Opinion
NO. 2017-CA-001875-MR NO. 2017-CA-001876-MR
01-03-2020
JULIE G. THOMAS AND DONALD F. THOMAS, INDIVIDUALLY AND AS NEXT FRIENDS FOR S.T., A MINOR APPELLANTS v. BESSIE PERKINS; JERRY PERKINS; AND STATE FARM FIRE AND CASUALTY COMPANY APPELLEES AND ELIZABETH RENNER AND JEFFERY RENNER, AS NEXT FRIENDS AND PARENTS OF C.R., A MINOR APPELLANTS v. BESSIE PERKINS; JERRY PERKINS; AND STATE FARM FIRE AND CASUALTY COMPANY APPELLEES
BRIEF FOR APPELLANTS: Zachary L. Taylor Louisville, Kentucky ORAL ARGUMENT FOR APPELLANTS: Michael F. Eubanks Richmond, Kentucky Co-Counsel Zachary L. Taylor Louisville, Kentucky BRIEF AND ORAL ARGUMENT FOR APPELLEE STATE FARM FIRE AND CASUALTY COMPANY: David T. Klapheke Louisville, Kentucky
TO BE PUBLISHED APPEAL FROM MADISON CIRCUIT COURT
HONORABLE JEAN CHENAULT LOGUE, JUDGE
ACTION NO. 16-CI-00169 APPEAL FROM MADISON CIRCUIT COURT
HONORABLE JEAN CHENAULT LOGUE, JUDGE
ACTION NO. 16-CI-00133 OPINION
AFFIRMING
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BEFORE: COMBS, JONES AND L. THOMPSON, JUDGES. THOMPSON, L., JUDGE: In this consolidated appeal, Julie Thomas, Donald Thomas, Elizabeth Renner, and Jeffery Renner ("Appellants") appeal from declaratory judgments of the Madison Circuit Court applying insurance policy exclusions in favor of State Farm Fire & Casualty Company ("Appellee"). Appellants argue that the circuit court erred in concluding that these exclusions shield Appellee from liability for the alleged negligence of Jerry Perkins. We find no error, and AFFIRM the judgments on appeal.
Facts and Procedural History
In approximately 2000, Bessie Perkins began working in the child care business. She was employed at ABC Daycare as a teacher of two- and three-year-old children until she was terminated in 2015. After she was unable to find other child care employment, Mrs. Perkins began providing child care at the residence she shared with her husband, Jerry Perkins.
Jerry Perkins knew Donald Thomas from their place of employment. When Mr. Thomas' wife, Julie Thomas, was pregnant, Jerry and Donald discussed the possibility of Mrs. Perkins providing child care for the Thomas baby at the Perkins' residence. The Thomases' daughter, S.T., was born in February 2015. About five months after the birth, Mrs. Thomas returned to work and Mrs. Perkins began caring for S.T. during the day at the Perkins' residence.
These proceedings address the physical abuse of minor children; therefore, we will only use the initials of the children.
Jeffery Renner was a friend of Mr. Thomas and asked Mrs. Perkins if she would be willing to provide child care for the Renners' baby boy, C.R. The baby's mother, Elizabeth Renner, spoke with Mrs. Perkins, who agreed to provide the child care. The Thomases and the Renners each paid Mrs. Perkins $80 per week to watch their children. The parents provided baby formula, diapers and wipes, while Mrs. Perkins provided toys, a swing and a walker. The Thomases and the Renners would later testify that they expected their children to receive the level of care normally provided by a daycare, including feeding, attention, playtime, and the changing of diapers.
On November 12, 2015, baby C.R. began exhibiting symptoms of illness including lethargy and fever. Mrs. Renner took C.R. to the pediatrician the following day. C.R. presented with additional symptoms including a "twitching" arm and a bulging soft spot on his head. Based on these symptoms, the pediatrician recommended that C.R. be taken immediately to University of Kentucky Hospital. At the hospital, C.R. began experiencing increasingly worsening seizures. MRI and CT scans, in addition to a spinal tap and other investigative measures, led to the diagnosis of "shaken baby syndrome," i.e., neurological trauma associated with physical abuse. Physicians told the Renners that C.R. showed signs of both old and new acute injuries.
A police detective interviewed Mrs. Perkins on November 15, 2015. Mrs. Perkins initially stated that she accidentally dropped C.R., then admitted that she had shaken him on at least three occasions because he would not stop crying.
Based on the police investigation of Mrs. Perkins, a social worker and a detective contacted the Thomases and asked them to bring S.T. to the hospital to determine if S.T. was also injured. S.T. was examined on November 17, 2015. The following day, the Thomases were informed that S.T. had two spiral fractures of the left tibia which were about four and nine weeks old respectively. Physicians determined that the fractures were likely a result of a twisting force applied to the leg.
A detective interviewed Mrs. Perkins on November 24, 2015. Mrs. Perkins told the detective that she grabbed S.T.'s leg on two occasions to prevent S.T. from falling out of a bouncy chair.
Thereafter, the Madison County grand jury returned indictments charging Mrs. Perkins with various criminal offenses related to the injuries of C.R. and S.T. On March 2, 2017, Mrs. Perkins entered a plea of guilty to one count of assault in the first degree as to C.R., and two counts of criminal abuse in the first degree related to the charges involving S.T. Final judgment was rendered on April 21, 2017.
Kentucky Revised Statutes (KRS) 508.010.
Approximately five months after initially learning of S.T.'s injury, the Thomases, individually and as next friends for S.T., filed a civil action in Madison Circuit Court against Mr. and Mrs. Perkins. The Thomases asserted various claims of negligence and gross negligence against the Perkinses arising from a breached duty to provide a reasonably safe premises to S.T. About the same time, the Renners filed a separate action in Madison Circuit Court against the Perkinses alleging negligence, gross negligence, premises liability, and intentional or negligent infliction of emotional distress, and assault and battery as against Mrs. Perkins.
At all relevant times, the Perkinses were provided with personal liability coverage under a homeowners' insurance policy issued by Appellee State Farm. State Farm defended the Perkinses in each proceeding under a reservation of rights. On May 10, 2016, State Farm was granted leave to file intervening complaints seeking a declaratory judgment in each action. As a basis for the intervening complaints, State Farm argued that its policy of insurance excluded coverage for intentional acts and for child care services. The Thomases and Renners answered and counterclaimed asserting statutory and common law bad faith under the Consumer Protection Act, and they sought punitive damages, interest and attorney fees.
State Farm moved for a declaratory judgment in each proceeding, arguing that its policies of insurance did not provide liability coverage to the Perkinses based on the intentional acts and child care services exclusions. It also sought summary judgment on the bad faith claims as a matter of law. On October 11, 2017, the Madison Circuit Court rendered findings of fact and conclusions of law in each proceeding, holding in relevant part that State Farm had no duty to defend or indemnify the Perkinses under the liability coverage of its homeowners' policy because such coverage was precluded under the child care exclusion. It also determined that liability coverage for the claims against Mrs. Perkins was precluded under the intentional acts exclusion. Finally, the court opined that State Farm was entitled to summary judgment dismissing the bad faith claims based on the absence of a contractual obligation to pay and the failure to present any evidence supporting the elements of a bad faith claim. This consolidated appeal followed.
The appeals were consolidated by an order entered on June 12, 2018.
Arguments and Analysis
Appellants now argue that the circuit court erred in failing to hold as a matter of law that State Farm owes coverage to its insured, Jerry Perkins, arising from Mr. Perkins' negligence in causing injuries to the children. They contend that Mr. Perkins negligently recommended Mrs. Perkins to the Renners and Thomases, misrepresented Mrs. Perkins' work history during the vetting process, failed to report the child abuse to either the parents or to state authorities, permitted and perhaps concealed the abuse, negligently supervised Mrs. Perkins, and failed to create a safe environment for the children in his home. Subsumed in their primary argument are the contentions that: 1) the "intentional acts" and "child care services" exclusions do not apply to Mr. Perkins because he was not the child care provider; 2) a jury, rather than the circuit court, should decide whether the exclusions are applicable; 3) the "child care services" exclusion is void as against public policy; and 4) coverage for Mr. Perkins' negligence is excepted from the exclusion for child care services. The focus of Appellants' claim of error is their argument that Mr. Perkins did not engage in intentional bad acts and did not provide child care services; therefore, the policy exclusions should not be implicated.
As the parties are well aware, State Farm's policy of insurance extended to Mr. Perkins personal liability coverage for a claim or suit "brought against an insured for damages because of bodily injury or property damage to which this coverage applies, caused by an occurrence . . . ." (Emphasis in original.) The policy defines "occurrence" as "an accident, including exposure to conditions, which first results in . . . bodily injury . . . during the policy period[.]" In another section of the policy, State Farm excluded from coverage bodily injury for "any claim or suit brought against an insured by: (1) any person who is in the care of any insured because of child care services provided by or at the direction of: (a) any insured . . . or (c) any other person actually or apparently acting on behalf of any insured . . . ." Also excluded is any claim brought against any insured by "(2) any person who makes a claim because of bodily injury to any person who is in the care of any insured because of child care services provided by or at the direction of: (a) any insured . . . or (c) any other person actually or apparently acting on behalf of any insured." (Emphasis in original.) "[O]ccasional child care services" are exempt from the exclusion.
Policy - Section II: Liability Coverages, Coverage L - Personal Liability.
In addressing the issue of coverage exclusions as to Mr. Perkins, the Madison Circuit Court did not separate his role in the child care service from that of Mrs. Perkins. While recognizing that Mrs. Perkins alone inflicted the injuries to S.T. and C.R., the court characterized the child care service as being owned and operated by the Perkinses jointly rather than solely by Mrs. Perkins. As such, it determined that the policy exclusions applied to Mr. Perkins as well as Mrs. Perkins.
When distilled to its essence, the question for our consideration is whether State Farm's personal liability coverage of Mr. Perkins was properly excluded by virtue of his role and participation in the child care service as the Madison Circuit Court so found or, as Appellants contend, Mr. Perkins did not engage in intentional bad acts nor provide child care service and was therefore not subject to the exclusions. Having closely examined the record and the law, we conclude that Mr. Perkins did provide child care services, that these services implicated the child care services exclusion, and that the circuit court did not err in so ruling.
It is uncontroverted that Mr. Perkins recruited the Thomases and negotiated and arranged the child care service for S.T. The child care for both C.R. and S.T. occurred at Mr. Perkins' home, in his presence and with his participation. Mr. Perkins stated that he would hold the infants or let them sit on his lap. He did not, as Appellants contend, provide only "occasional" child care not subject to the policy exclusion, nor was he a remote and disinterested third party. Appellants argue that Mr. Perkins breached various duties to C.R. and S.T., for which State Farm's personal liability coverage must apply. However, such duties, if any, can be found only in the context of the child care service, which implicates the exclusion.
Appellants appeal from judgments entered in their respective actions on October 11, 2017. Those judgments addressed: 1) State Farm's September 15, 2017 motions for declaratory judgments on the grounds that the intentional acts and child care services exclusions applied, and 2) State Farm's motions for summary judgment dismissing Appellants' counterclaims for bad faith. The instant consolidated appeal addresses an issue arising solely from the declaratory judgments. The standard of review on appeal from a declaratory judgement is whether the judgment was clearly erroneous. American Interinsurance Exchange v. Norton, 631 S.W.2d 851, 852 (Ky. App. 1982).
The summary judgment standard of review cited by the parties is not applicable herein because Appellants are not appealing from the dismissal of their bad faith claims. --------
Conclusion
The record supports the Madison Circuit Court's finding that Mr. Perkins provided child care services to C.R. and S.T. and that the policy's child care exclusion applies. This conclusion was not clearly erroneous, and accordingly we find no error. We find unpersuasive Appellants' contention that Mr. Perkins' negligence is excepted from the exclusion for child care services, that a jury rather than the circuit court should decide whether the exclusions are applicable, and that the child care services exclusion is void as against public policy. For the foregoing reasons, we AFFIRM the declaratory judgments of the Madison Circuit Court.
ALL CONCUR. BRIEF FOR APPELLANTS: Zachary L. Taylor
Louisville, Kentucky ORAL ARGUMENT
FOR APPELLANTS: Michael F. Eubanks
Richmond, Kentucky Co-Counsel
Zachary L. Taylor
Louisville, Kentucky BRIEF AND ORAL ARGUMENT
FOR APPELLEE STATE FARM
FIRE AND CASUALTY
COMPANY: David T. Klapheke
Louisville, Kentucky