Am. Family Mut. Ins. Co. v. Bower

• Decision Date: 05 November 2010
• Docket Number: Cause No. 1:07 CV 254.
• Parties: AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Plaintiff,v.Jonathan L. BOWER, II, Michael Bower and Anne Bower the Church on Fire f/k/a New Hope Worship Center GLB b/n/f Anna Butler,1 Defendants.
• Court: U.S. District Court — Northern District of Indiana

752 F.Supp.2d 957

AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Plaintiff,

v.Jonathan L. BOWER, II, Michael Bower and Anne Bower the Church on Fire f/k/a New Hope Worship Center GLB b/n/f Anna Butler,1 Defendants.

Cause No. 1:07 CV 254.

United States District Court, N.D. Indiana, Fort Wayne Division.

Nov. 5, 2010.

Linda Ann Hammel, Matthew C. Robinson, Yarling & Robinson, Indianapolis, IN, for Plaintiff.H. Joseph Cohen, Michael H. Michmerhuizen, Barrett & McNagny LLP, Fort Wayne, IN, Michael J. O'Brien, The Law Offices of Michael J. O'Brien, Crown Point, IN, April L. Board, April L. Board PC, Valparaiso, IN, for Defendants.

OPINION AND ORDER

WILLIAM C. LEE, District Judge.

This is a declaratory judgment action filed by American Family Mutual Insurance Company (“American Family”) against its insureds, Michael and Anne Bower (“the Bowers”) and their son, Jonathan Bower (“Jonathan”). The sole issue in this case is whether American Family's homeowners policies provide coverage and a duty to defend for state law claims by Gabrielle Butler (“Butler”) arising from an alleged sexual molestation by Jonathan, on the Bowers' premises, while Butler was a minor child.

Presently before the court is American Family's Second Motion for Summary Judgment filed on March 12, 2010. The Bowers responded on June 25, 2010 to which American Family replied on August 2, 2010. Butler filed a response as well wherein she adopted the Bowers' position on all issues in the case. For the following reasons, the Second Motion for Summary Judgment will be GRANTED in part and DENIED in part.

FACTUAL BACKGROUND

American Family ² issued six Gold Star Special Deluxe homeowners policies (“the Policies”) to the Bowers covering the premises at 5210 Timbers End Place, Fort Wayne, Indiana for the period of August 2, 2000 through January 24, 2005. During that time, it is undisputed that Jonathan was an additional insured on the policies. American Family did not provide insurance coverage to the Church until 2005.

In 2003 and 2004, Jonathan is alleged to have molested Gabrielle Butler, then a minor, by having sexual intercourse with her on at least five or six occasions, at 5210 Timbers End Place, Fort Wayne, Indiana. Jonathan eventually pled guilty to three counts of child molesting. Butler has filed a civil suit against Jonathan, the Bowers, and The Church of Fire a/k/a The New Hope Worship Center (“the Church”) in state court seeking damages for bodily injury, emotional distress, and punitive damages arising from the conduct of Jonathan. With respect to the Bowers, she asserts that they had actual knowledge of the assaults but did nothing to prevent them. Alternatively, she asserts that they knew or should have known of Jonathan's deviate sexual behavior and/or the sexual assaults but did not prevent them. As part of this latter argument, Butler asserts that the Bowers assumed the role of in loco parentis by supervising her and were negligent in their role. Butler also asserts claims against Michael Bower in his capacity as the Pastor of the Church asserting that he knew or should have known of the sexual deviate behavior of Jonathan. She asserts claims of negligent supervision, hiring (she alleges Jonathan was a Church employee), and retention.

In light of these assertions, the Bowers' sought coverage under and a defense from the Policies issued by American Family.³ American Family asserts a host of defenses to the Bowers's assertions that Butler's claims are covered under the Policies and therefore, American Family owes a duty to defend them in the underlying suit. American Family first contends that its Policies do not provide coverage for Butler's claims because there was no “occurrence” sufficient to trigger the coverage provisions. Alternatively, American Family asserts that even if there was an “occurrence,” the policies have several exclusions that operate to preclude coverage, and therefore, a duty to defend, as to Michael and Anne Bower for the lawsuit filed by Butler. These include: (1) an exclusion for bodily injury arising out of any actual or alleged sexual molestation; (2) an exclusion for bodily injury arising out of violation of any criminal law for which violation any insured is convicted; (3) an exclusion for bodily injury caused intentionally by any insured even if the actual bodily injury is different than that which was expected or intended from the standpoint of any insured; (4) an exclusion for bodily injury to any insured; (5) an exclusion for bodily injury arising out of business pursuits; (6) an exclusion for bodily injury arising out of the rendering or failing to render professional services; (7) an exclusion for bodily injury arising out of any act or omission occurring on any premises controlled by any insured other than an insured premises; (8) an exclusion for punitive damages. After a review of the applicable standard, each of these arguments shall be examined seriatim.

Applicable Standard

Summary judgment is proper when “the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P 56(c)(2). A genuine issue of material fact exists if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In determining summary judgment motions, “facts must be viewed in the light most favorable to the nonmoving party only if there is a ‘genuine’ dispute as to those facts.” Scott v. Harris, 550 U.S. 372, 127 S.Ct. 1769, 1776, 167 L.Ed.2d 686 (2007). The party seeking summary judgment has the burden of establishing the lack of any genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). After “a properly supported motion for summary judgment is made, the adverse party ‘must set forth specific facts showing that there is a genuine issue for trial.’ ” Anderson, 477 U.S. at 255, 106 S.Ct. 2505 (quoting Fed R. Civ. P. 56(e)).

DISCUSSION

Insurance policies typically impose dual obligations on the insurer—the duty to indemnify the insured against damages or losses, and the duty to defend against claims for damages. Because an insurance policy is a contract for insurance, they are governed by the same rules of construction as other contracts. Briles v. Wausau Ins. Cos., 858 N.E.2d 208, 213 (Ind.Ct.App.2006) (citing Gregg v. Cooper, 812 N.E.2d 210, 215 (Ind.Ct.App.2004)). As with other contracts, their interpretation is a question of law. Briles, 858 N.E.2d at 213.

When interpreting an insurance policy, the goal is to ascertain and enforce the parties' intent as manifested in the insurance contract. Id. In reviewing policy terms, the court construes them “from the perspective of an ordinary policyholder of average intelligence.” Allgood v. Meridian Sec.Ins. Co., 836 N.E.2d 243, 246–47 (quoting Burkett v. Am. Family Ins. Group, 737 N.E.2d 447, 452 (Ind.Ct.App.2000)). Where an ambiguity exists, that is, where reasonably intelligent people may interpret the policy's language differently, courts construe insurance policies strictly against the insurer. See Fidelity and Deposit Co. of Md. v. Pettis Dry Goods Co., 207 Ind. 38, 42, 190 N.E. 63 (1934) (“any doubts or ambiguities must be resolved most strongly against” the insurer).⁴ This is particularly the case where a policy excludes coverage. Am. States Ins. Co. v. Kiger, 662 N.E.2d 945 (Ind.1996). At the same time, interpretation should harmonize the policy's provisions rather than place its provisions in conflict. Allgood, 836 N.E.2d at 247.

An insurer's duty to defend its insureds against suit is broader than its coverage liability or duty to indemnify. Trisler v. Indiana Ins. Co. 575 N.E.2d 1021, 1023 (Ind.Ct.App.1991). The insurer's duty to defend is determined from the allegations of the complaint and from those facts known to or ascertainable by the insurer after reasonable investigation. Id. If the pleadings disclose that a claim is clearly excluded under the policy, no defense is required. Id.

I. Coverage

American Family asserts that there is no coverage under the Policies that would set in motion its duty to defend the Bowers in the underlying suit by Butler. Coverage under the Policies is triggered by an “occurrence.” Specifically, the relevant portion of the insuring agreements provide as follows:

We will pay, up to our limit, compensatory damages for which any insured is legally liable because of bodily injury or property damage caused by an occurrence covered by this policy.

The Policies further contain a defense provision which reads:

If a suit is brought against any insured for damages because of bodily injury or property damage caused by an occurrence to which this policy applies, we will provide a defense ...

Bodily injury is defined in the Policies as “bodily harm, sickness or disease.” An “occurrence” is defined as “an accident, including exposure to conditions which results, during the policy period, in .... bodily injury or ... property damage.” The policy does not further define “accident” but, in the context of insurance coverage, Indiana law states that “an accident means an unexpected happening without an intention or design.” Indiana Farmers Mut. Ins. Co. v. North Vernon Drop Forge, Inc. 917 N.E.2d 1258, 1271 (Ind.Ct.App.2009) (quoting Terre Haute First Nat'l Bank, 634 N.E.2d at 1336).

According to American Family, insurance coverage is not authorized for Michael and Anne Bower because no “occurrence” i.e., no accident, occurred. American Family argues that the sexual molestation of Butler by Jonathan was not accidental and thus, any injuries flowing to Butler as a result of Jonathan's conduct do not fall within the scope of the policy's insuring clause.

In response, the Bowers do not dispute that Jonathan's...