Employers Mutual Casualty Company v. Raddin et al
Filing
96
ORDER granting 37 Motion for Summary Judgment; denying 50 Motion for declaration of duty to defend and/or declaration of coverage Signed by Honorable David C. Bramlette, III on 3/30/2012 (ECW)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
WESTERN DIVISION
EMPLOYERS MUTUAL CASUALTY COMPANY
VS.
PLAINTIFF
CIVIL ACTION NO. 5:10-cv-137(DCB)(RHW)
CHARLIE RADDIN; JACOB WOODARD;
KYLE CORLEY; BRIAN STEPHENSON;
JEROLD HOLLOWELL; RICHARD DARDEN;
THE YAZOO CITY MEDICAL CLINIC;
AND JOHN DOES 1-20
DEFENDANTS
MEMORANDUM OPINION AND ORDER
This cause is before the Court on the plaintiff Employers
Mutual Casualty Company’s motion for summary judgment (docket entry
37), and on defendant Yazoo City Medical Clinic’s cross motion for
declaration of duty to defend and/or declaration of coverage
(docket entry 50).
Having carefully considered the motions and
responses, the memoranda and the arguments of the parties, as well
as the legal authorities cited therein, and being fully advised in
the premises, the Court finds as follows:
On or about May 26, 2010, Charlie Raddin, Jacob Woodard, Kyle
Corley, Brian Stephenson and John Does 1-20 commenced a civil
action against Richard Darden; Manchester Education Foundation,
Inc.;
Mississippi
Association
of
Independent
Schools,
Inc.
(“MSAIS”); and the Yazoo City Medical Clinic (“the Clinic”) in the
Circuit Court of Yazoo County, Mississippi.
On August 19, 2010, Employers Mutual Casualty Company (“EMC”)
filed its Complaint for Declaratory Judgment in this Court.
On or about December 3, 2010, Charlie Raddin, Jacob Woodard,
Kyle Corley, Brian Stephenson, Jerold Hollowell and John Does 1-20
filed an Amended Complaint against Richard Darden; Manchester;
MSAIS; the Clinic; Dr. William Thompson; Guideone Mutual Insurance
Company;
Insurance
Medical
Assurance
Company
Company
in
the
Circuit
2011,
EMC
filed
of
Mississippi
Court
of
and
Yazoo
Tudor
County,
Mississippi.
On
May
3,
the
Amended
Complaint
for
Declaratory Judgment presently pending before this Court.
The Underlying Amended Complaint in Yazoo County Circuit Court
arises out of allegations that Richard Darden, while he was the
Dean of Students at Manchester Academy (“Manchester”) in Yazoo
City, engaged in acts of “inappropriate misconduct and other
tortious behavior against Plaintiffs.”
The Underlying Amended
Complaint further alleges:
18.
Richard Darden was the dean of students of
Manchester until May 7, 2010.
He had been with the
school for over 25 years. He also acted as a ninth grade
biology teacher and as a coach/“trainer” with the
football team and other sports teams at Manchester.
19.
Plaintiffs will show that on various occasions
throughout Darden’s tenure at Manchester up and until May
7, 2010, that Defendants allowed Darden, through the use
of his power, authority and trust as an administrator,
teacher and coach at Manchester, to engage in wrongful,
illegal, tortious, negligent and otherwise improper
conduct toward Plaintiffs.
20. In support of their claims, Plaintiffs would show
the following:
(a)
That Darden invited Plaintiffs to his home which is
2
located in Yazoo City, Mississippi approximately 1/2 a
mile from Manchester. Many of these invitations were made
at the school by Darden while he was engaged in
instructing the Plaintiffs as students of Manchester;
(b)
That such visits to Darden’s home were allowed,
condoned,
supported,
encouraged
and
ratified
by
Defendants Manchester and the MSAIS;
(c) That Darden had Plaintiffs stay overnight at his
house and engage in other activities giving Darden close
and private access to Plaintiffs and other students;
(d) That Manchester and the MSAIS benefitted from the
use of Darden’s house as a “clubhouse” and/or adjunct
field house for the athletic teams and other male
students;
(e) That Darden and Manchester invited students and, in
particular, athletes to shower at Darden’s house as an
ad-hoc field house for the male sports teams of
Manchester;
(f) That Manchester knew of, encouraged, and benefitted
from the use of Darden’s house as a field house and/or
team room for the school’s male athletic teams. Under
the supervision of Manchester, Darden’s house was used
for numerous team and school functions including
showering after games and practices, team and school
meetings, unlicensed and inappropriate team “physicals,”
and other team and/or school events all sanctioned,
allowed, supervised and ratified by Manchester and the
MSAIS;
(g) That Darden administered unlicensed “physical exams”
and other purported medical “examinations” to Plaintiffs
allowing him to come in direct contact with the
Plaintiffs’
genitalia
at
Darden’s
residence,
at
Manchester, at the offices of the Yazoo City Medical
Clinic and other places. These physicals were conducted
even though Darden had no license to administer the
physicals and was not a licensed physician, licensed
nurse practitioner or licensed athletic trainer.
Plaintiffs and their parents were advised that the
physicals were required to be conducted by Darden in
order for the students to be eligible to participate in
football and in other sports at Manchester;
3
(h) That despite Darden being legally and morally unable
to conduct these physicals, he operated under the
authority of Defendants Manchester, the MSAIS, and the
Yazoo City Medical Clinic in wrongfully examining
Plaintiffs and other students;
(i) That Darden threatened to suspend or otherwise punish
Plaintiffs and other students for school-related behavior
unless they endured private paddlings at Darden’s
residence;
(j) That Darden had inappropriate physical contact with
Plaintiffs in various places, including, but not limited
to, his home, Manchester and the Yazoo City Medical
Clinic;
(k) That unbeknownst to Plaintiffs and other students
who slept, showered and otherwise used Darden’s house as
an adjunct field house/team hang-out, Darden used various
concealed devices and operations to view Plaintiffs and
other students who showered, changed clothes and/or slept
at his private residence on hundreds of occasions. Upon
information and belief, Darden used various covert
methods of viewing Plaintiffs in the nude while
showering, changing clothes and/or sleeping;
(l) That Darden caused the Plaintiffs to be watched,
viewed and otherwise spied upon while they were not
clothed in various places while Plaintiffs were minors
and without their knowledge and consent; and
(m)
That Darden administered numerous improper drug
tests at his home, at the school and at the Yazoo City
Medical Clinic whereby he would watch, view and otherwise
look upon students while they were unclothed and
urinating in a cup.
21. On May 7, 2010, current male students at Manchester
discovered Darden’s secret room in his home and confirmed
it was used to voyeuristically watch minor boys. The
students went public by reporting what they found to
their parents and the authorities. This information,
previously unknown and unknowable to Plaintiffs, alerted
authorities and Plaintiffs of Darden’s actions.
22. Thereafter, Darden resigned from his position with
Manchester amid accusations that he used his position
with the school to voyeuristically invade the privacy of
4
male students who attended Manchester.
Underlying Amended Complaint, ¶¶ 18-22.
The Underlying Amended Complaint further alleges that the
actions and inactions of the Underlying Defendants other than
Darden allowed and emboldened Darden to engage in the allegedly
tortious conduct. Specifically, the Underlying Plaintiffs allege
that Darden was inappropriately viewing them while nude/unclothed,
and
inappropriately
unlicensed
Amended
and
touched
inappropriate
Complaint
sets
forth
their
genitalia
while
conducting
team
physicals.
The
Underlying
the
following
claims:
Count
I:
Invasion of Privacy, Count II: Outrage, Count III: Infliction of
Emotional Distress, Count IV: Battery, Count V: Battery by Improper
Physicals, Count VI: Negligence, Count VII: Negligent Hiring, Count
VIII: Negligent Training, Count IX: Negligent Supervision, Count X:
Negligent Entrustment, Count XI: Negligent Retention, Count XII:
Breach of Contract, and Count XIII: Breach of Fiduciary Duty.
The
claims set forth by the Underlying Plaintiffs arise out of Darden’s
intentional conduct and/or are derivative and interdependent on
Darden’s intentional conduct, and arise out of the remaining
Underlying Defendants’ intentional conduct.
First and foremost, EMC asserts in its Rebuttal Brief that
none of the alleged conduct, including physicals and drug tests,
occurred and/or was committed during the applicable dates of the
EMC policies.
The EMC policies were only in effect from April 15,
5
2005,
through
August
1,
2008.
In
their
responses
to
interrogatories in the Yazoo County Circuit Court proceedings, the
Underlying Plaintiffs state that the examinations complained of
took
place
between
1995
and
2003.
The
Clinic,
also
in
interrogatory responses in the state court proceedings, contend
that Darden performed no examinations at the Clinic after the year
2000.
Therefore, none of the conduct alleged by the Underlying
Plaintiffs could have taken place after 2003; therefore, the EMC
policies do not apply and there is no coverage.
In the alternative, EMC asserts that coverage is not provided
under the subject policies for the underlying claims, because: (1)
the Underlying Amended Complaint does not allege “bodily injury”,
“property damage”, or “personal or advertising injury” as defined
in the policies; (2) the Underlying Amended Complaint does not
allege an “occurrence” as defined in the policies and as governed
by Mississippi law and/or (3) the allegations of the Underlying
Amended Complaint are excluded by the “expected or intended injury”
exclusion, the “professional services” exclusion, and the “abuse or
molestation” exclusion.
From April 15, 2005, through August 1, 2008, the Clinic had in
effect EMC policy numbers 3W2-15-29-06; 3W2-15-29-07; 3W2-15-29-08
and 3W2-15-29-09 at the various times shown on the policies.
The
policies list the Clinic as the named insured and are business
policies.
All of the policies only provide coverage for “bodily
6
injury” or “property damage” if it is caused by an “occurrence,”
which is defined as an “accident.”
In addition, EMC asserts that
all of the policies contain various exclusions which preclude
coverage for the Underlying Plaintiffs’ claims.
As a result of the underlying lawsuit in Yazoo County Circuit
Court,
the
including
lawsuit.
Clinic
defense
EMC
asserted
and
a
claim
indemnity,
contends
that
it
for
for
insurance
the
allegations
investigated
the
benefits,
of
claims
the
in
accordance with the terms of the subject policies and determined
that the Clinic is not owed a defense or indemnification under the
terms of the policies.
EMC has commenced the present declaratory
judgment action seeking judicial confirmation that the underlying
claims are not covered under the EMC policies.
The Federal Rules of Civil Procedure provide that summary
judgment is appropriate when “there is no genuine issue as to any
material fact and that the moving party is entitled to judgment as
a matter of law.”
Fed.R.Civ.P. 56(c).
“The construction and effect of an insurance policy are
matters of law to be decided by the court.”
Jones v. Southern
Marine & Aviation Underwriters, Inc., 888 F.2d 358, 360 (5th Cir.
1989)(citations omitted). Inasmuch as this Court’s jurisdiction is
grounded in diversity, the oft-cited case of Erie Railroad Co. v.
Tompkins, 304 U.S. 64 (1938), commands the Court to employ the
substantive law of the appropriate state to determine the outcome
7
of this dispute.
See Sentry Ins. v. R.J. Weber Co., 2 F.3d 554,
556 (5th Cir. 1993).
Regarding construction of insurance policies, Mississippi law
is clear that an insurance contract, like any other contract, must
be interpreted according to its terms.
Foreman v. Continental
Casualty Co., 770 F.2d 487, 489 (5th Cir. 1985). The interpretation
of an insurance policy is a question of law for the court when the
meaning of the terms is clear and unambiguous.
See Aero Int’l,
Inc. v. United States Fire Ins. Co., 713 F.2d 1106, 1109 (5th Cir.
1983); Reece v. State Farm Fire & Cas. Co., 684 F.Supp. 140, 143
(N.D. Miss. 1987).
“No rule of construction requires or permits
the court to make a contract differing from that made by the
parties
themselves,
or
to
enlarge
an
insurance
company’s
obligations where the provisions of its policy are clear.’” Id. at
489 (quoting State Auto. Mut. Ins. Co. v. Glover, 176 So.2d 256,
258 (Miss. 1965)).
“Where terms of insurance contracts are ambiguous or doubtful,
the contract must be construed most favorably to insured and
against
insurer.
Terms
of
insurance
policies
are
construed
favorably to insured wherever reasonably possible, particularly
exclusion clauses.”
State Farm Mut. Auto. Ins. Co. v. Scitzs, 394
So.2d
(Miss.
1371,
1372
1981).
“A
supplemental
rule
of
construction is that when the provisions of an insurance policy are
subject
to
two
interpretations
8
equally
reasonable,
that
interpretation which gives greater indemnity to the insured will
prevail.” Caldwell v. Hartford Accident & Indemnity Co., 160 So.2d
209 (Miss. 1960).
However, it is also well-settled law that “the special rules
favoring the insured are only applicable when there is an ambiguity
... [and that] courts ought not to strain to find such ambiguities,
if, in so doing, they defeat probable intentions of the parties ...
even when the result is an apparently harsh consequence to the
insured.”
Courts will neither create an ambiguity where none
exists nor make a new contract for the parties.
If the policy
language is clear, unequivocal, and, hence unambiguous, its terms
will be enforced.
Brander v. Nabors, 443 F.Supp. 764, 769 (N.D.
Miss. 1978) (internal citations omitted).
In determining whether an insurance policy is ambiguous,
“[t]he mere fact that policy language requires interpretation does
not render the policy ambiguous.”
Employers Ins. of Wausau v.
Trotter Towing Corp., 834 F.2d 1206, 1210 (5th Cir. 1988) (citations
omitted).
The construction of an insurance contract is limited to
an examination of the “written terms” of the policy itself.
Employers Mut. Casualty Co. v. Nosser, 164 So.2d 426, 430 (Miss.
1964). The policy itself is the sole manifestation of the parties’
intent, and no extrinsic evidence is permitted absent a finding by
a court that the language is ambiguous and cannot be understood
from a reading of the policy as a whole.
9
Cherry v. Anthony, Gibbs,
Sage, 501 So.2d 416, 419 (Miss. 1987). If an insurance contract is
clear and unambiguous, the language therein must be given its plain
meaning.
Gulf Nat’l Bank v. United States Fire Ins. Co., 713 F.2d
1106, 1109 (5th Cir. 1983); see also Putman v. Insurance Co. of
North America, 673 F.Supp. 171, 175 (N.D. Miss. 1987) (“Mississippi
law requires that the words of the contract be given their ordinary
meaning.”) (citing Mississippi Power and Light v. United Gas Pipe
Line, 760 F.2d 618 (5th Cir. 1985)).
The Court must construe the
policy in a manner that effectuates the parties’ intentions.
See
Western Line Consol. School Dist. v. Continental Cas. Co., 632
F.Supp. 295, 302 (N.D. Miss. 1986) (citing Monarch Ins. Co. v.
Cook, 336 So.2d 738, 741 (Miss. 1976)).
The insurance policies issued by EMC only provide coverage for
“bodily injury,” “property damage” and “personal and advertising
injury.”
“Bodily injury” is defined in the policies as “bodily
injury, sickness or disease sustained by a person, including death
resulting
from
any
of
these
at
any
time.”
The
Underlying
Plaintiffs claim that the Underlying Defendants caused them to
suffer “mental anguish, pain, suffering, duress, nervousness,
depression, anxiety, embarrassment, humiliation and economic losses
in the past and Plaintiffs will experience mental anguish, pain,
suffering, duress, nervousness, depression, anxiety, embarrassment,
humiliation and economic losses in the future as a result of [the
Underlying] Defendants’ actions.” Underlying Amended Complaint, ¶¶
10
30, 38, 45, 50, 56, 65, 71, 81, 91, 101, 111, 121 and 135.
The
Underlying Plaintiffs do not allege that they received any “bodily
injury” as it is defined in the EMC policies.
Allegations of mental/psychological and emotional injuries by
themselves do not qualify as “bodily injury.”
In Travelers Indem.
Co. v. Holloway, 17 F.3d 113 (5th Cir. 1994), the Fifth Circuit,
relying on its own interpretation of an insurance policy in the
absence of Texas precedent, construed a policy defining “bodily
injury” as “bodily injury, sickness or disease, including death
resulting therefrom, sustained by any person.”
court
found
that
where
the
complaint
Id. at 115.
alleged
extreme
The
pain,
suffering, emotional anguish, and emotional trauma, the phrase
“bodily injury” unambiguously excluded the types of non-physical
injuries asserted.
Id.
In 1996, the district court for the Northern District of
Mississippi confronted the issue in Siciliano v. Hudson, 1996 WL
407562 (N.D. Miss. April 3, 1996). The policy in that case defined
“bodily injury” as “bodily harm sickness or disease, including
required care, loss of services and death resulting therefrom.”
Id. at *5.
Finding no Mississippi Supreme Court case addressing
the issue, the court relied on the Fifth Circuit’s reasoning in
Holloway, as well as “the explications of the overwhelming majority
of other states,” in holding that to qualify as “bodily injury”
under an insurance policy, there must be some allegation of
11
physical injury to the body; therefore, mental anguish and mental
damages are not included within the definition of “bodily injury.”
Id. at *6-7.
In 1999, the Mississippi Supreme Court decided Lincoln County
School District v. Doe, 749 So.2d 943 (Miss. 1999).
In this case,
the court found that “claims for emotional distress, pain and
suffering, fear of contracting a dangerous and/or deadly disease,
and humiliation ... are in the nature of emotional and intangible
injuries and do not fall within the policy’s definition of ‘bodily
injury,’ which clearly applies only to physical injuries, including
sickness and disease.”
Id. at 945-46.
No allegations of physical injury to the body are made in the
Underlying Amended Complaint.
Even Darden’s unwanted touching of
the Underlying Plaintiffs would not constitute “bodily injury.”
The Underlying Plaintiffs allege that Darden touched them when he
conducted
unlicensed
physical
exams;
however,
the
Underlying
Amended Complaint does not contain any allegations that Darden’s
touching of the Underlying Plaintiffs actually caused them to
suffer
“bodily
Underlying
injury.”
injury.”
Plaintiffs
by
Darden’s
itself
unwanted
does
not
touching
constitute
of
the
“bodily
See American Nat’l Gen. Ins. v. Jackson, 203 F.Supp.2d
674, 677 (S.D. Miss. 2001)(allegations of unwanted sexual touching
do
not
qualify
as
“bodily
insurance coverage”).
injury
for
purposes
of
liability
Since the Underlying Plaintiffs have not
12
presented an injury within the “bodily injury” provisions of the
EMC policies, the Court finds that EMC has no duty to indemnify or
defend these claims.
“Property
Damage”
is
defined
in
the
EMC
policies
as
“[p]hysical injury to tangible property, including all resulting
loss
of
use
Complaint,
of
the
that
property.”
Underlying
In
Plaintiffs
the
Underlying
allege
that
the
Amended
Clinic
breached its contract with the plaintiffs to provide them with a
quality
licensed
environment.
physical
examination
in
a
safe
comfortable
As a result, the Underlying Plaintiffs claim that
they have suffered economic loss. Underlying Amended Complaint, ¶¶
122-127 and 128-135.
However, the Underlying Plaintiffs do not
claim that the alleged breach of contract resulted in any physical
damage to tangible property or loss of use of that property.
Rather, the Underlying Plaintiffs assert that they have only
suffered economic loss.
Breach of contract claims resulting in
pure economic loss, without physical damage to property, are
pecuniary in nature and do not constitute “property damage.”
Audubon Ins. Co. v. Stefancik 98 F.Supp.2d 751, 756 (S.D. Miss.
1999).
Accordingly, the Underlying Plaintiffs’ claims for breach
of contract resulting in pure economic loss do not constitute
“property damage” within the meaning of the EMC policies.
In addition to requiring an allegation of a covered injury,
the EMC policies also limit coverage to “bodily injury” and/or
13
“property damage” caused by an “occurrence.”
The policies define
“occurrence” as “an accident, including continuous or repeated
exposure to substantially the same general harmful conditions.”
Thus, the policies require that the Underlying Plaintiffs allege an
“occurrence” (i.e. an accident) before coverage is available.
In interpreting the “occurrence” provision, the Mississippi
Supreme Court has instructed that the focus is on the act alleged
and not on whatever unintended damages flowed from that act.
Architex Association, Inc. v. Scottsdale Insurance Company, 27
So.3d 1148, 1153-54 (Miss. 2002)(in determining whether there has
been
an
“occurrence,”
“[t]he
only
relevant
consideration
is
whether, according to the declaration, the chain of events leading
up to the injuries complained of were set in motion and followed a
course consciously devised and controlled by [the insured] without
the unexpected intervention of any third person or extrinsic
force”).
Nor
does
Mississippi
law
recognize
intentional
or
deliberate acts as “occurrences,” even if the insured did not
intend the resulting harm. Acceptance Ins. Co. v. Powe Timber Co.,
Inc., 403 F.Supp.2d 552, 555 (S.D. Miss. 2005).
The Underlying Plaintiffs’ allegations all originate from,
inter alia, Richard Darden’s alleged intentional administration of
improper drug tests, intentional administration of unlicensed
physical examinations, intentional touching of the Underlying
Plaintiffs’ genitalia and intentional viewing of them while they
14
were undressed.
The allegations against the Underlying Defendants
who are not alleged to have actually participated in touching the
Underlying Plaintiffs’ genitalia and intentionally viewing them
while they were nude/unclothed are entirely derivative of Darden’s
alleged intentional sexual misconduct.
The alleged actions of the
Clinic independent of those of Darden also constitute intentional
conduct.
Accordingly, the allegations of the Underlying Amended
Complaint fail to allege an “occurrence” as required by the
policies.
The Underlying Plaintiffs allege that Darden’s intentional
actions invaded their right to privacy, were outrageous, and caused
the Underlying Plaintiffs various psychological injuries.
The
Underlying Plaintiffs also allege that the Clinic negligently
allowed and ratified Darden’s conduct by its actions.
Darden’s
intentional actions do not constitute an “occurrence” and are
clearly excluded under the terms and conditions of the policies.
Although the Underlying Plaintiffs allege “negligence” against the
Clinic, all of the conduct from which the alleged damages arose was
allegedly intentional and not accidental.
“[U]nder Mississippi law, the duty of an insurer to defend its
insured
against
legal
claims
asserted
by
a
third
determined by the allegations in the ... complaint.”
party
is
Employers
Reinsurance Corp. v. Martin, Gordon & Jones, Inc., 767 F.Supp.
1355, 1359-60 (N.D. Miss. 1991). “However it is the facts alleged,
15
not the pleader’s legal conclusions, that are relevant to the
insurer’s duty to defend.”
Id.
In this case, the underlying
allegations of “negligence” against the Clinic do not correspond
with any factual allegation of accidental conduct.
The factual
allegations
intentional
strictly
relate
to
Darden’s
alleged
administration of improper drug tests, intentional administration
of unlicensed physical examinations, intentional touching of the
Underlying Plaintiffs’ genitalia, and intentional viewing of them
while they were nude.
Under Mississippi law, negligence is not
synonymous with “accident.”
[I]t would make no difference whether appellant’s acts
were prompted by malice or negligence, or some other
motivating force.
The only relevant consideration is
whether, according to the declaration, the chain of
events leading up to the injuries complained of were set
in motion and followed a course consciously devised and
controlled by [the insured] without the unexpected
intervention of any third person or extrinsic force.
Allstate Ins. Co. v. Moulton, 464 So.2d 507, 509 (Miss. 1985).
The Underlying Amended Complaint alleges that the Clinic
allowed Darden to conduct unlicensed physicals and improper drug
tests, and that it knew or should have known that the physicals and
drug tests were being administered.
There are no allegations that
the Clinic accidentally allowed the physicals and drug tests to
occur.
To the extent there was a mistake or accident on the
Clinic’s part, it would appear to have been a mistake in believing
that Richard Darden was licensed to conduct physicals and/or drug
tests.
Nevertheless, the Clinic is alleged to have intended to
16
allow Darden to conduct the physicals and/or drug tests on the
Underlying Plaintiffs.
Because the Clinic’s actions were “set in
motion and followed a course consciously devised and controlled by
[the Clinic] without the unexpected intervention of any third
person or extrinsic force,” there is no “occurrence.”
See United
States Fidelity & Guaranty Co. v. Omnibank, 812 So.2d 196, 201
(Miss. 2002).
Therefore, the Underlying Plaintiffs’ claims of
invasion of privacy, outrage, and infliction of emotional distress
do not constitute “occurrences.”
In the Underlying Amended Complaint, the Underlying Plaintiffs
assert that they were battered by Darden’s actions in conducting
unauthorized/unlicensed physicals on them.
The alleged battery
allegations all arise out of Darden’s alleged sexual misconduct in
touching the Underlying Plaintiffs’ genitalia.
Under Mississippi
law, sexual abuse is an inherently injurious act as to which the
law will infer intent. Thus, regardless of how the allegations are
worded in a particular complaint, sexual abuse will be considered
intentional conduct.
American Manufacturers Mut. Ins. Co. v.
Stallworth, 433 F.Supp.2d 767, 772 (S.D. Miss. 2006).
The alleged
actions of Darden in intentionally spying on the plaintiffs and
conducting unlicensed physical examinations would have been actions
that Darden intended, set in motion, and/or consciously planned.
Thus, his alleged acts would not constitute “occurrences.”
The
Underlying Plaintiffs further allege that the Clinic and the
17
remaining Underlying Defendants negligently allowed and ratified
Darden’s conduct.
These alleged acts would likewise not be
considered an “occurrence” under Mississippi law since they require
intent,
and
would
be
non-accidental
conduct.
See
Employers
Reinsurance Corp., 767 F.Supp. at 1359-60.
In Counts VI through XI of the Underlying Amended Complaint,
the Underlying Plaintiffs assert that the remaining defendants are
liable for Darden’s actions as a result of their negligence,
negligent
hiring,
negligent
negligent
entrustment
and
training,
negligent
negligent
retention.
supervision,
In
American
Guarantee and Liability Ins. Co. v. 1906 Co., 129 F.3d 802 (5th Cir.
1997), the Fifth Circuit Court of Appeals considered a Mississippi
case in which a photographer had surreptitiously videotaped young
women dressing and undressing in his studio dressing room.
When
his actions were discovered, 21 women filed lawsuits against the
photographer alleging various causes of action, including invasion
of privacy, outrage, intentional infliction of emotional distress,
fraud, negligence, and exploitation of minors. The complaints also
included
allegations
that
the
photographer’s
employer
was
vicariously liable for his actions and for its own negligence in
hiring, supervising and entrusting the photographer with equipment
owned by the company.
The Fifth Circuit recognized that the
underlying action of the photographer was clearly intentional and
excluded by the insurance policy.
18
The court further recognized
that, although no Mississippi Supreme Court case had addressed the
issue, the Fifth Circuit, in applying the law of neighboring
jurisdictions, had repeatedly held that there is no coverage for an
employer or supervisory personnel for claims of negligent hiring or
supervision when the underlying tortious conduct is intentional.
The court held:
Although we have found no Mississippi cases addressing
this issue, this Court, in applying the law of
neighboring jurisdictions, has repeatedly rejected [the]
argument [that there is coverage]. These cases hold that
no coverage is provided the employer or supervisory
personnel for claims of negligent hiring or supervision
when the underlying tortious conduct is intentional and
when those claims against the employer or supervisor are
related to and are interdependent on the employee’s
intentional misconduct. See Cornhill Insurance PLC. v.
Valsamis, Inc., 106 F.3d 880, 87 (5th Cir. 1997)(“[W]here
liability premised on negligence is related to and
interdependent of other tortious activities, the
‘ultimate issue’ is whether the tortious activities
themselves
are
encompassed
by
the
‘occurrence’
definition.”); New York Life Ins. v. Travelers Ins. Co.,
92 F.3d 336, 339 (5th Cir. 1996) (excluding claims for
negligent hiring, training, and supervision against
employer that were “related to” and “interdependent on”
claim of fraud by employee because employee’s intent is
imputed to employer); Canutillo Indep. Sch. Dist. v.
Nat’l Union Fire Ins. Co., 99 F.3d 695, 703 (5th Cir.
1996)(“Where the legal claims asserted by the plaintiffs
are not independent and mutually exclusive, but rather
related to and dependent upon excluded conduct, the
claims are not covered, even if asserted against an
insured who did not himself engage in the prohibited
conduct.”); Old Republic Ins. Co. v. Comprehensive Health
Care Assoc., Inc., 786 F.Supp. 629, 632 (N.D. Tex. 1992),
aff’d on other grounds, 2 F.3d 105 (5th Cir.
1993)(finding no duty to defend insured against claim of
negligent hiring when the claim of negligent hiring
arises out of agent’s intentional sexual harassment);
Columbia Mut. Ins. Co. v. Fiesta Mart, Inc., 987 F.2d
1124,1128 (5th Cir. 1993)(holding that under Texas law,
where liability of insured and liability of its agent
19
were “related and interdependent,” court must look to
whether agent’s fraud was covered by policy); Huey T.
Littleton Claims, Inc. v. Employers Reinsurance Corp.,
933 F.2d 337, 339 (5th Cir. 1991)(holding that under
Louisiana law, dishonest act exclusion in employer’s
commercial liability policy excluded negligence and
vicarious liability claims against employer for losses
based upon the excluded conduct of its employee).
Id. at 809.
The Fifth Circuit then predicted that the Mississippi
Supreme Court would hold that such related or interdependent claims
would be excluded from coverage:
Although a close question, we conclude that Mississippi
courts would likely follow the lead of neighboring
jurisdictions and hold that where negligence claims
against an employer, such as negligent hiring, negligent
training, and negligent entrustment, are related to and
interdependent on the intentional misconduct of an
employee, the “ultimate question” for coverage purposes
is whether the employee’s intentional misconduct itself
falls within the definition of an occurrence.
As we
explained in New York Life, the issue turns largely on
principles of agency and imputed intent. See 92 F.3d at
340-41 (“Fiesta Mart resolves . . . whether an agent’s
intent or expectations will be imputed to a principal,”
and holds that “[w]hen an agent intends or expects an
injury, such intent and knowledge will be imputed to the
principal for purposes of determining whether there is an
occurrence.”). We believe Mississippi courts would apply
these same principles in resolving the issue.
Id. at 810. See also Meyers v. Miss. Ins. Guaranty Assn., 883 So.2d
10,
16
(Miss.
2004)(finding
that
controlling
case
law
in
Mississippi is clear: claims of negligent entrustment, negligent
supervision, and failure to train will not be recognized as
independent acts of negligence sufficient to allow coverage under
insurance policies and that “[m]ore broadly, application of the
exclusion is not dependent on the theory of liability asserted.”)
20
Even
if
the
Underlying
Defendants
are
not
employers
or
supervisors of Darden, claims of negligent entrustment, negligent
supervision,
and
“occurrences.”
319
(5th
failure
to
train
are
not
recognized
as
In American Nat’l Gen. Ins. Co. v. Ryan, 274 F.3d
Cir.
2001),
Linda
Isbell
sued
Charlotte
Ryan
for
negligently failing to warn her of her minor son’s proclivity to
molest children.
The court held, “where a third-party’s liability
is related to and interdependent on other tortious activities, the
ultimate issue [in determining coverage] is whether the underlying
tortious
activities
are
encompassed
within
the
definition
of
‘occurrence.’” Id. at 325 (quoting American States Ins. Co. v.
Bailey, 133 F.3d 363, 371 (5th Cir. 1988)).
Ryan holds that an
occurrence-based policy provides no coverage to any third party for
claims related to and interdependent on intentional conduct.
Id.
at 325.
In
this
negligence,
case,
the
negligent
Underlying
hiring,
Plaintiffs’
negligent
allegations
training,
of
negligent
supervision, negligent entrustment and negligent retention are
interdependent on Darden’s intentional actions in touching the
Underlying Plaintiffs genitalia and viewing them while undressed
and therefore do not constitute an “occurrence.”
The EMC policies also provide coverage for “personal and
advertising injury.”
“Personal and advertising injury” is defined
by the policies as follows:
21
“Personal and advertising injury” means injury, including
consequential “bodily injury”, arising out of one or more
of the following offenses:
a. False arrest, detention or imprisonment;
b. Malicious prosecution;
c. The wrongful eviction from, wrongful entry into, or
invasion of the right of private occupancy of a room,
dwelling or premises that a person occupies, committed by
or on behalf of its owner, landlord or lessor;
d. Oral or written publication, in any manner, of
material that slanders or libels a person or organization
or disparages a person’s or organization’s goods,
products or services;
e. Oral or written publication, in any manner,
material that violates a person’s right of privacy;
f. The use of another’s
“advertisement”; or
advertising
idea
in
of
your
g. Infringing upon another’s copyright, trade dress or
slogan in your “advertisement”.
The Underlying Plaintiffs have alleged a claim for invasion of
privacy; however, the claim for invasion of privacy does not
constitute a claim for “personal injury” under the policies. There
is only coverage for the invasion of privacy under the EMC policies
if it arises out of the oral or written publication of material.
In this case, the Underlying Plaintiffs’ claims for invasion of
privacy do not involve any alleged written or oral publication of
material. Neither Darden nor the Underlying Defendants are alleged
to
have
published
Plaintiffs.
any
material
relating
to
the
Underlying
Accordingly, the policies issued to the Clinic do not
provide a duty to defend or indemnify the Underlying Plaintiffs for
22
their claim of invasion of privacy.
In paragraphs 151 through 164 of the Underlying Amended
Compliant, the Underlying Plaintiffs claim that they have alleged
“personal injury” arising out of the invasion of their right of
private occupancy of the private visitor rooms at the Clinic.
The
EMC policies issued to the Clinic state that EMC “will pay those
sums that the insured becomes legally obligated to pay as damages
because of ... ‘personal and advertising injury’ ... caused by an
offense arising out of your business, but only if the offense was
committed ... during the policy period.” “Personal and advertising
injury” is defined as: “injury, including consequential ‘bodily
injury’ arising out of ... [t]he wrongful eviction from ... or
invasion of the right of private occupancy of a room ... committed
by or on behalf of its owner, landlord or lessor.”
Similar
allegations were asserted against an employer in 1906 Co., in which
the Fifth Circuit concluded that the policy would only provide a
duty to defend and indemnify the plaintiffs if, inter alia, the
alleged invasion of the right of private occupancy was committed
during the policy period.
The court stated, “[u]nder Mississippi
law, the tort of invasion of privacy accrues when the plaintiff
discovers or through exercise of reasonable diligence should have
discovered the invasion.”
Roman
Catholic
Church,
273 F.3d at 618 (citing Tichhenor v.
32
F.3d
953,
962
(5th
Cir.
1994)
(acknowledging Mississippi’s application of the discovery rule to
23
invasions
of
privacy
involving
“inherently
undiscoverable”
injury)).
In 1906 Co., a handful of plaintiffs claimed that they
were taped in 1990, but did not discover that their right to
privacy was violated until 1991.
The court determined that their
claims did not accrue until 1991, as that was the time that they
actually
discovered
the
invasion
of
their
right
to
private
occupancy of a room.
In the Underlying Amended Complaint, the Underlying Plaintiffs
claim that throughout Darden’s tenure at Manchester Academy, the
Clinic allowed Darden to engage in wrongful and illegal acts.
Underlying Amended Complaint, ¶ 19.
The Underlying Plaintiffs
assert that they first discovered that Darden was voyeuristically
watching minor boys on May 7, 2010. Pursuant to the discovery rule
set forth in 1906 Co., the Underlying Plaintiffs’ claim for
invasion of the right to private occupancy of the visitors rooms at
the Clinic did not accrue until May 7, 2010 – the time they first
discovered Darden’s tortious actions.
Therefore, the Underlying
Plaintiffs’ claim for invasion of the right to private occupancy
would only accrue under an EMC policy in effect on May 7, 2010.
However, the Clinic did not have an insurance policy in effect on
May 7, 2010.
EMC insured the Clinic from April 15, 2005, until
August 1, 2008.
of
State’s
In addition, records of the Mississippi Secretary
office
reveal
that
the
Yazoo
Medical
Clinic
was
administratively dissolved on December 22, 2009, and therefore was
24
not in existence on May 7, 2010.
There is therefore no duty to
defend or indemnify the Clinic for the allegation of invasion of
the right of private occupancy.
The policies also contain an “expected or intended injury”
exclusion which states that, “[t]his insurance does not apply to
‘bodily injury’ or ‘property damage’ expected or intended from the
standpoint of the insured.
The Underlying Amended Complaint
alleges that all of the Underlying Defendants knew or should have
known
of
conduct.
Darden’s
actions
and
allowed
and
ratified
Darden’s
Underlying Amended Complaint, ¶¶ 17, 20, 28, 36, 44, 48,
54, 59, 60, 63, 66, 69, 75, 85, 95, 105, 115 and 126.
Mississippi
Supreme
Court
recognizes
the
validity
of
The
policy
provisions excluding coverage for injuries intended by the insured.
In determining whether the intentional injury exclusion applies,
Mississippi Courts look to the act as well as the consequences of
the act.
In Lewis v. Allstate Ins. Co., 730 So.2d 65 (Miss. 1998),
the court noted that in Mississippi, “[an] act is intentional if
the actor desires to cause the consequences of his act, or believes
that the consequences are substantially certain to result from it.”
All of the allegations asserted against the remaining Underlying
Defendants
assert
acts
which,
it
is
alleged,
the
Underlying
Defendants knew would either cause the Underlying Plaintiffs to
sustain damage or that damage to the Underlying Plaintiffs was
substantially certain to follow.
Underlying Amended Complaint, ¶¶
25
20, 59, 60, 66, 75, 85, 95, 105 and 115.
If the Underlying
Defendants knew about the sexual misconduct as alleged, they would
certainly
know
Plaintiffs.
that
damages
Accordingly,
the
would
result
“expected
to
and
the
Underlying
intended
injury”
exclusion of the policies containing the exclusion applies as an
additional basis for no coverage.
The policies also contain a “professional services” exclusion
which states that, “[t]his insurance does not apply to ‘bodily
injury,’ ‘property damage’ or ‘personal and advertising injury’
caused by the rendering or failure to render any professional
services.
This includes but is not limited to: ... [m]edical ...
or nursing services treatment ... [or] any health or therapeutic
service treatment, advice or instruction.”
The Underlying Amended
Complaint alleges that the Underlying Defendants allowed Darden to
render professional medical or nursing services (sports physicals
and drug tests) without being properly licensed.
Amended Complaint, ¶ 20.
claim various damages.
Underlying
As a result, the Underlying Plaintiffs
Id., ¶ 50.
The administration of medical
sports physicals/drug tests falls under the policy’s exclusion for
“professional services,” since it is medical/nursing treatment,
advice and/or instruction.
In fact, the Underlying Plaintiffs
assert that the physicals are a medical examination that should
have only been rendered by a licensed physician, nurse or athletic
trainer.
Id. at ¶ 20.
Accordingly, the “professional services”
26
exclusion contained in the EMC policies applies as an additional
basis for no coverage.
Finally, the Abuse or Molestation Exclusion Endorsement to
policy 3W2-15-29-09 modifies the Businessowners Coverage Form by
adding an exclusion to the “bodily injury,” “property damage,” and
“personal
and
endorsement
advertising
excludes
injury”
injuries
coverage
arising
out
provisions.
of
the
This
“actual
or
threatened abuse or molestation by anyone of any person while in
the care, custody or control of any insured.” In addition, the
endorsement
excludes
injury
arising
out
of
the
negligent
employment, investigation, supervision, reporting and retention of
a person for whom any insured is or ever was legally responsible.
In this case, the Underlying Plaintiffs’ allegations all originate
from, inter alia, Richard Darden’s alleged abuse of the Underlying
Plaintiffs by touching their genitalia and viewing them while
unclothed.
Darden’s alleged misconduct amounts to actual or
threatened
abuse
or
molestation.
The
“abuse
or
molestation
exclusion” endorsement applies to the actual or threatened abuse or
molestation by “anyone” of any person.
“anyone.”
Darden would be considered
In order for the exclusion to apply, the alleged abuse
or molestation must also happen while the person is in the care,
custody and control of the insured.
In this case, it is alleged
that the physicals were conducted by Darden while at the Clinic and
at his home.
The exclusion is applicable to any harm caused by the
27
physicals that were conducted by Darden while at the Clinic.
The
Underlying Plaintiffs were in the care, custody and control of the
Clinic and Darden when the alleged abuse took place.
Thus the
allegations of the Underlying Amended Complaint fit squarely within
the “abuse or molestation exclusion” endorsement. Accordingly, the
“abuse
or
molestation
exclusion”
endorsement
applies
as
an
additional basis for no coverage.
Under Mississippi law, it is well established that whether an
insurer has a duty to defend an insured is determined by the
allegations
of
the
Complaint,
and
the
insurer
only
has
an
obligation to defend when the pleadings state facts which bring the
injury within coverage under the policy.
See Southern Farm Bureau
Cas. Ins. Co. v. Logan, 119 So.2d 268, 271 (Miss. 1960); State Farm
Mut.
Auto.
Ins.
Co.
v.
Taylor,
233
So.2d
805
(Miss.
1970);
Employers Reinsurance Corp., 767 F.Supp. at 1360 (“only if the
pleadings state facts ‘bringing the injury within the coverage of
the policy’ must the insurer defend”).
The
Court
finds
that
the
policy
language
is
clear
and
unambiguous, and that the Court’s construction of the policies
effectuates the parties’ intentions. Therefore, EMC is entitled to
summary judgment.
Accordingly,
IT IS HEREBY ORDERED that the plaintiff Employers Mutual
Casualty Company’s motion for summary judgment (docket entry 37) is
GRANTED;
28
FURTHER ORDERED that defendant Yazoo City Medical Clinic’s
cross motion for declaration of duty to defend and/or declaration
of coverage (docket entry 50) is DENIED;
FURTHER ORDERED that the plaintiff is granted a declaratory
judgment as follows:
The wrongful acts complained of in the Underlying Amended
Complaint, and/or their discovery, are outside the policy periods
of the EMC policies;
The Underlying Amended Complaint (1) does not allege “bodily
injury,” “property damage,” or “personal or advertising injury” as
defined in the EMC policies; (2) does not allege an “occurrence” as
defined in the EMC policies and as governed by Mississippi law;
and/or (3) the allegations of the Underlying Amended Complaint are
excluded by the “expected or intended injury” exclusion, the
“professional services” exclusion, and the “abuse or molestation”
exclusion.
A separate final judgment shall follow in accordance with Rule
58 of the Federal Rules of Civil Procedure.
SO ORDERED, this the 30th day of March, 2012.
/s/ David Bramlette
UNITED STATES DISTRICT JUDGE
29
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