Cotton States Mutual Insurance Company v. Daniel

Filing 28

MEMORANDUM OPINION AND ORDER, granting 18] MOTION for Summary Judgment filed by Cotton States Mutual Insurance Company. Signed by Honorable William Keith Watkins on 11/20/08. (Attachments: # 1 appeals checklist)(vma, )

IN THE UNITED STATES DISTRICT COURT F O R THE MIDDLE DISTRICT OF ALABAMA E A S T E R N DIVISION C O T T O N STATES MUTUAL INS. CO., P l a in tif f , v. ROBERT STANLEY DANIEL, D e f e n d a n t. ) ) ) ) ) ) ) ) )

C A S E NO. 3:07-CV-843-WKW

M E M O R A N D U M OPINION AND ORDER Before the court is a Motion for Summary Judgment (Doc. # 18), filed by Plaintiff C o tto n States Mutual Insurance Co. ("Cotton States"). Cotton States moves for a declaratory ju d g m e n t and for summary judgment that it has no duty to defend or indemnify its insured, R o b e rt Stanley Daniel ("Mr. Daniel"), in a pending state court lawsuit brought against him. T h e motion is accompanied by a brief and evidence. (Doc. # 19.) Mr. Daniel filed a Brief in Opposition to Cotton States's Motion for Summary Judgment. (Doc. # 21.) After careful c o n s id e ra tio n of the arguments of counsel, the relevant law and the record as a whole, the c o u rt finds that the motion is due to be granted. I. JURISDICTION AND VENUE T h e court properly exercises subject matter jurisdiction over this action pursuant to 2 8 U.S.C. § 1332. The parties do not contest personal jurisdiction or venue, and the court f in d s adequate allegations of each.

I I . STANDARD OF REVIEW S u m m a ry judgment should be granted only "if the pleadings, the discovery and d is c lo s u re materials on file, and any affidavits show that there is no genuine issue as to any m a te ria l fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 5 6 (c ). Under Rule 56, the moving party "always bears the initial responsibility of informing th e district court of the basis for its motion." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1 9 8 6 ). "[T]he court must view all evidence and make all reasonable inferences in favor of th e party opposing summary judgment." Haves v. City of Miami, 52 F.3d 918, 921 (11th Cir. 1 9 9 5 ). The movant can meet this burden by presenting evidence showing that there is no g e n u in e issue of material fact, or by showing that the non-moving party has failed to present e v id e n c e in support of some element of its case on which it bears the ultimate burden of p ro o f . Celotex Corp., 477 U.S. at 322-23. O n c e the moving party has met its burden, "an opposing party may not rely merely on a lle g a tio n s or denials in its own pleading; rather, its response must ­ by affidavits or as o th e rw is e provided in this rule ­ set out specific facts showing a genuine issue for trial." F ed . R. Civ. P. 56(e)(2). To avoid summary judgment, the nonmoving party "must do more th a n simply show that there is some metaphysical doubt as to the material facts." Matsushita E le c . Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). A genuine factual dispute e x is ts if "a reasonable jury could return a verdict for the non-moving party." Damon v. F le m in g Supermarkets, Inc., 196 F.3d 1354, 1358 (11th Cir. 1999) (internal quotation marks an d citation omitted). After the nonmoving party has responded to the motion for summary

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ju d g m e n t, the court must grant summary judgment if there is no genuine issue of material fa ct and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). I I I . FACTS It is undisputed that Mr. Daniel is insured by a homeowner's policy issued by Cotton S ta te s (policy number AH00193958) and that the policy period began on November 4, 2005. (D o c . # 19 (Pl. Ex. A, Policy); Doc. # 1 (Ex. B, Declaration Page).) Mr. Daniel made a claim p u rsu a n t to this policy for defense and indemnity with regard to a lawsuit filed against him o n July 11, 2007, in the Circuit Court of Randolph County, Alabama, by Paula Yates, suing o n behalf of her minor daughter ("minor"). In response, on September 17, 2007, Cotton S ta te s brought this action, pursuant to 28 U.S.C. § 2201, for a judgment declaring that it has n o duty to defend or to indemnify Mr. Daniel in the underlying state court action. (Doc. # 1 (C o m p l. at 1)); (Doc. # 19 (Pl. Ex. B at 1, State Ct. Compl.).) The facts alleged in the state c o u rt complaint are as follows. From October 2005 to May 2007, the minor attended the Pearls of Promise Girls A c ad e m y ("academy") and El Bethel Baptist Christian School ("school"), ministries of El B e th e l Baptist Church ("church") in Roanoke, Alabama. (Pl. Ex. B ¶ 8.) While attending th e school, the minor lived in several residences on the premises of the academy, school and c h u rc h . (Pl. Ex. B ¶ 8.) Mr. Daniel was the pastor of the church and the administrator of the a c a d e m y and school. (Pl. Ex. B ¶ 3.) During the minor's enrollment, Mr. Daniel allegedly " se x u a lly molested" the minor, including "fondling" her," "kissing her," having vaginal interco u rse with her, and forcing her "to perform oral sex on him." (Pl. Ex. B ¶ 11.) Mr.

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D a n ie l also allegedly distributed to the minor "pornographic and lewd text messages and p h o to s , including photos of his genital area while in an aroused state," and left harassing and in tim id a tin g voice mails on the minor's cell phone, "vividly describ[ing] the sexual acts he in te n d e d to perform on her in the future." (Pl. Ex. B ¶ 12.) It is further alleged that Mr. D a n iel "used his position of authority and trust" to engage the minor in these "inappropriate a n d perverted acts," (Pl. Ex. B ¶ 9), and that the sexual molestation occurred "on the grounds o f the church, academy, and school." (Pl. Ex. B ¶ 13.) The complaint further sets out that M r. Daniel regularly provided the minor "with prescription drugs, including Ambien and L o ra ta b [sic]," and permitted the minor "to break the [academy's] rules and regulations," but in return "for these favors[,] inquired of [the minor] as to what she was going to do for him." (P l. Ex. B ¶ 10.) The underlying state court complaint against Mr. Daniel1 contains six counts, seeking u n s p e c if ie d compensatory and punitive damages for assault and battery (Count I), negligence a n d /o r wantonness (Count II), negligent, wanton and/or intentional infliction of emotional d is tre ss (Count III), invasion of privacy (Count IV), breach of fiduciary duty (Count V), and o u tra g e (Count VI). (Pl. Ex. B at 3-8.) Cotton States contends that all of these claims b ro u g h t against Mr. Daniel in the state court action either are not covered by the

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The church, academy and school also are named as defendants.

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h o m e o w n e r's policy or are excluded from coverage.2 Pursuant to the homeowner's policy C o tto n States issued to Mr. Daniel, Cotton States agrees that [i]f a claim is made or a suit is brought against an insured for damages b e c au s e of bodily injury or property damage caused by an occurrence to w h ich this coverage applies, we will: 1. p a y up to our limit of liability for the damages for which th e insured is legally liable; and 2. p ro v id e a defense at our expense by counsel of our c h o ice , even if the suit is groundless, false or fraudulent. W e may investigate and settle any claim or suit that we d e c id e is appropriate. Our duty to settle or defend ends w h e n the amount we pay for damages resulting from the o c c u r re n c e equals our limit of liability. (P l. Ex. A at 10 (emphasis in original).) The policy defines "bodily injury" as "bodily harm, s ic k n e ss or disease, including required care, loss of services and death that results," and " o c cu rre n c e" as "an accident, including exposure to conditions, which results, during the p o lic y period, in . . . bodily injury; or . . . property damage." (Pl. Ex. A at 1.) The policy also contains various exclusions for liability. The intentional acts

e x c lu s io n precludes coverage for "bodily injury or property damages . . . which is expected o r intended by the insured." (Pl. Ex. A at 11.) There also is a "business pursuits" exclusion, a s well as a "sexual misconduct" exclusion. (Pl. Ex. A at 11; Pl. Ex. A at 16 (Endorsement).) I V . DISCUSSION T h e summary judgment motion brings to the forefront Cotton States's duties, if any, u n d e r the homeowner's policy to defend and indemnify Mr. Daniel in the underlying state c o u r t action. Cotton States contends that Mr. Daniel fails to demonstrate that there exists a
The court notes that there is no allegation or argument by Cotton States that the acts forming the basis of the state court complaint occurred outside the policy's coverage period.
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g e n u in e issue of material fact regarding whether his acts, as alleged in the underlying state c o u rt complaint, constitute an "occurrence" under the homeowner's policy at issue. (Doc. # 19 (Pl. Summ. J. Br. at 4-5).) Alternatively, Cotton States argues that, even if Mr. Daniel's a c ts constitute an "occurrence," there is no coverage because of the policy exclusions for (1) in te n tio n a l acts, (2) sexual misconduct and (3) business pursuits. (Pl. Summ. J. Br. at 5-8.) M r . Daniel opposes all of Cotton States's arguments. (Doc. # 21 (Def. Summ. J. Resp. a t 7-15).) For the reasons set out below, the court agrees with Cotton States that it has subm itted undisputed evidence demonstrating that the exclusion for intentional acts precludes c o v e r a g e .3 T h e parties do not dispute that Alabama law governs the substantive issues in this d iv e rs ity action. An insurer's duty to defend "is determined primarily by the allegations c o n ta in e d in the complaint." Hartford Cas. Ins. Co. v. Merchs. & Farmers Bank, 928 So. 2d 1 0 0 6 , 1009 (Ala. 2005) (internal quotation marks omitted). When analyzing the allegations, " it is the facts, not the legal phraseology, that determine whether an insurer has a duty to d e f e n d its insured in the action," and if those "facts are irreconcilable with a legal theory, s u c h as `negligence,' asserted in the complaint, the facts, not the mere assertion of the legal th e o ry, determine an insurer's duty to defend." Id. at 1012. "If the allegations of the injured

Consequently, it is unnecessary for the court to decide whether these acts constitute an "occurrence," or whether coverage is excluded under the separate sexual misconduct exclusion or, more specifically, to address Mr. Daniel's argument that the applicability of the latter exclusion presents a genuine issue of material fact because the policy does not define "sexual misconduct." (Def. Summ. J. Resp. at 11-12.) For the same reason, the court need not resolve the parties' competing arguments relating to the policy's business pursuits exclusion. (Compare Pl. Summ. J. Br. at 8 with Def. Summ. J. Resp. at 13-15.)

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p a rty's complaint show an accident or an occurrence within the coverage of the policy, then th e insurer is obligated to defend, regardless of the ultimate liability of the insured." Tanner v . State Farm Fire & Cas. Co., 874 So. 2d 1058, 1063-64 (Ala. 2003) (emphasis omitted). If , though, the complaint's allegations show the non-existence of coverage, "the court is not l i m i t e d to the bare allegations of the complaint in the action against [the] insured but may lo o k to facts which may be proved by admissible evidence." Hartford Cas. Ins. Co., 928 So. 2 d at 1010 (internal quotation marks omitted). The insured bears the burden of establishing c o v e ra g e by demonstrating that a claim falls within the policy, Colonial Life & Accident Ins. C o . v. Collins, 194 So. 2d 532, 535 (Ala. 1967), while the insurer bears the burden of proving th e applicability of any policy exclusion. Universal Underwriters Ins. Co. v. Stokes

C h e v ro le t, Inc., 990 F.2d 598, 605 (11th Cir. 1993). An insurer's duty to indemnify generally must be examined independently from its d u ty to defend, Porterfield v. Audubon Indem. Co., 856 So. 2d 789, 792 (Ala. 2002), and " [ t]h e insured's conduct rather than the allegedly injured person's allegations determine w h e th e r the insurer has a duty to indemnify," Tanner, 874 So. 2d at 1066. There is an e x c e p tio n to this general rule to be discussed below. In addition to the foregoing general principles, State Farm Fire & Casualty Company v . Davis, has particular relevance in this case, given Cotton States's reliance on the policy's in te n tio n a l acts exclusion. See 612 So. 2d 458 (Ala. 1993). Davis interpreted an intentional a c ts exclusion substantively identical to the one in the case, i.e., one excluding coverage for " b o d ily injury . . . which is either expected or intended by an insured." Id. at 460. In Davis,

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th e court was confronted with a factual scenario where four mothers, suing in state court on b e h a lf of their minor daughters, sued one Jerry Davis, alleging that he sexually abused and m o le s te d their daughters, id. at 459, and Jerry Davis's wife, alleging that she breached "a d u ty to report the egregious conduct of her husband," id. at 466. The issue was whether the in s u re r, "under the terms of a homeowner's policy, was under a duty to defend its insureds in [the state court] action against its insureds alleging sexual abuse and molestation of minor c h ild re n ." Id. at 459. The Davis court explained that typically the subjective intent test applies to determine if an insured "`expected or intended' to inflict bodily injury upon another, within the meaning o f a policy's intentional acts exclusion," reiterating that [ u ]n d e r this subjective test, an injury is `intended from the standpoint of the in su re d ' if the insured possessed the specific intent to cause bodily injury to a n o th e r, whereas an injury is `expected from the standpoint of the insured' if the insured subjectively possessed a high degree of certainty that bodily injury to another would result from his or her act. Id . at 460. "In Alabama, because of this subjective intent test, whether an injury the insured in f licts upon another person is `expected or intended' from the standpoint of the insured is g e n e ra lly a question of fact for the jury or judge." Id. at 461. In Davis, however, the court "create[d] one narrow exception [to the subjective intent ru le ] in cases of sexual abuse of children" and "adopted the inferred-intent rule in child sex a b u se cases." Id. at 464. The inferred-intent rule "stands for the proposition that a person w h o sexually manipulates a minor cannot expect his insurer to cover his misconduct and c a n n o t obtain such coverage simply by saying that he did not mean any harm." Id. at 465

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( in t e rn a l quotation marks omitted). "[S]exual misconduct with a minor is objectively so s u b s ta n tia lly certain to result in harm to the minor victim, that the perpetrator cannot be a llo w e d to escape society's determination that he is expected to know that." Id. (internal q u o ta tio n marks omitted). "[I]ntent to harm," therefore, is "infer[red] . . . as a matter of law in sexual misconduct cases involving minors." Id.; see also Universal Underwriters Ins. Co., 9 9 0 F.2d at 603 ("Alabama has affirmatively adopted an irrebuttable presumption of intent to cause injury . . . in the realm of the sexual abuse and molestation of children.") (citing D a v is). Furthermore, the Davis court made clear that in a sexual abuse case, "the insurer has n o duty to indemnify the insured and no duty to defend the insured." 612 So. 2d at 465. " A lth o u g h the law in Alabama holds that an insurer's duty to defend can be broader than its d u ty to pay, we find the two duties inseparable in this type of case." Id. The court finds that Davis, the sole case upon which both parties rely to support their d iv e rg e n t positions, is controlling on the question of whether the policy's intentional acts e x c lu s io n relieves Cotton States of its duty to defend and indemnify Mr. Daniel. Mr. Daniel d o e s not dispute that the assault and battery claim in Count I "is based solely upon the alleged s e x u a l misconduct of [Mr. Daniel]" (Def. Summ. J. Resp. at 9) and, thus, upon an intentional a c t from which Mr. Daniel's intent to harm is implied as a matter of law, given the alleged v ic tim 's status as a minor. See Davis, 612 So. 2d at 464-65. In short, as to the sexual m isco n d u ct allegations, Mr. Daniel does not contest that the inferred-intent rule applies. Mr. D a n ie l also does not dispute that "[t]he alleged sexual misconduct of [Mr. Daniel] . . . m ak e[ s] up a large portion of the underlying lawsuit." (Def. Summ. J. Resp. at 13.) Mr.

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D a n ie l, however, disputes Cotton States's contention that all of the claims are based upon M r. Daniel's alleged sexual molestation of the minor. (Def. Summ. J. Resp. at 7.) Namely, h e says that the allegations that Mr. Daniel unlawfully provided prescription drugs to the m ino r are "totally separate from [Mr. Daniel's] alleged sexual misconduct" and, thus, are g o v e r n e d by the subjective intent test. (Def. Summ. J. Resp. at 10-13.) Because the s u b je c tiv e intent test presents a question of fact for the fact-finder, Davis, 612 So. 2d at 461, M r. Daniel says that this declaratory judgment action cannot be resolved at the summary ju d g m e n t stage. (Def. Summ. J. Resp. at 8.) Mr. Daniel's argument is not persuasive. T h e allegations pertaining to Mr. Daniel's supplying the minor with prescription drugs c a n n o t be read in a vacuum. The first sentence of paragraph ten in the "Statement of the F a c ts " alleges that Mr. Daniel "began providing the minor . . . with prescription drugs, in c lu d in g Ambien and Loratab [sic], on a regular basis." (Pl. Ex. B ¶ 10.) The paragraph, h o w e v e r, does not end there. The next sentence establishes that there was a quid pro quo for th e provision of prescription drugs, namely, "for these favors [Mr. Daniel] inquired of the m in o r . . . as to what she was going to do for him." (Pl. Ex. B ¶ 10.) The court finds that, f a irly read against the backdrop of the complaint as a whole, sexual acts were the quid pro q u o for the provision of prescription drugs and that these allegations clearly point to in te n tio n a l action by Mr. Daniel to subject his victim to further sexual molestation. M o re o v e r, no count in the state court complaint discusses Mr. Daniel's provision of p re sc rip tio n drugs to the minor as a claim separate or apart from the sexual molestation and

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a b u s e . To the contrary, as set out in the footnote below, each claim is built on the premise that Mr. Daniel sexually molested and abused the minor.4 M r. Daniel also suggests that the allegations pertaining to "electronic c o m m u n ic a tio n s " sent from him to the minor arguably fall outside of Davis's reach because th e fact-finder could conclude that the communications were not sexual in nature. (Def. S u m m . J. Resp. at 12-13.) As alleged, however, the allegations clearly specify intentional a c ts by Mr. Daniel to expose the minor to sexually explicit materials and messages, sp e c if ica lly, "pornographic and lewd text messages and photos, including photos of his g e n ital area while in an aroused state" and descriptions of "sexual acts he intended to p e rf o rm on [the minor] in the future." (Pl. Ex. B ¶ 12.) Indeed, Mr. Daniel concedes that the c o m m u n i ca tio n s alleged in the complaint are "sexual in nature." (Def. Summ. J. Resp. a t 11.) Thus, for the court to consider Mr. Daniel's argument, it must be supported by facts o u ts id e the complaint which are provable by admissible evidence. See Hartford Cas. Ins. C o ., 928 So. 2d at 1010. Mr. Daniel, however, has not submitted such other facts or even a rg u e d that they exist.

(See Pl. Ex. B ¶ 20 (Count II), alleging that Mr. Daniel breached his duty to protect the minor from harm by "sexually molest[ing] and abus[ing]" her); (Pl. Ex. B. ¶ 24 (Count III), alleging that Mr. Daniel "knew or should have known that [his] acts . . . in sexually molesting and abusing the minor . . . would cause [her] to suffer severe emotional distress"); (Pl. Ex. B ¶ 30 (Count IV), alleging that Mr. Daniel "forwarded voice messages, text messages, and photographs of an extremely lewd and lascivious nature" to the minor's cell phone, including photographs of Mr. Daniel's "genital area in an aroused state"); (Pl. Ex. B ¶ 35 (Count V), alleging that Mr. Daniels breached his fiduciary duty to the minor by "sexually molest[ing] and abus[ing]" her and by "thereafter forward[ing] lewd and lascivious messages and photographs" to the minor); (Pl. Ex. B ¶ 39 (Count VI), alleging that Mr. Daniel caused the minor "to suffer physical and emotional distress in other such manners as alleged [in the complaint]").)

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F in a lly, while the argument is not entirely clear, to the extent that Mr. Daniel is saying th a t the claims for negligence (Count II) and negligent infliction of emotional distress (Count III) are sufficient to support an "occurrence" under the terms of the policy (see Def. Summ. J . Resp. at 13-14), the court disagrees.5 To ascertain whether Cotton States owes Mr. Daniel a duty to defend, the court focuses on the factual allegations in the complaint, not on the legal th e o rie s asserted. See Hartford Cas. Ins. Co., 928 So. 2d at 1011. The facts that form the b a sis of these two claims are Mr. Daniel's intentional acts of "sexually molesting and a b u sin g " the minor. (Pl. Ex. B ¶ 24 (Count III); accord Pl. Ex. B ¶ 20 (Count II).) As p lead ed , the minor's alleged "physical injury," "emotional distress and mental anguish" are th e direct result of Mr. Daniel's intentional and sexually abusive acts, and are not caused by a n y negligent act on the part of Mr. Daniel.6 There is no uncertainty from these alleged facts; M r. Daniel's alleged conduct was intentional. The claims for negligence, therefore, do not b rin g the allegations outside the scope of the intentional acts exclusion. See Hartford Cas. In s . Co., 928 So. 2d at 1012. In sum, reading the underlying state court complaint as a whole, the court finds that a ll claims are premised on Mr. Daniel's intentional acts of sexually molesting and abusing

Incidentally, the court notes that Alabama law does not recognize a cause of action for negligent infliction of emotional distress. Gideon v. Norfolk S. Corp., 633 So. 2d 453, 453-54 (Ala. 1994). Davis's holding pertaining to coverage for the wife lends support to the court's conclusion. There, the wife argued "that she should be afforded coverage because she was not accused of any intentional act, but only a breach of a duty to report the egregious conduct of her husband." Davis, 612 So. 2d at 466. Rejecting the argument, the Supreme Court of Alabama held that the intentional acts exclusion precluded coverage for the wife "for harm directly attributable to the intentional conduct of her husband, Jerry Davis." Id.
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t h e minor and, thus, are couched entirely within the policy's intentional acts exclusion. M o re o v e r, because the complaint alleges that Mr. Daniel engaged in sexual misconduct with a child, Davis's inferred-intent rule applies, and Cotton States's duty to defend is coextensive w ith its duty to indemnify. It follows that there are no disputed issues of material fact re g a rd in g whether there is coverage in this case. Consequently, Cotton States owes neither a duty to defend nor a duty to indemnify Mr. Daniel, and summary judgment is due to be en tered in Cotton States's favor. V . CONCLUSION For the foregoing reasons, it is ORDERED that Plaintiff Cotton States Mutual Insurance C o.'s Motion for Summary Judgment (Doc. # 18) on its complaint for declaratory judgment is G R A N TED . An appropriate judgment will be entered. DONE this 20th day of November, 2008. /s/ W. Keith Watkins UNITED STATES DISTRICT JUDGE

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