AIG Property Casualty Co. v. Cosby, No. 17-1505 (1st Cir. 2018)

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Justia Opinion Summary

The First Circuit affirmed the judgment of the district court declaring that AIG Property Casualty Company had a duty to defend William H. Cosby, Jr.

In 2014 and 2015, nine of the women who had, over the past decade, accused Cosby of sexual assault, filed three separate actions claiming that Cosby had defamed them by publicly denying their accusations. At the relevant times, Cosby held two insurance policies issued by AIG. Under each policy, AIG had a duty to defend lawsuits alleging defamation. AIG sought a declaration that the policies’ “sexual misconduct” exclusions barred coverage because the underlying defamation claims “arose out of” Cosby’s alleged sexual assaults. The district court granted judgment on the pleadings for Cosby, concluding that the sexual-misconduct exclusions were ambiguous. The First Circuit affirmed, holding that the “arising out of” language in the policies rendered the pertinent sexual-misconduct exclusions ambiguous as to the question in this case, requiring judgment for Cosby, the policyholder.

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United States Court of Appeals For the First Circuit No. 17-1505 AIG PROPERTY CASUALTY COMPANY, Plaintiff, Appellant, v. WILLIAM H. COSBY, JR., Defendant, Appellee, BARBARA BOWMAN, TAMARA GREEN, ANGELA LESLIE, KATHERINE MAE MCKEE, LOUISA MORITZ, KRISTINA RUEHLI, THERESE SERIGNESE, JOAN TARSHIS, LINDA TRAITZ, Defendants. APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS [Hon. Mark G. Mastroianni, U.S. District Judge] Before Lynch, Circuit Judge, Souter, Associate Justice, and Stahl, Circuit Judge. Michael F. Aylward, with whom William A. Schneider, Morrison Mahoney LLP, Rebecca R. Weinreich, Steven V. Kovarik, and Lewis Brisbois Bisgaard Smith LLP were on brief, for appellant. Kirk A. Pasich, with whom Pamela M. Woods, Mikaela Hon. David H. Souter, Associate Justice (Ret.) of the Supreme Court of the United States, sitting by designation. Gallagher-Whitman, Pasich LLP, Francis D. Dibble, Jr., John M. Greaney, Elizabeth S. Zuckerman and Bulkley, Richardson & Gelinas, LLP were on brief, for appellee. June 7, 2018 - 2 - SOUTER, Associate Justice. In this declaratory judgment action, plaintiff AIG Property Casualty Company appeals from a judgment that it has a duty to defend the policyholder, defendant William H. Cosby, Jr. We affirm. Over the past decade, a number of women have accused Cosby of sexual assault. defendants here, filed In 2014 and 2015, nine of them, also three separate actions claiming that Cosby had defamed them by publicly denying their accusations. At relevant times, Cosby held two insurance policies issued by AIG: a homeowners policy and a personal excess liability policy (the "umbrella policy"). Under each, AIG has a duty to "pay damages [Cosby] is legally obligated to pay [due to] personal injury or property damage caused by an occurrence covered[] by this policy anywhere in the world . . . ." Both policies define "personal injury" to include "[d]efamation," and oblige AIG to pay the cost of defending against suits seeking covered damages. When Cosby notified AIG of the underlying defamation suits, AIG initially agreed to defend him, subject to a reservation of rights that permitted the company to bring this action, seeking a declaration that misconduct" exclusions barred coverage. the policies' "sexual The cited exclusion in the homeowners policy bars coverage for liability or defense costs "arising out of any actual, alleged[,] or threatened . . . - 3 - [s]exual molestation, misconduct or harassment[,] . . . or . . . [s]exual, physical or mental abuse." similarly excludes coverage for And the umbrella policy liability or defense costs "[a]rising out of any actual, alleged[,] or threatened . . . [s]exual misconduct, molestation or harassment[,] . . . or . . . [s]exual, physical or mental abuse." Contending that the underlying defamation claims arose out of Cosby's alleged sexual assaults, AIG moved judgment claim. for summary judgment on its declaratory Cosby, for his part, moved to dismiss or, in the alternative, for judgment on the pleadings. The district court treated his motion as one for judgment on the pleadings under Federal Rule of Civil Procedure 12(c) and held that the sexual-misconduct consequently exclusions granted Cosby's were motion at least insofar ambiguous as it and sought a judgment that AIG had a duty to defend.1 As with a dismissal under Rule 12(b)(6), we review a judgment on the pleadings de novo, "tak[ing] all well-pleaded facts in the light most favorable to the non-moving party and draw[ing] all reasonable inferences in that party's favor." Najas Realty, LLC v. Seekonk Water Dist., 821 F.3d 134, 140 (1st Cir. 2016). 1 By consent of the parties, the district court dismissed AIG's claim to the extent it sought a judgment that it owed no duty to indemnify, without prejudice to the filing of a new action if subsequent developments justified it. - 4 - The parties debate whether Massachusetts or California law governs policies, the with interpretation AIG of arguing the for relevant Massachusetts insurance on its understanding that its law requires a finding of no coverage. But we have no need to resolve that dispute because, simply by applying the law of Massachusetts as AIG asks, we conclude that AIG has a duty to defend Cosby.2 unnecessary judicially to address estopped Cosby's even from For the same reason, it is arguments arguing that that AIG should Massachusetts be law applies. "Under policy . . . under the begin[ning] Massachusetts general with law, rules the of actual we construe contract language given its plain and ordinary meaning." an insurance interpretation[,] of the policies, Brazas Sporting Arms, Inc. v. Am. Empire Surplus Lines Ins. Co., 220 F.3d 1, 4 (1st Cir. 2000). "The insurer bears the burden of demonstrating that an exclusion exists that precludes coverage,” however, “and any ambiguities in the exclusion provision are strictly construed 2 It is no surprise that AIG would prefer to avoid the application of California law. On the same day it commenced this action, AIG began a separate declaratory judgment proceeding against Cosby in federal court in California, seeking a declaration that it had no duty to defend or indemnify Cosby against a similar defamation action. AIG Prop. Cas. Co. v. Cosby, 2015 WL 9700994, at *1-2 (C.D. Cal. Nov. 13, 2015). Interpreting the same policy provisions at issue here, the California court applied California law and held that AIG had a duty to defend Cosby, given the ambiguity of the sexualmisconduct exclusions. Id. at *3-5. - 5 - against the insurer." 93, 97 (1st Cir. Valley Forge Ins. Co. v. Field, 670 F.3d 2012) (internal quotation marks omitted). Indeed, the general interpretive rule that "[a]mbiguous policy terms are construed in favor of the insured," Scottsdale Ins. Co. v. Torres, 561 F.3d 74, 77 (1st Cir. 2009), "applies with particular force to exclusionary provisions," U.S. Liab. Ins. Co. v. Benchmark Const. Servs., Inc., 797 F.3d 116, 120 (1st Cir. 2015) (internal quotation marks omitted). "Ambiguity exists when the policy language is susceptible to more than one meaning." Scottsdale, 561 F.3d at 77. There is under Massachusetts Court has said no single law. that the definition The term of "arising Massachusetts "indicates a out Supreme wider of" Judicial range of causation than the concept of proximate causation in tort law," Commerce Ins. Co. v. Ultimate Livery Serv., Inc., 897 N.E.2d 50, 62 (Mass. 2008) (internal quotation marks omitted), and that it "suggest[s] a causation more analogous to 'but for' causation," Fuller v. First Fin. Ins. Co., 858 N.E.2d 288, 292 (Mass. 2006) (internal quotation marks omitted). In a slightly earlier decision, however, the same court has taken care to note that "the expression does not refer to all circumstances in which the injury would not have occurred 'but for'" the excluded activity. Rischitelli v. Safety Ins. Co., 671 N.E.2d 1243, 1245 (Mass. 1996) (injuries resulting from fisticuffs that broke out after - 6 - vehicle collision did not "aris[e] maintenance or use of an auto"). sufficiently causal close relationship" connection between of the ownership, Rather, "there must be a or the out a injury "reasonably and apparent" relevant event. Commerce Ins. Co., 897 N.E.2d at 62 (internal quotation marks omitted). to where Ultimately, "[a] judgment call . . . must be made as the causation." facts of the case fall along a continuum of Am. Home Assur. Co. v. First Specialty Ins. Corp., 894 N.E.2d 1167, 1170 (Mass. App. Ct. 2008). Here, AIG says that because Cosby's allegedly defamatory denials were prompted by the women's sexual-assault allegations, the defamation injury and the excluded conduct are so "inextricably intertwined" misconduct exclusions. as to trigger the sexual- Cosby counters that the source of the women's claimed injuries is not any alleged sexual misconduct, but rather the allegedly defamatory statements. Cf. Bagley v. Monticello Ins. Co., 720 N.E.2d 813, 817 (Mass. 1999) ("It is the source from which the plaintiff's personal injury originates rather than the specific theories of liability alleged in the complaint which (emphasis in Given independent causal the link determines original; between insurer's internal cause the the of duty quotation injury, excluded marks Cosby conduct and defend." omitted)). maintains, the claims is too attenuated to trigger the exclusions. - 7 - to the defamation It is only fair to say that applying the quoted governing principles of Massachusetts law to this case does not supply an easy answer to the question before us. But we need not determine whether the homeowners policy's "arising out of" exclusion, standing on its own, would or would not eliminate coverage. Instead, a closer look at the umbrella policy provides a key to decision here. As the district court observed, the presence of another, more broadly worded sexual-misconduct exclusion in the umbrella policy tips the scales in favor of finding ambiguity. That policy's coverage for "Limited Charitable Board Directors and Trustees Liability" is subject to an exclusion that applies to claims for involving, damages directly misconduct." RA "[a]rising or at out indirectly, 328, ¶ D.10 of, or any in any alleged (emphasis way sexual added). This provision has a place in the analysis here under the rule that "[e]very word in an insurance contract must be presumed to have been employed with a purpose effect whenever practicable." 984 N.E.2d omitted); N.E.2d 835, see 374, 844 also 378 (Mass. J.A. (Mass. and must be given meaning and Metro. Life Ins. Co. v. Cotter, 2013) (internal Sullivan Corp. 1986). Given v. quotation marks Commonwealth, that this 494 separate, specific sexual-misconduct exclusion was drafted so closely to a but-for view, the umbrella policy's - 8 - more laconic, generally applicable counterpart may most reasonably be read, in the circumstances of this case, as imposing a standard closer along the continuum to proximate causation than but-for, under that policy. And because both the umbrella and homeowners policies were drafted by the same insurer, and the policies were issued by it side by side to the same insured, we may infer that the two policies' identical "arising out of" language was intended to carry identical meaning, calling for identical effect. And if that meaning is not proximate cause outright, at a minimum it renders the pertinent sexual-misconduct exclusions ambiguous as to the question here, requiring judgment for the insured.3 To be clear, we do not hold that "arising out of" is an inherently ambiguous term under Massachusetts law or that discrepancies ambiguity. in insurance provisions always give rise to Rather, our holding is confined to this case where the ambiguity question is close to begin with and where another sexual-misconduct exclusion is worded more broadly.4 Out of caution, we also note that this appeal decides only the question 3 Notably, the same result would obtain under California law. See Safeco Ins. Co. of Am. v. Robert S., 28 P.3d 889, 893 (Cal. 2001) (ambiguities are resolved in favor of insured); Palmer v. Truck Ins. Exch., 988 P.2d 568, 572-73 (Cal. 1999) ("We must . . . give effect to every part of the policy with each clause helping to interpret the other." (internal quotation marks omitted)). 4 In view of our holding, we alternative grounds for affirmance. - 9 - need not reach Cosby's of coverage in providing defense to the policyholder. for any damages that may be awarded if the Coverage defense is unsuccessful could turn on facts beyond those pertinent here, requiring independent analysis. Cotter, 984 N.E.2d at 850 (an "insurer's duty to defend is independent from, and broader than, its duty to indemnify" (internal quotation marks omitted)). Affirmed. - 10 -