State Farm Fire and Casualty Company v. Hansen

Background

State Farm sought a declaratory judgment concerning its obligations under a homeowners’ policy and a personal liability umbrella policy issued to Jeffrey and Carol Hansen. Jeffrey had asked State Farm to defend him and provide indemnification in an Eastern District of Missouri lawsuit brought by Katherine and Jason Anderson. The underlying lawsuit alleged that Jeffrey drugged and raped Katherine during an Aflac business meeting in St. Louis, Missouri. The Andersons asserted claims including battery, assault, false imprisonment, tortious interference, and loss of consortium. Jeffrey denied drugging or raping Katherine and maintained that the sexual encounter was consensual.

State Farm had been defending Jeffrey under a reservation of rights while paying the legal fees of his chosen counsel. In this case, State Farm asked for judgment on the pleadings under Federal Rule of Civil Procedure 12(c), which allows judgment when the pleadings show that no material factual issue remains and a party is entitled to judgment as a matter of law. The Hansens opposed the motion and asked the court to certify a legal question to the Minnesota Supreme Court because they argued Minnesota law was unsettled.

Insurance Coverage Analysis

The parties agreed that Minnesota law governed the policies. Under that law, an insurer’s duty to defend is broader than its duty to indemnify. A duty to defend generally arises when any part of a claim is arguably covered. But when the facts alleged cannot create a legal basis for indemnification, the insurer also has no duty to defend.

The court concluded that the underlying complaint alleged only intentional conduct: the drugging and rape of Katherine. Both policies generally covered bodily injury or loss caused by an accident. Minnesota law defines an accident as an unexpected, unforeseen, or undesigned event, and Minnesota decisions generally hold that sexual assault is not an accident. Jeffrey’s denial of the assault and his contention that the encounter was consensual did not create a potentially covered claim. As the court explained, if Katherine prevailed, the alleged intentional conduct would not be covered; if Jeffrey prevailed, there would be no tort liability requiring coverage.

The court also held that the policies’ intentional-act exclusions barred coverage. Those provisions excluded bodily injury that was intended, expected, willful, or malicious. Applying Minnesota law, the court stated that intent to harm in cases involving nonconsensual sexual conduct may be inferred as a matter of law for insurance-coverage purposes. The court further held that related claims, including false imprisonment, tortious interference, and loss of consortium, were excluded because they arose from and were inseparably connected to the alleged intentional sexual assault.

The court separately determined that the policies’ sexual-act exclusions barred coverage. Those provisions applied to bodily injury or loss arising from alleged or actual sexual harassment, sexual molestation, or sexual misconduct. Because the exclusions expressly covered alleged conduct, Jeffrey’s denial did not prevent their application. The court concluded that the allegations fell within the ordinary meaning of the excluded terms.

Certification Request and Disposition

The court denied the Hansens’ request to certify a question to the Minnesota Supreme Court. It found that several Minnesota decisions addressed whether an insured’s denial of sexual assault affects an insurer’s duty to defend, so the issue was sufficiently settled for the federal court to decide without certification.

The court granted State Farm’s motion for judgment on the pleadings. It declared that State Farm had no duty to defend or indemnify Jeffrey Hansen for the claims asserted in the underlying Missouri case. The court denied the Hansens’ motion for certification and ordered that judgment be entered.