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AMERICAN EMPIRE SURPLUS LINES INS. CO. v. BAY AREA

February 13, 1991

AMERICAN EMPIRE SURPLUS LINES INSURANCE CO., Plaintiff,
v.
BAY AREA CAB LEASE, INC.; and KERTETTER GARDLEY, as Guardian ad Litem for SHAWN J., Defendants



The opinion of the court was delivered by: INGRAM

 WILLIAM A. INGRAM, UNITED STATES DISTRICT JUDGE

 I.

 For the reasons set out below, the motion of plaintiff AMERICAN EMPIRE for SUMMARY JUDGMENT is HEREBY GRANTED.

 II.

 This case arises out of a coverage dispute between an insurer and its insured. American Empire Surplus Lines Insurance Co. (American Empire) issued an Owner's, Landlord's & Tenant's Liability policy to defendant Bay Area Cab Lease, Inc. (Cab Co.) for the period covering Sept., 1988 to Sept., 1989.

 Between Oct. 20, 1988 and Oct. 26, 1988 Donald Edwards Woods (Woods), one of Cab Co.'s drivers, molested an 8 year old, retarded boy (Shawn J.) in his cab. The assault took place in Palo Alto, in the parking lot of Shawn's school. Cab Co.'s business premises is located in Menlo Park.

 Woods was convicted on two felony counts and sentenced to state prison. Shawn, through his guardian ad litem, brought a civil action against Woods, Cab Co., and the school district. The complaint alleges negligence in Woods' conduct towards Shawn, and in Cab Co.'s hiring and supervision of Woods. Shawn also charges Woods, as an agent and employee of Cab Co. and the school district, with an intentional tort; specifically, sexual molestation.

 Upon the filing of this civil action, Cab Co. demanded that American assume Cab Co.'s defense. American initially denied coverage but then undertook the defense under a reservation of rights. This is a declaratory relief action seeking a judicial determination that there is no coverage for Shawn's injuries under the policy issued by American, that American has no duty to defend Cab Co. in the civil suit and that American is entitled to reimbursement for its costs to date.

 III.

 The parties do not dispute the facts, as outlined above, which underlie this action. Neither do they dispute the terms of the insurance policy. Because of this, the only issue before the court is whether the negligent hiring and/or supervision of an employee who causes intentional injury to a third party is covered under the terms of the policy.

 1. Contract interpretation is an issue of law for the court to decide.

 The coverage under a written insurance policy is solely a matter for judicial interpretation. Merced Mutual Ins. Co. v. Mendez, 213 Cal. App. 3d 41, 45, 261 Cal. Rptr. 273 (1989). Therefore, because the court finds that the policy does not provide coverage in this ...


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