Encompass Indemnity v. H. et al

Filing 42

MEMORANDUM DECISION AND ORDER granting 31 Motion for Summary Judgment. Signed by Judge David Nuffer on 5/12/17 (alt)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH, CENTRAL DIVISION
ENCOMPASS INDEMNITY COMPANY, an
Illinois Company

MEMORANDUM DECISION
AND ORDER GRANTING [31]
MOTION FOR SUMMARY JUDGMENT

Plaintiff,
v.

Case No. 1:16-cv-00018-DN

J.H., a Utah Citizen; and D.C., a Utah Citizen,

District Judge David Nuffer

Defendant.

BACKGROUND
Plaintiff Encompass Indemnity Company is a liability insurance company. Encompass
seeks declaratory relief from defending or indemnifying J.H., an insured. 1 In the Complaint for
Damages (Underlying Complaint), 2 D.C. brings numerous tort and statutory claims against J.H.
and others. In this Motion, 3 Encompass moves for summary judgment. Defendant D.C. opposes
this motion.4 Defendant J.H. did not file a response. Encompass replied in support of its Motion. 5
Because the allegations in the Underlying Complaint are not an “occurrence” and
therefore do not fall within the policy, the Motion is GRANTED.
Table of Contents
Background ..................................................................................................................................... 1
Evidentiary Objections.................................................................................................................... 2
1.
D.C.’s objection regarding J.H.’s tender of the Underlying Complaint is
overruled. ................................................................................................................ 2
2.
D.C.’s objection to admissibility of Exhibits A and B is overruled. ...................... 3
1

Complaint for Declaratory Relief (Complaint), docket no. 2, filed February 4, 2016.

2

Complaint for Damages (Underlying Complaint), 1:14-cv-00175-JNP, docket no.1, filed December 23, 2014.

3

Motion for Summary Judgment and Memorandum in Support (Motion), docket no. 31, filed January 17, 2017.

4

Defendant’s Memorandum in Opposition (Opposition), docket no. 36, filed March 17, 2017.

5

Reply to Response to Motion for Summary Judgment (Reply), docket no. 39, filed March 27, 2017.

Undisputed Material Facts .............................................................................................................. 5
Standard of Review ....................................................................................................................... 13
Discussion ..................................................................................................................................... 14
Encompass Does Not Have a Duty To Defend J.H. Under the Policy Because D.C.’S
Injuries Are not “Occurrences” ............................................................................. 15
1.
Unwanted sexual contact with a minor is not an occurrence. ................... 17
2.
Knowingly supplying alcohol to a minor is not an occurrence. ............... 18
3.
Verbal abuse and sexual harassment at the workplace is not an occurrence.
................................................................................................................... 18
Conclusion .................................................................................................................................... 19
Order ........................................................................................................................................... 20
EVIDENTIARY OBJECTIONS
D.C. makes numerous evidentiary objections. For the reasons that follow, those
objections are overruled.
1. D.C.’s objection regarding J.H.’s tender of the Underlying Complaint is overruled.
D.C. argues that Encompass’s reference to J.H. tendering the Underlying Complaint to
Encompass is hearsay, lacks foundation, and lacks authenticity. 6 Encompass responds that J.H.
already admitted to tendering the Underlying Complaint to Compass in her Answer. 7 Because of
relevant judicial admissions, the question of whether J.H. tendered the Underlying Complaint to
Encompass is beyond dispute.
Judicial admissions are “formal concessions in the pleadings, or stipulations by a party or
its counsel, that are binding upon the party making them. They may not be controverted at trial
or on appeal. Indeed, they are not evidence at all but rather have the effect of withdrawing a fact
from contention.” 8
In the Complaint, Encompass alleges

6

Opposition at 13.

7

Reply at 2.

8

Keller v. U.S., 58 F.3d 1194, 1198 n.8 (10th Cir. 1995) (internal quotation marks omitted).

2

26. In August of 2015, J.H. provided notice and tender the Underlying
[Complaint] to Encompass. 9
27. Encompass conducted an investigation of the tender of the Underlying
[Complaint] and on or about October 13, 2015, counsel for Encompass sent a
letter to J.H. and her defense counsel informing them of Encompass’ decision to
defend J.H. in the Underlying [Complaint], subject to a reservation of rights. 10
Defendant J.H. filed an answer. 11 In response to the above two paragraphs of the
Complaint, J.H. stated
26. Defendant J.H. admits the allegations contained in paragraph 26 of Plaintiff’s
Complaint.
27. Defendant J.H. admits that counsel for Encompass sent a letter to J.H. and her
defense counsel informing them of Encompass’ decision to defend J.H. in the
Underlying [Complaint], subject to a reservation of rights. All other allegations
are denied.
Therefore, J.H. has admitted that she tendered the Underlying Complaint to Encompass.
That admission is binding. Defendants’ objection is overruled.
2. D.C.’s objection to admissibility of Exhibits A and B is overruled.
D.C. also argues that the USP Deluxe Home Insurance Policy that Encompass attaches as
Exhibit A to the Motion12 and Defense Under a Reservation of Rights Letter Encompass attaches
as Exhibit B to the Motion 13 are hearsay, lack foundation, and are not authenticated. 14
Encompass makes numerous arguments for why Exhibits A and B are not hearsay, have
foundation, and are authenticated. 15 Encompass also attempts to remedy the alleged issue by

9

Encompass Complaint ¶ 26.

10

Id. ¶ 27.

11

Answer of J.H., Defendant, docket no. 5, filed April 4, 2016.

12

Docket no. 31-1, filed January 17, 2017.

13

Docket no. 31-2, filed January 17, 2017.

14

Opposition at 14–16

15

Reply at 2–4.

3

adding Additional Statement of Material Facts. 16 Exhibits A and B are admissible because
Encompass’s Additional Statement of Material Facts provide foundation and authenticity.
Federal Rule of Civil Procedure 56(e) states that if “a party fails to properly support an
assertion of fact . . . , the court may . . . give an opportunity to properly support or address the
fact.” Rule 56(e) materials included in a reply brief are distinct from simply adding facts or
evidence in a reply. When a moving party includes additional facts or evidence in a reply brief, a
district court can “either . . . permit[] a surreply or, in granting summary judgment for the
movant, it [can] . . . refrain[] from relying on any new material contained in the reply brief.” 17
By contrast, Rule 56(e) evidence can be used to remedy evidentiary objections—such as lack of
foundation or authenticity—without requiring the district court to disregard the material fact or
allow further briefing. 18 This is because the facts or evidence would have already been present in
the original motion; the Rule 56(e) materials are simply resolving any technical evidentiary
deficiencies.
To authenticate and lay foundation for Exhibits A19 and B 20 to the Motion, Encompass
includes in its Reply numerous statements of fact 21 that reference a Declaration of Rebecca L.
Hill (Hill Declaration) 22 and numerous attachments to the Hill Declaration (collectively “Rule
56(e) Materials”). These Rule 56(e) Materials sufficiently lay foundation and authenticate

16

Reply at iii–v.

17

Beaird v. Seagate Technology, Inc., 145 F.3d 1159, 1164 (10th Cir. 1998).

18

See Pfeffer v. Hilton Grand Vacaqtions Co., LLC, No. CV. 07-00492 DAE-BAK, 2009 WL 37519, at *6 (D.
Hawai’i, Jan. 7, 2009) (allowing one party to remedy evidentiary deficiencies without further briefing because the
exhibits could “easily be authenticated and the exhibits do not provide anything new that Defendant was not
previously aware of.”).
19

Exhibit A, docket no. 31-1, filed January 17, 2017.

20

Exhibit B, docket no. 31-2, filed January 17, 2017.

21

Encompass’ Additional Statement of Facts 2–10, Reply at iii–v.

22

Declaration of Rebecca L. Hill, docket no. 40, filed March 27, 2017.

4

Exhibits A and B to the Motion. Therefore, Encompass’s Additional Statement of Material
Facts 23 and the affidavit and exhibits resolve the alleged evidentiary deficiencies in Encompass’s
motion. The defendants’ objections are overruled. And no additional briefing is required.
UNDISPUTED MATERIAL FACTS 24
1. D.C. filed a complaint against J.H. under seal in the United States District Court for the
District of Utah on or about December 23, 2014 under civil number 1:14-cv-00175 (the
“Underlying Complaint”). 25
2. The Underlying Complaint’s “Statement of Facts” alleges facts and conduct common to
each cause of action asserted in the Underlying Complaint. 26
3. The Statement of Facts Section of the Underlying Complaint alleges that J.H. performed
sexual acts on D.C. to which D.C. did not consent – including molestation, intercourse and oral
sex – and often did so while D.C. was under the intoxicating effects of alcohol that J.H. had
furnished to D.C.:
30. On multiple occasions in or about April 2013 and thereafter, Defendants
furnished, or allowed to be furnished, alcohol and alcoholic products to minors at
some or all of Defendants Properties, including to Plaintiff, a minor.
31. On or about May 16, 2013, for example, [J.H.] . . . supplied Plaintiff with alcohol,
to the point that [J.H.] aided and abetted Plaintiff in becoming intoxicated.

23

Reply at iii–v.

24
This summary of the undisputed material facts is derived from the parties’ memoranda. D.C.’s Statement of
Additional Material (Disputed Facts) (a–h), Opposition at 17–19, are not included. As stated below, see infra
Discussion Section, any evidence extrinsic to the Policy and the Underlying Complaint is immaterial. All the
Additional Facts refer to such evidence and include information relating to the merits of the Underlying Complaint.
25

Motion at vii (undisputed).

26

Id. at vii; Opposition at 6. There is no genuine dispute of material fact. D.C. qualifies his response as follows:
“Undisputed as to what the Underlying Complaint states in part, but there are other allegations particular to
Negligence (First Cause of Action) and for Negligent Infliction of Emotional Distress (Seventh Cause of Action).”
This does not create a genuine dispute. D.C. similarly qualifies his response to facts 2–13 below. Thus, each is
deemed “undisputed”.

5

32. Due to being intoxicated, Plaintiff went and laid down on a bed. After Plaintiff
was lying down, [J.H.] came to Plaintiff, pulled Plaintiff's pants down, and began to
perform unwelcomed sex acts to Plaintiff without his consent.
33. In doing so, [J.H.] touched the intimate parts and genitalia of Plaintiff's body,
taking indecent liberties with him, such as performing oral sex and vaginal sex to
him.
....
36. From mid-May to mid-July, multiple similar incidents took place . . . including
sexual activity by [J.H.] to Plaintiff.
37. [J.H.] [had] interactions with minor boys, including Plaintiff, and her involvement
towards them involve[ed] [sic] drugs, alcohol and sexual activity.
....
41. On or about July 11, 2013, Plaintiff attempted suicide and was hospitalized due to
the emotional damages, injuries and harm he sustained as a result of Defendants’
unlawful conduct to him.
42. While Plaintiff was hospitalized in July 2013, [J.H.] went to Plaintiff at the
hospital and while there she engaged in further inappropriate conduct with Plaintiff.
43. Later, on or about July 23, 2013, after Plaintiff was out of the hospital and
knowing of Plaintiff’s condition, severe depression and troubles, [J.H.] engaged in
further inappropriate conduct with Plaintiff, including further sexual activity,
including intercourse.
44. On or about July 23, 2013, Plaintiff attempted suicide a second time and was
taken to emergency and hospitalized due to the further emotional damages, injuries
and harm he sustained as a result of Defendants’ unlawful conduct to him. 27
4. The Underlying Complaint’s “Statement of Facts” otherwise alleges that J.H. furnished
D.C. with alcohol:
26. In or about April 2013 and thereafter on multiple occasions, including at El
Matador, Defendants furnished alcohol and alcoholic products to Plaintiff, whom they
knew was a minor.

27

Motion at vii–viii (undisputed).

6

27. Defendants' supplying of alcohol to Plaintiff, a minor, was in violation Utah's
Alcoholic Beverage Control Act, Utah Code Title 32B, Chapter 4, including section
32B-4-403.
28. In or about April 2013 and thereafter, Defendants had special duties, knowledge
and familiarity with prohibitions of furnishing alcohol and alcoholic products to
minors.
29. Among their duties, knowledge and familiarity, including not to furnish alcohol
and alcoholic products to minors, Defendants had made and taken upon themselves
statutory and affirmative duties, including with the Utah Department of Alcoholic
Beverage Control (“DABC”), including with respect to an application with and a
liquor license[] through the DABC . . . .
....
96. For example, shortly after Plaintiff was hired, [J.H.] furnished regularly alcohol
and alcoholic products to employees, including minors . . . . 28
5. The statute cited in Paragraph No. 27 of the Underlying Complaint, Section 32B-4-403 of
Utah’s Beverage Control Act, is a criminal statute providing, in relevant part:
(1) A person may not sell, offer for sale, or furnish an alcoholic product to a minor.
(2)(a)(i) Except as provided in Subsection (3), a person is guilty of a class B
misdemeanor if the person who violates Subsection (1) negligently or recklessly fails
to determine whether the recipient of the alcoholic product is a minor.
....
(b) Except as provided in Subsection (3), a person is guilty of a class A misdemeanor
if the person who violates Subsection (1) knows the recipient of the alcohol product is
a minor. 29
6. Within the cause of action for “Violations of Civil Rights,” the Underlying Complaint
alleges that J.H. sexually harassed and verbally abused D.C. while D.C. was working at El
Matador, and from that conduct alleges economic losses and other injuries:
92. At all times during Plaintiff’s employment at El Matador, [J.H.] was Plaintiff’s
superior, supervisor and an owner, principal, and officer of El Matador.
....
95. Beginning in May 2013, and thereafter, Plaintiff, a male and a member of a
protected class, was subjected to repeated severe and pervasive harassment, including
28

Id. at viii-ix(undisputed).

29

Id. at ix (undisputed).

7

sexual harassment, with numerous unwelcomed and offensive crude, lewd verbal
abuse directed to Plaintiff by [J.H.], a female, including because of and based on
Plaintiff’s sex.
....
98. Defendant would also make sexually explicit and verbally harassing comments to
others, including to Plaintiff, such as: “It’s hard to work with you because I want to
fuck you.”
99. Defendant [J.H.] would also make quid-pro-quo promises to keep Plaintiff [D.C.]
“happy”, with physical and inappropriate touching, hugging, and kissing [D.C.], with
promises by Defendants to Plaintiff [D.C.] of pay raises, including one for $.50/hour.
....
101. Notwithstanding the above, and despite Plaintiff’s questioning to his superiors,
including [J.H.], Plaintiff was subjected to further harassment, hostile work
environment, discrimination, ridicule, insult, abuse, intimidation, fear of reprisal, and
retaliation.
....
104. As a result of actions of El Matador, including by its agent and proxy, [J.H.],
Plaintiff has suffered irreparable injuries and is entitled to damages, including but not
limited to, actual damages such as back and front pay, compensatory damages, and
other economic loses [sic], emotional pain and suffering, mental anguish,
humiliations, embarrassment, personal indignity and other intangible injuries for all
of which he should be compensated, as well as for punitive damages, attorney fees
and costs. 30
7. The Underlying Complaint alleges that “[J.H.] engaged in all or some of the wrongful
acts and omissions . . . while under the supervision and control of the Defendants [El Matador
and its owners] as their agents. 31
8. The Underlying Complaint’s “Statement of Facts” alleges that J.H. was 39 years old and
D.C. was 16 years old at the time when J.H. performed unwanted sex acts on D.C., furnished
D.C. with alcohol, and mentally abused and sexually harassed D.C. at work. The Underlying
Complaint further alleges that at the time J.H. was committing these acts she knew that D.C. was
a minor. 32

30

Id. at ix–x (undisputed).

31

Id. at x (undisputed).

32

Id. at x–xi (undisputed).

8

9. The Underlying Complaint’s “Statement of Facts” alleges harm to D.C. from the alleged
conduct of J.H. or the other Defendants named in the suit:
41. On or about July 11, 2013, Plaintiff [D.C.] attempted suicide and was hospitalized
due to the emotional damages, injuries and harm he sustained as a result of
Defendants’ unlawful conduct to him.
42. While Plaintiff [D.C.] was hospitalized in July 2013, [J.H.] went to Plaintiff
[D.C.] and while there she engaged in further inappropriate conduct with Plaintiff.
43. Later, on or about July 23, 2013, after Plaintiff [D.C.] was out of the hospital and
knowing of Plaintiff’s condition, severe depression and troubles, [J.H.] engaged in
further inappropriate conduct with Plaintiff, including further sexual activity,
including intercourse.
44. On or about July 23, 2013, Plaintiff [D.C.] attempted suicide a second time and
was taken to emergency and hospitalized due to the further emotional damages,
injuries and harm he sustained as a result of Defendants’ unlawful conduct to him.
45. On or about August 7, 2013, [J.H.] was contacted by law enforcement. 33
10. The Underlying Complaint asserts six causes of action against J.H. for: 1) Negligence; 2)
Civil Assault; 3) Civil Battery; 4) Unlawful Sexual Activity and/or Abuse of a Child –
Negligence and/or Intentional; 5) Negligent Infliction of Emotional Distress; and 6) Intentional
Infliction of Emotional Distress. 34
11. The causes of action are each based on the conduct alleged in the Underlying
Complaint’s “Statement of Facts.” 35
12. The causes of action for Civil Assault, Civil Battery, Unlawful Sexual Activity and/or
Abuse of a Child and Intentional Infliction of Emotional Distress asserted against J.H. each
allege that J.H.’s actions were unlawful, and that she knew or should have known that her

33

Id. at xi (undisputed).

34

Id. at xi (undisputed).

35

Id. at xii (undisputed).

9

conduct “with minor child Plaintiff would cause both permanent emotional harm and permanent
physical harm to Plaintiff.” 36
13. With respect to the causes of action for Negligence and Negligent Infliction of Emotional
Distress asserted against Defendants, including J.H., the Underlying Complaint provides:
FIRST COUNT
(Negligence)
(Breach of Duties, Including Statutory Duties, Assumed Duties
and Affirmative Duties)
50. Defendants owed statutory and other legal duties to Plaintiff, including not to
furnish alcohol or alcoholic products to minors. Utah’s Alcoholic Beverage Control
Act, Utah Code Title, 32B, Chapter 4, including section 32B-4-403.
51. Plaintiff, then a minor, was a member of the class of individuals intended to be
protected by law, including by Utah Code Ann. § 32B-4-403.
52. Defendants negligently or recklessly breached their duties of reasonable care and
furnished or allowed to be furnished alcohol and alcoholic products to Plaintiff, then a
minor, repeatedly and on numerous occasions.
53. Defendants’ continuing to provide alcohol, including to minors, including
Plaintiff, was reasonably foreseeable at the time of these breach of duties.
54. Defendants owed statutory and other legal duties to Plaintiff, including not to
engage in, assist, enable or be involved with complicit or otherwise unlawful sexual
activity with minors, including Plaintiff. Utah Code Ann. 78B-2-308.
55. Plaintiff, then a minor, was a member of the class of individuals intended to be
protected by law, including Utah Code Ann § 78B-2-308.
56. Defendants negligently or recklessly breached their duties of reasonable care and
engaged in, assisted in, enabled and/or were involved with unlawful sexual activity,
including to Plaintiff repeatedly and on numerous occasions.
57. Defendants owed additional statutory and other assumed and/or affirmative legal
duties to Plaintiff, including to provide adequate supervision, safety and/or security so
that Plaintiff would not be injured or harmed.
58. Plaintiff, then a minor, was a member of the class of individuals to be protected,
including by being on or as an invited or permissive guest to the 1411 South Property
and/or the Jacqueline Property.
36

Id. (undisputed).

10

59. Defendants negligently or reckless [sic] breached their duties of reasonable care
and allowed and caused Plaintiff to be subjected to injury and harm, including at the
1411 South Property and the Jacqueline Property where Defendants breached and
failed in their duties to provide adequate supervision, safety and security to Plaintiff.
60. Defendants’ negligent or reckless conduct, directly, consequentially, and/or
indirectly, constituted breached [sic] of the duties Defendants owed Plaintiff,
including with respect to not damaging or otherwise harming Plaintiff.
61. As a direct and proximate result of these repeated breaches of duties of reasonable
care by Defendants, Plaintiff suffered severe, permanent physical and emotional harm
....
SEVENTH COUNT
(Negligent Infliction of Emotional Distress)
(Against All Defendants)
111. Defendants engaged in outrageous conduct and acted with negligent and/or
reckless disregard of the consequences of Defendants’ conduct, acting in a negligent
manner reasonably calculated to cause or resulting in Plaintiffs’ severe emotional
distress and physical and emotional anguish, fear, and injury. Defendants’ conduct,
described above, has caused, and continues to cause, Plaintiff severe emotional
distress. 37
14. J.H. tendered the Underlying Complaint to Encompass. 38
15. Encompass accepted J.H.’s tender of defense, but did so under a reservation of rights to
deny coverage and under a reservation to file the above-captioned declaratory judgment suit. 39
16. Encompass issued to J.H. a USP Deluxe Home Insurance Policy, Policy No. 281339613,
Policy Period 10/05/2012 to 10/05/3013 (“Homeowners Policy”). 40
17. The Insuring Agreement of the liability portion of the Homeowners Policy provides in
relevant part:
LIABILITY COVERAGE – HOME
37

Id. at xii–xiv (undisputed).

38

Id. at xiv; Opposition at 13. Resolved in Reply at iii (Encompass’ Additional Statement of Fact No. 1).

39

Motion at xiv; Opposition at 13. Resolved in Hill Declaration ¶ 12.

40

Motion at xiv; Opposition at 14. Resolved in Reply at iii–v (Encompass’ Additional Statements of Fact Nos. 2–
10).

11

PERSONAL LIABILITY – INSURING AGREEMENT
If a claim or suit is brought against you or any covered person for the following:
1. Personal Injury,
2. Bodily Injury, or
3. Property Damage,
caused by an occurrence to which this coverage applies, we will:
(1) Pay on your behalf claims for which you or any covered person are legally liable,
including pre-judgment interest awarded against you or any covered person, up to
our limit of liability; except as excluded by the provisions listed in the Liability
Coverage – Losses We Do Not Cover; and
(2) Provide defense costs for the counsel of our choice, even if the suit is groundless,
false or fraudulent. We may investigate and settle any claim or suit that we decide
is appropriate. Our duty to settle or defend ends when the amount we pay for
damages resulting from an occurrence equals our limit of liability. 41
18. The Homeowners Policy contains several coverage exclusions which are relevant to the
claims and causes of action alleged by D.C. against J.H. in the Underlying Complaint:
LOSSES WE DO NOT COVER
1. Personal Liability and Medical Expense coverages do not apply to bodily injury
or property damage:
....
h. Intended by, or which may reasonably be expected to result from intentional or
criminal acts or omissions of one or more covered persons.
This exclusion applies even if:
(1) Such covered person lacks the mental capacity to govern his or her conduct;
(2) Such bodily injury or property damage is of a different kind or degree than
that intended or reasonably expected; or
(3) Such bodily injury or property damage is sustained by a different person than
intended or reasonably expected.
This exclusion applies regardless of whether or not such covered person is actually
charged with or convicted of a crime.
....
j. Arising out of business pursuits of you or any covered person. This exclusion does
not apply to:
41

Motion at xiv–xv; Opposition at 14–15. Resolved in Reply at iii–v (Encompass’ Additional Statements of Fact
Nos. 2–10).

12

(1) Activities which are usual to non-business pursuits; or
(2) Part-time business pursuits of any covered person who is under 18 years of
age.
....
o. Arising out of sexual molestation, corporal punishment or physical or mental
abuse. However, we will cover your liability for corporal punishment to any pupil if
coverage for corporal punishment is shown on the Coverage Summary.
p. Resulting from criminal acts or omissions of or at the direction of one or more
covered persons. This exclusion applies even if:
(1) Such covered person lacks the mental capacity to govern his or her conduct;
(2) Such covered person is not actually charged with or convicted of a crime. 42
19. The Homeowner’s Policy contains the following definition of “bodily injury,”
“business,” and “occurrence” in relevant part:
2. Bodily Injury means physical bodily harm, including sickness or disease. This
includes required care, loss of services and death resulting therefrom.
3. Business includes trade, profession or occupation, farming or ranching or any
activity aimed at providing a product or a service with the anticipation of economic
gain from the enterprise. The providing of home day care services in exchange for
monetary or other compensation, such as services to other than a relative of a covered
person, is considered a business pursuit.
....
10. Occurrence means:
....
a. An accident, including continuous or repeated exposure to substantially the same
general harmful conditions during the policy period, resulting in bodily injury or
property damage. 43
STANDARD OF REVIEW
Summary judgment is appropriate if “there is no genuine dispute as to any material fact
and the movant is entitled to judgment as a matter of law.” 44 A factual dispute is genuine when

42

Motion at xv–xvi; Opposition at 15–16. Resolved in Reply at iii–v (Encompass’ Additional Statements of Fact
Nos. 2–10).

43

Motion at xvii; Opposition at 16. Resolved in Reply at iii–v (Encompass’ Additional Statements of Fact Nos. 2–
10).

44

Fed. R. Civ. P. 56(a).

13

“there is sufficient evidence on each side so that a rational trier of fact could resolve the issue
either way.” 45 In determining whether there is a genuine dispute as to material fact, the court
should “view the factual record and draw all reasonable inferences therefrom most favorably to
the nonmovant.” 46
The moving party “bears the initial burden of making a prima facie demonstration of the
absence of a genuine issue of material fact and entitlement to judgment as a matter of law.” 47 In
this case, Encompass must make a prima facie demonstration that it does not have a duty to
defend or indemnify J.H. under the Policy. “An insurance policy is merely a contract between the
insured and the insurer.” Determining whether Encompass has a duty to defend or indemnify
J.H. in the underlying action requires using state contract interpretation principles. 48 “The duty to
defend is generally broader than the duty to indemnify, so if there is no duty to defend, there can
be no duty to indemnify.” 49 Thus, a duty-to-indemnify analysis will only be done if Encompass
has a duty to defend J.H. under the Policy.
DISCUSSION
Encompass argues that it does not owe a duty to defend J.H. because J.H.’s actions were
not “occurrences.” 50 Encompass is correct. It does not have a duty to defend. And because
Encompass does not have a duty to defend J.H., a duty to indemnify analysis is unnecessary.

45

Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998).

46

Id.

47

Id. at 670-71.

48

Benjamin v. Amica Mut. Ins. Co., 140 P.3d 1210, 1213 (Utah 2006).

49

Mid-America Pipeline Co., LLC v. Mountain States Mut. Cas. Co, No: 2:05-CV-153 DB, 2006 WL 1278748 at *1
(D. Utah May 8, 2006).
50

Motion at 5–12.

14

Encompass Does Not Have a Duty To Defend J.H. Under the Policy Because D.C.’S
Injuries Are not “Occurrences”
Under Utah law, when undertaking a duty-to-defend analysis, the focus is on two
documents: “the insurance policy and the complaint.” 51 The analysis begins by “comparing the
language of the insurance policy with the allegations of the complaint . . . and the starting point
must always be the underlying policy.” 52 Additionally, when comparing the policy language to
the allegations of the complaint, “Utah law looks to the substance of a particular claim not its
form.” 53
The Policy states:
If a claim or suit is brought against you or any covered person for the following:
1. Personal Injury,
2. Bodily Injury, or
3. Property Damage,
caused by an occurrence to which this coverage applies, we will:
...
Provide defense costs for the counsel of our choice, even if the suit is groundless,
false or fraudulent. We may investigate and settle any claim or suit that we decide
is appropriate. Our duty to settle or defend ends when the amount we pay for
damages resulting from an occurrence equals our limit of liability. 54
The parties do not dispute that D.C. has properly alleged “bodily injury” in the
Underlying Complaint. Thus, the analysis hinges on the definition of “occurrence.” The Policy
defines an “occurrence” as “an accident, including continuous or repeated exposure to
substantially the same general harmful conditions during the policy period, resulting in bodily
injury or property damage.” 55

51

Benjamin, 140 P.3d at 1214.

52

Id.

53

Great American ins. Co. v. Woodside Homes Corp., 448 F.Supp.2d 1275, 1285 (D. Utah 2006).

54

Exhibit A to Motion at 32.

55

Id. at 47.

15

The Utah Supreme Court has consistently defined the term “accident” in connection to
insurance policies as:
The probable consequence of the use of given means is the consequence which is
more likely to follow from their use than it is to fail to follow. An effect which is
the natural and probable consequence of an act or course of action is not an
accident, nor is it produced by accidental means. 56
Harm resulting from the “natural and probable consequence[s] of an act” will not be
considered an “occurrence” under the Policy. When examining the “natural and probable
consequences” of the insured’s act, it is measured against an “average individual” standard, i.e.
“what the average individual would expect to happen under the circumstances.” 57
Thus, there are “two independent methods by which bodily injury or property damage
may be deemed nonaccidental. First, harm or damage is not accidental if it is the result of actual
design or intended by the insured. Second, harm or damage is not accidental if it is the natural
and probable consequence of the insured's act or should have been expected by the insured.” 58
The D.C. Complaint asserts three types of conduct that resulted in injury: (1) unwanted
sexual contact, including molestation, oral sex, and intercourse, with a minor; (2) knowingly
supplying alcohol to a minor; and (3) verbal abuse and sexual harassment in the workplace. 59 All
eight of the causes of action in the D.C. complaint allege injuries resulting from the above
conduct. Looking at the substance of the claims, the definition of “accident” and its analysis will
be limited to the above categories of conduct, rather than the specific causes of action. 60

56

N.M. on behalf of Caleb v. Daniel E., 175 P.3d 566, 569 (Utah 2008) (emphasis added).

57

Id. at 570.

58

Id. at 569.

59

See Underlying Complaint.

60

See Great American ins. Co., 448 F. Supp. 2d at 1285.

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D.C. argues that the Policy covers his negligence claims. 61 The allegations in his claims
for negligence are not independent from the conduct discussed above. They are related and
interdependent. Without the underlying sexual molestation, sexual harassment, and supplying of
alcohol, there would be no basis for a suit against J.H. for negligence. 62 The harm resulting from
J.H.’s actions does not constitute an “occurrence” simply because it resulted from negligence
rather than intentional acts.
1. Unwanted sexual contact with a minor is not an occurrence.
First, D.C. alleges that J.H. sexually molested him in J.H.’s home and various other
places. 63
As Encompass correctly points out, 64 there is no allegation in the Underlying Complaint
that J.H. “design[ed] or intended” to cause D.C. harm. The question then is whether D.C.’s
alleged injuries are “the natural and probable consequence of [J.H.’s] act or should have been
expected by” J.H.
“Some actions . . . are so likely to result injury that, as a matter of law, the court will find
that the injury did not result from an accident regardless of the actor’s subjective intent or
expectations . . . . Ordinarily, sexual molestation of a minor by an adult falls within” this
category of actions. 65 Though the Utah Supreme Court has yet to adopt this per se rule, many
jurisdictions have. 66 Therefore, an injured minor “is the natural and probable consequence of”
molestation, and this should be “expected by the insured.”

61

Opposition at 20.

62

See GATX Leasing Corp. v. National Union Fire Ins. Co., 64 F.3d 1112, 1118 (7th Cir.1995)

63

Underlying Complaint ¶¶ 31–36.

64

Motion at 6.

65

Allstate Ins. Co. v. Patterson, 904 F. Supp. 1270, 1280 (D. Utah 1995).

66

See Manufacturers and Merchants Mut. Ins. Co. v. Harvey, 330 S.C. 152, 159 n.1 (S.C. Ct. App. 1998) (collecting
cases and finding that “[e]very jurisdiction having the opportunity to consider the issue in the context of sexual

17

Therefore, the injuries which resulted from J.H. (an adult) molesting D.C. (a minor) were
not an accident because the natural and probable consequence of sexual molestation of a minor
is harm to the minor. Therefore, Encompass does not have a duty to defend J.H. under the Policy.
2. Knowingly supplying alcohol to a minor is not an occurrence.
Second, D.C. alleges injury from J.H. knowingly supplying alcohol to D.C. 67 There is no
allegation in the Underlying Complaint that J.H. “design[ed] or intended” to cause D.C. harm.
The question is again whether D.C.’s alleged injuries from being given alcohol are the “natural
and probable consequence of [J.H.’s] act or should have been expected by” J.H.
Injury resulting from an adult providing alcohol to a minor is not an accident. It is
reasonable to expect an average person to know that alcohol harms minors. 68 Many jurisdictions
have held that injuries resulting from an adult supplying a minor with alcohol is not an
accident. 69
Therefore, the injuries which resulted from J.H. (an adult) supplying D.C. (a minor)
alcohol were not an accident because the natural and probable consequence of supplying a minor
alcohol is harm to the minor.
3. Verbal abuse and sexual harassment at the workplace is not an occurrence.
Third, D.C. alleges injuries from sexual harassment and verbal abuse in the workplace. 70
Specifically, D.C. alleges that J.H. would inappropriately touch, hug, and kiss D.C. during the

molestation of a minor by an insured has adopted the ‘inferred intent’ doctrine and found that the intent to perform
the act of molestation is sufficient to infer the intent to harm the child.”).
67

Underlying Complaint ¶¶ 26–31.

68

Allstate Ins. Co. v. J.J.M., 657 N.W.2d 181, 184 (Mich. Ct. App. 2002).

69

Sheely v. Sheely, No. 2-10-38, 2012 WL 34451, at *9 (Ohio Ct. App. 2012) (collecting cases).

70

Underlying Complaint ¶¶ 94–104

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workday with promises to give quid-pro-quo pay raises and other promises. 71 And D.C. alleges
that J.H. repeatedly directed offensive, crude, and lewd verbal abuse towards D.C. 72 There is no
allegation in the Underlying Complaint that J.H. “design[ed] or intended” to cause D.C. harm.
The question is again whether D.C.’s alleged injuries from being sexually harassed and verbally
abused in the workplace are the “natural and probable consequence of [J.H.’s] act or should have
been expected by” J.H.
Many courts have stated that injury borne from sexual harassment and verbal abuse is not
accidental because injury is the natural and probable consequence of that behavior. “[I]t strains
the imagination to speculate how a pattern of sexual overtures and touching can be
‘accidental.’” 73 This is especially true when the harassment involves power disparity such as
between an adult manager and a minor subordinate.
Therefore, the alleged injuries which resulted from J.H. allegedly sexually harassing and
verbally abusing D.C. were not an accident because the natural and probable consequence of
sexual harassment and verbal abuse is harm to the victim.
CONCLUSION
There are no genuine disputes of material fact in this case. The undisputed facts establish
that Encompass does not have a duty to defend J.H. in the underlying action under the Policy
because the harm D.C. suffered as a result of J.H.’s actions was not due to an “occurrence.”

71

Id.

72

Id.

73

Commercial Union Ins. Cos. V. Sky, Inc., 810 F.Supp. 249, 253 (W.D. Ark. 1992); see also Russ v. Great
American Ins. Companies, 121 N.C. App. 185, 188 (N.C. Ct. App. 1995) (“acts of sexual harassment are so nearly
certain to cause injury that intent to injure can be inferred as a matter of law.”) (collecting cases).

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ORDER
IT IS HEREBY ORDERED that Encompass’s Motion and Supporting Memorandum for
Summary Judgment is GRANTED.
The clerk of the court is directed to CLOSE this case.
Signed May 12, 2017.
BY THE COURT

________________________________________
District Judge David Nuffer

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