No Coverage Under Homeowners’ Policy for Civil Judgment for Child Pornography

The United States District Court for the Northern District of Illinois, applying Illinois law, in an opinion written by District Judge Charles P. Kocoras, held that a homeowners’ policy did not provide coverage for a $2 million judgment for invasion of privacy related to child pornography because, due to the intentional nature of the acts, there was no occurrence.

Citizens Insurance Company of Illinois (“Citizens”) provided homeowners’ insurance to Keith Farnham, former member of the Illinois House of Representatives from 2009 until 2014.  In 2014, Farnham was charged with violating certain federal criminal child pornography statutes.  Farnham was indicted and pled guilty to knowingly transporting child pornography. 

Erin and Jane Doe as next friend for minor Fiona (the “Plaintiffs”) filed a civil action alleging, among other things, invasion of privacy.  Farnham executed an affidavit in the case admitting guilt and also confessing to a $2 million judgment in favor of the Plaintiffs, which was entered by the District Court after Farnham died while an inmate at a Federal Medical Center. Plaintiffs then amended their complaint to seek a declaratory judgment that the Citizens’ homeowner’s policy covers the Plaintiffs’ claims and that Citizens was required to provide defense and indemnification for the Plaintiffs.

The homeowners’ policy applies to “personal injury” that is caused by an “occurrence.”  “Personal injury” includes an “invasion of privacy” claim.  “Occurrence” is defined as “an accident,” including “continuous or repeated exposure to substantially the same general harmful conditions.”   The homeowners’ policy also contains an exclusion which precludes coverage for “personal injury … caused by a violation of a penal law or ordinance committed by or with the knowledge or consent of an ‘insured’” (the “Penal Law Exclusion”).

Citizens filed a motion to dismiss and argued that the Plaintiffs’ claims were not properly pled because sexual mistreatment of a minor is not an “occurrence” under the homeowners’ policy.   Citizens also argued that even if there was an “occurrence,” the Penal Law Exclusion precluded coverage.

The District Court found no coverage under the homeowners’ policy because the bodily harm did not arise from an occurrence.  Under Illinois law, where the underlying claim involves conduct that results in injuries that are either “expected or intended” by the insured, the insurance company is released from liability because the insured acted with specific intent to injure or cause harm to a third party.  In contrast, there is an “occurrence” under Illinois law when it is alleged that the actions of the insured result in injury which was unexpected.  Farnham’s actions were intentional and not accidental. 

The Plaintiffs argued that the policy was ambiguous because it contains both an exclusion for intentional acts (i.e. an alleged “occurrence”) and an endorsement specifically providing coverage for the intentional act of invasion of privacy.  The District Court found that the policy unambiguously asserted that the “personal injury” must still be predicated on an “occurrence.”  “Therefore, although Farnham’s actions were clearly repugnant and crossed every line of human decency, the Plaintiffs have failed to plausibly allege an ‘occurrence’ under the [homeowners’ policy] because the action was not accidental.”

In addition, the District Court found that even if the Plaintiffs did allege an occurrence, the Penal Law Exclusion barred coverage.  According to the Plaintiffs, the Penal Law Exclusion was inapplicable because the judgment against Farnham was civil, and not criminal; and the exclusion was to only be applicable if the violation was one of the offenses listed in the insuring agreement.  The District Court did not agree with the Plaintiffs and found that the Plaintiffs’ injuries, invasion of privacy, were caused by a violation of the penal law, federal child pornography statutes.  Thus, because the Plaintiffs’ allegations did not fall within the purview of the homeowners’ policy, the Plaintiffs’ claim for a declaratory judgment was dismissed.   Doe v. Citizens Ins. Co. of Illinois, 18 C 04414 (N.D. Ill. June 4, 2019).