Last week, the SJC issued a cautionary decision regarding the scope of an insurer’s duty to indemnify under a homeowners’ policy. On the basis of ambiguity, the Court held that a policy’s physical abuse and molestation exclusion did not preclude homeowners’ coverage for a suit involving an alleged assault by an insured on a public sidewalk.
The suit alleged that the insureds’ 23-year-old son pushed a 63-year-old attorney on a public sidewalk, which resulted in the latter falling and suffering injury. The incident stemmed from a dispute over the latter man’s fishing prowess, though the parties disputed who instigated the confrontation. The victim filed suit and the insurer defended the claim under a reservation of rights. After that matter settled, the insurer filed an action seeking a declaration that it had no duty to indemnify. The insureds then filed a counterclaim alleging unfair settlement practices in violation of Chapters 93A and 176D.
The SJC framed the issue as whether a policy exclusion precluding coverage for “[b]odily injury ... arising out of sexual molestation, corporal punishment or physical or mental abuse,” would apply in the scenario presented, i.e., of one person pushing another on a public sidewalk. The insurer maintained that it had no duty to indemnify because the conduct constituted “physical abuse,” while the insureds countered that the phrase was ambiguous such that the “abuse and molestation” exclusion did not preclude coverage.
The Court sided with the insureds in observing that a reasonable insured would interpret such an exclusion to apply to a “limited subset of physically harmful treatment, where the treatment is characterized by an ‘abusive’ quality such as a misuse of power or, perhaps, conduct so extreme as to indicate an abuser’s disposition towards inflicting pain and suffering.” It similarly concluded that “the mere fact that the conduct at issue was physically harmful does not suffice to render it ‘physical abuse.” The court did not disturb the superior court’s finding that there was no violation of Chapters 93A and 176D.
The key takeaway is that context can play a significant role in construing policy exclusions. Here, the Court arrived at a narrow construction by virtue of the text surrounding the phrase “physical abuse,” even though the words alone might appear to support a broader reading. While the plain language of terms read in isolation may support a particular coverage position, it is important to consider the context in which they appear, and the overall impact that a seemingly straightforward application might have upon the scope of coverage afforded by the policy as a whole.