Gemini Insurance Company v. Earth Treks, Inc.

Filing 35

MEMORANDUM OPINION. Signed by Judge Richard D. Bennett on 5/12/2017. (bas, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
GEMINI INSURANCE
COMPANY,

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Plaintiff/Counter-Defendant
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v.

Civil Action No. RDB-16-2520
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EARTH TREKS, INC.,
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Defendant/Counter-Plaintiff.
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MEMORANDUM OPINION
Gemini Insurance Company (“Gemini”) has brought this action against Earth Treks,
Inc. (“Earth Treks”), a Maryland corporation operating a series of rock climbing gyms,
which purchased a commercial general liability insurance policy issued by Gemini (the
“Policy”). Gemini seeks a declaration that it did not owe Earth Treks a defense1 under the
Policy or, alternatively, owed Earth Treks a defense limited to $100,000, in the now-settled
underlying action of Kelsey Fabian v. Earth Treks, Inc., Case Number 13-C-14-100242 (the
“Fabian Suit”) in the Circuit Court for Howard County, Maryland. See Compl., p. 1, ECF
No. 1. Earth Treks expended approximately $1,200,000 in defending against the Fabian Suit,
but Gemini has declined to reimburse Earth Treks for any portion of that amount. Earth
Treks has now filed a Counterclaim against Gemini, alleging breach of the Policy’s defense
provisions and requesting a monetary judgment in the full amount of its costs and expenses
incurred in defending against the Fabian Suit. See Counterclaim, ¶¶ 85-89, ECF No. 7.
Gemini has additionally sought a declaration that Gemini did not owe Earth Treks indemnification, but the
parties have subsequently resolved that issue. See January 25, 2017 Status Report, ¶ 5, ECF No. 26.
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Currently pending before this Court are Earth Treks’ Motion for Partial Summary Judgment
(ECF No. 19) and Gemini’s Cross-Motion for Summary Judgment (ECF No. 27) on the
issue of liability. Specifically, the issues before this Court are whether or not Gemini owed
Earth Treks a defense in the underlying Fabian Suit and if so, whether Gemini’s defense
obligation is limited by one or more of the Policy’s coverage limitation endorsements. Also
pending is Earth Treks’ Motion to Strike Gemini’s Extrinsic Evidence (ECF No. 28).
The parties’ submissions have been reviewed, and no hearing is necessary. See Local
Rule 105.6 (D. Md. 2016). For the reasons stated herein, Earth Treks’ Motion for Partial
Summary Judgment (ECF No. 19) is GRANTED IN PART and DENIED IN PART, and
Gemini’s Cross-Motion for Summary Judgment (ECF No. 27) is also GRANTED IN PART
and DENIED IN PART. Specifically, Gemini did owe Earth Treks a defense in the Fabian
Suit as a matter of law, but its defense obligation is limited to $100,000 pursuant to the
“Sexual Abuse or Molestation” (“SAM”) coverage limitation endorsement or, alternatively,
the “Assault, Battery, or Assault and Battery” (“A&B”) endorsement.

Accordingly,

Judgment is entered for Earth Treks on Gemini’s initial claim for declaratory judgment and
Earth Treks’ Counterclaim for breach of contract, subject to a $100,000 limit on Gemini’s
defense liability. This case shall proceed to a separate determination of the specific damages
to be awarded, pursuant to this Court’s Bifurcation Order of December 22, 2016 (ECF No.
25). Additionally, Earth Treks’ Motion to Strike Gemini’s Extrinsic Evidence (ECF No. 28)
is GRANTED. All extrinsic evidence submitted by Gemini is stricken and has not been
considered by this Court in determining whether Gemini owed Earth Treks a defense or in
determining the scope of that defense under the coverage limitation endorsements.
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BACKGROUND
I.

Earth Treks Rock Climbing Gyms
Defendant/Counterclaim-Plaintiff Earth Treks, Inc. (“Earth Treks”) is a Maryland

corporation operating three rock climbing gyms in Rockville, Timonium, and Columbia,
Maryland, and a fourth gym in Golden, Colorado. Fabian Second Am. Compl., ¶¶ 2, 9, ECF
No. 7-7. “Each of these locations offers climbing lessons and instructions.” Id., ¶ 9.
Additionally, Earth Treks leads climbing teams for children between the ages of six (6) and
eighteen (18), including “Team Earth Treks,” a nationally ranked competition team. Id. ¶ 10.
In 2008, Earth Treks hired Michael Lyons (“Lyons”) to be the head coach of Team Earth
Treks. Id., ¶ 17. Daniel Montague (“Montague”) was the assistant coach. Id., ¶ 29.
II.

Gemini’s Commercial General Liability Insurance Policy
Earth Treks is a participating member of the “Climbing Wall Association.”

Counterclaim, ¶ 2, ECF No. 7.

Plaintiff/Counterclaim-Defendant Gemini Insurance

Company (“Gemini”) has issued a commercial general liability insurance policy (Policy
Number VUMC 10000010) (the “Policy”) to the participating members of the Climbing
Wall Association, including Earth Treks. See Policy, ECF No. 1-1; Certificate, ECF No. 7-1.
At all relevant times, the Policy has provided Earth Treks general liability coverage subject to
a per occurrence limit of $1,000,000 and an aggregate limit of $2,000,000. Id. at 1.
The Policy provides insurance against “bodily injury” or “property damage” caused
by an “occurrence” that takes place in the “coverage territory.” Id. at 6. The Policy defines
“occurrence” as “an accident, including continuous or repeated exposure to substantially the
same general harmful conditions.” Id. at 19. The Policy further provides that “[Gemini] will
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have the right and duty to defend any ‘insured’ against any ‘suit’ seeking those damages . . . .
[h]owever, [Gemini has] no duty to defend the insured against any ‘suit’ seeking damages for
‘bodily injury’ or ‘property damage’ to which [the] insurance does not apply.” Id. at 6.
Additionally, the Policy excludes coverage for “ ‘bodily injury’ . . . expected or intended from
the standpoint of the insured.’ ” Id. at 7. The Policy further includes two separate coverage
limitation endorsements for damages resulting from “Sexual Abuse or Molestation” (the
“SAM” endorsement) and “Assault, Battery, or Assault and Battery” (the “A&B”
endorsement”). Id. at 59-60. Coverage for claims that fall within the scope of those
endorsements is limited to $100,000 for “Each Claim” and $300,000 in the “Aggregate.” Id.
Under both endorsements, “[a]ll claims for damages made by one or more persons because
of any one act or series of acts . . . shall be deemed to be one claim.” Id. (emphasis added).
III.

The Underlying “Fabian Suit” – Fabian v. Earth Treks, Inc., No. 13-C-14-100242
On April 16, 2014, Kelsey Fabian (“Fabian”), a former member of Team Earth

Treks, filed suit against Earth Treks in the Circuit Court for Baltimore County, Maryland.
See Fabian v. Earth Treks, Inc., Case No. 13-C-14-100242 (the “Fabian Suit”). The case was
subsequently transferred to the Circuit Court for Howard County, Maryland on Earth Treks’
motion. Fabian, then a minor acting under the direction of her parents, initially brought suit
under the pseudonym “Jane Doe,” but was required to proceed under her real name after
the case was transferred. The Second Amended Complaint was the operative Complaint in
that now-settled action. Kelsey Fabian’s allegations were as follows:
In September of 2010, Fabian joined Team Earth Treks at the Earth Treks gym in
Columbia, Maryland. Fabian Second Am. Compl., ¶ 29, ECF No. 7-7. At that time, Fabian
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was thirteen years old. Id. Head Coach Lyons was thirty years old, and Assistant Coach
Montague was nineteen years old. Id. Fabian has claimed that Lyons had a history of
inappropriate relationships with Earth Treks students and team members, of which Earth
Treks personnel were aware. Id., ¶¶ 21-22. She has alleged that Lyons and Montague
“engaged in a course of increasingly aggressive sexual behavior” targeted at her and at least
one other climber. Id., ¶¶ 30-31. It is specifically alleged that “Montague . . . engaged in
sexual activity with [her] on multiple occasions between March and May of 2011.” Id., ¶ 34.
“Despite the increasingly apparent nature of Michael Lyons’ inappropriate, sexual
behavior,” Earth Treks permitted him to lead a team trip to Massachusetts in the “late
Spring/early Summer of 2011.” Id., ¶ 43. Lyons and members of Team Earth Treks stayed
in the same hotel room, “an arrangement that was known to Earth Treks beforehand.” Id., ¶
44. During this trip, Lyons “engaged in sexual intercourse with [Fabian] twice in his hotel
room.” Id. The following weekend, “Earth Treks again permitted Mr. Lyons to organize
and conduct a sleepover event with Earth Treks’ youth climbers” at the Earth Treks gym in
Columbia, Maryland. Id., ¶ 45. That night, Lyons again sexually assaulted then-fourteenyear-old Fabian in a storage closet. Id.
In connection with these allegations, Fabian brought a three-count Second Amended
Complaint against Earth Treks for Negligence (Count I), Negligent Hiring, Retention, and
Supervision (Count II), and Respondeat Superior Liability (Count III). Id., ¶¶ 54-98. Earth
Treks coaches Lyons and Montague each subsequently pled guilty to various sex offenses in
the Circuit Court for Howard County, Maryland. Id., ¶ 11 (citing State v. Lyons, Case No. 13K-11-051485; State v. Montague, Case No. 13-K-11-51536). As a result of repeated sexual
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assaults by both Lyons and Montague, Fabian has claimed injuries “in the form of
significant, negative effects on [her] health.” Id., ¶ 50. In August of 2016, Earth Treks and
Fabian reached a settlement in the Fabian Suit that was reflected in a confidential Settlement
Agreement and Release. See Gemini Counterclaim, ¶ 50, ECF No. 7.
IV.

Earth Treks’ Extrinsic Evidence as to the Fabian Allegations
Earth Treks Chief Executive Officer Christopher Warner (“Warner”), Chief

Operating Office Christopher Jenkins (“Jenkins”), and Vice President of Operations Scott
Heidtman (“Heidtman”) have stated that “[n]o one in Earth Treks’ senior management knew
or suspected that Michael Lyons or Daniel Montague would engage in inappropriate sexual
activity or conduct with Kelsey Fabian or with any other Earth Treks team member.” See,
e.g., Warner Aff., ¶ 4, ECF No. 19-1. Prior to joining Earth Treks, Lyons was a USA
Climbing certified coach and coached a competitive climbing team in Ohio. See Lyons Dep.,
pp. 18:14-19:3; 15:7-16:10, ECF No. 19-16. Additionally, Lyons was referred to Earth Treks
by the parent of a Team Earth Treks climber. Jenkins Dep., p. 46:4-9, ECF No. 19-14.
Before offering Lyons the coaching position, Earth Treks contacted Lyons’ references, and
members of Earth Treks management interviewed him. Id. at 51:10-17; 53:8-20; 58:4-9.
Detective Aaron Miller of the Howard County Police Department was an investigator
in the criminal cases against Lyons and Montague. When asked by Earth Treks parents if
they could have detected Lyons’ and Montague’s actions sooner, Detective Miller responded
that “with no prior allegations, no criminal investigation, no criminal conviction, there would
be no record of it.” Miller Dep., p. 159:1-8, ECF No. 19-17. Detective Miller has explained
that perpetrators of child sex abuse “groom” both their “victim[s]” and “social fabric” “to
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see the [perpetrator] as being . . . above reproach.” Id. at 154:11-155:5. Detective Miller has
concluded that Lyons groomed both the Earth Treks parents and “Earth Treks as a
corporate employer” because “no one seemed to have anything bad to say about him or
would say anything bad about him . . . [t]hey all had praise about him.” Id. at 157:1-15.
While Fabian was a minor incapable of legal consent, she has acknowledged her own
wrongdoing. In a police interview on June 24, 2011, Fabian stated that the sexual abuse was
“a little bit” her fault, that she “could have said no,” that Montague did not threaten her, and
that engaging in sexual intercourse with Lyons was a “mutual decision.” Kelsey Fabian
Interview, pp. 41-47, ECF No. 19-24. Additionally, Kelsey Fabian has indicated that she and
her friend Clarissa Sheltraw composed a “bucket list” of sexual acts that they sought to
complete. Id. at 20-29. Fabian completed several of those acts with Montague and Lyons,
and initialed various items on the list with a “K” to indicate that she had completed them.
Id. Fabian has further stated that she had a “little girl crush” on Montague shortly after
joining Team Earth Treks. Kelsey Fabian Dep., p. 91, ECF No. 19-11. Fabian kissed
Montague at Earth Treks and subsequently engaged in sexual acts with him about “four or
five times” at her mother’s home. Kelsey Fabian Interview, pp. 33-36, ECF No. 19-24.
Sometime later, Fabian learned that Montague was also “doing stuff” with another sixteenyear-old climber named “Steph.” Id. at 34-38. She has stated that she “was kind of upset
with Dan.” Id. at 43. Accordingly, when Lyons “started coming on to [her]” around that
time, “[she] really didn’t say no.” Id. Fabian has stated that Lyons began “touching” her
“[a]t Earth Treks in Columbia,” “and [she] didn’t say no.” Id. at 44:1-6.

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Earth Treks Executives Warner, Jenkins, and Heidtman have stated that “Daniel
Montague was not working for Earth Treks when he and Kelsey Fabian engaged in their
consensual sexual activity in Linda Fabian’s home” and, accordingly, that “Kelsey Fabian at
this time was not in the care, custody, or control of Earth Treks.” See, e.g., Warner Aff., ¶ 15,
ECF No. 19-1. Additionally, Warner, Jenkins, and Heidtman have stated that “Earth Treks
did not accept responsibility for the care, custody, control of Kelsey Fabian during the
competitive-climbing trip to Massachusetts on June 11-12, 2011.” Id., ¶ 17. Kelsey travelled
to the climbing competition in June of 2011 “in the care of” Georgann Sheltraw, her friend
Clarissa’s mother. See, e.g., Georgann Sheltraw Dep., p. 19, ECF No. 19-21.
V.

The Instant Action – Gemini Insurance Co. v. Earth Treks, Inc. – No. RDB-16-2520
On January 2, 2014, counsel for Kelsey Fabian, then-proceeding under the

pseudonym “Jane Doe,” issued a demand letter upon Earth Treks, informing Earth Treks of
Fabian’s intent to file the Fabian Suit, discussed supra. See Demand Letter, ECF No. 7-9.
After receiving that demand letter, Earth Treks notified Verus Underwriting Managers, LLC
(“Verus”), claims services representative for Gemini, that Earth Treks may have a claim
under the Policy in connection with the impending Fabian Suit and, via letter dated February
21, 2014 (ECF No. 7-10), Verus acknowledged receipt of Earth Treks’ notice. Subsequently,
Verus forwarded to Earth Treks a letter from Verus’ outside coverage counsel, DeCaro,
Doran, Siciliano, Gallagher, & DeBlasis, LLP (ECF No. 7-11), providing counsel’s opinions
as to, inter alia, Gemini’s duty to defend Earth Treks in the Fabian Suit. The opinion letter
stated that “if suit were filed [Gemini] would have a duty to defend under the [P]olicy,” but

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that “coverage for this claim would be limited to $100,000 each claim and $300,000
aggregate,” pursuant to the Policy’s “Sexual Abuse or Molestation” (“SAM”) endorsement.
After Kelsey Fabian filed the Fabian Suit on April 16, 2014, Verus confirmed via letter
dated May 8, 2014 (ECF No. 7-13) that the Fabian Suit did constitute a “claim” under the
Policy, but that the SAM endorsement limited coverage for the lawsuit to “$100,000.” In a
response dated May 9, 2014 (ECF No. 7-14), counsel for Earth Treks agreed to this
limitation, but “reserve[d] the right to renew its demand for indemnity and a defense based
on the changed situation or circumstances.” Additionally, Earth Treks declined to draw on
the $100,000 coverage amount as defense costs were incurred, but rather requested that it be
held in reserve to cover potential costs. Over a year later, on October 30, 2015, Verus
inquired as to whether Earth Treks was ready to receive the $100,000 payment. See Verus
October 30, 2015 Email, ECF No. 7-15. Earth Treks declined Verus’ offer and instead sent
Verus a letter (ECF No. 7-16), in which it reasserted its demand for indemnification and
defense and argued that the SAM endorsement did not apply. Following several weeks of
correspondence, Verus rejected Earth Treks’ demand via letter dated July 5, 2016 (ECF No.
7-20) and further retained the right to “withdraw funding for the defense of Earth Treks if
and when it is determined that there is no coverage under the Gemini policy.” (emphasis added).
On July 8, 2016, Gemini filed the instant declaratory action in this Court, seeking a
declaratory judgment that it owed Earth Treks no duty to defend or indemnify under the
Policy or, alternatively, that its liability was limited to $100,000 under both the “SAM” and
“Assault & Battery” (“A&B”) endorsements. See Gemini Compl., ¶¶ 62-77. Subsequently, in
August of 2016, Earth Treks and Fabian reached a settlement in the Fabian Suit that was
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reflected in a confidential Settlement Agreement and Release. See Gemini Counterclaim, ¶ 50,
ECF No. 7. Earth Treks has now filed a Counterclaim against Gemini for breach of
contract for its failure to provide a full defense, without regard to the SAM and A&B
endorsement limitations. Id., ¶ 85. Earth Treks has indicated that it has “incurred costs and
expenses, including attorneys’ fees, expert witness fees, deposition costs, process server fees
and the like, of approximate[ly] $1.2 million.” Id., ¶ 87. This action has been bifurcated into
separate liability and damages phases, pursuant to this Court’s Order of December 22, 2016
(ECF No. 25). Additionally, the parties have resolved the issue of indemnification, so the
only remaining issues as to liability are whether or not Gemini owed Earth Treks a defense
in the Fabian Suit and, if so, whether Gemini’s liability was limited by either the SAM or
A&B endorsements. See January 25, 2017 Status Report, ¶ 5, ECF No. 26. The parties have
filed cross-motions for summary judgment (ECF Nos. 19 & 27) as to those questions.
STANDARD OF REVIEW
Rule 56 of the Federal Rules of Civil Procedure provides that a court “shall grant
summary judgment if the movant shows that there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). “A
dispute is genuine if ‘a reasonable jury could return a verdict for the nonmoving party.’ ”
Libertarian Party of Va. v. Judd, 718 F.3d 308, 313 (4th Cir. 2013) (quoting Dulaney v. Packaging
Corp. of Am., 673 F.3d 323, 330 (4th Cir. 2012)). A material fact is one that “might affect the
outcome of the suit under the governing law.” Id. (quoting Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 248 (1986)). A genuine issue over a material fact exists “if the evidence is such that
a reasonable jury could return a verdict for the nonmoving party.” Anderson, 477 U.S. at 248.
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Where, as here, the parties have filed cross-motions for summary judgment, this
Court “must consider each motion separately on its own merits to determine whether either
of the parties deserves judgment as a matter of law.” Bacon v. City of Richmond, 475 F.3d 633,
637-38 (4th Cir. 2007) (internal quotation marks omitted). “ ‘Both motions must be denied
if the court finds that there is a genuine dispute of material fact.[ ] But if there is no genuine
dispute and one or the other party is entitled to prevail as a matter of law, the court will
render judgment.[ ]’ ” Hicks v. Stanford, No. ELH-14-928, 2016 WL 7426139, at *5 (D. Md.
Dec. 23, 2016) (quoting 10A C. WRIGHT & A. MILLER, FED. PRACTICE &
PROCEDURE, § 2720 (4th ed.)).
ANALYSIS
I.

Gemini Did Owe Earth Treks a Defense in the Underlying Fabian Suit
The first question before this Court on the parties’ cross-motions for summary

judgment as to liability (ECF Nos. 19 & 27) is whether or not Gemini owed Earth Treks a
defense in the now-settled Maryland state court negligence action Kelsey Fabian v. Earth Treks,
Inc., Case Number 13-C-14-100242 (the “Fabian Suit”).

As discussed supra, Gemini’s

coverage counsel initially acknowledged that it did owe Earth Treks a defense in the Fabian
Suit, limited to $100,000, but Gemini has subsequently taken the position that it owed Earth
Treks no defense. Gemini contends that it “did not owe Earth Treks a defense in the [Fabian
Suit] because the bodily injury alleged by [ ] Fabian was not accidental or unexpected from
the standpoint of Earth Treks.” Mem. Supp. Gemini Mot. Summ. J., p. 8, ECF No. 27-1.
Accordingly, Gemini argues that Fabian’s alleged injury does not constitute an “occurrence,”
or “accident” as that term is defined in the Policy and, additionally, that the Policy’s coverage
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exclusion for “expected or intended” injuries bars coverage. Id. at 9-10. However, although
the Fabian Suit alleges negligence by Earth Treks with respect to the actions of Lyons and
Montague, Earth Treks has presented extrinsic evidence demonstrating that it had no
“actual, subjective knowledge of Lyons and Montague’s proclivities” and did not “expect[ ]
or fores[ee] that they would engage in the sexual misconduct that purportedly injured Kelsey
Fabian.” Mem. Supp. Earth Treks Mot. Summ. J., p. 28, ECF No. 19-27.
The parties agree that Maryland law governs this dispute. As this Court has recently
explained in Unwired Sols., Inc. v. Ohio Sec. Ins. Co., No. CCB-16-0405, 2017 WL 1165953, at
*3 (D. Md. Mar. 29, 2017), “[i]n Maryland, an insurance company has a duty to defend its
insured ‘for all claims that are potentially covered under the policy’ ” (quoting Walk v.
Hartford Cas. Ins. Co., 852 A.2d 98, 106 (Md. 2004)). “That is, ‘[e]ven if a tort plaintiff does
not allege facts which clearly bring the claim within or without the policy coverage, the
insurer still must defend if there is a potentiality that the claim could be covered by the policy.’
” Id. (quoting Brohawn v. Transamerica Ins. Co., 347 A.2d 842, 850 (Md. 1975) (emphasis
added)). In determining whether a duty to defend exists under Maryland law, this Court
follows a two-part inquiry. “First, it examines the coverage and defenses under the terms
and requirements of the insurance policy.” Id. “Second, it asks whether the allegations in
the underlying suit ‘potentially bring the . . . claim within the policy’s coverage.’ ” Id.
(quoting St. Paul Fire & Marine Ins. Co. v. Pryseski, 438 A.2d 282, 285 (Md. 1981)). “The first
question focuses upon the language and requirements of the policy, and the second question
focuses upon the allegations of the tort suit.” Maryland Cas. Co. v. Blackstone Int’l Ltd., 114
A.3d 676, 682 (Md. 2015), reconsideration denied (June 17, 2015) (quoting Pryseski, 438 A.2d at
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285. “[W]here a potentiality of coverage is uncertain from the allegations of a complaint, any
doubt must be resolved in favor of the insured.” Id. (quoting Aetna Cas. & Sur. Co. v.
Cochran, 651 A.2d 859, 863-64 (Md. 1995)).
“Maryland does not follow the rule that insurance policies should, as a matter of
course, be construed against the insurer.” Megonnell v. United States Automobile Assn., 796 A.2d
758, 771-72 (Md. 2002). “Instead, ordinary principles of contract interpretation apply.” Id.
“Nevertheless, under the general principles of contract construction, if an insurance policy is
ambiguous, it will be construed liberally in favor of the insured and against the insurer as
drafter of the instrument.” Empire Fire & Marine Ins. Co. v. Liberty Mut. Ins. Co., 699 A.2d
482, 494 (Md. Ct. Spec. App. 1997). Additionally, where a duty to defend is contested, an
insurer may not look outside the underlying pleadings to deny its obligations. Cochran, 651
A.2d at 863. An insured, however, may rely on extrinsic evidence. Id. at 866.2
The Policy in this case provides coverage for “occurrence[s],” which it defines as “an
accident, including continuous or repeated exposure to substantially the same general
harmful conditions.” This Court has observed that an “accident” occurs under Maryland
law “ ‘if in that act, something unforeseen, unusual and unexpected occurs which produces
the event.’ ” Nautilus Ins. Co. v. BSA Ltd. P’ship, 602 F. Supp. 2d 641, 650 (D. Md. 2009)
As discussed infra, Earth Treks has filed a Motion to Strike Gemini’s Extrinsic Evidence (ECF No. 28). It is
a well-settled principle under Maryland law that the insured, but not the insurer, may rely on extrinsic
evidence to establish that a duty to defend exists. See, e.g., Marvin J. Perry, Inc. v. Hartford Cas. Ins. Co., 615 F.
Supp. 2d 432, 434 (D. Md. 2009), aff’d, 412 F. App’x 607 (4th Cir. 2011) (Maryland law permit insureds (but
not insurers) to produce extrinsic evidence for the purpose of demonstrating the potentiality of coverage).
Additionally, Gemini has specifically indicated that it “does not rely upon extrinsic evidence to rebut any
claim by Earth Treks that Gemini owed a duty to defend” in the Fabian Suit, but relies on extrinsic evidence
only as to the applicability of the “Sexual Abuse or Molestation” (“SAM”) or “Assault, Battery, or Assault and
Battery” (“A&B”) coverage limitation endorsements. See Gemini Opp’n to Mot. to Strike, p. 3, ECF No. 32.
Accordingly, Earth Treks’ Motion to Strike Gemini’s Extrinsic Evidence (ECF No. 28) is GRANTED with
respect to the initial question of whether a duty to defend exists.
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(quoting Cole v. State Farm Mut. Ins. Co., 753 A.2d 533, 540 (Md. 2000)). Additionally, under
Maryland law, “an act of negligence constitutes an ‘accident’ under a liability insurance policy
when the resulting damage was an event that takes place without [the insured’s] foresight or
expectation,” a subjective rather than objective standard. USAA Cas. Ins. Co. v. Mummert, 213 F.
Supp. 2d 538, 542 (D. Md. 2002) (emphasis added) (internal quotations omitted). The Court
of Appeals of Maryland has specifically explained that distinction as follows:
If we were to adopt an objective standard and hold that the term “accident” as
used in liability insurance policies excludes coverage for damage that should
have been foreseen or expected by the insured, such insurance policies would be
rendered all but meaningless. Under such an interpretation, the policy would
provide no coverage for negligent acts resulting in objectively foreseeable or
expectable damage. Only acts of negligence resulting in objectively
unforeseeable or unexpectable damage would be covered. Of course, under
basic principles of tort law, the insured is unlikely to be held liable for
unforeseeable or unexpectable damages resulting from his negligence. Thus,
interpreting “accident” as encompassing only negligent acts resulting in
unforeseeable and unexpectable damages would leave the insured covered
against only those damages for which he or she is not likely to be held liable.
Sheets v. Brethren Mut. Ins. Co., 679 A.2d 540, 549 (Md. 1996) (emphasis added).
As discussed supra, the Fabian Suit alleges various negligence claims against Earth
Treks premised, inter alia, on Fabian’s contention that “Earth Treks knew, or should have known,
that Lyons was not competent or fit for the duties of a youth climbing coach.” Earth Treks
concedes that the alleged sexual abuse would not constitute an “accident” and, accordingly,
would not be covered by the Policy if Earth Treks had actual, subjective knowledge of the abuse.
See Earth Treks Mem. Supp. Mot. Summ. J., p. 27, ECF No. 19-27. However, Fabian’s
alternative claim, that Earth Treks simply should have known of the abuse, would still be an
“accident,” and covered by the Policy, under Maryland’s subjective definition of “accident.”
The United States Court of Appeals for the Fourth Circuit has explained that “[u]nder
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Maryland’s comprehensive duty to defend, if an insurance policy potentially covers any claim
in an underlying complaint, the insurer . . . must typically defend the entire suit, including
non-covered claims.” Perdue Farms, Inc. v. Travelers Cas. And Sur. Co. Of Am., 448 F.3d 252,
258 (4th Cir. 2006). “[I]n most circumstances, ‘if any claims potentially come within the
policy coverage, the insurer is obligated to defend all claims, notwithstanding alternative
allegations outside the policy’s coverage.’ ” Id. (quoting Utica Mut. Ins. Co. v. Miller, 746 A.2d
935, 940 (Md. Ct. Spec. App. 2000) (internal quotation marks omitted)).
Earth Treks executives Warner, Jenkins, and Heidtman have all stated that Earth
Treks had a uniform system in place for reporting incidents of misconduct by Earth Treks
employees, but nothing was brought to their attention indicating sexual abuse by their
coaches. Lyons was referred to Earth Treks by a Team Earth Treks parent and, prior to
hiring Lyons, Earth Treks interviewed him and contacted his references. Nothing led Earth
Treks to believe that Lyons would engage in sexual acts with Earth Treks climbers.
Additionally, Linda Fabian, Kelsey Fabian’s mother, and Georgann Sheltraw, the mother of
another Earth Treks climber, have both indicated that they never witnessed anything
concerning in the behavior of Lyons or Montague. Furthermore, Detective Miller has
explained that perpetrators of sexual abuse go to great lengths to hide their illicit activities
and that Earth Treks had no chance of detecting Lyons’ misconduct. Earth Treks has
presented evidence that both Lyons and Montague were very well-liked among the Earth
Treks community. Detective Miller specifically observed that “no one seemed to have
anything bad to say about [Lyons] or would say anything bad about him . . . [t]hey all had
praise about him.” Having reviewed the allegations in the Fabian Suit and Earth Treks’
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extrinsic evidence, Earth Treks has established, as a matter of law, a “potentiality” that the
events underlying the Fabian Suit constitute an “accident” and, accordingly, are covered
under the Policy.
The Policy additionally excludes coverage for “ ‘bodily injury’ . . . expected or
intended,” although that exclusion only applies where injury was expected or intended “from
the standpoint of the insured.” This Court has observed that “as to the duty to defend in
particular, exclusions have been held inapplicable where the facts related to the triggering of
the exclusion were in dispute, a conclusion consistent with the ‘potentially covered’ duty to
defend rule followed in Maryland.” Cowan Sys., Inc. v. Harleysville Mut. Ins. Co., No. CCB-05217, 2005 WL 2453002, at *7 (D. Md. Sept. 30, 2005), aff’d, 457 F.3d 368 (4th Cir. 2006).
The Second Amended Complaint in the Fabian Suit does not allege that Earth Treks
“intended” the alleged sexual acts committed by Montague and Lyons. Additionally, based
on the evidence outlined supra, Earth Treks’ has demonstrated, as a matter of law, a
“potentiality” that Earth Treks did not “expect” the alleged sexual abuse either.
Accordingly, Earth Treks has demonstrated, as a matter of law, that the “expected or
intended” exclusion does not foreclose coverage in this case.
Furthermore, as discussed supra, an opinion letter submitted to Earth Treks by Verus,
Gemini’s claims services representative, on behalf of its coverage counsel prior to litigation
provided that Gemini did have a duty to defend Earth Treks in the Fabian Suit. Although not
determinative, the Fourth Circuit has held that pre-litigation letters from an insurance
company acknowledging coverage are “highly probative” of a duty to defend. See Provident
Bank of Maryland v. Travelers Prop. Cas. Corp., 236 F.3d 138, 145 (4th Cir. 2000); see also Hartford
16

Fire Ins. Co. v. Annapolis Bay Charters, Inc., 69 F. Supp. 2d 756, 763 (D. Md. 1999). For all of
these reasons, Gemini owed Earth Treks a defense in the Fabian Suit as a matter of law.
II.

Gemini’s Defense Obligation is Limited to $100,000
A.

This Court Will Not Consider Extrinsic Evidence Submitted by Gemini

Gemini contends that Kelsey Fabian’s allegations in the underlying Fabian Suit clearly
fall within the ambit of the Policy’s “Sexual Abuse or Molestation” (“SAM”) and “Assault,
Battery, or Assault and Battery” (“A&B”) coverage limitation endorsements. In support of
this argument, Gemini has submitted extrinsic evidence as to the nature of the alleged sexual
abuse against Fabian, including Kelsey Fabian’s Deposition Transcript (ECF No. 27-11);
Daniel Montague Criminal Plea Hearing Transcript (ECF No. 27-12); Michael Lyons
Criminal Plea Hearing Transcript (ECF No. 27-13); Sergeant Aaron Miller Transcript (ECF
No. 14); Declaration of Antonia L Baum, M.D. (ECF No. 27-16); Deposition of Michael
Lyons (ECF No. 27-17); Clarissa Sheltraw Police Interview Transcript (ECF No. 27-18);
Kelsey Fabian June 24, 2011 Police Interview Transcript (ECF No. 27-19); and Michael
Lyons Police Interview Transcript (ECF No. 27-20). Earth Treks has now filed a Motion to
Strike Gemini’s Extrinsic Evidence (ECF No. 28).
As discussed supra, the parties agreed that Gemini’s extrinsic evidence would not be
considered by this Court as to the preliminary question of whether a duty to defend exists,
pursuant to well-settled Maryland law. See Gemini Opp’n to Mot. to Strike, p. 3, ECF No.
32. However, Gemini contends that a different standard should apply in determining the
scope of its duty to defend and that it “is entitled to rely on extrinsic evidence to evaluate

17

Gemini’s limit of liability.” Id. at 2. For the reasons that follow, this Court will not consider
Gemini’s extrinsic evidence for either purpose.
It is a well-established principle of Maryland insurance law that “in deciding whether
to defend, an insurer may only rely on the language of the policy and the facts alleged in the
complaint, and not on outside evidence, as that would risk deciding the question on facts not
advanced in the underlying action.” Cowan Sys., Inc. v. Harleysville Mut. Ins. Co., 457 F.3d 368,
372 (4th Cir. 2006) (citing Cochran, 651 A.2d at 866)). In fact, prior to the Maryland Court of
Appeals decision in Aetna Casualty & Surety Co. v. Cochran, 651 A.2d 859 (Md. 1995),
Maryland courts assessed whether a duty to defend existed “by applying the ‘eight corners’
rule, under which only the underlying complaint and the insurance policy could be consulted
to determine the potentiality of coverage.” Id. In Cochran “the Maryland Court of Appeals
modified the rule to allow insureds to introduce extrinsic evidence for the purpose of
demonstrating coverage . . . . [but] kept in place an asymmetrical prohibition on the use of
extrinsic evidence by the insurer.” Id. This prohibition applies even in cases where the
insured is arguing for the application of a specific exclusion to the duty to defend, despite
the fact that the insurer has the burden of proving any exclusions. See, e.g., National Elec.
Mfrs. Ass’n v. Gulf Underwriters Ins. Co., 162 F.3d 821, 824 (4th Cir. 1998); Litz v. State Farm
Fire & Cas. Co., 695 A.2d 566, 570 (Md. 1997).
Although Gemini now contends that this rule does not apply to evaluating Gemini’s
limit of liability under the SAM and A&B endorsements, Gemini has identified no authority
supporting this position. This Court is aware of no authority holding that, in a duty to
defend case, a different rule as to the admissibility of extrinsic evidence applies with respect
18

to establishing the limits of that duty than applies to the question of whether a duty to
defend exists at all. On the contrary, the Court of Appeals of Maryland has held that
defining the “scope and limitations” of coverage is part and parcel of the two-step duty to
defend analysis. See Cochran, 651 A.2d at 862 (“[W]e must ascertain the scope and limitations
of coverage under the Aetna insurance policies and then determine whether the allegations
in the [underlying] action would potentially be covered under those policies.”). Additionally,
this Court has specifically held in Nationwide Mut. Ins. Co. v. Lafarge Corp. et al., 910 F. Supp.
1104, 1109 (D. Md. 1996), aff’d, 121 F.3d 699 (4th Cir. 1997) that “coverage dispute[s]
aris[ing] as a result of [an insurer’s] duty to defend under its policies” also require this Court to
“once again look to the allegations of the complaints in the underlying action which gave rise to
[the insurer’s] duty to defend.” (emphasis added).
Furthermore, although “Maryland recognizes two limited exceptions to the general
rule against an insurer’s use of extrinsic evidence,” id. (citing Baltimore Gas & Elec. Co. v.
Commercial Union Ins. Co., 688 A.2d 496, 509 (Md. Ct. Spec. App. 1997)), neither of them
apply in this case. The Fourth Circuit has summarized those exceptions as follows:
First, when the underlying tort plaintiff has amended his allegations against the
insured, the insurer may utilize the amendments as extrinsic evidence. Baltimore
Gas, 688 A.2d at 510. If the amended allegations no longer raise a potentiality
for coverage, the insurer no longer has a duty to defend. As a second
exception to the general rule, a court is not obligated to “turn a blind eye
where [it is established] that an insured tortfeasor is excluded from coverage
under [the] particular terms of the insurance policy.” [quoting Universal
Underwriters Ins. Co. v. Lowe, 761 A.2d 997, 1012 (Md. Ct. Spec. App. 2000)] In
other words, an insurer may utilize uncontroverted extrinsic evidence from the
underlying lawsuit if such evidence clearly establishes that the suit’s allegations
are beyond the scope of coverage.

19

Id. In this case, Gemini does not rely on any different version of the complaint in the Fabian
Suit, nor has Gemini sought to introduce any “uncontroverted” extrinsic evidence that
“clearly establishes that the suit’s allegations are beyond the scope of coverage.”
For these reasons, Earth Treks’ Motion to Strike Gemini’s Extrinsic Evidence (ECF
No. 28) is GRANTED. This Court will not consider extrinsic evidence submitted by
Gemini as to the existence of a duty to defend or in determining the scope of that duty
under the SAM and A&B endorsements.

However, as discussed infra, even without

Gemini’s extrinsic evidence, the allegations in the Fabian Suit and Earth Treks’ own extrinsic
evidence clearly demonstrate as a matter of law that the Policy’s SAM and A&B coverage
limitation endorsements do apply and limit Gemini’s defense obligation to $100,000.
B.

The “Sexual Abuse or Molestation” Coverage Limitation Endorsement
Applies to the Allegations in the Fabian Suit

The “Sexual Abuse or Molestation” (“SAM”) endorsement to the Policy limits the
amount that Gemini will pay with respect to claims made against Earth Treks “caused by
actual or threatened sexual abuse or molestation by anyone of any person while in the care,
custody or control of [Earth Treks].” Policy, p. 60, ECF No. 1-1. Earth Treks argues that
the SAM limitation endorsement does not apply because Fabian was not in the “care,
custody or control” of Earth Treks when the alleged sexual acts occurred at Linda Fabian’s
house or in the hotel room in Massachusetts. Earth Treks management has stated that Earth
Treks does not exercise care, custody or control over climbers outside of competition or
practice hours or on team trips. Linda Fabian and Georgann Sheltraw have both indicated
that it was their understanding that Kelsey was under the care of Ms. Sheltraw on the
Massachusetts trip. Additionally, Mr. Warner, the CEO of Earth Treks, has stated that
20

Montague was not acting as an employee of Earth Treks when he engaged in sexual acts
with Fabian at Linda Fabian’s home. However, Montague and Lyons both began their
sexual relationships with Fabian at Earth Treks while Fabian participated in team activities
and both used their positions at Earth Treks to pursue sexual relationships with Fabian.
Although the Policy does not explicitly define “care, custody or control,” Maryland
courts have discussed the concept extensively in the context of the student-teacher
relationship. “Teachers are undeniably charged with the ‘care and custody’ of students.
When parents send their child to school, they entrust the teacher with that child’s well-being.
For nearly a century, courts have recognized this basic principle.” Anderson v. State, 812 A.2d
1016, 1023 (Md. 2002). “[A] teacher’s duty of care and custody extends beyond the confines
of the schoolyard.” Id. The Court of Appeals of Maryland has observed that “[a]t bottom, a
teacher-student relationship is based on the student’s trust and acquiescence to her teacher’s
authority.” Id. at 1022. “By virtue of [a teacher’s] position, [a teacher] [is] able to exert
influence upon [a student], not only within the confines of the school, but outside of it as
well.” Id. at 1033. In Anderson, the Court of Appeals of Maryland held that sufficient
evidence existed for a trier of fact to find that [a teacher] was a person who had
responsibility for the supervision of a minor child, under Maryland’s criminal child abuse
statute, because the teacher’s “official supervisory interactions with the [child] that began at
school, his transportation of her that was initiated at school, and his sexual involvement with
her together constituted an indivisible, ongoing relationship.” Id. at 1023-24.
While several of the sexual acts alleged in the Fabian Suit occurred away from the
Earth Treks facilities, Fabian and Lyons did engage in sexual intercourse at Earth Treks
21

Columbia during an overnight team event shortly after the Massachusetts trip. Additionally,
while the other acts were not committed on the Earth Treks premises, both Lyons and
Montague were “able to exert influence” over Fabian by virtue of their positions. See
Anderson, 812 A.2d at 1033. Lyons first engaged in sexual intercourse with Fabian during a
competition trip, which Fabian attended as a member of Team Earth Treks. Lyons went on
that trip in his capacity as head coach of the team, and the allegations in Fabian’s Second
Amended Complaint, as well as evidence submitted by Earth Treks itself, indicate that
Fabian understood Lyons’ invitation to Lyons’ hotel room as coming from a coach. Fabian
stated in her deposition testimony, submitted as extrinsic evidence by Earth Treks, that she
“really didn’t want to go” to Lyons’ hotel room, “but [she] didn’t, like, want to say no to him
because he was a coach.” Fabian Dep., p. 142, ECF No. 19-11.
Although Earth Treks contends that Fabian was under the “care, custody or control”
of Georgann Sheltraw during the Massachusetts trip, the concept of “care, custody, or
control” is not a mutually exclusive concept. See, e.g., Holiday Hospitality Franchising, Inc. v.
AMCO Ins. Co., 983 N.E.2d 574, 580-581 (Ind. 2013) (holding that motel guest molested by
motel employee was under the “care, custody or control” of the motel, within the meaning
of a similar insurance coverage exclusion, despite also being in the care of his friend’s
mother). Although Kelsey Fabian was under the care of Sheltraw on the trip, she was still, as
a matter of law, under the “care, custody or control” of Earth Treks.
Earth Treks relies on the case of Wicomico Cnty. Dep’t of Soc. Servs. v. B.A., 141 A.3d
208 (Md. 2016), in which the Court of Appeals of Maryland found that a girl was not in the
“care, custody or control” of her karate instructor when he sent her sexual text messages
22

because she was home when this conduct occurred and none of the sexually inappropriate
behavior occurred during class or shortly thereafter. However, the Court of Appeals of
Maryland specifically held in that case that “[i]f [the instructor] had given clear indications of
romantic feelings during class, then the outcome might be different . . . . [i]f he had said or
done anything inappropriate during their conversations immediately after class, while [the
girl] was still at the martial arts center, then the outcome might be different . . . .” Id. at 219.
In this case, Fabian has specifically stated that Montague kissed her at Earth Treks and that
their relationship formed during, and as a result of, their coach-student relationship at Earth
Treks. See Kelsey Fabian Interview, p. 36:2-3, ECF No. 19-24. She has further stated that
Lyons “touch[ed]” her and began making sexually charged comments to her at Earth Treks,
including inquiring as to when it would be his turn to engage in sexual acts with her. See
Tribbitt v. State, 943 A.2d 1260, 1271 (Md. 2008).
Earth Treks further contends that the sexual acts alleged in the Fabian Suit do not
constitute “abuse” or “molestation” because “sexual abuse or molestation would not include
knowing, voluntary, consensual sexual activity.” Earth Treks Mem. Supp. Mot. Summ. J., p.
32, ECF No. 19-27. Earth Treks argues that Fabian consented to the alleged sexual acts
because she had a “crush” on Montague and did not resist Lyons’ sexual overtures. Earth
Treks further points to Fabian’s knowledge of sexual acts, her “bucket list,” and her
statements that neither Lyons or Montague forced her to do anything she did not want to
do. However, “[i]t is uncontested [under Maryland’s criminal sex abuse statute] that the act
of sexual intercourse by an adult with a fourteen-year-old girl qualifies as ‘abuse.’ ” Anderson,
812 A.2d at 1020. Additionally, although Fabian has stated that Lyons “didn’t physically
23

force [her]” to engage in sexual intercourse, she has alleged in the Fabian Suit that Lyons’ and
Montague’s behavior was “increasingly aggressive” and that Lyons “used” Earth Treks trips
to arrange sexual encounters.

Fabian Second Am. Compl., ¶¶ 26, 30, ECF No. 7-7.

Additionally, Fabian has made clear in deposition testimony submitted by Earth Treks that
he “did force [her] to . . . by manipulating [her] and talking to [her] and making [her] do—go
certain places and saying things and scaring [her].” Fabian Dep., p. 164, ECF No. 19-11.
For these reasons, as a matter of law, the allegations in the Fabian Suit involved “sexual
abuse or molestation.” Accordingly, the “SAM” limitation endorsement applies.”
C.

Alternatively, the Policy’s “Assault, Battery, or Assault and Battery” Coverage
Limitation Endorsement Would Also Apply

Even if Gemini’s liability to defend Earth Treks were not limited by the “Sexual
Abuse or Molestation” endorsement, it would still be limited by the Policy’s “Assault,
Battery, or Assault and Battery” (“A&B”) endorsement. The A&B endorsement limits the
amount that Gemini will pay with respect to claims made against Earth Treks “caused by . . .
‘Assault,’ ‘Battery’ or ‘Assault and Battery.’ ” Policy, p. 59, ECF No. 1-1. “Assault” is
defined as “an act creating an apprehension in another of immediate harmful or offensive
contact” or “an attempt to commit a “Battery.” Id. “Battery” is defined as “an act which
brings about harmful or offensive contact to another or anything connected to another.” Id.
Although Earth Treks argues that Fabian consented to the alleged sexual acts by
Montague and Lyons and, therefore, that no battery occurred, Fabian was a fourteern-yearold minor at the time and, accordingly, was incapable of consenting. The Court of Special
Appeals of Maryland has specifically held that “children cannot consent to sexual acts with
an adult.” Pettit v. Erie Ins. Exch., 699 A.2d 550, 559 (Md. Ct. Spec. App. 1997). Earth Treks
24

further contends that Fabian suffered no injury. However, the Second Amended Complaint
in the Fabian Suit specifically alleges injury and, as a matter of law, “any sexual contact
between an adult and a child, whether or not accompanied by force, is injurious to the
child.” Id (although discussed in the context of an “intentional injury” exclusion). “Sexual
contact by an adult upon a minor child clearly falls within our society’s definition of
offensive and harmful contact.” Id. at 557.
Earth Treks relies on Tate v. Bd. of Educ., Prince George’s Cty, 843 A.2d 890 (Md. Ct.
Spec. App. 2004), a case in which the Court of Special Appeals of Maryland held “that a
minor’s consent is relevant for purposes of determining civil liability.” However, the Tate
case involved the question of whether a minor child could “assume the risk,” thus
precluding recovery in a negligence action against a third-party. This case, in contrast,
concerns the applicability of an Assault and Battery coverage endorsement. The question
here is whether the A&B endorsement applies because an offensive and harmful touching
occurred, not whether a third-party was negligent. Furthermore, the Tate case held that
assumption of the risk is available as a defense in a civil liability case against a third-party. The
case clearly states that it does not even reach “the question of whether assumption of the
risk is available as a defense against the actual abuser.” Tate, 843 A.2d at 901.
The Second Amended Complaint in the Fabian Suit clearly alleges that Kelsey Fabian
was fourteen years old at the time she engaged in sexual acts with Montague and Lyons, then
nineteen and over thirty years old, respectively. Under Maryland law, those sexual acts were
unconsented and injurious. Additionally, Fabian’s Second Amended Complaint specifically
alleges injury in the form of “significant, negative effects on [her] health.” For these reasons,
25

the events underlying the Fabian Suit constitute a “battery” within the meaning of the
endorsement, as a matter of law. Therefore, the “Assault, Battery or Assault and Battery”
endorsement would also limit Gemini’s defense liability under the Policy.
D.

The Fabian Suit Constitutes “One Claim” Under the Policy’s Coverage
Limitation Endorsements, Limiting Gemini’s Defense Obligation to $100,000

The “Sexual Abuse or Molestation” and “Assault, Battery or Assault and Battery”
coverage limitation endorsements both limit Gemini’s defense liability to “$100,000 Each
Claim” and “$300,000 Aggregate.”

Policy, pp. 59-60, ECF No. 1-1.

Under both

endorsements, “[t]he Each Claim Limit is the most [Gemini] will pay as damages . . . sustained
and expenses incurred in the defense and adjustment of claims and ‘suits’ asserted in any one
claim.” Id. (emphasis added). The endorsements provide that “[a]ll claims for damages made
by one or more persons because of any one act or series of acts [of ‘sexual abuse or molestation’
or ‘Assault,’ ‘Battery’ or ‘Assault and Battery’] shall be deemed to be one claim.” Id. (emphasis
added). “The Aggregate Limit is the most, subject to the Each Claim Limit, [Gemini] will
pay as damages . . . in the defense and adjustment of claims and ‘suits’ regardless of how
many persons assert claims or ‘suits’ against [Earth Treks].” Id.
“While the Fabian Suit contains multiple counts,” Gemini contends that the Each
Claim Limit “includes all counts or claims for injury to one person” and, accordingly, that
the “Fabian Suit represents one claim,” subject to a single $100,000 limit. Compl., ¶ 76, ECF
No. 1.

Earth Treks objects that Kelsey Fabian’s claims against Lyons and Montague

constitute two distinct “series of incidents” against “two distinct persons.” Counterclaim, ¶
69, ECF No. 7. Therefore, Earth Treks argues that it is entitled to a total of $200,000 in
defense costs if either of the endorsements apply. Id., ¶ 70.
26

The Court of Appeals of Maryland has held that, in interpreting insurance contracts,
courts shall “accord words their ordinary and accepted meanings.” Pac. Indem. Co. v. Interstate
Fire & Cas. Co., 488 A.2d 486, 488 (1985). “The test is what meaning a reasonably prudent
layperson would attach to the term.” Id. The Policy does not define the term “claim,” but
the Court of Appeals of Maryland has specifically held that “[t]he ordinary meaning of ‘claim
made’ refers to the assertion of a claim by or on behalf of the injured person against the insured.” St.
Paul Fire & Marine Ins. Co. v. House, 554 A.2d 404, 407 (1989) (emphasis added); see also Klein
v. Fid. & Deposit Co. of Am., 700 A.2d 262, 270 (Md. Ct. Spec. App. 1997).
Although the Court of Appeals of Maryland has not squarely addressed the question
currently before this Court—whether a Complaint alleging multiple acts of sexual abuse by
two abusers against one individual constitutes a single “claim” or two separate “claims”—
“[t]he Maryland appellate courts have made clear that, in this State and other states, courts
construe insurance policies with ‘each claim’ or ‘per person’ liability limits to include all claims
for the injury to one person.” Leake v. Johnson, 40 A.3d 1127, 1142–43 (Md. Ct. Spec. App. 2012).
For example, in Travelers Indem. Co. v. Cornelsen, 321 A.2d 149, 150-51 (1974), the Court of
Appeals of Maryland held that a married couple’s claim for “loss of consortium” following a
car accident in which the husband was injured did not constitute a separate claim from the
husband’s “personal injur[y]” claim, under an insurance coverage limitation similar to the
endorsements in this case, because it did not constitute “a bodily injury sustained by a second
person as a result of the same occurrence.” (emphasis added).
In Essex Ins. Co. v. Doe ex rel. Doe, 511 F.3d 198, 200 (D.C. Cir. 2008) the United
States Court of Appeals for the District of Columbia Circuit, applying District of Columbia
27

law, held that a boy who was sexually assaulted by four different residents on four different
occasions at a children’s residential facility had four different “claims” against that facility under
the facility’s liability insurance policy. The D.C. Circuit based its holding, in part, on the fact
that “insurers such as Essex are well aware how to limit their coverage for sexual abuse
claims made against an insured,” yet Essex had not done so in drafting its policy. Essex Ins.
Co., 511 F.3d at 201. The Court observed that “[a] contract may define negligence with respect
to multiple instances of sexual abuse as a single occurrence.” Id. In contrast to the Essex policy,
the coverage limitation endorsements to the Policy in this case have done just that,
specifically defining claims made because of “any one act or series of acts” as “one claim.”
Therefore, although the Fabian Suit alleged multiple instances of abuse by two
different Earth Treks coaches, it constitutes one “claim” within the meaning of the Policy’s
“Sexual Abuse or Molestation” coverage limitation endorsement or, alternatively, the
“Assault, Battery or Assault and Battery” endorsement. As the Court of Special Appeals of
Maryland has explained in Leake, 40 A.3d 1127 at 1142–43, an “each claim” insurance
coverage limit “include[s] all claims for the injury to one person.” (emphasis added). In this case,
the Fabian Suit alleges injury to one person, Kelsey Fabian. Accordingly, Gemini’s defense
liability is limited to the “Each Claim” limit of $100,000 as a matter of law.
CONCLUSION
For these reasons, Earth Treks’ Motion for Partial Summary Judgment (ECF No. 19)
is GRANTED IN PART and DENIED IN PART, and Gemini’s Cross-Motion for
Summary Judgment (ECF No. 27) is also GRANTED IN PART and DENIED IN PART.
Specifically, Gemini did owe Earth Treks a defense in the Fabian Suit as a matter of law, but
28

its defense obligation is limited to $100,000 pursuant to the “Sexual Abuse or Molestation”
(“SAM”) coverage limitation endorsement or, alternatively, the “Assault, Battery, or Assault
and Battery” (“A&B”) endorsement. Accordingly, Judgment is entered for Earth Treks on
Gemini’s initial claim for declaratory judgment and Earth Treks’ Counterclaim for breach of
contract, subject to a $100,000 limit on Gemini’s defense liability. This case shall proceed to
a separate determination of the specific damages to be awarded, pursuant to this Court’s
Bifurcation Order of December 22, 2016 (ECF No. 25). Additionally, Earth Treks’ Motion
to Strike Gemini’s Extrinsic Evidence (ECF No. 28) is GRANTED. All extrinsic evidence
submitted by Gemini is stricken and has not been considered by this Court in determining
whether Gemini owed Earth Treks a defense or in determining the scope of that defense
under the coverage limitation endorsements.
A separate Order follows.
__/s/___________________
Richard D. Bennett
United States District Judge

Dated: May 12, 2017

29