Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-14-56120/USCOURTS-ca9-14-56120-0/pdf.json

Parties Involved:
Joseph Ledesma
Appellant
Ledesma and Meyer Construction Company, Inc.
Appellant
Liberty Insurance Underwriters, Inc.
Appellee
Liberty Surplus Insurance Corporation
Appellee
Kris Meyer
Appellant

Document Text:

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

LIBERTY SURPLUS INSURANCE

CORPORATION, a New

Hampshire corporation;

LIBERTY INSURANCE

UNDERWRITERS, INC.,

Plaintiffs-Appellees,

v.

LEDESMA AND MEYER

CONSTRUCTION COMPANY,

INC., a California corporation;

JOSEPH LEDESMA, an

individual; KRIS MEYER, an

individual,

Defendants-Appellants.

No. 14-56120

D.C. No.

2:12-cv-00900-

RGK-SP

ORDER

CERTIFYING

QUESTION TO

THE SUPREME

COURT OF

CALIFORNIA

Filed August 22, 2016

Before: Thomas I. Vanaskie,* Mary H. Murguia,

and Paul J. Watford, Circuit Judges.

* The Honorable Thomas I. Vanaskie, United States Circuit Judge for the

U.S. Court of Appeals for the Third Circuit, sitting by designation.

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2 LIBERTY SURPLUS V. LEDESMA & MEYER CONSTR.

SUMMARY**

Certification to Supreme Court of California

The panel certified the following question of law to the

Supreme Court of California pursuant to Rule 8.548 of the

California Rules of Court:

Whether there is an “occurrence” under an

employer’s commercial general liability

policy when an injured third party brings

claims against the employer for the negligent

hiring, retention, and supervision of the

employee who intentionally injured the third

party.

** 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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LIBERTY SURPLUS V. LEDESMA & MEYER CONSTR. 3

ORDER

We respectfully request that the Supreme Court of

California exercise its discretion to decide the certified

question set forth in Part II of this order.

I

Caption and Counsel

A. The caption of the case is:

No. 14-56120

LIBERTY SURPLUS INSURANCE CORPORATION, a

New Hampshire corporation; LIBERTY INSURANCE

UNDERWRITERS, INC.,

Plaintiffs-Appellees,

v.

LEDESMA AND MEYER CONSTRUCTION COMPANY,

INC., a California corporation; JOSEPH LEDESMA, an

individual; KRIS MEYER, an individual,

Defendants-Appellants.

B. The names and addresses of counsel for the parties are:

For Plaintiffs-Appellees:

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4 LIBERTY SURPLUS V. LEDESMA & MEYER CONSTR.

Patrick Peter Fredette and Christopher M. Ryan,

McCormick BarstowLLP, 312 Walnut Street, Scripps

Center, Cincinnati, OH 45202

For Defendants-Appellants:

Michael Bidart, Matthew William Clark, Ricardo

Echeverria, and Steven Schuetze, Shernoff Bidart

Echeverria Bentley, LLP, 600 S. Indian Hill Blvd.,

Claremont, CA 91711-5498

C. Designation of party to be deemed petitioner: 

Defendants-Appellants

II

Question Certified

Pursuant to Rule 8.548 of the California Rules of Court,

a panel of the United States Court of Appeals for the Ninth

Circuit, before which this appeal is pending, respectfully

requests that the Supreme Court of California answer the

question presented below. This court will accept the decision

of the Supreme Court of California on this question. Our

phrasing of the question is not intended to restrict the

California Supreme Court’s consideration of the case. The

question certified is as follows:

Whether there is an “occurrence” under an

employer’s commercial general liability

policy when an injured third party brings

claims against the employer for the negligent

hiring, retention, and supervision of the

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LIBERTY SURPLUS V. LEDESMA & MEYER CONSTR. 5

employee who intentionally injured the third

party?

The answer to this question is of exceptional importance to

injured parties, employers, and insurance companies doing

business in California.

III

Statement of Facts

In April of 2002, Ledesma & Meyer Construction

Company, Inc., Joseph Ledesma, and Kris Meyer

(collectively “L&M”) entered into a Construction

Management Contract with the San Bernardino County

Unified School District to complete construction work at the

Cesar E. Chavez Middle School (the “Project”). In relevant

part, the Construction Contract specified that L&M would

defend and indemnify “the Owner, its officers, employees,

and agents” from all claims resulting from L&M’s

negligence, errors, acts, or omissions. The Project began in

June of 2003, and continued into the 2006–2007 school year.

In 2003, L&M hired Darold Hecht and assigned him to

the Project as an Assistant Superintendent. On January 12,

2010, L&M received notice that a tort claim had been filed

against the School District, arising out of allegations that

Hecht sexually abused a 13-year old student at the Middle

School beginning in October of 2006. The School District

tendered the defense and indemnification of the claim to

L&M pursuant to the Construction Contract.

In May of 2010, Jane JS Doe, filed a complaint in state

court (the “Underlying Action”), naming as defendants,

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6 LIBERTY SURPLUS V. LEDESMA & MEYER CONSTR.

L&M, the School District, Hecht, Joseph Ledesma, Kris

Meyer, and others. Doe amended the complaint twice. The

operative complaint in the underlying action alleged claims

for Negligence; Negligent Hiring/Retention and Supervision;

Violation of the California Education Code; Violation of

California Civil and Penal Codes; Intentional Infliction of

Emotional Distress; Violation of 42 U.S.C. § 1983; and

Battery.

1

Liberty Surplus Insurance Co. had issued L&M a

commercial general liability policy (“General Policy”) for the

relevant time period. The General Policy between the parties

provided, in pertinent part:

SECTION I – COVERAGES

COVERAGE A. BODILY INJURY AND

PROPERTY DAMAGE LIABILITY

1. Insuring Agreement

a. We will pay those sums that the

insured becomes legally obligated to

pay as damages because of “bodily

injury” . . . to which this insurance

applies. We will have the right and

1 Specifically, Jane Doe’s Complaint alleged that L&M “hired owner

Joseph Ledesma’s . . . brother-in-law, Darold Hecht,” with “knowledge

that [] Hecht was a registered sex offender who was previously convicted

on two different occasion[s] of sexually abusing young girls . . . .” (ER

130 at ¶ 18.) The Complaint further alleged that L&M “turned this sexual

predator loose on all of the schoolchildren attending [the school],

including Jane Doe, and further failed to monitor [] Hecht’s conduct or his

interaction with the schoolchildren.” (Id.)

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LIBERTY SURPLUS V. LEDESMA & MEYER CONSTR. 7

duty to defend the insured against any

“suit” seeking those damages.

However, we will have no duty to

defend the insured against any “suit”

seeking damages for “bodily injury”

. . . to which this insurance does not

apply. . . .

b. This insurance applies to “bodily

injury” and “property damages” only

if:

(1) The “bodily injury” . . . is caused

by an “occurrence” that takes

place in the “coverage territory”;

* * *

SECTION V – DEFINITIONS

. . .

13. “Occurrence” means an accident,

including continuous or repeated exposure to

substantially the same general harmful

conditions.

(ER 267–68, 289.)

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Pursuant to the General Policy, and other insurance

policies,2both L&M and the School District tendered their

defense in the Underlying Action to Liberty Surplus

Insurance Corporation and Liberty Insurance Underwriters,

Inc. (collectively “Liberty”). Liberty defended L&M under

a reservation of rights and denied a defense to the School

District on the ground that the School District was not insured

under the General Policy. Because Liberty denied a defense

to the School District, L&M paid expenses incurred by the

School District to defend against Jane Doe’s claims, pursuant

to the terms of the Construction Contract.

Libertycommenced the current action in the United States

District Court for the Central District of California, seeking

a declaration that, among other things, it was under no

obligation to defend or indemnifyL&M or the School District

in the Underlying Action. L&M filed a counterclaim,

arguing, among other things, that the insurance policies at

issue required Liberty to defend or indemnify L&M and the

School District in relation to the Underlying Action. After

the parties filed cross-motions for summary judgment, the

district court entered summary judgment in favor of Liberty. 

Relying on Delgado v. Interinsurance Exchange of

Automobile Club of Southern California, 211 P.3d 1083 (Cal.

2009), the district court found that L&M’s negligent hiring,

retention, and supervision of Hecht was too attenuated from

the injury-causing conduct committed by Hecht to constitute

2

In addition to Liberty Surplus Insurance Co.’s General Policy, Liberty

Insurance Underwriters, Inc. had issued L&M a commercial umbrella

policy (“Umbrella Policy”). Crosby Insurance Inc., L&M’s insurance

broker, issuedCertificates ofInsurance stating that the School District was

an additional insured. The Certificates of Insurance were issued for

informational purposes only, with no authority to change the coverage

provided by the policies.

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LIBERTY SURPLUS V. LEDESMA & MEYER CONSTR. 9

an “occurrence”—defined as an accident—under the General

Policy.

IV

Explanation of Our Request

We seek the California Supreme Court’s determination as

to the proper interpretation of liability insurance policies that

provide coverage for injuries sustained as a result of an

“occurrence,” which is defined as “an accident, including

continuous or repeated exposure to substantially the same

general harmful conditions.” (ER 289.) The answer to the

certified question will not only determine the outcome of

L&M’s appeal of the district court’s order granting Liberty’s

motion for summary judgment, but also resolve an unsettled

matter of insurance law in California. The certified question

is of considerable importance to employers, insurers, and

third parties injured by the willful acts of employees. 

Moreover, we note that the resolution of this question will

extend beyond the employment context, affecting many

insured entities and persons, and the third parties that are

injured by the willful acts of those individuals supervised by

the insured. Given the ubiquity of insurance policies that

cover “occurrences” in California, this certified question

presents an issue of significant precedential and public policy

importance.

The Supreme Court of California has yet to address this

issue of exceptional importance. Nonetheless, in Minkler v.

Safeco Insurance Co. of America, when answering a question

certified by this Court in the context of a claim for coverage

for damages caused by the sexual molestation of a minor, the

California Supreme Court signaled the unsettled nature of the

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10 LIBERTY SURPLUS V. LEDESMA & MEYER CONSTR.

question of whether such intentional abuse constitutes an

“occurrence” under a liability policy that defined

“occurrence” as an “accident.” 232 P.3d 612, 617 n.3 (Cal.

2010). Because the parties had not addressed this issue, the

California Supreme Court declined to do so. Although

declining to address the issue, the Court in Minkler cited

Delgado and Hogan v. Midland National Insurance Co.,

476 P.2d 825 (Cal. 1970). Delgado held that an assault and

battery committed by the insured did not constitute an

“accident” under the liability policy at issue there. 211 P.3d

at 1092. Hogan, in pertinent part, held that damages caused

by a decision to cut lumber wider than had been specified in

order to compensate for a defect in the saw were not the result

of an “accident” within the meaning of the liability policy. 

476 P.2d at 827.

Delgado and Hogan thus provide general guidance on the

question of whether deliberate conduct constitutes an

“accident” under a liability policy. Neither case, however,

addresses the question of whether claims of negligence in

hiring, retaining and supervising an employee who commits

a sexual assault fall within a policy’s coverage for an

“occurrence,” which is defined as an “accident.”

The California Courts of Appeal have also not provided

clear guidance on this issue. In L.A. Checker Cab Co-op.,

Inc. v. First Specialty Insurance Co., 112 Cal. Rptr. 3d 335,

336 (Cal. Ct. App. 2010), ordered not to be officially

published (Oct. 27, 2010), the Court ruled that the alleged

negligent supervision of a cab driver who intentionally shot

a passenger did not constitute an occurrence under the

insurance policy. But the case was ordered not to be

published. In the absence of a controlling decision on this

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LIBERTY SURPLUS V. LEDESMA & MEYER CONSTR. 11

question, a deep division of the federal district courts of

California persists.3

Because the Supreme Court of California has not yet

directly addressed this issue, and California law is unsettled

in this area, certification seems particularly appropriate to

determine this consequential matter of state law. See Lehman

Bros. v. Schein, 416 U.S. 386, 391 (1974) (noting that federal

certification of state law questions “helps build a cooperative

judicial federalism,” and is “particularly appropriate” for

novel or unsettled questions of state law); see also Pino v.

United States, 507 F.3d 1233, 1236 (10th Cir. 2007) (noting

that “the federal character of our judicial system” recognizes

that matters of state law should first be decided by state

courts when possible, not federal courts) (citations omitted). 

Accordingly, we respectfully request that your Court accept

this important certified question.

3 Compare Fireman’s Fund Ins. Co. v. Nat’l Bank for Coops., 849 F.

Supp. 1347, 1367–68 (N.D. Cal. 1994) (finding liability under a policy

that provided coverage for damages resulting froman “occurrence” where

the plaintiff asserted a claim of negligent supervision of an employee who

committed fraud), and Westfield Ins. Co. v. TWT, Inc., 723 F. Supp. 492,

495 (N.D. Cal. 1989) (negligent supervision may constitute an

“occurrence” under the insurance policy), with Farmer ex rel. Hansen v.

Allstate Ins. Co., 311 F. Supp. 2d 884, 893 (C.D. Cal. 2004) (negligent

supervision of child molester did not qualify as an “occurrence” for

purposes of insurance coverage), aff’d sub nom. Farmer v. Allstate Ins.

Co., 171 F. App’x 111 (9th Cir. 2006), and Am. Empire Surplus Lines Ins.

Co. v. Bay Area Cab Lease, Inc., 756 F. Supp. 1287, 1290 (N.D. Cal.

1991) (negligent hiring of cab driver who sexually molested a child did

not constitute an “accident” for purposes of insurance coverage).

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V

Accompanying Materials

In accordance with California Rule of Court 8.548, the

Clerk of this Court is hereby directed to file in the Supreme

Court of California, under official seal of the Ninth Circuit,

copies of all relevant briefs and excerpts of record, and an

original and ten copies of the request with a certification of

service on the parties.

Further proceedings before us are stayed pending the

Supreme Court of California’s decision regarding

certification and, in the event the certification is accepted, our

receipt of the answer to the question certified.

This case is withdrawn from submission, but we retain

jurisdiction over further proceedings after the Supreme Court

of California renders a decision or declines to answer the

certified question. The parties shall notify the Clerk of this

Court within one week after the Supreme Court of California

accepts or rejects certification.

If the Supreme Court of California denies the request for

certification, this case will be automatically resubmitted upon

notice of that denial. If the Supreme Court of California

accepts the certified question, the case will be automatically

resubmitted upon receipt of the Supreme Court of

California’s answer to the certified question. Additionally, if

our request for certification is accepted, the parties shall file

a joint status report with our Court every six months.

IT IS SO ORDERED.

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