Lead Opinion
H.E. Butt Grоcery Company (“HEB”) brought suit against National Union Fire Insurance Company (“National Union”) seeking a declaratory judgment to determine its rights and responsibilities under a comprehensive general liability insurance policy that National Union issued to HEB. The district court granted summary judgment in favor of National Union. We affirm.
I
This insurance coverage dispute arises from an HEB employee’s sexual abuse of two children in an HEB grocery store. While both children have been compensated for the sexual assaults, this dispute concerns how the loss will be allocated between HEB and National Union. Under the terms of its insurance policy, HEB is its own primary insurer — it must pay a self-insured retention (“SIR”) limit of $1,000,000 per “occurrence” as that term is defined in the policy. National Union is then respоnsible for the payment of damages after HEB has satisfied its SIR limit for each occurrence. The question for this Court is how many “occurrences” arise from the two sexual assaults.
The relevant facts for this appeal are not disputed. In 1994, an HEB employee sexually assaulted two different children on different days in the restroom of an HEB store. The two sexual assaults took place approximately one week apart and involved the same employee and the same store. The family of each child filed claims against HEB in unrelated suits in Texas state court. Each suit alleged that HEB was negligent in several respects, including failing to provide adequate security, failing to warn, failing to adequately supervise its employees, and in hiring and retaining employees when it knew or should have known that its employees were unable to provide a safe environment in its store. The lawsuits also alleged that HEB knew that the same employee had committed an act of “untoward sexual conduct” in the past with a different child at another store and that the sole corrective action taken was to transfer the employee to another store location. HEB eventually settled each lawsuit for $1,000,000, the amount of its SIR limit per occurrence under the insurance policy.
HEB then brought suit against National Union in state court seeking a declaratory judgment that its payment of $1,000,000 to settle the first lawsuit satisfied its SIR obligation for both suits because they arose from the same “occurrence” — i.e., its negligence in overseeing its pedophihc еmployee. National Union removed the case to federal court on diversity grounds and sought summary judgment, arguing that the two separate instances of sexual abuse constituted two occurrences under the policy. The district court agreed and granted summary judgment in favor of National Union. HEB now appeals the grant of summary judgment.
II
We review the district court’s grant of summary judgment de novo, taking the facts in the light most favorable to the non-moving party. See New York Life Ins. Co. v. Travelers Ins. Co.,
Because this case comes before us through diversity jurisdiction, we apply Texas law. See Erie R.R. Co. v. Tompkins,
If the court is uncertain- as to which of two or more meanings was intended, a provision is ambiguous. See Butler & Binion v. Hartford Lloyd’s Ins. Co.,
Ill
The outcome of this case depends on the meaning of “occurrence” under the policy. HEB argues that “occurrence” is ambiguous and that its interpretation is a reasonable construction of the term. Whether a provision is ambiguous is a question of law for the court to decide. See CBI Indus., Inc.
The policy defines “occurrence” as follows:
“Occurrence” means an event, including continuous or repeated exposure to conditions, which result[s] in Personal Injury or Property Damage during the policy period, neither expected nor intended from the standpoint of the Insured. All Personal Injury or Property Damage arising out of the continuous or repeated exposure to substantially the same general conditions shall be considered as arising out of one occurrence.
This definition of “occurrence” is virtually identical to the definition contained in standard-form commercial liability policies. See American Physicians Ins. Exch. v. Garcia,
Although no Texas court has interpreted “occurrence” in the context of a pedo-philic employee and the sexual abuse of two different children, we must make an Erie guess as to how the Texas Supreme Court would decide the issue. See Farm Credit Bank v. Guidry,
Texas courts agree that the proper focus in interpreting “occurrence” is on the events that cause the injuries and give rise to the insured’s liability, rather than on the number of injurious effects. See, e.g., Maurice Pincoffs Co. v. St. Paul Fire & Marine Ins. Co.,
HEB’s argument — that we can ignore the immediate cause of each child’s injuries and look only to the underlying negligent supervision — is similar to one rejected by the Texas courts in Burlington Insurance Co. v. Mexican American Unity Council, Inc.,
We reached a similar conclusion under Texas law in Commercial Union Insurance Co. v. Roberts,
HEB argues that the above-mentioned decisions are not relevant here because they do not concern the construction of the policy term “occurrence.” This argument misses the рoint; the principle underlying Burlington, Roberts, and Johnson indicates that when the underlying basis for liability is negligent supervision, yet the damage is caused by an intervening intentional tort, the court cannot look past the immediate cause of the damage for purposes of the insurance policy. Thus, the two independent acts of sexual abuse “caused” the two children’s injuries and gave rise to HEB’s separate and distinct liability in each case. See Johnson,
Further undercutting HEB’s argument is the fact that there are insurance policies available with a sexual misconduct endorsement that would treat both incidents of sexual abuse as one occurrence under the circumstances. In Preferred Risk Mutual Insurance Co. v. Watson,
In addition, where insurance provisions are identical across jurisdictional borders, as they are here, Texas courts strive to interpret the provisions uniformly. See CBI Indus., Inc.
HEB attempts to distinguish this Court’s conclusion in Catholic Church by arguing that our holding was based on a finding that “occurrence” was ambiguous, and that we must similarly find an ambiguity under the circumstances of this ease. In addition to the fact that Catholic Church applied Louisiana, rather than Texas law, we disagree with HEB’s conclusion that Catholic Church found “occurrence” to be ambiguous as to the molestation of different children. In Catholic Church, we werе faced with an insurance coverage dispute between the Diocese of Lafayette and its insurers which arose from two miscreant priests’ repeated molestation of 31 different children. Similar to the case at hand, the dispute centered around the meaning of “occurrence” under the policy; we considered the identical question to the one before us here — namely, whether the priests’ molestation of 31 children constituted 31 separate occurrences.
After noting the interpretation favorable to the Diocese, we nonetheless held that the priest’s molestation of each child was a separate “occurrence” under the policy (i.e., 31 occurrences). See id. We came to this conclusion even though it was not the conclusion favorable to the Diocese because Louisiana law made it clear that the damage to each child was a separate occurrence. In short, we could not have concluded that the definition of “occurrence” had an uncertain application under Louisiana law.
HEB further argues that the final sentence of the definition of “occurrence” — all injury “arising out of the continuous or repeated exposure to substantially the same conditions shall be considered as arising out of one occurrence” — indicates that two sexual assaults on two different children is only one “occurrence” when they are predicated on an employer’s negligence. HEB confuses the circumstances of its case (i.e., two independent acts of sexual abuse on two different children) with the second question we considered in Catholic Church, which was whether multiple acts of sexual abuse on the same child constituted one or multiple occurrences. See supra note 4. We concluded in Catholic Church that multiple molestations of the same child was one occurrence per policy period. See Catholic Church,
HEB’s argument “depicts a pedophilic [employee] as similar to hazardous waste: living next to a church from which oil has seeped into the ground is one ‘occurrence’ no matter how long the conditions exist.” See Lee,
Although the Seventh Circuit recently questioned our analysis in Catholic Church relating to the repeated molestation of the same child, see Lee,
At oral argument, counsel for Lloyd’s conceded that if [the priest] had abused two boys in a single policy year, that would be two “occurrences.” Presumably two priests abusing four boys would be four occurrences. From the victim’s perspective, this makes sense. Each loss is independent, and this understanding affords both the victim and the insured Diocese one full “occurrence” worth of coverage.
Lee,
This is the same type of “cause” analysis undertaken by other courts. While “a single occurrence may result in multiple injuries to multiple parties over a period of time ...[,] if one cause is interrupted and replaced by another intervening cause, the chain of causation is broken and more than one occurrence has taken place.” Home Indem. Co. v. City of Mobile,
We recognize that courts have not been uniform in their interpretation of “occurrence” under similar circumstances. The Virginia Supreme Court, without much analysis, found that “occurrence” was ambiguous with regard to the molestation of multiple children, but then concluded that the molestation of each child was a separate occurrence because that was the interpretation favorable to the insured in that case. See S.F. v. West Am. Ins. Co.,
HEB fails to recognize that the interpretation of “occurrence” favorable to the insured in this case will not necessarily be the interpretation favorable to the insured in the next case. Because HEB serves as its own primary insurer (because of its SIR limit), it wants to call the separate molestations one “occurrence” to limit the number of self-insured retentions that it must pay. See, e.g., Catholic Church,
The Virginia Supreme Court’s decision in West American Insurance Co. is a perfect case in point. The insured-employer in that
IV
We recognize that the financial burden of settling the sexual abuse lawsuits will fall heavily on HEB under the terms of its policy; “[hjowever unfortunate such a result would be from the perspective of [the insured], it is dictated by the terms of the policies [it] purchased.” Archdiocese of Portland,
HEB cannot successfully argue that the two separate acts of sexual abuse on two different children constitute only one “occurrence” under the policy. Neither Texas law nor the policy language allow this result. We reach this conclusion not by looking to the number of injuries or the number of victims,
WIENER, Circuit Judge, concurs in the judgment only.
Notes
. On appeal, National Union raises a question of fact as to whether the sexual abuse was "expected” by HEB. If the injury was “expected” from the standpoint of the insured (i.e., HEB), there is no "occurrence" under the terms of the insurance policy. See Diocese of Winona v. Interstate Fire & Cas. Co.,
. In his concurring opinion, Judge Benavides suggests that examining the "cause” of the injuries and examining the events "giving rise” to liability are mutually exclusive tests for determining the number of "occurrences.” I disagree, and contrary to Judge Benavides’s characterization of this opinion, I do not reject one in favor of the other. Indeed, both common sense and legal parlance suggest that these approaches are related aspects of the same test or principle. See Appalachian Ins. Co. v. Liberty Mutual Ins. Co.,
. We recognize that some of the opinions that find separate occurrences for the molestation of each different child discuss the issue only in dicta. Because we are interpreting Texas law, however, we are interested only in the courts’ reasoning and their analytical approach. We do not consider the cases to be binding precedent.
. In addition, we were faced with a second, more complicated question as to whether the repeated molestation of a single child over time constituted one on-going occurrence or separate occurrences for each subsequent act of molestation. As to this question, we concluded that the repeated molestation of the same child was one ongoing occurrence for each policy period in which a molestation occurred. See Catholic Church,
.A recent Texas decision discussing our opinion in Catholic Church misunderstands our holding in that case. See Preferred Risk Mut. Ins. Co. v. Watson, 937 S.W.2d 148, 150 (Tex.App. 1997, writ denied). Although the Texas court found Catholic Church to be "inapposite” because the insurance policy at issue had a sexual misconduct endorsement, see supra at 531, the court stated that we interpreted the insurance policy in
. We express no opinion as to the number of "occurrences” that would arise if an employee molested two children at the same time in the same incident. That question is not before us and remains for another day.
. National Union's Motion to Certify Questions of Law is denied as moot.
Concurrence Opinion
concurring:
Although I agree that Texas courts would focus on the events giving rise to liability to determine the number оf occurrences, I do not agree that the question under Texas law is “whether HEB’s negligent employment relationship with its pedophilic employee, rather than the two acts of sexual abuse, ‘caused’ the injuries to the two children and gave rise to HEB’s liability.”
Both Goose Creek Consol. ISD v. Continental Cas. Co.,
This circuit’s approach was similar in Pin-cojfs. The Pincojfs court viewed the occurrence as the “event” giving rise to liability from the insured’s point of view. Pincoffs involved the sale by Pincoffs of contaminated bird seed to dealers who in turn sold the seed to bird owners, whose birds then died. The liability-triggering event, from Pincoffs’s point of view, was Pineoffs’s sale of contaminated sеed rather than the original contamination of the seed (apparently by a third party) or the subsequent sales by the dealers. This'holding was not based on a conclusion that the contamination of the seed or subsequent sales did not cause the bird owner’s injuries or that the sale was an “immediate” or “intervening” cause, but rather on the idea that the sales were “the events or incidents for which Pincoffs is liable.”
Similarly, in this case, the children’s injuries resulted from HEB’s negligent hiring of the pedophilic employee and from the employee’s acts. But the events that gave rise to liability, even from HEB’s point of view, were the employee’s molestations of еach child. Notably, however, applying the “immediate cause” test to the facts in Pincoffs would produce a different result: the immediate cause of the bird owner’s injuries was not Pineoffs’s sale to the dealers but the dealers’ sale to the bird owners (or even more particularly, the feeding of the birds). Nonetheless, the liability-triggering event from Pincoffs’s point of view was its sale of the seed to the dealers. Thus, Pincoffs supports the result that Judge Garza reaches here, but in my view is inconsistent with the test he would adopt.
Moreover, the cause test set forth by the district court in Transport Insurance Co. v. Lee Way Motor Freight, Inc.,
Indeed, the Nevada Supreme Court in Washoe County v. Transcontinental Insurance Co.,
In addition to being more consistent with Pincoffs and Goose Creek, a liability-triggering event test would also be more consistent
Finally, I disagree with Judge Garza’s conclusion that this circuit in Society of the Roman Catholic Church v. Interstate Fire & Cas. Co.,
Applying the liability-triggering event test to the facts of McCaleb also leads to a finding that there was but one occurrence. Unlike Judge Garza, however, I would conclude that the panel in the Catholic Church case did in fact believe that the definition of occurrence was subject to more than one interpretation. The court noted that the meaning of the phrases “a continuous or repeated exposure to conditions” and “substantially the same general conditions” is “malleable” and that the meaning of “occurrence” “can be perplexing in application.” Id. at 1364. The court further explained:
An “occurrence” could be the church’s continuous negligent supervision of a priest,*538 the negligent supervision of a priest with respect to each child, the negligent supervision of a priest with respect to each molestation, or each time the Diocese became aware of a fact which should have led it to intervene, just to name a few possibilities.
Id. Nevertheless, the panel was bound by the Louisiana Supreme Court’s decision in Lombard v. Sewerage & Water Bd. of New Orleans,
In sum, because the liability-triggering event test is more consistent with Texas law and with the language of policy in this case and is more easily applied, I respectfully concur.
. See Dow Chem. Co. v. Associated Indem. Corp.,