State Farm Fire and Cas. Co. v. Davis

Page 458

612 So.2d 458

STATE FARM FIRE AND CASUALTY COMPANY v. Jerry H. DAVIS and Delores Davis.

1910714.

Supreme Court of Alabama.

Jan. 15, 1993.

Jeffrey W. Smith and Christopher J. Hughes of Beers, Anderson, Jackson & Smith, Montgomery, for appellant.

Walter Gregory Ward, Lanett, for appellees.

MADDOX, Justice.

United States District Judge Truman Hobbs has certified to this Court several questions pursuant to Rule 18, Ala.R.App.P. Those questions call for us to consider whether State Farm Fire and Casualty Company, under the terms of a homeowner's policy, was under a duty to defend its insureds in a civil action against its insureds alleging sexual abuse and molestation of minor children.

On September 21, 1990, four mothers, suing on behalf of their minor daughters, sued Jerry and Delores Davis in the Circuit Court for Chambers County, Alabama, alleging personal injury as the result of sexual abuse and molestation by Jerry Davis. The plaintiffs claimed on behalf of their respective children that the abuse took place in the Davises' home with the knowledge of Delores Davis. As a result of this alleged abuse, Jerry Davis pleaded guilty in state court to one count of sexual abuse in the second degree, in violation of § 13A-6-67, Ala.Code 1975.

On March 28, 1991, State Farm Fire and Casualty Company sued in the United States District Court for the Middle District of Alabama for a judgment declaring that, under its homeowner's policy issued to the Davises, it had no duty to indemnify or defend the Davises in the civil action brought by the mothers in Chambers County for damages based on personal injury resulting from the alleged sexual abuse and molestation of the children. The Davises answered State Farm's complaint, and the mothers (the plaintiffs in the underlying action) were allowed to intervene on May 6, 1991.

On February 11, 1992, Judge Hobbs requested this Court to consider questions of state law involved in the declaratory judgment action filed in the federal court. This Court consented to consider them. He certified the following questions:

"A) Whether State Farm is relieved of any obligation to indemnify Jerry Davis or Delores Davis on the ground that to do so would be to offend the public policy of the state?

"B) Despite the public policy contentions, would there be a duty to defend either or both Jerry and Delores Davis?

"C) Would any of the stated policy exclusions apply and as a matter of law relieve a defendant of the duty to indemnify or defend either or both Jerry Davis and Delores Davis?

"D) Would it be a factual question for the jury as to whether one or more of the exclusions would apply? If so, would the charge to the jury state that an objective or a subjective standard would apply in determining whether an exclusion applied? If the 'willful and malicious' exclusion is applicable to the testimony which has been stipulated, is it properly a determination by the court as a matter of law as to whether the acts were malicious and willful, or is it an issue for the jury? If the latter, is the jury to apply an objective or a subjective standard?"

Because our answer to question C disposes of the issues presented in the declaratory judgment action, we need not address the remaining questions.

The State Farm policy, which the parties stipulate was in full force and effect at all pertinent times, contains the following exclusions:

"1. Coverage L (Personal Liability) and Coverage M (Medical Payments to Others) do not apply to:

"a. bodily injury or property damage

"(1) which is either expected or intended by an insured; or

"(2) to any person or property which is the result of willful and malicious acts of an insured;"

(Emphasis added.)

This Court has never answered the question presented in a case in which sexual abuse or molestation was the cause of the alleged injury, but has considered the issue in other factual contexts, and has established rules of law to apply. In Alabama Farm Bureau Mut. Cas. Ins. Co. v. Dyer, 454 So.2d 921 (Ala.1984), for example, this Court, in interpreting an analogous provision of an insurance contract, held that a purely subjective standard governed the determination of whether an insured either "expected or intended" to inflict bodily injury upon another. In Dyer, the insured shot and killed his brother after an argument over a water ski. The insured then committed suicide. The trial court found that the shooting of the brother was neither expected nor intended from the standpoint of the insured and entered a judgment accordingly. Farm Bureau appealed, but this Court affirmed. This Court reviewed its prior rulings wherein it had previously held that an intentional act could have an unexpected or unintended result and that insurance coverage can be extended in such a case. ¹ In defining the purely subjective standard, the Court stated:

"Under this subjective test, an injury is 'intended from the standpoint of the insured' if the insured possessed the specific intent to cause bodily injury to another, whereas an injury is 'expected from the standpoint of the insured' if the insured subjectively possessed a high degree of certainty that bodily injury to another would result from his or her act."

454 So.2d at 925. In Dyer, the Court distinguished the subjective intent rationale from objective methodology by explaining as follows:

"Because the presumption in tort and criminal law that a person intends the natural and probable consequences of his or her intentional acts has no application to the interpretation of the terms used in the 'expected or intended from the standpoint of the insured' policy exclusion, the policy term, 'expected or intended injury,' cannot be equated with 'foreseeable injury.' "

Id. Although the subjective intent test enunciated in Dyer has been used in Alabama in several similar contexts, ² our courts have never addressed a case where an insured seeks indemnification for damages assessed because of the insured's sexual abuse of children.

In Alabama, because of this subjective intent test, whether an injury the insured inflicts upon another person is "expected or intended" from the standpoint of the insured is generally a question of fact for the jury or judge. White v. Maryland Cas. Co., 589 So.2d 1294 (Ala.1991); Dyer; Boyd v. Great Central Ins. Co., 401 So.2d 19 (Ala.1981).

Our courts have never directly addressed the situation where an insured seeks indemnification for damages assessed because of sexual abuse or molestation of children, but two United States District Courts in Alabama have addressed the issue and have reached opposite results. In State Auto Mut. Ins. Co. v. McIntyre, 652 F.Supp. 1177 (N.D.Ala.1987), a federal district court concluded that Dyer mandated that a subjective intent standard govern all manner of cases in which an exclusion for intentional acts existed. In McIntyre, a grandfather, the insured, sued for a judgment declaring that he had coverage under his homeowner's policy for damages that might be assessed against him in a personal injury action arising out of a claim that he had sexually abused his granddaughter. The insured pleaded guilty to sexual abuse in the first degree and was sentenced to serve six years in the state penitentiary. In applying the Dyer subjective intent test to that case, the court held:

"This Court is fully persuaded that the pronouncements of the Supreme Court of Alabama in Dyer, Watson, Shirah, Portis, and Armstrong [see n. 2] govern the determination by this United States District Court of whether the insured, Edward McIntyre, either expected or intended to inflict bodily harm upon his minor granddaughter ... when in a nonviolent way he sexually abused the child on one occasion in the McIntyre home in the summer of 1983 and again on another occasion approximately one year later at the same Alabama location. Moreover, this Court is bound by Alabama law to use and apply a purely subjective standard in making such determination from the evidentiary record in this declaratory judgment action. Under this subjective test, clearly and recently enunciated by Alabama's highest court in five recently reported decisions, supra, each involving an exclusion clause in a homeowner's insurance policy which is similar [to] or the same as the exclusion clause in ... McIntyre's homeowner's insurance policy hereinabove set out or analogous thereto, an injury is 'intended or expected from the standpoint of the insured' if the insured possessed the specific intent to cause bodily injury to another, whereas an injury is 'expected from the standpoint of the insured' if the insured subjectively possessed a high degree of certainty that bodily injury to another would result from his or her act. Furthermore, the law is well settled in Alabama that the question of whether an injury which the insured inflicts upon another is 'expected or intended from the standpoint of the insured' is a question of fact for the jury or judge, whichever is the trier of fact."

McIntyre, 652 F.Supp. at 1193-92.

The McIntyre court's reliance on Dyer and its progeny in the context of the sexual abuse of children is misplaced. The decision in McIntyre has been criticized and its validity questioned by those courts that have discussed it. In Horace Mann Ins. Co. v. Fore, 785 F.Supp. 947 (M.D.Ala.1992), where the insurer sought a declaration that, because of exceptions in its homeowner's policy, it owed no duty to defend or indemnify its insured, a school teacher, in a civil action based on alleged sexual abuse of three minor students, Judge Carroll stated that "no amount of qualification could persuade this court that [McIntyre ] is correct." 785 F.Supp. at 949-50. The Fore court, in rejecting the McIntyre interpretation of Alabama law in this context, distinguished cases such as Dyer from cases of sexual abuse as follows:

"Dyer did not involve sexual abuse, but the discharge of a gun. This court finds that Dyer can...