Insurance: medical malpractice by insured was not covered as concurrent cause, independent of excluded sexual misconduct.

ProSelect Insurance Co. v. Levy, 2011 VT 109 (mem.)

 ProSelect Insurance Company filed this declaratory relief action to determine its duty to indemnify its insured in a lawsuit alleging medical malpractice and sexual assault.   On summary judgment, the trial court construed a policy exclusion to bar coverage and entered judgment in favor of ProSelect.  Plaintiff in the underlying suit appeals from the judgment, asserting that the malpractice claims are covered under the concurrent causation doctrine. We affirm.

The trial court relied on a policy exclusion for “any damages, incidents, claims or suits . . . [w]hich, in whole or in part, arise out of or contain any allegations of any of … [s]exual intimacy, . . . exploitation, assault or undue familiarity.” (emphasis added.)

 Plaintiff relies on the “concurrent causation” doctrine and contends her malpractice claims are “wholly independent” of the sexual assault allegation. Under this doctrine, “coverage may not be denied merely because a separate excluded risk was an additional cause of the accident provided that the conduct on which coverage is premised is “somehow independent of the conduct excluded from the policy.”    State Farm Mutual Automobile Insurance Co. v. Roberts, 166 Vt. 452, 459, 463 697 A.2d 667, 671, 673-74.  (1997). Plaintiff alleged that the insured  negligently failed to properly diagnose her psychological disorder, prescribed harmful medications, encouraged her to pursue “unhealthy lifestyle choices,” failed to refer her to a community-based mental health program, and engaged in treatment “at variance with accepted professional protocols.”  In a separate count, plaintiff alleged that, “[i]n the course of . . .  treatment,” the insured doctor had committed sexual assault and battery. 

The short answer to plaintiff’s reliance on the concurrent causation doctrine is that it is misplaced.  Thee unambiguous policy language plainly excludes coverage where, as here, the claimant’s suit contains an allegation of sexual misconduct. 

In any event, we are not dealing here with independent and unrelated claims of non-sexual misconduct otherwise covered under the policy. This is a case where all of the claims essentially derive from the noncovered allegation of sexual misconduct. The evidence shows the insured doctor was intent on isolating plaintiff from other health care providers in order to preserve their improper sexual relationship, and that all alleged deviations from accepted medical norms were all designed to accomplish this end.  Thus, the malpractice and assault claims cannot be viewed as separate or independent causes.

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.