Auto Club Property-Casualty Insurance v. B.T. Ex Rel. Thomas
596 F. App'x 409
6th Cir.2015Background
- On July 5, 2010, a bottle rocket ignited by another child (J.J.) struck ten-year-old B.T.’s eye at the Cambrons’ home; B.T. sued Brad and Melissa Cambrón, D.C., and J.J. in Kentucky state court for negligence and related claims.
- The Cambrons sought defense and indemnity under their homeowners policy issued by Auto Club; Auto Club brought a declaratory-judgment action in federal court seeking a ruling that it had no duty to defend or indemnify.
- Auto Club relied on four policy exclusions: (1) Criminal-Act Exclusion; (2) Intentional-Act Exclusion; (3) Negligent-Entrustment Exclusion; and (4) Negligent-Supervision Exclusion.
- The district court granted summary judgment for Auto Club based solely on the Criminal-Act Exclusion, finding possession/use of unlicensed fireworks criminal and therefore excluded.
- The Sixth Circuit reversed: it held the Criminal-Act Exclusion ambiguous under Kentucky law and applied the reasonable-expectations doctrine to find coverage could reasonably be expected; the court remanded because genuine factual disputes existed as to the other three exclusions.
Issues
| Issue | Plaintiff's Argument (B.T./insureds) | Defendant's Argument (Auto Club) | Held |
|---|---|---|---|
| Whether the Criminal-Act Exclusion unambiguously bars coverage for injury from unlicensed fireworks | Exclusion ambiguous; an ordinary insured would reasonably expect coverage for these sorts of non-core criminal conduct | Possessing/using unlicensed fireworks is criminal conduct and thus falls squarely within the exclusion | Reversed district court: exclusion ambiguous under Kentucky law; reasonable-expectations doctrine favors insureds, so exclusion does not conclusively bar coverage |
| Whether Intentional-Act Exclusion authorizes summary judgment for insurer | Insureds: factual dispute exists whether acts/omissions were intended or reasonably expected to cause injury | Insurer: granting children access and failing to supervise could be reasonably expected to cause injury, triggering exclusion | Not decided on merits; remanded — genuine factual disputes preclude summary judgment |
| Whether Negligent-Entrustment Exclusion bars coverage | Insureds: disputed whether entrustment/negligence existed and whether resulting conduct was an ‘‘occurrence’’ or criminal/intentional act excluded elsewhere | Insurer: entrustment of dangerous items to children triggers exclusion (if resulting conduct not an occurrence or is criminal/intentional) | Remanded — fact questions about negligence and foreseeability prevent summary judgment |
| Whether Negligent-Supervision Exclusion bars coverage | Insureds: disputed whether supervision was negligent and whether injury was reasonably foreseen | Insurer: failure to supervise that leads to injury triggers exclusion | Remanded — factual issues remain; summary judgment inappropriate |
Key Cases Cited
- Healthwise of Ky., Ltd. v. Anglin, 956 S.W.2d 213 (Ky. 1997) (exclusion for losses suffered while committing a crime held ambiguous; reasonable-expectations analysis invoked)
- American Family Life Assurance Co. v. Bilyeu, 921 F.2d 87 (6th Cir. 1990) (‘‘during the commission of a crime’’ exclusion ambiguous as applied to drunk-driving; insureds reasonably expect coverage)
- St. Paul Fire & Marine Ins. Co. v. Powell–Walton–Milward, Inc., 870 S.W.2d 223 (Ky. 1994) (where exclusion susceptible to two reasonable interpretations, interpretation favorable to insured adopted)
- Wolford v. Wolford, 662 S.W.2d 835 (Ky. 1984) (exclusions must be ‘‘unequivocally conspicuous, plain and clear’’ to defeat insured’s reasonable expectations)
- James Graham Brown Found., Inc. v. St. Paul Fire & Marine Ins. Co., 814 S.W.2d 273 (Ky. 1991) (applicability of insurance exclusions often a question of fact, particularly regarding state of mind)
- Spivey v. Sheeler, 514 S.W.2d 667 (Ky. Ct. App. 1974) (leaving dangerous instrument accessible to child raises jury question on negligence; analogous to entrustment/supervision issues)