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D.R. v. Allstate Insurance Co.


January 27, 2010


On appeal from the Superior Court of New Jersey, Law Division, Burlington County, Docket No. L-1499-06.

Per curiam.



Argued September 21, 2009

Before Judges Lisa, Baxter and Alvarez.

In this insurance coverage dispute, plaintiff D.R. appeals from summary judgment dismissing her complaint seeking a defense and coverage from defendant Allstate Insurance Company (Allstate). D.R. sought a defense and coverage because she and her minor son J.R. were sued for damages resulting from J.R.'s alleged sexual molestation of a child, S.M., who attended the day care center D.R. operated out of her home. We now reverse.

Through her guardian ad litem, S.M. filed the underlying tort action on November 16, 2005. The complaint asserted theories of recovery including: vicarious liability, because J.R. occasionally assisted plaintiff in her day care operations; negligent supervision and hiring of J.R.; and ordinary negligence.

D.R. filed this declaratory judgment action seeking a defense and coverage from Allstate on May 19, 2006. The proceedings were consolidated by consent for discovery purposes; motions and cross-motions for summary judgment were filed in April and May 2007. On July 9, 2007, the motion judge granted summary judgment to Allstate as to J.R., finding that it had "no obligation to provide a defense or indemnification." This order is not appealed. The sole issue before us is whether the policy provides coverage for D.R.

On April 11, 2008, the motion judge granted summary judgment to Allstate as to D.R., and denied her cross-motion to compel Allstate to extend coverage. The motion judge's decision was based on his reading of J.S. v. R.T.H., 155 N.J. 330 (1998), High Point Insurance Co. v. J.M., 398 N.J. Super. 562 (App. Div. 2008), and J.C. v. N.B., 335 N.J. Super. 503 (App. Div. 2000).

He interpreted the cases to mean that public policy forbids any insurance coverage for the sexual molestation of children. The order was signed on May 27, 2008. On July 31, 2008, a consent judgment was entered in favor of S.M. and her guardian ad litem against only D.R. for $225,000 in the underlying tort action.*fn1


D.R. operated a fully-licensed day care center for approximately eighteen years. During the relevant time frame she was insured by Allstate through a "Deluxe Policy" with a "Home Day Care" rider purchased for an extra premium. Until October 30, 2004, the policy excluded coverage for intentional acts of "the" insured. Effective October 31, 2004, the exclusion was rewritten so as to apply to "an" insured.

S.M. claimed that the physical and emotional harm resulting from J.R.'s molestation was inflicted prior to October 31, 2004, although initially this fact was in dispute. The grant of coverage in the pre-October 31, 2004 policy was exclusive of bodily injury "intended by, or which may reasonably be expected to result from the intentional acts or omissions of the insured person." (Emphasis added). The parties stipulated that D.R. had no knowledge of the molestation and that she had no reason to know of her son's sexual proclivities.


We view the facts and all reasonable inferences that can be drawn therefrom in the light most favorable to the party against whom summary judgment was entered. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). We apply the same standard as governs the trial court pursuant to Rule 4:46-2(c). See Liberty Surplus Ins. Corp. v. Amoroso, 189 N.J. 436, 445-46 (2007). Stated another way, the question is whether the evidence "'is so one-sided that one party must prevail as a matter of law.'" Brill, supra, 142 N.J. at 536 (citations omitted).


In Villa v. Short, 195 N.J. 15 (2008), decided on June 5, 2008, after the conclusion of the proceedings in this case, grandparents were sued by a granddaughter who claimed that she was sexually molested by her uncle, the grandparents' "mildly mentally retarded" adult son, John. Id. at 18-19. John lived at home with the plaintiff's grandparents when the alleged incident occurred. Ibid. The surviving grandparent sought to compel Allstate, through whom he had homeowner's insurance, to extend coverage. Id. at 19. Allstate asserted that "intentional or criminal acts" were excluded by the terms of the policy and, accordingly, declined coverage. Ibid. As a result, the surviving grandparent brought a declaratory judgment action seeking to compel coverage. Ibid.

The trial court granted Allstate summary judgment. Id. at 18. The policy excluded losses arising from the intentional or criminal conduct of "an" insured. Id. at 20. We affirmed, in an unpublished opinion, reasoning that "because John was 'an insured person' under the policy and the losses arose from his intentional or criminal acts, the policy denied coverage for all insureds, including him and his parents." Id. at 21.

The Supreme Court framed the issue as whether the Allstate policy "clearly and unambiguously excludes from coverage all insureds for the intentional acts of 'any' insured, or whether the clause is ambiguous and therefore requires an interpretation in favor of the insureds." Id. at 23. A majority of the Court concluded that "an insured" is synonymous with "any insured." Id. at 26. Therefore, the Court concluded that "the policy language excludes all insureds from coverage for damages caused by the intentional or criminal acts of an insured." Ibid. (emphasis added). The Court held that the use of the "an insured" language "plainly excludes coverage for all insureds when any insured commits an intentional or criminal act." Id. at 27 (emphasis added).

When the policy excludes intentional conduct by "the" insured, however, the result is different. See id. at 26. The use of such language limits the exclusion to the insured who committed the intentional or criminal act. See ibid. In this case, the intentional conduct exclusion is couched in terms of "the" insured. The exclusion therefore applies only to J.R., the insured who committed the intentional or criminal act.


On appeal, Allstate argues that no coverage is available to D.R. regardless of the Villa v. Short interpretation of "the insured" because of the policy's definition of occurrence as "an accident." We do not agree.

By defining "occurrence" as an accident, the insurance company "preclude[s] coverage for insureds whose conduct is intentionally-wrongful." Voorhees v. Preferred Mut. Ins. Co., 128 N.J. 165, 180 (1992). It is in the public interest not to indemnify or condone "the civil consequences of wrong-doing" while guaranteeing fair compensation to the victim and the maximum protection for the insured. Id. at 181. Thus, there is no dispute that coverage is precluded as to J.R. It was stipulated, however, that J.R.'s mother had no knowledge of the molestation by her son and had no reason to anticipate that her operation of the day care center would result in injury inflicted by J.R. on attendees. She neither intended nor expected injury to S.M. Accordingly, as to D.R., we consider the charged conduct to fall squarely within the definition of an accidental occurrence. See id. at 183.

In Villa v. Short, in distinguishing between and, in our view, preserving the differing results flowing from the use of "the insured" and "an insured," the Court cited several cases in which the judicial interpretation of "the insured" resulted in coverage for the insured who was not the direct tortfeasor. Villa v. Short, supra, 195 N.J. at 26. In one of the cited cases, for example, the Court considered whether a homeowner's policy covered the vicarious liability of a parent for vandalism by the minor son, in light of the policy exclusion for damage "which is expected or intended by the insured." Prop. Cas. Co. of MCA v. Conway, 147 N.J. 322, 324-25 (1997) (emphasis added). The Court there explained:

From the son's perspective, the damage was intended and expected and, therefore, not an "accident" or "occurrence." From [the parent's] perspective, however, his son's vandalism was both unintended and unexpected and, therefore, would be covered under the policy. The question is whether we should view the son's acts of vandalism from his perspective or from that of his father. [Id. at 326.]

The Court found coverage for the father, thus concluding that the parent's perspective was determinative of whether the parent's conduct was an "occurrence" or "accident" versus an intentional act. See id. at 330. The same rationale applies here.

This construction of the policy advances the victim's interest in compensation for the harm, while meeting the "insured's objectively-reasonable expectation of coverage for unintentionally-caused harm." Voorhees, supra, 128 N.J. at 183. This circumstance sets this case apart from those relied upon by the motion judge, where there was a factual question as to whether the non-offending party knew or should have known about the molestation by the direct tortfeasor. See J.S. v. R.T.H., supra, 155 N.J. at 340-51; High Point Ins. Co. v. J.M., supra, 398 N.J. Super. at 565, 572; and J.C. v. N.B., supra, 335 N.J. Super. at 506. That was a critical underpinning of the public policy consideration in those opinions, but is not an issue here. Because D.R. had no knowledge or reason to know of her son's misdeeds, denying her coverage would not advance the public policy of protecting children. This is in contrast to the cases relied upon by the motion judge, where concerns about the preservation of a marital relationship may have led a spouse to silence that would not otherwise occur.


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