Liberty Mut. Ins. Co. v. Lange

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LIBERTY MUTUAL INSURANCE COMPANY, et al., Plaintiffs, v. BENJAMIN LANGE, et al., Defendants.

No. C20-0309JLR

United States District Court, W.D. Washington, Seattle

July 24, 2023

ORDER

JAMES L. ROBART, UNITED STATES DISTRICT JUDGE

I. INTRODUCTION

Before the court is Plaintiffs Liberty Mutual Insurance Company and Liberty Insurance Company's (collectively, “Liberty Mutual”) motion for summary judgment. (MSJ (Dkt. # 52) Reply (Dkt. # 58).) Defendants Benjamin Lange and Carolyn Lange (collectively, the “Langes”) oppose the motion, request attorneys' fees and costs, and ask the court to strike certain material in Liberty Mutual's reply. (Resp. (Dkt. # 56); Surreply (Dkt. # 60).) The court has reviewed the parties' submissions, relevant portions of the record, and applicable law. Being fully advised,^[1] the court GRANTS in part and DENIES in part Liberty Mutual's motion for summary judgment, GRANTS the Langes' motion to strike, and DENIES the Langes' request for fees and costs.

II. BACKGROUND

This lawsuit arises out of a dispute between the parties regarding Liberty Mutual's duty to defend the Langes in separate state court proceedings (the “Underlying Dispute”) brought by their adopted daughter, C.L. (See Praecipe (Dkt. # 19), Ex. 1 (“Underlying Compl.”).) The court reviews the relevant, undisputed factual and procedural background in the instant and underlying disputes as well as the relevant portions of the operative insurance policies.

A. The Underlying Dispute^[2]

The Langes served as foster parents for C.L. between 2002 and 2004, and formally adopted C.L. and her biological sister, S.L. in 2004. (Underlying Compl. ¶¶3.2, 3.9); C.L. v. Wash. State Dep't of Soc. & Health Servs., 402 P.3d 346, 348 (Wash.Ct.App. 2017) (noting C.L.'s adoption by the Langes was approved on August 24, 2004). C.L. alleges that two of the Langes' biological sons, Dillon and Colten Lange, sexually abused her “for many years.” (Underlying Compl. ¶ 3.11.) The sexual abuse continued until 2008.

(See MSJ at 3; Resp. at 6 (both citing C.L., 402 P.3d at 349)); see also The Standard Fire Ins. Co. v. Lange, No. C20-0092JLR-MLP, 2020 WL 6083452, at *3-4 (W.D. Wash. Sept. 29, 2020), report and recommendation adopted, No. C20-0092JLR, 2020 WL 6079176, at *1 (W.D. Wash. Oct. 15, 2020) (referencing Dillon and Colten Langes' guilty pleas to charges related to the sexual abuse of C.L. between 2003 and 2008).^[3] C.L. has testified that she told Ms. Lange about the sexual abuse in 2011, but that Ms. Lange did not believe her and told her that if any abuse did occur, C.L. should forgive Dillon. C.L., 402 P.3d at 349. C.L. told a friend and the friend's mother about the abuse in August 2013; the friend's mother contacted Child Protective Services (“CPS”), and C.L. did not return to live in the Langes' home. Id. Shortly thereafter, C.L. returned to the Lange home to collect her belongings and found them in garbage bags outside the home, with C.L.'s face scratched out of photographs. (6/5/23 Carr Decl. (Dkt. # 57) ¶ 5, Ex. D (“C.L.'s Resp. to Defs' 3d MSJ”) at 22.^[4])

C.L. further alleges that Ms. Lange directed S.L. to falsely accuse C.L. of abuse. (Id.) CPS ultimately removed C.L.'s sister, S.L., from the home in November 2013. C.L., 402 P.3d at 349. Later, in 2017, C.L. learned that Dillon had sexually assaulted a young cousin years before C.L. joined the Lange household, but that Ms. Lange did not disclose the incident to the Department of Social and Health Services (“DSHS”) in her foster care application or during the adoption process. (See 6/5/23 Carr Decl. ¶ 4, Ex. C (“7/7/20 Transcript”) at 17.)

C.L. accuses both Benjamin and Carolyn Lange of failing to protect her from sexual abuse by Dillon and Colten. (Underlying Compl. ¶ 4.10.) C.L. also alleges that Benjamin and Carolyn each failed to protect her from various forms of abuse by the other. See Standard Fire, 2020 WL 6083452, at *1. C.L. alleges that while she was living in the Langes' home, Ms. Lange forced her to pull down her pants and grab her ankles while Ms. Lange struck her with items such as a leather belt and metal kitchen ladle. Id. C.L. further alleges Mr. Lange molested her once, and that Ms. Lange failed to protect her from this abuse. Id.

C.L. filed suit against the Langes in November 2017 in Whatcom County Superior Court. (See Underlying Compl.) C.L. alleges that the Benjamin and Carolyn Lange: (1) had a duty to protect and care for C.L.; (2) owed a duty of reasonable care to C.L.; (3) were negligent in their actions and/or omissions relating to C.L.; (4) engaged in willful and wanton conduct relating to C.L.; (5) negligently inflicted emotional distress; (6) are liable for outrage; and (7) breached their duties of care to C.L. (Id. ¶¶ 3.3-3.4, 3.8, 4.1-4.8.) C.L. alleges “the negligence of Benjamin and Carolyn Lange was a direct and proximate cause of severe and permanent injuries to C.L.” (id. ¶ 4.9), and that the Langes “are each liable under RCW 9.68A.130 for facilitating the abuse and neglect of C.L.... particularly with respect to Colten and Dillon Lange's communications with a minor for immoral purposes” (id. ¶ 4.10). See also RCW 9.68A.130 (providing a cause of action to sexually exploited minors). C.L. seeks damages for the Langes' alleged “negligence and/or other tortious conduct [that] began in 2002 and lasted through at least 2016.” (Id. ¶ 4.7.) C.L. states that she is traumatized by the abuse she endured and, “as a consequence of her placement into this predatory environment, C.L. faces a lifetime of PTSD, sexual aversion, flashbacks, paranoid ideation, and anxiety.” (C.L.'s Resp. to Defs' 3d MSJ at 20.)

Discovery in the Underlying Dispute is now closed and C.L. and the Langes have each filed several summary judgment motions. (See Resp. to Mot. to Lift Stay (Dkt. # 46) at 8.) The trial court proceedings are currently stayed while the Washington State Court of Appeals decides whether C.L. can pursue damages for sexual abuse from the Langes for which she also recovered in her case against DSHS. (Id. at 4-5.)

B. Procedural Background of the Instant Dispute and the Liberty Mutual Insurance Policies

The Langes obtained two insurance policies from Liberty Mutual: (1) a homeowner policy effective May 29, 2015 through May 29, 2018 (the “Homeowner Policy”) (5/4/23 Chavez Decl. (Dkt. # 54) ¶ 4 & Ex. 2 (“Homeowner Policy”)), and (2) an excess coverage policy effective May 29, 2015 through July 11, 2016 (the “Umbrella Policy”) (collectively, the “Insurance Policies”) (id. ¶ 5 & Ex. 3 (“Umbrella Policy”)). The Langes filed a claim for coverage in the Underlying Dispute and Liberty Mutual found no coverage under either insurance policy. (See 5/4/23 Chavez Decl. ¶ 3, Ex. 1 (“Reservation of Rights Letter”) at 2.) Liberty Mutual agreed to defend the Langes in the Underlying Dispute under a full reservation of rights. (Id. at 2, 6-8 (describing bases for denial of coverage).)

Liberty Mutual filed the instant action on February 26, 2020, seeking a declaratory judgment that it has no duty to defend or indemnify the Langes in the Underlying Dispute. (Compl. (Dkt. # 1) ¶¶ 31-33.) On November 17, 2020, the court granted the parties' stipulated motion to stay the case while litigation in the Underlying Dispute proceeded. (11/17/20 Order (Dkt. # 31).) The undersigned lifted the stay on March 23, 2023 on Liberty Mutual's motion, over the Langes' objections. (3/23/23 Order (Dkt. # 49).)

The court now reviews the relevant provisions of the Homeowner Policy and Umbrella Policy that Liberty Mutual issued to the Langes.

1. The Homeowner Policy

The Homeowner Policy provides the following inclusionary provision:

If a claim is made or a suit is brought against an insured for damages because of bodily injury or property damage caused by an occurrence to which this coverage applies, we will:

1. Pay up to our limit of liability for the damages for which the insured is legally liable; and

2. Provide a defense at our expense by counsel of our choice even if the allegations are groundless, false or fraudulent

(Homeowner Policy at 10-11 (emphasis in original).) The Homeowner Policy also contains the following definitions, in relevant part:

1. “bodily injury” means bodily harm, sickness, disease except a disease which is transmitted through sexual contact. “Bodily injury” includes required care, loss of services, and death resulting from covered bodily harm, sickness or disease. .... 3. “insured” means you and residents of your household who are: (a) your relatives; or (b) other persons under the age of 21 and in the care of any person named above.

....

5. “occurrence” means 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.

(Id. at 8 (emphasis in original).) The Homeowner Policy contains the following exclusion:

1. Coverage E - Personal Liability and Coverage F - Medical Payments to Others do not apply to bodily injury or property damage: (a) which is expected or intended by the insured

(Id. at 11 (emphasis in original).) The Homeowner Policy contains the following condition:

1. Policy Period. This policy applies only to loss . . . or bodily injury . . . which occurs during the policy period.

(Id. at 15 (emphasis in original).) The policy period for the Homeowner Policy was May 29, 2015 through May 29, 2018. (5/4/23 Chavez Decl. ¶ 4.)

2. The Umbrella Policy

The Umbrella Policy provides the following liability insuring provision:

COVERAGE - PERSONAL EXCESS LIABILITY

We will pay all sums in excess of the retained limit and up to our limit of liability for damages because of personal injury or property damage to which this policy

...