Wiley v. State Farm Fire & Cas. Co.

Page 457

995 F.2d 457

Dennis WILEY, as next of friend, parent, and guardian of Trilby Wiley; Dennis Wiley; Elaine Wiley, his wife, Appellants, v. STATE FARM FIRE & CASUALTY CO.; Floyd Wiley, Jr.

No. 92-3137.

United States Court of Appeals Third Circuit.

Submitted Jan. 11, 1993.

Decided June 3, 1993.

Richard A. Damiani, Richard A. Damiani & Associates, Cleveland, OH, for appellants.

S. Asher Winikoff, Jones, Gregg, Creehan & Gerace, Pittsburgh, PA, for appellee, State Farm Fire & Cas. Co.

Before HUTCHINSON, SCIRICA, and ROSENN, Circuit Judges.

OPINION OF THE COURT

ROSENN, Circuit Judge.

In this diversity case, we are called upon to predict whether Pennsylvania law would obligate an insurer under its homeowner's insurance policy to provide coverage for damages incurred by an insured in the sexual molestation of his minor niece. Prior to the commencement of the present action, the insured, Floyd Wiley, Jr. (Floyd), pled guilty in 1988 in a state court of Pennsylvania to one count of indecent assault and one count of corrupting the morals of a minor.

The plaintiffs, Dennis and Elaine Wiley, as parents and next of friend of the minor (the Wileys), citizens of Ohio, then filed the instant civil suit against Floyd, a citizen of Pennsylvania, in the United States District Court for the Western District of Pennsylvania to recover money damages for bodily harm resulting from their daughter's molestation in 1986. The complaint alleged negligent infliction of personal injury, as well as intentional tort.

Floyd tendered defense of the civil action to State Farm Fire and Casualty Co. (State Farm) under the homeowner's policy it issued to him. State Farm accepted the defense subject to a reservation of rights to contest coverage on the ground that Floyd's conduct fell within a standard homeowner's policy coverage exclusion for bodily injury "intended or expected" by an insured (the intended harm exclusion). ¹ The proper construction of this clause is at the heart of the insurer's defense and is the sole issue on appeal. The parties eventually stipulated to Floyd's culpability, the value of the Wileys' claim should they prevail, and the filing of a declaratory judgment action against State Farm to determine the applicability of the homeowner's policy to the Wileys' claim. Upon the filing of the declaratory judgment action, the plaintiffs dismissed the suit against Floyd.

Both parties filed motions for summary judgment. The district court denied the Wileys' motion and entered judgment granting State Farm's motion. The Wileys timely appealed. We affirm.

I. BACKGROUND

In July 1986, Floyd sexually molested his minor niece, then age 13, while she was a visitor at his home. It was undisputed for purposes of summary judgment that Floyd, an admitted alcoholic at the time of these incidents of sexual misconduct, was intoxicated during these episodes. Although the district court found no Pennsylvania law directly on point, it determined that courts in other jurisdictions infer an intent to harm as a matter of law from acts of child molestation and rape, which intent precludes insurance coverage. It also found that other courts consider the sexual molestation of children to be a criminal offense for which public policy precludes a claim that no harm was intended. For these reasons, the court predicted that the Pennsylvania Supreme Court would hold Floyd's sexual abuse of the minor excluded from coverage under his homeowner's policy with State Farm. Wiley v. State Farm Fire & Cas. Co., No. 89-421, slip op. at 2-4, 1992 WL 503433 (W.D.Pa. Feb. 24, 1992).

On appeal, the Wileys contend that the district court erred (1) in granting State Farm's motion for summary judgment because a genuine issue of material fact exists as to the intent of the insured at the time of the incidents, and (2) in finding that Pennsylvania public policy insulates the insurer from liability to victims of sexual molestation when the insured's actions are found to be criminal, regardless of the actual existence or non-existence of an intent to harm.

II. DISCUSSION

On appeal, the Wileys initially contend that the district court erred in granting State Farm's motion for summary judgment because a genuine issue of material fact exists as to Floyd's intent at the time of the incidents in question. To respond to this contention, we must first determine whether the Pennsylvania Supreme Court would adopt and apply the inferred intent rule when an insured asserts that he or she subjectively intended no harm to his or her victim. We must then consider whether that court would also apply the rule when an insured asserts a lack of capacity to form an intent to harm.

A. STANDARD OF REVIEW

We review the district court's prediction of state law under a plenary standard. Compagnie des Bauxites de Guinee v. Ins. Co. of N. Am., 724 F.2d 369, 371 (3d Cir.1983). Federal courts sitting in diversity "are required to apply the substantive law of the state whose laws govern the action." Robertson v. Allied Signal, Inc., 914 F.2d 360, 378 (3d Cir.1990) (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938)). We must therefore turn to the substantive law of Pennsylvania to evaluate the propriety of the district court's grant of summary judgment in this case. ²

The Pennsylvania Supreme Court, however, has not spoken on the issues raised in this appeal. Therefore, we must predict how the state court would resolve these issues should it be called upon to do so. Id. Although our review of the district court's prediction of Pennsylvania law is plenary, in discharging our function we take into consideration the district judge's prediction of the law of the state in which he or she sits. Compagnie des Bauxites, 724 F.2d at 371. We also examine:

(1) what the Pennsylvania Supreme Court has said in related areas;

(2) the "decisional law" of the Pennsylvania intermediate courts (3) federal appeals and district court cases interpreting the state law;

(4) decisions from other jurisdictions that have discussed the issue we face here.

Gruber v. Owens-Illinois Inc., 899 F.2d 1366, 1369-70 (3d Cir.1990).

B. APPLICABILITY OF THE INFERRED INTENT RULE WHEN THE INSURED ASSERTS AN ABSENCE OF SUBJECTIVE INTENT TO HARM

The inferred intent rule allows a court to infer an actor's intent from the nature and character of his or her acts. See, e.g., Fireman's Fund Ins. Co. v. Hill, 314 N.W.2d 834, 835 (Minn.1982). Courts applying the inferred intent rule generally do so to establish conclusively the existence of intent to harm as a matter of law. See, e.g., State Farm Fire & Cas. Co. v. Abraio, 874 F.2d 619, 623 (9th Cir.1989) (applying California law) ("there is an irrebuttable presumption of intent to harm supplied as a matter of law in child molestation cases"). ³ Once established, this conclusive presumption of intent to harm results in a determination as a matter of law that, notwithstanding the insured's assertion of an absence of subjective intent to harm, an insurer has no obligation under a policy containing a standard intended harm exclusion to provide coverage for bodily injury to a child sexually abused by an insured adult. Id. at 623; see also Horace Mann Ins. Co. v. Leeber, 180 W.Va. 375, 376 S.E.2d 581, 585 (1988); Horace Mann Ins. Co. v. Independent Sch. Dist. No. 656, 355 N.W.2d 413, 417 (Minn.1984).

In adjudicating general liability insurance cases, as opposed to those exceptional cases involving sexual child abuse, Pennsylvania courts presently follow the intermediate appellate court decision of United Services Automobile Association v. Elitzky, 358 Pa.Super. 362, 517 A.2d 982 (1986), appeal denied, 515 Pa. 600, 528 A.2d 957 (1987). Applying well-settled standards of insurance contract interpretation, the Elitzky, court first determined that, as used in the standard intended harm exclusion, "intentional and expected are synonymous." 517 A.2d at 986, 991. The court then stated:

We hold that an intended harm exclusionary clause in an insurance contract is ambiguous as a matter of law and must be construed against the insurer. We hold that such a clause excludes only injury and damage of the same general type which the insured intended to cause. An insured intends an injury if he desired to cause the consequences of his act or if he acted knowing that such consequences were substantially certain to result.

Id. at 989.

In Pennsylvania, then, it is not sufficient that the insured intended his actions; rather, for the resulting injury to be excluded from coverage, the insured must have specifically intended to cause harm. Id. at 987; Eisenman v. Hornberger, 438 Pa. 46, 264 A.2d 673, 674-75 (1970). Additionally, in cases that do not involve sexual child abuse, Pennsylvania has adopted a general standard for determining the existence of this specific intent that looks to the insured's actual subjective intent. See Eisenman, 264 A.2d at 675 ("There is no basis on which to conclude that that [sic] the insured in this case intended to cause any property damage [while burglarizing plaintiffs' home]."); Elitzky, 517 A.2d at 987, 989 (stating standard in terms of desires and knowledge of insured and specifically rejecting objective standard by stating "[t]he exclusion is inapplicable even if the insured should reasonably have foreseen the injury which his actions caused").

In the context of general liability insurance cases, this subjective standard is not uncommon. See, e.g., Continental W. Ins. Co. v. Toal, 309 Minn. 169, 244 N.W.2d 121, 124-25 (1976) (intended harm exclusion inapplicable unless insured acts with intent to cause bodily injury). As the district court noted in this case, however, Pennsylvania has not decided the appropriate standard for determining the existence of an insured's intent to harm in the specific context of liability insurance cases involving intentional acts of child molestation. In this particular context, Elitzky's...