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USAA Texas Lloyd's Co. v. Doe

Court of Appeals of Texas, Fourth District, San Antonio

June 28, 2017

USAA TEXAS LLOYD'S COMPANY, Appellant
v.
John DOE and Jane Doe, Individually and as Next Friends of XXX, a Minor, Appellees

         From the County Court at Law No. 5, Bexar County, Texas Trial Court No. 392757 Honorable Walden Shelton, Judge Presiding

          Sitting: Karen Angelini, Justice Marialyn Barnard, Justice Patricia O. Alvarez, Justice

          MEMORANDUM OPINION

          Marialyn Barnard, Justice

         This is an appeal from a summary judgment granted in favor of appellees, John and Jane Doe (collectively, "the Does"), on their request for declaratory relief as well as their breach of contract and Texas Prompt Payment of Claims Act claims against appellant, USAA Texas Lloyd's Company ("USAA"). On appeal, USAA argues the trial court erred in declaring it owed the Does a duty to defend because the Does' renters' insurance policy excludes coverage and the trial court's ruling violates public policy. We reverse the judgment of the trial court and render judgment in favor of USAA.

          Background

         USAA issued a renters' insurance policy to the Does. The Does and their thirteen-year-old son, XXX, were named insureds under the policy. As a result of an incident involving their son, the Does submitted a claim to USAA seeking a defense under the policy. The basis of their claim arose out of an allegation that XXX sexually assaulted a five-year-old girl in front of her twin brother. After reviewing the claim, USAA denied coverage, stating the claim did not meet the definition of "an occurrence" under the policy and, alternatively, the claim was barred under the intentional act exclusion provision of the policy.

         In January of 2014, the parents of the twins filed a lawsuit against the Does and XXX, alleging XXX had sexually assaulted their daughter in front of their son. Specifically, the petition alleged that while XXX was alone with the twins, he suggested "playing doctor" with the twins and explained that "they were going to be delivering babies." According to the petition, XXX inserted his finger as well as a plastic toy thermometer from a toy doctor's kit inside the girl's vagina in front of her twin brother. With regard to XXX, the petition alleged causes of action for negligence and assault, stating XXX breached a duty not to harm others by acting intentionally, knowingly, and recklessly when he made contact with the girl's body and such contact caused bodily injury to the girl. With regard to the Does, the petition alleged the Does were negligent in failing to supervise XXX and failing to warn the parents of the twins that XXX had a history of sexual aggression toward other children.

         After being served with the lawsuit, the Does submitted another claim to USAA, demanding it provide them with a defense to the lawsuit pursuant to the terms of their renters' insurance policy. USAA again denied coverage, reiterating the claim did not meet the definition of "an occurrence" under the policy and, alternatively, the claim was barred under the intentional act exclusion provision of the policy. The relevant portions of the renters' insurance policy read as follows:

LIABILITY
If a claim is made or a suit is brought against an insured for damages because of bodily injury or property damage caused by an occurrence to which this coverage applies, we will:
2. Provide a defense at our expense by counsel of our choice, even if the suit is groundless, false, or fraudulent.
Occurrence means an accident, including continuous or repeated exposure to substantially the same general harmful conditions, which results, during the policy period, in:
a. Bodily injury; or b. Property ...

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