“Care” Does Not Require Physical Control

The First Circuit Court of Appeals was asked to resolve an insurance coverage issueconcerning the abuse of an eleven-year-old child (the child) in Valley Forge Insurance Co., American Casualty of Reading v. Carol Field, the Carson Center For Human Services, Inc, No. 11-1316, (1st Cir. 02/22/2012).

FACTS

The child suffered from long-term horrific abuse and on September 11, 2005 was

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beaten nearly to death by her adoptive mother and stepfather. The child’s legal guardian, David Murphy, brought suit in the Superior Court of the Commonwealth of Massachusetts against several defendants including the Carson Center for Human Services, Inc. (Carson Center), and one of its employees, licensed social worker Carol Field, whose patient the child was during this period. The complaint alleged that they failed to detect or report to state authorities signs of ongoing physical abuse of the child. That state court suit led to this insurance coverage litigation in federal court.

The federal plaintiffs are Valley Forge Insurance Company and American Casualty of Reading, PA, the insurers of the Carson Center and, as such, of Field as an employee of the Carson Center. The insurers sought a declaratory judgment that the allegations against the insureds in the underlying suit fall within exclusions to coverage. The district court granted the request for declaratory judgment. The insureds and Murphy appealed.

Murphy filed the underlying suit in Superior Court on October 18, 2007. The complaint alleged that the Carson Center, Field, and other providers had a doctor-patient relationship with the child and that in each case the providers knew or should have known that the physical injuries sustained by the child while she was in their care were the result of systematic abuse by her parents. Those injuries included head injuries from a baseball bat, severe burns on her legs from standing in scalding hot water, toenails that had been pulled off, beatings, chipped teeth, and numerous cuts, scrapes, and bruises that required sutures or had become infected.

Murphy’s complaint further alleged that the negligent failure to suspect or report such abuse on the part of the Carson Center, Field, and the other providers culminated in the near-fatal brain injury the child sustained as a result of abuse by her parents on September 11, 2005, and that breach of their duties of reasonable care were substantial contributing factors to the child’s serious injuries. The child’s physical injuries, including paraplegia, are permanently disabling, and she has been left with significant and permanent mental deficits, for all of which she will require lifetime care.

Field was a social worker and therapist at the Carson Center in Westfield, Massachusetts, when she met the child on October 30, 2002. The Carson Center is a non-profit facility that provides psychiatric, mental health, rehabilitation, and family stabilization services to the community. Field provided therapeutic services to the child over the course of the next thirty-five months. In the state suit, Field recalled approximately fifty-one in-person counseling sessions with the child; approximately twenty different meetings or telephone conferences with the child’s adoptive mother; at least four meetings with the child’s other health care providers; involvement in four of the child’s hospitalizations; eleven telephone conferences with the child’s medical providers; at least four telephone conversations with the child’s school counselors; and four conferences with the Massachusetts Department of Social Services. Field’s treatment of the child continued until the child suffered her catastrophic injuries on September 11, 2005.

ISSUE

The issue is one of policy language interpretation. It is whether the policy language of an Abuse or Molestation Exclusion in a Professional Liability Coverage part and an Abuse or Molestation Exclusion in a Commercial Umbrella Coverage part precludes coverage. The language of these Exclusions precludes coverage for abuse that occurs to anyone in the insureds’ “care, custody or control.” The question is whether the Exclusions apply where, as here, at the time of the abuse the victim was not in the physical custody of the insureds and had been receiving bi-weekly outpatient therapeutic services from them for fourteen months covered by the policies in question.

This action for declaratory judgment is concerned only with Murphy’s claims in the underlying Superior Court suit for the years 2002 and 2003. All told, during the period of October 30, 2002, through December 19, 2003, Field saw the child about twenty-five times, which averages to a visit nearly every other week.

The plaintiffs insured the Carson Center from December 19, 1998, through December 19, 2003. At issue is the policy provided by Valley Forge for the period December 19, 2001, through December 19, 2002, and the policy provided by American Casualty for the period December 19, 2002, through December 19, 2003. Each of these policies contained an Abuse or Molestation Exclusion. The parties do not dispute that, absent these Exclusions, the policies would provide coverage to the Carson Center and Field for the underlying suit.

THE EXCLUSION

The pertinent part of the Abuse or Molestation Exclusion to the Professional Liability Coverage reads:

        EXCLUSION – ABUSE OR MOLESTATION

This endorsement modifies insurance provided under the following:

        PROFESSIONAL LIABILITY COVERAGE FORM

The following exclusion is added to paragraph 2., Exclusions of Section I – Coverage:

This insurance does not apply to damages arising out of:

1. The actual or threatened sexual or physical abuse or molestation by anyone to any person while in the care, custody or control of any insured; . . . .

Exclusions of this type for sexual or physical abuse or molestation are not uncommon for these types of insurance policies for those who have care of others. Such exclusions appear to have been in use since 1987. Exclusions of this sort have generally been found to be unambiguous in the face of attacks on various parts of the language used, and the insureds in these cases have included medical or therapeutic care providers, health care centers, summer camps, schools and preschools, job training programs, churches, and the like.

Both sides argue that the Abuse or Molestation Exclusion here is unambiguous, offering competing interpretations of its language. That competing interpretations are given does not make an exclusion ambiguous. There is no dispute that the child was not in the physical dominion or control of either Field or the Carson Center at the time any of the abuse took place, and it is not a prerequisite to the application of the Abuse or Molestation Exclusion that an insured be the abuser, nor is it necessary that the abuse occur on the insured’s premises.

CONCLUSION

Under Massachusetts law, whose canons of construction dictate the outcome, the First Circuit concluded it must give the term “care” its plain and ordinary meaning.

The core argument of the defendants is that, regardless of common meaning, the word “care” in the phrase “care, custody or control” should be treated as an insurance industry term of art, across all types of coverage, meaning “physical dominion or control.” The defendants rely on certain constructions of the phrase from property and construction law, not on constructions of the Exclusions for sexual and physical abuse from liability insurance for care givers.

Defendants rely on the doctrine that “technical terms and words of art are given their technical meaning when used in a transaction within their technical field.”  The technical field at issue here is the provision of care to patients. After a review of multiple precedents the First Circuit concluded that the cases reinforce the conclusion that the plain and ordinary meaning rule applies and that the preconditions for applying the technical term of art rule were not met by the defendants finding that the term “care” is not a term of art nor is it unclear or ambiguous.

A body of law has developed around Abuse or Molestation Exclusions that is separate from the body of law regarding “owned property” exclusions upon which defendants rely. Terms in a contract may, when applied to certain factual scenarios, sometimes overlap. But those terms still have different, independent meanings. On the facts alleged by Murphy in the underlying suit, the child was clearly in the care of Field and the Carson Center and the use of the term “care, custody and control” in property insurance policies is irrelevant to the analysis of the care of a child.

The Exclusion precludes coverage on the limited occasions where the damages flow from sexual or physical abuse by another of someone in the care of the insured. As explained earlier, that is the very purpose for the Abuse or Molestation Exclusion since its creation. Nor is this a case in which application of the Exclusion defeats an objectively reasonable policyholder’s expectations of coverage. Since the Exclusion was not ambiguous, the Carter Center and Field had no reasonable expectation of coverage.

ZALMA OPINIONS

Barry Zalma, Esq., CFE

The dissenting opinion argued, unsuccessfully, about the reasonable expectations of the insured ignoring the fact that “reasonable expectations” must be interpreted as of the time of the acquisition of the policy not after a loss with hindsight. The First Circuit used an appropriate method of interpreting a policy by using the plain and ordinary meaning of the policy wording.

Ever since the first major child abuse cases made the news the Insurance Services Office wrote an exclusionary endorsement to eliminate coverage for abuse of a child whether intentional or negligent. The exposure to major judgments was just too big.

Every person insured, after a loss, believe that their “reasonable expectation” was that every claim and suit brought against the insured was intended to be covered for both defense and indemnity. The majority of the justices of the First Circuit did not fall for the “reasonable expectations” argument but interpreted the policy based solely on the clear meaning of the contract of insurance.

© 2012 – Barry Zalma

Barry Zalma, Esq., CFE, is a California attorney, insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud. Mr. Zalma serves as a consultant and expert, almost equally, for insurers and policyholders.

He founded Zalma Insurance Consultants in 2001 and serves as its senior consultant. He recently published the e-books, “Zalma on Diminution in Value Damages – 2012,”“Zalma on Insurance,” “Heads I Win, Tails You Lose — 2011,” “Zalma on Rescission in California,” “Arson for Profit,” “Insurance Fraud,” and others that are available at www.zalma.com/zalmabooks.htm.

Mr. Zalma can also be seen on World Risk and Insurance News’ web based television program “Who Got Caught” with copies available at his website at http://www.zalma.com.