American Family Mutual Insurance Company v. McCowan et al
OPINION AND ORDER: GRANTING in part American Family's motion for summary judgment (DE #44) as to the allegations against Dustin McCowan; otherwise DENIES American Family's motion for summary judgment; MOVES for summary judgment against defe ndants; and GRANTS the parties 30 days from the date of this order in which to file any argument or evidence that they believe is relevant to the court's analysis regarding whether or not American Family is entitled to summary judgment as to Joseph McCowan on the basis of the violation of law exclusion. Signed by Senior Judge James T Moody on 2/16/17. (ksp)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
AMERICAN FAMILY MUTUAL
DUSTIN McCOWAN, et al.,
No. 2:14 CV 46
OPINION and ORDER
Defendants William and Sandra Bach (the “Bachs”) were the parents of Amanda
Bach. Amanda died on September 16, 2011, as a result of a gunshot wound. (DE ## 12
at 3, 46-5 at 2.) On February 26, 2013, Defendant Dustin McCowan was convicted of the
murder of Amanda. (DE # 46-3.)
At the time of Amanda’s death, Dustin resided at the household of his parents:
Amy McCowan and Defendant Joseph McCowan. (DE # 46-7 at 6.) American Family
Mutual Insurance Company (“American Family”) issued a homeowners policy of
insurance (the “Policy”) to Amy and Joseph McCowan for their residence in Valparaiso,
Indiana. (DE # 46-1.) The Policy was in force on the date of Amanda’s death. (DE # 461.)
In the summary that follows, the court refers only to undisputed facts, or, if
there is a dispute, notes that it exists and relies on the version of the facts, or inference
therefrom, that is most favorable to the non-moving parties. This summary provides an
overview. Additional relevant undisputed facts will be referred to in the analysis that
The Policy, written by American Family, provided liability coverage as follows:
Coverage D— Personal Liability Coverage. We will pay, up
to our limit, compensatory damages for which any insured is
legally liable because of bodily injury or property damage
caused by an occurrence covered by this policy.
Defense Provision. If a suit is brought against any insured
for damages because of bodily injury or property damage
caused by an occurrence to which this policy applies, we will
provide a defense at our expense by counsel of our choice.
We will defend any suit or settle any claim for damages
payable under this policy as we think proper.
(DE # 46-1 at 12.) The Policy defines “bodily injury” as “bodily harm, sickness or
disease. It includes resulting loss of services, required care and death.” (Id. at 4.) The
Policy defines “occurrence” as “an accident, including exposure to conditions, which
results during the policy period in” (a) bodily injury; or (b) property damage. (Id.)
Additionally, “[i]nsured means you and, if residents of your household: (1) your
relatives; and (2) any other person under the age of 21 in your care or in the care of your
resident relatives.” (Id.)
Furthermore, the Policy contains certain exclusions from liability coverage:
Coverage D— Personal Liability and Coverage E— Medical
Expense do not apply to:
10. Intentional Injury. We will not cover bodily injury or
property damage caused intentionally by or at the direction
of any insured even if the actual bodily injury or property
damage is different than that which was expected or
intended from the standpoint of the insured.
17. Violation of Law. We will not cover bodily injury or
property damage arising out of . . . violation of any criminal
law for which any insured is convicted.
(DE # 46-1 at 14.)
On March 28, 2013, the Bachs filed a lawsuit against Dustin and Joseph
McCowan in the Porter County Superior Court. (DE # 46-5.) In the lawsuit, the Bachs
allege that Dustin McCowan negligently, carelessly, recklessly, and/or intentionally
shot Amanda Bach. (Id. at 3.) They also allege Joseph McCowan negligently failed to
secure his firearms, one of which was used to shoot Amanda Bach. (Id. at 4.)
On February 14, 2014, American Family filed a complaint against Dustin
McCowan, Joseph McCowan, and the Bachs in this court. (DE # 1.) American Family
seeks a declaratory judgment stating, in essence, that it has no obligations under the
Policy as to the actions of Dustin and Joseph McCowan which are the subject of the
lawsuit filed by the Bachs. (See id.)
On July 31, 2015, American Family moved for summary judgment. (DE # 45.)
Joseph McCowan filed a response to the motion (DE # 50) as did the Bachs (DE # 51).
American Family filed a single reply addressing the responses. (DE # 54.) The motion is
ripe for ruling.
Plaintiff has moved for summary judgment. Federal Rule of Civil Procedure 56
requires the entry of summary judgment, after adequate time for discovery, 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). “[S]ummary judgment is
appropriate—in fact, is mandated—where there are no disputed issues of material fact
and the movant must prevail as a matter of law. In other words, the record must reveal
that no reasonable jury could find for the non-moving party.” Dempsey v. Atchison,
Topeka, & Santa Fe Ry. Co., 16 F.3d 832, 836 (7th Cir. 1994) (citations and quotation marks
The moving party bears the initial burden of demonstrating that these
requirements have been met. Carmichael v. Village of Palatine, Ill., 605 F.3d 451, 460 (7th
Cir. 2010). “[T]he burden on the moving party may be discharged by ‘showing’—that is,
pointing out to the district court—that there is an absence of evidence to support the
nonmoving party’s case.” Celotex, 477 U.S. at 325. Once the moving party has met his
burden, the non-moving party must identify specific facts establishing that there is a
genuine issue of fact for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986);
Palmer v. Marion County, 327 F.3d 588, 595 (7th Cir. 2003) (citing Celotex, 477 U.S. at 324).
In doing so, the non-moving party cannot rest on the pleadings alone, but must present
fresh proof in support of its position. Anderson, 477 U.S. at 248; Donovan v. City of
Milwaukee, 17 F.3d 944, 947 (7th Cir. 1994). In viewing the facts presented on a motion
for summary judgment, the court must construe all facts in a light most favorable to the
non-moving party and draw all reasonable inferences in favor of that party. Chmiel v. JC
Penney Life Ins. Co., 158 F.3d 966 (7th Cir. 1998).
In the context of declaratory judgment actions, “[w]hen the basis of jurisdiction is
diversity, most courts rely on the applicable state law to determine which party
shoulders the burden of proving the facts.” Am. Nat’l Fire Ins. Co. v. Rose Acre Farms,
Inc., 911 F. Supp. 366, 369 (S.D. Ind. 1995). In Indiana, the party seeking the judgment in
an action for declaratory judgment carries the burden of proof. Sans v. Monticello Ins.
Co., 718 N.E.2d 814, 819 (Ind. Ct. App. 1999). Here, American Family bears the initial
burden of showing that no genuine issue of material fact remains.
In their lawsuit, the Bachs allege that Dustin McCowan shot Amanda Bach, and
this caused a bodily injury resulting in her death. (DE # 46-5 at 2.) In its motion for
summary judgment, American Family argues that it is not required to provide coverage
to Dustin for any potential liability resulting from that injury, due to the terms of the
Policy. (DE # 45 at 6–9.) Under the Policy, any relative of the named insured is also
insured if he or she resides at the covered household. (DE # 46-1 at 4.) It is undisputed
that Dustin was a resident of his parents’ household at the time of the shooting, and
therefore Dustin is also an insured. (See DE # 46-7 at 6.) Nevertheless, American Family
contends that the Policy does not apply here for two reasons: (1) Dustin’s actions were
not an “occurrence” as defined in the Policy; and (2) liability coverage for Dustin is
excluded under the intentional injury and violation of law exclusions. (DE # 45 at 6–9.)
Regarding the first of these two arguments, the Policy only provides liability
coverage for injuries caused by “occurrences,” which the Policy defines as accidents.
(DE # 46-1 at 4, 12.) The Policy does not define the word “accident” but the Indiana
Supreme Court has held that “implicit in the meaning of ‘accident’ is the lack of
intentionality.”2 Auto Owners Ins. Co. v. Harvey, 842 N.E.2d 1279, 1283 (Ind. 2006).
American Family argues that Dustin’s murder conviction establishes his conduct
was intentional, and therefore collateral estoppel bars any argument that his actions
constitute an accidental occurrence. (DE # 45 at 6–8.) On the other hand, the Bachs
argue that collateral estoppel does not apply. (DE # 51 at 3–4.)
However, the court need not reach the issue of whether or not Dustin’s actions
were intentional. Even if Dustin’s conviction does not necessitate a finding of
intentionality, it certainly triggers the Policy’s violation of law exclusion. That exclusion
states that American Family will not provide personal liability coverage for bodily
injury “arising out of . . . violation of any criminal law for which any insured is
convicted.” (DE # 46-1 at 14.) There is no dispute that Dustin was convicted of murder.
(DE # 46-3.) To the extent that Dustin caused the fatal bodily injury to Amanda Bach, as
described in the Bachs’ claim against Dustin, that injury arose out of Dustin’s violation
of the law. Thus, the exclusion applies and American Family need not provide liability
coverage for Dustin McCowan.
Furthermore, the Policy’s defense provision only applies to bodily injury caused
by an occurrence to which this policy applies. (DE # 46-1 at 12 (emphasis added).) Since
coverage for this bodily injury is excluded under the Policy, American family is not
obligated to provide a defense for Dustin McCowan in the Bachs’ suit.
The parties do not dispute that Indiana substantive law applies. (See DE ## 45
at 5, 50 at 7, 51 at 9.)
Regarding Joseph McCowan, the Bachs allege that his negligence in failing to
secure his firearms caused injury to Amanda Bach. (DE # 46-5 at 4.) However, American
Family argues that it is not required to provide coverage to Joseph for any potential
liability resulting from that injury. (DE # 45 at 10–20.) In its brief, American Family puts
forth several arguments which assert, in sum, that even if Joseph did cause such an
injury through his negligent actions, his liability coverage would be excluded under the
Policy as a matter of law, due to Dustin’s actions. (See id.)
The Bachs disagree with plaintiff’s arguments and contend that American Family
fails to address the holding in Frankenmuth Mutual Insurance, Co. v. Williams, 690 N.E.2d
675 (Ind. 1997). Frankenmuth specifically examines if the intentional acts of one insured
preclude coverage for the negligent acts of a co-insured. Id. The facts of Frankenmuth
involved a man who intentionally molested a child, while his wife committed only
negligence. Id. at 676, 679. The Indiana Supreme Court held that the wife’s negligence
resulted in a legally distinct injury to the child: an injury of “exposure to the risk of
molestation.” Id. at 679. The husband and wife were co-insureds under the same
insurance policy, but the Indiana Supreme Court concluded that the policy’s
“intentional act exclusion” did not apply to her negligence. Id. at 677, 679.
After the Frankenmuth decision, another judge in this district issued an opinion in
which he applied the Indiana Supreme Court’s reasoning while interpreting an
American Family homeowners policy. American Family Mut. Ins. Co. V. Bower, 752 F.
Supp. 2d 957, 960 (N.D. Ind. 2010). The policy in Bower contained the exact same
language as the McCowan’s Policy in the sections outlining personal liability coverage,
the intentional injury exclusion, and the violation of law exclusion. Id. at 962, 965. Both
the policy in Bower and the Policy in the case at hand also contain identical “sexual
molestation exclusions.” (DE # 46-1 at 13); Bower, 752 F. Supp. 2d at 965. Ultimately, the
court held that “under Indiana law the sexual molestation, the criminal law, or the
intentional acts exclusions in American Family’s policies do not apply to preclude
coverage for the alleged negligent acts of a co-insured.” Id. at 970.
The court also noted in Bower that Frankenmuth does not include discussion of
any exclusions other than the intentional act exclusion. Id. Nevertheless, the court found
no reason not to extend its holding to American Family’s violation of law exclusion and
the sexual molestation exclusion. Id. (“Indeed, it would make little sense to delineate
among the three exclusions . . . .”). However, in a more recent decision, another judge in
this district found that Frankenmuth’s reasoning did not apply to the interpretation of a
sexual molestation exclusion, because the language of that exclusion was dissimilar to
the language found in the intentional act exclusion in Frankenmuth. Westfield Ins. Co. v.
Hill, 790 F. Supp. 2d 855, 867–68 (N.D. Ind. 2011). Specifically, the court focused on the
“arising out of” language used in the sexual molestation exclusion. See id. at 863–64,
867–68. The violation of law exclusion in the McCowan Policy also contains “arising out
of” language, while the intentional injury exclusion does not. (DE # 46-1 at 14.) Thus,
Hill indirectly brings into question Bower’s conclusion that there was no reason to
delineate between the exclusions in American Family’s policies.
Hill itself makes no mention of Bower so there is no discussion of their apparent
inconsistencies in either case. Furthermore, although the Bachs and American family
each discuss Bower at length, the defendants do not address Hill. Meanwhile, American
Family mentions Hill only in its reply brief, and even then it does not discuss the
decision’s apparent disagreement with Bower or the possibility that it may call for the
violation of law exclusion to apply even in a situation where the intentional injury
exclusion does not. (See DE # 54 at 12–13.) Since the parties have not provided sufficient
briefing on this issue, the court is inclined to follow the holding of Bower and not draw a
distinction between the two exclusions.
Given the cases outlined above, the court must now decide whether to grant
American Family’s motion for summary judgment as to Joseph McCowan. American
Family has failed to draw a distinction between this case and Bower. At the very least,
Frankenmuth and Bower support the Bachs’ assertion that an injury caused by Joseph
McCowan’s negligence would fall under the personal liability coverage of the Policy,
and that the intentional injury exclusion would not preclude coverage. American
Family has also failed to address the possibility that the violation of law exclusion
might apply where the intentional injury exclusion does not. Consequently, the court
denies the motion for summary judgment as to Joseph McCowan.
The court can, however, move for summary judgment sua sponte “if [it has] given
the affected parties advance notice of their intent to do so and a fair opportunity to
respond with argument and evidence.” Smith v. Bray, 681 F.3d 888, 903 (7th Cir. 2012),
overruled on other grounds by Ortiz v. Werner Enters., Inc., 834 F.3d 760 (7th Cir. 2016). The
court so moves, here, on the question of whether summary judgment is appropriate as
to Joseph McCowan under the violation of law exclusion. Specifically, this motion will
allow the parties to address the applicability of Westfield Insurance Company v. Hill.
For the foregoing reasons, the court
(1) GRANTS, in part, American Family’s motion for summary judgment
(DE # 44) as to the allegations against Dustin McCowan;
(2) otherwise DENIES American Family’s motion for summary judgment;
(3) MOVES for summary judgment against defendants; and,
(4) GRANTS the parties thirty days from the date of this order in which to file
any argument or evidence that they believe is relevant to the court’s analysis regarding
whether or not American Family is entitled to summary judgment as to Joseph
McCowan on the basis of the violation of law exclusion.
Date: February 16, 2017
s/James T. Moody
JUDGE JAMES T. MOODY
UNITED STATES DISTRICT COURT
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