The California Court of Appeal has held that a homeowners insurer had no duty to defend a woman who allegedly was negligent in failing to prevent her husband from sexually molesting their daughter. ( Bjork v. State Farm Fire and Casualty Co. (2007) 157 Cal.App.4th 1)
Facts
In 1977, Melvin Fergerson and his wife Carol Fergerson had a daughter, Darcie. From 1979 through 1994, Mr. Fergerson allegedly molested Darcie. Ultimately, in 1997, Darcie moved out of the family home. Later, Darcie sued her mother, Mrs. Fergerson, alleging that Mrs. Fergerson had negligently failed to prevent Mr. Fergerson from molesting Darcie.
State Farm Fire and Casualty Company and related companies had issued homeowners policies to Mr. and Mrs. Fergerson jointly between 1987 and 2000, and to Mrs. Fergerson individually between 2000 and 2005. Mrs. Fergerson tendered defense of the lawsuit to State Farm, but State Farm denied Mrs. Fergerson’s tender.
Following State Farm’s refusal to defend Mrs. Fergerson, Darcie and Mrs. Fergerson entered into a stipulated judgment of $4.5 million. Darcie agreed not to enforce the judgment against Mrs. Fergerson’s assets, and Mrs. Fergerson in turn assigned her rights against State Farm to Darcie.
Darcie, as assignee, then filed suit for breach of contract and bad faith, alleging that State Farm had improperly failed to defend and indemnify Mrs. Fergerson in the underlying action. The trial court ruled that Darcie’s claims against Mrs. Fergerson in the underlying action were not potentially covered under the State Farm policies, and that State Farm had thus properly refused to defend and indemnify Mrs. Fergerson. Darcie appealed.
Holding
The Court of Appeal agreed that Darcie’s claims against Mrs. Fergerson in the underlying action were not potentially covered under the State Farm policies, and thus affirmed the judgment in favor of State Farm.
The Court reasoned that the State Farm policies which were in effect while Darcie lived with Mr. Fergerson and Mrs. Fergerson (i.e., between 1987 and 1997) excluded coverage for bodily injury “to … any ‘insured’,” and defined “insured” so as to include Mrs. Fergerson’s “relatives” who were “residents of [her] household.” Here, at the time the alleged molestations occurred, Darcie was Mrs. Fergerson’s relative and resided in her household. Thus, Darcie qualified as an “insured” under Mrs. Fergerson’s policies, with the result that Darcie’s claims against Mrs. Fergerson were excluded from coverage. The Court observed that this “resident relative” exclusion was designed to prevent an insurer from having to defend against potentially collusive intra-family claims, and that it applies even if there is no evidence of actual collusion. Further, because the policies’ “resident relative” exclusion barred coverage, there was no need for the policies to contain a separate “sexual molestation” exclusion.
The Court next reasoned that the State Farm policies which were in effect after Darcie stopped living with Mr. Fergerson and Mrs. Fergerson (i.e., after 1997) only covered bodily injury occurring “during the policy period.” Here, however, Mr. Fergerson had stopped molesting Darcie by 1994, before the post-1997 policies were issued. While it was true that Darcie claimed she continued to suffer emotional distress with physical manifestations after the post-1997 policies were issued, that was not sufficient to require State Farm to defend. Even under California’s “continuous injury” trigger of coverage, there was no evidence that Darcie suffered any “continuous or progressively deteriorating bodily injury” in the post-1997 time period resulting from the earlier molestations.
Because Darcie’s claims against Mrs. Fergerson were not potentially covered under any of the State Farm policies, State Farm had no duty to defend or indemnify Mrs. Fergerson in the underlying action brought by Darcie. Thus, Darcie, as Mrs. Fergerson’s assignee, could not recover under the State Farm policies.
Comment
An interesting aspect of this case is the court’s ruling that the allegedly “continuing nature” of Darcie’s injuries did not trigger coverage under the policies which were in effect after Darcie stopped living with her parents in 1997. Although the opinion is not entirely clear on this point, the court seems to suggest that once the actual molestations ended in 1994, any ongoing emotional distress/physical manifestations which Darcie suffered while subsequently-issued policies were in force would not trigger coverage under those subsequently-issued policies. In effect, the court refused to find coverage for any continuous emotional/physical injury that might have occurred after the molestations ended.