Facts
In Gordon v. Continental Casualty Co., No. B329455 (Cal. Ct. App. 2nd Dist. 12/3/2024), insured Shen, the owner and operator of a massage spa, and his wife Xin, the spa manager, were sued by three customers alleging that Shen sexually assaulted and molested them during massage sessions. Shen and Xin tendered the suit to the spa’s commercial general liability insurer, Continental. After Continental denied a defense based on abuse or molestation exclusion, Shen and Xin stipulated to liability and a $6.8M judgement was entered against them. They assigned their rights against Continental to the plaintiffs who then sued Continental.
Holding
The trial court granted summary judgment for Continental based on the abuse or molestation exclusion. On appeal, the California intermediate court of appeal affirmed. The abuse or molestation exclusion, which appears to be identical to the ISO 21 46, provided in relevant part:
This insurance does not apply to “bodily injury, “property damage” or “personal and advertising injury,” arising out of:
(a) The actual or threatened abuse or molestation by anyone of any person while in the care, custody or control of any insured.
The primary issue was whether the underlying complaint alleged that the plaintiffs were in the “care, custody or control” of Shen at the time of the alleged assaults. Identifying this as an issue of first impression in California, the court held that the underlying complaint did allege that the plaintiffs were within Shen’s “care, custody or control.” The court rejected the plaintiffs’ argument that the phrase “care, custody or control” required exclusive or complete control which is generally the rule applied for the exclusion for damage to property in the “care, custody or control of the insured.” Noting that the “care, custody or control” terms are in disjunctive such that satisfaction of any one of terms would suffice. Here, the allegations in the complaint that Shen was performing services as the plaintiff’s massage therapist support the conclusion that, because Shen was responsible for plaintiff’s well-being, plaintiff was under Shen’s care. Similarly, the absence of any allegations that anyone else was in the room combined with the allegations that Shen held plaintiff down with his body weight and pressure, supports the conclusion that plaintiff was also under Shen’s control.