Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-13-15223/USCOURTS-ca9-13-15223-0/pdf.json

Parties Involved:
Interstate Fire & Casualty Company, Inc.
Appellant
Roman Catholic Church of the Diocese of Phoenix
Appellee

Document Text:

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

INTERSTATE FIRE & CASUALTY

COMPANY, INC., an Illinois

corporation,

Plaintiff-Counter-Defendant–

Appellant,

v.

ROMAN CATHOLIC CHURCH OF THE

DIOCESE OF PHOENIX, a corporation

sole, by and through Bishop Thomas

J. Olmsted, his predecessors and

successors,

Defendant-Counter-Claimant–

Appellee.

No. 12-17195

D.C. No.

2:09-cv-01405-

NVW

INTERSTATE FIRE & CASUALTY

COMPANY, INC., an Illinois

corporation,

Plaintiff-Counter-Defendant–

Appellee,

v.

ROMAN CATHOLIC CHURCH OF THE

DIOCESE OF PHOENIX, a corporation

sole, by and through Bishop Thomas

No. 12-17264

D.C. No.

2:09-cv-01405-

NVW

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2 IFC V. ROMAN CATHOLIC CHURCH

J. Olmsted, his predecessors and

successors,

Defendant-Counter-Claimant–

Appellant.

INTERSTATE FIRE & CASUALTY

COMPANY, INC., an Illinois

corporation,

Plaintiff-Counter-Defendant–

Appellant,

v.

ROMAN CATHOLIC CHURCH OF THE

DIOCESE OF PHOENIX, a corporation

sole, by and through Bishop Thomas

J. Olmsted, his predecessors and

successors,

Defendant-Counter-Claimant–

Appellee.

No. 13-15223

D.C. No.

2:09-cv-01405-

NVW

OPINION

Appeal from the United States District Court

for the District of Arizona

Neil V. Wake, District Judge, Presiding

Argued and Submitted

May 13, 2014—San Francisco, California

Filed July 30, 2014

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IFC V. ROMAN CATHOLIC CHURCH 3

Before: Dorothy W. Nelson, M. Margaret McKeown,

and Milan D. Smith, Jr., Circuit Judges.

Opinion by Judge McKeown;

Dissent by Judge D.W. Nelson

SUMMARY*

Arizona Insurance Law

The panel reversed the district court’s judgment in favor

of the Roman Catholic Church of the Diocese of Phoenix, and

vacated and remanded the district court’s grant of attorneys’

fees and taxable costs, in a diversity insurance coverage case

concerning indemnity for the alleged sexual abuse of

adolescent males by priests in the Diocese.

Following the Diocese’s settlement of four lawsuits for

alleged sexual abuse by its priests, the Diocese sought

indemnification under its insurer’s excess liability indemnity

policies. The policy excluded “liability of any Assured for

assault and battery committed by or at the direction of such

Assured . . . .” The district court construed the exclusion as

applying only to the offending priest, and concluded that the

exclusion did not foreclose coverage for the Diocese of the

sexual abuse claims.

The panel held, based on the ordinary meaning of the

exclusion and consistent with Arizona law, because the

* This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

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4 IFC V. ROMAN CATHOLIC CHURCH

exclusion precluded coverage for “any assured” the assault

and battery exclusion categorically excluded coverage for

both the insured who committed the assault and battery as

well as innocent co-insureds. The panel remanded to the

district court to determine whether the insurer was the

“successful party” under Arizona law, and if so, whether to

award attorneys’ fees.

Judge D.W. Nelson dissented because she believes that

the disputed policy provision excluded coverage only for

those individuals who committed or directed an assault or

battery, and she would affirm the district court.

COUNSEL

Steven G. Mesaros (argued), Richard H. Goldberg, and Kevin

R. Myer, Renaud Cook Drury Mesaros, Phoenix, Arizona;

Timothy J. McNamara, Onebane Law Firm, Lafayette,

Louisiana,forPlaintiff-Counter-Defendant–Appellant-CrossAppellee.

Andrew S. Jacob (argued) and Andrew B. Turk, Polsinelli

PC, Phoenix, Arizona, for Defendant-Counter-Claimant–

Appellee-Cross-Appellant.

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IFC V. ROMAN CATHOLIC CHURCH 5

OPINION

McKEOWN, Circuit Judge:

Does “any” mean “any,” or does “any” mean “any one”?

The answer to this seemingly simple question dictates the

result in this insurance coverage case, which arises from the

alleged sexual abuse of adolescent males by priests in the

Roman Catholic Church of the Diocese of Phoenix (“the

Diocese”). The excess indemnity policy provided by

Interstate Fire & Casualty Company, Inc. (“IFC”) to the

Diocese excludes “liability of any Assured for assault and

battery committed by or at the direction of such Assured

. . . .” Based on the ordinary meaning of this exclusion and

consistent with Arizona law, we conclude that “the language

‘any insured’ . . . express[es] a contractual intent to prohibit

recovery by innocent co-insureds.” Am. Family Mut. Ins. Co.

v. White, 65 P.3d 449, 457 (Ariz. Ct. App. 2003). We reverse

the district court’s judgment in favor of the Diocese, and

vacate and remand its grant of attorneys’ fees and taxable

costs.

This action follows the Diocese’s settlement of four

lawsuits for alleged sexual abuse by its priests, after which

the Diocese filed a declaratory judgment action seeking

entitlement to indemnification under IFC’s excess liability

indemnity policies. IFC’s policies typically “follow[ed]

form” with those of Lloyd’s of London, the Diocese’s

primary excess insurer. The general liability clause in

Lloyd’s of London’s insuring policy provided:

Underwriters hereby agree, subject to the

limitations, terms and conditions hereunder

mentioned, to indemnify the Assured for all

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6 IFC V. ROMAN CATHOLIC CHURCH

sums which the Assured shall be obligated to

pay by reason of the liability imposed upon

the Assured by law or assumed by the Named

Assured under contract or agreement, for

damages direct or consequential, and

expenses, all as more fully defined by the

term “ultimate net loss”, on account of

personal injuries . . . arising out of any

occurrence happening during the period of

Insurance.

The policy described the term “Assured” as including the

Diocese and “any official, trustee or employee of the

[Diocese],” working “in any parishes, schools, cemeteries,

and other agencies or directly connected organizations of the

Diocese,” and “acting within the scope of his duties as such

. . . .” The policy excluded coverage for claims that alleged

assault and battery:

THIS INSURANCE DOES NOT APPLY -

(a) to liability of any Assured for assault

and battery committed by or at the direction

of such Assured except liability for Personal

Injury or Death resulting from any act alleged

to be assault and battery for purpose of

preventing injury to persons or damage to

property[.]

On cross motions for summary judgment, the district

court in relevant part granted summary judgment in favor of

the Diocese on the assault and battery exclusion. Despite

finding IFC’s argument “plausible,” the district court

construed the exclusion as applying only to the offending

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IFC V. ROMAN CATHOLIC CHURCH 7

priest, concluding that “the best reading of the assault and

battery clause is that ‘such assured’ means ‘that insured’; i.e.,

the assured who committed or directed the assault and

battery.” The district court therefore concluded that the

exclusion did not foreclose coverage of the sexual abuse

claims.

On appeal, as before the district court, IFC contends that,

because the exclusion precludes coverage for “any

assured”—and because “such assured” refers back to “any

assured”—the assault and battery exclusion categorically

excludes coverage for both the insured who committed the

assault and battery as well as innocent co-insureds. We agree

with IFC’s reading of the exclusion.

Neither party disputes that the “Assured” under the policy

covers not only the Diocese itself but also its priests and other

employees working in the schools, parishes, agencies, and

organizations directly connected to the Diocese. The

question is the scope of the assault and battery exclusion,

which uses the term “Assured” in two places: “any Assured,”

followed by “such Assured.” Two principles guide our

analysis. In interpreting the policy under Arizona law, the

words “any” and “such” are to be given their ordinary

meaning. See Phelps Dodge Corp. v. Brown, 540 P.2d 651,

653 (Ariz. 1975). We read these words in the context of the

policy and do not rewrite its text. See id.; see, e.g., Barber v.

Old Republic Life Ins. Co., 647 P.2d 1200, 1202 (Ariz. Ct.

App. 1982) (“[T]he court must read the policy as a whole . . .

with an appropriate regard for the context of the various

component parts” and without “rewrit[ing] a policy . . . .”).

We turn first to the plain meaning of the term “such

Assured.” As relevant here, the word “such” is defined as “of

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8 IFC V. ROMAN CATHOLIC CHURCH

a kind or character about to be indicated, suggested, or

exemplified” or “having a quality already or just

specified—used to avoid repetition of a descriptive term.” 

Webster’s Third New International Dictionary 2283 (2002). 

This definition indicates that “such Assured” in the exclusion

carries the precise meaning as the assured “just specified.” 

See id.; see, e.g., Spartan Petroleum Co. v. Federated Mut.

Ins. Co., 162 F.3d 805, 809 (4th Cir. 1998) (holding that

“such” property damaged referred back to the last mentioned

“property damage” in the policy at issue). Here, the assured

“just specified” is “any Assured”—those who allegedly

committed the assault and battery as well as innocent coinsureds.

The Diocese maintains that the phrases “any Assured”

and “such Assured” should be “presumed to have different

meanings” and that IFC should have used language clearly

communicating a limitation of coverage. Yet the Diocese’s

reading can only be reached by ignoring the plain meaning of

the exclusion and jumping to the conclusion that the text is

unclear. This effort to infuse ambiguity into an otherwise

clear agreement is unavailing. As the Arizona Court of

Appeals noted in Brown v. United States Fidelity &Guaranty

Company, “when an exclusionary clause precludes recovery

to ‘any insured,’ the term is not ambiguous and clearly

encompasses all persons insured under the policy.” 977 P.2d

807, 817 (Ariz. Ct. App. 1998). Reading the policy in

context, the ordinary meaning provides that “such” refers

back to “any,” thus indicating that the exclusion applies to

“any official, trustee or employee” of the Diocese.

The Diocese’s argument also requires that we read

additional language into the text. The only assured “just

specified” in the exclusion is “any Assured.” A narrower

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IFC V. ROMAN CATHOLIC CHURCH 9

specification, such as “the assured” or “that assured,” is

nowhere to be found. See Sales v. State Farm Fire & Cas.

Co., 849 F.2d 1383, 1385 (11th Cir. 1988) (“[U]nlike the

phrase ‘the insured,’ the phrase ‘any insured’ unambiguously

expresses a contractual intent to create joint obligations and

to prohibit recovery by an innocent co-insured.”). Nor does

“any” mean “any one”; the exclusion expressly states “any

Assured.” We decline to cast aside the ordinary meaning of

these terms in favor of words that are not included in the text. 

See D.M.A.F.B. Fed. Credit Union v. Emp’rs. Mut. Liab. Ins.

Co. of Wis., 396 P.2d 20, 23 (Ariz. 1964) (en banc) (“[T]he

court will not pervert or do violence to the language used . . .

[by] expand[ing] it beyound [sic] its plain and ordinary

meaning or add[ing] something to the contract which the

parties have not put there.”).

The plain meaning of “such Assured” also comports with

Arizona law. In White, an Arizona Court of Appeals joined

a “majority” of Arizona courts in “constru[ing] the phrase

‘any insured’ in an exclusion” as “bar[ring] coverage for any

claim attributable to the excludable acts of any insured . . . .” 

65 P.3d at 456, 457; see TIG Specialty Ins. Co. v.

Pinkmonkey.com Inc., 375 F.3d 365, 372 (5th Cir. 2004)

(holding that coverage was foreclosed because a policy

exclusion “use[d] the specific term ‘such Insured’ to indicate

the same insured as previously referred to,” namely, “an

Insured”). We too conclude that “if any one of the insureds

[violates the exclusion], no other insureds can recover.” 

White, 65 P.3d at 457 (alteration in original) (internal

quotation marks omitted). Because we determine that the

assault and battery exclusion applies to innocent co-insureds,

we need not reach the remainder of the arguments raised on

appeal.

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10 IFC V. ROMAN CATHOLIC CHURCH

We vacate the award of attorneys’ fees and taxable costs

and remand to the district court to determine whether IFC is

the “successful party” under Arizona Revised Statute § 12-

341.01, and if so, whether to award attorneys’ fees. See Med.

Protective Co. v. Pang, 740 F.3d 1279, 1280 (9th Cir. 2013). 

Costs on appeal shall be taxed against the appellee.

REVERSED in part;VACATEDand REMANDED in

part.

D.W. NELSON, Senior Circuit Judge, dissenting:

Because I believe that the plain language of the policy

provision relied on by IFC excludes coverage only for those

individuals who commit or direct an assault or battery, I

would affirm the district court. I respectfully dissent.

I agree with the majority that this case turns on what

exactly the plain meaning of the phrase “such Assured” refers

back to. See Sparks v. Republic Nat. Life Ins. Co., 647 P.2d

1127, 1132 (Ariz. 1982). In my view, however, the definition

of “such” adopted and applied by the majority—“having a

quality already or just specified—used to avoid repetition of

a descriptive term[,]”—does not refer back to the class of

“any Assured[s]” “just specified.” Instead, “such” refers to

those Assureds “having a quality already or just specified.” 

Maj. Op. at 8 (emphasis added). Referring to the language of

the exclusion, I see three possible qualities that “such” can

refer to. First, the exclusion identifies “the liability of any

Assured,” so “such” may refer to those Assureds facing

liability. Second, the exclusion references “any Assured,”

meaning that “such” might refer to the entire class of those

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IFC V. ROMAN CATHOLIC CHURCH 11

covered by the policy. Finally, the exclusion references

“assault and battery committed by or at the direction of,”

which means that “such” might refer to those Assureds who

committed or directed assault and battery. Of these three

possible qualities, that which was “just specified” is the

quality of having committed or directed assault and battery. 

Under the plain meaning of the word “such,” I believe that

the exclusion therefore only excludes coverage for assureds

who committed or directed the assault or battery giving rise

to liability.

Moreover, the word “quality,” a word central to the

definition of “such,” is defined as a “peculiar or essential

attribute” or “distinguishing attribute[.]” Webster’s Ninth

New Collegiate Dictionary 963 (9th ed. 1987). That is, a

quality is an attribute used to differentiate individuals within

a class, compare them to one another, or explain why one

individual in a class or subset of a class is different from

others within the wider class. Out of the three possible

“qualities” in the exclusion, only two serve to differentiate

from the wider class—the subset of assureds facing liability

for assault and battery and the subset of assureds who

committed or directed assault and battery. It is least likely

that “such” refers back to “any Assured” because “any

Assured” is the complete class of assureds, not a subset of the

class identified by some unique characteristic. Nor is “any

Assured” the quality “just specified.” Finally, if “such” refers

back to the entire class of “any Assured,” the exclusion is

redundant, but using such to refer to either of the other

qualities gives meaning to the phrase “such Assured” that is

consistent with the plain and common usage of the word

“such.”

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12 IFC V. ROMAN CATHOLIC CHURCH

Considering the plain and customary usage of the word

“such,” it is difficult to construct a hypothetical sentence that

carries the same structure as the policy exclusion in this case

where the word “such” refers back to the entire universe of

individuals under consideration. For example:

The recess policy does not apply to any

student acting up during Mr. Jones’ class,

such students are not entitled to recess.

Do all students in Mr. Jones’ class lose recess privileges, or

is it plain that only those students who act up lose recess

privileges? If such referred back to “that just specified,” then

“any Student,” or the entire class of students who attended

Mr. Jones’ class, would lose recess privileges. That is not the

commonly understood meaning of the sentence. It is also

relevant that it is easy to construct1an exclusion that clearly

applies to all assureds without ambiguity. For example:

This insurance does not apply to liability

arising from an assault and battery committed

or directed by any Assured.

Or:

This insurance does not apply to liability of

anyAssured for assault and battery committed

by or at the direction of any Assured.

1

I recognize that the policy exclusion was drafted by Lloyd’s of London

and merely incorporated by IFC into the excess policy. I also note that

Lloyd’s of London provided coverage for the underlying claims despite

the existence of the exclusion.

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IFC V. ROMAN CATHOLIC CHURCH 13

Where these examples would unambiguously preclude

coverage for the underlying claims, in order to reach the same

result with the actual exclusion applicable here, “such

Assured” must be, for all practical purposes, stripped from

the policy language. I therefore do not think that the

exclusion applies to the Diocese’s vicarious liability for the

torts of its employees.

Finally, although I believe the exclusion is inapplicable to

the vicarious claims against the Diocese on its plain language,

even if the exclusion is merely ambiguous it should be

construed in favor of coverage. Sparks, 647 P.2d at 1132. 

Arizona law resolves ambiguities in favor of the insured if

“after consideration of legislative goals, social policy, and

examination of the transaction as a whole[,]” it is not clear

how the policy applies to the facts of the particular case. 

Empl’rs Mut. Cas. Co. v. DGG & CAR, Inc., 183 P.3d 513,

515 (Ariz. 2008) (quotation omitted). As the district court

noted, both IFC’s and the Diocese’s interpretations of the

assault and battery exclusion are at least plausible, and

neither interpretation offends public policy as both exclude

coverage for intentional torts. See, e.g., Transamerica Ins.

Grp. v. Meere, 694 P.2d 181, 185–86 (Ariz. 1984). I

therefore believe Arizona law requires interpreting the

exclusion in favor of the Diocese.

Nothing in the authority cited by the majority compels a

different result. American Family Mutual Insurance Co. v.

White construed the following provision to preclude coverage

for innocent co-insureds:

Violation of Law. We will not cover bodily

injury or property damage arising out of . . .

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14 IFC V. ROMAN CATHOLIC CHURCH

violation of any criminal law for which any

insured is convicted . . . .

65 P.3d 449, 452 (Ariz. Ct. App. 2003) (emphasis omitted). 

White relied on Brown v. United States Fiduciary &Guaranty

Corporation, which interpreted a similar provision to also

preclude coverage for innocent co-insureds:

[The insurer] will not pay for loss or damage

arising out of any acts committed:

a. By or at the direction of any “insured;”

and

b. With the intent to cause a loss.

977 P.2d 807, 817(Ariz. Ct. App. 1998). The provisions

interpreted in White and Brown use materially different

language than the exclusion in the Diocese’s policy. The

precluding provisions from White and Brown use the term

“any insured” once to unambiguously identify the class of

insureds referenced, i.e. all of the individuals covered under

the policy. Thus, the precluding provisions from White and

Brown exclude coverage entirely based solely on the type of

liability. But the exclusion in the Diocese’s policy references

assureds twice. First, “Assured” identifies the type of

liability excluded—liability arising from acts of assault and

battery committed by “any Assured.” Second, “such

Assureds” limits the exclusion to those whose acts gave rise

to the liability.

2 Thus, while “any insured” clearly limits the

2 The insurance policies in White and Brown were also family

homeowner policies where the class of insureds was limited by the nature

of the policies to the family members or residents in the home. White,

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IFC V. ROMAN CATHOLIC CHURCH 15

type of liability in simply constructed policy exclusions like

those in White and Brown, the same reasoning does not apply

to the exclusion in the Diocese’s policy due to the additional

“such Assured” language. And at the least, the exclusion in

the Diocese’s insurance policy has a significant ambiguity not

present in the relatively simple exclusions analyzed in White

and Brown.

I would hold that the policy exclusion does not apply in

this case and would reach the parties’ remaining arguments. 

I respectfully dissent.

65 P.3d at 451; Brown, 977 P.2d at 809. The Diocese’s policy, however,

is a general liability excess insurance policy issued to a huge organization

that provides coverage for the Diocese itself and its employees over a

number of parishes, schools, and other sub-units. Such a policy must

account for direct and vicarious liability in its exclusions if it is to be

sufficiently clear.

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