LAW OFFICES
OF
ANDREA LYNN RICE
A Professional Corporation
12100 Wilshire Boulevard
Suite 780
Los Angeles, California 90025
Telephone (310) 207-3717
Facsimile (310) 207-6785
Appellate Attorney
LIABILITY UPDATE
February 8, 2008
In Bjork v. State Farm Fire and Casualty Company 2007 Daily Journal D.A.R 17260, the Fourth Appellate District of the California Court of Appeal held that a “resident relative exclusion” in a homeowner’s insurance policy precludes coverage for a daughter’s claim that her mother negligently prevented her from being molested by her father.
In the underlying action, Darcie A. Bjork (Bork) sued her mother, Carol D. Fergerson (Carol), alleging that Carol was liable for negligence because she did not prevent Bjork from being molested by Bjork’s father and Carol’s husband, Melvin E. Fergerson (Melvin). Bjork, who was born in 1977 and resided in California with Carol and Melvin until at least 1997, alleged that she was sexually molested by Melvin from the age of approximately two until she was a teenager in 1991 or 1992. Bjork alleged that because of Carol’s negligence, she suffered damages including “emotional distress, anxiety, including physical related symptoms such as panic attacks.”
State Farm issued a series of homeowner’s insurance policies to Melvin and Carol from 1987 to 2000 for their successive homes in California. After Bjork filed the underlying lawsuit, Carol requested that State Farm provide her with a defense in the underlying action and indemnify her from any liability pursuant to the personal liability coverage in the homeowner’s insurance policies that covered Melvin and Carol’s homes in California.
State Farm denied coverage based on an exclusion in the applicable policies stating that personal liability coverage does not apply to “bodily injury to you or any insured within the meaning of part a. or b. of the definition of insured.”The applicable policies, which identified Melvin and Carol as the named insureds, defined “ ‘insured’ ” as follows: “4. ‘insured’ means you and, if residents of your household: a. your relatives; and b. any other person under the age of 21 who is in the care of a person described above.” State Farm stated that because Bjork was Carol’s daughter and resided with her when the alleged molestation occurred, Bjork was considered an insured under the definition contained in the applicable policies, and the exclusion for injury to “any insured” accordingly applied. The exclusion relied on by State Farm to deny coverage to Carol is commonly known as the “resident relative exclusion.” (See, e.g., Afrasiabi v. State Farm Fire & Casualty Co. (1999) 73 Cal.App.4th 1183, 1186-1187.)
Bjork and Carol subsequently entered into a stipulated judgment in the underlying action in the amount of $4.5 million, and Bjork agreed not to execute the judgment against Carol’s assets. In the stipulated judgment, Carol assigned Bjork any claims that she had against insurance companies for failing to provide her with a defense or indemnity in connection with the underlying lawsuit. Bjork then filed this lawsuit against State Farm. State Farm filed a motion for summary judgment, relying on the resident relative exclusion to establish that it was not obligated to provide coverage to Carol for the claims made against her by Bjork in the underlying lawsuit. The trial court ruled that the resident relative exclusion applied, and it entered judgment in favor of State Farm. Bjork filed this appeal, and the Court of Appeal affirmed.
The sole issue presented for the court’s resolution was whether the resident relative exclusion bars coverage for Carol’s liability to Bjork in the underlying action. “A resident relative exclusion, such as the exclusion at issue here, has long been held to be an enforceable exclusion. . . . As our Supreme Court has explained, ‘ “[The] concept of a household exclusion is a common one which has long enjoyed judicial support.” ’ (Farmers Ins. Exchange v. Cocking (1981) 29 Cal.3d 383, 389.) The exclusion is premised on the principle that an ‘insurance carrier need not insure risks arising from intrafamily torts unless it chooses to do so.’ ”
Bjork presented several arguments in favor of the inapplicability of the resident relative exclusion to this case, each of which the court rejected. The court first addressed Bjork’s argument that the resident relative exclusion should not apply in this case because the reasons behind the exclusion—the possibility of collusion—were not implicated in this case. The court rejected this argument because “the plain language of the applicable insurance policies does not limit the exclusion to instances in which collusion between family members is present. Instead, the applicable policies clearly and unambiguously exclude coverage for every personal liability claim involving injury to a relative who resides with a named insured.”
Bjork next argued that applying the resident relative exclusion in this case would violate public policy because the Legislature enacted a law reviving, for a period of one year, claims against individuals who negligently failed to stop childhood sexual abuse, when the statute of limitations otherwise already would have expired. (Code Civ. Proc., § 340.1, subd. (c).) “We reject Bjork’s argument. Code of Civil Procedure section 340.1, subdivision (c) expresses an intent to allow victims of childhood sexual abuse to bring otherwise expired claims. It does not deal with the subject of insurance coverage. Accordingly, we perceive nothing in the statute that would indicate a legislative policy against the application of the resident relative exclusion to instances of sexual molestation.”
Each of the State Farm policies contained a severability clause which stated, “This insurance applies separately to each insured. . . .” Bjork claimed that the severability clause created an ambiguity with respect to whether the resident relative exclusion applies, and that the court should resolve the ambiguity in favor of coverage. “We reject Bjork’s argument because . . . the severability clause does not allow us to disregard the fact that Bjork satisfies the definition of an insured under the policy.”
Some of State Farm’s policies were issued after Bjork ceased to reside with Carol in 1997 (the post-1997 policies). Bjork claimed that Carol should be afforded coverage under the post-1997 policies, despite the relative resident exclusion, because Bjork did not reside with Carol during those policy periods. “The difficulty with this argument is that, according to Bjork, the molestation ceased no later than 1994. Because the liability coverage in the policies is for bodily injuries ‘caused by an occurrence,’ and an occurrence is defined as ‘an accident, including exposure to conditions, which results in: [¶] a. bodily injury; [¶] or b. property damage [¶] during the policy period,’ to establish coverage under the post-1997 policies, Bjork would have to establish that she incurred bodily injury during the policy period (i.e., after 1997), and that the injury was caused by an earlier molestation.”
Bjork also relied on the California Supreme Court’s decision in Montrose Chemical Corp. v. Admiral Ins. Co. (1995) 10 Cal.4th 645, 685-686, which decided that when an insured’s liability stems from continuous or progressively deteriorating bodily injury, such as from the gradual release of pollutants, an “occurrence” exists for the purpose of a liability insurance policy, during the entire progression of the injury. The court rejected Bjork’s argument because she had not identified a continuous or progressively deteriorating bodily injury in the post-1997 time period that resulted from the molestation, but only continuing emotional distress, which was clearly excluded from the definition of bodily injury. “We thus conclude that there is no coverage under the post-1997 policies because Carol’s liability to Bjork is not based on any bodily injury to Bjork during the post-1997 policy periods that Carol brought about by failing to stop the earlier molestation.”
----Andrea Lynn Rice
OF
ANDREA LYNN RICE
A Professional Corporation
12100 Wilshire Boulevard
Suite 780
Los Angeles, California 90025
Telephone (310) 207-3717
Facsimile (310) 207-6785
Appellate Attorney
LIABILITY UPDATE
February 8, 2008
In Bjork v. State Farm Fire and Casualty Company 2007 Daily Journal D.A.R 17260, the Fourth Appellate District of the California Court of Appeal held that a “resident relative exclusion” in a homeowner’s insurance policy precludes coverage for a daughter’s claim that her mother negligently prevented her from being molested by her father.
In the underlying action, Darcie A. Bjork (Bork) sued her mother, Carol D. Fergerson (Carol), alleging that Carol was liable for negligence because she did not prevent Bjork from being molested by Bjork’s father and Carol’s husband, Melvin E. Fergerson (Melvin). Bjork, who was born in 1977 and resided in California with Carol and Melvin until at least 1997, alleged that she was sexually molested by Melvin from the age of approximately two until she was a teenager in 1991 or 1992. Bjork alleged that because of Carol’s negligence, she suffered damages including “emotional distress, anxiety, including physical related symptoms such as panic attacks.”
State Farm issued a series of homeowner’s insurance policies to Melvin and Carol from 1987 to 2000 for their successive homes in California. After Bjork filed the underlying lawsuit, Carol requested that State Farm provide her with a defense in the underlying action and indemnify her from any liability pursuant to the personal liability coverage in the homeowner’s insurance policies that covered Melvin and Carol’s homes in California.
State Farm denied coverage based on an exclusion in the applicable policies stating that personal liability coverage does not apply to “bodily injury to you or any insured within the meaning of part a. or b. of the definition of insured.”The applicable policies, which identified Melvin and Carol as the named insureds, defined “ ‘insured’ ” as follows: “4. ‘insured’ means you and, if residents of your household: a. your relatives; and b. any other person under the age of 21 who is in the care of a person described above.” State Farm stated that because Bjork was Carol’s daughter and resided with her when the alleged molestation occurred, Bjork was considered an insured under the definition contained in the applicable policies, and the exclusion for injury to “any insured” accordingly applied. The exclusion relied on by State Farm to deny coverage to Carol is commonly known as the “resident relative exclusion.” (See, e.g., Afrasiabi v. State Farm Fire & Casualty Co. (1999) 73 Cal.App.4th 1183, 1186-1187.)
Bjork and Carol subsequently entered into a stipulated judgment in the underlying action in the amount of $4.5 million, and Bjork agreed not to execute the judgment against Carol’s assets. In the stipulated judgment, Carol assigned Bjork any claims that she had against insurance companies for failing to provide her with a defense or indemnity in connection with the underlying lawsuit. Bjork then filed this lawsuit against State Farm. State Farm filed a motion for summary judgment, relying on the resident relative exclusion to establish that it was not obligated to provide coverage to Carol for the claims made against her by Bjork in the underlying lawsuit. The trial court ruled that the resident relative exclusion applied, and it entered judgment in favor of State Farm. Bjork filed this appeal, and the Court of Appeal affirmed.
The sole issue presented for the court’s resolution was whether the resident relative exclusion bars coverage for Carol’s liability to Bjork in the underlying action. “A resident relative exclusion, such as the exclusion at issue here, has long been held to be an enforceable exclusion. . . . As our Supreme Court has explained, ‘ “[The] concept of a household exclusion is a common one which has long enjoyed judicial support.” ’ (Farmers Ins. Exchange v. Cocking (1981) 29 Cal.3d 383, 389.) The exclusion is premised on the principle that an ‘insurance carrier need not insure risks arising from intrafamily torts unless it chooses to do so.’ ”
Bjork presented several arguments in favor of the inapplicability of the resident relative exclusion to this case, each of which the court rejected. The court first addressed Bjork’s argument that the resident relative exclusion should not apply in this case because the reasons behind the exclusion—the possibility of collusion—were not implicated in this case. The court rejected this argument because “the plain language of the applicable insurance policies does not limit the exclusion to instances in which collusion between family members is present. Instead, the applicable policies clearly and unambiguously exclude coverage for every personal liability claim involving injury to a relative who resides with a named insured.”
Bjork next argued that applying the resident relative exclusion in this case would violate public policy because the Legislature enacted a law reviving, for a period of one year, claims against individuals who negligently failed to stop childhood sexual abuse, when the statute of limitations otherwise already would have expired. (Code Civ. Proc., § 340.1, subd. (c).) “We reject Bjork’s argument. Code of Civil Procedure section 340.1, subdivision (c) expresses an intent to allow victims of childhood sexual abuse to bring otherwise expired claims. It does not deal with the subject of insurance coverage. Accordingly, we perceive nothing in the statute that would indicate a legislative policy against the application of the resident relative exclusion to instances of sexual molestation.”
Each of the State Farm policies contained a severability clause which stated, “This insurance applies separately to each insured. . . .” Bjork claimed that the severability clause created an ambiguity with respect to whether the resident relative exclusion applies, and that the court should resolve the ambiguity in favor of coverage. “We reject Bjork’s argument because . . . the severability clause does not allow us to disregard the fact that Bjork satisfies the definition of an insured under the policy.”
Some of State Farm’s policies were issued after Bjork ceased to reside with Carol in 1997 (the post-1997 policies). Bjork claimed that Carol should be afforded coverage under the post-1997 policies, despite the relative resident exclusion, because Bjork did not reside with Carol during those policy periods. “The difficulty with this argument is that, according to Bjork, the molestation ceased no later than 1994. Because the liability coverage in the policies is for bodily injuries ‘caused by an occurrence,’ and an occurrence is defined as ‘an accident, including exposure to conditions, which results in: [¶] a. bodily injury; [¶] or b. property damage [¶] during the policy period,’ to establish coverage under the post-1997 policies, Bjork would have to establish that she incurred bodily injury during the policy period (i.e., after 1997), and that the injury was caused by an earlier molestation.”
Bjork also relied on the California Supreme Court’s decision in Montrose Chemical Corp. v. Admiral Ins. Co. (1995) 10 Cal.4th 645, 685-686, which decided that when an insured’s liability stems from continuous or progressively deteriorating bodily injury, such as from the gradual release of pollutants, an “occurrence” exists for the purpose of a liability insurance policy, during the entire progression of the injury. The court rejected Bjork’s argument because she had not identified a continuous or progressively deteriorating bodily injury in the post-1997 time period that resulted from the molestation, but only continuing emotional distress, which was clearly excluded from the definition of bodily injury. “We thus conclude that there is no coverage under the post-1997 policies because Carol’s liability to Bjork is not based on any bodily injury to Bjork during the post-1997 policy periods that Carol brought about by failing to stop the earlier molestation.”
----Andrea Lynn Rice
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