HEATHER F., a Minor, etc., Plaintiff and Appellant, v. TOPA INSURANCE COMPANY, et al., Defendants and Respondents.
Heather F., by and through her mother and guardian ad litem Sharon D., appeals the summary judgment granted by the trial court establishing that defendant and respondent Topa Insurance Company (Topa) was not liable for her claim upon its day care home liability insurance policy. Heather, an infant, was being cared for at a family day care home operated by Valarie and Jeffrey B., Topa's insureds, when their 12–year–old son, Matthew, touched, rubbed, and inserted his finger into Heather's vagina, causing bruising and bleeding. Topa declined to provide a defense or to indemnify the B.'s for the claim for damages made by Heather. Topa then obtained summary judgment in this declaratory relief action on the theories that Matthew's conduct was specifically excluded from the insurance policy, as was any claim of negligent supervision by his parents, and that, in addition, Insurance Code section 533 1 precluded coverage for such a willful act. Because triable issues of fact exist as to the coverage question, we conclude the grant of summary judgment was incorrect and reverse the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
This declaratory relief action was filed after an underlying personal injury case by Heather against Valarie and Jeffrey was settled with a stipulated judgment created against Valerie and Jeffrey in the amount of $150,000. (Heather F. v. Valarie and Jeffrey B. (Super.Ct. San Diego County, 1988, No. 605834).) It was agreed execution on the judgment would be made only upon any insurance proceeds, and Valarie and Jeffrey assigned to Heather all assignable claims that they had against Topa. (Cain v. State Farm Mut. Auto. Ins. Co. (1975) 47 Cal.App.3d 783, 121 Cal.Rptr. 200.) Previously, Topa had declined to defend Valarie and Jeffrey or to provide coverage under the policy on the grounds that Matthew's acts constituted “sexual behavior” which Topa claimed was specifically excluded under the policy.2
Pursuant to the assignment of claims, Heather brought this declaratory relief action against Topa. The first amended complaint contains the allegation that on or about November 12, 1987, when Heather was nine months old and Matthew was twelve years old, while the Topa policy was in full force and effect, “Plaintiff was injured by Matthew [B.], the minor son of Jeffrey [B.] and Valarie [B.], when Matthew [B.] touched and rubbed Plaintiff's vaginal area and inserted his finger into her vagina, causing bruising and vaginal bleeding.”
Declaratory relief was sought as to the applicability of certain exclusions in the Topa policy. First, the insuring agreement provides as to coverage that Topa will pay:
“․ on behalf of the Insured all sums which the Insured shall become legally obligated to pay as a result of bodily injury, property damage or personal injury arising out of the Insured's activities as a Day Care Provider, except and excluding any and all sums which the Insured shall become obligated to pay as a result of bodily injury, property damage or personal injury arising out of or as a result of sexual behavior or sexual abuse.”3
Key exclusions in the policy provide it shall not apply:
“(n) to any claim of loss or loss arising out of licentious, lewd or sexual behavior, including but not limited to licentious, lewd or sexual behavior prohibited by the California penal code, any other criminal, penal, or administrative statute or regulation or any other provision of law.
“(o) to any claim made against the Insured that he or she is, intentionally or unintentionally, liable for hiring, employing, supervising, failing to supervise, or failing to prevent any other person from engaging in licentious, lewd or sexual behavior as defined in (n) above.”
Other exclusions which Topa contended would govern this case stated the policy would not apply:
“(b) To any loss arising out of any dishonest, fraudulent, criminal or malicious act;
“(e) to liability assumed by the Insured under any agreement other than a written agreement relating directly to the care of a day care child or to the day care provider's residential premises;
“(h) to any claim of loss or loss arising out of the willful violation of a penal statute or ordinance by or with the knowledge or consent of any insured.”4
Discovery was conducted in the matter, and Matthew was deposed. On advice of his attorney, he asserted his Fifth Amendment privilege against discussing the events of November 12, 1987, until such time as the statute of limitations had run upon any crime that may have been committed.5 His attorney recited that no immunity had been granted from any prosecutor. Matthew was asked whether before the incident he had any ideas as to what was right and wrong sexual behavior. He answered that wrong sexual behavior was “[l]ike rape, and, you know, what I did and stuff. Right now, I know I was wrong.” At the time, he felt that what he did was wrong. Hypothetically, he would consider a 12–year–old boy's touching of the vagina of an infant to be sexual behavior, both at present and before the incident happened. Matthew's attorney commented that although he would not allow Matthew to testify about the incident, he would concede in any argument or brief that Matthew's behavior was certainly sexual behavior. Matthew was also asked whether he had any duties in connection with his parents' day care business. He did not. His parents supervised him at the house on the day in question.
In form interrogatories, Heather was asked whether she or anyone acting on her behalf contended that any person involved in the incident violated any statute, and that the violation was a legal or a proximate cause of the incident. Heather's response was, “Yes; Matthew [B.]; 228(A) P.C. [Penal Code] Child Molest.”
In additional discovery, Detective Duffy, who conducted the police investigation of the incident, was deposed. Although he refused, based on Penal Code section 11167.5, to answer any questions about the specifics of this case, he explained the procedure he used in deciding whether a child knew the wrongfulness of an act when it was committed, for purposes of recommending for or against the bringing of criminal charges. (Pen.Code, § 26, subd. One.)6 Duffy's police report was identified at deposition; it and the deposition were provided to the trial court and this court under seal. In the report, Duffy gave an account of his interview with Matthew and his parents. Matthew said to both his father and to Duffy that he did not know why he had put his hand inside Heather's vaginal opening. After having some sexual terminology explained to him by his father, Matthew said he had never masturbated or ejaculated, but he had had one erection a few months ago.
Topa brought its summary judgment motion alleging it had no liability on the policy under exclusions (n) and (o), as well as the implied exclusion provided by section 533 for willful acts. Topa also contended its maximum exposure would be limited to $10,000 under the terms of Civil Code section 1714.1, restricting the liability of parents for the willful misconduct of their minor children.
In opposition, Heather relied in large part upon Detective Duffy's police report, which contained the statements summarized above. Topa filed evidentiary objections (Code Civ.Proc., § 437c, subd. (b)) on the basis of hearsay to the use of the material in the police report, and also claimed that Matthew's motive, knowledge and intentions at the time of the incident were irrelevant under J.C. Penney Casualty Insurance Co. v. M.K. (1991) 52 Cal.3d 1009, 278 Cal.Rptr. 64, 804 P.2d 689 (J.C. Penney ).
At the hearing on the motion, the trial court stated the issue before it as whether Matthew had reached the point of sexual maturity in order to be doing the things he did for sexual reasons, which would then bring his conduct within the scope of the exclusion for sexual behavior. The court distinguished the facts before it from those in J.C. Penney, where the molestor was an adult who admitted his purpose had been sexual gratification. However, Topa's motion was granted, the court ruling there were no triable issues of material fact concerning Matthew's intent at the time of the incident, as demonstrated by the contents of the police report and Matthew's statements at deposition revealing that he did the things he did to Heather for sexual reasons. Heather timely appealed.
In reviewing this summary judgment, we are required to examine the facts presented to the trial court at the summary judgment proceedings and independently determine their effect as a matter of law. (Stratton v. First Nat. Life Ins. Co. (1989) 210 Cal.App.3d 1071, 1083, 258 Cal.Rptr. 721.) “[D]oubts about the propriety of granting the motion are resolved by denying summary judgment, due to the drastic nature of the procedure. [Citation.]” (Ibid.)
“Summary judgment is an appropriate vehicle to determine coverage under an insurance policy when it appears there is no material issue of fact to be tried and the sole issue before the court is one of law. [Citations.]” (Pepper Industries, Inc. v. Home Ins. Co. (1977) 67 Cal.App.3d 1012, 1017, 134 Cal.Rptr. 904.) Because of the assignment of Valarie and Jeffrey's cause of action to Heather, we are asked to determine whether Topa's policy afforded coverage to Valarie and Jeffrey for Heather's claims of injuries resulting from Matthew's actions, or whether such liability is excluded by the policy. Heather has the same rights under the policy as did Valarie and Jeffrey and is subject to the same defenses. (Code Civ.Proc., § 368; Civ.Code, § 1459; 1 Witkin, Summary of Cal. Law (9th ed. 1988) Contracts, § 948, p. 844.)
“Under rules of construction applicable to insurance policies, any uncertainty or ambiguity must be resolved against the insurer and, if semantically possible, the policy must be construed so as to achieve its manifest object of indemnifying the insured against the losses to which the policy relates [citation]. [¶] To be effective, an exclusionary clause must be ‘conspicuous, plain and clear.’ Exclusionary clauses must be construed strictly against the insurer and liberally in favor of the insured [citations].” (Pepper Industries, Inc. v. Home Ins. Co., supra, 67 Cal.App.3d 1012, 1018, 134 Cal.Rptr. 904.)
We are dealing here not only with the express exclusionary clauses contained in the policy, but also with the provisions of section 533, which constitute “ ‘an implied exclusionary clause which by statute is to be read into all insurance policies.’ [Citations.]” (J.C. Penney, supra, 52 Cal.3d 1009, 1019, 278 Cal.Rptr. 64, 804 P.2d 689.)7 Although the Supreme Court made very clear in J.C. Penney, supra, 52 Cal.3d 1009, 1019, 278 Cal.Rptr. 64, 804 P.2d 689, that “section 533 excludes liability insurance coverage for child molestation,” the facts of the case before us present complexities that were absent in J.C. Penney. Specifically, the Supreme Court dealt in that case with a 39–year–old man who sexually molested a 5–year–old girl, who was found criminally liable for that conduct, and who sought liability insurance coverage under his own homeowner's policy. (Id. at p. 1014, 278 Cal.Rptr. 64, 804 P.2d 689.) In contrast, the alleged perpetrator of the sexual abuse in this case was a 12–year–old boy who was not criminally charged for his conduct, and whose parents sought liability coverage under their family day care insurance policy. We are therefore required to analyze the coverage question in light of the policy established in Penal Code section 26, subdivision One, providing that children under the age of 14 are presumed to be incapable of committing a crime, “in the absence of clear proof that at the time of committing the act charged against them, they knew its wrongfulness.” (Ibid.) Our coverage analysis will address the purpose of the exclusion for willful acts created by section 533 and the exclusionary terms of the policy in light of these concerns.
Our discussion begins, as it must, with the rule established by J.C. Penney. It holds that under section 533, there is no coverage as a matter of law for child sexual molestation, since “[t]he very essence of child molestation is the gratification of sexual desire. The act is the harm. There cannot be one without the other. Thus, the intent to molest is, by itself, the same as the intent to harm.” (J.C. Penney, supra, 52 Cal.3d at p. 1021, 278 Cal.Rptr. 64, 804 P.2d 689.) The public policy underlying section 533 is to discourage willful torts (Ibid.; Tomerlin v. Canadian Indemnity Co. (1964) 61 Cal.2d 638, 648, 39 Cal.Rptr. 731, 394 P.2d 571), or the commission of criminal acts (National Union Fire Ins. Co. v. Lynette C. (1991) 228 Cal.App.3d 1073, 1086, 279 Cal.Rptr. 394) (National Union ).
In J.C. Penney, supra, 52 Cal.3d 1009, 278 Cal.Rptr. 64, 804 P.2d 689, the Supreme Court declined to hold in accordance with the molested child's theory that “coverage applies unless the insured acted with a subjective intent to injure.” (Id. at p. 1024, 278 Cal.Rptr. 64, 804 P.2d 689.) Instead, the Supreme Court held an intent to molest, even absent an intent to harm, was enough to invoke the exclusionary rule of section 533. As explained by the court in Fire Ins. Exchange v. Altieri (1991) 235 Cal.App.3d 1352, 1358, 1 Cal.Rptr.2d 360, a requirement of a “ ‘ “preconceived design to inflict harm” ’ ” does not apply “ ‘when the insured seeks coverage for an intentional and wrongful act if the harm is inherent in the act itself. [Citation.] The emphasis is on the wrongfulness of the act committed by the insured, not on the insured's subjective expectation of injury.’ ” (Ibid.) “Where an act is always wrongful as a matter of law, the insured's intent or motive is irrelevant.” (Id. at p. 1359, 1 Cal.Rptr.2d 360.) And, as explained by the Supreme Court in J.C. Penney, “child molestation is always intentional, it is always wrongful, and it is always harmful.” (J.C. Penney, supra, 52 Cal.3d at p. 1025, 278 Cal.Rptr. 64, 804 P.2d 689.)
The case before us arose upon facts outside the purview of the Supreme Court's analysis in J.C. Penney: i.e., the perpetrator of the alleged abuse here is subject to the presumption of Penal Code section 26, subdivision One, regarding criminality. In J.C. Penney, the court discussed an instance in which the wrongfulness of an insured's acts was in question, and distinguished Walters v. American Ins. Co. (1960) 185 Cal.App.2d 776, 783, 8 Cal.Rptr. 665. There, an insured's actions according to his motive of self-defense were found to create an insurable claim, since actions taken in self-defense are not wrongful and thus not excludable by section 533. (Ibid.; J.C. Penney, supra, 52 Cal.3d at pp. 1023–1024, 278 Cal.Rptr. 64, 804 P.2d 689.) However, the motive of a child molester is relevant “only to the question of whether he acted wrongfully in the first instance.” (J.C. Penney, supra, 52 Cal.3d at p. 1024, 278 Cal.Rptr. 64, 804 P.2d 689.) The Supreme Court went on to say, “There is no motive that can justify child sexual molestation. The insured's professed motive is therefore beside the point for purposes of section 533.” (J.C. Penney, supra, at p. 1027, 278 Cal.Rptr. 64, 804 P.2d 689.)
This line of analysis raises a question as to whether Matthew's conduct in this matter was excludable as wrongful, in light of the presumption under Penal Code section 26, subdivision One that he, as a 12–year–old child, was presumed to be incapable of crime, absent a showing by clear proof that he knew the wrongfulness of his actions when they were committed. (In re Billie Y. (1990) 220 Cal.App.3d 127, 130–133, 269 Cal.Rptr. 212.) Such a clear showing is to be made beyond a reasonable doubt. (Ibid.) Here, no criminal charges were brought against Matthew. We are unable to construe his statements at deposition in this civil case as meeting this “beyond a reasonable doubt” standard. This record, therefore, does not support the applicability of the specific policy exclusions which are based upon criminal conduct; i.e., exclusions (b) and (h).
We shall likewise assume that the references in exclusions (n) and (o) to lewd and licentious behavior (see, e.g., Pen.Code, § 288, subd. (a)) 8 are not applicable to the facts of this case. The dispositive question, it seems to us, is the remaining scope of exclusions (n) and (o). Exclusion (n) is broadly worded to cover any claim of loss arising out of “sexual behavior,” including but not limited to such behavior that is prohibited by the Penal Code and other criminal, penal, or administrative statutes, regulations, or any other provisions of law. Similarly, exclusion (o) incorporates the same language regarding negligent supervision. Although exclusion (n) defines sexual behavior by reference to the Penal Code or other regulations, it is not stated whether conduct which is a willful tort falls under this exclusion. The same is true of exclusion (o), applicable to negligent supervision. Also, it is not specified on whose part such behavior may take place in order to invoke the exclusion. (See Arenson v. Nat. Automobile & Cas. Ins. Co. (1955) 45 Cal.2d 81, 84, 286 P.2d 816.)
Similar issues concerning non-criminal sexual behavior are also raised by section 533, since the Supreme Court has explicitly stated in J.C. Penney, supra, 52 Cal.3d at page 1025, footnote 13, 278 Cal.Rptr. 64, 804 P.2d 689, “Neither an admission by the insured nor a criminal conviction is necessary to give rise to the exclusion under section 533.” With regard to the exclusionary clauses, our task is to construe them strictly against the insurer. (National Union, supra, 228 Cal.App.3d 1073, 1077, 279 Cal.Rptr. 394.) With respect to the provisions of section 533, we do not apply this strict construction rule, since section 533 is a statute subject to the rules of statutory construction rather than contract interpretation. (J.C. Penney, supra, 52 Cal.3d at p. 1020, fn. 9, 278 Cal.Rptr. 64, 804 P.2d 689.) Our focus will be on how Matthew's presumed incapacity to commit crime affects our evaluation of the wrongfulness of his conduct for purposes of interpreting these exclusionary provisions.
As we will explain, several factors lead us to conclude that triable issues of fact remain as to Matthew's intent for purposes of interpreting both exclusion (n) and exclusion (o), with reference to their term “sexual behavior.” We concluded above we cannot equate Matthew's behavior with the criminal sexual molestation performed by an adult which formed the basis of the opinion in J.C. Penney. Even if we were to conclude that Matthew's acts were so extreme that public policy forbids insuring against them (National Union, supra, 228 Cal.App.3d at p. 1084, 279 Cal.Rptr. 394), we would still run into the rule set forth in Arenson v. Nat. Automobile & Cas. Ins. Co., supra, 45 Cal.2d 81, 84, 286 P.2d 816, that section 533 does not preclude coverage for an insured against whom a claim is made, arising out of a situation where that insured is not personally at fault, unless the policy clearly so provides. In other words, public policy does not flatly prohibit insurance coverage for negligence liability which arises even out of criminal or wrongful behavior. (National Union, supra, 228 Cal.App.3d at pp. 1085–1086, 279 Cal.Rptr. 394.) We first consider the extent to which trial is warranted on the allegations that there is coverage for Matthew's actions, and then turn to a consideration of the triable issues regarding the negligent supervision exclusionary clause.
We now proceed to review the evidence that was presented in support of and in opposition to Topa's motion for summary judgment. In its separate statement, Topa relied upon the allegations of Heather's first amended complaint, including the statement that she was injured by Matthew when he “touched and rubbed [h]er vaginal area and inserted his finger into her vagina, causing bruising and vaginal bleeding.” Such reliance by a party upon the allegations in its adversary's pleading is proper. (Joslin v. Marin Mun. Water Dist. (1967) 67 Cal.2d 132, 148, 60 Cal.Rptr. 377, 429 P.2d 889.) Topa also cites the exclusionary provisions of the policy, as attached to the complaint. To support its claims that Matthew's actions were intentional and criminal in nature and thus excluded from coverage by section 533 and the policy, Topa relied upon Matthew's statements at his deposition in response to questioning as follows:
“Q. Did you have before November 12th, 1987, an idea in your own mind as to what was right sexual behavior and what was wrong sexual behavior?
“Q. Okay. [¶] Can you give me an idea what wrong sexual behavior was in your mind at that time?
“A. Like rape, and, you know, what I did and stuff. Right now, I know I was wrong.
“Q. And you now feel that what you did was wrong, correct?
“Q. And at the time, did you feel that it was wrong?
In opposition to the summary judgment motion, as noted above, Heather relied heavily upon the police report that was prepared by Detective Duffy and attached as an exhibit to his deposition transcript. In particular, she pointed to Matthew's statements that he did not know why he did what he did, and his lack of sexual knowledge at that time. In response, Topa filed evidentiary objections to this material on the basis of hearsay and lack of relevance. (Code Civ.Proc., § 437c, subd. (b).) At the hearing on the motion, however, the evidentiary dispute was not addressed, although the court discussed this particular evidence as support for its determination to grant Topa's motion. It thus appears that no ruling on the evidentiary issues was made.
Generally, where a trial court has, through inadvertence or neglect, failed to rule on an evidentiary matter or to reserve its ruling, the rule is:
“In such a case, the party who objected must make some effort to have the court actually rule. If the point is not pressed and is forgotten, he may be deemed to have waived or abandoned it, just as if he had failed to make the objection in the first place. [Citations.]” (3 Witkin, Cal. Evidence (3d ed. 1988) Introduction of Evidence at Trial, § 2030, pp. 1992–1993, original italics; see Haskell v. Carli (1987) 195 Cal.App.3d 124, 129, 240 Cal.Rptr. 439.)
Where evidence is admitted over a party's objection, and that party thereafter offers or makes use of the same evidence, the prior objection has been waived. (Heiman v. Market St. Ry. Co. (1937) 21 Cal.App.2d 311, 315, 69 P.2d 178; 9 Witkin, Cal. Procedure (3d ed. 1985) Appeal, § 308, p. 318.) In the case before us, although Topa duly filed written evidentiary objections, its counsel remained quiet as the court thoroughly discussed the material contained in the police report, in a manner favorable to Topa, and then ruled in Topa's favor by granting the summary judgment that no coverage existed.
We are aware that some courts in reviewing summary judgments have held that Code of Civil Procedure section 437c does not require express rulings on evidentiary objections, and that a party must show prejudice if claiming that certain objections should have been sustained. (Biljac Associates v. First Interstate Bank (1990) 218 Cal.App.3d 1410, 1419, 267 Cal.Rptr. 819; Hoover Community Hotel Development Corp. v. Thomson (1985) 167 Cal.App.3d 1130, 1133, 213 Cal.Rptr. 750.) However, those cases involved proceedings in which the judges who issued the rulings expressly declined to make specific rulings on the voluminous evidentiary objections, instead representing that they would be disregarding any inadmissible or incompetent evidence. (Ibid.) This record does not reveal the court addressed itself to the evidentiary objections in any way, with the acquiescence of Topa, who saw things were going its way. Such acquiescence, however, did not preserve the evidentiary objection.
Code of Civil Procedure section 437c, subdivision (c) requires the court to make its ruling upon “all the papers submitted” and “all of the evidence set forth in the papers, except that to which objections have been made and sustained by the court․” (Italics added.) The police report is an integral part of the record on this appeal, and we will consider its contents in the same manner as did the trial court.
Applying the law to this record, we reiterate that as stated in National Union, supra, 228 Cal.App.3d 1073, 1086, 279 Cal.Rptr. 394, the “essential attribute” of the public policy represented by section 533 “is to discourage the commission of willful torts or criminal acts. [Citations.]” In a somewhat similar factual context, where a parent sought liability insurance coverage for arson committed by his minor child, the Supreme Court held in Arenson v. Nat. Automobile & Cas. Ins. Co., supra, 45 Cal.2d 81, 84, 286 P.2d 816, that an exclusionary clause designed to prevent indemnification of a person against loss from his own wrongdoing will not be construed as excluding coverage for the willful acts of another, absent a “clear expression” of such an intent. (Ibid.) Thus, the court stated:
“Section 533 ․ which codifies the general rule that an insurance policy indemnifying the insured against liability due to his own wilful wrong is void as against public policy, has no application to a situation where the plaintiff is not personally at fault.”
Topa's policy exclusions are worded in the abstract, referring to “sexual behavior” but not stating on whose part it would take place in order for the exclusion to apply. Whether this is such a “clear expression” of the insurer's intent is arguable. For example, carried to its logical extreme, such an exclusion would conceivably apply to prevent liability on a policy even where the insured allowed a suspicious stranger to mix with and molest the children under the insured's care. Would a sexually precocious 6–year–old's “sexual behavior” be excluded, if directed at another child in care? The policy does not explain.
More importantly, however, although J.C. Penney, supra, 52 Cal.3d 1009, 278 Cal.Rptr. 64, 804 P.2d 689 makes clear that “as a matter of law section 533 excludes liability insurance coverage for an insured's sexual molestation of a child” (id. at p. 1028, 278 Cal.Rptr. 64, 804 P.2d 689), the Supreme Court in that case dealt directly with an insured adult molestor and did not address the issue of insurability where a third party acts wrongfully toward a child. The court did expressly recognize that where an insured has not acted wrongfully in the first instance (e.g., where self-defense applies), no issues of exclusion from coverage under section 533 arise. (Id. at pp. 1023–1024, 278 Cal.Rptr. 64, 804 P.2d 689.)
Here, as we have outlined above, substantial questions exist as to whether 12–year–old Matthew's conduct was wrongful in a criminal sense, due to the operation of Penal Code section 26, subdivision One. Willful conduct under section 533 can also include tortious conduct; child molestation is considered a willful tort against a child, as well as a criminal act. (J.C. Penney, supra, 52 Cal.3d at p. 1021, 278 Cal.Rptr. 64, 804 P.2d 689.)10 Can we consider Matthew's conduct to be such a tort as a matter of law, within the meaning of this policy or section 533? The pleadings raise the issue of whether Heather's injuries were “an accidental loss” under the policy and were therefore covered, since Matthew did not intend to injure her. If criminal intent is presumed absent, is not tortious intent as well? These are questions for a trier of fact.11
Section 533 expressly distinguishes between willful acts, against which coverage cannot be obtained, and negligent or reckless acts, which are insurable. (J.C. Penney, supra, 52 Cal.3d at pp. 1020–1021, 278 Cal.Rptr. 64, 804 P.2d 689.) In explaining that “[t]here is no such thing as negligent or even reckless sexual molestation” (id. at p. 1021, 278 Cal.Rptr. 64, 804 P.2d 689), the Supreme Court stated:
“The very essence of child molestation is the gratification of sexual desire. The act is the harm. There cannot be one without the other.” (J.C. Penney, supra, 52 Cal.3d at p. 1021, 278 Cal.Rptr. 64, 804 P.2d 689.)
This statement, however, presumes that criminal sexual molestation is the conduct being discussed. As the Court of Appeals stated in State Farm Fire and Cas. Co. v. Nycum, supra, 943 F.2d 1100, 1105:
“As we read it, then, this passage from J.C. Penney means only that allegations of child molestation that are accompanied by proof of willfulness—whether by criminal conviction, stipulation or otherwise—are presumed to be willful as a matter of law, and hence are excluded from coverage by § 533. It follows that once the insurer shows that the touching was intentional molestation, the insurer need not make any additional showing. J.C. Penney does not, however, relieve the insurer or its initial burden of showing that the act was intentional molestation.”
For all of the above reasons, we do not believe Topa has met this burden of showing that Matthew's acts were intentional molestation, within the meaning of the exclusionary term “sexual behavior.” It is unclear under the policy whether the risks sought to be insured against were intended to include such conduct by a 12–year–old child against a younger day care child. Such a risk is not uncommon among day care providers, and could reasonably have been intended to be one of the risks insured against, because of its relatively less culpable nature than the licentious and lewd conduct expressly excluded from the policy.
Moreover, although Matthew at deposition answered “yes” to the question of whether he would have, prior to the incident, considered a 12–year–old boy's touching of an infant's vagina to be sexual behavior, his contemporaneous statements to Detective Duffy and his parents show he did not know why he did what he did. A trier of fact is best equipped to weigh the facts as stated by 12–year–old Matthew and then by 15–year–old Matthew at deposition, a veteran of counseling. Also, Matthew's own statements at either time may not be dispositive of the reasonable expectations of his non-offending parents, the insureds. (Arenson v. Nat. Automobile & Cas. Ins. Co., supra, 45 Cal.2d at p. 84, 286 P.2d 816.) Accordingly, we do not find controlling on Heather the concession by Matthew's attorney at his deposition that his behavior was sexual behavior, since we have found that term is not adequately defined by the policy. Triable issues remain as to the definition of sexual behavior under the policy, including whose sexual behavior is excluded, and whether Matthew's conduct fell within that definition.
Case authority both before and after the issuance of J.C. Penney has found an “innocent insured” to be entitled to coverage for her alleged negligence in failing to supervise or control the acts of a relative who molested children in her care. In National Union, supra, 228 Cal.App.3d 1073, 1078–1086, 279 Cal.Rptr. 394, the court construed a foster parent liability insurance policy to provide coverage to a foster mother whose husband molested a foster child. That policy included a broad basic coverage clause “consistent with coverage for a foster parent who does not engage directly in prohibited sexual behavior.” (Id. at p. 1079, 279 Cal.Rptr. 394.) The court based its conclusion chiefly upon the language of an exclusionary clause which referred to coverage to be afforded “the insured” if “an insured” committed acts leading to a claim upon the policy. (Id. at p. 1077, 279 Cal.Rptr. 394.) While finding that the insured who had done the molesting was not entitled to indemnification, the court found that public policy was not offended by allowing coverage for the negligent insured who had failed to discover the molestation or who had failed to use reasonable care to prevent it. (Id. at p. 1086, 279 Cal.Rptr. 394.) Distinguishing J.C. Penney, the court stated: “Here, we are not concerned with the molestor's inherently harmful acts, but with the molestor's wife's negligent conduct.” (Id. at p. 1084, fn. 4, 279 Cal.Rptr. 394.)
In a Court of Appeals case issued by the Ninth Circuit in 1987, American States Ins. Co. v. Borbor by Borbor (1987) 826 F.2d 888, 891–895, the court found no public policy impediment under section 533 to allowing an insured wife, who operated a preschool in partnership with her husband, to have coverage under an insurance policy for negligence in failing to discover her husband's acts of molestation of children in their care. The policy provisions allowed for coverage for damages for bodily injury and did not contain specific exclusionary clauses directed at sexual molestation. (Cf. Allstate Ins. Co. v. Gilbert (9th Cir.1988) 852 F.2d 449, 453–454 [where the court of appeals found that an insured wife was not entitled to coverage for negligence based upon her husband's molestation of a minor, under a homeowner's insurance policy; the court based its decision on an unambiguous exclusion of coverage for damages caused by the intentional wrongful act of any insured under the policy].)
State Farm Fire and Cas. Co. v. Nycum, supra, 943 F.2d 1100 is also instructive on the issue of coverage for negligence stemming out of a claim of sexual molestation. There, the insured was alleged to have touched a child in the anal or vaginal area while she was at a child care center in his home. His homeowner's insurer provided a defense under a reservation of rights. The child's personal injury case went to a jury on theories of both intentional and negligent liability, and a general verdict was rendered in state court awarding damages to the child and her parents. A declaratory relief action was then filed in federal court, and the insurer sought summary judgment on the ground that it was not required to indemnify its insured because it asserted his conduct involved “digital anal or vaginal penetration” of the child. (Id. at p. 1102.) However, reviewing the evidence after summary judgment was granted to the child's family, the court emphasized that the insurer's characterization of the record as involving such penetration of the child was not supported by the record. Instead, the Court of Appeals found that the general verdict was consistent with a determination of negligence liability only, and commented “[t]he distinction, then, between ‘molestation’ and a mere ‘touching’ is an important one, and indeed, in this case, it is dispositive.” (Id. at p. 1103.) Interpreting J.C. Penney, supra, the court emphasized that section 533 does not preclude coverage for negligent acts, and that in order to exclude coverage under section 533, an insurer must show that intentional molestation took place. The record did not contain any such showing, and the judgment for the child's family was affirmed. The court interpreted the holding of J.C. Penney as showing that the behavior involved in that case, criminal child molestation, was always considered intentional, wrongful, and harmful, but that negligent touching might not fall under that rule. (State Farm Fire and Cas. Co. v. Nycum, supra, 943 F.2d at p. 1106.)
Although Penal Code section 288, subdivision (a), and the authority of J.C. Penney make it clear that there can be no lawful sexual conduct with a minor, Penal Code section 26, subdivision One nevertheless can exculpate a minor under the age of 14 from criminal liability for such conduct, absent a showing beyond a reasonable doubt that he or she knew the wrongfulness of the conduct when it occurred. (In re Billie Y., supra, 220 Cal.App.3d 127, 269 Cal.Rptr. 212.) For purposes of interpreting this insurance policy, we believe this apparent contradiction leads to a construction of these exclusionary clauses narrowly against the insurer. Triable issues of fact remain as to the definition of sexual behavior under this policy. The Supreme Court in J.C. Penney strongly emphasized the narrowness of the question before it, i.e., wrongdoing such as the sexual molestation of a child. As the trial court here recognized, where another child performs those acts, it is possible that the strict rule of J.C. Penney must be adapted to fit those facts.
Thus, we conclude that Topa's showing in its summary judgment motion that Matthew's conduct was “intentional molestation” (State Farm Fire and Cas. Co. v. Nycum, supra, 943 F.2d at p. 1105), was incomplete,based on Penal Code section 26, subdivision One. Moreover, Matthew's answers to deposition questions (i.e., that he knew his conduct was wrong when he did it) should not be equated with a voluntary admission of engaging in sexual behavior within the meaning of these exclusionary clauses. If Matthew's behavior is determined at trial to be something less than intentional criminal sexual molestation, the public policy supporting the applicability of the section 533 implied exclusionary clause would not be served by excluding liability for negligent supervision of Matthew by his parents. (Arenson v. Nat. Automobile & Cas. Ins. Co., supra, 45 Cal.2d 81, 84, 286 P.2d 816.) These matters remain for trial.
We are required to address two further claims: the applicability of exclusion (e), “to liability assumed by the Insured under any agreement other than a written agreement relating directly to the care of a day care child or to the day care provider's residential premises”, as well as the applicability of Civil Code section 1714.1, subdivision (a) to these facts. First, regarding exclusion (e) and the settlement contract between Heather and Valarie and Jeffrey, Heather's position at the summary judgment proceedings was that such settlement contract did not create a new liability, but instead settled an existing claim. She argued:
“[I]nsured's liability was not assumed under a contract with the Plaintiff. The settlement agreement merely provides for the amount of compensation ․ Plaintiff is to receive to settle the Plaintiff's claim against [Valarie and Jeffrey B.]. The intent of exclusions such as exclusion ‘(e)’ of the TOPA Policy is to preclude the insurer from liability where it's [sic ] insured agrees to hold harmless or indemnify a third party [citation]. This was not an agreement whereby [Valarie and Jeffrey B.] agreed to indemnify the Plaintiff or hold her harmless.”
The settlement agreement in this case was reached pursuant to the procedure approved in Cain v. State Farm Mut. Auto. Ins. Co., supra, 47 Cal.App.3d 783, 794–796, 121 Cal.Rptr. 200. It was arrived at after the operative facts occurred which gave rise to the original liability. Accordingly, exclusion (e) does not as a matter of law apply to the settlement agreement in this case.
One further issue requires discussion. Topa argues its maximum exposure, if any, is limited to $10,000 under Civil Code section 1714.1, subdivision (a).12 A parental responsibility statute such as Civil Code section 1714.1 must be strictly construed because it is in derogation of the common law. (Cynthia M. v. Rodney E. (1991) 228 Cal.App.3d 1040, 1046, 279 Cal.Rptr. 94.) By our reversal, we return the issue of whether Matthew engaged in willful misconduct to the trial court. We therefore need only note here that if parental liability for such misconduct is found, it will be limited to $10,000, but according to the express terms of the statute, such liability “is in addition to any liability now imposed by law.” (Civ.Code, § 1714.1, subd. (a).) Thus, if negligent supervision is found on the part of Matthew's parents, any damages attributable to that conduct would be in addition to any damages award directly attributable to Matthew's willful misconduct, if any. (See 6 Witkin, Summary of Cal. Law (9th ed. 1988) Torts, § 1003, pp. 393–396.)
The judgment is reversed.
1. All statutory references are to the Insurance Code unless otherwise specified.
2. Valarie and Jeffrey's homeowner's insurance carrier, Allstate Insurance Company, was also sued in the underlying action and also declined to provide a defense or coverage. It prevailed in the underlying action and is not a party to this appeal.
3. The term “bodily injury” as found in the insuring agreement is defined as that “․ which occurs during the policy period and [is] caused by an occurrence.” “Occurrence” is then defined as “an accident ․ which results in bodily injury ․ neither expected nor intended from the standpoint of the Insured.”
4. Topa's assertion of exclusion (e) was directed to the settlement agreement between Heather and Matthew's parents.
5. At his deposition, a letter from his parents to their insurer was referenced, explaining the circumstances of the incident. After his mother discovered blood on Heather's diaper, Matthew admitted that “he had put his hand into Heathers [sic ] diaper, while doing homework in his room.” Although there was a police investigation, no reason for criminal charges was found. Under an agreement with child protective services, Valarie and Jeffrey agreed to get counseling for Matthew. Their day care licensing was not affected after an investigation.
6. Penal Code section 26, subdivision One, provides that children under the age of 14 are presumed to be incapable of committing a crime, “in the absence of clear proof that at the time of committing the act charged against them, they knew its wrongfulness.”
7. Section 533 provides in full: “An insurer is not liable for a loss caused by the wilful act of the insured; but he is not exonerated by the negligence of the insured, or of the insured's agents or others.”
8. Penal Code section 288, subdivision (a), provides in relevant part: “Any person who shall willfully and lewdly commit any lewd or lascivious act ․ upon or with the body, or any part or member thereof, of a child under the age of 14 years, with the intent of arousing, appealing to, or gratifying the lust or passions or sexual desires of that person or of the child, shall be guilty of a felony․”
9. Topa also relies on Heather's responses to form interrogatories, where she contended that Matthew had violated Penal Code section 288, subdivision (a), child molest. In her opposition to the summary judgment motion, Heather disputes that any admission had been made on Matthew's behalf that he violated Penal Code section 288, subdivision (a), or that he had been convicted of doing so. We do not find this discovery response that Matthew was guilty of violating Penal Code section 288, subdivision (a) to be dispositive of the issues in this appeal, in light of the more probative lack of criminal charges against him shown by this record.
10. Pleading of such a willful tort requires allegations of the following: “(1) The wrongful act, either an attempt to commit physical injury (assault), or a harmful contact (battery). (2) The resulting harm, such as emotional distress or physical injury. [Citations.]” (5 Witkin, Cal. Procedure (3d ed. 1985) Pleading, § 715, pp. 163–164.)
11. The Ninth Circuit Court of Appeals stated in dicta in State Farm Fire and Cas. Co. v. Nycum (1991) 943 F.2d 1100, 1103, “While we are inclined to agree that a finding of penetration would necessarily imply a finding of intent to molest,” the court found the evidence did not support such a finding in that case. This issue is not disputed here. However, the court in Nycum also noted that there was an important distinction between “molestation” and a mere “touching.” Given the age difference between 12–year–old Matthew and 9–month–old Heather, we believe on this record that a fact finder should evaluate whether Matthew should be considered to be the equivalent of an adult or a person who understood the criminal wrongfulness of his act.
12. Civil Code section 1714.1, subdivision (a) reads as follows: “Any act of willful misconduct of a minor which results in injury or death to another person or in any injury to the property of another shall be imputed to the parent or guardian having custody and control of the minor for all purposes of civil damages, and the parent or guardian having custody and control shall be jointly and severally liable with the minor for any damages resulting from the willful misconduct. [¶] The joint and several liability of the parent or guardian having custody and control of a minor under this subdivision shall not exceed ten thousand dollars ($10,000) for each tort of the minor, and in the case of injury to a person, imputed liability shall be further limited to medical, dental and hospital expenses incurred by the injured person, not to exceed ten thousand dollars ($10,000). The liability imposed by this section is in addition to any liability now imposed by law.” (Italics added.)
HUFFMAN, Associate Justice.
TODD, Acting P.J., and NARES, J., concur.