In World Harvest Church v. Grange Mutual Casualty Co., 2016-Ohio-2913 (Ohio May 11, 2016), the Ohio Supreme Court ruled that an abuse or molestation exclusion barred coverage for a church’s settlement after a jury found it vicariously liable for its day care worker beating a young child and for negligent supervision.
Grange Mutual Casualty Company (Grange Mutual) insured World Harvest Church (WHC). The parents of a young child who was beaten with a ruler by a WHC daycare worker sued WHC. After trial, a jury awarded: 1) $764,235 in compensatory damages, $5 million in punitive damages and attorneys’ fees against WHC; and 2) $134,865 in compensatory and $100,000 in punitive damages against the daycare worker.
The jury’s answers to interrogatories indicated that the damages were proximately caused by: 1) the daycare workers’ intentional harm or battery; 2) intentional infliction of emotional distress committed by the daycare worker and/or WHC; and 3) WHC’s negligent supervision of the daycare worker. After the verdict was affirmed on appeal, the parties settled the claims for $3.1 million.
Grange Mutual denied coverage for the settlement on the basis of an “Abuse or Molestation Exclusion” that barred coverage for “1. The actual or threatened abuse or molestation by anyone or any person while in the care custody or control of any insured or 2. The negligent: a. Employment; b. Investigation; c. Supervision; d. Reporting to the proper authorities or failure to so report, or e. Retention of a person for whom any insured is or ever was legally responsible and whose conduct would be excluded by Paragraph 1. above.” After the denial, WHC filed suit against Grange Mutual for breach of contract and bad faith.
On cross motions for summary judgment, the trial court ruled that Grange Mutual was obligated to reimburse WHC for all the compensatory damages, attorneys’ fees and prejudgment interest, but not the punitive damages. The U.S. Court of Appeals for the 10th Circuit affirmed the trial court with the exception of compensatory damages, as Grange Mutual was only obligated to reimburse the damages for which WHC was secondarily liable. The appellate court found that the “Abuse or Molestation Exclusion” only barred coverage for WHC’s direct liability.
On further appeal, the Ohio Supreme court reversed. The Court held that the exclusion was clear and unambiguous. It excluded coverage for both an insured’s direct and vicarious liability so long as the victim was in the care, custody or control of any insured at the time of the threatened abuse or molestation. In reaching its decision, it rejected WHC’s claim that the exclusion was ambiguous because it failed to expressly state that coverage was excluded for secondary or vicarious liability. The Court concluded that the exclusion clearly excluded coverage for actual or threatened abuse by anyone.
Tressler Comments
This case demonstrates that courts will give policy exclusions their plain and ordinary meaning and will enforce provisions that clearly exclude coverage for abuse or molestation whether the insured is sought to be held directly or vicariously liable.