H. E. Butt Grocery Co. v. National Union Fire Insurance

UNITED STATES COURT OF APPEALS
FIFTH CIRCUIT

____________

No. 97-50215
____________

H E BUTT GROCERY COMPANY,

Plaintiff - Appellant,

versus

NATIONAL UNION FIRE INSURANCE COMPANY OF
PITTSBURGH, PA,

Defendant - Appellee.

Appeal from the United States District Court
For the Western District of Texas

August 26, 1998

Before WIENER, EMILIO M. GARZA, and BENAVIDES, Circuit Judges.

EMILIO M. GARZA, Circuit Judge:

H.E. Butt Grocery Company (“HEB”) brought suit against

National Union Fire Insurance Company (“National Union”) seeking a

declaratory judgment to determine its rights and responsibilities

under a comprehensive general liability insurance policy that

National Union issued to HEB. The district court granted summary

judgment in favor of National Union. We affirm.

I

This insurance coverage dispute arises from an HEB employee’s
sexual abuse of two children in an HEB grocery store. While both

children have been compensated for the sexual assaults, this

dispute concerns how the loss will be allocated between HEB and

National Union. Under the terms of its insurance policy, HEB is

its own primary insurer))it must pay a self-insured retention

(“SIR”) limit of $1,000,000 per “occurrence” as that term is

defined in the policy. National Union is then responsible for the

payment of damages after HEB has satisfied its SIR limit for each

occurrence. The question for this Court is how many “occurrences”

arise from the two sexual assaults.

The relevant facts for this appeal are not disputed. In 1994,

an HEB employee sexually assaulted two different children on

different days in the restroom of an HEB store. The two sexual

assaults took place approximately one week apart and involved the

same employee and the same store. The family of each child filed

claims against HEB in unrelated suits in Texas state court. Each

suit alleged that HEB was negligent in several respects, including

failing to provide adequate security, failing to warn, failing to

adequately supervise its employees, and in hiring and retaining

employees when it knew or should have known that its employees were

unable to provide a safe environment in its store. The lawsuits

also alleged that HEB knew that the same employee had committed an

act of “untoward sexual conduct” in the past with a different child

at another store and that the sole corrective action taken was to

transfer the employee to another store location. HEB eventually

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settled each lawsuit for $1,000,000, the amount of its SIR limit

per occurrence under the insurance policy.

HEB then brought suit against National Union in state court

seeking a declaratory judgment that its payment of $1,000,000 to

settle the first lawsuit satisfied its SIR obligation for both

suits because they arose from the same “occurrence”))i.e., its

negligence in overseeing its pedophilic employee. National Union

removed the case to federal court on diversity grounds and sought

summary judgment, arguing that the two separate instances of sexual

abuse constituted two occurrences under the policy. The district

court agreed and granted summary judgment in favor of National

Union. HEB now appeals the grant of summary judgment.

II

We review the district court’s grant of summary judgment de

novo, taking the facts in the light most favorable to the non-

moving party. See New York Life Ins. Co. v. Travelers Ins. Co., 92

F.3d 336, 338 (5th Cir. 1996). We will affirm a summary judgment

ruling if we are “convinced, after an independent review of the

record that there is no genuine issue of material fact and that the

moving party is entitled to a judgment as a matter of law.” Yeager

v. City of McGregor, 980 F.2d 337, 339 (5th Cir. 1993); see also

FED. R. CIV. P. 56(c). Here, both parties agreed below that the

only question to be decided was whether two unrelated molestations

of different children on two separate dates were one or two

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“occurrences” under the terms of the policy.1

Because this case comes before us through diversity

jurisdiction, we apply Texas law. See Erie R.R. Co. v. Tompkins,

304 U.S. 64, 78-79, 58 S. Ct. 817, 822, 82 L.Ed. 518 (1938). A

contract of insurance is generally subject to the same rules of

construction as other contracts. See National Union Fire Ins. Co.

v. Hudson Energy Co., 811 S.W.2d 552, 554 (Tex. 1991). The court’s

primary concern is to give effect to the written expression of the

parties’ intent. See Forbau v. Aetna Life Ins. Co., 876 S.W.2d

132, 133 (Tex. 1994). If the written contract is worded so that it

can be given a definite or certain legal meaning, it is not

ambiguous and will be enforced as written. See National Union Fire

Ins. Co. v. CBI Indus., Inc. 907 S.W.2d 517, 520 (Tex. 1995).

If the court is uncertain as to which of two or more meanings

was intended, a provision is ambiguous. See Butler & Binion v.

1
On appeal, National Union raises a question of fact as to
whether the sexual abuse was “expected” by HEB. If the injury was
“expected” from the standpoint of the insured (i.e., HEB), there is
no “occurrence” under the terms of the insurance policy. See
Diocese of Winona v. Interstate Fire & Cas. Co., 89 F.3d 1386,
1395-96 (8th Cir. 1996) (holding that sexual abuse was expected by
Diocese, and thus, no occurrence under identical policy language).
National Union, however, failed to raise this issue in the district
court below, and we will not address it. See Yeager v. City of
McGregor, 980 F.2d 337, 339 (5th Cir. 1993) (“We may affirm a
summary judgment on a ground not utilized by the district court if
it was raised below and has proper support in the record.”); see
also Cullen/Frost Bank v. Commonwealth Lloyd’s Ins. Co., 852 S.W.2d
252 (Tex. App. 1993, writ denied) (rejecting insurer’s claim that
damages were “expected” by insured because claim was not raised in
the trial court on insurer’s motion for summary judgment).

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Hartford Lloyd’s Ins. Co., 957 S.W.2d 566, 570 (Tex. App. 1995,

writ denied). An ambiguity in a contract is either “patent” or

“latent.” See CBI Indus., Inc. 907 S.W.2d at 520. “A patent

ambiguity is evident on the face of the contract. A latent

ambiguity arises when a contract which is unambiguous on its face

is applied to the subject matter with which it deals and an

ambiguity appears by reason of some collateral matter.” Id.

(citation omitted). Only after a court has determined a contract

is ambiguous can it consider the parties’ interpretations. See

id. at 520. When a contract is not ambiguous, the court will

construe the contract as a matter of law. See Coker v. Coker, 650

S.W.2d 391, 393-94 (Tex. 1983).

III

The outcome of this case depends on the meaning of

“occurrence” under the policy. HEB argues that “occurrence” is

ambiguous and that its interpretation is a reasonable construction

of the term. Whether a provision is ambiguous is a question of law

for the court to decide. See CBI Indus., Inc. 907 S.W.2d at 520.

HEB does not specify whether it believes that the definition of

“occurrence” is “patently” or “latently” ambiguous; consequently,

we will consider each proposition in turn.

The policy defines “occurrence” as follows:

‘Occurrence’ means an event, including continuous or
repeated exposure to conditions, which result[s] in
Personal Injury or Property Damage during the policy
period, neither expected nor intended from the standpoint

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 of the Insured. All Personal Injury or Property Damage
arising out of the continuous or repeated exposure to
substantially the same general conditions shall be
considered as arising out of one occurrence.

This definition of “occurrence” is virtually identical to the

definition contained in standard-form commercial liability

policies. See American Physicians Ins. Exch. v. Garcia, 876 S.W.2d

842, 854 n.21 (Tex. 1994). Texas courts have routinely applied the

term without concluding that it is patently ambiguous. See, e.g.,

Foust v. Ranger Ins. Co., No. 04-97-00714-CV, 1998 WL 82793, *3-4

(Tex. App. Feb. 27, 1998, n.w.h.); Transport Ins. Co. v. Lee Way

Motor Freight, Inc., 487 F. Supp. 1325, 1327 (N.D. Tex. 1980)

(applying Texas law). Not surprisingly, HEB cannot cite a single

Texas case that has found a patent ambiguity in the definition of

“occurrence.” We conclude that the definition of “occurrence” in

the policy is not ambiguous on its face. See Foust, 1998 WL 82793,

at *5 (concluding that virtually identical definition of

“occurrence” was “clearly define[d]” and not ambiguous).

Although no Texas court has interpreted “occurrence” in the

context of a pedophilic employee and the sexual abuse of two

different children, we must make an Erie guess as to how the Texas

Supreme Court would decide the issue. See Farm Credit Bank v.

Guidry, 110 F.3d 1147, 1149 (5th Cir. 1997) (when state law is

silent, court must make "Erie guess" as to how state supreme court

would rule). A latent ambiguity does not arise simply because the

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parties advance conflicting interpretations of the term; an

ambiguity exists only when the term cannot be given a definite and

certain legal meaning and more than one reasonable interpretation

exists. See Columbia Gas Transmission Corp. v. New Ulm Gas, Ltd.,

940 S.W.2d 587, 589 (Tex. 1996). Thus, we must decide whether

Texas law prescribes a definite legal meaning to “occurrence” under

the circumstances in this case.

Texas courts agree that the proper focus in interpreting

“occurrence” is on the events that cause the injuries and give rise

to the insured’s liability, rather than on the number of injurious

effects. See, e.g., Maurice Pincoffs Co. v. St. Paul Fire & Marine

Ins. Co., 447 F.2d 204, 206 (5th Cir. 1971) (applying Texas law and

holding that the events giving rise to liability constitute the

“occurrence”); Goose Creek Consol. I.S.D. v. Continental Cas. Co.,

658 S.W.2d 338, 339 (Tex. App. 1983, no writ) (explaining that a

majority of courts apply a “cause” analysis to determine whether a

set of facts involve only one or several occurrences); Lee Way

Motor Freight, 487 F. Supp. at 1330 (explaining that “[t]he great

majority of courts have adopted a ‘cause’ analysis”). The question

under Texas law becomes whether HEB’s negligent employment

relationship with its pedophilic employee, rather than the two acts

of sexual abuse, “caused” the injuries to the two children and gave

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rise to HEB’s liability.2

HEB’s argument))that we can ignore the immediate cause of each

child’s injuries and look only to the underlying negligent

supervision))is similar to one rejected by the Texas courts in

Burlington Insurance Co. v. Mexican American Unity Council, Inc.,

905 S.W.2d 359, 362 (Tex. App. 1995, no writ). In Burlington, a

resident of a youth home sued the youth home, alleging that it

negligently allowed her to leave its premises unsupervised and that

she was assaulted by an unknown person as a result. At issue in

the coverage dispute between the youth home and the insurance

2
In his concurring opinion, Judge Benavides suggests that
examining the “cause” of the injuries and examining the events
“giving rise” to liability are mutually exclusive tests for
determining the number of “occurrences.” I disagree, and contrary
to Judge Benavides’s characterization of this opinion, I do not
reject one in favor of the other. Indeed, both common sense and
legal parlance suggest that these approaches are related aspects of
the same test or principle. See Appalachian Ins. Co. v. Liberty
Mutual Ins. Co., 676 F.2d 56, 60-61 (3d Cir. 1982) (considering the
cause of the injuries in conjunction with the events giving rise to
liability to determine the number of “occurrences”). To the extent
that Judge Benavides rejects a test that examines the “cause” of
the injuries for determining the number of “occurrences,” the case
law rests squarely against him. See, e.g., Goose Creek Consol.
I.S.D. v. Continental Cas. Co., 658 S.W.2d 338, 340 (Tex. App.
1983, no writ) (“Courts in federal and foreign jurisdictions have
applied either a ‘cause’ or effect’ analysis in determining whether
a set of facts involved only one or several occurrences.”); see
also Michigan Chem. Corp. v. American Home Assurance Co., 728 F.2d
374, 379-80 (6th Cir. 1984) (noting that “[t]he vast majority of
courts . . . have concluded that . . . the number of occurrences
for purposes of applying coverage limitations is determined by
referring to the cause or causes of damage and not to the number of
injuries or claims.”); Appalachian Ins. Co., 676 F.2d at 60
(“Liberty acknowledges that the determination of whether an
occurrence is single or multiple properly depends on whether there
is a single cause or multiple causes for the losses sustained.”).

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company was the policy’s assault and battery exclusion, and whether

the insurance company had a duty to defend the youth home in the

suit brought by the injured child. The youth home argued that its

negligent supervision was an independent “cause” of the child’s

injuries, and therefore, that the policy exclusion for assault and

battery did not apply. The youth home argued “that there is

concurrent causation in this case: (1) the negligence of [the youth

home] in allowing Zertuche to leave the premises; and (2) the

assault by an unknown assailant.” The court rejected this

argument, concluding that because the child’s injuries arose out of

the assault and battery, the claim was excluded from coverage under

the policy. The court explained that the “cause” of the damages

for purposes of the insurance policy was the actual assault and

battery. “Without the underlying assault and battery, there would

have been no injury and no basis for suit against [the youth home]

for negligence. . . . [T]he origin of [the injured child’s] damages

is the assault and battery.” Id. at 363.

We reached a similar conclusion under Texas law in Commercial

Union Insurance Co. v. Roberts, 7 F.3d 86, 88-89 (5th Cir. 1993).

In Roberts, two children who were sexually molested by a doctor

brought suit against the doctor alleging that he was negligent for,

among other things, failing to obtain treatment for his pedophilia

and failing to have adequate supervision while he taught young

children at Sunday School. Again, the issue before the court was

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the “cause” of the children’s damages, and similar to HEB’s

argument here, the children “attempt[ed] to avoid the inescapable

fact that the sexual molestation caused the injuries.” Id. at 89.

We explained that “[e]ach and every allegation arises out of the

alleged acts of sexual molestation. The claims of negligence are

not independent causes-in-fact of the injuries.” We concluded that

“[w]ithout the underlying sexual molestation there would have been

no injury and obviously, no basis for a suit against [the doctor]

for negligence.” Id. at 89-90; see also Johnson v. Sawyer, 47 F.3d

716, 730-31 (5th Cir. 1995) (en banc) (holding that the negligent

supervision tort “came into Texas law by way of analogy to

negligent entrustment” which requires that liability be predicated

on the tortious conduct of the person to whom the vehicle was

entrusted).

HEB argues that the above-mentioned decisions are not relevant

here because they do not concern the construction of the policy

term “occurrence.” This argument misses the point; the principle

underlying Burlington, Roberts, and Johnson indicates that when the

underlying basis for liability is negligent supervision, yet the

damage is caused by an intervening intentional tort, the court

cannot look past the immediate cause of the damage for purposes of

the insurance policy. Thus, the two independent acts of sexual

abuse “caused” the two children’s injuries and gave rise to HEB’s

separate and distinct liability in each case. See Johnson, 47 F.3d

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at 731 (“[I]n negligent hiring or supervision cases, the general

rule is clearly that ‘liability . . . must be predicated upon the

wrongful act or omission of the employee . . . .”) (interpreting

Texas law).

Further undercutting HEB’s argument is the fact that there are

insurance policies available with a sexual misconduct endorsement

that would treat both incidents of sexual abuse as one occurrence

under the circumstances. In Preferred Risk Mutual Insurance Co. v.

Watson, 937 S.W.2d 148, 149 (Tex. App. 1997, writ denied), the

insured purchased an endorsement which stated that: “All acts of

sexual misconduct by one person, or two or more persons acting

together, or any breach of duty causing or contributing to such

acts will be considered one occurrence in determining our liability

under this section.” HEB did not purchase such an endorsement,

however, and chose instead to purchase the standard liability

policy which defines “occurrence” by the cause of the injuries.

Cf. Lee v. Interstate Fire & Cas. Co., 86 F.3d 101, 104 (7th Cir.

1996) (explaining that “‘continuous or repeated exposure to

conditions’ sounds like language designed to deal with asbestos

fibers in the air, or lead-based paint on the walls, rather than

with priests and choirboys”).

In addition, where insurance provisions are identical across

jurisdictional borders, as they are here, Texas courts strive to

interpret the provisions uniformly. See CBI Indus., Inc. 907

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S.W.2d at 522; see also Dickson v. State Farm Lloyds, 944 S.W.2d

666, 668 (Tex. App. 1997, n.w.h.). While the decisions of other

courts are not binding precedent under Texas law, most courts that

have considered the question have concluded that the sexual

molestation of different children constitutes separate occurrences.

See, e.g., Lee, 86 F.3d at 104-05 (Rhode Island law) (explaining

that the insurance company conceded the issue); Society of the

Roman Catholic Church of the Diocese of Lafayette and Lake Charles,

Inc. v. Interstate Fire & Cas. Co., 26 F.3d 1359, 1364-65 (5th Cir.

1994) (Louisiana law) (“Catholic Church”) (holding that the

molestation of different children constitutes separate

occurrences); Interstate Fire & Cas. Co. v. Archdiocese of

Portland, 747 F. Supp. 618, 624 (D. Or. 1990) (Oregon law) (“Each

time this negligent supervision presented Father Laughlin with the

opportunity to molest a different child, the Archdiocese was

exposed to new liability.”), rev’d on other grounds, 35 F.3d 1325

(9th Cir. 1994); S.F. v. West Am. Ins. Co., 463 S.E.2d 450, 452

(Va. 1995) (Virginia law) (holding that the molestation of

different children constitutes separate occurrences); State Farm

Fire & Cas. Co. v. Elizabeth N., 12 Cal. Rptr. 2d 327 (Cal. Ct.

App. 1992) (California law) (“[W]e conclude that the insured’s

liability to each child was one occurrence[.]”). These decisions

support our conclusion that two independent molestations of two

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children equals two occurrences.3

HEB attempts to distinguish this Court’s conclusion in

Catholic Church by arguing that our holding was based on a finding

that “occurrence” was ambiguous, and that we must similarly find an

ambiguity under the circumstances of this case. In addition to the

fact that Catholic Church applied Louisiana, rather than Texas law,

we disagree with HEB’s conclusion that Catholic Church found

“occurrence” to be ambiguous as to the molestation of different

children. In Catholic Church, we were faced with an insurance

coverage dispute between the Diocese of Lafayette and its insurers

which arose from two miscreant priests’ repeated molestation of 31

different children. Similar to the case at hand, the dispute

centered around the meaning of “occurrence” under the policy; we

considered the identical question to the one before us

here))namely, whether the priests’ molestation of 31 children

constituted 31 separate occurrences.4 The insurance policy’s

3
We recognize that some of the opinions that find separate
occurrences for the molestation of each different child discuss the
issue only in dicta. Because we are interpreting Texas law,
however, we are interested only in the courts’ reasoning and their
analytical approach. We do not consider the cases to be binding
precedent.
4
In addition, we were faced with a second, more
complicated question as to whether the repeated molestation of a
single child over time constituted one on-going occurrence or
separate occurrences for each subsequent act of molestation. As to
this question, we concluded that the repeated molestation of the
same child was one on-going occurrence for each policy period in
which a molestation occurred. See Catholic Church, 26 F.3d at
1365-66.

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definition of “occurrence” was almost identical, and the policy

contained a self-insured retention provision requiring the Diocese

to pay a deductible on a per-occurrence basis (just as HEB’s policy

does). Moreover, Louisiana law, like Texas, requires that when a

term in an insurance policy has uncertain application, the policy

be interpreted in favor of the insured. See Catholic Church, 26

F.3d at 1364. Because of the self-insured retention limit, the

interpretation favorable to the Diocese of Lafayette was that all

of the sexual abuse arose from one occurrence))its negligent

supervision of the priests.

After noting the interpretation favorable to the Diocese, we

nonetheless held that the priest’s molestation of each child was a

separate “occurrence” under the policy (i.e., 31 occurrences). See

id. We came to this conclusion even though it was not the

conclusion favorable to the Diocese because Louisiana law made it

clear that the damage to each child was a separate occurrence. In

short, we could not have concluded that the definition of

“occurrence” had an uncertain application under Louisiana law.5

5
A recent Texas decision discussing our opinion in
Catholic Church misunderstands our holding in that case. See
Preferred Risk Mut. Ins. Co. v. Watson, 937 S.W.2d 148, 150 (Tex.
App. 1997, writ denied). Although the Texas court found Catholic
Church to be “inapposite” because the insurance policy at issue had
a sexual misconduct endorsement, see supra at 10, the court stated
that we interpreted the insurance policy in favor of the insured in
Catholic Church. We disagree with the Texas court’s interpretation
of our holding. While there is dicta in Catholic Church stating
that the definition of occurrence “affords little assistance” and
is “malleable” and “perplexing,” we did not interpret the policy in

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Instead, at least with respect to the molestation of different

children, “occurrence” had a clear and definite meaning: the

molestation of each child constituted a separate occurrence. See

Catholic Church, 26 F.3d at 1364 (“Following Lombard, ‘the damage

to each [child] is a separate occurrence.’”) (quoting Lombard v.

Sewerage & Water Bd., 284 So. 2d 905, 915-16 (La. 1973)).

HEB further argues that the final sentence of the definition

of “occurrence”))all injury “arising out of the continuous or

repeated exposure to substantially the same conditions shall be

considered as arising out of one occurrence”))indicates that two

sexual assaults on two different children is only one “occurrence”

when they are predicated on an employer’s negligence. HEB confuses

the circumstances of its case (i.e., two independent acts of sexual

abuse on two different children) with the second question we

considered in Catholic Church, which was whether multiple acts of

sexual abuse on the same child constituted one or multiple

occurrences. See supra note 4. We concluded in Catholic Church

that multiple molestations of the same child was one occurrence per

policy period. See Catholic Church, 26 F.3d at 1365-66 (“When a

favor of the insured with regard to the molestation of each
different child. As this opinion notes, our conclusion in Catholic
Church))that the molestation of each child was a different
occurrence))was directly contrary to the interpretation favorable
to the insured Diocese in that case. Our holding therefore
indicates that Louisiana law did not find the question uncertain or
subject to more than one interpretation. See Catholic Church, 26
F.3d at 1364.

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priest molested a child during a policy year, there was both bodily

injury and an occurrence, triggering policy coverage. All further

molestation of that child during the policy period arose out of the

same occurrence.”). As the opinion in Catholic Church itself makes

clear, the conclusion that multiple molestations of the same child

is only one occurrence is easily distinguishable from the

conclusion regarding separate acts of molestation of different

children. Where an employee repeatedly molests the same child,

each new act of abuse does not necessarily give rise to new

liability for the employer. In the case at hand, however, HEB is

exposed to new liability for each separate and independent act of

molestation on a new child.

HEB’s argument “depicts a pedophilic [employee] as similar to

hazardous waste: living next to a church from which oil has seeped

into the ground is one ‘occurrence’ no matter how long the

conditions exist.” See Lee, 86 F.3d at 103. In response to a

similar argument, the Seventh Circuit explained that “[a] priest is

not a ‘condition’ but a sentient being, and of course the victim

was never ‘exposed’ to the Diocese’s negligent supervision.” Lee,

86 F.3d at 104. Here, each child was “exposed” to the pedophilic

employee, not to HEB’s negligent employment practices. “[T]he

occurrence is not the Archdiocese’s negligent supervision of Father

Laughlin as such, but the ‘exposure’ of the boy to the negligently

supervised priest[.]” Archdiocese of Portland, 35 F.3d at 1329.

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 Although the Seventh Circuit recently questioned our analysis

in Catholic Church relating to the repeated molestation of the same

child, see Lee, 86 F.3d at 104-05 (“Following the fifth and ninth

circuits, both [parties] assume that every child abuse case

produces either one ‘occurrence’ or many according to the number of

victims and policy years involved. We do not think that Rhode

Island would find either end of this continuum attractive.”), the

court appeared to agree that the molestation of different children

would constitute separate occurrences:

At oral argument, counsel for Lloyd’s conceded that if
[the priest] had abused two boys in a single policy year,
that would be two ‘occurrences.’ Presumably two priests
abusing four boys would be four occurrences. From the
victim’s perspective, this makes sense. Each loss is
independent, and this understanding affords both the
victim and the insured Diocese one full ‘occurrence’
worth of coverage.

Lee, 86 F.3d at 104. The court noted that “a single negligent act

undoubtedly can produce multiple ‘occurrences’ if the injuries are

independent.” Id.

This is the same type of “cause” analysis undertaken by other

courts. While “a single occurrence may result in multiple injuries

to multiple parties over a period of time . . .[,] if one cause is

interrupted and replaced by another intervening cause, the chain of

causation is broken and more than one occurrence has taken place.”

Home Indem. Co. v. City of Mobile, 749 F.2d 659, 662 (11th Cir.

1988); see also Appalachian Ins. Co. v. Liberty Mut. Ins. Co., 676

F.2d 56, 61 (3d Cir. 1982) (holding that to determine the number of

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occurrences “the court asks if ‘[t]here was but one proximate,

uninterrupted, and continuing cause which resulted in all of the

injuries and damage’”) (quoting Bartholomew v. Insurance Co. of N.

America, 502 F. Supp. 246, 251 (D. R.I. 1980), aff’d, 655 F.2d 27

(1st Cir. 1981)). Here, it is clear that each child’s injuries are

independent and caused by the separate acts of sexual abuse. We

agree with the Ninth Circuit that “the terms of the policy make

clear that negligent supervision alone, whether ongoing or not,

would not trigger any obligation on the part of the insurers.

Rather it is the [] ‘exposure’ of the boy to the negligently

supervised priest, resulting in injury, that provides the basis for

indemnification.” Archdiocese of Portland, 35 F.3d at 1329.

We recognize that courts have not been uniform in their

interpretation of “occurrence” under similar circumstances. The

Virginia Supreme Court, without much analysis, found that

“occurrence” was ambiguous with regard to the molestation of

multiple children, but then concluded that the molestation of each

child was a separate occurrence because that was the interpretation

favorable to the insured in that case. See S.F. v. West Am. Ins.

Co., 463 S.E.2d 450, 452 (Va. 1995). The Nevada Supreme Court

recently reached the opposite conclusion: it did not find

“occurrence” to be ambiguous, yet the court concluded that the

molestation of different children constituted only one occurrence

when premised on the county’s underlying negligence. See Washoe

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County v. Transcontinental Ins. Co., 878 P.2d 306, 308-10 (Nev.

1994). Even though the court recognized that “the actions of the

individual wrongdoers are the most direct causes of harm for the

victims,” it “conclude[d] that the County’s negligence in the

licensing process and in its attendant duties to investigate and

monitor [the day-care center] constitutes a single occurrence for

purposes of liability.” Id. We find, however, that the Nevada

court’s approach conflicts with the greater weight of authority and

“attempt[s] to avoid the inescapable fact that the sexual

molestation caused the injuries.” Roberts, 7 F.3d at 88-90.

Moreover, under Texas law, even where courts from different

jurisdictions are split as to the interpretation of a particular

insurance provision, “[n]either conflicting views of coverage, nor

disputation is sufficient to create an ambiguity.” Union Pac.

Resources v. Aetna Cas. & Sur., 894 S.W.2d 401, 401 (Tex. App.

1994, writ denied) (emphasis in original).

HEB fails to recognize that the interpretation of “occurrence”

favorable to the insured in this case will not necessarily be the

interpretation favorable to the insured in the next case. Because

HEB serves as its own primary insurer (because of its SIR limit),

it wants to call the separate molestations one “occurrence” to

limit the number of self-insured retentions that it must pay. See,

e.g., Catholic Church, 26 F.3d at 1363 (“[T]he larger the number of

‘occurrences,’ the greater the loss borne by the primary insurers

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. . . .”). The Seventh Circuit noted, however, that “[w]inners and

losers will change with the circumstances. . . . [I]f tomorrow the

victim’s loss exceeds the maximum coverage for a single occurrence,

the roles will be reversed. The [insurance company] would want to

call the sexual abuse a single occurrence to cap its own exposure,

while the Diocese would favor multiple occurrences in order to

maximize its insurance coverage.” Lee, 86 F.3d at 104; see also

Elizabeth N., 12 Cal. Rptr. 2d at 328-29 (demonstrating that where

insurance company’s liability was capped at $200,000 per

occurrence, it argues that multiple acts of sexual abuse constitute

only one occurrence).

The Virginia Supreme Court’s decision in West American

Insurance Co. is a perfect case in point. The insured-employer in

that case argued that the molestation of each child was a separate

“occurrence” under an identical policy definition, while the

insurance company argued that the employer’s negligence in hiring,

supervising and retaining its pedophilic employee constituted only

one occurrence. See West Am. Ins. Co., 463 S.E.2d at 452. The

court ultimately construed “occurrence” in favor of the insured and

concluded that the molestation of each child was a separate

occurrence))giving the insured full coverage for each molestation

up to the policy’s per-occurrence maximum (instead of coverage for

only one “occurrence”). See id. Thus, the cases make clear that

whether the definition of “occurrence” is favorable to the insured

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depends on whether the parties are arguing over the maximum

coverage per occurrence or the number of self-insured retentions

that must be paid. While this opinion rejects HEB’s interpretation

of “occurrence,” the definition of “occurrence” remains a mixed

blessing to both insurers and insured.

IV

We recognize that the financial burden of settling the sexual

abuse lawsuits will fall heavily on HEB under the terms of its

policy; “[h]owever unfortunate such a result would be from the

perspective of [the insured], it is dictated by the terms of the

policies [it] purchased.” Archdiocese of Portland, 35 F.3d at

1331. HEB chose to purchase an insurance policy that provided for

a self-insured retention limit of $1,000,000 per occurrence. Cf.

Diocese of Winona, 89 F.3d at 1390 (SIR limit of $100,000); Lee, 86

F.3d at 102 (SIR limit of $100,000); Archdiocese of Portland, 35

F.3d at 1327-28 (SIR limit ranging from $75,000-$100,000); Catholic

Church, 26 F.3d at 1362 (SIR limit of $100,000); Washoe County, 878

P.2d at 307 (SIR limit of $50,000). It is this high SIR limit that

requires HEB to bear the entire burden of settling the children’s

two lawsuits for $1,000,000 each.

HEB cannot successfully argue that the two separate acts of

sexual abuse on two different children constitute only one

“occurrence” under the policy. Neither Texas law nor the policy

language allow this result. We reach this conclusion not by

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looking to the number of injuries or the number of victims,6 but

rather by looking to the two independent events that gave rise to

HEB’s liability and caused the injuries. HEB’s argument that it

should not have to bear the $1,000,000 burden for each act of

sexual abuse is without merit. We conclude that the insurance

policy is not ambiguous under the circumstances of this case; under

Texas law, two independent acts of sexual abuse injuring two

children are two occurrences. The summary judgment in favor of

National Union is AFFIRMED.7

WIENER, Circuit Judge, concurs in the judgment only.

6
We express no opinion as to the number of “occurrences”
that would arise if an employee molested two children at the same
time in the same incident. That question is not before us and
remains for another day.
7
National Union’s Motion to Certify Questions of Law is
denied as moot.

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BENAVIDES, J., concurring.

Although I agree that Texas courts would focus on the events

giving rise to liability to determine the number of occurrences, I

do not agree that the question under Texas law is “whether HEB’s

negligent employment relationship with its pedophilic employee,

rather than the two acts of sexual abuse, ‘caused’ the injuries to

the two children and gave rise to HEB’s liability.” ___ F.3d at

___. I would hold that the appropriate test for counting

occurrences under Texas law is a “liability-triggering event” test

rather than the “immediate cause” test applied by Judge Garza.

Applying a liability-triggering event test yields the same result

reached by Judge Garza. There were two occurrences: the employee’s

molestation of each child.

Both Goose Creek Consol. ISD v. Continental Cas. Co., 658

S.W.2d 338, 339 (Tex. App.— Houston [1st Dist.] 1983, no writ) and

Maurice Pincoffs Co. v. St. Paul Fire & Marine Insurance Co., 447

F.2d 204 (5th Cir. 1971), are best understood as applying a

“liability-triggering event” test, rather than the “immediate

cause” test adopted in the majority opinion.8 In Goose Creek, the

8
See Dow Chem. Co. v. Associated Indem. Corp., 727 F. Supp.
1524, 1528 (E.D. Mich. 1989); Comment, Tung Yin, Nailing Jello to
a Wall: A Uniform Approach for Adjudicating Insurance Coverage
Disputes in Products Liability Cases with Delayed Manifestation
Injuries and Damages, 83 CAL. L. REV. 1243, 1254 (1995). I
court focused on the particular language of the policy at issue in

that case, which defined occurrence in terms of a “single event,”

and concluded that each of two fires was a separate event and thus

that there were two occurrences under the policy. 658 S.W.2d at

339. Although the court noted that a majority of states had

adopted a “cause” test for occurrence, the court did not in fact

apply a cause test, but rather relied on its understanding of the

term “single event” in determining how many occurrences there were.

Id. at 340.

This circuit’s approach was similar in Pincoffs. The Pincoffs

court viewed the occurrence as the “event” giving rise to liability

from the insured’s point of view. Pincoffs involved the sale by

Pincoffs of contaminated bird seed to dealers who in turn sold the

seed to bird owners, whose birds then died. The liability-

triggering event, from Pincoffs’s point of view, was Pincoffs’s

sale of contaminated seed rather than the original contamination of

the seed (apparently by a third party) or the subsequent sales by

the dealers. This holding was not based on a conclusion that the

contamination of the seed or subsequent sales did not cause the

bird owner’s injuries or that the sale was an “immediate” or

“intervening” cause, but rather on the idea that the sales were

recognize that there is room for disagreement on this point. See
Michael J. Murphy & Robert E. Wilder, The "Event" Debate in
Asbestos-Related Excess of Loss Reinsurance Disputes, 31 Tort &
Ins. L.J. 687, 702 (1996).

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“the events or incidents for which Pincoffs is liable.” 447 F.2d

at 206. Indeed, the court clearly acknowledged that “the damage to

the birds resulted from the contamination of the bird seed.” Id.

at 207.

Similarly, in this case, the children’s injuries resulted from

HEB’s negligent hiring of the pedophilic employee and from the

employee’s acts. But the events that gave rise to liability, even

from HEB’s point of view, were the employee’s molestations of each

child. Notably, however, applying the “immediate cause” test to

the facts in Pincoffs would produce a different result: the

immediate cause of the bird owner’s injuries was not Pincoffs’s

sale to the dealers but the dealers’ sale to the bird owners (or

even more particularly, the feeding of the birds). Nonetheless,

the liability-triggering event from Pincoffs’s point of view was

its sale of the seed to the dealers. Thus, Pincoffs supports the

result that Judge Garza reaches here, but in my view is

inconsistent with the test he would adopt.

Moreover, the cause test set forth by the district court in

Transport Insurance Co. v. Lee Way Motor Freight, Inc., 487 F.

Supp. 1325, 1237 (N.D. Tex. 1980), cited by Judge Garza, is

inconsistent with the result reached in this case. Lee Way

involved a company-wide racially discriminatory policy. The court

held that the occurrence was not each individual instance of

discrimination that resulted from the discriminatory policy, but

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rather the adoption of the policy itself. By analogy, the

occurrence in this case would be the negligent hiring and

supervision of a pedophilic employee instead of the two instances

in which that pedophilic employee harmed the children of customers.

Indeed, the Nevada Supreme Court in Washoe County v.

Transcontinental Insurance Co., 878 P.2d 306 (Nev. 1994), applied

the causal analysis employed in Lee Way and reached a conclusion

contrary to that reached by Judge Garza. The Nevada court held

that even though multiple children had been molested by an employee

negligently hired by the county, there was only one occurrence from

the county’s point of view (the county’s negligent hiring). See

id. at 308. The Washoe County court actually cites Lee Way in

support of its conclusion that there was a single occurrence. See

id. The Lee Way/Washoe County approach bears little resemblance to

the approach taken in Pincoffs and Goose Creek.

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 In addition to being more consistent with Pincoffs and Goose

Creek, a liability-triggering event test would also be more

consistent with the specific policy language in this case, which

defines “occurrence” in terms of an “event.” The liability-

triggering event test also has the virtue of avoiding the

acrobatics required to conclude that the molester’s actions rather

than HEB’s negligence caused the injuries to the molested children.

Judge Garza relies on Burlington v. Mexican Am. Unity Council, 905

S.W.2d 359 (Tex. App.—San Antonio 1995, no writ), and Commercial

Union Ins. Co v. Roberts, 7 F.3d 86 (5th Cir. 1993), for the

proposition that occurrences should be counted with reference to

the immediate cause of the injuries. Both Burlington and Roberts,

however, involved the applicability of intentional tort policy

exclusions (in Burlington, an exclusion for assault and battery; in

Roberts, for intentional torts generally). These cases, which deal

with what happens when the covered cause of harm is not independent

of the excluded cause of harm, do not shed any light on counting

the number of occurrences under an insurance policy. Suppose, for

example, in Pincoffs, that the bird seed dealer’s insurance policy

had contained coverage for its liability arising out of sales to

pet store owners, but excluded coverage for the death of livestock

resulting from the ingestion of contaminated food. Under

Burlington and Roberts, there would have been no coverage for the

birds’ deaths under the policy because the ingestion of

-27-
contaminated food (the immediate, but excluded cause) and the sales

to pet store owners (the covered cause) were not independent causes

of the birds’ deaths. That does not mean, however, that, absent

the exclusion, the number of occurrences would be based on each

bird’s ingestion of the contaminated seed rather than the sales as

the Pincoffs court held. In other words, whether coverage is

negated because the immediate cause of harm is excluded from

coverage (and the covered cause is not independent of the excluded

cause) has no necessary connection to the way occurrences should be

counted under the policy.

Finally, I disagree with Judge Garza’s conclusion that this

circuit in Society of the Roman Catholic Church v. Interstate Fire

& Cas. Co., 26 F.3d 1359 (5th Cir. 1994), found that the term

“occurrence” was not ambiguous. ___ F.3d ___ n.4 (criticizing

Preferred Risk Mut. Ins. Co. v. Watson, 937 S.W.2d 148, 150 (Tex.

App.—Fort Worth 1997, writ denied)). To the extent, as Judge Garza

suggests, that the Catholic Church panel held that the definition

of occurrence unambiguously requires that occurrences be counted

from the injured party’s point of view, Judge Garza’s opinion here

conflicts with Catholic Church. The definition of occurrence he

would adopt (keyed to “immediate cause”) is inconsistent with the

Catholic Church panel’s effects test. This inconsistency can be

demonstrated by applying the two definitions to the facts in Anchor

Casualty Co. v. McCaleb, 178 F.2d 322 (5th Cir. 1949). In McCaleb,

-28-
an oil well exploded, injuring the property of four people who

brought suit. Like the Catholic Church court, the McCaleb court

adopted an “effects” test for counting the number of occurrences

under Texas law, holding that number of occurrences must be

determined based on the property damage suffered by each individual

property owner as a result of the explosion. See McCaleb, 178 F.2d

at 325. Applying the test adopted by Catholic Church and McCaleb

and examining the claim from the point of view of the injured

parties, there were four occurrences in McCaleb. Under Judge

Garza’s definition, however, there was only one occurrence because

there was only one immediate cause of the injuries (the oil well

explosion). Thus, Judge Garza cannot simultaneously conclude that

the Catholic Church case found the definition of occurrence to be

unambiguous.

Applying the liability-triggering event test to the facts of

McCaleb also leads to a finding that there was but one occurrence.

Unlike Judge Garza, however, I would conclude that the panel in the

Catholic Church case did in fact believe that the definition of

occurrence was subject to more than one interpretation. The court

noted that the meaning of the phrases “a continuous or repeated

exposure to conditions” and “substantially the same general

conditions” is “malleable” and that the meaning of “occurrence”

“can be perplexing in application.” Id. at 1364. The court

further explained:

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 An “occurrence” could be the church’s continuous
negligent supervision of a priest, the negligent
supervision of a priest with respect to each child, the
negligent supervision of a priest with respect to each
molestation, or each time the Diocese became aware of a
fact which should have led it to intervene, just to name
a few possibilities.

Id. Nevertheless, the panel was bound by the Louisiana Supreme

Court’s decision in Lombard v. Sewerage & Water Bd. of New Orleans,

284 So.2d 905 (La. 1973), in which the court held that the number

of occurrences under Louisiana law must be determined from the

point of view of the injured parties (i.e., applied an “effects”

test).

In sum, because the liability-triggering event test is more

consistent with Texas law and with the language of policy in this

case and is more easily applied, I respectfully concur.

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