NOT RECOMMENDED FOR FULL-TEXT PUBLICATION

File Name: 13a0034n.06

No. 12-3095

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

AUTO-OWNERS INSURANCE COMPANY,

Plaintiff-Appellant,

v.

ILLINOIS NATIONAL INSURANCE COMPANY,

Defendant-Appellee.

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ON APPEAL FROM THE

UNITED STATES DISTRICT

C O U R T F O R T H E

NORTHERN DISTRICT OF

OHIO

BEFORE: SUTTON, GRIFFIN, and WHITE, Circuit Judges.

GRIFFIN, Circuit Judge.

After plaintiff Auto-Owners Insurance Company defended and eventually settled claims

brought against its insured, Adopt America Network, Inc., it filed this action seeking a declaration

that defendant Illinois National Insurance Company, who also insured Adopt America, was required

to contribute to the costs of defense, including the settlement amount. The district court entered

summary judgment in Illinois National’s favor, finding that the insurer had no duty to defend Adopt

America and thus no obligation to contribute to the defense. We reverse and remand the case for

further proceedings. 

I.

Adopt America is a private adoption agency located in Ohio. During the 1990s, it placed

many foster children in the home of Michael and Sharen Gravelle, who allegedly forced children to
No. 12-3095

Auto-Owners Ins. Co. v. Ill. Nat’l Ins. Co.

sleep in cage-like enclosures. Eventually, authorities discovered the abuse and removed the children

from the Gravelle home on September 9, 2005. 

Two allegedlyabused children later sued Adopt America and others for negligence, claiming

that the agency breached its duty of reasonable care to discover and report to authorities the ongoing

abuse in the Gravelle home (the “Torrence action”). Auto-Owners assumed Adopt America’s

defense in the underlying lawsuit. Although Illinois National also insured Adopt America, it refused

to defend its insured, claiming that its policy of insurance did not cover the allegations made in the

Torrence complaint. The Torrence action eventually settled, and Auto-Owners paid the settlement

on behalf of Adopt America. Auto-Owners then brought the present declaratory action seeking

contribution from Illinois National for the settlement sum and defense costs. See 28 U.S.C. §§

1332(a), 2201(a). On cross-motions for summary judgment, the district court ruled that Illinois

National had no duty to defend its insured against the allegations asserted in the Torrence action and

thus had no obligation to contribute. It therefore granted Illinois National’s summary-judgment

motion and entered judgment in its favor. Auto-Owners timely appealed. 

II.

We review de novo a district court’s entry of summary judgment. King v. Taylor, 694 F.3d

650, 661 (6th Cir. 2012). “The court shall grant summary judgment 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). We apply the substantive law of Ohio in this diversity action. 28

U.S.C. § 1652; Erie R. Co. v. Tompkins, 304 U.S. 64 (1938). 

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III.

A.

Auto-Owners seeks a declaration of its contribution rights against Illinois National in

connection with the Torrence action. “Contribution is the right of a person who has been compelled

to pay what another should have paid in part to require partial (usually proportionate)

reimbursement.” Pa. Gen. Ins. Co. v. Park-Ohio Indus., Inc., 902 N.E.2d 53, 58 (Ohio Ct. App.

2008); see also 15 Lee R. Russ & Thomas F. Segalla, Couch on Insurance § 217:4 (3d ed. 2005)

(“Where one of two or more potentially liable insurers pays a loss, whether in satisfaction of a

judgment or in settlement of a claim, it may then seek payment from the other insurers of their fair

share of the loss. . . . [T]he payment sought is referred to as a ‘contribution.’”). Here, if Illinois

National, as Adopt America’s insurer, had a common duty to defend it in the Torrence litigation,

Auto-Owners is entitled under equitable principles to recover from Illinois National a portion of the

settlement sum and its defense costs. 

In Ohio, “[t]he scope of the allegations in the complaint against the insured determines

whether an insurance company has a duty to defend the insured.” Ohio Gov’t Risk Mgmt. Plan v.

Harrison, 874 N.E.2d 1155, 1160 (Ohio 2007). It is an insurer’s “absolute duty to defend an action

when the complaint contains an allegation in any one of its claims that could arguably be covered

by the insurance policy, even in part and even if the allegations are groundless, false, or fraudulent.” 

City of Sharonville v. Am. Emp’rs Ins. Co., 846 N.E.2d 833, 837 (Ohio 2006). If an insurer must

defend against one claim in a complaint, it must defend against all claims in the complaint, even

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those with no relation to policy coverage. Id. No duty to defend arises, however, where all alleged

claims are “clearly and indisputably outside of the contracted policy coverage.” Id. As we discuss

below, all claims lodged against Adopt America in the Torrence complaint are not “clearly and

indisputably outside” of Illinois National’s policy. One claim is squarely covered. 

The relevant policy language is contained in the “Abuse and Molestation Endorsement,”

which provides: 

We shall pay those amounts that the insured becomes legally obligated to pay as

damages for bodily injury, mental injury, advertising injury or personal injury arising

out of: 

1. Any abuse or molestation incident arising out of . . . Negligent:

a. Employment;

b. Investigation;

c. Supervision;

d. Reporting to the proper authorities, or failure

to report; or

e. Retention;

of a person for whom the insured is or ever was legally responsible.

The abuse or molestation incident must take place on or after the retroactive date of

this endorsement, but before the end of the policy period and within the coverage

territory. . . .

(Emphases added.) An “abuse or molestation incident” is “any actual or alleged negligent act, error,

or omission resulting in abuse or molestation or threatened abuse or molestation.” The

Endorsement’s retroactive date is April 11, 2005.

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B.

The district court concluded that although the Endorsement covered the type of conduct

alleged in the Torrence complaint—a conclusion Illinois National does not challenge on

appeal—Illinois National had no duty to defend Adopt America because of when that conduct was

alleged to have occurred. In the district court’s words: 

The Endorsement definition of an “abuse or molestation incident” is not broad, but

is limited to “any actual or alleged negligent act, error, or omission resulting in abuse

or molestation.” (Doc. No. 31-1 at 6) (emphasis added). Thus, the policy does not

cover actual abuse—but does cover the failure to prevent abuse, exactly the

allegation in Torrence against Adopt America. This then clears the first hurdle [in

establishing coverage]. 

However, Auto-Owners cannot clear the second hurdle. Adopt America’s alleged

failure in Torrence occurred in the 2002 and/or 2004 home inspections—well before

the policy’s effective date in April 2005. Any argument for a continuing violation

carrying over into the covered period fails because the Torrence complaint only

implicates the initial failure to discover or report the abuse. Such failures necessarily

predate the 2005 retroactive date. Auto-Owners cannot stretch the Torrence

complaint far enough to allow for coverage. 

The district court was correct that the Torrence plaintiffs alleged conduct specifically covered by the

Endorsement—a failure to report abuse. However, it incorrectly concluded that this omission

predated the Endorsement’s April 11, 2005, retroactive date. 

The Torrence complaint contains the following allegations: 1

We can consider the Torrence complaint even though it is not part of our record. See Fed. 1

R. Evid. 201(b), (d); United States v. Ferguson, 681 F.3d 826, 834 (6th Cir. 2012) (“[Rule 201]

applies to appellate courts taking judicial notice of facts supported by documents not included in the

record on appeal.”); cf. E.I. Du Pont de Nemours & Co. v. Cullen, 791 F.2d 5, 7 (1st Cir. 1986). 

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25. . . . Adopt America was responsible for placing one or more of the younger

Children in the Gravelles’ foster/adoptive care, and conducted “home studies” or

other evaluations of the home prior thereto. During this evaluation and placement

process, Adopt American discovered or should have discovered the Gravelles’

history of abuse, ongoing abuse, and neglect Plaintiffs were subjected to, and should

have reported it to the proper authorities. 

* * *

45. Defendant Adopt America conducted or employed or contracted with certain

John Doe Defendants to conduct a “home study” of the Gravelles in 2002 and/or

2004 to determine whether they should receive yet another adoptive child. At the

time of these assessments, the Plaintiffs (and the other Children) were already being

abused and neglected. This abuse included kenneling the children in cages. Adopt

America’s “home studies” found or should have found this mistreatment and reported

it to the proper authorities, but Defendant Adopt America failed to do so. 

* * *

82. [Adopt America] owed duties to Plaintiffs . . . to adequate[ly] investigat[e] . . .

the condition of the Gravelle home to discover if there was ongoing abuse and

neglect, and to report the same to the appropriate authorities. 

83. [Adopt America] breached [its] duties by failing to investigate and/or failing to

report the ongoing abuse and neglect of the Plaintiffs. 

(Torrence, et al. v. Thompson, et al., No. 09-cv-2724 (N.D. Ohio filed Nov. 23, 2009)) (emphases

added). 

These allegations reasonably state two theories of negligence by Adopt America: (1) failure

to discover child abuse during home inspections and report it; and (2) failure to report ongoing child

abuse actually discovered during home visits. Although any duty Adopt America had to discover

abuse during the home visits in 2002 and 2004 (the first theory) may logically have ceased after the

visits, its duty to report abuse actually discovered during these visits (the second theory) arguably

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continued until the abuse stopped—i.e., until the children were removed from the Gravelle home,

which was well after the retroactive date and therefore within the coverage period. (The retroactive

date is April 11, 2005; authorities removed the children from the home five months later, on

September 9, 2005.) According to the complaint, failing to report the known abuse was a breach of

that duty and continued into the coverage period. Illinois National offers no obvious legal basis, nor

have we found any, for why a common-law duty to report discovered child abuse would cease before

the abuse did. This claim against Adopt America falls within the Abuse and Molestation

Endorsement, including its coverage period. Therefore, Illinois National had a duty to defend Adopt

America in the Torrence litigation. 

In its attempt to avoid this result, Illinois National mischaracterizes the Torrence complaint. 

According to Illinois National, the Torrence complaint alleges that Adopt America “had a duty at

the time it placed a child in the home to report ongoing abuse at that time”; it points out that the

complaint does not allege “an ‘ongoing duty’ to report abuse after [the] placement work was done.” 

(Emphasis added.) Illinois National provides no record citation supporting this reading of the

complaint, which is not surprising—the Torrence complaint nowhere circumscribes in a temporal

sense the reporting dutyAdopt America allegedly owed and breached. The purpose of the complaint

was to give notice of the claim against the adoption agency. Cf. City of Willoughby Hills v.

Cincinnati Ins. Co., 459 N.E.2d 555, 558 (Ohio 1984) (“Ohio has embraced notice pleading[.]”). 

Without any allegations suggesting otherwise, the complaint is reasonably read to allege a breach

of a duty to report known, ongoing abuse, which duty lasted until the children were removed from

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Auto-Owners Ins. Co. v. Ill. Nat’l Ins. Co.

the home, five months after the policy’s retroactive date. This pleaded theory falls squarely within

Illinois National’s Abuse and Molestation Endorsement. 

C.

Taking a different tack, Illinois National offers alternative grounds for affirmance not

considered by the district court. Because our review is de novo, we can affirm the entry of summary

judgment on any preserved ground supported by the record, even one not considered below. See

Harchar v. United States (In re Harchar), 694 F.3d 639, 644 (6th Cir. 2012). Illinois National’s

alternative grounds for affirmance lack merit. 

First, Illinois National argues that its Commercial General Liability coverage insuring

agreement relating to Bodily Injury and Property Damage does not cover the allegations in the

Torrence action. That might be true, but it is irrelevant, for that specific insuring agreement does

not apply here; it has been displaced by the Abuse and Molestation Endorsement, which “modifies

insurance provided under the [Commercial General Liability Coverage Part].” The Endorsement

further explains that: 

For the purposes of this endorsement, Coverage A., Bodily Injury and Property

Damage, and Coverage B., Advertising Injuryand Personal Injury, are each amended

by adding the following to the end of each insuring agreement and the following shall

be the only insuring agreement to apply to abuse or molestation incidents. 

(Emphasis added.) Therefore, Illinois National’s reliance on the insuring agreement for Bodily

Injury and Property Damage is misplaced so long as the allegations fall within the Endorsement’s

coverage provisions, which they do. 

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Forsimilar reasons, also misplaced is Illinois National’s reliance on the Commercial General

Liability coverage’s “Abuse or Molestation Exclusion.” That exclusion operates to take away

coverage for instances of abuse or molestation reasonably found to be covered by the insuring

agreement relating to Bodily Injury and Property Damage. But again, this insuring agreement does

not apply to “abuse or molestation incidents,” incidents governed exclusively by the Abuse and

Molestation Endorsement. If the insuring agreement for Bodily Injury and Property Damage does

not apply, then neither does the Abuse or Molestation Exclusion, which works only to modify that

specific insuring agreement. As the district court put it, the Endorsement “negates the exclusion.” 

Illinois National points out that the Abuse and Molestation Endorsement “expressly does not change

any other ‘terms and conditions’ of the policy,” which logically includes the Abuse or Molestation

Exclusion, thereby suggesting that the Exclusion still applies in cases where the Endorsement

applies. Not so. Again, the Exclusion is part of the insuring agreement for Bodily Injury and

Property Damage, which insuring agreement is entirely displaced by the Endorsement when it

applies, as it does here. 

Moreover, denying coverage for the reason that it is excluded by the Abuse or Molestation

Exclusion (it is not) would render the Abuse and Molestation Endorsement illusory. See Talbert v.

Cont’l Cas. Co., 811 N.E.2d 1169, 1172 (Ohio Ct. App. 2004) (“Generally, courts disfavor contract

interpretations which render contracts illusory[.]” (quotation marks omitted)); cf. id. at 1177 (“[W]e

are not inclined to give the insurance policy a reading that would render it useless. Amcast paid a

significant premium for this policy, and we fail to see what it paid for if it was not coverage for

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substantial-certainty intentional torts. Therefore, we do not find Continental’s argument

persuasive.”); cf. also GNFH, Inc. v. W. Am. Ins. Co., 873 N.E.2d 345, 364 (Ohio Ct. App. 2007)

(“[I]n the absence of an explanation why the insurance coverage offered in the endorsement is

anything but illusory, we conclude that the exclusion for ‘expected’ injuries does not bar coverage

for the alleged intentional torts in the present case.”). 

Finally, Illinois National points to the policy’sSocial ServiceProfessional Liability coverage

and argues that the allegations made against Adopt America in the Torrence action are expressly

excluded from coverage under that provision. While that might be true, Professional Liability

coverage and Commercial General Liability coverage are distinct, and exclusion from coverage

under one does not appear to preclude coverage under the other—there are no cross-references

between the two; the coverages contain their own sets of definitions, exclusions, and limitations on

coverage; and the Professional Liability coverage portion repeatedly refers to itself as a distinct

“policy.” And for the same reason, Illinois National’s assertion that coverage is limited here by the

clause in the Professional Liability coverage portion stating that such insurance “will apply only in

excess” of other insurance coverage is beside the point—the clause does not affect Commercial

General Liability coverage. 

IV.

In sum, we hold that Illinois National had a contractual duty to defend Adopt America in the

Torrence action. Therefore, under Ohio law, Pa. Gen. Ins. Co., 902 N.E.2d at 59, Illinois National

must contribute to the costs borne by Auto-Owners. On remand, we direct the district court to

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determine the proper contribution amount. Forthese reasons, we reverse the judgment of the district

court and remand for proceedings consistent with this opinion. 

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