Shelter Mutual Insurance Company v. Phillips et al
Filing
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MEMORANDUM OPINION AND ORDER. Signed by Honorable Robin J. Cauthron on 06/13/18. (wh)
IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF OKLAHOMA
SHELTER MUTUAL INSURANCE
COMPANY,
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Plaintiff,
vs.
DANIEL PHILLIPS AND
APRIL MARTIN, as custodial
parent of S.M. and A.M.,
minors,
Defendants.
No. CIV-17-1237-C
MEMORANDUM OPINION AND ORDER
Plaintiff filed a Motion for Summary Judgment (Dkt. No. 18). Defendant April
Martin filed an Opposition to Plaintiffs’ Motion for Summary Judgment (Dkt. No. 24).
Defendant Phillips filed an Objection and Response to Plaintiff Shelter Insurance’s Motion
for Summary Judgment (Dkt. No. 25). Plaintiff filed a Combined Reply to Defendant
Martin’s and Defendant Phillips’ Responses to Plaintiff’s Motion for Summary Judgment
(Dkt. No. 26). The Motion is now at issue.
I. Background
April Martin filed a state court action against Daniel Phillips for alleged sexual
misconduct and molestation.
Martin accused Phillips of engaging in “the sexual
molestation and abuse of [S.M. and A.M.] on multiple occasions between March of 2010
and September of 2010.” (Pl.’s Mot., Dkt. No. 18, Ex. 2.) Phillips pled guilty in Oklahoma
County District Court to multiple counts of lewd acts with children in violation of 21 Okla.
Stat. § 1123. (Pl.’s Mot., Dkt. No. 18, Ex. 4.) Shelter Mutual Insurance Company
(“Shelter”) issued multiple Dwelling Insurance Policies1 to Daniel Phillips and these
policies insured multiple rental properties that Daniel Phillips owned. (Pl.’s Mot., Dkt. No.
18, p. 1.) The offending conduct occurred in these rental properties. (Pl.’s Mot., Dkt. No.
18, p. 2.) In her state court Petition, Martin labels her causes of action: Assault and Battery,
Negligence, and Intentional Infliction of Emotional Distress. (Pl.’s Mot., Dkt. No. 18, Ex.
2.)
In the underlying action, Shelter is defending Phillips under a reservation of rights.2
Shelter Mutual Insurance Company instituted this action in federal court and seeks a
declaratory judgment that Defendant Phillips’ alleged conduct in molesting S.M. and A.M.
was intentional and excluded under the Landlords Liability Coverage provision of their
policy and Shelter has no obligation to defend Phillips in either the underlying action or in
the event of a judgment against him in the underlying action. (Pl.’s Mot., Dkt. No. 18, p.
9.)
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Policy Nos. 35-73-3628133-1, 35-73-3628133-3, and 35-73-3628133-4. (Pl.’s
Comp., Dkt. No. 1, p.1).
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The reservation of rights is explained as follows:
The fact that an insurer’s duty to defend arises at the outset of
litigation while its duty to indemnify is determined at the conclusion of the
litigation means that an insurer may have to defend an action in which there
will be no duty to indemnify the insured. In such cases, insurers typically
defend insureds under a reservation of rights. . . . [and] the insurer reserves
the right to deny coverage notwithstanding its initial decision to defend the
insured.
Douglas R. Richmond, Reconsidering the Rejection of Reservations of Rights 34 No. 1
Ins. Litig. Rep. 5 Feb. 3, 2012 (footnotes omitted).
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II. Standard
A. Declaratory Judgment Act
The Declaratory Judgment Act is a procedural tool and does not create substantive
rights for parties. See Farmers Alliance Mut. Ins. Co. v. Jones, 570 F.2d 1384, 1386 (10th
Cir. 1978). “When faced with a motion for declaratory judgment, courts therefore often
construe the motion as a motion for summary judgment on a declaratory judgment action.”
Miller v. Cincinnati Ins. Co., Civ. No. 17-00271 SCY/JHR, 2018 WL 1633460 (D.N.M.
April 2, 2018). “The party seeking a declaratory judgment pursuant to § 2201(a) must
overcome two hurdles. First, the plaintiff must demonstrate the existence of an ‘actual
controversy. . . .’ Second, ‘even where a constitutionally cognizable controversy exists[’],
a plaintiff ‘must convince the court to exercise its jurisdiction’ under the DJA based on ‘a
number of case-specific factors.’” Fair Am. Ins. and Reinsurance Co. v. Stewart, 274
F.Supp.3d 1238, 1244 (N.D. Okla. 2017) (citations omitted). The next and final question
“‘involves a discretionary assessment of disparate, often incommensurate, and casespecific concerns.’” Id. at 1244-45.
B. Summary Judgment
A key policy goal and primary principle of Fed. R. Civ. P. 56 is “to isolate and
dispose of factually unsupported claims or defenses.” Celotex Corp. v. Catrett, 477 U.S.
317, 323-24 (1986). Fed. R. Civ. P. 56 sets the standard for summary judgment:
A party may move for summary judgment, identifying each claim or
defense—or the part of each claim or defense—on which summary judgment
is sought. The court shall grant summary judgment 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.
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Fed. R. Civ. P. 56(a). Summary judgment is appropriate “after adequate time for discovery
and upon 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., 477 U.S. at 322. “[T]his standard provides that
the mere existence of some alleged factual dispute between the parties will not defeat an
otherwise properly supported motion for summary judgment; the requirement is that there
be no genuine issue of material fact.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 24748 (1986). It is also well established that the “party seeking summary judgment always
bears the initial responsibility of informing the district court of the basis for its motion, and
identifying those portions of ‘the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any,’ which it believes demonstrate the
absence of a genuine issue of material fact.” Celotex Corp., 477 U.S. at 323, (quoting
Fed. R. Civ. P. 56) (“As to materiality, the substantive law will identify which facts are
material. Only disputes over facts that might affect the outcome of the suit under the
governing law will properly preclude the entry of summary judgment.” Anderson, 477
U.S. at 248.) “When the moving party has carried its burden under Rule 56(c), its opponent
must do more than simply show that there is some metaphysical doubt as to the material
facts. . . . Where the record taken as a whole could not lead a rational trier of fact to find
for the non-moving party, there is no ‘genuine issue for trial.’” Matsushita Elec. Indus.
Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986) (footnote and internal citations
omitted). In its review, the Court construes the record in the light most favorable to the
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party opposing summary judgment. Garratt v. Walker, 164 F.3d 1249, 1251 (10th Cir.
1998).
III. Discussion
Generally, the insurer bears the burden to defend the insured if the disputed conduct
or loss falls outside a policy’s exclusionary clause. See generally Fretwell v. Protection
Alarm Co., 1988 OK 84, 764 P.2d 149. “[T]here is no duty on the part of the insurer to
defend ‘when it is established by the insurer that the facts are such that there is no coverage
under the policy for any resulting liability.’” State Farm Fire & Cas. Co. v. Williams, 355
N.W.2d 421, 424-25 (Minn. 1984) (citation omitted). “In order for an intentional act
exclusion to result in a denial of coverage in Oklahoma, two elements must be shown:
(1) the insured must have intended to commit the act and (2) the insured must intend to
commit the injury or harm which resulted.” Allstate Ins. Co. v. Thomas, 684 F.Supp. 1056,
1058 (W.D. Okla. 1988). “Oklahoma’s treatment of child molestation convinces the court
that Oklahoma would infer an intent to inflict harm to a child when an adult intentionally
commits an act of sexual abuse.” Id. Oklahoma courts have determined “that an allegation
of child molestation satisfies these two elements as a matter of law.” Id.
Plaintiff’s policy, which was issued to Dan Phillips, contains the following
language:
Exclusions
UNDER LIABILITY AND MEDICAL PAYMENTS TO OTHERS
We do not cover:
3. bodily injury or property damage expected or intended by an insured.
(Pl.’s Mot., Dkt. No. 18, Ex. 1, p. 3.)
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Plaintiff argues that the alleged conduct “was intentional and the injuries
complained of were expected and intended.” (Pl.’s Mot., Dkt. No. 18, p. 4.) The plain
language of the policy does not discuss or state any coverage requirements relating to
negligence. Defendant Martin argues that even though courts have “ruled that the intended
harm to the child is inferred when dealing with sexual molestation. . . . this conclusion . . .
does not necessarily mean that all harms the child may suffer are intended, and thus would
be an issue for a finder of fact to determine.” (Def. Martin Resp., Dkt. No. 24, p. 2.) This
argument does not have merit with regard to the instant circumstances. The clear and
unambiguous policy language does not include coverage for intentional actions. Defendant
Martin argues “[i]t is the contention of the Defendant that there are possible damages that
resulted from the [Defendant Phillips’] actions that are still covered under the policy even
though the acts of the [Defendant Phillips] were intentional.” (Def. Martin Resp., Dkt. No.
24, p. 3.) However, Defendant does not elucidate or define any of those actions that are
still covered under the policy. Defendant does not allege any material issue of fact, or
indeed any fact or policy language that would indicate the language of the policy at issue
would cover negligent actions.
In this instance, Phillips did commit intentional acts of molestation and lewd
conduct and from the applicable case law, this Court can infer as a matter of law that
Phillips intended to cause the alleged harm to S.M. and A.M. The clear and unambiguous
language of the insurance policy excludes intentional acts. Additionally, there is nothing
in Plaintiff Shelter’s insurance policy that purports, even within a broad reading and
understanding of the insurance policy, to cover negligent acts.
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IV. Conclusion
Accordingly, Plaintiff’s Motion for Summary Judgment (Dkt. No. 18) is
GRANTED. A judgment will enter accordingly.
IT IS SO ORDERED this 13th day of June, 2018.
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