Fire Ins. Exchange v. Diehl

Decision Date19 March 1996
Docket NumberNo. 100985,No. 10,100985,10
Citation450 Mich. 678,545 N.W.2d 602
Parties, 64 USLW 2622 FIRE INSURANCE EXCHANGE, Plaintiff-Appellant, v. Mary Ann DIEHL, Individually and as Next Friend of Evelyn Diehl, a Minor, Defendant-Appellees, and Clifford Buckmaster, Michelle Buckmaster, and Nathan Buckmaster, Defendants. Calendar
CourtMichigan Supreme Court

Harvey, Kruse, Westen & Milan by Michael F. Schmidt, Evelyn C. Tombers and Maurice A. Borden, Troy, for plaintiff.

Campbell, Keenan, Harry, Cooney & Karlstrom, P.C. by C. Daniel Harry, Clarkston, for defendants.

BRICKLEY, Chief Justice.

In this case we decide if a homeowner's insurance policy covers the injury resulting from a child actor's requests for the child victim to perform fellatio and the child victim's acquiescence. We find that the policy may cover the incidents if a jury finds that the injury resulting from the child actor's conduct was not reasonably foreseeable to a child of like age, ability, intelligence, and experience under like circumstances.

Reaching this conclusion, we find that if the policy excludes coverage for intentional acts where the result is "reasonably foreseeable," reasonable foreseeability for an insured child should be judged under a mixed objective-subjective standard.

As a separate holding, we also decline to infer, as a matter of law, that child actors intend the harm that results from their sexual assault of a victim. 1 The inference is inappropriate because children, as a group, do not have the capacity to understand the consequences of their sexual acts.

Facts

On two distinct occasions the male child actor requested the victim to perform fellatio and the victim complied. At the time of the first incident, the child actor was about six or seven years old. At the time of the second incident, the child actor was nine years old. The victim is younger than the actor. Neither party disputes that the child actor intended the act.

The child actor's deposition testimony emphasizes that, although the child actor intended his acts, he was unaware that the acts could hurt.

Q. Did you have any idea that you would be hurting [the victim]?

A. No.

Q. Did you ever mean to hurt [the victim]?

A. No.

Q. [The victim] was your friend, wasn't she?

A. Yes.

Q. Did you have any idea that you may be hurting [the victim] in her head?

A. No.

Q. Did you have any idea whether or not you were hurting [the victim] on her body?

A. No.

Testifying about the second incident the child actor still maintained that he did not know he was hurting the victim.

Q. All right. Did you know you were hurting [the victim] then?

A. No.

Q. Did you mean to hurt [the victim] in any way then?

A. No.

The victim's mother learned of the assaults and brought a civil action for physical and emotional damages against the child actor and his parents. Separately, Fire Insurance Exchange (plaintiff), who covered the actor and the actor's parents under a homeowner's policy, filed this action, seeking a declaratory judgment that the company was under no duty either to defend or indemnify the assailant or the assailant's parents in the action arising from the sexual assaults. Plaintiff based its summary judgment motion on the terms of the homeowner's policy.

Plaintiff asserted that the child actor's acts were not covered because the policy only covered injury that was "neither expected nor intended by the insured," and because the policy excluded coverage for intentional acts. The intentional-acts exclusion was based on the foreseeability of harm that resulted from such acts. Plaintiff also argued that, despite the child actor's assertions that he did not intend to hurt the child victim, the court must infer the child actor's intent to injure the victim as a matter of law. The trial court granted plaintiff's motion for summary disposition on the basis of the intentional-acts exclusion. The trial court ruled that the intentional-acts exclusion applied because a reasonable adult could have foreseen the harm that resulted from the acts.

The Court of Appeals reversed. It declined to impose on a minor the objective standard of foreseeability used by the trial court. Instead, it interpreted the intentional-acts exclusion to require a mixed objective-subjective standard of foreseeability. It announced this standard as being whether "a reasonable child of like age, ability, intelligence, and experience under like circumstances" would have foreseen the harm. Fire Ins. Exchange v. Diehl, 206 Mich.App. 108, 119, 520 N.W.2d 675 (1994). The Court arrived at this standard by adapting the negligence standard for minors to the concept of foreseeability. Id. It also refused to infer as a matter of law that the child actor intended to injure the victim. Id. at 118, 520 N.W.2d 675.

The Insurance Policy

This Court must now address plaintiff's motion for summary judgment by deciding if plaintiff's policy would cover sexual assaults by minors where a minor intends the act but is unaware that harm could result. An insurance policy is a contract between the parties. To decide whether a policy covers a particular act, the court must determine what the parties agreed to in the policy. Auto-Owners Ins. Co. v. Churchman, 440 Mich. 560, 566, 489 N.W.2d 431 (1992). To determine what the parties agreed to, the court applies a two-part analysis. In the first part, the court must decide if the occurrence section of this policy includes a particular act. If so, the court then must decide if coverage is denied under one of the policy's exclusions. Heniser v. Frankenmuth Mut. Ins., 449 Mich. 155, 172, 534 N.W.2d 502 (1995).

We find that the occurrence section of this policy includes the assaults in this case. The policy states:

[Fire Insurance Exchange] shall pay all damages from an occurrence which the insured is legally liable to pay because of bodily injury or property damage covered by this policy. At our expense we shall defend an insured against any covered claim or suit. We may investigate and settle any claim or suit that we consider proper.

The policy also provides a definition of "occurrence."

[A] sudden event, including continuous or repeated exposure to the same conditions, resulting in bodily injury or property damage neither expected nor intended by the insured.

Therefore, the policy covers the present assaults if the injuries were "neither expected nor intended by the insured."

Because, in this case, the child actor intended the acts but did not intend the injuries, we must determine whether the phrase "neither expected nor intended by the insured" excludes broad policy coverage for all injuries if the injuries were objectively intended, or whether the phrase only excludes coverage for injuries subjectively intended by the insured. In Allstate Ins. Co. v. Freeman, 432 Mich. 656, 709, 443 N.W.2d 734 (1989), a majority of this Court held that the following policy required the use of an objective standard:

We do not cover any bodily injury or property damage which may reasonably be expected to result from the intentional or criminal acts of an insured person or which is in fact intended by an insured person.

Comparatively, a majority of this Court held that the following policy exclusion required the use of a subjective standard:

[The policy excludes b]odily injury or property damage which is either expected or intended from the standpoint of the insured. [Id. at 708, 443 N.W.2d 734.] (See also opinions by ARCHER, CAVANAGH, and LEVIN, JJ.)

Explaining the distinction, Justice BOYLE noted that the first policy required an objective standard because, of the two exclusionary phrases in the policy, the first exclusionary phrase applied to injury "reasonably" expected, and the policy counterpoised the first exclusionary phrase to the second phrase that applied if the injury was "in fact intended." Therefore, the first phrase must require application of an objective standard or the word "reasonably" loses its meaning and the second exclusionary phrase is redundant. Id. at 709, 443 N.W.2d 734. On the other hand, the policy exclusion from the second policy did not contain the word "reasonably," but instead employed the phrase "from the standpoint of the insured." This language required application of a subjective standard. Id.

The language of plaintiff's policy places the policy somewhere between the two policies at issue in Freeman. Although the policy does not employ the term "reasonably," the phrase "from the standpoint of the insured" is also absent. Yet, even without these aids we find that the definition of "occurrence" in plaintiff's policy also requires the application of a subjective standard. The policy states that it applies to "bodily injury ... neither expected nor intended by the insured." (Emphasis added.) The manner in which the policy employs the phrase "by the insured" suggests that the emphasis of the policy is on whether the insured expected or intended the injury.

Additionally, in Auto-Owners Ins. Co. v. Churchman, 440 Mich. 560, 567-568, 489 N.W.2d 431 (1992), a majority of this Court held that a policy exclusion for injury " 'expected or intended by an insured person,' is unambiguous and requires a subjective intent...." We find no substantial difference between the policy exclusion language in Churchman and the disputed phrase in plaintiff's policy's definition of "occurrence." Therefore, we hold that the definition of "occurrence" in plaintiff's policy requires the application of a subjective standard. Because there is no evidence at this stage in the trial that the child actor subjectively intended the harm that resulted from the assaults, summary judgment on the basis of the policy's definition of "occurrence" is denied.

Intentional-Acts Exclusion

The Court must next consider whether the policy's intentional-acts exclusion denies coverage for the assaults at issue. The intentional-acts exclusion has two parts.

We do not...

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