Scottsdale Ins. Co. v. Children's Home Soc'y of N.C., Inc.
| Decision Date | 03 July 2013 |
| Docket Number | NO. 5:12-CV-81-FL,5:12-CV-81-FL |
| Court | U.S. District Court — Eastern District of North Carolina |
| Parties | SCOTTSDALE INSURANCE COMPANY, Plaintiff, v. CHILDREN'S HOME SOCIETY OF NORTH CAROLINA, INC. and RONALD E. FORD, SR., Administrator of the Estate of Sean Paddock, Defendants. |
This matter comes before the court on the parties' cross-motions for summary judgment, (DE 34, 38, 41). All motions have been fully briefed, and issues raised are ripe for ruling. For the reasons that follow, the court will grant plaintiff's motion for summary judgment, and deny defendants' motions.
This action between plaintiff Scottsdale Insurance Company and defendants Children's Home Society of North Carolina, Inc. ("CHSNC") and Ronald E. Ford, Sr., Administrator of the Estate of Sean Paddock ("the Estate") (collectively "defendants") arises out of a lawsuit filed in the Johnston County Superior court in 2008 ("the underlying lawsuit"). In the underlying lawsuit, the Estate filed a third amended complaint on February 15, 2012, against CHSNC and Johnny and Lynn Paddock ("the Paddocks," not a party to this lawsuit) for personal injury and wrongful death claimsarising out of the death of Sean Paddock, a minor.
Plaintiff - who provided CHSNC with insurance policies ("the Policies") effective during the time of relevant events in the underlying lawsuit - filed complaint for declaratory judgment in this court on February 21, 2012. Plaintiff seeks a declaration that the only indemnity coverage it owes to CHSNC in the underlying lawsuit falls under the relevant policies' Sexual and/or Physical Abuse Liability Coverage Form. CHSNC answered and counterclaimed on March 16, 2012, and the Estate likewise answered and counterclaimed on March 19, 2012. On March 22, 2012, the Estate filed an amended answer and counterclaim.
On May 8, 2012, the Estate filed a fourth amended complaint in the underlying lawsuit. With consent of plaintiff in this action, on May 10, 2012, CHSNC filed an amended answer and counterclaim, and the Estate filed a second amended answer and counterclaim. Defendants seek a declaration that coverage arises under other provisions of the policies. On June 6, 2012, plaintiff filed a motion for summary judgment. CHSNC filed its own for summary judgment on June 29, 2012, and the Estate also filed a motion for summary judgment on June 30, 2012.
The material facts of this case are not in dispute, and are as follows.
In the Estate's fourth amended complaint - attached to plaintiff's motion for summary judgment as Exhibit B - it alleges that CHSNC "is in the business of assisting in the arrangement of adoptions in return for payments from the state and/or county departments of social services." Pl.'s Ex. B. ¶ 6. The Estate further alleges that CHSNC had an active role in placing Sean Paddock and his siblings (referred to in Exhibit B as "the Ford children") in the Paddocks' home in January2005. Id. at ¶¶ 62-71. After this time, Sean Paddock and his siblings were placed with the Paddocks under supervision of a Wake County Human Services employee on March 11, 2005. Id. at ¶ 94. Sean Paddock and his siblings were formally adopted by the Paddocks on July 22, 2005. Id. at ¶ 17.
The Estate alleges that from January 2005, until Sean Paddock's death in February 2006, the Paddocks repeatedly abused him in numerous ways, including: beating him with a variety of objects; telling him nobody loved him; kicking and pushing him around the house; forcing him to stand in a small confined area ("the puppet stand") which prevented him from being able to see or interact with anyone else, and keeping him there most of the day; showing him toys but not allowing him to play with them; forcing him to eat his own feces; and tightly binding him in blankets and placing heavy objections on him at nights so the he could not move (which the Paddocks referred to as "the mummy style"), sometimes wrapping his face in duct tape. Id. at ¶¶ 99-101, 113-115. On the evening of February 25, 2006, Sean Paddock was allegedly bound in the mummy style with his head and mouth bound in duct tape, causing his death by asphyxiation. Id. at ¶¶ 118-119.
The Estate alleges that CHSNC was negligent in its conduct during the adopting process of Sean Paddock and his siblings, including in failing to discover facts and circumstances that should have been discovered in the exercise of reasonable care and which would have prevented the Paddocks' adoption of Sean Paddock and his siblings. Id. at ¶ 132. The Estate further alleges that such negligence was a proximate cause of the numerous injuries Sean Paddock suffered, and of his death. Id. at ¶¶ 133-138.
Plaintiff issued to CHSNC a general liability policy, No. CLS1068579, with an effective period of January 21, 2005, to January 21, 2006 (the "First Policy"). Plaintiff later issued a renewedpolicy, No. CLS106857901, for the period of January 21, 2006, to January 21, 2007, with terms identical to the First Policy (the "Second Policy" together with the First Policy, "the Policies"). The Policies contain numerous forms, and relevant to this matter are the Commercial General Liability Coverage Form, the Errors and Omissions Coverage Part, the Sexual and/or Physical Abuse Exclusion endorsement ("the SPAE"), and the Sexual and/or Physical Abuse Liability Coverage Form ("the SPAL").
The Commercial General Liability Coverage Form contains various coverage provisions. Material to this case is "Coverage A" which provides for coverage of up to one million dollars ($1,000,000.00) per occurrence and three million dollars ($3,000,000.00) in the aggregate for sums CHSNC becomes legally obligated to pay as damages because of, among other things, "bodily injury" to which the policy applies. See Pl.'s Ex. A, 7. "Bodily injury" is defined as "bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time." Id. at 18. Also material is "Coverage B" which provides for coverage of up to one million dollars ($1,000,000.00) which CHSNC becomes legally obligated to pay as damages because of "personal and advertising injury" to which the policy applies, caused by an offense arising out of CHSNC's business if such offense was committed in the "coverage territory," including the United States, during the effective period of the policy. See id. at 11-12, 18. "Personal and advertising injury" is defined to include "injury, including consequential 'bodily injury', arising out of . . . False arrest, detention or imprisonment." Id. at 20.
In the Errors and Omissions Coverage Part of the policies, plaintiff agrees to pay sums CHSNC becomes liable to pay as damages due to an "error or omission" to which the policy applies. See id. at 32. Coverage is limited to one millions dollars ($1,000,000.00) per claim and threemillion dollars ($3,000,000.00) aggregate. See id. "Error or omission" is defined to mean "any negligent act, error or omission while performing any services normal to the business of the insured." Id. at 37.
The Policies also include a number of other exclusions. Particularly relevant to this litigation is the SPAE, which provides, in pertinent part, as follows.
This endorsement modifies insurance provided under:
COMMERCIAL GENERAL LIABILITY COVERAGE PART
Finally, the Policies included the SPAL, which, in exchange for an additional premium charged, provides for coverage of one hundred thousand dollars ($100,000.00) per claim and three hundred thousand dollars ($300,000.00) aggregate "only with respect to Sexual and/or Physical Abuse Liability as indicated." Id. at 26. Sexual and/or Physical Abuse for purposes of coverage under the SPAL is defined as "sexual or physical injury or abuse, including assault and battery, negligent or deliberate touching."
Summary judgment is appropriate where "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a); see also Anderson v. Liberty Lobby, 477 U.S. 242, 247-48 (1986) (). The party seeking summary judgment bears the initial burden of demonstrating the absence of any genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once the moving party has met its burden, the nonmoving party then must affirmatively demonstrate with specific evidence that there exists a genuine issue of material fact requiring trial. Matsushita Elec. Indus. Co. Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986).
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