Doe v. Liberty Mut. Fire Ins. Co., CIVIL ACTION NO. 3:18-CV-1513

• Decision Date: 13 September 2019
• Docket Number: CIVIL ACTION NO. 3:18-CV-1513
• Parties: JOHN DOE 1, et al., Plaintiffs, v. LIBERTY MUTUAL FIRE INS. CO., Defendant.
• Court: U.S. District Court — Middle District of Pennsylvania

JOHN DOE 1, et al., Plaintiffs, v. LIBERTY MUTUAL FIRE INS. CO., Defendant.

CIVIL ACTION NO. 3:18-CV-1513

UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA

September 13, 2019

(JUDGE MARIANI)

(Magistrate Judge Carlson)

MEMORANDUM OPINION

I. INTRODUCTION AND PROCEDURAL HISTORY

Presently before the Court is a Report and Recommendation ("R&R") (Doc. 17) by Magistrate Judge Martin C. Carlson in which he recommends that the Motion of Defendant, Liberty Mutual Fire Insurance Company, to Dismiss the Complaint (Doc. 6), be granted (Doc. 17 at 17). The Complaint at issue is a declaratory judgment action in which Plaintiffs, who are also the plaintiffs in a state court action, seek a declaration that Defendant Liberty Mutual Fire Insurance Company ("Liberty Mutual") has a duty to defend and indemnify the defendants in the state court action who were insured by Liberty Mutual at the relevant time. (Doc. 2 at 4-12.) Magistrate Judge Carlson's recommendation is based on his conclusion that Defendant has no duty to defend or indemnify the insureds under the policy at issue based on both the policy's general liability coverage provisions and the sexual molestation exclusion contained in the policy. (Doc. 17 at 9-16.)

A District Court may "designate a magistrate judge to conduct hearings, including evidentiary hearings, and to submit to a judge of the court proposed findings of fact and recommendations for the disposition" of certain matters pending before the Court. 28 U.S.C. § 636(b)(1)(B). If a party timely and properly files a written objection to a Magistrate Judge's Report and Recommendation, the District Court "shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made." Id. at § 636(b)(1)(C); see also Fed. R. Civ. P. 72(b)(3); M.D. Pa. Local Rule 72.3; Brown v. Astrue, 649 F.3d 193, 195 (3d Cir. 2011). "If a party does not object timely to a magistrate judge's report and recommendation, the party may lose its right to de novo review by the district court." EEOC v. City of Long Branch, 866 F.3d 93, 99-100 (3d Cir. 2017). However, "because a district court must take some action for a report and recommendation to become a final order and because the authority and the responsibility to make an informed, final determination remains with the judge, even absent objections to the report and recommendation, a district court should afford some level of review to dispositive legal issues raised by the report." Id. at 100 (internal citations and quotation marks omitted).

Plaintiffs timely filed objections to the R&R (Doc. 18) and a brief in support of the objections (Doc. 19). Defendant filed a response to the objections (Doc. 20), and Plaintiffs filed a reply (Doc. 21). Therefore, this matter is ripe for disposition.

Having conducted the required de novo review, the Court agrees with the R&R's conclusion that the Motion of Defendant, Liberty Mutual Fire Insurance Company, to Dismiss the Complaint (Doc. 6), should be granted. However, because the Court adds to the analysis set out in the R&R, the Court will adopt the R&R as modified.

II. BACKGROUND

A. Factual and Procedural Background

In accordance with the standard of review for a motion to dismiss, the Court relies primarily on Plaintiffs' recitation of facts contained in their brief in opposition to the pending motion (Doc. 9 at 6-8). The factual assertions in Plaintiffs' brief reference those contained in their complaint in the underlying state court action. (Id. at 7-8.) Reference to the underlying state court complaint is appropriate because "[a] carrier's duty to defend and indemnify an insured in a suit brought by a third party depends upon a determination of whether the third party's complaint triggers coverage," Mutual Benefit Insurance Co. v. Haver, 555 Pa. 534, 725 A.2d 743, 745 (1999).

Procedurally, Plaintiffs initiated the instant action on June 29, 2018, by filing a Declaratory Judgment Complaint in the Court of Common Pleas of Lackawanna County against Defendant. (Doc. 2.) Plaintiffs state that they have filed this Declaratory Judgment Complaint

seeking judgment from the Court that Defendant has a duty to defend D.H. and minor N.H. in the action brought against them filed to term number 16-CV-9198 in the Court of Common Pleas of Monroe County. Plaintiffs areinterested parties and thus necessary parties to the subject declaratory judgment action.

(Doc. 9 at 6-7.)

On July 30, 2018, Defendant filed a Notice of Removal to the United States District Court for the Middle District of Pennsylvania based on diversity jurisdiction. (Doc. 1.) On August 1, 2018, Defendant filed the Motion of Defendant, Liberty Mutual Fire Insurance Company, to Dismiss the Complaint (Doc. 6) and supporting brief (Doc. 7), asserting that the underlying Monroe County complaint shows that it has no duty to defend or indemnify the defendants in that action.

In their responsive brief (Doc. 9), Plaintiffs assert that

[t]he underlying action arises out of serious injuries sustained by Plaintiff John Doe, 1, a minor, an incident that occurred on or about June 27, 2015. See a true and correct copy of the December 9, 2016 Complaint hereto as "Exhibit B," at ¶4. On that date, John Doe 1 was visiting minor N.H. at 1256 Chateau Drive, 4b, East Stroudsburg, PA 18301, which was the residence owned by minor N.H.'s mother D.H.. Id. On the aforementioned date and at all times pertinent hereto, John Doe 1 and [N.H.] were under the supervision and control of D.H.. Id., at ¶5. On that date, while John Doe 1 was visiting with minor N.H., minor N.H. sexually abused John Doe 1, who was five (5) years old at the time, causing substantial harm, both mental and physical, to John Doe 1. Id., at ¶6. Minor Plaintiff John Doe 1 was too young to have given any consent and minor N.H.'s abuse was in fact unwanted and has caused substantial harm to Minor Plaintiff John Doe 1. Id., at ¶7. Minor N.H. also forced John Doe 1 to watch pornographic videos. Id., at ¶8. As a result of the incident, John Doe 1, has suffered great emotional distress resulting in anxiety, self-aggression, stomachaches, decreased appetite, sleep disruption, and shock to his nerves and nervous system, all of which caused him, continue to cause him and will/may cause him for an indefinite time in the future, great pain, agony and suffering, both physical and mental. Id., at ¶9.

On December 9, 2016, Plaintiffs filed the underlying Complaint against minor N.H. and his mother D.H. in the Court of Common Pleas of Monroe County, docketed to the term number 16-CV-9198. The Complaint alleges three (3) counts of negligence, three (3) counts of battery, three (3) counts of negligent infliction of emotion distress and three (3) counts of punitive damages. Id. The Complaint alleges that Plaintiff John Doe 1 suffered serious injuries arising out of the acts of D.H. and minor N.H. occurring at their household. Id., at ¶¶9-13. Specifically, the Complaint alleges that Plaintiff John Doe 1 suffered great emotional distress resulting in anxiety, self-aggression, stomachaches, decreased appetite, sleep disruption, and shock to his nerves and nervous system, all of which caused him, continue to cause him and will/may cause him for an indefinite time in the future, great pain, agony and suffering, both physical and mental. Id., at ¶9.

(Doc. 9 at 7-8.)

As set out above, the pending R&R recommends that the Court grant Defendant's motion. (Doc. 17 at 17.)

B. Insurance Policy

Defendant's "LibertyGuard Deluxe Homeowners Policy" ("Policy") number H32-281-299495-40 issued to D.H. was in effect from September 5, 2015, to September 5, 2016. The policy contains the following relevant definitions: "'Bodily Injury' means bodily harm, sickness or disease, including required care, loss of services and death that results"; and "'Occurrence' means an accident, including continuous or repeated exposure to substantially the same general harmful conditions, which results, during the policy period, in: a. 'Bodily injury'; or b. 'Property damage'." (Doc. 6-3 at 7 (Policy Definitions).)

Section II of the Policy addresses "Liability Coverages" wherein Coverage E for "Personal Liability" sets out the following in pertinent part:

If a claim is made or a suit is brought against an "insured" for damages because of "bodily injury" or "property damage" caused by an "occurrence" to which this coverage applies, we will:

1. Pay up to our limit of liability for the damages for which the "insured" is legally liable. . . . ; and

2. Provide a defense at our expense by counsel of our choice even if the allegations are groundless, false or fraudulent.

(Doc. 6-3 at 17 (Policy COVERAGE E).)

Section III of the Policy identifies "Exclusions" and states as follows in relevant part: "Coverage E - Personal Liability and Coverage F - Medical Payments to Others do not apply to 'bodily injury' or 'property damage': . . . k. Arising out of sexual molestation, corporal punishment or physical or mental abuse.'" (Doc. 6-3 at 11, 12.) An Amendatory Endorsement in the Policy states the following:

Item 1.a. under Coverage E - Personal Liability and Coverage F - Medical Payments to Others is amended as follows:

For "bodily injury" or "property damage" that results from or may reasonably be expected to result, from the intentional or criminal acts or omissions of an "insured," even if it

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

(2) is sustained by a different person, entity, real or personal property, than initially expected or intended.

However, this exclusion does not apply to "bodily injury" resulting from the use of reasonable force to protect persons or property.

(Doc. 6-3 at 36 (Policy Amendatory Endorsement).)

III. LEGAL STANDARD

A complaint must be dismissed under Federal Rule of Civil Procedure 12(b)(6) if it does not allege "enough facts to state a claim to relief that is plausible on its...