovered intentional misrepresentations, even where such duty existed regarding covered

negligent misrepresentations). Because the Court finds no coverage in this case, it need not

attempt to parse the damages.

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Nationwide Mut. Ins. Co. v. Pasiak, 2012 WL 310772 at *8 (Conn. Super. 2012). All of

the claimed bodily illnesses and injuries in this care are physical manifestations of

emotional distress. See State Farm Mut. Auto. Ins. Co. v. D.L.B. ex rel. Brake, 881

N.E.2d665,666 (Ind. 2008). Because the physical manifestationsof emotional distress

are not bodily injuriesunder the policies,Plaintiffshave presented no evidence that the

exposure caused bodily injury. Therefore, no occurrence happened under the policy,

and summary judgment for the Defendant in this case is proper.

B. Coverage is barred by the policy exclusions.

This conclusion is bolstered by examining the policy exclusions. The policies

exclude both injuriesthat are “either expected or intended by the insured” and those

that are “the result of willful and malicious acts of the insured.” (Doc. 1-3 at 12; Doc.

1-4 at 21.) Under Alabama law, State Farm bears the burden of demonstrating that

these exclusions apply. Acceptance Ins. Co. v. Brown, 832 So. 2d 1, 12 (Ala. 2001). The

exclusion for injuries that are “expected or intended by the insured” is normally

interpreted on a subjective basis, with the Court examining whether the insured has

“the specific intent to cause bodily injury to another.” Alabama Farm Bureau Mut.

Cas. Ins. Co. v. Dyer, 454 So. 2d 921, 925 (Ala. 1984). The Piersons have testified that

they saw nothing wrong with the photos,which might constitute substantial evidence

that they lacked the subjective intent to harm Plaintiffs’ daughters. However, the

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Alabama Supreme Court hasrejected this subjective standard in cases ofsexual abuse

of minors, choosing instead to infer the intent of harm from the act of sexual abuse.

State Farm Fire and Cas. Co. v. Davis, 612 So. 2d 458, 464 (Ala. 1993).

No Alabama court interpreting the “expected or intended” exclusion has

determinedwhether non-physical sexual exploitation should be subjectto the inferred

intent rule. The Davis Court, however, based its adoption of this rule, at least in part,

on the egregious and outrageous nature of the criminal acts committed by the insured.

Id. at 465. For this Court at least, the production and distribution of child pornography 

meets a level of outrage that should allow an inference of intent to harm the child. Jeff

Pierson’s guilty plea meant that he admitted knowing that the pictures he produced

and distributed were pornographic in nature. 18 U.S.C. § 2252A. 

The Davis Court also examined the approaches taken by other states in

interpreting insurance policies’ intentional act exclusions in the context of sexual

abuse of minors. 612 So. 2d at 463 (noting that inferred intent represented “the

majority rule”). Though perfectly analogous cases are rare, similar recourse to the

decisions of other states can be helpful in this case. At least two states have directly

ruled that the intent to harm required by exclusions in insurance policies can be

inferred in cases of non-physical sexual exploitation of minors. TBH ex rel Howard v.

Meyer, 716 A.2d 31, 33-34 (Vt. 1998); Amer. Econ. Ins. Co. v. Estate of Wilker, 977 P.2d

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677 (Wash. Ct. App. 1999); see also State v. Burda, 2009 WL 1181349 (Tenn. Crim.

App. May 4, 2009) (discussing TBH in the course of applying enhanced sentence to

crime ofnon-physical sexual exploitation). TheSupreme Court ofVermont explained

4

its ruling persuasively:

“[b]ecause of our enhanced concern for the well-being of Vermont’s

children, in determining the applicability of the inferred intent rule, we

did not and will not render a cramped definition of sexually abusive acts

so as to include only those acts which involve physical sexual contact

with a minor victim.”

TBH, 716 A.2d at 34 (citing, inter alia, Black’s Law Dictionary, 217 (5th ed. 1979)

(defining “child abuse” as “[a]ny form of cruelty to a child’s physical, moral, or

mental well-being”)). Like those who engage in physical sexual abuse, child

pornographers should not be allowed to subsidize such conduct “at the ultimate

expense of other insureds . . . .” Horace Mann Ins. Co. v. Fore, 785 F. Supp. 947, 956

(M.D. Ala. 1992).Thus, following the inferred intent rule, the injuries to Plaintiffs’

daughters were expected and intended by the insured, and are thus excluded from

coverage by the policy.

Finally, the conclusion that coverage does not exist is further strengthened by

the fact that the “willful and malicious acts” exclusion also applies to relieve State

 In addition, Nevada has relied in part on the inferred intent rule to exclude coverage for 4

parents’ failure to prevent sexual abuse by their adult child, where there was no allegation of

physical abuse by the parent. Fire Ins. Exch. v. Cornell, 90 P.3d 978 (Nev. 2004).

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Farm of the duty to indemnify in this case. Unlike the “intended acts” exclusion, an

objective standard should be used to evaluate whether the alleged acts are willful and

malicious. See Davis, 612 So. 2d at 465 (noting that, in addition to the inferred intent

decision described above, coverage would also be precluded under “the objective

standard” ofthe willful and maliciousactsexclusion). Under this standard,the insured

need not intendthe injury ifthe acts complained of are willful and malicious. McCauley

v. Estes, 726 So. 2d 719, 722 (Ala. Civ. App. 1998). In McCauley, the Court of Appeals

upheld summary judgment for the insurer on this exclusion,where the insuredsecretly

videotaped a woman in the restroom of his home. Id. at 721-22. In doing so, it relied

in part upon a definition of willful borrowed (via the Louisiana Court of Appeal)from

William Prosser’s Law of Torts, describing willful conduct as when the actor “has

intentionally done an act of unreasonable character in reckless disregard of the risk

known to him or so obviousthat hemust be taken to have been aware of it, and so great

as to make it highly probable that harm would follow.” Id. at 722 (citing Jeansonne v.

Detillier, 656 So. 2d 689, 692 (La. App. 1994)). 

As noted above, all of the Piersons’ acts in taking and distributing the pictures

were intentional. From an objective standpoint, they were clearly unreasonable in

character and done at great and obvious risk to Plaintiffs’ daughters. Even if the

Piersons did not intend to harm the Plaintiffs, and whether or not they understood the

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consequences of their actions, they acted with total indifference toward the impact of

their illicit business pursuits on the young girls involved. Under Alabama law, that

meansthey acted willfully and maliciously. McCauley, 726 So. 2d at 722; see also State

Farm Fire & Cas. Co. v. Burkhardt, 96 F. Supp. 2d 1343, 1347 (M.D. Ala. 2000)

(applying Alabama law to enforce willful and malicious acts exclusion in sexual

misconduct case). Because the policy excludessuch acts, no coverage exists and State

Farm cannot be liable to indemnify the Piersonsin this case. Thus,summary judgment

is due to be granted.

IV. Conclusion

No physical injury occurred under the policy definition. Therefore, the

complained of actions by the insureds did not constitute an occurrence. Without an

occurrence,no coverage exists. Furthermore, the exclusionsfor expectedandintended

injuries and for willful and malicious actsserve to bar State Farm’sliability in this case.

Because no reasonable jury could find that the acts complained of are covered by the

policy, summary judgment is due to be granted A separate order will be entered.

Done this 22 day of May 2014. nd

 

L. SCOTT COOGLER

UNITED STATES DISTRICT JUDGE

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174310

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