NOT RECOMMENDED F OR F ULL-TEXT PUBLICATION F ile Nam e: 13a0034n.06 No. 12-3095 UNITED STAT ES COURT OF AP P EALS F OR THE S IXTH CIRCUIT

AUTO- OWNERS I

NSURANCE COMPANY, Plaintiff-Appellant,

v. I L L I NOI S NATI ONAL

I NSURANCE COMPANY, Def endant- Appellee

. ) ) ) ) ) ) ) ) ) ) ON AP P E AL FROM THE UNI TED STATES DI STRI CT C O U R T F O R T H E NORTHERN DI STRI CT OF OHI O

BEF ORE: SUTTON, GRI FF I N, and WHI TE, Circuit J udg es. GRI FF I N, Circuit J udg e. After plaintiff Auto-Owne rs I nsuranc e Company defe nd ed and eventua lly settled claims broug ht a g ainst its insure d, Adopt Americ a Networ k, I nc., it filed this a ction seeking a decla ration that defe ndant I llinois National I nsuranc e Company , who also insured Adopt Americ a, was require d
to contribu t e to the costs of defe nse, including the settlement amount. The district court enter ed summary judgme nt in I llinois National’s favor , finding that the insurer had no duty to defe nd Adopt Americ a and thus no obliga tion to contribute to the defen s e. W e reve rse and rema nd the case for further proce eding s. I

. Adopt Americ a is a private adoption ag ency located in Ohio. During t h e 1 9 9 0 s , it place d many foster children in the home of Michae l and Sharen Gra velle, who alleg edly forc ed children toNo. 12-3095

Auto-Owners Ins. Co. v. I ll. Nat ’l Ins. Co. sleep in cag e-like enclosure s. Eventually , authorities discovere d the abuse and remove d the children from the Gr avelle home on September 9, 2005. Two alleg edly abused children later sued Adopt Americ a and others for neg lige nce, claiming that the ag ency brea ched its duty of rea sonable car e to discover and repor t to authorities the ong oing abuse in the Gra velle home (the “ Torrence action”)

. Auto-Owne rs assumed Adopt Americ a’s defe nse in the underly ing lawsuit. Although I llinois National also insured Adopt Americ a, it ref used
to defe nd its insured, claiming that its policy of insurance did not cover the alleg ations made in the Torrence complaint. The Torrence action eventua lly settled, and Auto-Owne rs paid the settlement

on behalf of Adopt Americ a. Auto-Owne rs then brou gh t the prese nt decla ratory action seeking contribution from I llinois National for the settlement sum and defe nse cos t s . S ee 2 8 U.S.C. §§ 1332(a) , 2201(a)

. On cross-motions for summary judgme nt, the district court rul ed that I llinois National had no duty to defe nd its insured ag ainst the alleg ations asser ted in the Torrence action and thus had no obliga tion to contribute. I t there fore g rante d I llinois Na t i o n al ’s summary -judg ment motion and entere d judgme nt in its favor . Auto-Owne rs timely appea led. I I

. We revie w de novo a district court’s entry of summary judgme nt. King v. Taylor , 694 F.3d 650, 661 (6th Cir. 2012). “The court shall g rant summary judgme nt if the movant shows that there is no g enuine dispu t e as t o any materia l fac t and the movant is entitled to judgme nt as a matter of l aw.” Fe d. R. Civ. P. 56(a)

. We apply the substantive law of Ohio in this diver s i t y ac t i o n . 2 8 U.S.C. § 1652; Erie R. Co. v. Tompkins , 304 U.S. 64 (1938).

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Auto-Owners Ins. Co. v. I ll. Nat ’l Ins. Co.

I I I

.

A. Auto-Owne rs seeks a decla ration of its contribut ion rig hts ag ainst I llinois National in

connec tion with the Torrence action. “Contribution is the rig ht of a person who has been compelled
to pay what another should have paid in part to require partial (usually proportiona t e) reimburse ment.” P a . Ge n . In s . Co. v. Park-O hio Indus., Inc. , 902 N.E.2d 53, 58 (Ohio Ct. App. 2008); see also 15 L ee R. Russ & Thom as F. Seg alla, Couch on Insurance § 217:4 (3d ed. 2005) (“Where one of two or more potentially li ab l e i n s u re rs pay s a loss, whether in satisfac tion of a judgme nt or in settlement of a claim, it may then seek pay ment from the other insurers of their fair share of the loss.

. . . [T] he pay ment soug ht is ref

err ed to as a ‘contribution.’” ). Her e, if I llinois National, as Adopt Americ a’s insurer, had a common duty to defe nd it in the T o r r en ce litigation, Auto-Owne rs is entitled under equitable principles to rec over from I llinois National a portion of the settlement sum and its defense costs. I n Ohio, “[t] he scope of the alleg ations in the complaint ag ainst t h e insured deter mines whether an insuranc e compa

ny has a duty to defe nd the i nsured.” Ohio Gov’ t Risk Mgmt. Plan v. Harrison , 874 N.E.2d 1155, 1160 (Ohio 2007). I t is an insurer’ s “absolute duty to defe nd an action when the complaint contains an alleg ation in any one of its claims that could arg uably be covere d by the insurance policy , even in part and even if the alleg ations are g roundless, false, or fra udulent.” City of Sharonville v. Am. Emp’rs Ins. Co. , 8 4 6 N. E

. 2 d 8 33, 837 (Ohio 2006). I f an insurer must defe nd ag ainst one claim i n a complaint, it must defe nd ag ainst all claims in the complaint, even

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Auto-Owners Ins. Co. v. I ll. Nat ’l Ins. Co.

those with no rela tion to policy cover ag e. Id. No duty to defe nd arises, howeve r, wher e all alleg ed claims are “cle arly and indisputably outside of the contra cted policy cover ag e.” Id. As we discuss below, all claims lodge d ag ainst Adopt Americ a in the Torrence complaint are not “c l ea rly and indisputably

outside” of I llinois National’s policy . One c laim is squarely cover ed. The rele vant policy lang uag e is contained in the “Abuse and M o l estation Endorseme nt,” which provide s: We sh al l p ay those amounts that the insured become s leg ally obliga ted to pay as damag es for bodily injury , mental injury , adver tising injury or persona l injury arising out of: 1. Any

abuse or molestation incident arising out of . . . Neg lige nt:

a. Employ

ment; b. I nvestig ation; c. Supervision; d. Reporting to the proper authoriti es, or failure to report ; or e. Retention; of a pe rson for w hom the insured is or eve r wa s leg ally responsible. The abuse or molestation incident must take place on or after the retroactive date of this end o r

s em ent , but befor e the end of the policy period and within the cover ag e territory

. . . . (Emphase s added.) An “abuse or molestation incident” is “any actua l or alleg ed neg lige nt act, err or,

or omission resulting in abuse or molestation or threa tened abuse or molest at i o n . ” T he Endorseme nt’s retroa ctive date is April 11, 2005.

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Auto-Owners Ins. Co. v. I ll. Nat ’l Ins. Co.

B. The dis t ri ct court conclude d that althoug h the Endorseme nt cover ed the ty pe of conduct alleg ed in the Torrence complaint—a conclusion I llinois National does n o t challeng e on appea l—I llinois National had no duty to de fend Adopt Americ a beca use of when that conduct was alleg ed to have occur

red. In the district court’s w ords: The Endorseme nt de finition of an “abuse or molestation inc ident” is not broa d, but is limit ed to “any actua l or alleg ed neg lige nt act, err or, or omission resulting in abuse or molestation.” (Doc

. No. 31-1 at 6) (empha sis added). Thus, the policy does not cover actua l abuse—but does cover the failure to preve nt ab use, exactly the alleg ation in Torrence ag ainst Adopt America . This then clea rs t he first hurdle [ in establishing c overa g e]. Howeve r, Auto-Owne rs cannot clea r the second hurdle. Adopt Am er i ca’ s alleg ed failure in Torrence occur

red in the 2002 and/or 2004 home inspections—well befor e the pol icy ’s effec tive date in April 2005. Any arg ument fo r a continuing violation car ry ing over into the cover ed period fails beca use the Torrence complaint only implicates the initial failure to discover or repor t the abuse. Such failure s nece ssarily preda te the 2005 retroa ctive date. Auto-Owne rs cannot stretch the Tor r en ce complaint far

enoug h to allow for c overa g e. The district court was corr ect that the Torrence plaintiffs alleg ed conduct specific ally cover ed by the Endorseme nt—a failure to repor t abuse. Howeve r, it incorrect ly conclude d that this omission preda ted the Endorse ment’s April 11, 2005, re troac tive date. The Torrence complaint contains the following alleg ations: 1

We can consider the Torrence complaint even though it is not part of our rec ord. See Fe d. 1 R. Evid. 201(b), (d); United States v. Fergu s o n , 681 F.3d 826, 834 (6th Cir. 2012) (“[Rule 201] applies to appellate courts taking judicial notice of fac ts supported by documents not included in the rec ord on appe al.”) ; cf. E.I. Du P ont de Nemours & Co. v. Cullen , 791 F.2d 5, 7 ( 1st Cir. 1986). - 5 -No. 12-3095

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25.

. . . Adopt Americ a was responsible for placing one or more of the y oung er Childre n in the Gra velles’ foster/a doptive car e, and conducte d “home studies” or other evaluations of t he home prior thereto. During this evalua tion and p l ac ement proc es s , Adopt Americ an discove red or should have discovere d the Gra velles’ history of abuse, ongoing abuse , and neg lect Plaintiffs wer e subjected to, and should have re ported it to the proper authoriti es . * * * 45. Def endant Adopt Americ a conducte d o r em ploy ed or contra cted with cer tain J ohn Doe Def

endants to conduct a “home study ” of the Gra velles in 2002 an d / o r 2004 to deter

mine whether t h ey should rec eive y et another adoptive child. At the time of these assessments, the Plaintiffs (and the other Children) wer e alre ady being abused and neg lected. This a buse included kenneling the children in c ag es. Adopt Americ a’s “ h o me s tu d ie s” found or should have found this mistreatment and repor ted it to the proper a

uthorities, but Defe ndant Adopt Amer ica f ailed to do so. * * * 82. [Adopt America] owed duties to Plaintiffs .

. . to a dequate [l y ] investig at[e] .

. . the condition of the Gr av el le home to discover if there was ong oing abuse and neg lect, and to report the same to the appropriate authorities

. 83. [Adopt Americ a] brea ched [i ts] duties by failing to investiga te and/ or failing to report the ongoing abuse and negle ct of the Plaintiffs. ( Torrence, e t al. v. Thompson, e t al. , No. 09-cv- 2724 (N.D. Ohio filed Nov. 23, 2009)) ( emphase s added)

. These alleg ations rea sonably state two theories of neg lige nce by Adopt Americ a: (1) failure
to discove r child abuse during home inspections and repor t it; and (2) failure to report ong oing child abuse actually discove red during home visits. Although any duty Adopt Americ a had to discove r abuse during the home visits in 2002 and 2004 (the first theory ) may logic ally have cea sed afte r the visits, its duty to repor

t abuse actually discovere d during these visi ts (the second t heory ) arg uably

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continued unti l the abuse stopped— i.e. , until the children were remove d from the Gra velle home, which was well afte r the retroa ctive date and there fore within the cover ag e period. (The retroa ctive date is April 1 1 , 2 0 05; authorities remove d the children from the home five months later, on September 9, 2005.) Acc ording to the complaint, failing to repor t the known abuse was a brea ch of that duty and continued into the cover ag e period. I llinois National offe rs no obvious leg al basis, nor have we found any , for why a common-law duty to repor t discovere d child abuse would cea se befor e the abuse did. This claim ag ains t Ad o p t Am eric a falls within the Abuse and Molestation Endorseme nt, including its cover ag e period. There fore , I llinois National had a duty to defe nd Adopt Americ a in the Torrence litigation. I n its attempt to avoid this result, I llinois National mischara cter izes the Torrence complaint. Acc ording to I llinois National, the Torrence complaint alleg es t hat Adopt Americ a “had a duty at the time it placed a child in the home to repo rt o n go i ng abuse at that time ”; it points out that the complaint does not alleg e “an ‘ong oing duty ’ to repor t abuse afte r [t he] place ment work was done.” (Emphasis added.) I llinois National provides no rec ord citation su p porting this rea ding of the complaint, which is not surprising —the Torrence complaint nowhere circumsc ribes in a temporal

sense the repor

ting duty Adopt Americ a alleg edly owed and brea ched. The purpose of the complaint

was to g ive notice of the claim ag ainst the adoption ag ency . Cf. City of W illoughby Hills v. Cincinnati Ins. C o. , 459 N.E.2d 555, 558 (Ohio 1984) (“Ohio has embrace d notice pleading[.]”). Wit hout any alleg ations sug g esting otherwise, the complaint is rea sonably rea d t o al l ege a breac h of a duty to r eport known, ong oing a buse, which duty lasted until the children wer e remove d from

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the home, five months afte r the policy ’s retroa ctive date. This pleade d theory falls square ly within I llinois National’s Abuse and Molestation Endorse ment. C. Taking a differ ent tack, I llinois National offe rs alterna tive g rounds for aff irman ce not considere d by the district court. Be cause our revie w is de novo, we can aff irm the entry of summary judgme nt on any prese rved g round supported by t he rec ord, even one not considere d below. See Harchar v. United States ( In re Harchar) , 694 F.3d 639, 644 (6 t h Cir. 2012). I llinois National’s alterna tive g rounds for a ffirma nce la ck mer it. First, I llinois National arg ues that its Commercial Gene ral L iability co v er age insuring ag ree ment rela ting to Bodily I njury and Property Damag e does n o t cover the alleg ations in the Torrence action. That m ight be true, but it is irrele vant, for that specific insuring ag ree ment does
not apply here ; it has been displaced by the Abuse and Molestation Endorseme nt, which “modifies insurance provided under the [C ommercia l Gene ral L iability Coverag e Part]

. ” T h e Endorseme nt further explains t hat: For the purposes of this endorse ment, Coverag e A. , Bo d i ly I njury and Property Damag e, and Coverag e B., Adver tising I njury and Personal I njury , are eac h amende d by adding the following to the end of eac h insuring ag ree ment and the follow ing shall be the only insuring agreement to apply to abuse or mole station i ncidents

. (Emphasis added.) There fore , I llinois Na t i o n al’s relianc e on the insuring ag ree ment for Bodily I njury and P roper

ty Damag e is misplaced so long as the alleg ations fall within the Endorsement’s

cover ag e provisions, which they do.

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For simil ar rea sons, also misplaced is I llinois National’s relianc e on the Commercial Gene ral L iability cover ag e’s “Abuse or Molestation Ex clusion. ” T h at exclusion opera tes to take awa

y

cover ag e for instances of abuse or molestation rea sonably found to be cover ed by t he insuring ag ree ment rela ting to Bodily I njury and Property Damag e. But ag ain, this insuring ag ree ment does
not apply to “abuse or molestation incidents,” incidents g over n ed ex clus ively by the Abuse and Molestation Endorsement. I f the insuring ag ree ment for Bodily I njury and Proper

ty Damag e does
not apply , then neither does the Abuse or Molestation E x clusion, which works only to modify that specific insuring ag ree ment. As the district court put it, the Endorseme nt “neg ates the exclusion.” I llinois National points out that the Abuse and Molestation Endorseme nt “expressly does not chang e any other ‘terms and conditions’ of the policy ,” which logic ally includes the Abuse or Molestation Ex clusion, there b y s u gges t ing that the Ex clusion still applies in case s wher e the Endorseme nt applies. Not so. Ag ain, the Ex clusion is part of the insuring ag ree m en t for Bodily I njury and P roper ty Damag e, which insuring ag ree ment is entirely displaced by the Endorseme n t wh en i t applies, as it does he re. Moreove r, deny ing cover ag e for the rea son that it is excluded by the Abuse or Molestation Ex clusion (it is not) would rende r the Abuse and Molestation Endorseme nt illusory

. See Talbert v. Cont’l Cas. Co. , 811 N.E.2d 1169, 1172 (Ohio Ct. App. 2004) (“G ener ally , courts disfavor contra ct interpre tations which rende r contra cts illusory [.] ” (quotation marks omitted)); cf. id. at 1177 (“[W] e

are not inclined to g ive the insuranc e policy a re ading that would rende r it useless. Amca st paid a

s ignif icant premium for this policy , and we fail to see what it paid for if it was not cover ag e fo r

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substantial-ce rtainty intentional torts

. T here fore , we do not find Continental’s arg ument persua sive.”); cf. al

so GNFH, Inc. v. W

. Am. Ins. Co. , 873 N.E.2d 345, 364 (Ohio C t. Ap p . 2007) (“[I ]n the absenc e of an explanation why the insurance cover ag e offe red in the endo rs em en t is any thing but illusory , we conclude that the exclusion for ‘expected’ injuries does not ba r cover ag e for the a lleg ed intentional torts in the prese nt case .”). Finally , I llinois National points to the policy ’s Social Service Professional L iability cover ag e and arg ues that the alleg ation s m ade ag ainst Adopt Americ a in the Torrence action are expressly excluded from cove rage under that provision. Whil e that might be true, Professional L iability

cover ag e and Commercial Gene ral L iability cover age ar e distinct, and exclusion from cover ag e under one d o es n o t appear to prec lude cover ag e under the other—ther e are no cross-r efe renc es betwee n the two; the cover ag es contain their own sets of definitions, exclusions, and limit ations on

cover ag e; and the Professional L iability cover ag e portion repe atedly ref ers to itself as a distinct “policy .” And for the same rea son, I llinois National’s asser tion that cover ag e is limit ed here by the clause in the Professional L iability cover ag e portion stating that such insurance “will apply only in excess” of other insurance cover age i s b es ide the point—the clause does not aff ect Commercial Gene ral L iability

cover ag e. I V. I n sum, we hold that I llinois National had a contra ctual duty to defe nd Adopt Americ a in the Torrence action. There fore , under Ohio law, Pa. Gen. Ins. Co. , 902 N.E.2d at 59, I llinois National
must contribute to the costs b o rn e b y Auto-Owne rs. On rema nd, we direc t the district court to

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deter mine the proper contribution amount. For these rea sons, we reve rse the judgme nt of the district
court a nd rema nd for pr ocee dings c onsistent with thi s opinion.

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