894 F2d 409 Employers Mutual Company v. G______ D______ D______
894 F.2d 409
NOTICE: Ninth Circuit Rule 36-3 provides that dispositions other than opinions or orders designated for publication are not precedential and should not be cited except when relevant under the doctrines of law of the case, res judicata, or collateral estoppel.
EMPLOYERS MUTUAL COMPANY, Plaintiff-Appellant,
G______ D______, d/b/a/ D______ Day Care Center; Ralph
Britzius, as Next Friend of Jean Ann Britzius, a
minor; Ralph Britzius; and Laurie
United States Court of Appeals, Ninth Circuit.
Argued and Submitted Dec. 6, 1989.
Decided Jan. 24, 1990.
Before CANBY, WIGGINS and FERNANDEZ, Circuit Judges.
Employers Mutual Companies ("Employers") appeals the district court's decision that Employers was required to defend its insureds on a state claim for negligent supervision. The insureds, G___ D___, d/b/a/ D___ Day Care Center ("G.D."), allegedly were negligent when they failed to prevent the molestation of a child at the day care center. For purposes of its decision the district court assumed that G.D.'s minor son was the molester. The district court granted summary judgment to G.D. and the Britzius'. The court held that Employers' insurance policy obligated Employers to defend G.D. in the state action even though the policy excluded coverage for harm arising out of sexual molestation. The court reasoned that the severability clause was ambiguous and could be read to mean that coverage was barred only as to the actual molester. The court was obligated to interpret the ambiguous clause in the insureds' favor. Therefore, it held that Employers was required to defend and indemnify G.D. in the state action. We reverse.
G.D. operates a day care center in Great Falls, Montana. The center is based in G.D.'s home. G.D. purchased a standard homeowner's insurance policy from Employers and for an extra premium that policy included supplementary coverage for the home day care center. The home day care supplement stated that it did not apply to injuries arising out of sexual molestation "inflicted upon any person by ... an insured, an insured's employee or any other person involved in any capacity in the day care enterprise." The insurance policy includes as an "insured" both of the named insureds and their minor son. The policy also states that coverage will be provided separately under the policy to each insured.
In 1988, G.D. was named as a defendant in a state civil action. Laurie and Ralph Britzius, the parents of one of G.D.'s day care children, alleged that their daughter had been sexually molested while at the day care center. The Britzius' did not name their daughter's alleged molester but they believe that molester to be G.D.'s minor son. The Britzius' base their state court action on the theory that G.D. is liable because G.D. failed to adequately supervise and protect the Britzius' daughter while she was in G.D.'s exclusive care.
G.D. notified Employers of the state action against G.D. and requested that Employers defend G.D. in the action. Employers brought this declaratory relief action in district court against both G.D. and the Britzius' in order to determine whether G.D.'s insurance policy required Employers to defend or indemnify G.D.
STANDARD OF REVIEW
This court reviews de novo a district court's grant of summary judgment. Kruso v. International Tel. & Tel. Corp., 872 F.2d 1416, 1421 (9th Cir.1989). The appellate court must determine whether the district court applied the appropriate substantive law. Tzung v. State Farm Fire and Casualty Co., 873 F.2d 1338, 1340 (9th Cir.1989). In this case, jurisdiction was based on diversity and the district court was required to apply Montana state law. This court also reviews de novo a district court's interpretation of state law. Dimidowich v. Bell & Howell, 803 F.2d 1473, 1477 (1986), reh'g denied, 810 F.2d 1517 (9th Cir.1987).
Montana follows the general rule that an insurance policy is to be interpreted in favor of the insured if there are any ambiguous terms. Bauer Ranch, Inc. v. Mountain W. Farm Bureau Mut. Ins. Co., 215 Mont. 153, 695 P.2d 1307, 1309 (1985). However, a court may not ignore the clear meaning of a provision under the rubric that the provision was ambiguous. Id. Furthermore, a court should rely on the common usage of terms rather than adopting a technical definition. Id. Finally, if the court is asked to interpret an exclusionary clause, then it must strictly interpret the clause against the insurer in order to protect the insured. Id.
Here, the district court was required to interpret the exclusion clause in G.D.'s policy. That clause prohibited coverage for any claims arising out of a charge that "an insured" sexually molested a child at the day care center.1 Employers argues that the exclusionary clause means that no insured is covered under the policy if any of the insureds had sexually molested the child. Therefore, Employers was not obligated to defend G.D. in the state negligence action because that claim arose out of a charge that one of the insureds had sexually molested the Britzius' daughter.
However, G.D. and the Britzius' argue that the exclusion applies only to the insured who was directly charged with molesting the child. In other words, G.D. argues that the phrase "an insured" is not a general referent to every insured but instead refers to the specific insured claiming coverage. Therefore, the person who is claiming coverage under the policy becomes the "insured" referred to in the exclusionary clause. Under such an interpretation, Employers would be obligated to defend G.D. in the state negligence action because G.D. did not sexually molest the Britzius' daughter. The only person that Employers would not be obligated to defend is G.D.'s minor son.
We have previously rejected a similar argument. Allstate Ins. Co. v. Gilbert, 852 F.2d 449 (9th Cir.1988). As we noted in Gilbert, when the insurance company used the phrase "an insured" it "unambiguously excluded coverage for damages caused by the ... act of any insured under the policies." 852 F.2d at 454 (emphasis in original).
The Montana Supreme Court appears to have also rejected the approach taken by the district court in this case. Travelers Ins. Co. v. American Casualty Co., 151 Mont. 198, 441 P.2d 177 (1968). In Travelers, the court held that the phrase "the insured" should be interpreted to mean "any insured." 441 P.2d at 179-80. Travelers suggests that G.D. and the Britzius' are precluded from arguing that the phrase "an insured" should be construed as meaning "the insured claiming coverage." The phrase "an insured" is even more broad than the phrase "the insured." If the Montana court interpreted "the insured" as an equivalent term for "any insured" then the court is likely to also interpret "an insured" as equivalent to "any insured." Therefore, the exclusionary clause in G.D.'s policy should be read as prohibiting coverage if "any" insured sexually assaults a child at the day care center.
The district court erred when it held that the mere presence of a severability clause created an ambiguity in the exclusion clause. We recognize that the district court's approach has been adopted by two state courts. See Worcester Mut. Ins. Co. v. Marnell, 398 Mass. 240, 245-46, 496 N.E.2d 158, 161 (1986) (presence of severability clause required court to construe phrase "an insured" as "the insured claiming coverage."); see also Cook v. Country Mut. Ins. Co., 126 Ill.App.3d 446, 466 N.E.2d 587 (1984) (court declined to interpret phrase "an insured" as "any insured.") However, we must determine whether the Montana Supreme Court would follow that approach. We find that it would not. In Travelers, the court was asked to find that a severability clause helped to clear up an ambiguity in the phrase "the insured." The court was of the opinion that the phrase "the insured" was not ambiguous but that the severability clause was ambiguous. The court declared that the ambiguous severability clause could not be used to clear up an alleged ambiguity in another clause. 441 P.2d at 180-81.
We do not think that the court would decide differently here. As we have already pointed out, the court would not find any ambiguity in the phrase "an insured." While the court may well find that the severability clause was not entirely clear in this insurance policy, it is unlikely that the court would then decide that the ambiguous severability clause would cause the unambiguous phrase "an insured" to become ambiguous. For example, even if the insurance policy at hand were said to apply separately to each insured, each separate application would still preclude coverage for certain acts of any insured. It is obvious that the alleged sexual molestation would be the type of act for which the policy excludes coverage. In other words, doubts about the application of the severability clause itself would not create doubts about other clauses in the insurance contract.2
We reverse the district court's decision that the clauses of the insurance policy in question here were ambiguous and should be construed in favor of coverage for the insureds.
However, we decline to decide whether Employers is relieved of its duty to defend or indemnify the insureds. At most, the Home Day Care Coverage Endorsement of the insurance policy only relieves Employers of its duties if the sexual molestation was committed by "any insured, any insured's employee or any other person involved in any capacity in the day care enterprise." If the sexual molestation was committed by a person not excluded by that part of the policy, then Employers may have a duty to defend G.D. in the state court action. Furthermore, G.D. continues to dispute the claim that G.D.'s son sexually molested the Britzius' daughter and that the alleged molestation occurred at G.D.'s home day care center. Perhaps there is sufficient information to suggest that the sexual molestation was committed by someone other than a person excluded by the policy. We express no opinion on that issue.
We remand for further proceedings consistent with this decision.
REVERSED AND REMANDED.
This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by 9th Cir.R. 36-3
We will use the phrase "an insured" without any of the other qualifying language that appears in the exclusionary clause since that phrase was the basis of this appeal. By so doing, we do not intend to express any opinion as to the applicability, if any, of that other language
Incidentally, we note that severability clauses have been included in standard form insurance policies for over three decades. See Walker v. Fireman's Fund Ins. Co., 268 F.Supp. 899, 901 (D.Mont.1967). With the exceptions already noted, those clauses do not appear to have affected decisions regarding the use of "a," "an," or "any" in insurance policies