Viewpoint: Videotaping of Child in Shower is ‘Sexual Misconduct’ Excluded by Policy

Plaintiffs, R.S. and D.S. filed a lawsuit against a homeowner, Shawn Conrad, in Yellowstone County, Montana. The case involved a minor who took a shower at Conrad’s home. The female minor discovered hidden cameras that had been placed in the shower area by Conrad to film the minor while taking a shower. Upon finding out about this situation, the minor’s mother, D.S., reported the matter to law enforcement. The federal government later charged Conrad with child sexual exploitation and possession of child pornography. Conrad pled guilty to the latter charge and was thereafter incarcerated.

Plaintiffs filed a civil case against Conrad, alleging negligent or intentional infliction of emotional distress on both the minor daughter and the mother. Plaintiffs were successful in securing a $500,000 judgment against Conrad. In R.S. and D.S. v. USAA decided April 5, the Supreme Court of Montana affirmed the trial court’s granting of summary judgment in favor of USAA.

Conrad was insured by USAA with a homeowners liability policy. The homeowner policy contained limited personal liability coverage. When Conrad was served with the civil lawsuit, he tendered the defense to USAA. USAA declined the defense and indemnity. In a detailed file letter, USAA advised Conrad that there had been no policy-defined occurrence which led to policy-defined bodily injury. There was no accident according to USAA, and the damages being sought were pure emotional distress damages without bodily injury.

The Montana Supreme Court concluded that the policy’s sexual misconduct exclusion resolved the coverage question and eliminated the need to address plaintiffs’ other arguments. The court found that the exclusion pertaining to claims “arising out of sexual misconduct” was unambiguous. The exclusion unequivocally demonstrated that the factual allegations in the civil case against Conrad would fall within the policy’s exclusion, precluding USAA’s obligation to defend Conrad.

The court rejected plaintiffs’ argument that the sexual misconduct exclusion in the policy did not provide an unequivocal demonstration that their claims were beyond the policy’s scope of coverage. First, the plaintiffs contended that it was ambiguous as to whether hiding cameras in showers were a kind of “sexual misconduct” that the exclusion was designed to apply to. In order to make the ambiguity argument, plaintiffs argued that USAA did not specifically define “sexual misconduct” in the policy.

The plaintiffs also insurance policies that were the subject of litigation in other jurisdictions that had defined “sexual misconduct” in physical terms or in terms of leading to a “sexual act.” Because other insurers defined the exclusion in those ways, while USAA argued for a broader definition that included videotaping of children, the term “sexual misconduct” had to be ambiguous.

The Montana Supreme Court rejected this ambiguity argument. Using common sense and giving the words their usual meaning, the court found that the term “sexual misconduct” was unambiguous. Secret recording of a minor showering created child pornography, which was an act unquestionably sexual in nature, according to the court. Next, the court found that from the viewpoint of a consumer with average intelligence who was not trained in law or insurance, the phrase “sexual misconduct” would encompass an act like Conrad’s surreptitious recording.