Insurance coverage for sexual abuse by minor at a day care center, unless subjective intent to harm.

Northern Security Insurance Company, Inc. v. Stanhope et al. (2009-078) (08-Oct-2010) 2010 VT 92 (Burgess, J.)    

Northern Security Insurance Company (Northern), appeals from a superior court judgment that it owes a duty of coverage to Rose, Steven, and Kyle Perron, its insureds under a homeowner’s policy. We affirm.

The first appeal, Northern Sec. Ins. Co. v. Perron, 172 Vt. 204, 777 A.2d 151 (2001) (Northern I) held that the inferred intent rule was inapplicable to minors.  Id. at 226, 777 A.2d at 167.  The Court remanded the case to the trial court for a factual determination on whether Kyle intended or expected injury to occur, as well as a ruling on Northern’s additional claim that coverage was voided by Rose Perron’s alleged misrepresentations in her policy application

Northern first contends the trial court erred in applying the innocent co-insured doctrine to hold that Rose Perron’s misrepresentation did not void coverage for Steven or Kyle.  The court found that our decision in Fireman’s Fund Ins. Co. v. Knutsen, 132 Vt. 383, 324 A.2d 223 (1974) was controlling. We conclude that the trial court did not err in applying the innocent co-insured doctrine to preserve coverage for Steven and Kyle.

Northern next contends the trial court erred in declining to allocate to defendants the initial burden of proving an occurrence, defined under the policy as “an accident” neither expected or intended.  We considered and rejected the same claim in State v. CNA Ins. Cos., 172 Vt. 318, 331, 779 A.2d 662, 672 (2001). Accordingly, we find no error in the trial court’s decision to place the burden of proof on Northern to establish that the harm was “intended or expected”.

Northern finally claims that the trial court erred in rejecting its request for an instruction on the intentional-harm exclusion that would have incorporated an objective rather than a subjective standard.  The trial court had propounded an instruction explaining that “[w]hen we say expected in this context, what we mean is this:  Did Kyle know . . . that his sexual actions would harm Jesse and/or Gus.”  Northern proposed modifying the instruction to state as follows: “Did Kyle know or have reason to know that his actions” would cause harm.  (Emphasis added).  The trial court’s rejection of this request was correct.  An insured expects an injury if he or she is subjectively aware that injury is substantially certain to result.

This ruling did not prevent Northern from arguing that intent to harm could be inferred from all of the surrounding facts and circumstances, including evidence that Kyle knew the assaults were harmful and non-consensual.

Our  conclusion that a subjective standard governs whether a minor in these circumstances intended or expected harm to result has no impact on our earlier decisions holding that, when the perpetrator of the sexual assault or harassment is an adult, such intent must be inferred.