Allstate Ins. Co. v. Morgan

123 F.Supp.3d 1266

ALLSTATE INSURANCE COMPANY, Plaintiff,

v.Debby Anne MORGAN, et al, Defendants.

No. 3:14–cv–00113–AC.

United States District Court, D. Oregon.

Signed Aug. 18, 2015.

Vernon S. Finley, Douglas F. Foley, Douglas Foley & Associates, PLLC, Vancouver, WA, for Plaintiff.

Billy M. Sime, Parks Bauer Sime Winkler & Fernety LLP, Salem, OR, Kimberly O. Weingart, R. Brendan Dummigan, J. Randolph Pickett, Pickett Dummigan Rhodes, LLP, Portland, OR, for Defendants.

ORDER

HERNÁNDEZ, District Judge.

Magistrate Judge John V. Acosta issued a Findings & Recommendation [56] on May 11, 2015, recommending that Plaintiff Allstate Insurance Company's motion for summary judgment [37] be granted and co-Defendants Debby Morgan and Adam Morgan's (collectively "the Morgans") cross-motions [41] and [42] for summary judgment and to stay this proceeding be denied. The Morgans jointly filed objections [59] to the Findings & Recommendation, and Defendant Jonathon Patrick Nicholson separately filed objections [58]. The matter is now before me pursuant to 28 U.S.C. § 636(b)(1) and Federal Rule of Civil Procedure 72(b).

When a party objects to any portion of the Magistrate Judge's Findings & Recommendation, the district court must make a de novo determination of that portion of the Magistrate Judge's report. 28 U.S.C. § 636(b)(1) ; Dawson v. Marshall, 561 F.3d 930, 932 (9th Cir.2009) ; United States v. Reyna–Tapia, 328 F.3d 1114, 1121 (9th Cir.2003) (en banc).

I have carefully considered all of the parties' objections and conclude there is no basis to modify Judge Acosta's conclusion that Allstate does not have a duty to defend the Morgans in this case. The Court finds, however, that reading the so-called "joint obligations" clause in combination with the criminal acts exclusion upon which Judge Acosta relied further bolsters that conclusion. The joint obligations clause states:

"The terms of the policy impose joint obligations on the person named on the Policy Declarations as the insured and on that person's residence spouse. These persons are defined as you and 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.

The terms of this policy impose 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. "

Foley Declaration, Exhibit 5, ECF No. 38–5, at 26–27 (emphasis in original).

The Court could not find an Oregon case that construes a similar joint obligations clause. However, numerous other courts have interpreted identical joint obligation clauses and have held that the language "renders the criminal acts exclusion applicable to claims for negligence against other insureds." Allstate Indem. Co. v. Tilmon, No. CIV.A. 1:13–00690–JM, 2014 WL 1154666, at *7 (D.S.C. Mar. 21, 2014) (collecting cases); see also Allstate Ins. Co. v. Ervin, No. CIV.A. 05–02800, 2006 WL 2372237, at *5 (E.D.Pa. Aug. 14, 2006) (holding that, based on the policy's criminal acts exclusion and joint obligations clause, insurer had no duty to defend a negligent supervision claim against parents of an insured who was convicted of assaulting a party-goer at the parents' house).

The Court finds that the joint obligations clause and criminal acts exclusion operate to relieve Allstate from its duty to defend any of the insureds under the policy at issue here from any claim that arises out of Adam Morgan's criminal act. Allstate Ins. Co. v. Berge, 522 F.Supp.2d 1180, 1187 (D.N.D.2007) ; Castro v. Allstate Ins. Co., 855 F.Supp. 1152, 1154–55 (S.D.Cal.1994) ; Allstate v. Raynor, 143 Wash.2d 469, 480, 21 P.3d 707 (2001).

I have also reviewed the pertinent portions of the record de novo and find no errors in the Magistrate Judge's Findings & Recommendation.

CONCLUSION

The Court ADOPTS Magistrate Judge Acosta's Findings & Recommendation [56], and therefore, Plaintiff Allstate's motion for summary judgment [37] is granted. Defendants Debby and Adam Morgan's cross motions [41] and [42] for summary judgment and to stay this proceeding are denied.

IT IS SO ORDERED.

FINDINGS AND RECOMMENDATION

ACOSTA, United States Magistrate Judge:

Introduction

Plaintiff Allstate Insurance Company ("Allstate") filed this action to obtain a declaration that Allstate is not obligated to defend or indemnify Adam William Morgan ("Adam") and Debby Anne Morgan ("Debby") (collectively, "the Morgans") for the claims alleged against them in the second amended complaint filed by Jonathon Patrick Nicholson ("Nicholson") in state court on May 6, 2014 (the "Nicholson Complaint"). Allstate, Debby, and Adam have filed cross-motions for summary judgment on Allstate's duty to defend the Morgans under the terms of the Homeowners Policy Allstate issued to Debby on June 21, 2011 (the "Policy"). Debby and Adam also seek a stay of this action until the entry of final judgment in the underlying case. Nicholson recently moved to join Debby's motion and the court granted that motion at oral argument.

The Policy's Criminal Acts Exclusion Clause bars coverage for bodily injury that results from the criminal act of any insured. Because Adam's criminal act caused Nicholson's injury, the Morgans are not covered under the Policy, and Allstate has no duty to defend or indemnify the Morgans. Accordingly, Allstate's motion for summary judgment should be granted Adam and Debby's motions for summary judgment should be denied. Because the Criminal Acts Exclusion Clause and established facts are dispositive of the issue, the motion to stay should be denied.

Background

I. Underlying Incident

On September 4, 2011, Adam hosted a party attended by friends and acquaintances in the home of his mother, Debby. (Nicholson Compl. ¶ 2.) Nicholson was among those at the party. (Nicholson Compl. ¶ 6.) At this party, Adam and three other attendees assaulted Nicholson. (Nicholson Compl. ¶ 5; Foley Decl. Exh. 3.) As a result of the assault, Nicholson received medical and dental care for severe and permanent injuries, including fractures to his face, damage and loss of vision in one of his eyes, cracked teeth, and a concussion. (Nicholson Compl. ¶¶ 8–9.).

II. Adam's Criminal Charges

Adam was criminally charged for participating in the assault and eventually pleaded guilty to Assault 3. (Foley Decl. Exh. 3.) In his Petition to Enter Plea, Adam represented that: "[o]n Sept 4th in Marion Co. I did unlawfully and recklessly while being aided by another person actually present cause physical injury to Jonathan Nicholson." (Foley Decl. Exh. 3.)

III. The Nicholson Complaint

Nicholson filed his complaint in Marion County Circuit Court asserting negligence claims against the Morgans and additional claims against the others who participated in the altercation or were responsible for the party.¹ (Nicholson Compl.) Nicholson specifically alleges the Morgans were negligent in:

(a) [ ] permitting the presence of persons they knew or had reason to know tended to use and abuse of alcohol, marijuana, other street drugs, and were prone to violence;

(b) [ ] failing to warn plaintiff of the presence of persons they knew or had reason to know tended to use and abuse of alcohol, marijuana, other street drugs, and were prone to violence;

(c) [ ] failing to provide adequate security for the party sufficient to protect participants and plaintiff;

(d) [ ] failing to instruct plaintiff to leave the party, or otherwise provide for his safe departure from the premises.

As a result of defendants' negligence, plaintiff suffered [ ] injuries and [ ] economic and non-economic damages....

(Nicholson Compl. ¶¶ 13–14.)

IV. The Policy

Allstate relies on certain defined terms and express provisions in the Policy to show it has no duty to defend or indemnify the Morgans. Relevant terms from the Policy's definition section include:

1. "You " or "your "—means the person named on the Policy Declarations as the insured and that person's resident spouse.

2. "Allstate ," "we, " "us, " or "our "—means the company named on the Policy Declarations.

3. "Insured person(s) "—means you and, if a resident of your household:

a) any relative; and

b)any dependent person in your care.

* * *

4. "Bodily injury "—means physical harm to the body, including sickness or disease, and resulting death....

* * *

9. "Occurrence "—means 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.

(Foley Decl. Exh. 5 at 25–26.)

In the Insuring Agreement section, the Policy also included a "joint obligations" clause which provides:

The terms of this policy impose 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.

(Foley Decl. Exh. 5 at 27.) (the "Joint Obligations Clause.")

Allstate's obligations for family liability and guest medical protection are found in Coverage X of the Policy. Under Coverage X, Allstate agreed to "pay damages which an insured person becomes legally obligated to pay because of bodily injury or property damage arising from an occurrence to which this policy applies, and is covered by this part of the policy." (Foley Decl. Exh. 5 at 42.) In the event an insured person is sued, Allstate also agreed to "provide a defense ... even if the allegations are groundless, false or fraudulent." (Foley Decl. Exh. 5 at 42.) However, the Policy specifically excluded coverage for intentional or criminal acts, or omissions of, an insured person:

Losses We Do Not Cover Under Coverage X:

1. 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

...