Allstate Vehicle and Property Insurance Company v. Hunter et al

Filing 67

ORDER granting 34 MOTION for Summary Judgment filed by Allstate Vehicle and Property Insurance Company and vacating 61 Order on Motion for Summary Judgment Signed by Honorable David C Norton on January 17, 2019. (kwhe, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
BEAUFORT DIVISION
ALLSTATE VEHICLE AND PROPERTY )
INSURANCE COMPANY,
)
)
Plaintiff,
)
)
vs.
)
)
ROSE WADFORD HUNTER, JANE DOE, )
by and through her mother and natural
)
Guardian ad Litem, MARY ROE, and
)
MARY ROE, individually,
)
)
Defendants.
)
____________________________________)

No.: 9:17-cv-00384-DCN
ORDER

The following matter is before the court on plaintiff Allstate Vehicle and Property
Insurance Company’s (“Allstate”) motion for summary judgment, ECF No. 34. For the
reasons set forth below, the court grants the motion for summary judgment.
I. BACKGROUND
This is an insurance coverage case. It arises out of the alleged sexual assault of
minor Jane Doe (“Doe”) by Joseph Stephen Hunter (“Joseph Hunter”), the husband of
Rose Wadford Hunter (“Rose Hunter”). According to the complaint, Rose and Joseph
Hunter were Doe’s neighbors in Bluffton, South Carolina when the abuse and harassment
occurred. Joseph Hunter began to sexually assault Doe in 2006, when Doe was seven
years old. He continued to do so until 2015, when Doe was 16 years old. During this
period, Joseph Hunter exposed himself to Doe, forced Doe to masturbate Joseph Hunter,
and made Doe perform and receive oral sex. Joseph Hunter videotaped and
photographed Doe performing these sex acts. On January 5, 2016 Joseph Hunter was
arrested on charges of first and third degree child molestation. The complaint alleges that
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Rose Hunter was aware of her husband’s sexual proclivities concerning young girls yet
continued to encourage interactions between Doe and Joseph Hunter including
sleepovers. The complaint further alleges that after Joseph Hunter’s arrest, Rose Hunter
posted comments on the social networking site Facebook “disparaging, denigrating, and
defaming” Doe’s mother Mary Roe (“Roe”) as a “sorry mother.” This type of behavior
was, the complaint alleges, part of a pattern of behavior that Rose Hunter engaged in to
discredit victims of Joseph Hunter’s abuse.
Doe, through Roe, brought suit against Rose Hunter in state court entitled Jane
Doe, by and through her mother and natural Guardian Ad litem, Mary Roe, and Mary
Roe, individually, C.A. No. 2016-CP-07-1541 (“the underlying suit”). Doe alleges that
as the result of Joseph Hunter’s actions—and Rose Hunter’s inactions in the face of the
abuse—Doe has received substantial medical, therapeutic, and counseling expenses. Doe
suffers from, and likely will continue to suffer from, psychological distress including
depression and post-traumatic stress disorder. Doe levies causes of action for
negligence/gross negligence/recklessness, defamation, breach of fiduciary duty, and
aiding and abetting breach of fiduciary duty.
Allstate issued a homeowner’s policy, Policy No. 990100794 (“the Policy”), to
the Hunters, with an effective date of June 16, 2015. The relevant provisions of the
Policy are the family liability protection and guest medical protection provisions. The
family liability protection provides:
Losses we cover under Coverage X:
Subject to the terms, conditions and limitations of this policy, we will pay
damages which an insured person becomes legally obligated to pay because
of bodily injury or property damages arising from an occurrence to which
this policy applies, and is covered by this part of the policy.
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The Policy defines an “insured person” as “you and, if a resident of your household: a)
any relative; and b) any dependent person in your care,” and further defines “you” and
“your” as “the person listed under Named Insured(s) on the Policy Declarations as the
insured and that person’s resident spouse.” The Policy goes on to define an “occurrence”
to mean “an accident, including continuous or repeated exposure to substantially the
same general harmful conditions during the policy period, resulting in bodily injury or
property damage.” And finally, “bodily injury” is defined as “physical harm to the body,
including sickness or disease . . . .” The Policy also includes a number of exclusions
from coverage. Most saliently, it includes an intentional acts exclusion:
Losses we do not cover under Coverage X:
We do not cover any bodily injury or property damage intended by, or
which may reasonably be expected to result from the intentional or criminal
acts or omissions of, any insured person. This exclusion applies even if:
a) Such insured person lacks the mental capacity to govern his or
her conduct;
b) Such bodily injury or property damage is of a different kind or
degree than intended or reasonably expected; or
c) Such bodily injury or property damage is sustained by a different
person than intended or reasonably expected.
Allstate is currently defending Rose Hunter in the underlying action, subject to a
reservation of rights.
On February 8, 2017 Allstate filed this suit, asking the court to declare that
Allstate is not required to provide coverage for any of Doe’s injuries. Specifically,
Allstate contends that the Policy does not provide coverage because: (1) allegations of
sexual abuse do not constitute an “occurrence” as defined under the Policy; (2) all or
some of the allegations of the sexual abuse did not happen during the policy period; and

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(3) the allegations of sexual abuse in the underlying action arise from the intentional and
criminal acts of Joseph Hunter, placing the acts within the Policy’s intentional acts
exclusion.
Allstate filed a motion for summary judgment on March 12, 2018. ECF No. 34.
Defendants 1 filed a response on March 26, 2018, ECF No. 36, and Allstate filed a reply
on April 9, 2018, ECF No. 41. The court held a hearing on the motion on May 15, 2018.
On June 7, 2018, the court entered an order deferring its ruling with regard to the
negligence and breach of fiduciary duty claims and instead certifying a question of state
law to the Supreme Court of South Carolina. ECF No. 48. In its order, the court also
held that there was no coverage for defamation under the Policy. Id. at 16. Then on
December 13, 2018, the court entered a text order denying without prejudice the motion
for summary judgment pending the outcome of the certified question. 2 ECF No. 61. The
Supreme Court of South Carolina answered the certified question on November 21, 2018,
ECF No. 62-1, and denied the petition for rehearing on December 13, 2018, ECF No. 631.
In addition, Roe and Doe filed a motion to reconsider on July 5, 2018 with respect
to the portion of the court’s June 7, 2018 order related to defendants’ defamation claim.
The court denied the motion on August 13, 2018. ECF No. 57. Doe and Roe filed an
appeal with the Fourth Circuit on September 11, 2018, ECF No. 58. That appeal is

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The court refers to “defendants” to refer collectively to Rose Hunter, Jane Doe,
and Mary Roe. While these parties are obviously adversarial in the underlying suit,
Allstate refers to all of these parties as “defendants,” so for ease of reference the court
adopts this lexicon.
2
This order vacates and supersedes the December 13, 2018 text order.
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currently pending before the Fourth Circuit. See Allstate Vehicle and Property v. Jane
Doe, No. 18-2079.
II. STANDARD
Summary judgment is appropriate “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). “Rule 56(c) of the Federal Rules of Civil Procedure requires that
the district court enter judgment against a party who, ‘after adequate time for
discovery . . . 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.’” Stone v. Liberty Mut. Ins. Co., 105 F.3d 188, 190 (4th Cir. 1997) (quoting
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986)). Any reasonable inferences are to be
drawn in favor of the nonmoving party. See Webster v. U.S. Dep’t of Agric., 685 F.3d
411, 421 (4th Cir. 2012). However, to defeat summary judgment, the nonmoving party
must identify an error of law or a genuine issue of disputed material fact. See Fed. R.
Civ. P. 56(a); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986); see also
Bouchat v. Balt. Ravens Football Club, Inc., 346 F.3d 514, 522 (4th Cir. 2003).
Although the court must draw all justifiable inferences in favor of the nonmoving
party, the nonmoving party must rely on more than conclusory allegations, mere
speculation, the building of one inference upon another, or the mere existence of a
scintilla of evidence. See Anderson , 477 U.S. at 252; Stone, 105 F.3d at 191. Rather, “a
party opposing a properly supported motion for summary judgment . . . must ‘set forth
specific facts showing that there is a genuine issue for trial.’” Bouchat, 346 F.3d at 522
(quoting Fed. R. Civ. P. 56(e) (2002) (amended 2010)). If the adverse party fails to

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provide evidence establishing that the factfinder could reasonably decide in his favor,
then summary judgment shall be entered “regardless of ‘[a]ny proof or evidentiary
requirements imposed by the substantive law.’” Id. (quoting Anderson, 477 U.S. at 248).
III. DISCUSSION
Allstate argues that the Policy does not cover the claims against Rose Hunter for
negligence and breach of fiduciary duty. 3 The court first includes the relevant substance
of its June 7, 2018 order to provide context for its discussion of the answer to the certified
question. 4 Then the court discusses the impact of the answer to the certified question on
this case. After considering the answer to the certified question, the court concludes that
the Policy provides no coverage for either claim and grants Allstate’s motion for
summary judgment.
A.

Relevant Substance of the June 7, 2018 Order
1. Joint Obligations Provision

The Policy includes a “joint obligations” provision, which states:
The policy imposes joint obligations on the Named Insured(s) listed on the
Policy Declarations and on that person’s resident spouse. These persons are
defined as you or your. This means that the responsibilities, acts and
omissions of a person defined as you or your will be binding upon any other
person defined as you or your.
This policy imposes joint obligations on persons defined as an insured
person. This means that the responsibilities, acts and failures to act of a
person defined as an insured person will be binding upon another person
defined as an insured person.

3

The court has already held that the Policy does not cover the defamation claim
against Rose Hunter in its June 7, 2018 order. Therefore, it does not address the
defamation claim now.
4
The court notes that in its June 7, 2018 order, it mistakenly referred to
defendants as “plaintiffs.” The court corrects this scrivener’s error in this order.
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It is undisputed that both Joseph Hunter and Rose Hunter are considered “named
insureds” under the Policy. Allstate argues that this joint obligations provision operates
such that the Policy imposes joint obligations on all insureds, and where coverage for
damages as the result of the intentional and/or criminal acts of one insured is excluded,
coverage is excluded for all insureds. ECF No. 41 at 6. Defendants counter that a
“reasonable and plausible interpretation of this ‘joint obligations’ clause” is that the
clause refers to the obligations to pay premiums to “take certain actions before and after
the loss.” ECF No. 36 at 37.
The court agrees with Allstate that the language of the joint obligations provision
is unambiguous. The Policy is clear that Rose Hunter, who is a named insured under the
Policy, is bound by the “acts and omissions” of her husband Joseph Hunter, another
named insured under the Policy. To find otherwise would be to torture the language of
the Policy. While it does not appear that South Carolina state courts have interpreted an
insurance policy containing a joint obligations provision, Allstate Indem. Co. v. Tilmon,
2014 WL 1154666 (D.S.C. Mar. 21, 2014) is instructive. In Tilmon, the court interpreted
an identical joint obligation clause and held that the language “renders the criminal acts
exclusion applicable to claims for negligence against other insureds.” Id. at *7. The joint
obligations provision in the policy in Tilmon stated that “[t] he terms of this policy
impose joint obligations on the persons defined as an insured person . . . [and][t]his
means that the responsibilities, acts and failures to act of a person defined as an insured
person will be binding upon another person defined as an insured person.” Id. The court
adopts the reasoning in Tilmon to find that the joint obligations provision is valid and
applies the claims for negligence against all named insureds.

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Defendants discuss at length the doctrine of reasonable expectations, and argue
that this doctrine should be applied to the joint obligation provision. Under the doctrine
of reasonable expectations, “[t]he objectively reasonable expectations of applicants and
intended beneficiaries regarding the terms of insurance contracts will be honored even
though painstaking study of the policy provisions would have negated those
expectations.” Bell v. Progressive Direct Ins. Co., 757 S.E.2d 399, 405 (S.C. 2014)
(citing Robert E. Keeton, Insurance Law Rights at Variance with Policy Provisions: Part
One, 83 Harv. L.Rev. 961, 967 (1970)). But in Bell, the Supreme Court of South
Carolina clearly held that the doctrine does not apply where the policy “unambiguously”
denies coverage under its plain terms. Id. A review of the joint obligations provision in
the policy at hand demonstrates that the policy unambiguously denies coverage to one
named insured where the other named insured has been barred from coverage. Because
the language of the Policy is clear and unambiguous, the court holds that the joint
obligations provision operates to bar coverage—where the actions of one insured person
excludes him from coverage, those acts are binding upon the other insured parties and
preclude coverage for any claims against the other insured as well.
2. Coverage for Sexual Abuse as “Occurrence” under Policy
The court now turns to the substantive questions of coverage under the Policy.
Allstate first argues that it is entitled to summary judgment because Joseph Hunter’s
sexual abuse of Doe was not an “occurrence” triggering coverage under the Policy
because it was not an accident. And even if the sexual abuse is considered an
“occurrence,” Allstate contends, coverage would be unavailable because the Policy
expressly excludes coverage for bodily injury resulting from intentional and criminal

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acts. For both arguments, the governing case is Mfrs. & Merchs. Mut. Ins. Co. v.
Harvey, 498 S.E.2d 222 (S.C. Ct. App. 1998).
Defendants first contend that there is a genuine issue of material fact whether the
Hunters’ acts are deemed an “occurrence” and that because the policies fail to define the
term “accident” the court should look to other common understandings of the term. In
Harvey, 498 S.E.2d at 224–26, the court considered whether a homeowner’s insurance
policy provided coverage against claims that the named insureds, a grandmother and
grandfather, sexually abused their grandchildren. The policies in Harvey defined a
covered “occurrence” as “an accident, including continuous or repeated exposure to
substantially the same general harmful conditions which results, during the policy period,
in: (a) bodily injury; or (b) property damage.” There too, the policies did not define the
term “accident.” The Harvey court concluded that there was no coverage because “an
intended injury cannot be accidental.” Harvey, 498 S.E.2d at 226. Indeed, in Harvey the
court concluded that because “the sexual abuse of a child is so inherently injurious . . .
[the] intent to harm the child will be inferred as a matter of law.” Id. In addition, the
court held, “the effect of sexual abuse is so integral to the act that the intent to do the act
is interchangeable with the intent to cause the resulting injury.” Id. at 227. In short,
under South Carolina law “an intended injury cannot be accidental.” Id. at 225. It is the
“intent to act, coupled with the intent to produce the consequences” that determines
whether an accident has caused the resulting injury. Id. at 227.
At the least, therefore, an insured’s act is not an accidental contributing
cause of injury when the insured actually intended to cause the injury that
results. “[A]n accident is never present when a deliberate act is performed
unless some additional unexpected, independent and unforeseen
[circumstance exists or] happening occurs which produces or brings about
the result of the injury or death.”
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Id. The Harvey court held that the sexual abuse of a child cannot be an accident when the
intent to harm is inferred as a matter of law. This operates to bar all coverage for Joseph
Hunter as his sexual abuse of Doe was not an “occurrence” under the Policy. 5
The more complicated question is whether Harvey also bars coverage for claims
levied against Rose Hunter for negligent supervision of Doe that facilitated Joseph
Hunter’s sexual abuse. The underlying suit alleges that Rose Hunter was a non-abusing
insured person who was negligent, as she “knew or should have known” that Joseph
Hunter was engaging in inappropriate intimate sexual contact with underage girls, and
had done so prior to the abuse that he perpetrated on Doe. Despite Rose Hunter being on
notice of this particular predilection, the complaint alleges that Rose Hunter continued to
allow Joseph Hunter to spend time with Doe alone and unsupervised in the Hunters’
home and failed to warn Roe or Doe of Joseph Hunter’s “deviant sexual proclivities.”
Defendants cite to Harvey for the proposition that such a negligence claim against a nonabusing third person is an “occurrence” in the context of a sexual abuse coverage case.
In Harvey, the mother of the abused child levied claims against the alleged
perpetrators of abuse that they negligently injured the minor children by “allowing the
plaintiff’s minor children to be in the company of a person or persons that each
Defendant knew or should have known posed a severe danger to the Plaintiff’s minor

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As the rule of inferred intent to injure invoked in Harvey is directly applicable
here, there is no need to wait to see whether the trial court recognizes a valid cause of
action for negligence in the underlying suit. Cf. State Farm Fire & Cas. Co. v. Blanton,
2015 WL 9239788, at *11 (D.S.C. Dec. 17, 2015) (“[T]he state court judge in the
underlying tort case found sufficient evidence to charge the jury on negligence as well as
self defense. Therefore, this court does not find that the acts by Blanton were intentional
acts cloaked in negligence terms.”).
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children,” and “in failing to prevent physical, sexual, or emotional abuse which each
defendant knew or should have known was likely to occur to the plaintiff’s minor
children.” Harvey, 498 S.E.2d at 228. The Harvey court found that these allegations
alleged negligent or reckless conduct, and that the conduct described alleged actions
which constituted an “occurrence” under the Harveys’ policy. Id. The Harvey court
further held that the negligence claims were not excluded by the intentional acts
exclusion in the Harveys’ homeowner’s insurance policies, as the underlying complaint
did not allege that the perpetrators of the abuse intended the harm to the minor children
through their negligent supervision. Id. This claim of negligence against a non-abusing
third person was, according to the Harvey court, separate and distinct from the acts of
molestation by the abuser himself. The Harvey court takes care to note that such a
negligence claim was both a covered “occurrence” and not barred by the intentional acts
exclusion.
However, the policy in Harvey did not have a joint obligations provision. As
discussed above, the language of the joint obligations provision in the Policy is
unambiguous. It is clear that Harvey held that acts of molestation by the abuser himself
do not constitute an “occurrence” in an insurance policy and so coverage is barred. Read
in conjunction with the joint obligation provision in the policy at hand, it was unclear
whether coverage is also barred for Rose Hunter as a named insured, leading the court to
submit the following certified question to the Supreme Court of South Carolina:
In Manufacturers & Merchants Mut. Ins. Co. v. Harvey, 498 S.E.2d 222
(S.C. Ct. App. 1998), the South Carolina Court of Appeals held that in a
coverage dispute involving sexual abuse, negligence claims against a nonabusing third party constitute “occurrences” and are not barred by the
intentional act exclusion in an insurance policy. How does this holding
interact with the intentional or criminal act exclusion and joint obligations
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provision found in Allstate’s insurance policy? Specifically, does Allstate’s
intentional or criminal act exclusion and the joint obligations provision
operate to bar coverage for claims such as negligent supervision and breach
of fiduciary duty levied against the non-abusing third party that is the other
“named insured” in a policy?
3. Coverage for Breach of Fiduciary Duty as an “occurrence” under the
Policy
Finally, defendants claim that the breach of fiduciary duty is an “occurrence” such
that coverage is warranted. 6 The operative complaint alleges that Rose Hunter “had a
special relationship” with Doe and Roe, and owed a fiduciary duty of care, loyalty and
good faith. Am. Compl. ¶¶ 95–97. The underlying complaint alleges that Rose Hunter
breached this duty in allowing Joseph Hunter to be alone with Doe despite his previous
history sexually abusing other minor and failing to warn Roe and Doe of Joseph Hunter’s
past sexual proclivities, which are substantially similar allegations to the negligence
claim against Rose Hunter. In their briefing, defendants subsume the breach of fiduciary
duty claim into the negligence claim. ECF No. 36 at 8 (“The negligence claim and
breach of fiduciary [duty] claim are combined for the purposes of this memorandum and
all references to the negligence claim apply equally to the claim for breach of fiduciary
duty against defendant Rose.”). Accordingly, the court treats the two claims as one as
well.
B. Discussion of the Answer to the Certified Question
The Supreme Court of South Carolina answered the question certified by this court,
stating:
There is nothing in Harvey or in the public policy of this State that would
alter the district court’s conclusion “the [Hunter] policy unambiguously
6

Defendants concede that the remaining claim of aiding and abetting fiduciary
duty is an intentional tort that is not covered by the Policy.
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denies coverage to [Rose Hunter] where [Joseph Hunter] has been barred
from coverage.”
ECF No. 62-1 at 3. The court clarified that Harvey’s holding “is limited to the insurance
policy at issue in that case” and mentioned several differences between the policy in
Harvey and the Policy here. Id. The Supreme Court of South Carolina concluded by
stating again that there is no public policy altering the conclusion that the Policy denies
coverage to Rose Hunter. Based on this answer, the court finds there is no coverage for
claims levied against Rose Hunter for negligent supervision of Doe that facilitated Joseph
Hunter’s sexual abuse.
Just like the negligence claim against Rose Hunter, the question of whether the
breach of fiduciary duty claim is barred by the joint obligations provision of the Policy
was addressed by the Supreme Court of South Carolina in its answer to the certified
question. As such, the court finds that there is no coverage for the claim against Rose
Hunter for breach of fiduciary duty.
IV. CONCLUSION
For the foregoing reasons, the motion for summary judgment is granted.
AND IT IS SO ORDERED.

DAVID C. NORTON
UNITED STATES DISTRICT JUDGE
January 17, 2019
Charleston, South Carolina
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