Court Broadens Coverage for Sexual Molestation
May 16, 2005
On December 17, 2004, the Texas Supreme Court denied petition to review Roman Catholic Diocese of Dallas v. Interstate Fire & Casualty Co., 133 S.W.3d 887 (Tex.App.—Dallas 2004, pet denied). In refusing to review Diocese of Dallas, the Court effectively broadened coverage for many sexual molestation claims by allowing the court of appeals’ opinion to serve as precedent.
In Diocese of Dallas, the Roman Catholic Diocese of Dallas (the “Diocese”) sought insurance coverage under a liability policy for claims asserted by John Doe. Doe’s claims against the Diocese, all arising out of one priest’s repeated sexual abuse of Doe, were a mix of intentional torts and negligence claims. The claims for intentional acts included knowing participation in breach of fiduciary duty, fraud, conspiracy, and intentional infliction of emotional distress. The negligence claims included negligent hiring, negligent supervision and failure to ascertain the priest’s dangerous sexual tendencies. The pivotal issue before the court of appeals was whether the determination of an “occurrence” was to be made from the standpoint of the insured (the Diocese) or the actor (the priest).
Like many liability policies, the Interstate Fire & Casualty (“Interstate Fire”) policy defined “occurrence” to mean “an accident or happening or event or a continuous or repeated exposure to conditions that unexpectedly and unintentionally result in personal injury…during the policy period.”
In the declaratory judgment action, Interstate Fire argued that its policy did not provide coverage for any judgment rendered against the Diocese in the underlying litigation because the policy did not cover liability arising from intentional, knowing, or grossly negligent torts. Moreover, it is well established in Texas that molestation is an intentional act, as a matter of law. Maayeh v. Trinity Lloyds Inc. Co., 850 S.W.2d 193 (Tex.App.—Dallas 1992, no writ). Therefore, according to Interstate Fire, the priest’s intentional acts did not constitute an “occurrence” as defined by the policy. Similarly, Interstate Fire argued that the negligence claims did not constitute an “occurrence” because they were inextricably intertwined with the intentional tort claims against the priest, and therefore were not covered.
The Diocese, on the other hand, contended that the claims against it constituted an “occurrence” because, in determining whether there is an occurrence, the court should consider the facts from the viewpoint of the insured. Viewing the negligence claims from the Diocese’s viewpoint, the priest’s abuse of Doe was an unintended and unexpected result of any negligence in hiring, retaining, and supervising the priest and in failing to ascertain and warn Doe of the priest’s sexual propensities.
The court of appeals decided that the crux of the parties’ disagreement concerned the interpretation of the Texas Supreme Court’s opinion in King v. Dallas Fire Ins. Co., 85 S.W.3d 185 (Tex.2002). In King, the insured, King, employed Lopez. An employee from another company,Jankowiak, and Lopez engaged in an altercation in which Lopez attacked Jankowiak causing him serious injury. Jankowiak sued King for negligent hiring, supervision, and training of Lopez. Under the CGL policy, both King and Lopez were insureds, but the policy had a provision that stated “this insurance applies (a) [A]s if each Named Insured were the only Named Insured; and (b) [S]eparately to each insured against whom a claim is made or ‘suit’ is brought.” Id. at 188.
Moreover, the insurance policy had a provision which excluded “bodily injury” or “property damage” expected or intended from the standpoint of the insured. Id. In accordance with these two provisions, the Court read the policy as if King were the only insured and considered whether the allegations constituted an “occurrence” from King’s viewpoint. Id. 191-92. The Court concluded that under Texas law, whether one who contributes to an injury is negligent is an inquiry independent from whether another who directly causes the injury acted intentionally. Essentially, the actor’s intent is not imputed to the insured in determining whether there is an occurrence. Id. The Court found this to be a better approach than the Fifth Circuit’s “related and interdependent” rule. The Court then considered whether, from King’s perspective, Jankowiak’s injury was expected or intended. After determining the injury was not expected or intended by King, the Court found an “occurrence.” Id. at 193.
In the Diocese of Dallas case, Interstate Fire argued that the holding in King should be limited to insurance policies with a “separate insureds” provision. Interstate Fire further argued that King is also distinguishable because the policy at issue did not contain a provision expressly stating that an “occurrence” should be viewed from the standpoint of the insured. Interstate Fire also pointed out that to hold otherwise would expose insurers to a risk for which they had not bargained. The court of appeals, however, concluded to the contrary. The court held that as a result of the King decision, an “occurrence” is always to be analyzed from the standpoint of the insured and not from the standpoint of the actor. The court determined this to be true regardless of whether the policy has a “separate insureds” provision or an express provision stating that an “occurrence” is to be analyzed from the standpoint of the insured. Therefore, the claims against the Diocese, although based upon the intentional acts of the priest, constituted an “occurrence.”
Interstate Fire argued, in the alternative, that the intentional tort allegations against the Diocese meant that no judgment in the underlying litigation could result from an unexpected and unintentional personal injury to Doe. The court disagreed, finding the presence of the negligence claims to be sufficient. The court reasoned that if Doe was unsuccessful in his attempt to prove the Diocese was aware of the priest’s pedophilia and his prior molestation, the finder of fact could still find the Diocese liable on the negligence grounds. Viewed from the Diocese’s standpoint, if it did not know of the priest’s sexual propensities, then his molesting Doe was both unexpected and unintentional. Accordingly, a judgment for Doe in the underlying case could fall within coverage under the policy. This logic seems to indicate that the court would not extend coverage to include claims that are exclusively for intentional acts. In other words, if Doe had only asserted the intentional tort claims and not the negligence claims, then there would be no coverage.
In the past, most courts had not only deemed sexual molestation to be an intentional act as a matter of law, but had also imputed that intent, as a matter of law, to the employers of those engaging in the sexual misconduct. Diocese of Dallas appears to signal a new willingness on the part of Texas courts to find insurance coverage for persons and entities, other than the individual sexual actors themselves, for liability arising out of sexual molestation. It is often extremely difficult to show that an employer knew of an employee’s sexual propensities such that the injuries resulting from the sexual molestation were expected or intended from the standpoint of the employer. As a result, more carriers will probably find themselves providing coverage for liability arising out of sexual molestation. Diocese of Dallas also suggests that King will result in broader coverage for insureds exposed to liability for the intentional conduct of others.