The insureds’ minor son sexually molested a neighbor’s children while he was babysitting them. The neighbors brought a civil action against the insureds and their son alleging negligent supervision, negligent entrustment, loss of consortium, and assault and battery. The insurer denied the claim on three grounds:
1. That the actions of the minor son did not constitute an “occurrence” as defined in the policy,
2. That the policy excluded coverage for acts “expected or intended by one of more insureds”, and
3. That the policy excluded coverage for bodily injury “arising out of sexual molestation.”
The insureds and the neighbors jointly filed a declaratory judgment to determine the extent to which the insurer was obligated to provide coverage. The court found that the alleged negligent supervision and negligent entrustment were “occurrences,” that the intentional act and sexual molestation exclusions were ambiguous and did not preclude coverage, and that the policy covered the claims. The insurer appealed.
The Appellate Court stated that the language of the policy must be construed, as would a reasonable person based upon a more than casual reading of the policy as a whole, giving the language its natural and ordinary meaning when the terms were clear and unambiguous. Noting that an insurer is free to limit its liability by using exclusions that are written in clear and unambiguous language, the Court determined that the wording used in the sexual molestation exclusion was clear and applied to the entire policy.
The insureds and neighbors argued that other courts had reached different conclusions in interpreting similar exclusions and applied the phrase “arising out of” more broadly to include acts due to an insured’s negligence. In response, the Court stated that there would have been no injuries or damages under the negligence claims absent the sexual molestation charges. Therefore, the alleged bodily injuries did “arise out of” the excluded act of sexual molestation and coverage was therefore precluded. The Court did not consider whether the intentional act exclusion applied as the sexual molestation exclusion already precluded all coverage.
Jennifer Philbrick and another v. Liberty Mutual Fire Insurance Company, SpCtNH, No. 2007-042. Filed October 31, 2007. Reversed.