Servants of Paraclete, Inc. v. Great American Ins.

Decision Date14 June 1994
Docket NumberCiv. No. 93-0236 JB.
Citation857 F. Supp. 822
PartiesThe SERVANTS OF the PARACLETE, INC., a New Mexico non-profit corporation, Plaintiff, v. GREAT AMERICAN INSURANCE COMPANY, St. Paul Fire and Marine Insurance Company, Catholic Mutual Relief Society of America, John Does I-XVI and John Does I-IV, Defendants.
CourtU.S. District Court — District of New Mexico

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Floyd Wilson, Wilson & Pryor, Albuquerque, NM, for plaintiff.

Robert Mroz, Madison, Harbour, Mroz & Puglisi, Albuquerque, NM and Jeffrey J. Bouslog, Oppenheimer, Wolff & Donnelly, St. Paul, MN, for defendant St. Paul.

David Spector, Mayer, Brown & Platt, Chicago, IL and Victor Ortega, Montgomery & Andrews, Santa Fe, NM, for defendant Catholic Mut.

Michael W. Brennan, Stephan J. Lauer, and Grey W. Handy, Carpenter, Comeau, Maldegen, Brennan, Nixon & Templeman, Santa Fe, NM, for defendant Great American.

Mark Wendorf, Reinhardt & Anderson, St. Paul, MN and Bruce Pasternack, Albuquerque, NM, for defendant John Does.

MEMORANDUM OPINION AND ORDER

BURCIAGA, Chief Judge.

THIS MATTER is before the Court on Defendant St. Paul Fire and Marine Insurance Company's ("St. Paul") December 23, 1993, motion for summary judgment, Defendant Catholic Mutual Relief Society of America's ("Catholic Mutual") January 31, 1994, motion for summary judgment on Count III, Defendant Great American Insurance Company's ("Great American") March 24, 1994 motion for summary judgment, Plaintiff's April 11, 1994, cross-motion for partial summary judgment against Great American, and Defendants John Does' April 11, 1994, cross-motion for partial summary judgment against Great American. On May 12, 1993, the Court held oral argument on these motions as well as Catholic Mutual's January 14, 1994, motion for realignment of parties and Catholic Mutual's February 24, 1994, motion for leave to file third party complaint against Royal Insurance Company of America. At the conclusion of oral argument, the Court denied Catholic Mutual's motion for realignment of parties, granted Catholic Mutual's motion for leave to file third-party complaint and took the remaining motions under advisement. This memorandum opinion and order constitutes the Court's decision as to the respective motions for summary judgment.

BACKGROUND

This is a declaratory judgment action. Plaintiff alleges the defendant insurance companies breached their respective contracts to defend and indemnify Plaintiff in numerous lawsuits seeking damages against Plaintiff for alleged sexual abuse committed by former priest James R. Porter ("Porter"). Porter was a priest with the Diocese of Fall River in Massachusetts. In 1967, he was sent to the Servants' facilities in Jemez Springs, New Mexico for treatment of pedophilia. During the course of his treatment, Porter was assigned to work as a "supply priest" in 1968 in various parishes throughout New Mexico and was similarly assigned to a church in Bemidji, Minnesota in August, 1969. At these locations, Porter allegedly sexually abused numerous parish children.

In 1992, the Servants was sued in state court actions brought by the children in Minnesota and New Mexico. John Doe I-XVI Defendants are the plaintiffs in the Minnesota actions and John Doe I-IV Defendants are the claimants in New Mexico. Plaintiff made a demand on each of the Defendants for defense and indemnification, but with the exception of Great American, which agreed to provide a defense only in the New Mexico litigation, Defendants rejected Plaintiff's demands. In November 1993, Plaintiff settled both the Minnesota and New Mexico actions and as part of the settlement, assigned to the John Does its claims against Defendants.

A motion for summary judgment may be granted only when there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Adickes v. S.H. Kress & Co., 398 U.S. 144, 157-59, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970). The movant bears the initial burden of demonstrating the absence of a genuine issue of material fact, Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986), and as a matter of law, must show entitlement to summary disposition beyond a reasonable doubt. Florom v. Elliott Mfg. Co., 867 F.2d 570, 574 (10th Cir.1989). Once the movant meets its burden, the burden shifts to the non-movant to demonstrate a genuine issue for trial on a material matter. Bacchus Indus. v. Arvin Indus. Inc., 939 F.2d 887, 891 (10th Cir.1991). The Court must view the record in a light most favorable to the existence of triable issues. Deepwater Investments Ltd. v. Jackson Hole Ski Corp., 938 F.2d 1105, 1110 (10th Cir.1991).

ST. PAUL'S MOTION FOR SUMMARY JUDGMENT

Plaintiff alleges St. Paul provided it general liability insurance coverage during some portion of the years 1969-1970 but Plaintiff is unable to locate its copy of the policy. First Amended Complaint at para. 5. St. Paul also no longer has a copy as it retains commercial liability policies for a period of three years. Plaintiff's Memorandum in Opposition to St. Paul's Motion for Summary Judgment, Ex. G.

The dates of the alleged abuse in the underlying tort actions are critical. The New Mexico claimants allege abuse by Porter in the spring and summer of 1968. The Minnesota claimants allege abuse from August 1969 through September 1970. All claimants contend it was not until 1992 that they realized the nature of their injuries. Therefore, it is undisputed that St. Paul did not insure Plaintiff during the period the New Mexico claimants were allegedly abused, whereas, if a policy existed, there was some overlap between the period of coverage and the alleged abuse of the Minnesota claimants.

St. Paul seeks an order of summary judgment that it had no duty to defend Servants in any of the underlying actions, or alternatively, an order for partial summary judgment that it had no duty to defend in the New Mexico actions.

A. Evidentiary Burden of Proof in "Lost Policy" Cases

A prerequisite to considering whether St. Paul has a duty to defend and indemnify is that there be proof of the existence and material terms of the insurance policy. Under New Mexico law, the insured bears the burden of establishing the existence and terms of the policy. Harden v. St. Paul Fire & Marine Ins. Co., 51 N.M. 55, 57, 178 P.2d 578, 579 (1947). The parties dispute whether Plaintiff must meet its burden by a "preponderance of the evidence" or "clear and convincing evidence."

The initial question is whether state or federal law controls in deciding which standard governs. St. Paul argues state law controls; Plaintiff contends federal law controls. The Court finds that under the analysis of Erie R.R. v. Thompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), the issue is a procedural matter controlled by the Federal Rules of Evidence. Remington Arms. Co. v. Liberty Mutual Ins. Co., 810 F.Supp. 1420, 1424 (D.Del.1992). Decisions cited by St. Paul applied state law to determine which party bore the burden of proving the existence and terms of a lost insurance policy, not to determine by what evidentiary standard the policy must be proved. See e.g., Bituminous Cas. Corp. v. Vacuum Tanks, Inc., 975 F.2d 1130, 1132 (5th Cir.1992) (applying Texas law to decide insured must prove terms of coverage); Abex Corp. v. Maryland Cas. Co., 790 F.2d 119, 129 (D.C.Cir.1986) (under New York law, burden on insured to prove coverage existed; UNR Indus., Inc. v. Continental Ins. Co., 682 F.Supp. 1434, 1447 (N.D.Ill.1988) (under Illinois law, insured must prove terms of policy, including exclusions); U.S. Fidelity & Guaranty Co. v. Thomas Solvent Co., 683 F.Supp. 1139, 1172 (W.D.Mich.1988) (Michigan law governs in deciding insured must prove terms of coverage).

Federal courts are split on whether to apply a preponderance of the evidence or clear and convincing standard in lost policy cases. St. Paul relies on Boyce Thompson Inst. for Plant Research, Inc. v. Insurance Co. of N. America, 751 F.Supp. 1137 (S.D.N.Y.1990) which adopted the clear and convincing standard. Boyce reasoned a heightened standard was needed because lost insurance instruments are a "common problem." Id. at 1140. Even if this assertion is correct, this Court does not find it justifies a higher standard of proof than the traditional preponderance of the evidence test in civil cases. The Court concurs with the analysis in Remington Arms Co. v. Liberty Mut. Ins. Co., 810 F.Supp. 1420 (D.Del.1992). A heightened standard of proof is required in the civil context where fraud is a concern, such as proving the existence and contents of a lost will or oral contract. Id. at 1425 (citing Wigmore, Evidence § 2498). Missing insurance policies are not similarly as vulnerable to fraud because the business records and standard forms used to prove the existence and contents of the policies are inherently more reliable than the majority of papers offered into evidence. Id. at 1425-26. The Court notes that the chain of cases relied upon in Boyce in support of the clear and convincing standard adopted it without any analysis. See Emons Indus. Inc. v. Liberty Mut. Fire Ins. Co., 545 F.Supp. 185 (S.D.N.Y.1982); Keene Corp. v. Ins. Co. of N. America, 513 F.Supp. 47 (D.D.C.1981).

St. Paul also relies on Crawford v. 733 San Mateo Co., 854 F.2d 1220 (10th Cir.1988), where the Tenth Circuit interpreted a provision of the New Mexico Uniform Commercial Code to require proof of a lost instrument by clear and convincing evidence. Id. at 1221. The provision at issue, N.M.Stat.Ann. § 55-3-804 (repealed eff. July 1, 1992) was intended to protect an obligor from potential double liability where a negotiable instrument is lost or stolen. A lost insurance policy does not raise the same concerns. Therefore, the Court concludes that Plaintiff must prove the existence and terms of the alleged St....

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