Nadine operated state-licensed child daycare in her home where she lived with her husband, Carlos. They were insured by an Allstate Deluxe Homeowners Policy with a special endorsement for home daycare coverage.

In 1998, Carlos was convicted and sentenced to six years in prison for sexually molesting Ashley, then 10 years old, a daycare child. After the conviction, Ashley’s parent sued Nadine, her husband and their childcare business for negligent supervision.

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Nadine tendered defense of the lawsuit to her insurer, Allstate. But Allstate refused to defend, citing the policy exclusion for sexual molestation, as well as intentional and criminal acts.

The trial court rendered a $400,000 judgment against Carlos (now in prison) and against Nadine for $100,000. The defendants then assigned their rights under the Allstate insurance policy to the parent of little Ashley.

This lawsuit was then brought against Allstate to enforce the trial court judgment for negligence.

If you were the judge would you order Allstate Insurance Co. to pay the sexual molestation and negligent supervision damages?

The judge said no!

Assignment of a judgment against a defendant is perfectly legal, the judge began. That means the plaintiff parent of little Ashley now stands in the shoes of the insured to attempt collection of the judgment from the insurance company, he continued.

However, Allstate’s insurance policy clearly excludes coverage for sexual molestation, as well as intentional and criminal acts, the judge explained. Therefore, Allstate had no duty to defend the lawsuit against Nadine, Carlos and the daycare center, he noted.

Because the acts of Nadine’s convicted husband, Carlos, were not insured under the insurance policy criminal and intentional acts exclusion, Nadine’s possible negligence in supervising the daycare center did not create coverage, the judge ruled. Therefore, Allstate’s insurance policy did not provide coverage so Allstate is not liable to pay the judgments, the judge concluded.

Based on the 2004 U.S. District Court decision in Farmer v. Allstate Insurance Co., 311 Fed.Supp.2d 884.

(For more information on Bob Bruss publications, visit his
Real Estate Center


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