Am. Family Mut. Ins. Co. v. S.C.

• Decision Date: 10 May 2022
• Docket Number: 4:20-cv-00243-SEB-DML
• Parties: AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Plaintiff, v. S.C., et al., Defendants.
• Court: U.S. District Court — Southern District of Indiana

602 F.Supp.3d 1098

AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Plaintiff,

v.S.C., et al., Defendants.

No. 4:20-cv-00243-SEB-DML

United States District Court, S.D. Indiana, New Albany Division.

Signed May 10, 2022

Ginny L. Peterson, Kightlinger & Gray, LLP, Indianapolis, IN, for Plaintiff.

Jeffrey T. Sampson, Pro Hac Vice, The Sampson Law Firm, Louisville, KY, Scott Thomas Roby, Scott T. Roby, Attorney at Law, PSC, Louisville, KY, for Defendant A Minor.

Jeremy Bart McMahon, Louisville, KY, for Defendants Kenneth Gray, Holly Jacobs.

ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

SARAH EVANS BARKER, JUDGE

This is a declaratory judgment action filed by Plaintiff American Family Mutual Insurance Company ("American Family") seeking a declaration that it has no duty to defend or indemnify Defendant Kenneth Gray or Defendant Holly Jacobs in connection with a lawsuit filed against Mr. Gray and Ms. Jacobs by Tara Robbins, as a parent and next friend of S.C., a minor, alleging negligence claims arising from the alleged sexual assault and molestation of S.C. by Mr. Gray and Ms. Jacobs's failure to protect S.C. from Mr. Gray. This matter is before us for a determination of Plaintiff's obligations under the insurance contracts as framed in its Motion for Summary Judgment [Dkt. 40], filed on January 14, 2022. For the reasons detailed below, we GRANT Plaintiff's motion.

Factual Background

I. The Underlying Civil Lawsuit

On June 12, 2020, Ms. Robbins, as a parent and next friend of S.C., filed an action against Mr. Gray and Ms. Jacobs in Clark Superior Court (the "Underlying Litigation"). The operative complaint in the Underlying Litigation is the amended complaint filed on January 11, 2021, which claims (in Count I) that S.C. was hired to babysit for Mr. Gray and Ms. Jacobs's children at the home they occupied with Ms. Jacobs's parents located at 220 Kewanna Drive, Jeffersonville, Indiana, starting on the evening of June 8, 2019, and lasting into the early morning of June 9, 2019. Mr. Gray is alleged to have returned to their home on June 9, 2021 in a "highly intoxicated state" and proceeded with negligence and reckless disregard for S.C.’s rights, to sexually assault and sexually molest her.¹ Count II of the amended complaint alleges that Ms. Jacobs was negligent in failing to protect S.C. from being sexually assaulted and sexually molested by Mr. Gray.

As a result of Mr. Gray's and Ms. Jacobs's alleged negligence, S.C. seeks payment from them for medical expenses, personal injury, personal and emotional suffering, both in the past and continuing into the future, and for Ms. Robbins's loss of her child's services, love, and companionship, and medical expenses. The prayer for relief in the Underlying Litigation requests both compensatory and punitive damages.

American Family was notified of the Underlying Action on July 9, 2020. After investigating coverage issues, American Family determined that it had issued to Ms. Jacobs's biological parents, Ronnie and Catherine Jacobs, two insurance policies potentially relevant to the Underlying Litigation: Policy No. 13-025507-01, effective March 4, 2019 to March 4, 2020 (the "Homeowners Policy"), and Policy No. 13-U26594-01, effective November 4, 2018 to November 4, 2019 (the "Umbrella Policy"). Because Mr. Gray has never been married to Ms. Jacobs and is not related in any other way to the named insureds, American Family denied that it has a duty to defend or indemnify him in a letter dated November 16, 2020. However, American Family agreed to defend Ms. Jacobs under a reservation of rights as documented by letter dated November 16, 2020. American Family has filed this lawsuit to secure a judicial determination of its obligations under the insurance contract to defend and/or indemnify Mr. Gray or Ms. Jacobs.

II. American Family's Homeowners Insurance Policy

The Homeowners Policy issued by American Family to Ms. Jacobs's parents provides in pertinent part:

LIABILITY COVERAGES – SECTION II

COVERAGE D – PERSONAL LIABILITY COVERAGE

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.

Defense Provision.

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 at our expense by counsel of our choice. We will defend any suit or settle any claim for damages payable under this policy as we think proper.

OUR OBLIGATION TO DEFEND ANY CLAIM OR SUIT ENDS WHEN THE AMOUNT WE HAVE PAID FOR DAMAGES RESULTING FROM THE OCCURRENCE EQUALS OUR LIMIT .

Dkt. 1-2, Exh. B.

The Homeowners Policy includes the following definitions relevant to this action:

DEFINITIONS

The following words in this policy have defined meanings[.] [T]hey will be printed in bold type.

1. Bodily Injury means bodily harm, sickness or disease. It includes resulting loss of service, required care and death.

Bodily injury does not include:

a. any of the following which are communicable: disease, bacteria, parasite, virus or other organism which are transmitted by any insured to any other person;

b. the exposure to any such communicable disease, bacteria, parasite, virus or other organism; or

c. emotional or mental distress, mental anguish, mental injury, or any similar injury unless it arises out of actual bodily harm to the person.

***

5. Insured

a. Insured means you and, if residents of your household:

(1) your relatives; and

(2) any other person under the age of 21 in your care or in the care of your resident relatives.

*** 7. Limit means the limit of liability that applies for the coverage.

***

9. Occurrence means an accident, including exposure to conditions, which results during the policy period, in:

a. bodily injury ; ...

***

14. You and your refer to the person or people shown as the named insured in the Declarations. These words also refer to your spouse who is a resident of your household.

Dkt. 1-2, Exh. B.

The Homeowners Policy includes the following exclusion:

EXCLUSIONS – SECTION II

17. Violation of Law. We will not cover bodily injury or property damage arising out of:

a. violation of any criminal law for which any insured is convicted;

b. violation of any building or housing code for which any insured is convicted; or

c. violation of any criminal law for which any insured is not convicted due to mental incapacity.

Dkt. 1-2, Exh. B.

The Homeowners Policy also includes the following language as amended in the Indiana Amendatory Endorsement:

Coverage D – Personal Liability and Coverage E – Medical Expense do not apply to:

Sexual Molestation or Misconduct, Corporal Punishment, Physical or Mental Abuse.

We will not cover bodily injury and property damage arising out of or resulting from sexual molestation or misconduct, corporal punishment, physical and mental abuse.

a. This includes any actual or alleged:

(1) sexual molestation or misconduct by any insured:

(a) including but not limited to personal interaction or photographic, video, or any other display of sexual activity;

(b) regardless of whether or not consent is given;

(2) corporal punishment; or

(3) physical or mental abuse resulting from acts or omissions of any insured .

b. This exclusion applies regardless of:

(1) intent to cause injury; or

(2) the theory of relief pursued, asserted, or claimed by anyone seeking compensation under this policy.

***

Expected or Intended. We will not cover bodily injury or property damage arising out of an expected or intended action or omission.

a. This includes any type of bodily injury or property damage that an insured :

(1) intends; or

(2) may expect to result from any intentional act or omission.

b. This exclusion applies even if the bodily injury or property damage is:

(1) of a different kind, quality, or degree than intended;

(2) to a different person or property than intended;

(3) the result of a willful and malicious act, no matter an whom the act was directed;

(4) unexpected or unforeseen by the person injured or the owner of the property damaged; or (5) sustained regardless of whether an insured ;

(a) is under the influence of alcohol or any controlled substance;

(b) lacks the mental capacity to govern his or her conduct; or

(c) is deemed not to have had the mental capacity to form the legal intent to commit the act or omission.

c. This exclusion applies regardless of the theory of relief pursued, asserted, or claimed by anyone seeking compensation under this policy.

***

Punitive, Statutorily Imposed, or Court Ordered Damages. We will not cover punitive, statutorily imposed, or court ordered damages. This includes any Personal Liability for:

a. punitive, exemplary, statutorily imposed, multiple, or aggravated damages;

b. fines, penalties, or court ordered restitution; or

c. awarded or statutorily mandated attorney fees related to a. or b. above.

Dkt. 1-2, Exh. B.

III. American Family's Umbrella Insurance Policy

The Umbrella Policy, as amended by the Indiana Personal Liability Endorsement, provides in pertinent part as follows:

INSURING AGREEMENT

We provide this policy in return for the premium you pay. The Application, Declarations and all Endorsements are part of this policy. You represent the statements in your application are true. We provide this policy on the condition that your statements are true. We may void this policy if you make, with intent to deceive, any material statements that we rely on. You and all insureds must comply with policy terms. This includes maintaining all Required Underlying Insurance Limits . Any failure to comply with the policy terms by you or any other insured will affect coverage.

PERSONAL LIABILITY COVERAGE

1. Bodily Injury or Property Damage. We will pay, up to our limit , compensatory damages for which an insured becomes liable for bodily injury or property damage caused by an occurrence covered by this policy;

2. Personal Injury. We will pay, up to the remaining amount of the Personal Injury Aggregate Limit shown

...