United States District Court, N.D. California
ORDER RE SUMMARY JUDGMENT
DONATO, United States District Judge
Liberty Mutual Fire Insurance Company (“Liberty
Mutual”) brought this declaratory judgment action for a
determination of its obligations in an underlying state
action arising out of alleged incidents of sexual molestation
in defendants' home. The state action settled, and
Liberty Mutual now seeks a declaration on summary judgment
that it had no duty to defend or indemnify defendants Shaibaz
S. and Saiqha S., or their minor son, Ishaaq S. Liberty
Mutual also seeks recovery of the settlement payment, and
attorneys' fees and costs expended on a defense under a
reservation of rights.
agree that there is no duty to defend or indemnify Ishaaq,
who is alleged to have committed intentional torts. The main
dispute on summary judgment is whether the sexual molestation
exclusion in Liberty Mutual's policies bars coverage of
the vicarious liability and negligence claims against
defendants. Summary judgment is granted in favor of Liberty
material facts are undisputed. Beginning on April 14, 2009,
Liberty Mutual issued renewable, yearly insurance policies to
Shaibaz and Saiqha. Dkt. No. 44-21 (Akoto Decl.) ¶ 3;
Dkt. No. 44 (Compendium of Exhibits), Exhs. D, E, & F.
Liberty Mutual first issued LibertyGuard Tenants Policy No.
H42-268-573995-40, which was effective until April 14, 2010,
and was renewed twice after that. Dkt. No. 44-21 ¶ 3;
Dkt. No. 44, Exhs. D & E (“Tenants Policy”).
This Tenants Policy was cancelled on October 4, 2011, at
which time defendants purchased LibertyGuard Deluxe
Homeowners Policy No. H32-268-844454-40, which was effective
through October 2012. Dkt. No. 44-21 ¶ 3; Dkt. No. 44,
Exh. F (“Homeowners Policy”).
December 2012, minor Ethan M. and some of his family members
filed a complaint against defendants and their minor son,
Ishaaq, in Contra Costa County Superior Court. Dkt. No. 44-21
¶ 8; Dkt. No. 44, Exh. C. They alleged that Ishaaq
sexually molested Ethan in defendants' home from June
2011 through May 2012. Dkt. No. 44-21 ¶ 8; Dkt. No. 44,
Exh. C ¶¶ 20-26. They also alleged that defendants
knew of Ishaaq's “violent sexual tendencies,
” but nonetheless allowed him to play with Ethan
unsupervised. Dkt. No. 44, Exh. C ¶¶ 42-50.
Ethan's family sued Ishaaq for sexual battery and
intentional infliction of emotional distress. Id.,
Exh. C at 4-5. They sued Shaibaz and Saiqha for: (1) sexual
battery -- imputed parental liability, (2) intentional
infliction of emotional distress, (3) negligent failure to
warn, and (4) negligent failure to supervise. Id.,
Exh. C at 4-6.
the insurance policies effective during that period,
defendants tendered their and Ishaaq's defense and
indemnity to Liberty Mutual. Dkt. No. 48 (Shaibaz S. Decl.)
¶ 4. Liberty Mutual denied coverage for Ishaaq, but
agreed to defend Shaibaz and Saiqha subject to a full
reservation of rights. Dkt. No. 44-21 ¶¶ 11-12;
Dkt. No. 44, Exhs. J & K. In 2013, Ethan's family
agreed to a settlement with defendants for $300, 000, which
Liberty Mutual paid. Dkt. No. 44-21 ¶¶ 14-18, Exhs.
Mutual filed this complaint on August 28, 2015, against
Shaibaz and Saiqha for declaratory judgment and restitution.
Dkt. No. 1. It filed an amended complaint on September 1,
2015, to add Doe defendants. Dkt. No. 7; see also
Dkt. No. 27. Liberty Mutual seeks a determination that: (1)
it properly denied coverage for Ishaaq; (2) it had no duty to
defend defendants or to pay any portion of the defense costs;
(3) it had no duty to pay the $300, 000 settlement; and (4)
defendants must reimburse Liberty Mutual for those costs of
defense and settlement, plus applicable prejudgment interest.
Liberty Mutual now moves for summary judgment on all counts.
Dkt. No. 44.
pertinent coverage provisions are straightforward:
If a claim is made or a suit is brought against an
“insured” for damages because of “bodily
injury” or “property damage” caused by an
“occurrence” to which this coverage applies, we
1. Pay up to our limit of liability for the damages for which
the “insured” is legally liable. Damages include
prejudgment interest awarded against the
2. Provide a defense at our expense by counsel of our choice
even if the suit is groundless, false or fraudulent.
Dkt. No. 44, Exh. D at 12 & Exh. F at 18. The policies
define “[i]nsured” to include the “named
insured” and “residents of [the named
insured's] household who are: a. [the named
insured's] relatives; or b. [o]ther persons under the age
of 21 and in the care of any person named above.”
Id., Exh. D at 5 & Exh. F at 8. The policies
further provide that:
1. “Bodily injury” means bodily harm, sickness or
disease, including required care, loss of services ...