Jessica M.F. v. Liberty Mut. Fire Ins. Co.

• Decision Date: 06 November 1996
• Docket Number: No. 95-3547,95-3547
• Citation: 561 N.W.2d 787,209 Wis.2d 42
• Parties: JESSICA M.F., a minor, Amy L.F., a minor, Jennifer F., a minor, and Becky L.F., a minor, by their Guardian Ad Litem, David M. SKOGLIND, David W.F. and Diane J.F., Plaintiffs- Appellants, d v. LIBERTY MUTUAL FIRE INS. CO., Preferred Risk Mutual Ins. Co., State Farm Fire & Casualty Co. and All West Insurance Company, Defendants-Respondents, Residence Mutual Insurance Company, FFF Insurance Company, GGG Insurance Company and Richard J.H., 1 Defendants. . Oral Argument
• Court: Wisconsin Court of Appeals

Page 787

561 N.W.2d 787

209 Wis.2d 42

JESSICA M.F., a minor, Amy L.F., a minor, Jennifer F., a minor, and Becky L.F., a minor, by their Guardian Ad Litem, David M. SKOGLIND, David W.F. and Diane J.F. Plaintiffs- Appellants, ^d v. LIBERTY MUTUAL FIRE INS. CO., Preferred Risk Mutual Ins Co., State Farm Fire & Casualty Co. and All West Insurance Company, Defendants-Respondents Residence Mutual Insurance Company, FFF Insurance Company GGG Insurance Company and Richard J.H., ¹ Defendants.

No. 95-3547.

Court of Appeals of Wisconsin.

Oral Argument Nov. 6, 1996.

Opinion Released Feb. 18, 1997.

Opinion Filed Feb. 18, 1997.

For the plaintiffs-appellants there were briefs by Warshafsky, Rotter, Tarnoff, Reinhardt & Bloch, S.C., with Edward E. Robinson and David M. Skoglind of Milwaukee, and oral argument by Edward E. Robinson.

For the defendants-respondents All West Ins. Co. there were briefs by Kasdorf, Lewis & Swietlik, S.C., with James M. Ryan and Vicki L. Arrowood of Milwaukee, and oral argument by James M. Ryan.

For the defendants-respondents Liberty Mut. Fire Ins. Co. there were briefs by Borgelt, Powell, Peterson & Frauen, S.C., with W. Ted Tornhel and Stephen M. Compton of Milwaukee, and oral argument by Stephen M. Compton.

For the defendants-respondents Preferred Risk Mut. Ins. Co. there were briefs and oral argument by Paulson, Hankel & Bruner, S.C., with Edward J. Bruner, Jr. of Racine.

For the defendants-respondents State Farm Fire & Cas. Co. there were briefs by Querrey & Harrow, Ltd., with Russell M. Ware of Racine, and Michael Resis of Chicago, IL, and oral argument by Russell M. Ware.

Before WEDEMEYER, P.J., and SCHUDSON and CURLEY, JJ.

SCHUDSON, Judge.

Jessica M.F., Amy L.F., Jennifer F., and Becky L.F. (the grandchildren), by their guardian ad litem, and their parents, David W.F. and Diane J.F., appeal from the trial court order granting summary judgment to Liberty Mutual Fire Insurance Company, Preferred Risk Mutual Insurance Company, State Farm Fire & Casualty Company, and All West Insurance Company. In the coverage phase of their bifurcated suit against their grandfather and his homeowner insurance companies, the grandchildren, together with their parents, sought to establish coverage under their grandparents' homeowner policies for alleged injuries they suffered as a result of their grandfather's alleged sexual assaults.

On appeal, the grandchildren and their parents do not challenge the trial court's conclusion that the policies' intentional-acts exclusions preclude coverage for the alleged intentional acts of the grandfather. They do contend, however, that the trial court erred in concluding that the policies provide no coverage for the alleged negligent conduct of the grandmother. We conclude that the intentional-acts exclusions ² also preclude coverage for the grandmother's conduct and, accordingly, we affirm.

I. BACKGROUND

The complaint ³ alleges that for several years prior to 1993, the grandfather ⁴ "had sexual contact and engaged in sexually explicit conduct" with each of the four grandchildren. The complaint also alleges that the grandmother: ⁵

knew or, in the exercise of reasonable care, should have known that [grandfather] was engaging in sexual contact and engaging in sexually explicit conduct with [the grandchildren]. [Grandmother] was negligent in, among other things, failing to prevent [grandfather] from committing such acts and/or in taking appropriate steps to protect [the grandchildren]. That such negligence of [grandmother] was a substantial factor in causing [the grandchildren] damages including, but not limited to, severe pain and suffering and mental anguish in the past, which in all probability will last permanently into the future.

The insurance companies ⁶ offered various arguments in support of their motions for summary judgment. All invoked the intentional-acts exclusion and severability clause of their respective policies. ⁷ Preferred Risk and Liberty Mutual also opposed coverage based on their sexual misconduct exclusions. The insurance companies also weaved public policy theories into several of their arguments.

Granting summary judgment to the insurance companies on the coverage issue, the trial court concluded:

Although the plaintiffs maintain that it is not clear that [grandfather] intended to harm the children, the intent to injure or harm is inferred by the law because the sexual assault of a minor is so certain to result in injury or harm that the law infers an intent to injure on behalf of an actor without regard to his or her claimed intent....

Therefore, since intentional acts are not covered under homeowner policies and sexual misconduct with a minor infers [sic] intent, the homeowner insurance companies for [grandfather] have no liability.

Although the plaintiffs maintain that [grandmother] should be held liable for not preventing the acts of [grandfather], case law and public policy prevent a homeowner's policy for being used to pay for sexual assaults. Moreover, [grandmother] would have no liability if it were not for the intentional acts of [grandfather]. As such, she has no homeowner's coverage because [grandfather] is prevented under each homeowner insurance policy from protection for intentional actions of which sexual conduct with a minor is inferred.

II. STANDARDS OF REVIEW

Summary judgment is appropriate if the pleadings and submissions establish "that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Section 802.08(2), STATS. ⁸ Whether to grant summary judgment presents a question of law we review de novo. Kelli T-G. v. Charland, 198 Wis.2d 123, 128, 542 N.W.2d 175, 177 (Ct.App.1995).

The interpretation of an insurance policy also presents a question of law we review independently of the trial court. Smith v. Atlantic Mut. Ins. Co., 155 Wis.2d 808, 810, 456 N.W.2d 597, 598 (1990). The interpretation of an insurance policy is governed by the general principles of contract construction. Kuhn v. Allstate Ins. Co., 193 Wis.2d 50, 60, 532 N.W.2d 124, 128 (1995). "We are to read insurance policies to further the insured's reasonable expectations of coverage while meeting the intent of both parties to the contract." Tara N. v. Economy Fire & Casualty Ins. Co., 197 Wis.2d 77, 88, 540 N.W.2d 26, 31 (Ct.App.1995). Further, "[a]n exclusionary clause in an insurance contract is strictly construed against the insurer. However, an insurance contract must also be interpreted to mean what a reasonable person in the position of the insured would have understood the words of the contract to mean." Id. at 90, 540 N.W.2d at 32.

Consistent with these fundamental principles of insurance law, and based on a growing body of persuasive case law addressing issues of homeowner insurance coverage for sexual abuse, we conclude that a reasonable person would understand that if he or she "knew or, in the exercise of reasonable care should have known" of a spouse's sexual abuse of children, a homeowner insurance policy's intentional-acts exclusion will preclude coverage.

III. ANALYSIS

On appeal, the appellants accept that the intentional-acts exclusions preclude insurance coverage for the grandfather's alleged intentional sexual abuse of the grandchildren. They contend, however, that those same exclusions do not preclude coverage for the alleged actions--and/or inactions--of the grandmother because each policy also includes a "severability" clause. Thus, the appellants maintain, the conduct of each insured must be viewed separately and, therefore, the exclusion of coverage for the grandfather's intentional acts does not preclude coverage for the grandmother's negligent acts. We conclude, however, that the intentional-acts exclusions also preclude coverage for the grandmother. ⁹

A. Homeowner insurance coverage for sexual abuse--Wisconsin case law

First, it will be helpful to summarize recent Wisconsin case law on homeowner insurance coverage for sexual abuse in order to locate the instant case in this rapidly developing area.

In 1988, reviewing summary judgment in K.A.G. v. Stanford, 148 Wis.2d 158, 434 N.W.2d 790 (Ct.App.1988), this court concluded "that acts of sexual molestation against a minor are so certain to result in injury to that minor that the law will infer an intent to injure on behalf of the actor without regard to his or her claimed intent." K.A.G., 148 Wis.2d at 165, 434 N.W.2d at 793. We held, therefore, that a policy's intentional-acts exclusion precluded coverage for the offender. In dicta, we also commented that the trial court's "viable alternative analysis" was "based upon sound legal principles"--that "no reasonable person would expect a homeowner's insurance policy to provide coverage for damages resulting from his sexual misconduct, especially when the language in the intentional act exclusion would alert a reasonable person that injury inflicted intentionally is not subject to coverage." Id., 148 Wis.2d at 165-166, 434 N.W.2d at 793.

In 1989, reversing a trial court's denial of a judgment notwithstanding the verdict in Hagen v. Gulrud, 151 Wis.2d 1, 442 N.W.2d 570 (Ct.App.1989), this court built upon both the holding and dicta of K.A.G., and concluded that where a homeowner policy contained an intentional-acts exclusion but "did not express an intention as to sexual assault coverage, we look to the reasonable expectations of" the parties. We concluded "that a person purchasing homeowner's insurance would not expect that he or she was insuring his or her children against liability for their sexual assaults" and, accordingly, we held that the offender's mother's policy provided no coverage. Id., 151 Wis.2d at 7, 442 N.W.2d at 573.

In 1990, reviewing summary judgment in N.N. v. Moraine Mutual Insurance Co., 153 Wis.2d 84, 450 N.W.2d 445 (1990), the supreme court, building further on K.A.G., concluded that despite an offender's claim of...