ARCH SPECIALTY INSURANCE COMPANY v. HEDRICK et al
Filing
42
MEMORANDUM OPINION AND ORDER. Signed by JUDGE THOMAS D. SCHROEDER on 11/21/2014, that Arch's motion for summary judgment (Doc. 23 ) is GRANTED, Hedrick's motion for summary judgment (Doc. 33 ) is DENIED, and Arch's motions to stay (Doc. 25 ) and bifurcate (Doc. 21 ) are DENIED as moot. This case is DISMISSED WITH PREJUDICE. (Daniel, J)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
ARCH SPECIALTY INSURANCE
COMPANY,
)
)
)
)
)
)
)
)
)
)
)
)
Plaintiff,
v.
TRAVIS HEDRICK and TALLEY
RESTAURANTS, INC., d/b/a
INFERNO,
Defendants.
1:13cv621
MEMORANDUM OPINION AND ORDER
THOMAS D. SCHROEDER, District Judge.
This
is
a
declaratory
judgment
action
by
insurer
Arch
Specialty Insurance Company (“Arch”) against its insured, Talley
Restaurants, Inc., d/b/a Inferno, and Travis Hedrick, Inferno’s
patron.
Several motions are before the court, but the principal
questions arise from the cross-motions for summary judgment by
Arch and Hedrick.
is
whether
(Docs. 23, 33.)
Hedrick’s
injuries
The heart of the disagreement
and
damages
stemming
from
his
physical expulsion from Inferno by its security employees fall
within the applicable limits of the assault and battery endorsement
to the club’s insurance policy with Arch.
For the reasons set
forth below, the court finds that they do.
Consequently, Arch’s
motion for summary judgment will be granted, Hedrick’s motion will
be denied, and the remaining motions will be denied as moot.
I.
BACKGROUND
The undisputed facts are as follows:
A.
The Incident
Around midnight on April 22, 2009, Hedrick and his companion,
Phillip Westmoreland, were patrons of Inferno, a nightclub in
Greensboro, North Carolina.
2.) 1
(Doc. 1-8, “Underlying Judgment,” at
Inferno at that time was owned and operated by Defendant
Talley Restaurants, Inc.
(Id.)
Westmoreland got involved in a
“fist fight,” and he and Hedrick were ejected from the club by
Inferno employees.
(Id.)
While ejecting Hedrick, one employee
put him in a headlock and eventually dropped him to the cement
floor, which Hedrick’s head hit. (Id.) Inferno staff then dragged
Hedrick out of the nightclub and apparently left him outside, where
he was found by a passerby who called for emergency aid.
(Id.)
The actions of the Inferno employees caused Hedrick
life-threatening injuries, including a major concussion,
bleeding of the brain resulting in head surgery (twice),
being in an extended coma, large medical bills, pain and
suffering, loss of income, and permanent injury
including having seizures to which he is subject to for
life as well as speech problems, loss of motor mechanical
ability, numbness on the surface of the skin, and
permanent scarring together with other major permanent
medical complications.
1
Both parties have authenticated and tendered the Underlying Judgment
from the State court as an exhibit in their pleadings, and the parties
have relied upon its findings of fact in their briefs to this court. No
party disputes the accuracy of the State court’s findings of fact; their
disagreement is over whether additional facts alleged in the State-court
complaint ought to be considered. (See Doc. 1-8; Answer ¶ 11; Doc. 61; Doc. 24 at 2 & n.3; Doc. 34 at 1.)
2
(Id. at 3.)
B.
The Insurance Policy
Prior to this incident, Inferno had purchased a commercial
general liability insurance policy from Arch.
Policy”).)
(Doc. 1-1 (“Ins.
In the policy, Arch promised to defend Inferno against
and indemnify it for lawsuits seeking damages for bodily injury:
We will pay those sums that the insured becomes legally
obligated to pay as damages because of “bodily injury”
or “property damage” to which this insurance applies.
We will have the right and duty to defend the insured
against any “suit” seeking those damages. However, we
will have no duty to defend the insured against any
“suit” seeking damages for “bodily injury” or “property
damage” to which this insurance does not apply. We may,
at our discretion, investigate any “occurrence” and
settle any claim or “suit” that may result.
(Id. at 6.)
that
takes
“Bodily injury” must be “caused by an ‘occurrence’
place
in
the
‘coverage
territory.’”
(Id.)
An
“occurrence” means “an accident, including continuous or repeated
exposure to substantially the same general harmful conditions.”
(Id. at 19.)
The general policy coverage provides up to $1 million
per occurrence and up to $2 million aggregate coverage for claims
falling within these coverage provisions.
(Id. at 4.)
These duties to defend and indemnify are subject to the
following limitations:
(1) The amount we will pay for damages is limited as
described in Section III – Limits Of Insurance; and
(2) Our right and duty to defend ends when we have used
up the applicable limit of insurance in the payment of
3
judgment or settlements under Coverages A or B or medical
expenses under Coverage C.
(Id.)
payments
Further, an endorsement (00ML0207001103) provided that
made
for
attorneys’
fees
in
defense
of
claims
settlements will reduce the applicable limits of insurance.
at
34.)
This
endorsement
rendered
the
insurance
policy
and
(Id.
one
commonly referred to as an “eroding limits” or “self-consuming”
policy.
See generally James M. Fischer, Insurer or Policyholder
Control of the Defense and the Duty to Fund Settlements, 2 Nev.
L.J. 1, 7 n.15 (2002).
As part of the policy, Arch and Inferno also agreed to an
assault and battery coverage endorsement, which limits the amount
that Arch could be required to pay under the policy for damages
“arising out of or resulting from” an assault or battery:
A.
The following provision is added to SECTION III –
LIMITS OF INSURANCE of both the LIQUOR LIABILITY
and the COMMERCIAL GENERAL LIABILITY COVERAGE
FORMS:
The Assault and Battery Aggregate Limit is the most
we will pay for all:
1.
“injury” arising out of “assault and/or
battery” as the result of the selling,
servicing
or
furnishing
of
alcoholic
beverages; and/or
2.
damages
because
of
“bodily
injury”
or
“property
damage”
and
medical
expenses
attendant thereto, arising out of “assault
and/or
battery”
as
the
result
of
all
“occurrences”; and/or
4
3.
damages because of all “personal injury”
arising out of “assault and/or battery”
sustained during the policy period.
(Ins. Policy at 31.)
The endorsement set the “Assault and Battery
Aggregate Limit” at $100,000 for such damages sustained during the
policy period.
(Id.)
Under the endorsement, the term “assault
and/or battery” means:
1.
actual or threatened assault or battery whether
caused by or at the instigation or direction of any
insured, his “employees”, patrons or any other person;
2.
the failure of any insured or anyone else for whom
any insured is legally responsible to prevent or
suppress assault or battery;
3.
the negligent:
a.
b.
c.
d.
e.
employment;
investigation;
supervision;
training; or
retention
of a person for whom any insured is or ever was legally
responsible and whose conduct is described by 1. or 2.
above.
(Id. at 32.)
Finally, the insurance policy creates a right for an injured
person to sue Arch on a final judgment entered against Inferno:
A person or organization may sue us to recover on an
agreed settlement or on a final judgment against an
insured; but we will not be liable for damages that are
not payable under the terms of this Coverage Part or
that are in excess of the applicable limit of insurance.
(Id. at 16.)
5
C.
The State Court Proceedings
On May 4, 2009, Arch reserved all rights under the policy,
pending
further
investigation,
noting
that
it
appeared
that
Hedrick had been “assaulted” at the nightclub and that such claims
are subject to the $100,000 endorsement limit.
2.)
(Doc. 1-3 at 1–
Nearly three years later, on March 15, 2012, Hedrick filed a
complaint
in
Superior
Complaint,” Doc. 24-5.)
Court,
Guilford
County.
(“Underlying
The complaint named several Defendants:
Talley Restaurants, d/b/a Inferno; Paul and Dale Talley (the owners
of Inferno); TR Nightlife, LLC (Inferno’s successor in interest);
and six John Does, the Inferno employees who allegedly beat Hedrick
and expelled him from the nightclub.
The complaint brought claims
for negligence; negligent hiring, retention, and supervision; and
punitive damages.
In the course of the State-court proceedings,
Hedrick voluntarily dismissed his claims against TR Nightlife and
the Talleys.
(Compl. ¶¶ 14, 16; Answer ¶¶ 14, 16.)
The factual
allegations of the complaint are considered in detail below.
Arch initially defended Inferno and the Talleys under the
policy.
(Compl. ¶ 12; Answer ¶ 12; Doc. 28-3.)
On April 20, 2012,
Arch sent a letter to Inferno, explaining that its duty to defend
against and indemnify for Hedrick’s claim was limited to the terms
of the assault and battery endorsement and that, because of the
settlement of a different claim against Inferno, only $5,000
remained for the defense against and indemnification of Hedrick’s
6
claims.
(Doc. 28-3 at 12.)
On February 7, 2013, Arch sent Inferno
another letter, explaining that only $255.95 remained available,
and that when the amount was exhausted, Arch would cease its
defense.
(Doc. 1-7 at 2.)
On March 7, 2013, within days of trial,
Arch withdrew from the representation of Inferno, with Inferno’s
consent and with a note that Inferno could no longer afford
representation on Hedrick’s claims and would no longer defend
against them.
(Doc. 28-5.)
The case was called for trial a few days later, on March 11,
2013.
No one appeared on behalf of Inferno.
at 1.)
(Underlying Judgment
Because of this, the court sanctioned Inferno by striking
its answer and “deeming admitted all allegations in” the Underlying
Complaint.
(Id.)
Hedrick presented evidence against Inferno at
the trial.
(Id.)
Judgment was entered against Inferno on March
14, 2013, for costs as well as compensatory damages in the amount
of $2,750,000.00, with an annual interest rate of 8% continuing
from
March
15,
2012,
and
punitive
damages
$500,000.00 for Inferno’s gross negligence.
D.
in
the
amount
of
(Id. at 4.)
Proceedings in This Court
With the Underlying Judgment in hand, Hedrick, by counsel,
sent a letter to Arch, demanding immediate payment. (Compl. ¶¶ 19,
24; Answer ¶¶ 19, 24; Doc. 1-9.)
present
action
for
declaratory
In response, Arch filed the
judgment
against
Hedrick
and
Inferno. In count one, Arch seeks a declaration that the aggregate
7
limit of assault and battery claims is $100,000; that Hedrick’s
injuries arose out of an assault or battery, as defined by the
policy; that his claim is subject to the $100,000 limit of the
policy;
that
the
$100,000
limit
was
exhausted
prior
to
the
Underlying Judgment; and that, therefore, Arch has no duty to pay
any part of it.
(Compl. ¶¶ 29–32.)
In count two, Arch seeks a
declaration that the insurance policy does not cover punitive
damages and thus Arch is not responsible for the punitive damages
awarded in the Underlying Judgment.
Hedrick
answered
the
(Id. ¶¶ 33–35.)
complaint,
matters, but denying both counts.
four counterclaims against Arch.
admitting
some
factual
Additionally, Hedrick brought
First, he seeks a determination
“whether or not” Arch has a duty to pay the Underlying Judgment
entered against Inferno.
(Countercl. ¶ 18.)
Second, he claims
breach of contract for $3.25 million against Arch as a third-party
beneficiary of the insurance policy.
(Id. ¶¶ 19–22.)
Third, he
claims unfair and deceptive trade practices, as defined at N.C.
Gen. Stat. § 58-63-15(11), entitling him to treble damages and
attorneys’ fees under N.C. Gen. Stat. § 75-1.1.
Fourth, he seeks
compensatory and punitive damages, as well as attorneys’ fees and
costs, for bad faith breach of contract.
(Countercl. ¶¶ 31–36.)
Although Inferno waived service of the complaint (Doc. 3), at no
point has it appeared in this case — a fact that neither Hedrick
nor Arch raises as an issue.
8
The following motions are currently before the court for
decision:
Both Arch (Doc. 23) and Hedrick (Doc. 33) move for
summary judgment on all claims and counterclaims in this case.
Arch also moves to stay all proceedings pending disposition of its
motion
for
summary
judgment.
(Doc.
25.)
Hedrick
has
not
responded. Arch also moves to bifurcate the issues of compensatory
damages from punitive damages in any future trial in the case.
(Doc. 21.)
Hedrick has not responded to this motion, either.
Because this case involves a live and actual controversy under 28
U.S.C. § 2201(a), these motions are ripe for disposition.
II.
ANALYSIS
A.
Standard of Review
“The 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.”
P. 56(a).
Fed. R. Civ.
The moving party bears the burden of establishing that
no genuine dispute of material fact remains.
Where the non-moving
party has the burden of proof, the moving party is entitled to
summary judgment if it shows the absence of material disputed
facts. Celotex Corp. v. Catrett, 477 U.S. 317, 322–23, 325 (1986).
For the purposes of these motions, the court regards statements of
the non-moving party as true and draws all inferences in the nonmoving party’s favor.
242, 255 (1986).
Anderson v. Liberty Lobby, Inc., 477 U.S.
But a non-moving party must establish more than
9
the “mere existence of a scintilla of evidence” to support his
position.
Id. at 252.
If the evidence is “merely colorable, or
is not significantly probative, summary judgment may be granted.”
Id. at 249–50.
Ultimately, summary judgment is appropriate where
the non-movant fails to offer “evidence on which the jury could
reasonably find for the plaintiff.”
Id. at 252.
Both parties seek summary judgment in this case. When a court
faces cross-motions for summary judgment, it must “review each
motion separately on its own merits ‘to determine whether either
of the parties deserves judgment as a matter of law.’”
Rossignol
v. Voorhaar, 316 F.3d 516, 523 (4th Cir. 2003) (quoting Philip
Morris Inc. v. Harshbarger, 122 F.3d 58, 62 n.4 (1st Cir. 1997)).
In
its
briefing,
Hedrick
concedes
count
two
of
complaint — that Arch has no duty to pay punitive damages.
28 at 10 n.2.)
Arch’s
(Doc.
Hedrick also does not appear to dispute that
Inferno’s assault and battery coverage was exhausted prior to entry
of the Underlying Judgment; certainly, Hedrick offers no evidence
to
contradict
Arch’s.
The
overriding
issue
in
this
case,
therefore, is whether Hedrick’s personal injuries arose out of an
assault or battery within the scope of the aggregate limits of the
assault and battery endorsement, which has been exhausted, or
rather are covered more broadly as an “occurrence” under the
policy, for which additional coverage exists.
10
B.
Did Hedrick’s Personal Injuries Arise out of an Assault
or Battery?
Insisting that this court is limited to considering the
findings in the Underlying Judgment, which held Inferno liable for
negligence
and
gross
negligence,
Hedrick
argues
that
only
negligently-inflicted personal injury occurred and that Arch’s
general personal injury coverage has not been exhausted.
15.)
(Id. at
Hedrick argues that Arch cannot now contest the terms of the
Underlying Judgment because Arch withdrew its defense of Inferno
before trial.
In contrast, Arch asks the court to declare that
Hedrick’s injuries arose out of an assault or battery and argues
that
the
court
should
make
this
determination
based
on
the
allegations of the Underlying Complaint. 2
In general, a commercial general liability insurance policy
creates two duties for the insurer: the duty to defend the insured
against claims, and the duty to indemnify for claims that succeed.
14 Steven Plitt et al., Couch on Insurance § 200:3 (3d ed.).
In
North Carolina, as elsewhere, the Supreme Court has explained:
Generally speaking, the insurer’s duty to defend the
insured is broader than its obligation to pay damages
incurred by events covered by a particular policy. An
insurer’s duty to defend is ordinarily measured by the
facts as alleged in the pleadings; its duty to pay is
measured by the facts ultimately determined at trial.
2
Hedrick had earlier moved to strike portions of Arch’s complaint in
this case that quotes the Underlying Complaint, as well as a copy of the
Underlying Complaint attached to Arch’s complaint in this case, all under
the theory that the Underlying Judgment (and not the Underlying
Complaint) controlled.
(Doc. 4.)
The Magistrate Judge denied the
motion, finding the Underlying Complaint to be relevant. (Doc. 20.)
11
Waste Mgmt. of Carolinas, Inc. v. Peerless Ins. Co., 340 S.E.2d
374, 377 (N.C. 1986) (emphasis added).
In a typical case of this sort, the injured bar patron sues
the insured for damages, and the insurer files a separate action
seeking a judicial declaration of whether it has a duty to defend
the insured at all; usually, the insurer argues that the personal
injury arose out of an assault or battery for which the insurance
policy provides little or no coverage.
E.g., Great Divide Ins.
Co. v. Midnight Rodeo, Inc., No. 5:08-CV-204-F, 2010 WL 2077162
(E.D.N.C. May 24, 2010).
In such a case, the second court will
look
of
to
the
allegations
the
personal-injury
determine whether a duty to defend has arisen.
complaint
to
See, e.g., id. at
*5; see also Waste Mgmt., 340 S.E.2d at 377 (“An insurer’s duty to
defend is ordinarily measured by the facts as alleged in the
pleadings . . . .”).
But when the personal-injury complaint
indicates “that the event in question is not covered, and the
insurer has no knowledge that the facts are otherwise, then it is
not bound to defend.”
Waste Mgmt., 340 S.E.2d at 377.
In this case, Hedrick is not an insured seeking to have his
insurer defend him against pending claims, which would ordinarily
call for examination of the Underlying Complaint.
a
third-party
beneficiary
seeking
recovery
Rather, he is
from
Arch
successful judgment already entered against the insured.
12
on
a
To be
sure, the insurance policy itself conveys upon Hedrick a right to
sue Arch on this “final judgment” against Inferno.
(See Ins.
Policy at 16.)
The most efficient starting place for analysis,
therefore,
the
is
Underlying
predicates his claims.
provide
a
basis
for
Judgment
upon
which
Hedrick
For, if the Underlying Judgment fails to
recovery,
any
failure
of
document
the
is
Underlying
Complaint to do so will not matter.
No
matter
principles
apply
which
State-court
equally.
First,
the
assault
examined,
and
two
battery
endorsement’s “arising out of” language requires only proximate
causation.
Harleysville Mut. Ins. Co. v. Buzz Off Insect Shield,
LLC, 692 S.E.2d 605, 613 (N.C. 2010).
Second, although the
insurance policy here does not define the terms “assault” or
“battery,” the terms are not foreign to courts, nor are they
ambiguous.
See United Nat’l Ins. Co. v. Waterfront N.Y. Realty
Corp., 994 F.2d 105, 108 (2d Cir. 1993) (rejecting argument of
ambiguity and stating that “the common meanings of ‘assault’ and
‘battery’ subsume all forms of tortious menacing and unwanted
touching”); Trainwreck West, Inc. v. Burlington Ins. Co., 235
S.W.3d 33, 40-41 (Mo. Ct. App. 2007) (rejecting claim that terms
“assault” and “battery” were ambiguous where not defined in the
CGL policy).
A battery 3 occurs under North Carolina law “when the
3
Because, as shown infra, the facts in this case clearly show a battery,
whether an assault also occurred need not be considered.
13
plaintiff is offensively touched against [his] will.”
Lynn v.
Burnette, 531 S.E.2d 275, 279 (N.C. Ct. App. 2000) (citation
omitted).
The intent required for battery is the tortfeasor’s
“intent to cause a harmful or offensive contact,” Andrews v.
Peters, 330 S.E.2d 638, 641 (N.C. Ct. App. 1985), aff’d, 347 S.E.2d
409 (N.C. 1986), and the wrongdoer need not act with malice,
willfulness, or wantonness, Myrick v. Cooley, 371 S.E.2d 492, 496
(N.C. Ct. App. 1988).
Under North Carolina law, grossly or
culpably negligent conduct will satisfy the intent requirement.
See
Pleasant
v.
Johnson,
325
S.E.2d
244,
248
(N.C.
1985)
(“Constructive intent to injure exists where conduct threatens the
safety of others and is so reckless or manifestly indifferent to
the consequences that a finding of willfulness and wantonness
equivalent in spirit to actual intent is justified.”); Lynn, 531
S.E.2d at 279 (noting that “the intent required for battery may be
supplied
by
grossly
or
culpably
negligent
conduct”).
Consequently, “[t]he issue in an action for battery is not the
hostile intent of the defendant, but rather the absence of consent
to contact on the part of the plaintiff.”
Lynn, 531 S.E.2d at 279
(citing McCracken v. Sloan, 252 S.E.2d 250, 252 (N.C. Ct. App.
1972)).
Therefore, if Hedrick’s injuries were proximately caused by
someone intending to cause harmful or offensive contact with him
without his consent, they are compensable, if at all, only under
14
the limits of the assault and battery endorsement that the parties
agree have been exhausted.
1.
The Underlying Judgment: Whether Hedrick’s Injuries
Arose out of a Battery
According to the findings of fact in the Underlying Judgment,
Hedrick’s friend got involved in a “fist fight and was ejected” by
Inferno employees.
(Underlying Judgment at 2, ¶ 2.)
guards “then moved to eject” Hedrick.
(Id.)
The security
This intent to eject
Hedrick explains the means of ejectment that followed, which turned
physical and offensive.
In effecting the ejectment, one guard “grabbed [Hedrick] in
a headlock and in the course of controlling him, negligently
dropped [Hedrick] on the cement floor causing [Hedrick’s] head to
hit the cement floor.”
Hedrick
was
“negligently
(Id.)
The State court’s finding that
grabbed”
and
“negligently
however, does not vitiate the intent for the headlock.
dropped,”
“Grabbing”
and putting someone in a “headlock” implies intentionality on the
part of the actor — and nothing in the Underlying Judgment suggests
otherwise.
As another court noted in a similar situation, “[i]t
is hornbook law . . . that the intent which is an essential element
of the action for battery is the intent to make contact, not to do
injury.”
(2d
Cir.
United Nat’l Ins. Co. v. Tunnel, Inc., 988 F.2d 351, 354
1993)
(rejecting
negligence
claims
where
nightclub
bouncer “grabbed” patron around the “arms and neck” and “started
15
to strike [him] in the face”); accord Andrews, 330 S.E.2d at 640–
41.
After the battery-by-headlock, the State court found that the
security guards “negligently carried [Hedrick] out and put him,
insensible, out of the Club where he was found by emergency
personnel after a call from a passerby.”
2, ¶ 3.)
(Underlying Judgment at
The court explained that this finding was intended to
show that the “handling” of Hedrick was “negligent in that even if
[the guards] had a right to eject [Hedrick], they handled him in
a negligent and careless manner which led directly to his head
striking the cement.”
(Id. at 2, ¶ 4.)
This finding does not
indicate that the guards carried Hedrick accidentally or were
otherwise unaware that they were carrying him out of the nightclub.
Rather,
under
any
plain
reading
of
the
Underlying
Judgment,
Hedrick’s injuries arose from a battery committed by one or more
of Inferno’s bouncers.
Hedrick argues that the negligence findings of the Underlying
Judgment overcome the limitations of the assault and battery
endorsement.
numerous
This argument, which has been commonly raised in
courts
in
similar
rejected, is unpersuasive.
or
closely-related
contexts
and
See, e.g., Great Divide Ins., 2010 WL
2077162, at *6 (granting judgment on the pleadings for insurer
under North Carolina law, noting “where the face of the Underlying
Action describes a ‘physical assault’ at the hands of agents or
16
employees of the bar, the insurer incurs no duty to defend because
the suit arises ultimately from that assault and battery” even
though the complaint sounds in negligence); Century Surety Co. v.
Seductions, LLC, 349 F. App’x 455, 458-59 (11th Cir. 2009) (finding
that “artful pleading of claims sounding in negligence does not
change the fact that [claimant’s] injuries arose directly from an
allegedly intentional attack” and declaring that patron’s injuries
arising from an assault and battery limited insurer’s liability to
$25,000 assault and battery endorsement in CGL policy despite
allegations that patron’s injuries and damages were caused by
nightclub’s
negligence);
Trainwreck
West,
235
S.W.3d
at
44
(finding that “where a plaintiff’s negligence claim arises out of
an assault or battery, the assault or battery exclusion bars
coverage of the insured’s negligence claim”) (citing multiple
cases); Tunnel, 988 F.2d at 354 (rejecting artful pleading of
negligence claims that arose from bouncer’s battery of patron as
basis for avoiding policy exclusion for assault and battery); St.
Paul Surplus Lines Ins. Co. v. 1401 Dixon’s, Inc., 582 F. Supp.
865, 867 (E.D. Pa. 1984) (“Although the complaint charges [insured]
with negligence, [claimant’s] injuries were directly caused by an
assault and battery — he was struck from behind.
The mere fact
that [insured] may have been negligent in allowing the assault and
battery to occur does not avoid the effect of the exclusion.”).
Thus, the facts found by the State court in the Underlying
17
Judgment
establish
that
a
battery
occurred,
the
findings
of
negligence notwithstanding. 4
2.
Does Hedrick’s Judicial Estoppel Argument Save His
Claim?
Hedrick seeks to avoid the policy limits by invoking the
4
Because the Underlying Judgment facially falls within the assault and
battery endorsement, which limits Inferno’s insurance coverage, the
court could stop here and certainly need not reach Arch’s separate
argument that exhaustion of the limited assault and battery coverage
prior to entry of the Underlying Judgment relieved the insurer of any
obligation to defend Inferno and, consequently, from any duty to
indemnify. However, in further support of the court’s conclusion, it
is noteworthy that Hedrick overlooks the fact that the Underlying
Judgment “deem[ed] admitted the allegations of the [Underlying]
Complaint” as a result of Inferno’s failure to appear at trial.
(Underlying Judgment at 1.)
The Underlying Complaint shows that
Inferno’s security staff intended to “eject” Hedrick and effected this
intent through offensive and unconsented physical touching. (Underlying
Compl. ¶ 9.) John Doe One “put [Hedrick] in a headlock and attempted
to move him up and out.” (Id.) Another security officer, John Doe Two,
then “grabbed” Hedrick while he was “continuing to struggle.”
(Id.)
During the struggle, another security officer, John Doe Three, “hit
[Hedrick] over the head with a partially filled liquor bottle,” which
did not break but “did split the skin and did remove some of [Hedrick’s]
hair.” (Id.) This strike left Hedrick “somewhat insensible,” putting
him under the headlocking guard’s “complete control.” (Id.) That guard
then carried Hedrick “several paces and threw [Hedrick] down on the
cement floor where his head made an audible crack even in the noisy Club.
[Hedrick] was at that point plainly knocked out.” (Id.) Once knocked
out, other security guards “grabbed” Hedrick’s legs and dragged him
across the floor and up a stairway, which his head “hit” as he was
carried. (Id. ¶ 10.) Rather than call for medical aid to attend to a
patron “knocked out cold” with “blood . . . running from his ear,” the
guards “simply laid [Hedrick] down on the cement outside the bar where
he would have surely died from his severe head injuries had a passerbyer [sic] not come upon him and insist that someone call for medical
help.” (Id. ¶ 11.) Hedrick characterized the security guards as “little
more than untrained thugs” (id. ¶ 22) whose “brutal” and “violent acts”
caused his injuries (id. ¶ 13.). Thus, although Hedrick’s Underlying
Complaint sought relief on theories of negligence, gross negligence,
willfulness, and wantonness, its factual allegations — deemed admitted
by the Underlying Judgment — also indisputably show that Hedrick’s
injuries arose out of or resulted from intentional, unconsented conduct
causing harmful or offensive contact.
18
doctrine of judicial estoppel.
Hedrick argues that, because Arch
initially defended Inferno and filed an answer on its behalf
denying the Underlying Complaint’s allegations sufficient to show
a battery (Doc. 28 at 11), Arch should now be judicially estopped
from arguing otherwise.
Judicial estoppel requires proof of three elements: (1) the
party to be estopped must now be attempting to adopt a position
about a fact (as opposed to one of law) that is inconsistent with
a stance taken in prior litigation; (2) the prior inconsistent
position must have been accepted by the court; and (3) the party
to be estopped must have intentionally misled the court to gain
unfair advantage.
Zinkand v. Brown, 478 F.3d 634, 638 (4th Cir.
2007) (citations omitted).
“with caution.”
Courts should only apply the doctrine
John S. Clark Co. v. Faggert & Frieden, P.C., 65
F.3d 26, 29 (4th Cir. 1995) (citation omitted).
It is doubtful that judicial estoppel has any application in
a context such as this, where Arch, in discharging its duty to
defend Inferno, was at best only putting Hedrick to his proof in
responding to the Underlying Complaint.
But even if the doctrine
could apply, Hedrick clearly cannot show that its second element
is met.
Arch’s alleged position in its answer, that a battery did
not occur, was not accepted by the State court.
Rather, the State-
court judge sanctioned Inferno for not appearing at trial by
explicitly striking its answer and deeming all allegations of the
19
complaint admitted.
(Underlying Judgment at 1.) 5
Thus, Hedrick’s
judicial estoppel argument fails.
III. CONCLUSION
As to count one of Arch’s complaint, there is no genuine
dispute that Hedrick’s claim, resting on the Underlying Judgment,
arose out of a battery and was subject to the assault and battery
endorsement’s $100,000 limit.
Because the limit was exhausted
prior to entry of the Underlying Judgment, Arch has no liability
to Hedrick.
(See Ins. Policy at 16 (“A person or organization may
sue us to recover on an agreed settlement or on a final judgment
against an insured; but we will not be liable for damages that are
not payable under the terms of this Coverage Part or that are in
excess of the applicable limit of insurance.”).)
As for count two of Arch’s complaint, Hedrick concedes that
it cannot recover against Arch for the punitive damages awarded
against Inferno in the Underlying Judgment.
For these reasons, Hedrick’s first counterclaim against Arch
fails as a matter of law. Because Arch did not breach the insurance
5
Indeed, if the doctrine had any application in this case, it might be
against Hedrick. Hedrick made allegations in his Underlying Complaint
which were deemed admitted upon Inferno’s failure to appear at trial.
Based on these allegations and other evidence, Hedrick successfully urged
the State court to award punitive damages against Inferno. Yet, now
Hedrick seeks to have this court conclude that the Underlying Judgment’s
specific factual findings of “negligence,” which Hedrick likely urged
in view of Arch’s policy limits, should take precedence over his prior
allegations of battery and other intentional misconduct.
20
policy, Hedrick’s second, third, and fourth claims for relief also
fail.
For all these reasons, therefore,
IT IS ORDERED that Arch’s motion for summary judgment (Doc.
23) is GRANTED, Hedrick’s motion for summary judgment (Doc. 33) is
DENIED, and Arch’s motions to stay (Doc. 25) and bifurcate (Doc.
21) are DENIED as moot.
This case is DISMISSED WITH PREJUDICE
/s/
Thomas D. Schroeder
United States District Judge
November 21, 2014
21
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