Bagley v. MONTICELLO INSURANCE COMPANY

• Decision Date: 15 December 1999
• Citation: 720 NE 2d 813,430 Mass. 454
• Parties: DEBORAH BAGLEY v. MONTICELLO INSURANCE COMPANY.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

430 Mass. 454

720 NE 2d 813

DEBORAH BAGLEY v. MONTICELLO INSURANCE COMPANY.

Supreme Judicial Court of Massachusetts, Essex.

November 1, 1999.

December 15, 1999.

Present: MARSHALL, C.J., ABRAMS, LYNCH, GREANEY, IRELAND, SPINA, & COWIN, JJ.

Edward L. Kirby, Jr. (Lauren A. Boice with him) for the defendant.

Mark F. Itzkowitz for the plaintiff.

Toni G. Wolfman & Joseph P. Liu for The Women's Bar Association of Massachusetts & another, amici curiae, submitted a brief.

GREANEY, J.

We granted the plaintiff's application for direct appellate review to decide whether exclusionary provisions contained in an insurance policy issued by the defendant, Monticello Insurance Company (Monticello), precluded coverage for a judgment the plaintiff obtained against Monticello's insured, Trader Alan's Fifth Wheel, Inc. (Trader Alan's). The plaintiff recovered the judgment in the underlying action after she had been assaulted and raped while staying at Trader Alan's motel. The plaintiff filed this action in the Superior Court against Monticello seeking to reach and apply its policy proceeds to satisfy the judgment against Trader Alan's. The plaintiff's motion for summary judgment was allowed as to the portion of her damages attributable to the rape, and Monticello appealed. Monticello contends that there is no coverage for the damages attributable to the rape because of the unambiguous language of the policy's assault and battery exclusion, absolute liquor exclusion, or illegal acts exclusion. We conclude that the illegal acts exclusion bars coverage of the plaintiff's damages for the rape, and, accordingly, we need not consider whether those damages are barred by the other two exclusions. We also need not consider Monticello's other contentions. We, therefore, vacate the judgment.

The factual and procedural background of the case may be summarized as follows. On April 19, 1993, the plaintiff was a patron of Trader Alan's, a truck stop that included a restaurant and a motel. The plaintiff drank alcoholic beverages at the bar and became visibly intoxicated. Despite the plaintiff's visible intoxication, Trader Alan's employees continued to serve her alcoholic beverages. Patrick M. Harper (Harper), another customer at the bar, was also served alcoholic beverages although he, too, was visibly intoxicated. Later that evening, according to the plaintiff's complaint, "employees of [Trader Alan's] negligently allowed Patrick Harper, who was intoxicated, to take the plaintiff, who was intoxicated, to his hotel room which was owned by and under the control of [Trader Alan's]." While in the motel room, Harper blindfolded and tied up Bagley and brutally beat and raped her for several hours. Trader Alan's employees were made aware of Bagley's screams for help during this attack, but they failed to obtain help or take any steps to assist the plaintiff. The plaintiff eventually escaped the following morning.

In the underlying action, the plaintiff sued Trader Alan's alleging negligent failure to provide reasonable security against assault and negligent service of liquor to an intoxicated person who subsequently injured her. The plaintiff subsequently amended the complaint to delete the claim for dram shop liability. A judge in the Superior Court granted the plaintiff's motion for summary judgment on liability, and a hearing to assess damages followed. At the damages hearing, the plaintiff presented a psychiatrist who had expertise in posttraumatic stress disorder and rape trauma syndrome. The psychiatrist testified on the plaintiff's physical and psychological injuries resulting from the rape and the assault and battery. The judge awarded the plaintiff two million dollars in damages, apportioning seventy-five per cent of the damages to the plaintiff's physical injuries from the assault and battery and twenty-five per cent to her psychological injuries caused by the rape.

The plaintiff then filed this action against Monticello, after it refused to pay the judgment against Trader Alan's, seeking to reach and apply the limits of the policy proceeds to recover all her damages. Monticello argued that coverage was barred under one or more of the policy's three exclusions: assault and battery exclusion, absolute liquor exclusion, or illegal acts exclusion. A judge in the Superior Court (not the same judge who decided the underlying action) granted the plaintiff summary judgment, permitting her to recover from Monticello for the psychological damages attributable to the rape, but barring her from recovering damages for the assault and battery on the basis of the policy's assault and battery exclusion.¹ This appeal followed.

We turn directly to the effect of the illegal acts exclusion, which reads as follows:

"All coverage is excluded hereunder for any claim which arises wholly or in part out of allegations of violation of any federal, state, or local statute, ordinance, or law. This exclusion shall specifically include but not be limited to any sexual misconduct committed or alleged to have been committed by any Insured or Additional Named Insured."

The judge concluded that the plaintiff's recovery for the damages associated with the rape was not barred by this exclusion for three reasons. First, the judge read the exclusion to apply only to illegal acts committed by Trader Alan's or its employees, not a third party such as Harper. Second, the judge reasoned that the exclusion was not relevant because the plaintiff's claim "sound[ed] in common law negligence, not the statutory crime of rape." Finally, the judge concluded that the policy would be illusory if construed to exclude coverage for claims arising from illegal acts. The plaintiff argues that each of these grounds is correct. We agree with the defendant that none of the reasons precludes the application of the exclusion. The language on which the judge relied as the first basis for finding the exclusion inapplicable ("by any Insured or Additional Named Insured") is preceded by the general and nonexclusive phrase "includ[ing] but not be limited to." The exclusion read as a whole, by its clear and unambiguous language, does not limit its application only to the acts of those who are expressly insured, but rather operates all inclusively.² See Moriarty v. Stone, 41 Mass. App. Ct. 151, 157 (1996). See also Doe v. Superintendent of Schs. of Worcester, 421 Mass. 117, 128 (1995). By its terms, the exclusion cannot be read in the restrictive manner adopted by the judge.

We also reject the second ground relied on by the judge — that the exclusion is not relevant to the plaintiff's claim because her action is based on negligence, not on any allegation of an illegal act. The plaintiff's complaint should not be read so narrowly. The exclusion, by its express terms, applies to any claim which "arises wholly or in part out of" an illegal act. Words in exclusionary clauses of insurance contracts should be construed "in their usual and ordinary sense." Liquor Liab. Joint Underwriting Ass'n of Mass. v. Hermitage Ins. Co., 419 Mass. 316, 320 (1995), quoting Barnstable County Mut. Fire Ins. Co. v. Lally, 374 Mass. 602, 605 (1978). See United Nat'l Ins. Co. v. Parish, 48 Mass. App. Ct. 67, 70 (1999), and cases cited. The phrase "arising out of" must be read expansively, incorporating a greater range of causation than that encompassed by proximate cause under tort law. See Rischitelli v. Safety Ins. Co., 423 Mass. 703, 704 (1996); United Nat'l Ins. Co. v. Parish, supra. Indeed, cases interpreting the phrase "arising out of" in insurance exclusionary provisions suggest a causation more analogous to "but for" causation, in which the court examining the exclusion inquires whether there would have been personal injuries, and a basis for the plaintiff's suit, in the absence of the objectionable underlying conduct. Id. at 70-71. See New England Mut. Life Ins. Co. v. Liberty Mut. Ins. Co., 40 Mass. App. Ct. 722, 727 (1996) (without the underlying illegal acts there would have been no injuries, and, therefore, no basis for a lawsuit against the insureds for negligence, misrepresentation, and loss of consortium). A fair reading of the plaintiff's complaint in the underlying action indicates that her claim against Trader Alan's, and her resulting injuries, had their genesis in Harper's illegal acts. For instance, the plaintiff alleges in her complaint that "Mr. Harper brutally and viciously raped [her] for several hours and attempted to murder her." The plaintiff also alleges that the "duty" Trader's Alan breached...