PUBLISHED OPINION
Case No.: 95-3547
† Petition for review filed.
Complete Title
of Case:
Jessica M.F., a minor, Amy L.F.,
a minor, Jennifer F., a minor,
and Becky L.F., a minor, by
their Guardian Ad Litem,
David M. Skoglind, David W.F.
and Diane J.F.,
Plaintiffs-Appellants, †
v.
Liberty Mutual Fire Ins. Co.,
Preferred Risk Mutual Ins. Co.,
State Farm Fire & Casualty Co.
and All West Insurance Company,
Defendants-Respondents,
Residence Mutual Insurance
Company, FFF Insurance Company,
GGG Insurance Company and
Richard J.H.,
Defendants.
Oral Argument: November 6, 1996
COURT COURT OF APPEALS OF WISCONSIN
Opinion Released: February 18, 1997
Opinion Filed: February
18, 1997
Source of APPEAL Appeal
from an order
Full Name JUDGE COURT: Circuit
Lower Court. COUNTY: Milwaukee
(If "Special", JUDGE: JOHN E.
McCORMICK
so indicate)
JUDGES: Wedemeyer, P.J., Schudson and Curley, JJ.
Concurred: Wedemeyer,
P.J.
Concurred: Schudson,
JJ.
Dissented: ----
Appellant
ATTORNEYSFor the plaintiffs-appellants there were briefs
by Warshafsky, Rotter, Tarnoff, Reinhardt & Bloch, S.C., with Edward
E. Robinson and David M. Skoglind of Milwaukee, and oral argument by
Edward E. Robinson.
Respondent
ATTORNEYSFor the defendants-respondents All West Insurance
Company there were briefs by Kasdorf, Lewis & Swietlik, S.C., with James
M. Ryan and Vicki L. Arrowood of Milwaukee, and oral argument by James
M. Ryan.
Respondent
ATTORNEYSFor the defendants-respondents Liberty Mutual
Fire Insurance Company there were briefs by Borgelt, Powell, Peterson &
Frauen, S.C., with W. Ted Tornhel and Stephen M. Compton of
Milwaukee, and oral argument by Stephen M. Compton.
Respondent
ATTORNEYSFor the defendants-respondents Preferred Risk
Mutual Insurance Company there were briefs and oral argument by Paulson,
Hankel & Bruner, S.C., with Edward J. Bruner, Jr. of Racine.
Respondent
ATTORNEYSFor the defendants-respondents State Farm Fire
& Casualty Company there were briefs by Querrey & Harrow, Ltd.,
with Russell M. Ware of Racine, and Michael Resis of Chicago,
Illinois, and oral argument by Russell M. Ware.
COURT OF APPEALS DECISION DATED AND RELEASED February 18, 1997 |
NOTICE |
A party may file with the
Supreme Court a petition to review an adverse decision by the Court of
Appeals. See § 808.10 and
Rule 809.62, Stats. |
This opinion is subject to
further editing. If published, the
official version will appear in the bound volume of the Official Reports. |
No.
95-3547
STATE
OF WISCONSIN IN COURT OF
APPEALS
Jessica M.F., a minor, Amy L.F.,
a minor, Jennifer F., a minor,
and Becky L.F., a minor, by
their Guardian Ad Litem,
David M. Skoglind, David W.F.
and Diane J.F.,
Plaintiffs-Appellants,
v.
Liberty Mutual Fire Ins. Co.,
Preferred Risk Mutual Ins. Co.,
State Farm Fire & Casualty Co.
and All West Insurance Company,
Defendants-Respondents,
Residence Mutual Insurance
Company, FFF Insurance Company,
GGG Insurance Company and
Richard J.H.,[1]
Defendants.
APPEAL from an order of
the circuit court for Milwaukee County:
JOHN E. McCORMICK, Judge. Affirmed
and cause remanded.
Before Wedemeyer, P.J.,
Schudson and Curley, JJ.
SCHUDSON, J. Jessica M.F., Amy L.F., Jennifer F., and
Becky L.F. (the grandchildren), by their guardian ad litem, and their parents,
David W.F. and Diane J.F., appeal from the trial court order granting summary
judgment to Liberty Mutual Fire Insurance Company, Preferred Risk Mutual
Insurance Company, State Farm Fire & Casualty Company, and All West
Insurance Company. In the coverage
phase of their bifurcated suit against their grandfather and his homeowner
insurance companies, the grandchildren, together with their parents, sought to
establish coverage under their grandparents' homeowner policies for alleged
injuries they suffered as a result of their grandfather's alleged sexual
assaults.
On appeal, the
grandchildren and their parents do not challenge the trial court's conclusion
that the policies' intentional-acts exclusions preclude coverage for the
alleged intentional acts of the grandfather.
They do contend, however, that the trial court erred in concluding that
the policies provide no coverage for the alleged negligent conduct of the
grandmother. We conclude that the
intentional-acts exclusions[2]
also preclude coverage for the grandmother's conduct and, accordingly, we
affirm.
I. BACKGROUND
The complaint[3]
alleges that for several years prior to 1993, the grandfather[4]
“had sexual contact and engaged in sexually explicit conduct” with each of the
four grandchildren. The complaint also
alleges that the grandmother[5]:
knew
or, in the exercise of reasonable care, should have known that [grandfather]
was engaging in sexual contact and engaging in sexually explicit conduct with
[the grandchildren]. [Grandmother] was
negligent in, among other things, failing to prevent [grandfather] from
committing such acts and/or in taking appropriate steps to protect [the
grandchildren]. That such negligence of
[grandmother] was a substantial factor in causing [the grandchildren] damages
including, but not limited to, severe pain and suffering and mental anguish in
the past, which in all probability will last permanently into the future.
The insurance companies[6]
offered various arguments in support of their motions for summary
judgment. All invoked the
intentional-acts exclusion and severability clause of their respective
policies.[7] Preferred Risk and Liberty Mutual also
opposed coverage based on their sexual misconduct exclusions. The insurance companies also wove public
policy theories into several of their arguments.
Granting summary
judgment to the insurance companies on the coverage issue, the trial court
concluded:
Although
the plaintiffs maintain that it is not clear that [grandfather] intended to
harm the children, the intent to injure or harm is inferred by the law because
the sexual assault of a minor is so certain to result in injury or harm that
the law infers an intent to injure on behalf of an actor without regard to his
or her claimed intent....
Therefore,
since intentional acts are not covered under homeowner policies and sexual
misconduct with a minor infers [sic] intent, the homeowner insurance companies
for [grandfather] have no liability.
Although the plaintiffs maintain that
[grandmother] should be held liable for not preventing the acts of
[grandfather], case law and public policy prevent a homeowner's policy for
being used to pay for sexual assaults.
Moreover, [grandmother] would have no liability if it were not for the
intentional acts of [grandfather]. As
such, she has no homeowner's coverage because [grandfather] is prevented under
each homeowner insurance policy from protection for intentional actions of
which sexual conduct with a minor is inferred.
II. STANDARDS OF REVIEW
Summary judgment is
appropriate if the pleadings and submissions establish “that there is no
genuine issue as to any material fact and that the moving party is entitled to
a judgment as a matter of law.” Section
802.08(2), Stats.[8] Whether to grant summary judgment presents a
question of law we review de novo.
Kelli T-G. v. Charland, 198 Wis.2d 123, 128, 542 N.W.2d
175, 177 (Ct. App. 1995).
The
interpretation of an insurance policy also presents a question of law we review
independently of the trial court. Smith
v. Atlantic Mut. Ins. Co., 155 Wis.2d 808, 810, 456 N.W.2d 597, 598 (1990). The interpretation of an insurance policy is
governed by the general principles of contract construction. Kuhn v. Allstate Ins. Co., 193
Wis.2d 50, 60, 532 N.W.2d 124, 128 (1995).
“We are to read insurance policies to further the insured's reasonable
expectations of coverage while meeting the intent of both parties to the
contract.” Tara N. v. Economy
Fire & Casualty Ins. Co., 197 Wis.2d 77, 88, 540 N.W.2d 26, 31 (Ct.
App. 1995). Further, “[a]n exclusionary
clause in an insurance contract is strictly construed against the insurer. However, an insurance contract must also be
interpreted to mean what a reasonable person in the position of the insured
would have understood the words of the contract to mean.” Id. at 90, 540 N.W.2d at 32.
Consistent with these
fundamental principles of insurance law, and based on a growing body of
persuasive case law addressing issues of homeowner insurance coverage for
sexual abuse, we conclude that a reasonable person would understand that if he
or she “knew or, in the exercise of reasonable care should have known” of a
spouse's sexual abuse of children, a homeowner insurance policy's
intentional-acts exclusion will preclude coverage.
III. ANALYSIS
On appeal, the
appellants accept that the intentional-acts exclusions preclude insurance
coverage for the grandfather's alleged intentional sexual abuse of the
grandchildren. They contend, however,
that those same exclusions do not preclude coverage for the alleged
actions—and/or inactions—of the grandmother because each policy also includes a
“severability” clause. Thus, the
appellants maintain, the conduct of each insured must be viewed separately and,
therefore, the exclusion of coverage for the grandfather's intentional acts
does not preclude coverage for the grandmother's negligent acts. We conclude, however, that the
intentional-acts exclusions also preclude coverage for the grandmother.[9]
A. Homeowner insurance coverage for sexual abuse—Wisconsin case law
First, it will be
helpful to summarize recent Wisconsin case law on homeowner insurance coverage
for sexual abuse in order to locate the instant case in this rapidly-developing
area.
In 1988, reviewing
summary judgment in K.A.G. v. Stanford, 148 Wis.2d 158, 434
N.W.2d 790 (Ct. App. 1988), this court concluded “that acts of sexual
molestation against a minor are so certain to result in injury to that minor
that the law will infer an intent to injure on behalf of the actor without
regard to his or her claimed intent.” K.A.G.,
148 Wis.2d at 165, 434 N.W.2d at 793.
We held, therefore, that a policy's intentional-acts exclusion precluded
coverage for the offender. In dicta, we
also commented that the trial court's “viable alternative analysis” was “based
upon sound legal principles”—that “no reasonable person would expect a
homeowner's insurance policy to provide coverage for damages resulting from his
sexual misconduct, especially when the language in the intentional act
exclusion would alert a reasonable person that injury inflicted intentionally
is not subject to coverage.” Id.,
148 Wis.2d at 165-166, 434 N.W.2d at 793.
In 1989, reversing a
trial court's denial of a judgment notwithstanding the verdict in Hagen
v. Gulrud, 151 Wis.2d 1, 442 N.W.2d 570 (Ct. App. 1989), this court
built upon both the holding and dicta of K.A.G., and concluded
that where a homeowner policy contained an intentional-acts exclusion but “did
not express an intention as to sexual assault coverage, we look to the
reasonable expectations of” the parties.
We concluded “that a person purchasing homeowner's insurance would not
expect that he or she was insuring his or her children against liability for
their sexual assaults” and, accordingly, we held that the offender's mother's
policy provided no coverage. Id.,
151 Wis.2d at 7, 442 N.W.2d at 573.
In 1990, reviewing
summary judgment in N.N. v. Moraine Mutual Insurance Co., 153
Wis.2d 84, 450 N.W.2d 445 (1990), the supreme court, building further on K.A.G.,
concluded that despite an offender's claim of intoxication and non-intent, his
guilty plea to criminal sexual assault of a young child established intent for
purposes of the intended-acts exclusion and, therefore, his homeowner policy
provided him with no coverage for his victim's injuries. Id., 153 Wis.2d at 93-97, 450
N.W.2d at 449-450.
In 1991, reviewing a
judgment following a jury trial in Loveridge v. Chartier, 161
Wis.2d 150, 468 N.W.2d 146 (1991), the supreme court distinguished K.A.G.
and N.N., and concluded that intent to injure could not be
inferred as a matter of law in the case of a forty-four-year-old man who had
not been convicted of sexual assault, but who had been sued by a young woman as
a result of injuries she suffered through the transmission of the herpes
simplex virus when, at age sixteen or seventeen, she had maintained a
consensual sexual relationship with him.
The court held, therefore, that the intentional-acts exclusion did not
preclude homeowner coverage. Id.
161 Wis.2d at 169-176, 468 N.W.2d at 151-154.
In 1993, reviewing
summary judgment in Taryn E.F. v. Joshua M.C., 178 Wis.2d 719,
505 N.W.2d 418 (Ct. App. 1993), this court concluded that a homeowner policy's
sexual misconduct exclusion referring to “any insured” precluded coverage for
the parents of an offender, despite the fact that the parents were “innocent
insureds,” and despite the fact that the policy also included a severability
clause. Id., 178 Wis.2d
at 723-727, 505 N.W.2d at 420-422.
In 1995, reviewing
summary judgment in Tara N., this court concluded that a
homeowner policy containing both an intentional-acts exclusion and a sexual
misconduct exclusion precluded coverage for the parents of an offender who
sexually abused his daughter during what was supposed to be supervised
visitation in their home. The victim
had sued her grandparents claiming they were negligent in carrying out
court-ordered supervision. We held, inter
alia, that “[a]n exclusion provision which excludes the act of the
wrongdoer also operates to exclude coverage for the parents' alleged negligent
supervision or control of the wrongdoer.”
Id., 197 Wis.2d at 89, 540 N.W.2d at 31.
We now take what we
believe to be the next logical step along this legal trail. Simply stated, despite a severability
clause, and regardless of whether a policy includes a sexual misconduct
exclusion, the intentional-acts exclusion precludes homeowner insurance
coverage for one who knew or should have known of sexual abuse committed by
one's spouse.
B. The
intentional-acts exclusion
Construing a policy
exclusion for bodily injury or property damage “which is expected or intended
by the insured,” this court, in K.A.G., explained:
In Pachuki v.
Republic Ins. Co., 89 Wis.2d 703, 278 N.W.2d 898 (1979), the supreme
court concluded that an intentional act exclusion precluded coverage as long as
the insured actor intended some harm or injury, even though he did not intend
the injury actually incurred. In
discussing the intent that must be proven to invoke the exclusion, the court
cited W. Prosser, Handbook on the Law of Torts sec. 8, at 31-32 (4th ed. 1971):
Intent,
however, is broader than a desire to bring about physical results. It must extend not only to those
consequences which are desired, but also to those which the actor believes are
substantially certain to follow from what he does.... The man who fires a bullet into a dense crowd may fervently pray
that he will hit no one, but since he must believe and know that he cannot
avoid doing so, he intends it. The
practical application of this principle has meant that where a reasonable man
in the defendant's position would believe that a particular result was
substantially certain to follow, he will be dealt with by the jury, or even by
the court, as though he intended it.
While the court did not elaborate on this
illustration, the included section suggests the court's implicit recognition
that where an actor's conduct is substantially certain to result in injury, the
existence of such an intention may be inferred as a matter of law without
regard to the actor's claimed intent.
Therefore, for purposes of the intentional act
exclusion, intent to injure may be inferred where injury is substantially
certain to result from an insured's intentional conduct.
K.A.G., 148
Wis.2d at 162-163, 434 N.W.2d at 792 (citation and footnote omitted; ellipses
and parenthetical in K.A.G.).
This court then went on
to “conclude that sexual molestation of a minor falls within this category” of
“intentional conduct ... substantially likely to cause injury so as to warrant
an inference of an intent to injure.” Id.,
148 Wis.2d at 434 N.W.2d at 793. In the
instant case, less obviously but just as certainly, the intentional-acts
exclusion also defeats coverage for the grandmother's alleged conduct.
The complaint alleges
that the grandmother “knew or, in the exercise of reasonable care, should have
known” of the grandfather's sexual abuse of their four grandchildren. We, like the trial court, “must assume that
the facts pleaded are true.” Stefanovich
v. Iowa Nat'l Mut. Ins. Co., 86 Wis.2d 161, 164, 271 N.W.2d 867, 869
(1978). Unquestionably, therefore, as a
matter of law under K.A.G., if the grandmother “knew” of her
husband's actions, she “expected or intended” the harm to her grandchildren.[10]
“A claim should not be
dismissed,” however, “unless it appears to a certainty that no relief can be
granted under any set of facts that plaintiff can prove in support of his
allegations.” Morgan v.
Pennsylvania Gen. Ins. Co., 87 Wis.2d 723, 732, 275 N.W.2d 660, 664
(1979). Therefore, we must also
consider whether the policies provide coverage if the grandmother allegedly did
not know but, “in the exercise of reasonable care, should have
known.” While this presents a more
subtle issue, we conclude that, in the context of child sexual abuse allegedly
committed by one's spouse under circumstances in which the spouse “in the
exercise of reasonable care, should have known,” the intentional-acts exclusion
precludes coverage.
In Hagen,
this court extended the analysis of K.A.G. to circumstances in
which a sexual assault victim sued not only her assailant, but also her
assailant's mother's homeowner insurer.
Hagen, 151 Wis.2d at 3, 442 N.W.2d at 571. The dispositive issue in Hagen
was “whether insurance policy coverage for injuries arising out of a
nonconsensual sexual assault were [sic] within the reasonable expectations of
the contracting parties.” Id. In reversing the trial court's denial of the
insurer's motion for judgment notwithstanding the verdict, Hagen
reiterated that “[w]e should construe an insurance policy as a reasonable
person in the position of the insured would understand it,” id.,
and explained:
In K.A.G. v. Stanford, we decided
a case similar to this one, but on a different theory. We noted that the trial court had dismissed
the insurers in that case “because no reasonable person would expect a
homeowner's insurance policy to provide coverage for damages resulting from
[the defendant's sexual misconduct....”
We suggested that this alternative analysis ... may be as persuasive as
the one used in K.A.G.
Id., 151
Wis.2d at 5, 442 N.W.2d at 572 (citations omitted; bracket and ellipses in Hagen).
Citing several cases from
other jurisdictions that had reached similar results, Hagen then
went on to conclude “that a person purchasing homeowner's insurance would not
expect that he or she was insuring his or her children against liability for
their sexual assaults.” Id.,
151 Wis.2d at 7, 442 N.W.2d at 573. We
emphasized that both the insurer and the assailant's mother “would cringe at
the very suggestion that they were buying and selling sexual assault insurance”
and, accordingly, “there is no coverage in this case as a matter of law.” Id.
Hagen
quoted with approval Rodriguez v. Williams, 713 P.2d 135 (Ct.
App.), aff'd, 729 P.2d 627 (Wash. 1986), and Altena v. United Fire
and Casualty Co., 422 N.W.2d 485 (Iowa 1988), not only for the
proposition that “‘[t]he average person purchasing homeowner's insurance would
cringe at the very suggestion that [the person] was paying for such coverage’”
(for claims arising out of nonconsensual sex acts), but also for the
proposition that “‘certainly [the person] would not want to share that type of
risk with other homeowner's policyholders.’”
Hagen, 151 Wis.2d at 6-7, 442 N.W.2d at 573 (citation
omitted; brackets in Hagen).
Similarly, an Illinois court recently commented that even though it
“need not consider the ... arguments ... that coverage for sexual abuse is
against public policy and that neither party to the contract contemplated
coverage for ... sexual misconduct,... [i]t is beyond the realm of the
imagination that [the assailant's] mother purchased her homeowner's insurance
policy with [her son's] sexual misconduct in mind.” State Farm Fire & Casualty Co. v. Watters, 644
N.E.2d 492, 499 (Ill. App. Ct. 1994).[11]
Thus, this case law
identified two separate but related principles of a policy-holder's reasonable
expectations, regardless of the policy-holder's knowledge of the sexual
abuse: (1) that one who purchases
homeowner insurance does not contemplate coverage for sexual misconduct
committed by one's child; and (2) that one who purchases homeowner
insurance would not want to share that type of risk, (and the increased
premiums that would result,) with other homeowner's policyholders. Hagen, 151 Wis.2d at 6-7, 442
N.W.2d at 573. These considerations
apply with at least equal force to a policy-holder's expectations with respect
to sexual assaults committed by his or her spouse.
C. Severability
The appellants offer
strong arguments based on the “severability of interest” clause of each policy
and Northwestern National Insurance Co. v. Nemetz, 135 Wis.2d
245, 400 N.W.2d 33 (Ct. App. 1986) (despite intentional-acts exclusion,
severability clause of homeowner's policy preserved coverage for wife where
husband committed arson of their tavern and neighbors' adjoining property). We conclude, however, that Nemetz
is distinguishable.
Nemetz
dealt with arson and, therefore, did not encounter the special considerations
that arise in the context of child sexual abuse, particularly within a family.[12] Moreover, Nemetz considered
whether an apparently innocent spouse retains separate coverage.[13] Here, by contrast, the grandmother allegedly
knew or should have known. Therefore,
according to the pleadings, she was not “innocent.” Indeed, Nemetz reiterates the “premise that public
policy considerations should prevent recovery by an insured who is not innocent
with respect to intentional damages.” See
id., 135 Wis.2d at 258, 400 N.W.2d at 38. A grandmother who, according to the complaint, knew or should
have known of her husband's sexual abuse of their four grandchildren “for
several years” certainly “is not innocent with respect to [the] intentional
damages” resulting from sexual abuse.[14]
IV. CONCLUSION
Accordingly, in this
case, we conclude that despite severability clauses and regardless of sexual
misconduct exclusions, the intentional-acts exclusions precluded homeowner
insurance coverage for the grandmother who allegedly knew or should have known
of her husband's alleged sexual abuse of their grandchildren. The trial court correctly granted summary
judgment for the homeowner insurers.
By the Court.—Order
affirmed and cause remanded.
No. 95-3547 (C)
SCHUDSON, J. (concurring). I further acknowledge that the parties have
vigorously argued public policy.
Although the panel disagrees over whether it is necessary to address
these arguments, I believe it appropriate to do so because the case law guiding
our resolution of this appeal is based, in part, on related public policy
considerations. Moreover, although at
summary judgment courts rarely resolve cases on the basis of public policy,
sometimes they deem it appropriate to do so, particularly where insurance
coverage is at issue. As this court
recently explained in a child sexual abuse case involving a woman's potential
liability (and her homeowner insurance coverage) for her alleged negligence in
failing to warn of her ex-husband's dangerousness:
“The application of public policy
considerations is solely a function of the court, and does not in all cases
require a full factual resolution of the cause of action by trial before policy
factors will be applied by the court.”
Kelli
T-G. v. Charland, 198 Wis.2d 123, 129, 542 N.W.2d 175, 177 (Ct. App.
1995) (quoting Hass v. Chicago & N.W. Ry., 48 Wis.2d 321,
326-327, 179 N.W.2d 885, 888 (1970)).
The appellants express
understandable concern for the opportunity of sexually-abused children to gain
compensation for their injuries. They
also express alarm over the possibility that the person they term an “innocent”
grandmother ultimately may be held financially accountable for her husband's
actions. The respondents counter not
only with case law demarcating the lines of a policyholder's reasonable
expectations, but also with public policy arguments intimating that our
decision's impact on sexually-abused children may not be as the appellants
suppose. Indeed, the respondents
implicitly contend, denying coverage under the circumstances of this case may
be more likely to aid children than granting coverage.
In all likelihood,
relatively few homeowners actually contemplate the precise parameters of their
coverage. Notwithstanding the case
law's conclusions about what reasonable policyholders expect, relatively few
homeowners consider whether their insurance covers sexual misconduct. A parent or grandparent confronting the
horror of sexual abuse by his or her spouse, or denying knowledge even though
he or she should have known, or deciding whether to intervene, rarely would
resolve these excruciatingly painful problems on the basis of anticipated
insurance coverage.
Still, to acknowledge
the remoteness of the possibility that one's decision to confront sexual abuse by
one's spouse would ever be determined by insurance coverage is not to
say that the decision would never be influenced by such
considerations. While improbable in
most cases, such a factor is not impossible in all. Therefore, at least in some cases, homeowner's coverage for the
so-called “non-offending” spouse would militate against that spouse intervening
to prevent abuse.
Thus, it is noteworthy
that in assessing the reasonable expectations of “a person purchasing
homeowner's insurance,” Hagen declared “that this person would
not want to remove any deterrence that the threat of a money judgment
provides.” Hagen, 151
Wis.2d at 7, 442 N.W.2d at 573 (emphasis added). Moreover, what now may seem a remote possibility could become far
less remote should courts ever conclude that the so-called “non-offending”
spouse could receive homeowner insurance coverage for the offender's
abuse. Not only would prevention,
intervention, and deterrence of sexual abuse decline, but collusion could
increase as sexually-abusive families discovered they could not only assault
children, but gain insurance recoveries as well.
Recently, an Illinois
court considering an intentional-acts exclusion came to the intersection of
several of the insurance law principles and public policy arguments present in
this appeal. Although addressing a case
in which coverage for the offender, not the offender's spouse, was at issue,
the court's words are instructive:
[The children] raise the argument that denial
of coverage will result in innocent victims going uncompensated. Courts ... “have determined that [the]
benefit [of compensating sexual abuse victims with insurance proceeds] is
outweighed by the effect of allowing sexual offenders to escape having to
compensate minors for the harm that the courts have established is inherent in
such offense[s].” Furthermore, economic
liability should be placed with the same precision as moral liability is
placed—squarely on the shoulders of the abuser. “Any other result subsidizes the episodes of child sexual abuse
... at the ultimate expense of other insureds to whom the added costs of
indemnifying child molesters will be passed.”
Western
States Ins. Co. v. Bobo Ins. Co., 644 N.E.2d 486, 491-492
(Ill. App. Ct. 1994) (first brackets and ellipses added; second and third
brackets added; second ellipses in Bobo); see also N.N.,
153 Wis.2d at 95, 450 N.W.2d at 449 (1990) (This benefit of making possible
another potential source of compensation for victims' injuries “‘is outweighed
by the effect of allowing sexual offenders to escape having to compensate
minors for the harm that the courts have established is inherent in such
offenses.’”) (quoting Whitt v. DeLeu, 707 F. Supp. 1011, 1016
(W.D. Wis. 1989)).
Thus, I also conclude
that although in most cases any impact is remote, in some situations the
unavailability of coverage will prevent abuse and, where abuse has occurred,
will motivate the “non-offending” spouse to intervene on behalf of the victims.
No. 95-3547(C)
WEDEMEYER, P.J. (concurring). I join in Judge Schudson's analysis and
conclusion that the intentional-acts exclusion precludes coverage in this
case. Accordingly, I agree that this
case should be affirmed. I write
separately, however, because I do not join in Judge Schudson's public policy
analysis provided in his separate concurring opinion. Because this case can be disposed of under the terms of the insurance
policy at issue, it is unnecessary to address public policy. See Gross v. Hoffman,
227 Wis. 296, 300, 277 N.W. 663, 665 (1938) (only dispositive issue need be
addressed); and State v. Blalock, 150 Wis.2d 688, 703, 442 N.W.2d
514, 520 (Ct. App. 1989) (cases should be decided on the narrowest possible
grounds).
[1] In consideration of the confidentiality interest of the young children in this case, this court has modified the caption's identification of their grandfather.
[2] As we will explain, the exclusion in all the policies at issue in this appeal applies to injuries that are “expected or intended” by the insured. In the context of one's responsibility for a spouse's sexual abuse of young children, one's “expectations” rather than “intentions” might seem to be more appropriate terminology. For consistency, however, we will continue to refer to the “expected or intended” exclusion as “an exclusion known in the insurance industry as an intentional-acts exclusion.” Loveridge v. Chartier, 161 Wis.2d 150, 166, 468 N.W.2d 146, 150 (1991).
[3] The plaintiffs filed two amended complaints replacing the fictitious insurance companies of the original complaint with the actual names of the companies. The substantive allegations, however, remained the same. Thus, for convenience, this decision will refer to the complaint.
[4] The complaints identified the defendant by name and as “an adult individual.” They did not identify him as the children's grandfather. From the briefs and oral argument, however, it is apparent that the parties have litigated this case with the assumption that the trial court and this court understand that this defendant is the children's grandfather. With that understanding, and with an appreciation for confidentiality of the children, this decision will refer to him not by name, but as the grandfather.
[5] The complaint did not name the grandmother
as a defendant. The parties agree,
however, that under the direct action statute, § 632.24, Stats., her potential liability is
linked through the plaintiffs' action against her homeowner insurance
companies.
The complaints also did not identify the grandmother, except by name, and did not allege her familial relationship to either the grandfather or the grandchildren. It is apparent, however, that the parties want this court to reach the merits of this appeal with the understanding that this named individual is the grandmother. Again, with that understanding and in consideration of the grandchildren's confidentiality, we will refer to her as the grandmother.
[6] The various companies provided homeowner coverage for different periods from 1980 to 1994. At this summary judgment stage, none argued that the alleged assaults did not occur during their respective periods of coverage.
[7] Each
of the policies includes an intentional-acts exclusion. With only slight variations immaterial to the
issues on appeal, the All West, Preferred Risk, and Liberty Mutual policies
exclude coverage for bodily injury or property damage “which is expected or
intended by the insured,” or “from the standpoint of the insured.” The State Farm policy excludes coverage for
such injuries “expected or intended by an insured.” Each policy also specifies that coverage “applies separately to
each insured.”
[8] The trial court dismissed the action without reference to anything outside the pleadings. Whether it did so under § 802.06(2)(f), Stats., or as the first step in summary judgment methodology under § 802.08, Stats., the analysis would be identical and would focus only on the sufficiency of the complaint. See Voss v. City of Middleton, 162 Wis.2d 737, 747, 470 N.W.2d 625, 628-629 (1991). Whether a complaint states a claim presents a question of law we determine without deference to the trial court's decision. See Williams v. Security Sav. & Loan Ass'n, 120 Wis.2d 480, 482, 355 N.W.2d 370, 372 (Ct. App. 1984).
[9] Accordingly, we need not consider a number of additional issues that relate, in part, to differences among the policies including: (1) the distinction between “the insured” and “an insured” in the intentional-acts exclusion; (2) the distinction between the policies that included a sexual misconduct exclusion and those that did not; and (3) the distinction between two different sexual misconduct exclusions. See Gross v. Hoffman, 227 Wis. 296, 300, 277 N.W. 663, 665 (1938) (only dispositive issue need be addressed).
[10] Increasingly, criminal law also has
recognized this realm of responsibility.
In Wisconsin, § 948.02(3), Stats.,
provides:
Failure to Act. A person responsible for the welfare of a child who has not attained the age of 16 years is guilty of a Class C felony if that person has knowledge that another person intends to have, is having or has had sexual intercourse or sexual contact with the child, is physically and emotionally capable of taking action which will prevent the intercourse or contact from taking place or being repeated, fails to take that action and the failure to act exposes the child to an unreasonable risk that intercourse or contact may occur between the child and the other person or facilitates the intercourse or contact that does occur between the child and the other person.
[11] State Farm Fire & Casualty Co. v. Watters, 644 N.E.2d 492 (Ill. App. Ct. 1994) also assists our consideration of an issue only affecting this appeal with respect to State Farm: whether Wisconsin or Illinois law applies. We need not determine which state's law governs because, consistent with State Farm Fire, we are satisfied that the outcome would be the same under either. See also Western States Insurance Co. v. Bobo Insurance Co., 644 N.E.2d 486 (Ill. App. Ct. 1994).
[12] See Prosser v. Leuck, 196 Wis.2d 780, 539 N.W.2d 466 (Ct. App. 1995), where this court considered whether principles of fortuity or an intentional acts exclusion precluded homeowner insurance coverage for the father of a teenager who caused a warehouse fire. Distinguishing K.A.G. and Hagen, we commented that the “act of playing with fire is far removed from the intentional acts of sexual assault and murder.” Id., 196 Wis.2d at 786, 539 N.W.2d at 468; see also Hedtcke v. Sentry Ins. Co., 109 Wis.2d 461, 488, 326 N.W.2d 727, 740 (1982) (“An absolute bar to recovery by an innocent insured is particularly harsh in a case in which the arson appears to be retribution against the innocent insured.”).
[13] The court noted that “[a]lthough some of Hazel's actions may have supported a conspiracy finding if the hired arsonist had burned the building as Walter originally planned, this scheme was clearly abandoned.... [T]here was no credible evidence to support Hazel's involvement in a conspiracy to set the actual ... fire.” Northwestern Nat. Ins. Co. v. Nemetz, 135 Wis.2d 245, 258, 400 N.W.2d 33, 39 (Ct. App. 1986). The court also concluded that the insurers had “waived their right to argue that Hazel was not an innocent insured.” Id., 135 Wis.2d at 258, 400 N.W.2d at 38-39.
[14] The
appellants also attempt to support their severability arguments with numerous
cases from other jurisdictions. We
briefly comment on some in order to identify several important distinctions.
In
American States Insurance Co. v. Borbor, 826 F.2d 888 (9th Cir.
1987), a case involving sexual abuse of children in a nursery school, the court
considered a partnership's comprehensive liability policy and “whether a
partner who is liable for the wilful acts of a co-partner may be insured
against that liability.” Id.,
826 F.2d at 892. In the instant case,
by contrast, we are dealing with homeowner insurance, not a comprehensive
liability policy; with a home, not a nursery school; and with spouses who are not
in a business partnership.
Moreover,
although Borbor is not entirely clear on this point, it seems to
imply that a spouse who “‘more likely’ ... closed her eyes to certain facts to
deliberately avoid learning the whole truth,” and who “was negligent in her
failure to supervise [her husband who was a pedophile who abused numerous
children and took over 2000 photographs of them], or in her failure to
undertake an investigation to find out what was going on,” was “innocent.” Id. at 892. We strongly disagree.
The
appellants also rely on National Union Fire Insurance Co. v. Lynette C.,
279 Cal. Rptr. 394 (Ct. App. 1991), where the court concluded that a woman was
covered by her homeowner policy for her husband's sexual abuse of their foster
children. The case is clearly
distinguishable. It was resolved not on
the basis of an intentional-acts exclusion, but rather, under the policy's
sexual misconduct exclusion. The
exclusion referred to both “the” insured and “an” insured in a manner leading
the court to conclude that the exclusion “can reasonably be read to protect one
insured against claims based on a second insured's sexual conduct so long as
the first insured has not engaged directly in that conduct.” Id., 279 Cal. Rptr. at
396-397.
Finally,
the appellants' reliance on United States Fidelity & Guaranty Co. v.
Open Sesame Child Care Center, 819 F.Supp. 756 (N.D.Ill. 1993), also is
misplaced. The case considered a
multi-peril policy's coverage of an employer for the alleged negligent hiring
of a staff member who molested a child in a daycare center. In the instant case, we address neither such
a policy, nor an employer-employee relationship, nor a claim of negligent
hiring, nor a child care business setting.