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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. M.C. v. Northern Insurance Company of New York (4/21/00) sp-5264

M.C. v. Northern Insurance Company of New York (4/21/00) sp-5264

     Notice:  This opinion is subject to correction before publication in
the Pacific Reporter.  Readers are requested to bring errors to the attention of the
Clerk of the Appellate Courts, 303 K Street, Anchorage, Alaska 99501, phone (907)
264-0608, fax (907) 264-0878.


             THE SUPREME COURT OF THE STATE OF ALASKA


M.C. and M.C.,                )
                              )    Supreme Court No. S-8558
               Appellants,    )
                              )    Superior Court No.
          v.                  )    3AN-96-3845 CI
                              )
NORTHERN INSURANCE COMPANY    )    O P I N I O N
OF NEW YORK,                  )
                              )    [No. 5264 - April 21, 2000]
               Appellee.      )
______________________________)


          Appeal from the Superior Court of the State of
Alaska, Third Judicial District, Anchorage,
                        John Reese, Judge.


          Appearances:  Mitchel J. Schapira, Anchorage,
for Appellants.  David R. Millen and Marc G. Wilhelm, Richmond &
Quinn, Anchorage, for Appellee.
 

          Before:  Matthews, Chief Justice, Eastaugh,
Bryner, and Carpeneti, Justices.  [Fabe, Justice, not
participating.]


          BRYNER, Justice.
                                
I.   INTRODUCTION
          Steven Flory sexually abused Mary Cook, [Fn. 1] a
fifteen-year-old girl who worked under his supervision.  Mary and
her mother sued Flory for damages; Flory confessed judgment and
assigned them his right to pursue a claim against his employer's
insurer, Northern Insurance Company of New York, which had denied
coverage and had declined to defend Flory.  The superior court
granted summary judgment in favor of Northern, finding that Flory
was not covered by the policy and that Northern had no duty to
provide him a defense.  The Cooks claim error.  But the policy in
question expressly excludes coverage for an employee's conduct that
causes bodily injury to a co-employee.  Because the record
establishes that Mary was Flory's co-employee and that her claim
against him involved a bodily injury, we affirm the superior
court's judgment.
II.  FACTS AND PROCEEDINGS
          In June 1994, while employed by the Anchorage Daily News
as a district manager responsible for newspaper home delivery,
thirty-four-year-old Steven Flory engaged in sexual relations with
a fifteen-year-old girl, Mary, a home delivery solicitor whom he
supervised.  The state charged Flory with sexual abuse of a minor
in the first degree, an unclassified felony. [Fn. 2]  Flory
eventually pleaded no contest to the lesser charge of sexual abuse
of a minor in the third degree, a class C felony. [Fn. 3] 
          Meanwhile, Mary and her mother, Mildred Cook, filed an
action against the Daily News and Flory, bringing claims of
assault, battery, seduction, and intentional and negligent
infliction of emotional distress against Flory, and vicarious
liability, negligent hiring, and improper supervision against the
Daily News.  The complaint alleged that Flory's acts occurred
within the scope of his employment with the Daily News as Mary's
direct supervisor.
          The Daily News's insurer, Northern Insurance Company of
New York, initially informed Flory that no coverage extended to him
under the Daily News policies.  Northern later offered to provide
Flory with representation in the civil case under a reservation of
right to contest coverage.  Flory accepted the offer.  But after
Flory entered into a plea bargain and changed his plea to no
contest in the criminal case, Northern informed Flory that it would
withdraw coverage of his defense in the civil case.  Flory then
signed a confession of judgment in favor of the Cooks, assigning
them his rights to proceed against Northern on the condition that
they not pursue the judgment against him. 
          The Cooks ultimately settled their claims against the
Daily News and proceeded against Northern on Flory's assigned
claims, alleging that as a Daily News employee, Flory was covered
under the newspaper's commercial general liability policy and that
Northern had breached its duties to defend and indemnify him.  The
superior court granted summary judgment in Northern's favor,
concluding that Flory was not covered under the Northern policy,
that Northern had no duty to defend him, and that his confession of
judgment in favor of the Cooks was unenforceable against Northern. 
          The Cooks appeal.
III. DISCUSSION
     A.   The Parties' Arguments
          The Cooks principally argue that the trial court erred in
granting summary judgment on the question of coverage, contending
that the issue of coverage involves questions of fact for the jury. 
They also contend that regardless of whether Flory was actually
covered by the policy, the possibility of coverage required
Northern to represent him.  Last, they contend that the superior
court erred in deciding that the Cooks' confessed judgment against
Flory is unenforceable against Northern. 
          Northern responds that Flory is not covered under the
Daily News policy for multiple reasons, any one of which relieved
it of its duty to pay under the policy: (1) his acts are excluded
from coverage because they are intentional torts; (2) he acted
outside the scope of his employment; and (3) his conduct fell
within policy provisions excluding Daily News employees from
coverage for injury to co-employees.  For the same reasons,
Northern maintains that it had no duty to defend Flory.  Last,
Northern insists that even if it did have a duty to defend Flory,
it would not necessarily be liable to pay for Flory's settlement
with the Cooks.
     B.   Standard of Review
          This court reviews a grant of summary judgment de novo,
applying its independent judgment. [Fn. 4]  We determine whether
the parties genuinely dispute any material facts and, if not,
whether the undisputed facts entitle the moving party to judgment
as a matter of law. [Fn. 5]   If no facts are in dispute, we apply
our independent judgment when we interpret the words of a contract.
[Fn. 6] 
     C.   Even Assuming That Flory Acted Within the Scope of His
Employment When He Sexually Abused Mary, Northern's Policy Excluded
His Conduct From Coverage Because He Injured a Co-Employee.

          Although the Cooks insist that this case presents
multiple questions of fact requiring jury resolution, we disagree
because we conclude that the undisputed facts establish that
Flory's conduct falls within an exclusion under the policy that
Northern issued to the Daily News.
          Because the Cooks assert Flory's assigned claim against
Northern, they cannot prevail unless they advance an arguable
factual theory under which Flory would qualify as "an insured"
under the Daily News policies.  In Section II.2.a.(1), titled "WHO
IS AN INSURED," the Daily News general liability policy specifies
that Daily News employees are considered to be insured under the
policy only while acting within the scope of their employment and
only if their conduct does not cause injury to a co-employee:   
          Each of the following is also an insured:

          a.   Your employees, other than your executive
officers, but only for acts within the scope of their employment by
you.  However, none of these employees is an insured for
          
               (1)  "Bodily injury" or "personal
injury" to you or to a co-employee while in the course of his or
her employment[.]

The umbrella policy contains a corresponding exclusion: 
 
          The insurance provided by this policy does not
apply to: . . . .  Any employee as an "insured" with respect to
"personal injury"[ [Fn. 7]] to another employee of the same employer
injured in the course of such employment. 

          For present purposes, we may assume, as the Cooks argue,
that they have raised genuine issues of material fact supporting
their claim that Flory was serving within the scope of his Daily
News employment when he abused Mary. [Fn. 8]  But even so, the
Cooks advance no factually supported theory under which Flory might
qualify for coverage as an insured under the foregoing policy
provisions.
          Flory's conviction for sexual abuse of a minor precludes
him from denying that Mary was his co-employee: Flory's felony
conviction was predicated on the position of authority that he
occupied in relation to Mary by virtue of her status as a Daily
News employee; the record suggests no basis for that authority
other than co-employee status.
          Moreover, Flory cannot deny that his claim arises from an
incident involving bodily injury to Mary: [Fn. 9]  In the civil
complaint upon which Flory confessed judgment, the Cooks asserted
a claim for bodily injury, alleging that Flory committed assault
and battery.  Flory's conviction of sexual abuse, based on the same
incident as the civil complaint, also establishes that he caused
bodily injury. [Fn. 10]  And in any event, the Cooks could not
sustain Flory's claim against Northern without alleging and proving
bodily injury, since, under the undisputed facts of this case,
bodily injury is the only potential basis for insurance coverage.
[Fn. 11]
          The Cooks argue that Flory's acts of sexual abuse did not
necessarily cause "expected or intended" "bodily injury" to Mary. 
But that issue is material only to the question of whether Flory's
acts would be excluded from coverage under Section I.2.a of the
policy. [Fn. 12]  As shown by the language from policy Section
II.2.a.(1) quoted above, whether Flory was an insured under the
policy when he injured his co-employee is an entirely separate
question.  Because we find that the exclusion at Section II.2.a.(1)
of the policy removes Flory from among those insured, we need not
reach the issue of whether he intended or expected to cause Mary
bodily injury when he sexually abused her. [Fn. 13]  Since the
undisputed facts establish that Flory was not among those insured
under the policy, we uphold the superior court's order granting
summary judgment to Northern on the Cooks' breach of coverage
claim. [Fn. 14]  
     D.   Northern Had No Duty to Defend Flory, Because There Was
No Possibility That He Was Insured Under the Daily News Policy for
His Sexual Abuse of Mary.

          The Cooks separately dispute Northern's decision to
withdraw its defense of Flory, arguing that because it violated its
duty to defend, Northern has forfeited its right to argue the
merits of any judgment against him.  The Cooks contend that if
there was any "possibility of coverage" of Flory's claim,
Northern's duty to defend him was triggered, regardless of whether
coverage was ultimately determined to exist. [Fn. 15]
          But under this standard Northern had no duty to defend
Flory because, under the facts alleged in the Cooks' complaint
against Flory and otherwise known by Northern when it decided to
withdraw its defense, Flory could not conceivably have been covered
by the policy.  Northern withdrew its defense only after Flory
pleaded no contest to a felony involving bodily injury to a co-
employee.  Because at that juncture Northern could fairly conclude
that the suit against Flory was not "within or potentially within"
the policy's coverage, Northern had no further duty to defend
Flory. [Fn. 16]
          Since we have held that the policy excluded Flory from
coverage and that Northern had no separate duty to defend him, we
have no need to address the superior court's independent
determination that the Cooks' judgment against Flory is
unenforceable against Northern. 
IV.  CONCLUSION
          We AFFIRM the superior court's judgment.


                            FOOTNOTES


Footnote 1:

     We use pseudonyms for the appellants in order to ensure
anonymity and to protect their privacy.  


Footnote 2:

     See AS 11.41.434(a)(3)(B) (defining first degree sexual abuse
of a minor to include engaging in sexual penetration with a person
who is under 16 years of age when the defendant occupies a position
of authority in relation to the victim).


Footnote 3:

     See AS 11.41.438(a)(2) (defining third degree sexual abuse of
a minor to include engaging in sexual penetration with a person who
is 16 or 17 years old and at least three years younger than the
defendant if the defendant occupies a position of authority in
relation to the victim). 


Footnote 4:

     See Christensen v. NCH Corp., 956 P.2d 468, 474 (Alaska 1998). 


Footnote 5:

     See Brady v. State, 965 P.2d 1, 2 (Alaska 1998).


Footnote 6:

     See National Bank of Alaska v. J.B.L. & K. of Alaska, Inc.,
546 P.2d 579, 586 (Alaska 1976). 


Footnote 7:

     The umbrella policy defines "personal injury" to include the
general liability policy's definition of "bodily injury."  


Footnote 8:

     But see Veco, Inc. v. Rosebrock, 970 P.2d 906, 924 n.36
(Alaska 1999) ("[I]mposing vicarious liability under a scope of
employment theory absent at least a partial purpose on the part of
the employee to serve the employer seems unjustified.") (modifying 
Doe v. Samaritan Counseling Ctr., 791 P.2d 344, 348 (Alaska 1990)).


Footnote 9:

     Although Mary's mother brought two claims against Flory in her
own right, these claims were nonetheless predicated on Flory's acts
of sexual abuse.  Because Mildred Cook's independent claims were
ultimately based on conduct by Flory that caused bodily injury to
Mary, it seems plausible that they too might fall within the co-
employee exclusion, even though Mildred Cook herself was not a
Daily News employee.  But we need not resolve this issue here.  The
Cooks did not separately discuss Mildred Cook's independent claims
in their summary judgment pleadings, and they do not mention them
on appeal.  We therefore decline to consider these claims. 


Footnote 10:

     It is immaterial that the offense of sexual abuse of a minor
does not require the state to prove nonconsensual sexual contact. 
The Alaska Criminal Code classifies the crime for which Flory was
convicted -- sexual abuse of a minor in the third degree -- as an
offense against the person.  See AS 11.41.438(a)(2).  Alaska law
regards the victim's minority as precluding meaningful consent. 
See, e.g., Yearty v. State, 805 P.2d 987, 994 (Alaska App. 1991)
("Virtually every case involving sexual abuse of a child is, in
this respect, nonconsensual; because no case of child sexual abuse
involves conduct that is truly consensual, it is difficult to
conceive of a situation in which an act of sexual abuse on a child
would not also be an act of sexual assault.").


Footnote 11:

     The General Liability Policy provides coverage for "bodily
injury," "property damage," "personal injury," and "advertising
injury."  The underlying facts obviously do not involve an
"advertising injury," and the Cooks claimed no "property damage." 
Furthermore, the policy's narrow definition of "personal injury"
precludes coverage on that basis:

          "Personal injury" means injury, other than
"bodily injury," arising out of one or more of the following
offenses:

          a.   False arrest, detention or imprisonment;

          b.   Malicious prosecution;

          c.   Wrongful entry into, or eviction of a
person from, a room, dwelling or premises that the person occupies;

          d.   Oral or written publication of material
that slanders or libels a person or organization or disparages a
person's or organization's goods, products or services; or

          e.   Oral or written publication of material
that violates a person's right of privacy. 

This leaves "bodily injury" as the only arguable basis for
coverage.  The policy defines "bodily injury" as follows:  

          "Bodily injury" means bodily injury, sickness
or disease sustained by a person, including death resulting from
any of these at any time.


Footnote 12:

     That section reads:  "This insurance does not apply to:  []
a. 'Bodily injury' or 'property damage' expected or intended from
the standpoint of the insured."


Footnote 13:

     But see Yearty, 805 P.2d at 994.


Footnote 14:

     Given our conclusion that this exclusion barred coverage, we
need not consider other potentially applicable exclusions argued by
Northern. 


Footnote 15:

     See State, Dep't of Transp. & Pub. Facilities v. State Farm
Fire & Cas. Co., 939 P.2d 788, 792 (Alaska 1997) (noting that duty
to defend is triggered if at least one cause of action alleged in
complaint presents a "possibility of coverage").


Footnote 16:

     See Afcan v. Mutual Fire, Marine & Inland Ins. Co., 595 P.2d
638, 645 (Alaska 1979).