A.S. et al v. Horace Mann Insurance Company

Filing 22

MEMORANDUM OPINION AND ORDER DISMISSING CASE that defendant's motion for summary judgment and its motion for entry of summary judgment are GRANTED and all claims are DISMISSED with prejudice; Costs are taxed to plaintiffs as more fully set out in order. Signed by Judge C Lynwood Smith, Jr on 7/8/2013. (AHI )

FILED
2013 Jul-08 AM 10:50
U.S. DISTRICT COURT
N.D. OF ALABAMA

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ALABAMA
NORTHEASTERN DIVISION
A.S., a minor, by and through her
natural parents and next friend, J.S.
and R.S, et al.,
Plaintiffs,
vs.
HORACE MANN INSURANCE
COMPANY,
Defendant.

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Civil Action No. CV-12-S-271-NE

MEMORANDUM OPINION AND ORDER
Plaintiffs, A.S., J.S., and R.S., commenced this action in the Circuit Court of
Madison County, Alabama, against defendant, Horace Mann Insurance Company.1
Defendant removed the case to this court on January 25, 2012.2 Plaintiffs assert a
single claim pursuant to Section 27-23-2 of the Alabama Code, under which a plaintiff
can “reach and apply” insurance proceeds to satisfy a prior judgment against an
insurance policyholder.3 Plaintiffs had previously settled an action they brought in
Madison County Circuit Court against William Reaves, and a consent judgment was

1

See doc. no. 1-2 (Complaint).

2

See doc. no. 1 (Notice of Removal).

3

Doc. no. 1-2 (Complaint) ¶¶ 2-12.

entered against Reaves.4 Reaves, who was a teacher at the time of the events giving
rise to this suit, had an insurance policy with defendant through the Alabama
Educational Association, and defendant denied Reaves’s claim for coverage in the
underlying litigation.5 Plaintiffs’ complaint asserts that Reaves’s insurance policy
with defendant provided coverage in the full amount of the settlement.6
The case is now before the court of defendant’s motion for summary judgment.7
Plaintiffs have not responded to the motion, despite the fact that it was filed over two
months ago. Consequently, defendant has filed a “motion for entry of summary
judgment.”8 Upon consideration, the motions are due to be granted.
I. STANDARD OF REVIEW
Federal Rule of Civil Procedure 56 provides that summary judgment must be
granted “if 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). In
other words, summary judgment is proper “after adequate time for discovery and upon

4

See doc. no. 19-1 (Defendant’s Summary Judgment Brief) ¶¶ 2, 5; doc. no. 20-3 (Complaint
in A.S. et al. v. Reaves, et al., No. CV-2005-217 (Mad. Co. Ala. Cir. Ct., Feb. 2, 2005)); doc. no. 205 (Settlement Agreement).
5

See doc. no. 20-2 (Insurance Policy), at 1-2; see also doc. no. 19-1 (Defendant’s Summary
Judgment Brief) ¶ 6; doc. no. 20-1 (Affidavit of Kaye Green) ¶¶ 1-2.
6

Doc. no. 1-2 (Complaint) ¶ 9.

7

Doc. no. 17.

8

Doc. no. 21.

2

motion, against a party who fails to make a showing sufficient to establish the
existence of an element essential to that party’s case, and on which that party will bear
the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).9
According to the court’s Uniform Initial Order, “material facts set forth in the
statement [of facts] required of the moving party will be deemed to be admitted for
summary judgment purposes unless controverted by the response of the party
opposing summary judgment.”10 See also Fed. R. Civ. P. 56(e)(2) (permitting such
action by the court). Plaintiffs in this case have not filed a brief or evidence in
opposition to defendant’s motion for summary judgment. Even so,
the district court cannot base the entry of summary judgment on the mere
fact that the motion was unopposed, but, rather, must consider the merits
of the motion. See Dunlap v. Transamerica Occidental Life Ins. Co.,
858 F.2d 629, 632 (11th Cir.1988) (per curiam). The district court need
not sua sponte review all of the evidentiary materials on file at the time
the motion is granted, but must ensure that the motion itself is supported
by evidentiary materials. See id. At the least, the district court must
review all of the evidentiary materials submitted in support of the motion
for summary judgment.
United States v. One Piece of Real Property, 363 F.3d 1099, 1101-02 (11th Cir. 2004).
Importantly, “there is no burden upon the district court to distill every potential
9

Rule 56 was amended, effective December 1, 2010, in conjunction with a general overhaul
of the Federal Rules of Civil Procedure. The Advisory Committee was careful to note, however, that
the changes “will not affect continuing development of the decisional law construing and applying
these phrases.” Adv. Comm. Notes to Fed. R. Civ. P. 56 (2010 Amends.). Consequently, cases
interpreting the previous version of Rule 56 are equally applicable to the revised version.
10

Doc. no. 12 (Uniform Initial Order), at 15.

3

argument that could be made based upon the materials before it on summary
judgment. Rather, the onus is upon the parties to formulate arguments.” Solutia, Inc.
v. McWayne, Inc., 672 F.3d 1230, 1239 (11th Cir. 2012).
II. FACTUAL BACKGROUND
A.S., who suffers from a mental disability, was enrolled in fifth-grade special
education classes at Madison County Elementary School during the 2002-2003 school
year.11 William Ford Reaves was one of A.S.’s teachers.12 Sometime during the
2002-2003 term, the school held a “Kite Day” outdoors for the students.13 After
students and teachers were outside for the festivities, Reaves approached A.S. and
convinced her to accompany him to his private office inside the school building.14
Once inside his office, Reaves locked the door and began rubbing A.S’s arms, legs,
and back.15 A.S. asked Reaves to stop, but instead he forced her onto a couch and
raped her.16 During the course of his heinous act, Reaves also threatened to kill A.S.’s
11

See doc. no. 19-1 (Defendant’s Summary Judgment Brief) ¶ 2; doc. no. 20-4 (Deposition
of A.S.), at 58, 150; doc. no. 20-6 (Deposition of William Ford Reaves), at 170-71.
12

Doc. no. 20-4 (Deposition of A.S.), at 58; doc. no. 20-6 (Deposition of William Ford
Reaves), at 169-70.
13

See doc. no. 19-1 (Defendant’s Summary Judgment Brief) ¶ 2; doc. no. 20-4 (Deposition
of A.S.), at 59-61, 63.
14

See doc. no. 19-1 (Defendant’s Summary Judgment Brief) ¶ 2; doc. no. 20-4 (Deposition
of A.S.), at 63, 66-69, 158.
15

Doc. no. 20-4 (Deposition of A.S.), at 73, 75-76, 92; see also doc. no. 19-1 (Defendant’s
Summary Judgment Brief) ¶ 2.
16

Doc. no. 20-4 (Deposition of A.S.), at 51, 79, 86-87, 92-93; see also doc. no. 19-1
(Defendant’s Summary Judgment Brief) ¶ 2.

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parents and “trash” her house.17
A.S. suffered nightmares and stomach sickness as a result of the rape.18 Soon
after the incident, she transferred to a different school.19 Eventually, she revealed her
ordeal to two friends, as well as in a letter addressed to her deceased brother.20 The
friends took A.S. to speak with a school guidance counselor, at which point she
recounted the rape to the counselor and another teacher.21
In February of 2005, A.S. and her parents, J.S. and R.S., sued Reaves, as well
as numerous other individuals or entities, in the Circuit Court of Madison County,
Alabama, for state law claims arising out of the rape.22 The defendant in the present
case, Horace Mann Insurance Company, provides insurance to members of the
Alabama Educational Association (“AEA”).23 Reaves was a member of the AEA.24

17

Doc. no. 20-4 (Deposition of A.S.), at 93, 159; see also doc. no. 19-1 (Defendant’s
Summary Judgment Brief) ¶ 2.
18

Doc. no. 20-4 (Deposition of A.S.), at 178.

19

Doc. no. 20-4 (Deposition of A.S.), at 42, 161, 167-68; see also doc. no. 19-1 (Defendant’s
Summary Judgment Brief) ¶ 2.
20

Doc. no. 20-4 (Deposition of A.S.), at 128-29, 132-34; see also doc. no. 19-1 (Defendant’s
Summary Judgment Brief) ¶ 2.
21

Doc. no. 20-4 (Deposition of A.S.), at 128-30, 132-35, 140, 179; see also doc. no. 19-1
(Defendant’s Summary Judgment Brief) ¶ 2.
22

Doc. no. 19-1 (Defendant’s Summary Judgment Brief) ¶ 2; see doc. no. 20-3 (Complaint
in A.S. et al. v. Reaves, et al., No. CV-2005-217 (Mad. Co. Ala. Cir. Ct., Feb. 2, 2005)).
23

See doc. no. 20-2 (Insurance Policy), at 1-2; see also doc. no. 19-1 (Defendant’s Summary
Judgment Brief) ¶ 6; doc. no. 20-1 (Affidavit of Kaye Green) ¶ 1.
24

Doc. no. 20-1 (Affidavit of Kaye Green) ¶ 1; see also doc. no. 19-1 (Defendant’s Summary
Judgment Brief) ¶ 6.

5

Accordingly, defendant furnished Reaves with a defense attorney in the underlying,
state-court case, and paid other costs associated with that litigation.25 However,
defendant denied liability coverage for Reaves’s actions, did not direct Reaves’s
defense, and refused to participate in settlement discussions of the underlying case.26
Defendant opined to Reaves in a March 7, 2005 letter that, as a matter of law, the
allegations in the underlying complaint fell outside the scope of its liability coverage.27
The insurance policy at issue covers losses “sustained by the Insured by reason
of liability imposed by law for damage caused by an occurrence in the course of the
Insured’s educational employment activities.”28 The policy defines “educational
employment activities” as activities performed by the insured:
1.

pursuant to the express or implied terms of his or her employment
by an educational unit;

2.

at the express request or with the express approval of his or her
supervisor, provided that, at the time of such request or approval,
the supervisor was performing what would appear to be his or her
educational employment activities within the meaning of Part
II(E)(1); or

25

Doc. no. 20-1 (Affidavit of Kaye Green) ¶ 2; doc. no. 20-5 (Settlement Agreement) ¶ 6;
doc. no. 20-8 (Letter of Mar. 7, 2005 from Attorney for Horace Mann Insurance Company to
William Reaves), at 1, 6; see also doc. no. 19-1 (Defendant’s Summary Judgment Brief) ¶ 6.
26

Doc. no. 20-1 (Affidavit of Kaye Green) ¶ 2; doc. no. 20-5 (Settlement Agreement) ¶¶ 6,
11; see also doc. no. 19-1 (Defendant’s Summary Judgment Brief) ¶ 6.
27

Doc. no. 20-8 (Letter of Mar. 7, 2005 from Attorney for Horace Mann Insurance Company
to William Reaves), at 4-5.
28

Doc. no. 20-2 (Insurance Policy), at 3 (boldface emphasis in original).

6

3.

as a member of a state board or commission which has as its
primary purpose the licensure or certification of educators, or the
setting of standards for such licensure or certification.29

The policy excludes from its liability coverage “intentional damages,” defined as
“[o]ccurrences involving damages which are the intended consequences of action
taken by the Insured or at the Insured’s direction.”30
On April 6, 2009, Reaves reached a settlement agreement in the underlying case
with A.S. and her parents that provided for the entry of a consent judgment in the
amount of $1,000,000.31 The agreement noted that Reaves “informed the plaintiffs
that Horace Mann has completely denied coverage or any obligation to pay any of the
claims or damages asserted by the plaintiffs in” the underlying action. It also
memorialized plaintiffs’ belief “that the Horace Mann insurance policy provides
coverage for Reaves,” and that they intended to pursue claims against defendant.32
To that end, A.S. and her parents commenced this action against defendant in
the Circuit Court of Madison County, Alabama, on December 21, 2011.33 As
previously noted, defendant removed the case to this court on January 25, 2012;34
29

Id. at 2 (boldface emphasis in original).

30

Id. at 4 (alteration and italicized emphasis supplied, boldface emphasis in original).

31

Doc. no. 20-5 (Settlement Agreement) ¶ 1; see also doc. no. 19-1 (Defendant’s Summary
Judgment Brief) ¶ 5.
32

Doc. no. 20-5 (Settlement Agreement) ¶ 6.

33

See doc. no. 1-2 (Complaint).

34

See doc. no. 1 (Notice of Removal).

7

defendant then moved for summary judgement on May 1, 2013; and, plaintiffs have
not filed a response.35 Defendant subsequently filed a “motion for entry of summary
judgment” on June 10, 2013, arguing that plaintiffs’ failure to respond constitutes
abandonment of their claims.
III. ANALYSIS
A.

Subject Matter Jurisdiction Under 28 U.S.C. § 1332
The court considers its subject matter jurisdiction sua sponte. This case was

removed on the basis of 28 U.S.C. § 1332,36 which requires complete diversity of
citizenship between the parties. Plaintiffs are residents of Alabama.37 Defendant’s
notice of removal stated that it is a citizen of Illinois because it is incorporated in that
state and maintains its principal place of business there.38 It is frequent legal
shorthand to say that “[f]or purposes of the diversity statute, a corporation is a citizen
of the state where it is incorporated and the state where it has its principal place of
business,” Crockett v. Securitas Security Services USA, Inc., 278 F. App’x 863, 864

35

Doc. no. 17. The court’s Uniform Initial Order commands that the “responsive submission
of the party opposing the motion for summary judgment shall be filed not later than 21 days after
the motion for summary judgment is filed.” Doc. no. 12 (Uniform Initial Order), at 12.
Additionally, the court specifically ordered plaintiffs to respond to the motion for summary
judgment on or before May 24, 2013. See Margin Order of May 2, 2013. Despite those orders,
plaintiffs have not filed a response.
36

See doc. no. 1 (Notice of Removal).

37

Id. ¶ 7.

38

Id. ¶ 8.

8

(11th Cir. 2007) (per curiam), but 28 U.S.C. § 1332 also provides that:
in any direct action against the insurer of a policy or contract of liability
insurance, whether incorporated or unincorporated, to which action the
insured is not joined as a party-defendant, such insurer shall be deemed
a citizen of . . . every State and foreign state of which the insured is a
citizen.
28 U.S.C. § 1332(c)(1)(A) (emphasis supplied).
If that provision does not apply, then defendant is deemed a citizen of Illinois,
and complete diversity of citizenship exists. See 28 U.S.C. § 1332.
On the other hand, if that provision does apply, then defendant is deemed to be
a citizen of whichever state Reaves, the insured, is a citizen. Reaves was a citizen of
Alabama in 2005 when the underlying action was filed,39 and a similar conclusion in
this case would destroy the diversity of citizenship. But the record does not reveal the
citizenship of Reaves at the time this case was removed. See Burns v. Windsor
Insurance Co., 31 F.3d 1092, 1097 n.13 (11th Cir. 1994) (noting that jurisdictional
facts are assessed at the time of removal). Thus, if § 1332(c)(1)(A) applies, the court
must order discovery on that issue to ensure that it has subject matter jurisdiction.
The application of § 1332(c)(1)(A) turns upon whether this case is a “direct
action.” It is not. The court agrees with the analysis recently provided by Judge Kristi
DuBose in Armentrout v. Atlantic Casualty Insurance Co., 731 F. Supp. 2d 1249 (S.D.
39

Doc. no. 20-3 (Complaint in A.S. et al. v. Reaves et al., No. CV-2005-217 (Mad. Co. Ala.
Cir. Ct., Feb. 2, 2005)) ¶ 4.

9

Ala. 2010):
In Fortson v. St. Paul Fire and Marine Ins. Co., 751 F.2d 1157 (11th Cir.
1985), the Court looked at the legislative intent behind the enactment of
28 U.S.C. § 1332(c):
That section was enacted by Congress in order to eliminate
the basis for diversity jurisdiction in states that allow an
injured third-party claimant to sue an insurance company
for payment of a claim without joining the company’s
insured as a party, where the insured would be a
non[-]diverse party, even though the party insurance
company would otherwise be diverse.
Id. at 1159 (citing Hernandez v. Travelers Ins. Co., 489 F.2d 721, 723
(5th Cir.) cert. denied, 419 U.S. 844, 95 S. Ct. 78, 42 L. Ed.2d 73
(1974)). The Hernandez opinion from which Fortson derived the above
statement, however, states in relevant part:
Congress intended that wherever a party claiming to have
suffered injuries or damage for which another is legally
responsible is entitled to sue the other’s liability insuror
[sic] without joining the insured and without having first
obtained a judgment against the insured, the insurer shall
be deemed a citizen of the State of which the insured is a
citizen as well as of any State by which the insurer has been
incorporated and of the State where it has its principal place
of business, for the purposes of determining whether
diversity jurisdiction exists.
Hernandez, 489 F.2d at 722 (emphasis added) (citing Vines v. United
States Fidelity & Guaranty Co., 267 F. Supp. 436 (E.D. Tenn.1967)).
Armentrout, 731 F. Supp. 2d at 1254. Judge DuBose then observed that § 27-23-2
of the Alabama Code — i.e., the statute at issue in this case — clearly “requires that

10

a plaintiff obtain a final judgment against an insured before suing an insurer.” Id. at
1255 (emphasis supplied); see also id. at 1254; Ala. Code § 27-23-2 (1975) (2007
Replacement Vol.) (conditioning a suit against the insurer “[u]pon the recovery of a
final judgment against” the insured). Consequently, a suit based upon that statute is
not a “direct action” against the insurer, and § 1332(c)(1)(A) does not apply.
Armentrout, 731 F. Supp. 2d at 1254-55.
That result holds even if, contrary to Judge DuBose’s analysis, Fortson did not
adopt Hernandez’s requirement that, in order to be a direct action against an insurer,
the suit must have been initiated “without having first obtained a judgment against the
insured.” Hernandez, 489 F.2d at 722. Hernandez is binding precedent in this
Circuit. See Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981)
(adopting as binding precedent all decisions of the former Fifth Circuit rendered prior
to September 30, 1981). To the extent Fortson and Hernandez are in tension,
Hernandez controls. “[W]hen circuit authority is in conflict, a panel should look to
the line of authority containing the earliest case.” Walker v. Mortham, 158 F.3d 1177,
1188 (11th Cir. 1998); see also id. at 1188-89 (referring to the rule as “emphatic” and
“firmly established in the Eleventh Circuit”). Indeed, that rule follows inexorably
from Eleventh Circuit authority stating that only an en banc panel or the U.S. Supreme
Court can overrule a prior panel’s decision. United States v. Archer, 531 F.3d 1347,
11

1352 (11th Cir. 2008); Bonner, 661 F.2d at 1209. In other words, the Fortson panel
did not have the authority to overrule Hernandez’s conclusion that a suit against an
insurer is not a direct action when a judgment was first obtained against the insured.
In summary, this case is not a “direct action” within the meaning of 28 U.S.C.
§ 1332(c)(1)(A). As a result, defendant is a citizen of Illinois, complete diversity of
citizenship between the parties exists, and the court has subject matter jurisdiction.
Accordingly, the court proceeds to the merits of defendant’s motion for summary
judgment.
B.

The Insurance Policy Does Not Cover Reaves’s Rape of A.S.
The Alabama statute at the center of this case provides:
Upon the recovery of a final judgment against any person . . . by any
person . . . for loss or damage on account of bodily injury . . . if the
defendant in such action was insured against the loss or damage at the
time when the right of action arose, the judgment creditor shall be
entitled to have the insurance money provided for in the contract of
insurance between the insurer and the defendant applied to the
satisfaction of the judgment, and if the judgment is not satisfied within
30 days after the date when it is entered, the judgment creditor may
proceed against the defendant and the insurer to reach and apply the
insurance money to the satisfaction of the judgment.

Ala. Code § 27-23-2 (1975) (2007 Replacement Vol.) (emphasis supplied). For the
statute to apply, Reaves must have been covered within the meaning of defendant’s
insurance policy at the time he raped A.S. Defendant offers two reasons why

12

Reaves’s actions were not covered by the policy: rape is not an “educational
employment activity”; and, damages resulting from intentional acts are excluded from
coverage. Both arguments have merit.
Section II.E.1 of the insurance policy defines “educational employment
activities” as activities undertaken by the insured “pursuant to the express or implied
terms of his or her employment by” a school district.40 In Horace Mann Insurance
Co. v. Fore, 785 F. Supp. 947 (M.D. Ala. 1992), the Middle District of Alabama
considered whether an identical insurance policy provision covered a teacher’s sexual
abuse of three special education students. Id. at 948-49. The opinion in Fore noted
that “it is intuitively obvious that sexual abuse is not an activity concerned with
education,” and then found “no Alabama authority that disputes this eminently
reasonable conclusion.” Id.
Six years later, the Alabama Court of Civil Appeals confronted another case of
sexual abuse by a teacher that also involved a definition of “educational employment
activities” identical to the one in Fore and in this case. See Horace Mann Insurance
Co. v. D.A.C., 710 So. 2d 1274, 1275 (Ala. Civ. App. 1998). The Court approvingly
quoted the Fore opinion before adopting its analysis, and noting that “no Alabama
authority . . . dispute[s Fore’s] conclusion.” Id. (alteration supplied). Indeed, the
40

Doc. no. 20-2 (Insurance Policy), at 2. The policy also provides alternative definitions in
Sections II.E.2-3, but neither of those provisions are implicated on these facts.

13

holdings in Fore and D.A.C. align with the well-established general principle that
“sexual misconduct by an employee is purely personal and outside the line and scope
of his employment.” Doe v. Swift, 570 So. 2d 1209, 1211 (Ala. 1990); see also
Anonymous v. Lyman Ward Military Academy, 701 So. 2d 25, 27 (Ala. Civ. App.
1997). This court restates what should be obvious: a teacher’s rape of a student is not
an “educational employment activity,” i.e., an act undertaken pursuant to the express
or implied terms of the teacher’s employment with a school district.

Thus,

defendant’s insurance policy did not cover Reaves’s rape of A.S. and, as a result,
plaintiffs’ claim under § 27-23-2 cannot succeed.
Additionally, the policy at issue does not cover “intentional damages,” i.e.,
“[o]ccurrences involving damages which are the intended consequence of action taken
by the insured or at the insured’s direction.”41 In State Farm Fire and Casualty Co.
v. Davis, 612 So. 2d 458 (Ala. 1993), the Alabama Supreme Court considered whether
similar language in a different policy barred liability coverage in a child sex abuse
case. Id. at 459. The Court adopted an “inferred-intent rule” in sexual abuse cases,

41

Id. at 4 (alteration supplied). The policy contains three exceptions to that exclusion for:
allegations of corporal punishment; allegations of civil rights violations; and the existence of
evidence indicating that the insured’s actions were not the intended consequence of his actions. Id.
But those exceptions either do not apply on these facts or fail as a matter of law. See Horace Mann
Insurance Co. v. McGee, 840 F. Supp. 875, 878-79 (M.D. Ala. 1994) (concluding that the second
and third exceptions are rendered inapplicable by State Farm Fire and Casualty Co. v. Davis, 612
So. 2d 458 (Ala. 1993)).

14

whereby an insured’s “intent to injure is inferred [from the insured’s sexually abusive
actions] as a matter of law regardless of claimed intent.” Id. at 463-64 (alteration and
emphasis supplied). As a result, the Court held that the insurance policy excluded
from coverage the insured’s sexual molestation of four female minors. Id. at 459,
464-65. Applying the inferred-intent rule articulated in Davis to this case, Reaves is
deemed by operation of law to have intended to injure A.S.

See Universal

Underwriters Insurance Co. v. Stokes Chevrolet, Inc., 990 F.2d 598, 603 n.10 (11th
Cir. 1993) (“Alabama has affirmatively adopted an irrebuttable presumption of intent
to cause injury . . . in the realm of the sexual abuse and molestation of children.”).
Therefore, his actions are excluded from liability coverage, and plaintiffs’ claims
cannot succeed. See Horace Mann Insurance Co. v. McGee, 840 F. Supp. 875, 877-78
n.4 (M.D. Ala. 1994) (applying Davis to identical policy language, and holding that
the “intentional damages” exclusion precludes coverage).
IV. CONCLUSION AND ORDER
For all the foregoing reasons, defendant’s motion for summary judgment and
its “motion for entry of summary judgment” are GRANTED,42 and all claims are
DISMISSED with prejudice. Costs are taxed to plaintiffs. The clerk is directed to
close this file.
42

Doc. no. 17; doc. no. 21.

15

DONE and ORDERED this 8th day of July, 2013.
______________________________
United States District Judge

16