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AIG Property Casualty Co. v. Green

United States District Court, D. Massachusetts

November 8, 2016



          MARK G. MASTROIANNI United States District Judge.

         I. Introduction

         In this action, AIG Property Casualty Company ("AIG") seeks a declaration that it has no duty to defend or indemnify William H. Cosby, Jr. under two insurance policies in relation to three defamation cases which are or were also pending in this court: Green v. Cosby, Case No. 14-cv-30211- MGM, Ruehli v. Cosby, Case No. 15-cv-13796-MGM, and McKee v. Cosby, Case No. 15-cv-30221- MGM.[1] AIG contends the insurance policies provide no coverage as to the defamation cases because of exclusions for expenses "arising out of sexual misconduct. After AIG amended its complaint, Cosby filed a motion to dismiss or, in the alternative, for judgment on the pleadings, asserting the sexual misconduct exclusions do not unambiguously apply to the defamation cases so as to bar coverage.[2] AIG, for its part, has filed a motion for summary judgment, arguing it is entitled to affirmative relief as a matter of law based on the sexual misconduct exclusions. For the following reasons, the court will grant Cosby's motion in part and deny AIG's motion.

         II. Background and Procedural History

         The following facts come from AIG's amended complaint, attachments thereto, and official public records in the form of judicial documents. See Grajales v. Puerto Rico Ports A.uth., 682 F.3d 40, 44 (1st Cir. 2012).[3] AIG issued Massachusetts Homeowners Policy No. PCG 006004261 ("Massachusetts Policy") and Personal Excess Liability Policy No. PCG 006235889 ("Excess Policy") to Cosby. (Dkt. No. 95, Am. Compl. ¶¶ 16, 20.) Both policies were in effect from January 1, 2014 to January 1, 2015. (Id. ¶¶ 17, 21.) The policies require AIG to "pay damages [Cosby] is legally obligated to pay for personal injury or property damage caused by an occurrence covered by this policy anywhere in the world." (Id. ¶¶ 19, 23.)[4] The policies define "personal injury" as including "[b]odily injury"; "[s]hock, emotional distress, mental injury"; [i]nvasion of privacy"; and "[d]efamation, libel, or slander." (Id., Exs. A and B, at pt. I.) The Massachusetts Policy also requires AIG to "pay the costs to defend [Cosby] against any suit seeking covered damages for personal injury or property damage, even if the suit is false, fraudulent, or groundless." (Id. ¶ 19.) And the Excess Policy states AIG "will defend [Cosby] against any suit seeking damages covered by Excess Liability . . . under this policy and where . . . [f]he underlying insurance has been exhausted by payment of claims [or] [n]o underlying insurance applies. . . even if the allegations of the suit are groundless, false, or fraudulent." (Id., Ex. B., at pt. IV.A.)

         The Massachusetts Policy contains an exclusion which states that it "does not provide coverage for liability, defense costs or any other cost or expense for . . . [p]ersonal injury arising out of any actual, alleged, or threatened by any person: (a) sexual molestation, misconduct or harassment;... or (c) sexual, physical or mental abuse." (Id. ¶ 19.) Similarly, the Excess Policy contains an exclusion stating it "does not provide coverage for liability, defense costs or any other cost or expense . . . [a]rising out of any actual, alleged or threatened: a. Sexual misconduct, molestation or harassment... or c. Sexual, physical or mental abuse." (Id. ¶ IV, Ex. B, at pt. V.B.3.) The court will refer to these two exclusions as the "sexual misconduct exclusions."

         On December 10, 2014, Tamara Green filed a complaint against Cosby for defamation. (Am. Compl. ¶ 26; Green v. Cosby, Case No. 14-cv-30211-MGM, Dkt. No. 1.) An amended complaint, which added Therese Serignese and Linda Traitz as plaintiffs along with Green, was filed on January 5, 2015, and a second amended complaint was filed on April 21, 2015. (Am. Compl. ¶ 27; Green v. Cosby, Case No. 14-cv-30211-MGM, Dkt. Nos. 13, 48.) On June 26, 2015, AIG commenced this declaratory judgment action directed at the Green case and the allegations contained in the second amended complaint therein. (Dkt. No. 1, Compl.)

         On November 9, 2015, Kristina Ruehli filed a complaint against Cosby for defamation. (Am. Compl. ¶ 92, Ex. D.)[5] On November 13, 2015, a third amended complaint was filed in the Green case, adding as plaintiffs Louisa Moritz, Barbara Bowman, Joan Tarshis, and Angela Leslie, and adding claims for invasion of privacy (false light) and intentional infliction of emotional distress on behalf of all the plaintiffs. (Am. Compl. ¶ 28, Ex. C.) And on December 21, 2015, Katherine Mae McKee filed a complaint against Cosby for defamation. (Am. Compl. ¶ 100, Ex. E.)[6] The underlying plaintiffs in the Green, Ruehli, and McKee cases alleged that many years ago Cosby sexually assaulted them and they subsequently disclosed the assaults to the public. The underlying plaintiffs further allege that in 2014[7] Cosby, directly or through spokespeople, falsely and publicly denied the accusations, thereby defaming them and, as to the Green plaintiffs, placing them in a false light and intentionally inflicting emotional distress. (Am. Compl. ¶¶ 30-105.) AIG filed its amended complaint in this action, seeking declaratory relief as to its duty to defend and indemnify Cosby regarding the three defamation cases, on March 31, 2016.

         Meanwhile, on June 26, 2015 (the same day AIG commenced this action), AIG brought a separate declaratory judgment action in the United States District Court for the Central District of California, AIG Prop. Cas. Co. v. Cosby, Case No. CV 15-04842-BRO (RAOx) ("California Action"), regarding its insurance obligations as to a similar defamation case filed against Cosby in California state court, Dickinson v. Cosby, case no. BC58090. The California Action involves the same Massachusetts Policy and Excess Policy as in this case, as well as a California Homeowners Policy. (Dkt. No. 19, Ex. C.) Moreover, the plaintiff in Dickinson also claimed that Cosby sexually assaulted her years ago and that Cosby's public denial of that accusation renders him liable for defamation, false light, and intentional infliction of emotional distress. (Dkt. No. Ill. Ex. A.) AIG claimed in the California Action, as it does here, that the sexual misconduct exclusions preclude coverage because the allegedly defamatory statements which form the basis of the claims in Dickinson "aris[e] out of sexual misconduct. (Dkt. No. 19, Ex. C.)

         The court granted Cosby's motion to dismiss in the California Action, holding AIG has a duty to defend Cosby in Dickinson because the sexual misconduct exclusions do not unambiguously bar coverage. AIG Prop. Cas. Co. v. Cosby, 2015 WL 9700994 (CD. Cal. Nov. 13, 2015). Notably, the court applied California law to the coverage dispute. It reasoned as follows:

Here, the policies arose in both California and Massachusetts. However, where the applicable rules of law of the potentially concerned jurisdictions do not materially differ, the Court may proceed to apply the law of the forum. . . . The party arguing that foreign law governs has the burden to identify the applicable law.... [AIG] asserts that Massachusetts and California law ought to govern this case, but represents that the laws of those states do not conflict. Therefore, the Court will apply California law, the law of the forum here.

Id. at *3 n.2 (internal citations and quotation marks omitted). The court explained that under California law, "both [AIG's] broad interpretation and [Cosby's] narrow interpretation of 'arising out of are reasonable." Id. at *5. Under Cosby's narrow interpretation, which the court found supported by a line of California cases, "the injuries Dickinson allegedly suffered originate from [Cosby's] statements, which have only an attenuated factual connection with sexual misconduct. Sexual misconduct may be the subject matter of [Cosby's] statements, but [Cosby's] statements, not his alleged sexual misconduct directly caused the injury for which Dickinson now seeks relief." Id. at *6. The court also noted that a separate sexual misconduct exclusion in the Excess Policy applicable to "Limited Charitable Board Directors and Trustees Liability" bars coverage for damage "arising out of, or in any way involving, directly or indirectly, any alleged sexual misconduct." Id. at *5 (emphasis added). Accordingly, the court explained, if AIG "wished to exclude a claim 'in anyway involving' sexual misconduct, " which "language is unquestionably broader" than the exclusions at issue, "it could have included such language, " and AIG's "decision not to do so suggests that a narrow interpretation" is reasonable. Id. Because the "arising out of language in the sexual misconduct exclusions is "reasonably susceptible to [Cosby's] narrow interpretation, and thus, ambiguous, " and "[a]ny ambiguous terms are interpreted in favor of finding coverage, " the court concluded AIG had a duty to defend Cosby in the Dickinson case. Id. at *4, 5-6.

         III. Standard of Review

         "When, as now, a motion for judgment on the pleadings under Federal Rule of Civil Procedure 12(c) is employed as a vehicle to test the plausibility of the complaint, it must be evaluated as if it were a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6)." Grajales, 682 F.3d at 44. "[T]o survive a Rule 12(b)(6) motion (and, by extension, a Rule 12(c) motion), a complaint must contain factual allegations that 'raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true . . . .'" Perez-Acevedo v. Rivero-Cubano, 520 F.3d 26, 29 (1st Cir. 2008) (quoting Bell Atlantic v. Twombly, 550 U.S. 544, 555 (2007)). That said, the pertinent facts are not disputed, and under both California and Massachusetts law (the substantive law the parties assert governs this dispute), interpretation of an insurance policy is a question of law for the court. See Encompass Ins. Co. v. Coast Nat'l Ins. Co., 764 F.3d 981, 984 (9th Cir. 2014); Certain Interested Underwriters at Lloyd's, London v. Stolberg, 680 F.3d 61, 65 (1st Cir. 2012).

         IV. Discussion

         Cosby argues this action should be dismissed because the sexual misconduct exclusions do not apply to the underlying claims in the defamation cases or, at least, are ambiguous, in which case the policy language must be construed against the drafter (AIG) and in favor of coverage. AIG opposes Cosby's motion to dismiss, and seeks summary judgment on its own behalf, on the ground that the sexual misconduct exclusions clearly bar coverage.

         As a preliminary matter, the parties disagree as to which law should apply. Cosby asserts California law governs because judicial estoppel bars AIG from asserting Massachusetts and California law are in conflict since, in the California Action, the court relied on AIG's representation to the contrary. Cosby also argues application of California law is appropriate under applicable choice-of-law principles. AIG counters that judicial estoppel does not apply because the conditions for invoking the doctrine are not met. Moreover, AIG argues Massachusetts law governs this dispute because Cosby's primary residence (covered by the Massachusetts Policy) is in Massachusetts and the underlying defamation cases are pending here as well.

         A. C ...

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