FIREMEN'S INSURANCE COMPANY OF WASHINGTON, D.C. v. WENVENTURE, INC. et al
Filing
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MEMORANDUM OPINION AND ORDER - it is hereby Ordered that Plaintiff's Motion for Summary Judgment (formerly Motion for Judgment on the Pleadings) (Doc. No. 18 ) is DENIED as to Plaintiff's duty to defend Wenventure, Inc. and Wendy's In ternational Inc. under the relevant insurance policy in the underlying suit, L.RE. v. Wendy's Old Fashioned Hamburgers et. al., in the Court of Common Pleas of Cambria County, Pennsylvania, docket number 2009-6277. Pursuant to Federal Rule of C ivil Procedure 56(f), the Court HEREBY GIVES NOTICE that it will enter SUMMARY JUDGMENT in favor of Defendants regarding the duty to defend under Coverage B on April 30, 2012, unless Plaintiff is able to provide evidence demonstrating a dispute of ma terial fact as to the duty to defend under that coverage. The Court grants Plaintiff leave to file a motion to that effect, and should Plaintiff file such a motion, Defendants will have 21 days to file a response. Plaintiff's Motion for Summary Judgment (formerly Motion for Judgment on the Pleadings) (Doc. No. 18 ) is DENIED WITHOUT PREJUDICE as to Plaintiff's duty to indemnify Wenventure, Inc. and Wendy's International Inc. under the relevant insurance policy in the same state court suit. Plaintiff is free to re-raise this issue after the conclusion of that action, and as more fully stated in said Memorandum Opinion and Order. Signed by Judge Kim R. Gibson on 3/29/2012. (dlg)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
FIREMEN'S INSURANCE COMPANY OF
WASHINGTON, D.C.,
Plaintiff,
)
)
)
)
)
v.
)
)
WENVENTURE, INC., d/b/a Wendy's Old
Fashioned Hamburgers, WENDY'S
INTERNATIONAL, INC., ROBERT LEE HINES,
and BRIAN H. KLAVUHN,
Defendants.
CIVIL ACTION NO. 3:10-CV-185
JUDGE KIM R. GIBSON
)
)
)
)
)
)
MEMORANDUM OPINION AND ORDER
GIBSON, J.
I. INRODUCTION
This matter comes before the Court on Plaintiff Firemen's Insurance Company of
Washington, D.C.'s Motion for Judgment on the Pleadings (Doc. No. 18) pursuant to Federal
Rule of Civil Procedure 12(c). Plaintiff asks this Court to enter a declaratory judgment in its
favor stating that Plaintiff has no duty to defend or indemnify Defendants with regard to an
ongoing lawsuit in the Court of Common Pleas of Cambria County, Pennsylvania. Plaintiff later
requested that its motion be converted into a Motion for Summary Judgment. Doc. No. 23 at 23.
Defendants Wenventure, Inc. and Wendy's International, Inc. [hereinafter "Defendants"]
oppose the Motion. Doc. No. 25. For the reasons that follow, Plaintiffs Motion for Summary
Judgment is DENIED.
II. JURISDICTION AND VENUE
Jurisdiction is proper pursuant to 28 U.S.C. § 1332(a). Venue is proper pursuant to 28
U.S.C. § 1391(a)(2) because a substantial part of the events giving rise to this action occurred in
this district.
III. FACTUAL AND PROCEDURAL BACKGROUND
On December 28, 2009, "L.R.E.", a former employee of a Wendy's restaurant in Bedford
County, Pennsylvania, brought suit in the Court of Common Pleas of Cambria County,
Pennsylvania, for claims stemming from two incidents at the restaurant involving Robert Lee
Hines and Brian H. Klavuhn, also Wendy's employees at the time of the relevant incidents. 1
Doc. No. 1-2.
The restaurant was operated by Defendant Wenventure, Inc. pursuant to a
franchise agreement with Defendant Wendy's International, Inc. L.R.E. alleged, inter alia, that
on March 15, 2007, when she was still a minor, Hines falsely imprisoned her in a bathroom at
the restaurant and subsequently raped her. !d. at 9. Further, L.R.E. alleged that in June 2007,
Klavuhn falsely imprisoned her and sexually assaulted her in a walk-in cooler, also at the
Bedford County Wendy's. 2 /d. at 10. These incidents occurred despite L.R.E. having allegedly
reported Hines' sexual harassment of her to supervisors prior to the rape. /d. at 8. She further
contended that both Hines and Klavuhn had criminal backgrounds prior to their hire by
Defendants, and that Defendants knew or should have been aware of these backgrounds when
they hired them. /d. at 7-8. As a result of Defendants' alleged negligence, L.R.E. claimed that
1
The plaintiff is identified as ''L.R.E." in the underlying state action because she was a minor at the time
of the events giving rise to her suit.
2
Hines later pled guilty to sexual assault for this incident in Pennsylvania court on June 15, 2009. Doc.
No. 1-2 at 36. Klavuhn pled guilty to indecent assault without consent in Pennsylvania court on
September 8, 2009. !d. at I 0. On December 17, 20 I 0, this Court entered a default judgment against
Hines and Klavuhn in the instant suit, finding that they were barred from claiming that Plaintiff Firemen's
Insurance Company has a duty to defend and/or indemnify Defendants Wenventure, Inc., and Wendy's
International, Inc. in the underlying suit in the Court of Common Pleas of Cambria County. Doc. No. 13.
2
she had sustained both physical and emotional injuries, leading to significant medical expenses,
interference with her education, loss of earnings, and other incidental costs.
!d. at 11.
Consequently, L.R.E. brought fourteen claims against Hines, Klavuhn, and the instant
Defendants. These included assault, battery, intentional infliction of emotional distress, and false
imprisonment as to each of Hines and Klavuhn; and negligence, breach of fiduciary duty,
negligent hiring, supervisiOn and retention, failure to warn of risk of unreasonable harm,
intentional failure to supervise, and punitive damages as to Defendants Wendy's International,
Inc. and Wenventure, Inc. !d. at 12-24. On March 14, 2011, L.R.E. amended her complaint to
include allegations of bodily injury resulting from the incidents, in addition to the
aforementioned physical and emotional injuries. Doc. No. 23-1 at 10.
During the time relevant to the underlying state court suit, two insurance policies issued
by Plaintiff to Defendants were in force.
These were commercial general liability and
commercial umbrella policies, both of which included provisions for Plaintiff to defend and
indemnify Defendants under certain conditions and according to certain facts. Both policies also
contained exclusions, the effect of which is to bar coverage in certain circumstances even when
the aforementioned conditions are met. The relevant provisions of those policies are discussed in
greater depth below.
On July 9, 2010, Plaintiff brought the instant suit in this Court. Doc. No. 1. On February
17, 2011, Plaintiff filed its Motion for Judgment on the Pleadings and Brief in Support (Doc.
Nos. 18 and 19) pursuant to Federal Rule of Civil Procedure 12( c), asking this Court to declare
that Plaintiff has no duty to defend or indemnify Defendants in the state court action. Plaintiff
also filed an Appendix (Doc. No. 20) the following day, which included a variety of judicial
opinions supporting Plaintiffs Motion. On April 29, 2011, Plaintiff filed a Supplemental Motion
3
to Amend/Correct its Brief in Support (Doc. No. 23), which attached L.R.E.'s amended
complaint from the underlying state court action, thus adding additional material to the record
and qualifying Plaintiff's earlier motion for possible conversion to a Motion for Summary
Judgment pursuant to Federal Rules of Civil Procedure 12(d) and 56(a). On May 31, 2011,
Defendants filed a Response to Plaintiff's Motion for Judgment on the Pleadings (Doc. No. 24),
as well as a Brief in Opposition (Doc. No. 25), styled as "Brief in Response to Plaintiff's Motion
for Judgment on the Pleadings (Now Motion for Summary Judgment)". Plaintiff filed a Reply
Brief on June 7, 2011, which included a request for this Court to defer any determination as to its
duty to indemnify should we find that Plaintiff has a duty to defend under the relevant policies.
Doc. No. 26 at 8-9.
Both Plaintiff and Defendants obtained leave of court to submit Sur-Reply
Briefs, both of which were filed on July 14, 2011 (Doc. Nos. 31 and 32).
IV. STANDARD OF REVIEW
Federal Rule of Civil Procedure 12(d) permits a court to convert a Motion for Judgment
on the Pleadings into a Motion for Summary Judgment when presented with matters outside the
pleadings, but requires the court to give the parties a reasonable opportunity to present pertinent
materials to the court prior to deciding the motion. Walk v. Westport Ins. Corp., 276 Fed. App'x
129, 132-33 (3d Cir.2008).
"Summary judgment is appropriate only where, drawing all reasonable inferences in
favor of the nonmoving party, there is no genuine issue as to any material fact . . . and the
moving party is entitled to judgment as a matter of law." Melrose, Inc. v. Pittsburgh, 613 F.3d
380, 387 (3d Cir. 2010) (quoting Ruehl v. Viacom. Inc., 500 F.3d 375, 380 n.6 (3d Cir. 2007));
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see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Fed. R. Civ. P. 56 (a). 3 Issues of
fact are genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 4 77 U.S. 242, 248 (1986); see also McGreevy v.
Stroup, 413 F.3d 359, 363 (3d Cir. 2005). Material facts are those which will affect the outcome
ofthe trial under governing law. Anderson, 477 U.S. at 248.
The moving party bears the initial responsibility of stating the basis for its motion and
identifYing those portions of the record which demonstrate the absence of a genuine issue of
material fact. Celotex, 477 U.S. at 323. If the moving party meets this burden, the party opposing
summary judgment "may not rest upon the mere allegations or denials of the ... pleading," but
"must set forth specific. facts showing that there is a genuine issue for trial." Saldana v. Kmart
Corp., 260 F.3d 228, 232 (3d Cir. 2001) (internal citations omitted); Matsushita Elec. Indus. Co.
v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); see also Podobnik v. U.S Postal Serv., 409
F.3d 584, 594 (3d Cir. 2005) (noting that a party opposing summary judgment "must present
more than just bare assertions, conclusory allegations or suspicions to show the existence of a
genuine issue" (internal quotation marks omitted)).
V.
DISCUSSION
The Court first addresses the conversion of Plaintiff's Motion for Judgment on the
Pleadings to a Motion for Summary Judgment, which Defendants do not oppose. As already
noted, Plaintiff attached, along with its Supplemental Motion to Amend/Correct its Brief in
Support (Doc. No. 23), the amended complaint from the underlying state court action. The
amended complaint contains additional allegations concerning the injuries suffered by L.R.E. As
will be discussed further below, this additional information is relevant to the Court's
3
Rule 56 was revised in 2010. The standard previously set forth in subsection (c) is now codified as
subsection (a). The language of this subsection is unchanged, except for '"one word-genuine 'issue'
bec[ame] genuine "dispute."' Fed. R. Civ. P. 56 advisory committee's note, 2010 amend.
5
determination of whether Plaintiff had a duty to defend under the relevant insurance policies, and
the Court will therefore consider it for purpose of this Motion. In addition, Defendants have had
ample opportunity to present pertinent materials to the Court prior to this decision, thus
satisfying the standard for conversion to summary judgment motions as set forth in Walk.
Accordingly, Plaintiff's original Motion will be considered as a Motion for Summary Judgment.
A. Duty to Defend
In its Motion for Summary Judgment, Plaintiff asks this Court to declare that it has no
duty to defend or indemnify Defendants with regard to the underlying state court suit. For their
part, Defendants oppose the Motion, and ask us to declare that Plaintiff did have a duty to
continue to defend and indemnify them under the relevant insurance policies.
4
When
considering whether a duty to defend exists, we look to the Third Circuit, which has stated:
Under Pennsylvania law, an insurer has a duty to defend if the complaint
filed by the injured party potentially comes within the policy's coverage. The duty
to defend is a distinct obligation, different from and broader than the duty to
indemnify. Because the duty to defend is broader than the duty to indemnify,
there is no duty to indemnify if there is no duty to defend. After determining the
scope of coverage under a policy, the court must examine the complaint in the
underlying action to determine whether it triggers coverage. If the complaint avers
facts that might support recovery under the policy, coverage is triggered and the
insurer has a duty to defend. Both the duty to defend and the duty to indemnify
"flow from a determination that the complaint triggers coverage."
Sikirica v. Nationwide Ins. Co., 416 F.3d 214, 225-26 (3d Cir. 2005) (internal citations omitted);
see also Kvaerner Metals Division of Kvaerner U.S., Inc. v. Commercial Union Ins. Co., 908
A.2d 888, 896 (Pa. 2006) (Pennsylvania law provides that ·'[a] carrier's duty to defend and
indemnify an insured in a suit brought by a third party depends upon a determination of whether
the third party's complaint triggers coverage."). Furthermore, ·'Pennsylvania's courts have taken
a relatively broad view in discerning whether a complaint triggers an insurer's duty to defend."
4
However, Defendants have not filed their own Motion for Summary Judgment to that effect.
6
Berg Chilling Sys., Inc. v. Vicarb, Inc., 70 F. App'x 620, 624 (3d Cir. 2003 ). The Third Circuit
has also explained that ''[t]he proper focus regarding issues of coverage under insurance
contracts is the reasonable expectation of the insured. That expectation is governed by the
unambiguous language of the insurance policy." Essex Ins. Co. v. Starlight Mgmt. Co., 198 F.
App'x 179, 183 (3d Cir. 2006) (internal citations and quotation marks omitted).
Where coverage or an insurer's duty to defend is at issue, the insured has the initial
burden of establishing coverage under the policy. When courts evaluate such claims, the factual
allegations of the underlying complaint against the insured are to be taken as true and liberally
construed in favor of the insured. Berg Chilling Sys., Inc. 70 F. App'x at 624. Should an insurer
rely on a policy exclusion as the basis for denying coverage, the insurer bears the burden of
proving that the exclusion applies. See State Farm Fire & Cas. Co. v. Estate of Mehlman, 589
F.3d 105, Ill (3d Cir.2009). Policy exclusions are strictly construed against the insurer and in
favor of the insured. Nationwide Mut. Ins. Co. v. Cosenza, 258 F.3d 197, 206-07 (3d Cir. 2001 ).
Pennsylvania law applies to the interpretation of the insurance contracts at issue. As the
Third Circuit has recently explained in Meyer v. CUNA Mut. Ins. Soc'y, 648 F.3d 154 (3d Cir.
2011):
The rules of analysis of insurance policies in Pennsylvania are well
established. The goal of interpreting an insurance policy, like that of interpreting
any other contract, is to determine the intent of the parties. It begins with the
language of the policy. A policy must be read as a whole and its meaning
construed according to its plain language.
The burden of drafting with precision rests with the insurance company,
the author of the policy. An ambiguity in contract language exists when the
questionable term or language, viewed in the context of the entire policy, is
reasonably susceptible of different constructions and capable of being understood
in more than one sense. Where a term is ambiguous, it is to be construed against
the insurer, in favor of the insured. The policy rationale underlying strict
application of the doctrine is that because most insurance agreements are drafted
by the insurance industry, they are essentially contracts of adhesion.
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Where, however, the language of the contract is clear and unambiguous, a
court is required to give effect to that language. Courts should not distort the
meaning of the language or strain to find an ambiguity. A contract is not rendered
ambiguous merely because the parties disagree about its construction.
Meyer, 648 F.3d at 163-64 (citations and quotation marks omitted).
With these principles in mind, we evaluate whether Plaintiff had a duty to defend under
the relevant insurance policies, heretofore known as "Coverage A'' and "Coverage B".
1. Coverage A
The Insuring Agreement to Coverage A states that Plaintiff "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." Doc. No. 1-3 at 61. The term "bodily injury" is
subsequently defined in the policy as "bodily injury, sickness, or disease sustained by a person,
including death resulting from any ofthese at any time." Doc. No. 1-3 at 73.
Based on this language, Plaintiff argues that the bulk of the injuries alleged by L.R.E. in
the underlying tort action - including humiliation, embarrassment, loss of self-esteem, stress,
nausea, exhaustion, migraine headaches, depression, severe mental anguish, diagnosis of posttraumatic stress disorder, loss of concentration, and similar afflictions relating generally to
L.R.E. 's mental health- fail to constitute ""bodily injuries'' under the subject policy and thus do
not implicate coverage under this subsection. Doc. No. 19 at 7 -12; Doc. No. 23 at 5-6. In
support, Plaintiff cites the subject policy, Doc. No. 19 at 8, as well as several Pennsylvania cases
holding that allegations of psychological trauma, embarrassment, and humiliation are insufficient
to trigger coverage where, as here, the insuring agreement unambiguously requires a "bodily
injury." Doc. No. 19 at 10 (citing Philadelphia Contributionship Ins. Co. v. Shapiro, 798 A.2d
781 (Pa. Super. 2002); Board of Public Education v. National Union Fire Ins. Co., 709 A.2d 910
(Pa. Super. 1998)).
8
Although Plaintiffs recitation of Pennsylvania law is
ultimately correct, the
aforementioned rule - to the extent that it is applicable to the broad litany of afflictions named
above - does not end the analysis, as Plaintiff readily concedes that the remaining injuries
alleged by L.R.E. in her amended complaint - namely, contusions to her back, buttocks, and
abdomen, and bruising to her vaginal area - "probably do" amount to allegations of "bodily
injury" under the subject policy. Doc. No. 23 at 5-6, 9; Doc. No. 23-1 at
~
44. In light of this
apparent concession by Plaintiff that the bruising alleged by L.R.E. is "probably" sufficient to
implicate coverage under Coverage A, this Court will assume, for purpose of argument, that
coverage is in fact implicated under the subject policy, at least as an initial matter. As such, the
Court will now consider whether an exclusion to that coverage applies.
Plaintiff avers that the Employer's Liability Exclusion found m Coverage A plainly
applies in this action to bar coverage for the bodily injuries sustained by L.R.E., an "employee"
of the insured. Doc. 23 at 9-12. In relevant part, the Employer's Liability Exclusion
unambiguously precludes coverage for "'Bodily injury' to (1) An 'employee' of the insured
arising out of and in the course of: (a) Employment by the insured; or (b) Performing duties
related to the conduct of the insured's business." Doc. No. 23 at 9-10; Doc. No. 1-3 at 62.
Plaintiff further avers that the injuries allegedly sustained by L.R.E. in the underlying action,
which ostensibly bring her tort claims against Defendants within the provision of Coverage A,
fall under this exclusion. Doc. No. 23 at 9-12. For their part, Defendants offer no
counterargument to this averment by Plaintiff.
Both the Pennsylvania Supreme Court and the Third Circuit, interpreting Pennsylvania
law, have long held that in the context of an employer's liability exclusion, the phrase "arising
out of and in the course of employment by the insured'' is satisfied by '"but for" causation- i.e., a
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cause and result relationship or other "obvious causal connection" between the plaintiff
employee's alleged "bodily injury" and her employment with the insured. See Forum Ins. Co. v.
Allied Security, Inc., 866 F.2d 80, 83 (3d Cir. 1989); McCabe v. Old Republic Ins. Co., 425 Pa.
221, 223 (Pa. 1967). Likewise, several district courts both within and outside Pennsylvania have
expressly found that such an exclusion plainly bars claims of sexual harassment and assault
brought by an employee of the insured. See, e.g., Nautilus Ins. Co. v. Gardner, 2005 WL 664358
at *5 (E.D. Pa. Mar. 21, 2005); Miller v. Quincy Mutual Fire Ins. Co, 2003 WL 23469293 at *9
(E.D. Pa. Dec. 4, 2003); Truck Ins. Exchange v. Gagnon, 33 P.3d 901 at 904-5 (N.M. App.
2001); Davidv. Nationwide Mut. Ins. Co., 665 N.E.2d 1171, 1174 (Ohio App. 1995).
Here, the underlying tort complaint specifically alleges that L.R.E. was at work,
performing her ''closing responsibilities" when she was assaulted and forcibly raped by
Defendant Hines. Doc. No. 1-2 at
~
32; Doc. No. 23-1 at
~
32. Likewise, the underlying
complaint expressly avers that L.R.E. was ''in the course of [performing] her clean-up duties"
when she was trapped in the walk-in cooler by Defendant Klavuhn and sexually assaulted. Doc.
No. 1-2
at~
38; Doc. No. 23-1
at~
38. Therefore, the bodily injuries alleged by L.R.E. in the
underlying tort action would not have occurred "but for" L.R.E.'s employment with Defendant
Wenventure. Accordingly, the Court finds that the Employer's Liability Exclusion, found in
Coverage A of the Commercial General Liability policy, exempts Plaintiff from the duty to
defend under Coverage A
2. Coverage B
This does not end the matter, as Defendants contend that the allegations in the underlying
tort complaint, as amended, trigger coverage under the subject insurance policy pursuant to the
Insuring Agreement to Coverage B. The relevant language states that Plaintiff "will pay those
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sums that the insured becomes legally obligated to pay as damages because of 'personal and
advertising injury' to which this insurance applies. We will have the right and duty to defend the
insured against any 'suit' seeking those damages." Doc. No. 25 at 12; Doc. No. 1-3 at 65
(emphasis added). The term "personal and advertising injury" is defined in the policy to mean
"injury, including consequential 'bodily injury,' arising out of ... (a) False arrest, detention, or
imprisonment." Doc. No. 25 at 13-14; Doc. No. 1-3 at 74. Thus, under the terms of Coverage B,
Plaintiff has a duty to defend Wenventure, Inc. and Wendy's International, Inc. for all suits
seeking damages that Defendants may become legally obligated to pay for injuries arising out of
false imprisonment.
In this context, both Pennsylvania courts and the Third Circuit have consistently
interpreted the term "arising out of' in insurance contracts to denote "but for" causation
requiring only a "causal connection'' between the injury and the underlying tort. See Essex Ins.
Co. v. RMJC, Inc., 306 Fed. Appx. 749, 752 (3d Cir. 2009) ("[C]ourts applying Pennsylvania law
have held [that] the phrase ["arising out of'] denotes but for causation both where it defines what
is included in coverage and where it delineates exclusions.") (quoting Forum Ins. Co. v. Allied
Sec., Inc., 866 F.2d 80, 82 (3d Cir. 1989)); Roman Mosaic & Tile Co. v. Aetna Cas. & Sur. Co.,
704 A.2d 665. 669 (Pa. Super. 1997) (stating that under Pennsylvania law, the term ""arising out
of means causally connected with, not proximately caused by") (quoting Erie Ins. Exchange v.
Eisenhuth, 305 Pa. Super. 571, 574 (Pa. Super. Ct. 1982)); Thus, to find that Plaintiff has a duty
to defend in the instant action under Coverage B of the subject policy, this Court need not
determine that the injuries alleged by L.R.E. in the underlying tort action were proximately
caused by false imprisonment. Rather, the Court need only determine that the injuries alleged by
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L.R.E. were at least "causally connected" to the allegation that L.R.E. was falsely imprisoned in essence, that L.R.E. would not have suffered the injuries "but for" her false imprisonment.
In the underlying state action, L.R.E. 's amended complaint plainly alleges that she was
falsely imprisoned by Defendant Hines; that during this imprisonment Defendant Hines raped
and sexually assaulted her; and that as a result of this experience L.R.E. suffered emotional and
physical injuries including: humiliation, embarrassment, loss of self-esteem, stress, nausea,
exhaustion, migraine headaches, depression, severe mental anguish, diagnosis of post-traumatic
stress disorder, loss of concentration, self-destructive behaviors including suicidal ideation, and
similar mental afflictions, as well as physical contusions to her back, buttocks, and abdomen, and
bruising to her vaginal area. Doc. No. 23-1 at
~~
32, 44, 49-54. Likewise, L.R.E.' s amended
complaint alleges that she was falsely imprisoned by Defendant Klavuhn in a walk-in cooler and,
during that imprisonment, was subjected to unwanted touching and intrusions upon her personal
dignity that directly resulted in severe personal injuries. Doc. No. 23-1 at
~~
38, 44, 62-74. In
light of these allegations, this Court finds that "but for" the instances of false imprisonment
alleged by L.R.E. in the underlying tort complaint, L.R.E. would not have been raped by
Defendant Hines or assaulted by Defendant Klavuhn, and would not have suffered the multitude
of emotional and physical injuries alleged to follow from these incidents.
For its part. Plaintiff argues that Coverage B cannot implicate coverage under the facts
alleged by L.R.E. because L.R.E. does not specifically allege false imprisonment against the
insured- i.e., the Defendants in this action. Accordingly, Plaintiff argues that because the false
imprisonment claims were brought only against Hines and Klavuhn, and not against the insured,
it is impossible for the insured to be held liable for any claims of false imprisonment, as no such
claims have been brought against them. Doc. No. 26 at 3-6. However, Plaintiff misconstrues the
12
policy's terms, as the Insuring Agreement to Coverage B clearly and unambiguously states that
Plaintiff "will have the right and duty to defend the insured against any 'suit"' for "those sums
that the insured becomes legally obligated to pay as damages because of [injury, including
consequential 'bodily injury,' arising out of false imprisonment]" (emphasis added). It is
therefore irrelevant whether L.R.E. actually brought a claim for false imprisonment against
Defendants in the underlying tort action, so long as the actual claims and injuries alleged against
Defendants can be said to "arise out of' the false imprisonment alleged against Hines and
Klavuhn. See Travelers Prop. Cas. Co. o{Am. v. Mericle, 2010 WL 3505117 at *8 (M.D. Pa.
Aug. 31, 201 0) ("[T]he duty to defend inquiry is not controlled simply by looking at the captions
for the underlying causes of action, and Travelers may still owe a duty to defend even though no
claims for false imprisonment are brought against Mericle or Mericle Construction. Instead, this
Court must determine whether the underlying suit "arises" out of a claim for false
imprisonment."). Accordingly, the allegations contained in L.R.E. 's underlying tort complaint
plainly raise the possibility that coverage could be implicated under the subject policy
Plaintiff next argues that the Employment Related Practices Exclusion, which appears as
an endorsement to the subject policy, nonetheless applies to bar coverage in this case. In relevant
part, the Employment Related Practices Exclusion bars coverage for '" [p ]ersonal and advertising
injury to: (1) A person arising out of any ... (c) Employment related practices, policies, acts or
omissions, such as coercion, demotion, evaluation, reassignment, discipline, defamation,
harassment, humiliation, or discrimination directed at that person." Doc. No. 26 at 7; Doc. No.
1-3 at 78; Doc. No. 1-6 at 52. In support, Plaintiff cites to several non-controlling authorities
from other states holding that similar exclusions applied to bar coverage where subject claims
arose from sexual harassment - and, in some instances, sexual assault (other than rape) - by a
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supervisor. Doc. No. 23 at 13-16 (citing Miller v. McClure, 742 A.2d 564 (NJ App. 1998); Parts
Inc. v. Utica Mutual Ins. Co., 602 F. Supp. 2d 617 (D. Md. 2009); Agricultural Ins. Co. v. Focus
Homes, Inc., 212 F.3d 407 (8th Cir. 2000)).
In response, Defendants point to Miller v. Quincy Mutual Fire Ins. Co, 2003 WL
23469293 (E.D. Pa. Dec. 4, 2003), which found that because the relevant exclusion applied only
to employment related practices, policies, acts or omissions directed at the person claiming
injury, such an exclusion did not bar coverage where the employment related practices in
question were directed at the supervisors charged with harassment rather than the injured
plaintiff. Notably, the court in Miller also specifically distinguished Miller v. McClure and
Agricultural Ins. Co. v. Focus Homes, Inc. because the relevant exclusion in these cases did not
contain the words ''directed at that person" and thus was plainly broader than the exclusion at
issue. Miller, 2003 WL 23469293 at * 10.
In light of this distinction between the Employment Related Practices Exclusion at issue
in this case and the exclusions at issue in the cases relied on by Plaintiff, this Court finds - in
accordance with Miller - that the McClure and Agricultural Ins. Co. cases are inapposite and do
not answer the current dispute. As the Third Circuit has noted, when an insurer relies on a policy
exclusion as the basis for denying coverage, the insurer bears the burden of proving that the
exclusion applies, and policy exclusions are strictly construed against the insurer and in favor of
the insured. State Farm Fire & Cas. Co. v. Estate of Mehlman, 589 F.3d 105, 111 (3d Cir.2009);
Nationwide Mut. Ins. Co. v. Cosenza, 258 F.3d 197, 206-07 (3d Cir. 2001 ). The plain language
of the insurance contract is insufficient to meet this burden, and absent controlling authority to
the contrary, the Court declines to interpret the Employment Related Practices Exclusion as
unambiguously barring coverage.
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Given that the underlying suit implicates Coverage B, and that the exclusions cited by
Plaintiff do not bar coverage, there is sufficient evidence in the record to find in favor of
Defendants that Coverage B mandates that Plaintiff has a duty to defend Wenventure, Inc. and
Wendy's International, Inc. in the underlying state court suit. The Court will therefore DENY
Plaintiffs Motion for Summary Judgment as to the duty to defend. However, as already noted,
Defendants have not filed their own Motion for Summary Judgment on this matter.
Nevertheless, the Court finds there is sufficient evidence in the record to grant summary
judgment for the nonmovant Defendants as to the duty to defend, pursuant to Federal Rule of
Civil Procedure 56(f). Rule 56(f) requires the Court to give the parties a reasonable time to
respond to this notice. Accordingly, if Plaintiff wishes to raise disputes of material fact in the
record that are relevant as to whether Coverage B applies, the Court grants Plaintiff leave to file
a motion to that effect. Should Plaintiff not file such a motion by April 30, 2012, the Court will
enter summary judgment in favor of Defendants and find that Plaintiff has a duty to defend the
underlying state court action under Coverage B of the insurance policy at issue. If Plaintiff files
such a motion, Defendants will have 21 days to file a response.
B.
Duty to Indemnify
We next address whether Plaintiff had a duty to indemnify Defendants under the
insurance policy. In both its Motion for Judgment on the Pleadings and subsequent Amended
Brief in Support, Plaintiff asked this Court to declare that it had neither a duty to defend nor
indemnify in the underlying state action. However, Plaintiff later modified that argument, asking
us to defer the issue of indemnification should we find that Plaintiff had a duty to defend. Doc.
No. 26 at 8-9.
In response to Plaintiffs original arguments, Defendants have asserted that
Plaintiff did have a duty to indemnify, given the plain language of the policy and the allegations
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of L.R.E.'s amended complaint. Doc. No. 25; Doc. No. 31. Defendants have made no direct
argument regarding whether the issue of indemnification should be deferred, but presumably
prefers that the Court address both issues forthwith, given their stated position in their Brief in
Response. Doc. No. 25 at 22.
The Court agrees with Plaintiff that the issue of indemnification is not ready for
adjudication at this point.
As Pennsylvania courts have noted, the duty to indemnify is a
"conditional obligation" dependent on a determination at trial as to whether the loss suffered is
covered by the terms of the policy. Unionamerica Ins. Co .. Ltd. v. J. B. Johnson, 806 A.2d 431,
434 (Pa. Super. 2002). In the instant case, there are still factual matters left to be determined in
the underlying state action, and it is still unclear, depending on the outcome of that case, as to
whether Plaintiff will have to indemnify Defendants at all.
Accordingly, to the extent that
Plaintiff asks us in its original motion to declare that it has no duty to indemnify Defendants in
the underlying state court action, that motion is DENIED without prejudice as to the Plaintiff
raising the issue again at a later date.
VI. CONCLUSION
Based upon the foregoing, Plaintiff has not provided sufficient evidence, when viewed in
the light most favorable to Defendants as the non-moving party, to allow the Court to determine
that Plaintiff does not have a duty to defend under the insurance policy at issue in this case. On
the contrary, the record indicates that Plaintiff does have a duty to defend Defendants under
Coverage B of the insurance policy. Accordingly, Plaintiffs Motion for Summary Judgment is
DENIED as to the duty to defend.
The Court will enter summary judgment in favor of
Defendants on this issue on April 30, 2012, unless Plaintiff is able to provide evidence
demonstrating a dispute of material fact as to the duty to defend under Coverage B. The Court
16
also DENIES WITHOUT PREJUDICE Plaintiffs Motion for Summary Judgment as to the
duty to indemnify. At the conclusion of the underlying state court action, Plaintiff is free to revisit the issue of indemnification in this Court. An appropriate order follows.
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IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
FIREMEN'S INSURANCE COMPANY OF
WASHINGTON, D.C.,
)
)
)
Plaintiff,
)
)
)
V.
)
WENVENTURE, INC., d/b/a Wendy's Old
)
Fashioned Hamburgers, WENDY'S
)
INTERNATIONAL, INC., ROBERT LEE HINES, )
and BRIAN H. KLA VUHN,
)
CIVIL ACTION NO. 3:10-CV-185
JUDGE KIM R. GIBSON
)
)
Defendants.
ORDER
111
AND NOW, this 29 day of March 2012, upon consideration of Plaintiffs Motion for
Judgment on the Pleadings, Brief in Support, and Appendix (Doc. Nos. 18, 19, and
20),
Plaintiffs Supplemental Motion to Amend/Correct its Brief in Support (Doc. No. 23),
Defendants' Response to Plaintiffs Motion for Judgment on the Pleadings and Brief in
Opposition (Doc. Nos. 24 and 25), Plaintiffs Reply Brief (Doc. No. 26), Defendants' Sur-Reply
Brief (Doc. No. 31 ), and Plaintiffs Sur-Reply Brief (Doc. No. 32), in accordance with the above
Memorandum IT IS HEREBY ORDERED that:
1. Plaintiffs Motion for Summary Judgment (formerly Motion for Judgment on the
Pleadings) (Doc. No. 18) is DENIED as to Plaintiffs duty to defend Wenventure,
Inc. and Wendy's International Inc. under the relevant insurance policy in the
underlying suit, L.RE. v. Wendy's Old Fashioned Hamburgers et. a!., in the Court of
Common Pleas of Cambria County, Pennsylvania, docket number 2009-6277.
2. Pursuant to Federal Rule of Civil Procedure 56(f), the Court HEREBY GIVES
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NOTICE that it will enter SUMMARY JUDGMENT in favor of Defendants
regarding the duty to defend under Coverage B on April 30, 2012, unless Plaintiff is
able to provide evidence demonstrating a dispute of material fact as to the duty to
defend under that coverage.
The Court grants Plaintiff leave to file a motion to that
effect, and should Plaintiff file such a motion, Defendants will have 21 days to file a
response.
3. Plaintiffs Motion for Summary Judgment (formerly Motion for Judgment on the
Pleadings) (Doc. No. 18) is DENIED WITHOUT PREJUDICE as to Plaintiffs
duty to indemnify Wenventure, Inc. and Wendy's International Inc. under the relevant
insurance policy in the same state court suit. Plaintiff is free to re-raise this issue
after the conclusion of that action.
BY THE COURT:
KIM R. GIBSON,
UNITED STATES DISTRICT JUDGE
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