MFRS. AND MERCHANTS MUT. INS. v. Harvey

330 S.C. 152

498 S.E.2d 222

MANUFACTURERS AND MERCHANTS MUTUAL INSURANCE COMPANY, Respondent, v. Norman L. HARVEY; Joyce P. Harvey; Betsy Baker; R.H., a minor child under the age of fourteen years, by his next friend, P.H.; K.E.H., a minor child under the age of fourteen years, by her next friend, P.H.; B.C.H., a minor child under the age of fourteen years, by his next friend, P.H.; B.E.B., a minor child under the age of fourteen years; F.H.B., a minor child under the age of fourteen years; Price H.; and Gloria H., Defendants.

Of Whom R.H., a minor child under the age of fourteen years, by his next friend, P.H.; K.E.H., a minor child under the age of fourteen years, by her next friend, P.H.; B.C.H., a minor child under the age of fourteen years, by his next friend, P.H.; Price H.; and Gloria H. are, Appellants/Respondents

Of Whom Betsy Baker; B.E.B., a minor child under the age of fourteen years; and F.H.B., a minor child under the age of fourteen years, are, Primary Respondents/Appellants

Of Whom, Joyce Harvey is, Secondary Respondent/Appellant.

No. 2772.

Court of Appeals of South Carolina.

Submitted April 1, 1998.

Decided April 2, 1998.

Victoria L. Eslinger and Susan Batten Lipscomb, both of Nexsen, Pruet, Jacobs & Pollard, Columbia, for Appellants/Respondents.

J. Marvin Mullis, Jr., and Frank A. Barton, both of Mullis & Barton, Columbia, for Primary Respondents/Appellants.

Joseph M. McCulloch, Jr., Columbia, for Secondary Respondent/Appellant.

Thomas C. Salane, of Turner, Padget, Graham & Laney, Columbia, for Respondent.

ORDER

The primary Respondents/Appellants and Respondent in the above captioned case have petitioned for rehearing. We grant this petition without oral argument and order that the opinion heretofore filed, Op. No. 2772, December 22, 1997, be withdrawn and the attached opinion be substituted.

IT IS SO ORDERED.

/s/ William T. Howell, C.J. /s/ Jasper M. Cureton, J. /s/ William L. Howard, J.

Introduction

HOWARD, Judge:

This appeal raises the important question of whether the sexual abuse of a minor by an insured constitutes an "occurrence" under an insurance contract. Manufacturers and Merchants Mutual Insurance Company (Manufacturers) brought this declaratory judgment action seeking a declaration that its policies provide no coverage to the insureds, Norman and Joyce Harvey, for alleged acts of sexual abuse against their five minor grandchildren. The trial court concluded Manufacturers had no obligation to defend or indemnify the Harveys for liability resulting from the underlying civil actions against them. We affirm in part and reverse in part.

Facts

Manufacturers issued homeowners policies to Norman Harvey for the period of February 1990 through February 1992. Joyce Harvey was an additional insured under the policies. It is uncontested that the alleged acts of sexual abuse were discovered during this time period.

In August of 1992, Norman Harvey pled guilty to indictments charging him with committing lewd acts upon children under fourteen years of age and with second degree criminal sexual conduct with minors. Joyce Harvey pled guilty to an indictment charging her with the unlawful abuse or neglect of children. The victims were the Harveys' five grandchildren. In 1993, lawsuits were filed on behalf of the grandchildren against Norman and Joyce Harvey. These suits alleged causes of action against both Harveys for assault, battery, intentional infliction of emotional distress, invasion of privacy, and false imprisonment. As to Norman Harvey, the complaints of the grandchildren alleged that he subjected them to various sexual acts including penile and digital penetration, penetration with other objects, fellatio, sodomy and other wrongful touching, exposure to harmful substances, exposure to dangerous practices, and exposure to ritualistic sex acts.

As to Joyce Harvey, the grandchildren alleged that she also engaged in wrongful sexual contact and photographed the grandchildren participating in wrongful, illicit touching with her husband. Further, the grandchildren alleged that Joyce Harvey knew Norman Harvey was a pedophile, condoned his conduct with the grandchildren, and refused to report it or protect the grandchildren from the abuse. In addition to these claims, the grandchildren alleged that Joyce Harvey negligently supervised them during the abuse of Norman Harvey.

The parents of the grandchildren, Price and Gloria H. and Betsy Baker, filed separate lawsuits against the Harveys, alleging intentional infliction of emotional distress, invasion of privacy, loss of consortium, and negligent supervision.

Manufacturers sought a determination that it had no obligation under the policies to defend or indemnify the Harveys for the allegations in the civil actions. During the non-jury hearing, the trial court received the testimony of two medical experts, Dr. Harold Morgan and Dr. Gene Abel. These experts stated that, in their professional opinion, pedophiles have no understanding their acts are harmful to their victims. Both admitted, however, that Mr. Harvey understood the nature and quality of his acts and was perfectly competent except for a diminished capacity to resist his deviant sexual urges with minors.

After the hearing, the court issued its order concluding Manufacturers had no duty to defend or indemnify because

(1) repeated acts of molestation by the insureds do not constitute an "occurrence" within the meaning of the insuring clause of the policies; (2) an insured's sexual molestation of a minor is an act for which damage or injury is "expected or intended" as a matter of law and, therefore, is excluded under the "expected or intended" exclusion of the policy; and (3) Manufacturers & Merchants has no obligation under the homeowner policies to defend or to indemnify its insureds for any liability resulting from the underlying civil actions.

Issues

I. Did the lower court err in holding that the intentional conduct of Joyce and Norman Harvey did not constitute an "occurrence" as defined under the policy?

II. Did the lower court err in finding that the intentional conduct of the Harveys is excluded from coverage by the intentional acts exclusion in the policy?

III. Did the lower court err in holding that the negligent supervision claims were not covered under the policy?

IV. Did the lower court err in finding that Norman and Joyce Harvey's guilty pleas collaterally estop the issue of intent?

Discussion

I. Did the lower court err in holding that the intentional conduct of Joyce and Norman Harvey did not constitute an occurrence as defined under the policy?

We uphold the trial court's finding that sexual abuse does not constitute an "occurrence" as defined by the Harveys' insurance policies. The homeowners policies issued by Manufacturers provided "Personal Liability" coverage as follows:

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.

2. provide a defense at our expense by counsel of our choice, even if the suit is groundless, false or fraudulent. We may investigate and settle any claim or suit that we decide is appropriate. Our duty to settle or defend ends when the amount we pay for damages resulting from the occurrence equals our limit of liability. (emphasis added)

The term "occurrence" is defined in the policies 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." (emphasis added) The term "accident" is not defined within the policies.

Since "accident" is not specifically defined in the policies, the term should be defined according to the usual understanding of the term's significance to the ordinary person. USAA Property and Casualty Ins. Co. v. Rowland, 312 S.C. 536, 435 S.E.2d 879 (Ct.App.1993). The South Carolina Supreme Court has interpreted the term "accident" to mean "an effect which the actor did not intend to produce and cannot be charged with the design of producing." Goethe v. New York Life Ins. Co., 183 S.C. 199, 190 S.E. 451 (1937). More plainly stated, an intended injury cannot be accidental. Id.

Appellants argue that the medical testimony submitted at trial states conclusively that pedophiles and Mr. Harvey, in particular, do not intend sexual abuse to be harmful and that, therefore, sexual abuse can constitute an "occurrence."

We today hold that the sexual abuse of a child is so inherently injurious to the victim that the perpetrator's intent to harm the child will be inferred as a matter of law. In so holding, we follow the 41 other jurisdictions which recognize an inferred intent to harm when adults sexually assault children.¹ As stated by Justice Souter, who addressed this issue while sitting on the New Hampshire Supreme Court:

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 injury or death." Nor can an insured's intentional act be an accidental cause of injury when it is so inherently injurious that it cannot be performed without causing the resulting injury.

Vermont Mutual Insurance Company v. Malcolm, 128 N.H. 521, 523-24, 517 A.2d 800, 802 (1986) (citation omitted and emphasis added). We conclude that 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.

The intent to act, coupled with the intent to produce the consequences is not an "acciden...