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Doe v. Liberty Mutual Fire Ins. Co.

United States District Court, M.D. Pennsylvania

September 13, 2019

JOHN DOE 1, et al., Plaintiffs,
v.
LIBERTY MUTUAL FIRE INS. CO., Defendant.

          Carlson, Magistrate Judge

          MEMORANDUM OPINION

          ROBERT D. MARIANI, UNITED STATES DISTRICT JUDGE

         I. INTRODUCTION AND PROCEDURAL HISTORY

         Presently before the Court is a Report and Recommendation ("R&R") (Doc. 17) by Magistrate Judge Martin C. Carlson in which he recommends that the Motion of Defendant, Liberty Mutual Fire Insurance Company, to Dismiss the Complaint (Doc. 6), be granted (Doc. 17 at 17). The Complaint at issue is a declaratory judgment action in which Plaintiffs, who are also the plaintiffs in a state court action, seek a declaration that Defendant Liberty Mutual Fire Insurance Company ("Liberty Mutual") has a duty to defend and indemnify the defendants in the state court action who were insured by Liberty Mutual at the relevant time. (Doc. 2 at 4-12.) Magistrate Judge Carlson's recommendation is based on his conclusion that Defendant has no duty to defend or indemnify the insureds under the policy at issue based on both the policy's general liability coverage provisions and the sexual molestation exclusion contained in the policy. (Doc. 17 at 9-16.)

         A District Court may "designate a magistrate judge to conduct hearings, including evidentiary hearings, and to submit to a judge of the court proposed findings of fact and recommendations for the disposition" of certain matters pending before the Court. 28 U.S.C. § 636(b)(1)(B). If a party timely and properly files a written objection to a Magistrate Judge's Report and Recommendation, the District Court "shall make a cte novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made." Id. at § 636(b)(1)(C); see also Fed. R. Civ. P. 72(b)(3); M.D. Pa. Local Rule 72.3; Brown v. Astrue, 649 F.3d 193, 195 (3d Cir. 2011). "If a party does not object timely to a magistrate judge's report and recommendation, the party may lose its right to cfe novo review by the district court." EEOC v. City of Long Branch, 866 F.3d 93, 99-100 (3d Cir. 2017). However, "because a district court must take some action for a report and recommendation to become a final order and because the authority and the responsibility to make an informed, final determination remains with the judge, even absent objections to the report and recommendation, a district court should afford some level of review to dispositive legal issues raised by the report." Id. at 100 (internal citations and quotation marks omitted).

         Plaintiffs timely filed objections to the R&R (Doc. 18) and a brief in support of the objections (Doc. 19). Defendant filed a response to the objections (Doc. 20), and Plaintiffs filed a reply (Doc. 21). Therefore, this matter is ripe for disposition.

         Having conducted the required Gfe novo review, the Court agrees with the R&R's conclusion that the Motion of Defendant, Liberty Mutual Fire Insurance Company, to Dismiss the Complaint (Doc. 6), should be granted. However, because the Court adds to the analysis set out in the R&R, the Court will adopt the R&R as modified.

         II. BACKGROUND

         A. Factual and Procedural Background

         In accordance with the standard of review for a motion to dismiss, the Court relies primarily on Plaintiffs' recitation of facts contained in their brief in opposition to the pending motion (Doc. 9 at 6-8). The factual assertions in Plaintiffs' brief reference those contained in their complaint in the underlying state court action. (Id. at 7-8.) Reference to the underlying state court complaint is appropriate because "[a] carrier's duty to defend and indemnify an insured in a suit brought by a third party depends upon a determination of whether the third party's complaint triggers coverage," Mutual Benefit Insurance Co. v. Haver, 555 Pa. 534, 725 A.2d 743, 745 (1999).

         Procedurally, Plaintiffs initiated the instant action on June 29, 2018, by filing a Declaratory Judgment Complaint in the Court of Common Pleas of Lackawanna County against Defendant. (Doc. 2.) Plaintiffs state that they have filed this Declaratory Judgment Complaint

seeking judgment from the Court that Defendant has a duty to defend D.H. and minor N.H. in the action brought against them filed to term number 16-CV-9198 in the Court of Common Pleas of Monroe County. Plaintiffs are interested parties and thus necessary parties to the subject declaratory judgment action.

(Doc. 9 at 6-7.)

         On July 30, 2018, Defendant filed a Notice of Removal to the United States District Court for the Middle District of Pennsylvania based on diversity jurisdiction. (Doc. 1.) On August 1, 2018, Defendant filed the Motion of Defendant, Liberty Mutual Fire Insurance Company, to Dismiss the Complaint (Doc. 6) and supporting brief (Doc. 7), asserting that the underlying Monroe County complaint shows that it has no duty to defend or indemnify the defendants in that action.

         In their responsive brief (Doc. 9), Plaintiffs assert that

[t]he underlying action arises out of serious injuries sustained by Plaintiff John Doe, 1, a minor, an incident that occurred on or about June 27, 2015. See a true and correct copy of the December 9, 2016 Complaint hereto as "Exhibit B," at ¶4. On that date, John Doe 1 was visiting minor N.H. at 1256 Chateau Drive, 4b, East Stroudsburg, PA 18301, which was the residence owned by minor N.H.'s mother D.H.. Id. On the aforementioned date and at all times pertinent hereto, John Doe 1 and [N.H.] were under the supervision and control of D.H.. Id., at ¶5. On that date, while John Doe 1 was visiting with minor N.H., minor N.H. sexually abused John Doe 1, who was five (5) years old at the time, causing substantial harm, both mental and physical, to John Doe 1. Id., at ¶6. Minor Plaintiff John Doe 1 was too young to have given any consent and minor N.H.'s abuse was in fact unwanted and has caused substantial harm to Minor Plaintiff John Doe 1. Id., at ¶7. Minor N.H. also forced John Doe 1 to watch pornographic videos. Id., at ¶8. As a result of the incident, John Doe 1, has suffered great emotional distress resulting in anxiety, self-aggression, stomachaches, decreased appetite, sleep disruption, and shock to his nerves and nervous system, all of which caused him, continue to cause him and will/may cause him for an indefinite time in the future, great pain, agony and suffering, both physical and mental. Id., at ¶9.
On December 9, 2016, Plaintiffs filed the underlying Complaint against minor N.H. and his mother D.H. in the Court of Common Pleas of Monroe County, docketed to the term number 16-CV-9198. The Complaint alleges three (3) counts of negligence, three (3) counts of battery, three (3) counts of negligent infliction of emotion distress and three (3) counts of punitive damages. Id. The Complaint alleges that Plaintiff John Doe 1 suffered serious injuries arising out of the acts of D.H. and minor N.H. occurring at their household. Id., at ¶¶9-13. Specifically, the Complaint alleges that Plaintiff John Doe 1 suffered great emotional distress resulting in anxiety, self-aggression, stomachaches, decreased appetite, sleep disruption, and shock to his nerves and nervous system, all of which caused him, continue to cause him and will/may cause him for an indefinite time in the future, great pain, agony and suffering, both physical and mental. Id., at ¶9.

(Doc. 9 at 7-8.)

         As set out above, the pending R&R recommends that the Court grant Defendant's motion. (Doc. 17 at 17.)

         B. Insurance Policy

         Defendant's "LibertyGuard Deluxe Homeowners Policy" ("Policy") number H32-281-299495-40 issued to D.H. was in effect from September 5, 2015, to September 5, 2016. The policy contains the following relevant definitions: "'Bodily Injury' means bodily harm, sickness or disease, including required care, loss of services and death that results"; and "'Occurrence' means an accident, including continuous or repeated exposure to substantially the same general harmful conditions, which results, during the policy period, in: a. 'Bodily injury'; or b. 'Property damage'." (Doc. 6-3 at 7 (Policy Definitions).)

         Section II of the Policy addresses "Liability Coverages" wherein Coverage E for "Personal Liability" sets out the following in pertinent part:

If a claim is made or a suit is brought against an "insured" for damages because of "bodily injury" or "property damage" caused by an "occurrence" to which this coverage applies, we will:
1. Pay up to our limit of liability for the damages for which the "insured" is legally liable; and
2 .Provide a defense at our expense by counsel of our choice even if the allegations are groundless, false or fraudulent.

(Doc. 6-3 at 17 (Policy COVERAGE E).)

         Section III of the Policy identifies "Exclusions" and states as follows in relevant part: "Coverage E - Personal Liability and Coverage F - Medical Payments to Others do not apply to 'bodily injury' or 'property damage':... k. Arising out of sexual molestation, corporal punishment or physical or mental abuse.'" (Doc. 6-3 at 11, 12.) An Amendatory Endorsement in the Policy states the following:

         Item la. under Coverage E - Personal Liability and Coverage F - Medical Payments to Others is amended as follows:

For "bodily injury" or "property damage" that results from or may reasonably be expected to result, from the intentional or criminal acts or omissions of an "insured," even if it
(1) is of a different kind, quality, or degree than initially expected or intended; or
(2) is sustained by a different person, entity, real or personal property, than initially expected or intended.
However, this exclusion does not apply to "bodily injury" resulting from the use of reasonable force to protect persons or property.

(Doc. 6-3 at 36 (Policy Amendatory Endorsement).)

         III. LEGAL STANDARD

         A complaint must be dismissed under Federal Rule of Civil Procedure 12(b)(6) if it does not allege "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 1974, 167 L.Ed.2d 929 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009).

         "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiffs obligation to provide the 'grounds' of his 'entitlement to relief requires more than labels and conclusions, and a formulaic recitation of a cause of action's elements will not do." Twombly, 550 U.S. at 555, 127 S.Ct. 1955 (internal citations and alterations omitted). In other words, "[f]actual allegations must be enough to raise a right to relief above the speculative level." (Id.) A court "take[s] as true all the factual allegations in the Complaint and the reasonable inferences that can be drawn from those facts, but... disregard[s] legal conclusions and threadbare recitals of the elements of a cause of action, supported by mere conclusory statements." Ethypharm S.A. France v. Abbott Laboratories, 707 F.3d 223, 231 n.14 (3d Cir. 2013) (internal citations and quotation marks omitted).

Twombly and Iqbal require [a court] to take the following three steps to determine the sufficiency of a complaint; First, the court must take note of the elements a plaintiff must plead to state a claim. Second, the court should identify allegations that, because they are no more than conclusions, are not entitled to the assumption of truth. Finally, where there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief.

Connelly v. Steel Valley Sen. Dist, 706 F.3d 209, 212 (3d Cir. 2013).

         "Under Federal Rule of Civil Procedure 8, a complaint need not anticipate or overcome affirmative defenses; thus, a complaint does not fail to state a claim simply because it omits facts that would defeat" an affirmative defense. Schmidt v. Skolas, 770 F.3d 241, 248 (3d Cir. 2014) (citations omitted). "Technically, the Federal Rules of Civil Procedure require a defendant to plead an affirmative defense ... in the answer, not in a motion to dismiss." (Id. at 249) (citing Robinson v. Johnson, 313 F.3d 128, 134-35 (3d Cir. 2002)). The Third Circuit Court of Appeals has explained that "[generally speaking, we will not rely on an affirmative defense... to trigger dismissal of a complaint under Rule 12(b)(6). A complaint may be dismissed under Rule 12(b)(6) where an unanswered affirmative defense appears on its face, however." In re Tower Air, 416 F.3d 229, 238 (3d Cir.2005) (internal citations omitted); see also Borough of Moosic v. Darwin Nat. Assur. Co., 556 Fed.Appx. 92, 98 (3d Cir. 2014) (citing Victaulic Co. v. Tiernan, 499 F.3d 227 (2007) (quoting In re Tower Air, 416 F.3d at 238)).

         "To decide a motion to dismiss, courts generally consider only the allegations contained in the complaint, exhibits attached to the complaint and matters of public record." Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993) (citations omitted); accord Mayer v. Belichick, 605 F.3d 223, 230 (3d Cir. 2010). "If, on a motion under Rule 12(b)(6) or 12(c), matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56. All parties must be given a reasonable opportunity to present all the material that is pertinent to the motion." Fed.R.Civ.P. 12(d). "However, an exception to the general rule is that a document integral to or explicitly relied upon in the complaint may be considered without converting the motion to dismiss into one for summary judgment." Schmidt, 770 F.3d at 249 (internal citations and quotation marks omitted).

         "[I]f a complaint is vulnerable to 12(b)(6) dismissal, a district court must permit a curative amendment, unless such an amendment would be inequitable or futile." Phillips v. Cnty. of Allegheny, 515 F.3d 224, 245 (3d Cir. 2008) (citing Grayson v. Mayview State Hosp., 293 F.3d 103, 108 (3d Cir. 2002)).

[E]ven when plaintiff does not seek leave to amend his complaint after a defendant moves to dismiss it, unless the district court finds that amendment would be inequitable or futile, the court must inform the plaintiff that he or she ...

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