Argonaut Great Central Insurance Company v. Valley Village, LLC d/b/a Comfort Inns & Suites Chesterfield et al

Filing 129

MEMORANDUM OPINION - IT IS HEREBY ORDERED that defendant E.N.'s motion to dismiss, or in the alternative, to abstain from judgment is denied. IT IS FURTHER ORDERED that plaintiff's requested declaratory judgment relief is granted in part , and denied in part. The CGL policy, Policy #HM9126562, does not provide coverage with respect to the claims and causes of action asserted by defendant E.N. against Bainsaeid and Valley Village in the underlying lawsuit. The CU policy, Policy #UM B9126562, does not provide coverage with respect to the claims and causes of action asserted by defendant E.N. against Bainsaeid in the underlying lawsuit, but does provide coverage with respect to the claims and causes of action against Valley V illage. Argonaut is not obligated to defend or indemnify Bainsaeid in connection with any claims in the underlying suit. Argonaut is obligated to defend and indemnify Valley Village in the underlying suit pursuant to the CU policy. A separate Judgment shall accompany this Memoradum Opinion. Signed by District Judge Catherine D. Perry on October 9, 2013. (MCB)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
ARGONAUT GREAT CENTRAL
INSURANCE COMPANY,
Plaintiff,
vs.
VALLEY VILLAGE, LLC, d/b/a
COMFORT INN & SUITES
CHESTERFIELD, et al.,
Defendants.

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Case No. 4:10 CV 2247 CDP

MEMORANDUM OPINION
Plaintiff Argonaut Great Central Insurance Company brings this suit for a
declaratory judgment seeking to establish that the claims E.N. brought against Valley
Village, LLC, doing business as Comfort Inns & Suites Chesterfield, in an underlying
state case are not covered by the insurance policies Argonaut issued to Valley Village.
The case is now before me for decision following a bench trial, as well as on defendant
E.N.‟s motion to dismiss, or in the alternative, to abstain from judgment.
On February 25, 2013, I issued a memorandum and order granting in part, and
denying in part, Argonaut‟s motion for summary judgment, and denying E.N.‟s motion
for summary judgment. It has since been established that the supposedly undisputed
evidence provided to me by all parties at the summary judgment stage was inaccurate,
particularly with regard to the dates of the sexual assaults at issue in the underlying

lawsuit. My summary judgment opinion considered two Argonaut policies held by
Valley Village, a Commercial General Liability policy and a Commercial Umbrella
policy. The issue of the dates does not impact my earlier conclusions regarding the
CGL policy—namely, that it does not provide coverage for either of the
incidents—and therefore I will not revisit that issue. Nor will I revisit my earlier
opinion regarding punitive damages, as that also remains unchanged.
On summary judgment, I also held that the CU policy excludes claims relating to
the first sexual assault, leaving only the coverage of the CU policy regarding the
second assault for trial. Summary judgment motions are interlocutory in nature, and
may be reconsidered and revised up until the time a final judgment is entered.
Bancorp Servs., L.L.C. v. Sun Life Assur. Co. of Can., 2011 WL 1599550, at *1 (E. D.
Mo. Apr. 27, 2011) (citing Ideal Instruments, Inc. v. Rivard Instruments, Inc., 434 F.
Supp. 2d 640, 647 (N.D. Iowa 2006)). Under Rule 54(b), “a district court may, in its
discretion, reconsider an interlocutory order to correct any clearly or manifestly
erroneous findings of fact or conclusions of law.” Seubert v. FFE Transp. Servs., Inc.,
2013 WL 827547, at *1 (E.D. Mo. Mar. 6, 2013) (quoting Munroe v. Cont’l W. Ins.
Co., 2012 WL 4358642, at *2 (E.D. Mo. Sept. 24, 2012)). Accordingly, given the
additional, corrected evidence now provided to me, I will consider the coverage of the
CU policy as it pertains to both incidents.

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For the reasons that follow, I will deny E.N.‟s motion to dismiss, or in the
alternative, to abstain from judgment, and I will enter judgment in favor of defendants
Valley Village and E.N. and against Argonaut with respect to the CU policy.
Motion to Dismiss
During the bench trial, defendant E.N. filed a motion to dismiss, or in the
alternative, to abstain from ruling in this declaratory judgment action, arguing that the
same parties and issues are involved in the underlying state court action. “The full
scope of a district court's discretion to grant a stay or abstain from exercising
jurisdiction under the Declaratory Judgment Act differs depending upon whether a
„parallel‟ state court action involving questions of state law is pending.” Lexington
Ins. Co. v. Integrity Land Title Co., Inc., 721 F.3d 958, 967 (8th Cir. 2013) (citing
Scottsdale Ins. Co. v. Detco Indus., Inc., 426 F.3d 994, 999 (8th Cir. 2005)). “Where
such an action is pending, a district court enjoys broad discretion.” Id. It would
ordinarily be “uneconomical as well as vexatious for a federal court to proceed in a
declaratory judgment suit where another suit is pending in a state court presenting the
same issues, not governed by federal law, between the same parties.” Brillhart v.
Excess Ins. Co. of Am., 316 U.S 491, 495 (1942).
If there is no pending parallel state action, discretion to abstain or grant a stay
still exists but is less broad. Lexington, 721 F.3d at 968 (citing Scottsdale, 426 F.3d at
998). The Eighth Circuit has adopted a six factor test to apply in cases with no parallel
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action. The six factors are: (1) whether the declaratory judgment sought “will serve
a useful purpose in clarifying and settling the legal relations in issue”; (2) whether the
declaratory judgment “will terminate and afford relief from the uncertainty, insecurity,
and controversy giving rise to the [federal] proceeding”; (3) “the strength of the state‟s
interest in having the issues raised in the federal declaratory judgment action decided in
the state courts”; (4) “whether the issues raised in the federal action can more
efficiently be resolved in the court in which the state action is pending”; (5) whether
permitting the federal action to go forward would result in unnecessary „entanglement‟
between the federal and state court systems, because of the presence of „overlapping
issues of fact or law‟”; and (6) “whether the declaratory judgment action is being used
merely as a device for „procedural fencing‟—that is, „to provide another forum in a
race for res judicata‟ or „to achiev[e] a federal hearing in a case otherwise not
removable.‟” Scottsdale, 426 F.3d at 998.
Here, the state court suit is brought by E.N. against Valley Village and Nasser
Bainsaeid. It is a liability case with issues that include personal injury and negligence.
This federal declaratory judgment suit, on the other hand, raises issues of coverage and
requires interpretation of the insurance contracts between the parties as well as a
determination of Bainsaeid‟s employment status at the time of the sexual assaults.
While some of the same factual evidence will undoubtedly be relevant, the state court
issues revolve around whether Bainsaeid perpetrated the acts and whether Valley
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Village was negligent in providing for resident safety and handling its employees.
This federal case, on the other hand, is not concerned with Valley Village‟s alleged
deficiencies in allowing the sexual assaults, but rather the nature of Bainsaeid‟s
relationship to Valley Village and whether the assaults are covered under the insurance
policies. Neither the parties nor the issues are the same, and thus the cases are not
parallel.1 See Allstate Ins. Co. v. Garrett, 1 Fed. App‟x 615, 616 (8th Cir. 2001)
(finding no parallel action where the state court case does not consider the scope of the
insurance policies and no indemnity action has been filed).
Furthermore, after applying the six-factor test adopted in Scottsdale, I conclude
that a stay or dismissal is not appropriate in this case. Both factors one and two weigh
in favor of this case's proceeding. A ruling on the coverage issue would clarify the
legal relations between the parties to this suit and would terminate the coverage
dispute. Factors three and four also weigh against a stay. The coverage issues have
not been raised in the state court case, so a determination here would not conflict with
any state court decision. Nor is there any efficiency gained by waiting for the state
court decision, especially considering that the trial has already concluded in this case.
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E.N. argues that other courts have found cases to be parallel even when the insurer was not a named
party in the underlying state suit. Regardless of the parties, the question of insurance coverage was
at issue in all of the underlying cases cited by E.N. See Wilton v. Seven Falls Co., 515 U.S. 277, 280
(1995) (“The Hill Group initiated an action against [Insurer] . . . in state court”); Cincinnati Indem.
Co. v. A & K Const. Co., 542 F.3d 623, 624 (8th Cir. 2008) (“Cincinnati also filed for declaratory
judgment in Missouri state court, requesting interpretation of the same policy at issue here”); Capitol
Indem. Corp. v. Haverfield, 218 F.3d 872, 874 (8th Cir. 2000) (“The Hunts filed with the state court a
Petition to Collect Insurance . . .”). This is not the case here, despite E.N.‟s contention that an
indemnity action may be brought at some future time in the underlying state case.
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Furthermore, since no parallel case is pending in state court, judicial economy is served
by deciding this case here in federal court.
As to factor five, allowing this suit to go forward would not result in
“unnecessary entanglement” between the federal and state court systems. Again, like
Scottsdale, “[a]ny common issues do not hinge on the same questions of law—the state
action sounds in tort and the federal action in contract.” 426 F.3d at 999. This
federal action requires an interpretation of the insurance contract between the parties.
The relevant issue will be whether Bainsaeid was an employee working in the course of
employment at the time of the sexual assaults. The state court action involves issues
of Missouri tort law which will not depend on the same factual determinations. Any
overlapping facts are insignificant and would not create entanglement between the
court systems.
Finally, I find that Argonaut is not using this action as a device for “procedural
fencing,” the concern of factor six. Argonaut is not a named party in the state court
litigation. There is no concern that a judgment here would be used to preclude a
judgment in state court. Therefore, all six factors weigh in favor of this declaratory
judgment suit proceeding.
Findings of Fact
Defendant Valley Village, LLC owns and operates the Comfort Inn & Suites
Chesterfield hotel located at 18375 Chesterfield Airport Road, Chesterfield, Missouri.
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Nasser Bainsaeid was employed as a front desk clerk at the Comfort Inn & Suites
Chesterfield between August 18, 2008 and December 11, 2008. Bainsaeid was
assigned to work the front desk between the hours of 3:00 p.m. and 11:00 p.m. In
September of 2008, E.N., then a 13-year old minor, moved into the Comfort Inn &
Suites Chesterfield with her mother, S.N.
On November 2, 2008, Bainsaeid took E.N. to a hotel room, Room 200 or one or
two down from there, shortly after 11:00 p.m. after he finished his shift at the front
desk. Bainsaeid kissed E.N., performed oral sex on her, and digitally penetrated
E.N.‟s vagina. Bainsaeid attempted sexual intercourse but she told him to stop.
On December 2, 2008, E.N., who was by then fourteen years old, was using the
computer in the hotel lobby when Bainsaeid approached her during his shift at the front
desk, handed her a key to Room 111, and told her to meet him in Room 111 in five
minutes. E.N. entered Room 111, located next to the front desk of the hotel, using the
key Bainsaeid had given her. Approximately five minutes after E.N. entered Room
111, Bainsaeid entered Room 111, bringing with him the cordless telephone from the
front desk. At approximately 8:00 p.m. on December 2, 2008, during Bainsaeid‟s
shift, Bainsaeid and E.N. engaged in oral sex and sexual intercourse in Room 111.
The December 2, 2008 incident ended when the cordless phone for the front desk
phone rang. Bainsaeid answered the call on the cordless phone, got dressed, left
Room 111, and returned to work at the front desk. E.N. got dressed, left Room 111,
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and returned the key card to Bainsaeid at the front desk. Later that evening, E.N.
returned to the front desk to get the key to Room 111 so she could retrieve her glasses
which she had left in Room 111.
Argonaut issued a Commercial General Liability Policy, Policy #HM9126562,
and a Commercial Umbrella Policy, Policy #UMB9126562, to Comfort Inn for the
period of September 1, 2008 to September 1, 2009. The CU policy limited coverage
to Abodily injury@ or Aproperty damage@ caused by an Aoccurrence.@ The CU policy
defined an Aoccurrence@ as Aan accident, including continuous or repeated exposure to
substantially the same general harmful conditions.@ The CU policy also had an
exclusion for A>Bodily injury= or >property damage= expected or intended from the
standpoint of an insured.@ “An insured” under the CU policy included “your
employees . . . but only for acts within the scope of their employment by you.”
Conclusions of Law
This Court has jurisdiction over Argonaut‟s claims under 28 U.S.C. § 1332 and
28 U.S.C. § 2201(a). Missouri contract and agency law provides the basis for my
decision.
The only issue remaining in this case is whether Valley Village=s alleged
negligence regarding the safety of its premises and the hiring, training, and supervision
of Bainsaeid is covered by the CU policy. As discussed in my February 25, 2013
opinion, the claims against Valley Village constitute an Aoccurrence@ or accident under
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the policies. However, the CU policy contains an exclusion for A>Bodily injury= or
>property damage= expected or intended from the standpoint of an insured@ (emphasis
added). This is significant insofar as it means an excluded act of any insured bars
coverage for all insureds. Compare Pac. Ins. Co. v. Catholic Bishop of Spokane, 450
F. Supp. 2d 1186, 1199 (E.D. Wash. 2006) (quoting Unigard Mut. Ins. Co. v. Spokane
Sch. Dist. No. 81, 579 P.2d 1015, 1015 (Wash. Ct. App. 1978) (holding that >the
insured= means the contract between the insurer and several insureds is separable, and
an excluded act of one insured does not bar coverage for additional insureds) with
Hayes v. United Fire & Cas. Co., 3 S.W.3d 853, 859 (Mo. Ct. App. 1999) (holding that
because a policy excluded coverage for intentional acts by Aany insured,@ coverage was
excluded for the negligent party even despite a severability clause elsewhere in the
insurance contract). See also Am. Motorists Ins. Co. v. Moore, 970 S.W.2d 876, 881
(Mo. Ct. App. 1998) (citing Shelter Mut. Ins. Co. v. Brooks, 693 S.W.2d 810, 812 (Mo.
1985) (holding that Aan insured@ and Aany insured@ have the same meaning in the
context of coverage exclusions).
The relevant question, then, is whether Bainsaeid was “an insured” at the time of
each of the two incidents. If he was, then the claim is excluded from coverage because
it is for an injury “expected or intended by an insured.” “An insured” under the CU
policy included “your employees . . . but only for acts within the scope of their
employment by you.” “The course and scope of employment is defined as acts (1)
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which, even though not specifically authorized, are done to further the business or
interests of the employer under his „general authority and direction‟ and (2) which
naturally arise from the performance of the employer's work.” Inman v. Dominguez,
371 S.W.3d 921, 924 (Mo. Ct. App. 2012) (internal quotations and citations removed).
“„Naturally,‟ implies that the employee['s] conduct must be usual, customary and
expected.” Id. (quoting Md. Cas. Co. v. Huger, 728 S.W.2d 574, 579 (Mo. Ct. App.
1987)).
Inman further held that some actions can be “too outrageous and unexpected to
ever be considered within the course and scope of . . . employment.” Id. at 925-26
(citing Wellman v. Pacer Oil Co., 504 S.W.2d 55 (Mo. 1974) (en banc); Noah v. Ziehl,
759 S.W.2d 905 (Mo. Ct. App. 1988)). In Inman, one truck driver stabbed another at a
truck stop because the latter driver (the stabbing victim) had refused to let the first
driver merge in front of him. Id. at 922-23. The stabbing victim sued the first driver,
as well as the company that employed him. Id. The court held that the stabbing was
too outrageous to be considered within the scope of his employment for the trucking
company. Id. at 925-26. Also relied upon by the court was the fact that he acted not
in furtherance of his employer‟s interests, but with a personal goal. Id. at 926 (citing
Noah, 759 S.W.2d at 911).
Such is the case here. Bainsaeid accompanied E.N., a minor girl, to a hotel
room and engaged in various sexual activities with her. That conduct is clearly too
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outrageous and unexpected as to be within the scope of his employment.
Furthermore, he was acting not in furtherance of his employer‟s interests, but with his
own personal interest. It is thus immaterial whether he was “on the clock” at the time
of the incidents. The acts of Bainsaeid were not within the scope of his employment,
and thus he was not “an insured” under the clear terms of the CU policy. Since
Bainsaeid was not “an insured,” the exclusion for intentional acts of an insured does
not apply. I find that the CU policy provides coverage for Valley Village‟s alleged
negligence with regard to both incidents.
Accordingly,
IT IS HEREBY ORDERED that defendant E.N.‟s motion to dismiss, or in the
alternative, to abstain from judgment is denied.
IT IS FURTHER ORDERED that plaintiff‟s requested declaratory judgment
relief is granted in part, and denied in part. The CGL policy, Policy #HM9126562,
does not provide coverage with respect to the claims and causes of action asserted by
defendant E.N. against Bainsaeid and Valley Village in the underlying lawsuit. The
CU policy, Policy #UMB9126562, does not provide coverage with respect to the
claims and causes of action asserted by defendant E.N. against Bainsaeid in the
underlying lawsuit, but does provide coverage with respect to the claims and causes of
action against Valley Village. Argonaut is not obligated to defend or indemnify
Bainsaeid in connection with any claims in the underlying suit. Argonaut is obligated
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to defend and indemnify Valley Village in the underlying suit pursuant to the CU
policy.
A separate Judgment shall accompany this Memorandum Opinion.

CATHERINE D. PERRY
UNITED STATES DISTRICT JUDGE
Dated this 9th day of October, 2013.

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