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Miller v. Quincy Mutual Fire Insurance Company

United States District Court, E.D. Pennsylvania
Dec 4, 2003
CIVIL ACTION NO. 03-1328 (E.D. Pa. Dec. 4, 2003)

Summary

holding that physical touching is insufficient to constitute bodily injury and observing that "the weight of authority is that there must be some physical injury to the body alleged in order to constitute 'bodily injury'" and that Black's Law Dictionary defines "'bodily injury' as 'physical damage to a person's body'"

Summary of this case from Inc. Vill. of Old Westbury v. Am. Alt. Ins. Corp.

Opinion

CIVIL ACTION NO. 03-1328

December 4, 2003


Memorandum and Order


Rachel Miller brings this action against Quincy Mutual Fire Insurance Company ("Quincy") as the successor in interest to its insureds for breach of an insurance contract and statutory bad faith. Quincy has moved for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c). See, Motion for Judgment on the Pleadings (Doc. #4). For the reasons below, Quincy's motion will be granted.

BACKGROUND

This case arises out of acts of sexual harassment that led Rachel Miller to bring a lawsuit against her former employer, Dollar Emporium, Inc. (Dollar Emporium), and the secretary and store manager of Dollar Emporium, Richard Lazar. Pertinent to that suit, Quincy, Dollar Emporium's insurance provider, disclaimed any duty to provide a defense or indemnification to both Lazar and the company. Def.'s Mot. for Judge. on the Pleadings ¶ 5. Miller eventually reached a settlement agreement with Lazar and Dollar Emporium in the amount of $350,000. Compl. ¶¶ 15, 23, 29. Under the terms of the agreement, Miller agreed to settle with Lazar for $15,000 (and in the event that he did not pay promptly, a personal judgment against Lazar in the amount of $50,000). Id. Dollar Emporium settled for a judgment in the amount of $300,000. Compl. ¶ 15. As part of the agreement, Lazar and the company also assigned their rights under the insurance contract with Quincy to Miller. Miller thereafter filed the present suit in this court, where, as the successor in interest to Lazar and Dollar Emporium's policy with Quincy, she advances claims against Quincy. Compl. ¶ 1. She alleges breach of the insurance contract and statutory bad faith.

Miller brought a count against Lazar for assault and battery, alleging in the underlying complaint that Lazar touched her breasts and vaginal areas. Underlying Compl. ¶ 8. Miller also brought a negligence count against Dollar Emporium for failing to supervise, manage and properly screen Lazar. Id. ¶¶ 15, 18. Miller filed the underlying lawsuit in the Court of Common Pleas of Philadelphia. See, Def.'s Mot., Exhib. 2 A.

The Philadelphia Court of Common Pleas issued an order granting Miller's motion to enforce this settlement agreement on February 12, 2003. See, Def.'s Memo, in Support of Def.'s Mot. for Judg. on the Pleadings at 2 (Exhibit "2B").

STANDARD OF REVIEW

In deciding a motion for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c), a district court must view the facts and inferences to be drawn from the pleadings in the light most favorable to the non-moving party. See Janney Montgomery Scott, Inc. v. Shepard Niles, Inc., 11 F.3d 399, 406 (3d Cir. 1993). The court may grant the motion only if no material issue of fact remains to be resolved and the movant is entitled to judgment as a matter of law. See Jablonski v. Pan Am. World Airways, Inc., 863 F.2d 289, 290 (3d Cir. 1988).

DISCUSSION

Quincy moves for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c). It argues that it did not breach the insurance contract and did not act in bad faith because it had no duty to provide a defense or indemnification to Dollar Emporium or Lazar. Def.'s Mot. ¶ 16. Quincy asserts six reasons why it is entitled to judgment on the pleadings:

(I) Quincy argues that Miller's "purely emotional injuries" do not constitute "bodily" injuries, which are covered by the policy. Def.'s Memo, at 4 et seq.,

(II) Quincy urges that even if there was bodily injury, the incident was not an "occurrence." Id. at 11.

(III IV) Quincy maintains that two exclusions — the employer's liability exclusion and the employment-related practices exclusion — barred coverage for Miller's claims and thus Quincy never had a duty to defend its insureds. Id. at 16 et seq.,

(V VI) Quincy argues that Lazar's actions are excluded from coverage because Miller's injuries were "expected or intended," and thus are not covered by the Quincy policy. Id. at 13. Quincy also argues that providing coverage would be against public policy, which "prevents an insurer from providing a defense or indemnification in connection with an insured's intentional, criminal misconduct." Id. at 16.

The policy excludes coverage for "expected or intended" injuries. Def.'s Mot., Exhib. 2C at § B.I.a (page 2 of 12 of the policy).

Defendant's counsel conceded at oral argument that the issues of whether the injury was "expected or intended" and whether providing coverage would violate public policy as to Dollar Emporium required discovery and were therefore not properly considered in a motion for judgment on the pleadings with reference to Dollar Emporium. I will, therefore, not discuss these issues.

Additionally, Quincy posits that it did not act in bad faith, as Miller alleges, because Quincy never had a duty to defend the underlying suit. Id. at 23.

As an insurer, Quincy's duty to defend its insureds is "a distinct obligation, different from and broader than its duty to indemnify." Aetna Cas. Sur. Co. v. Roe, 650 A.2d 94, 98 (Pa.Super. 1994). However, an insurer only has a duty to defend those claims that are covered by the policy. Id. The insurer agrees to defend the insured against any suits no matter how groundless, false or fraudulent, such that the obligation to defend arises any time the complaint may potentially come within the policy's coverage. Britamco Underwriters, Inc. v. Weiner, 636 A.2d 649, 651 (Pa.Super. 1994). That obligation is at least initially determined solely by the allegations that appear on the face of the underlying complaint. Roe, 650 A.2d at 98. "An insurer's duty to defend an action against the insured is measured, in the first instance, by the allegations to the Plaintiff's pleadings." Gene's Restaurant Inc. v. Nationwide Insurance Co., 548 A.2d 246 (Pa. 1988) (citing J. Appleman's Insurance Law and Practice, § 4683 at 42, 50 (W. Berdel ed. 1979)). "Therefore, the course and outcome of the underlying litigation is irrelevant in this context." Roe, 650 A.2d at 99. Furthermore, "[w]here a claim is potentially within the scope of an insurance policy, the insurer who refuses to defend at the outset does so at its own peril." Id.

The parties have agreed that the relevant documents for resolving this motion are the complaint and answer in this action (Docs. #1, 2), the insurance policy (attached to Def's Mot., Exhib. 2C), the underlying complaint (attached to Def.'s Mot., Exhib. 2A) and the settlement agreement with reference to the underlying complaint (attached to Def.'s Mot., Exhib. 1C). The parties also agree that the Quincy policy covers both Dollar Emporium and Lazar even though Dollar Emporium is the named insured.

The policy covers employees for acts within the scope of their employment or while performing duties related to the conduct of the employer's business. See, Def.'s Mot., Exhib. 2C at § C.2 (page 7 of 12 of the policy). The policy also covers executive officers and directors with respect to their duties as officers and directors. Id. at § C.l.c. The parties agree that Lazar is an employee. He is also an officer (secretary) and director. Plaintiff alleged, and defendant admits, that the policy insured both Dollar Emporium and Lazar, Compl. and Ans. ¶ 25.

I. "Bodily Injury"

In her present complaint, Miller alleges that the policy issued by Quincy affords coverage for the claims she made in her underlying action filed in the Court of Common Pleas. Compl. ¶ 26. Those claims arose from a series of sexual assaults, which allegedly caused Miller "extreme embarrassment, humiliation and psychological harm." Underlying Compl. ¶ 16. In her underlying complaint, Miller averred that these injuries "are of a continuing and permanent nature for which psychological treatment was and continues to be necessary." Id. ¶ 19.

Miller now seeks coverage under § A.1.a. of the Businessowners Liability Coverage Form ("the policy"). Compl. ¶ 9; see Def.'s Mot., Exhib. 2C at § A.1.a (form BP 00 06 0196; page 1 of 12 of the policy). This section of the policy provides coverage for bodily injury:

A. COVERAGES

1. Business Liability

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury," . . . to which this insurance applies. We will have the right and duty to defend any "suit" seeking those damages. We may at our discretion investigate any "occurrence" or offense and settle any claim or "suit" that may result.

* * *

b. This insurance applies:

(1) To "bodily injury" . . . only if:

(a) The "bodily injury" . . . is caused by an "occurrence" that takes place in the "coverage territory"; and
(b) The "bodily injury" . . . occurs during the policy period.

Section F of the policy defines the term "bodily injury":

SECTION F — LIABILITY AND MEDICAL EXPENSES DEFINITIONS
3. "Bodily Injury" means bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time.
See, Def.'s Mot., Exhib. 2C at §§ A.I, F.3 (pages 1 and 9 of 12 of the policy). Quincy argues that Miller's emotional and psychological injuries do not constitute "bodily injury" as defined by the policy. Def.'s Memo. at 6. Miller's response is that the language of the policy is ambiguous because the policy defines "bodily injury" as "bodily injury." See, Doc. #7, Plaintiff's Memo. in Opposition to Def.'s Mot. at 7. Miller asks this court to presume bodily injury where there has been unwanted physical contact and submits that the "assault and battery she suffered at the hands of Richard Lazar was a bodily injury." Id. at 8-9. The underlying complaint alleges that Lazar touched the breasts and vaginal areas of the plaintiff, but Miller alleges only emotional harm. Underlying Compl. ¶¶ 8, 16, 19. Nowhere in her complaint or underlying action does Miller allege physical harm from the assault and battery, or physical harm as a manifestation of her psychological injuries.

The fact that Count I of the underlying complaint alleged assault and battery, and that this claim was settled by an agreement of defendant Lazar to pay $15,000 or have a $50,000 judgment entered against him, does not mean that the plaintiff suffered bodily injury. In Pennsylvania, a civil action for battery does not require bodily injury:

A battery is an act which, directly or indirectly, is a legal cause of a contact with another's person or with anything so closely attached thereto that it is customarily regarded as a part thereof and which is offensive to a reasonable sense of personal dignity, although not necessarily involving bodily harm, if (a) the act is done with the intention of inflicting a harmful or offensive contact upon the other or a third person or of putting the other or a third person in apprehension thereof, and (b) the contact is not privileged.

Stephen M. Feldman, Pennsylvania Trial Guide (Civil), 2d revised edition, vol. 2, § 28.6 (1991) (emphasis added). Unlike a criminal action for assault and battery, a civil action requires merely an unwanted touching. Thus, stating a claim for civil assault and battery does not, without a more specific allegation of bodily harm, state a claim for bodily injury.

Miller's argument that the definition of bodily injury in the policy is ambiguous is unavailing. Of course, any ambiguity in an insurance policy must be construed against the insurer and in favor of the insured. See Burne v. Franklin Life Ins. Co., 301 A.2d 799, 804 (Pa. 1973). A term is considered ambiguous if it is reasonably susceptible to more than one interpretation. See C.H. Heist Caribe Corp. v. Am. Home Assurance Co., 640 F.2d 479, 481 (3d Cir. 1981). Courts should read policy provisions to avoid ambiguities and take care not to torture the language to create uncertainties where none exist. Northbrook Ins. Co. v. Kuljian Corp., 690 F.2d 368, 372 (3d Cir. 1982). When "a term is not defined in an insurance policy, but possesses a clear legal or common meaning that may be supplied by a court, the contract is not ambiguous." See City of Erie v. Guaranty Nat'l Co., 109 F.3d 156, 163 (3d Cir. 1997).

Because the term "bodily injury" possesses a clear legal meaning, the policy here is not ambiguous. The policy defines "bodily injury" as "bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time." See, Def.'s Mot., Exhib. 2C at § F.3 (page 9 of 12 of the policy). Rather than creating ambiguity as Miller contends, this definition of "bodily injury" is purposefully self-referential. By defining "bodily injury" as "bodily injury," the policy suggests that the term is to be read as it is commonly understood.

Black's Law Dictionary defines "bodily injury" as " physical, damage to a person's body." BLACK'S LAW DICTIONARY 789 (7th ed. 1999) (emphasis added). Black's Law Dictionary also notes that the term is synonymous with the term "physical injury." Id. Although it does not define the term "bodily injury," the Second Restatement of Torts does define "bodily harm" as "any physical, impairment of the condition of another's body, or physical, pain or illness." Restatement (Second) of Torts, § 15 (1965) (emphases added). The Restatement defines "physical harm" as the "physical impairment of the human body." Id. § 7(3). If the harm is to the body it is called bodily harm. Id. § 7 cmt. e. These definitions reinforce the distinction between physical and emotional harm, suggesting that where the adjective "bodily" is used to describe harm or injury, it refers to physical, as opposed to emotional, harm. Id. cmt. b.

The tentative draft for the Restatement of the Law (Third) of Torts does not change this language. (Tentative Draft No. 1, March 28, 2001). "Physical harm" is still defined as "the physical impairment of the human body"and includes physical illness, disease and death. Id. § 4.

The Restatement defines the terms "injury" and "harm" more generally, suggesting that the terms "physical" and "bodily" are meant to set limitations on the type of harm or injury at issue. "Injury" means "the invasion of any legally protected interest of another." Id. § 7(1). "Harm" is defined as the "existence of loss or detriment in fact of any kind to a person from any cause"; that detriment may impair a person's physical or emotional well-being. Id. § 7(2) cmt. b.

The parties have not presented any on-point Pennsylvania cases in which a plaintiff alleges a physical touching unaccompanied by a specific allegation of bodily harm. The Pennsylvania case most closely on point is Board of Education, a civil rights action decided en banc, by the Superior Court. Bd. of Educ. v. Nat. Union Fire Ins., 709 A.2d 910 (Pa.Super. 1998). The underlying complaint in that action alleged that because of the school district's negligence, the president of the middle school's parent-teacher organization was able to sexually molest a student in violation of the student's civil rights. Id. at 911. In the opinion, written by Judge Eakin, now Justice Eakin, the en banc, court stated, albeit in dictum, that there was no bodily injury because the complaint did not allege any "physical wounds or injury." Id. at 913. The court found that the damage alleged was not bodily injury: "the complaint did not allege injury to the body, but rather injury to the civil rights of the plaintiff as manifested by `severe psychological trauma, severe depression, paranoia, loss of self-esteem, mental anguish, embarrassment and humiliation.'" Id.

Where Pennsylvania courts have discussed bodily harm in other contexts, they have found that bodily injury requires physical injury, even though none of these cases involves physical touchings. See, e.g., Needleman v. Liberty Mut. Fire Ins., 507 A.2d 1233 (Pa.Super. 1986). In Needleman, the Pennsylvania Superior Court addressed a family's claim for psychological and psychiatric care under the Pennsylvania No-Fault Motor Vehicle Insurance Act. Id. at 1234. The court found that the mental anguish suffered after witnessing a family member's accidental death was not bodily injury: "It is clear that the common and approved usage of `bodily' injury connotes a physical, and not mental, injury." Id. at 1236. The Superior Court has since reaffirmed this principle. See Jackson v. Travelers Ins. Co., 606 A.2d 1384, 1386-87 (Pa.Super. 1992) (emotional trauma or distress suffered as a result of witnessing wife's death is not bodily injury).

Defendant also points out a number of other cases involving employment termination and witnesses to an accident wherein Pennsylvania courts have found that "bodily injury" does not include psychological harm or the physical manifestations that result from mental and emotional harm. The language in these opinions also supports the defendant's position; although again, none of these cases is directly on point because they do not allege any physical touching. See Terrafranca v. Virgin Atlantic Airways Ltd., 151 F.3d 108, 111 (3d Cir. 1998) (where an airline passenger suffers extreme emotional distress, specifically post traumatic stress disorder complicated by anorexia, after flight crew informed passengers of a bomb threat, "bodily injury" requires a showing of more than "mere [physical] manifestation of fear or anxiety"); Legion Indemnity Co. v. Carestate Ambulance, Inc., 152 F. Supp.2d 707, 719 (E.D. Pa. 2001) (physical symptoms that result from mental and emotional harm from having to watch a family member die do not constitute "bodily injury" under a general liability insurance policy); and Zerr v. Erie Ins. Exchange, 667 A.2d 237, 240 (Pa.Super. 1995)("a distinction between physical and psychological maladies remains, such that one who suffers psychological illness cannot successfully claim benefits" for bodily injury).

See also Kline v. Kemper Group, 826 F. Supp. 123 (M.D. Pa. 1993), affirmed without opinion, 22 F.3d 301 (3d Cir. 1994); Nationwide Property Casualty Ins. Co. v. Feryo Hearing Aid Service, Inc., 895 F. Supp. 85 (E.D. Pa. 1995); Allstate Ins. Co. v. Montalabano, 2001 U.S. Dist. LEXIS 11645 (E.D. Pa. 2001); ARC Water Treatment Co. v. Hartford Casualty Ins. Co., 2002 U.S. Dist. LEXIS 11523 (E.D. Pa. 2002); and Philadelphia Contributionship Ins. Co. v. Shapiro, 798 A.2d 781 (Pa.Super. 2002).

Additionally, defendant cites cases that involve physical touchings, although they are from other jurisdictions. The language from these decisions demonstrates that the distinction between bodily contact and bodily harm is widely accepted when interpreting insurance policies.

Among the many cases defendant cites from other jurisdictions, four involve sexual harassment. David v. Nationwide Mut. Ins. Co., 665 N.E.2d 1171 (Ohio App. 1995); O'Delly. Saint Paul Fire Marine Ins. Co., 478 S.E.2d 418, 420 (Ga.Ct.App. 1996); Batter-Up, Inc. v. Commercial Union Ins. Co., 1997 U.S. Dist. LEXIS 13267 (N.D. 111. 1997); and American Foreign Ins. Co. v. Church Schools in the Diocese, 645 F. Supp. 628 (E.D. Va. 1986).
In David, the court found that claims for emotional distress resulting from an employee's actions directed toward plaintiff — employee grabbed Plaintiff's breast, exposed his penis and made sexually repugnant remarks — did not constitute claims for bodily injury absent an allegation of physical harm. 665 N.E.2d at 1173.
In O'Dell, the court found that claims for emotional distress resulting from sexual harassment did not constitute claims for bodily injury. 478 S.E.2d at 420.
In Batter-Up, a former employee of the insured alleged mental and emotional pain and suffering as a result of the alleged misconduct of her supervisor. 1997 U.S. Dist. LEXIS 13267 at *5. The court, interpreting language identical to the language of the Quincy policy, found that Plaintiff's allegations that her manager touched, fondled, and kissed her in addition to repeatedly requesting sexual favors in exchange for favorable working conditions, did not constitute bodily injury. Id. at * 13. The court concluded that there must be actual physical injury. Id.
In American Foreign Ins. Co., a teacher allegedly squeezed a student's buttocks in a sexually suggestive manner; the underlying suit for assault and battery and intentional infliction of emotional distress did not establish bodily injury because the harm was purely emotional. 645 F. Supp. at 630, 632. The court distinguished between physical bodily contact, and bodily injury. Id. at 632 (emphases in original).

Plaintiff cites absolutely no authority from this or any other jurisdiction in support of her argument that the allegations in the underlying action state a claim for bodily injury. I conclude, therefore, that although the physical touching makes this case different factually from the cases defendant cites from this jurisdiction, the weight of authority is that there must be some physical injury to the body alleged in order to constitute "bodily injury." Plaintiff has not made the necessary allegations either in her original complaint or in any subsequent information supplied to Quincy. Because no bodily injury is alleged, defendant is entitled to judgment on the pleadings with reference to both Dollar Emporium and Lazar,

II. "Occurrence"

Defendant's next basis for judgment in its favor is that the assault and battery of plaintiff was not an "occurrence." Def `s Memo, at 11. The policy provides coverage for bodily injury caused by an occurrence. See, Def's Mot., Exhib. 2C at § A.1.b(1)(a). The policy defines "occurrence" to mean "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." Id. at § F.12.1 find that even though the policy does not cover Lazar because his actions were clearly not accidental, the policy would afford coverage for Dollar Emporium's alleged negligence if bodily injury had occurred.

"This insurance applies to `bodily injury' . . . only if: [it] is caused by an `occurrence' that takes place in the `coverage territory.'" See, Def.'s Mot., Exhib. 2C at § A.1.b(1)(a) (page 1 of 12 of the policy).

Lazar's actions are not covered by the policy because under Pennsylvania law the intentional torts of assault and battery are not ordinarily considered "accidents." Gene's Restaurant, Inc. v. Nationwide Insurance Co., 548 A.2d 246 (Pa. 1988); Britamco Underwriters, Inc. v. Stokes, 881 F. Supp. 196 (E.D.Pa. 1995). As such, intentional torts are excluded from coverage so that the insurer has no duty to defend. Id.; see also Britamco Underwriters v. Grzeskiewicz, 639 A.2d 1208 (Pa.Super. 1994).

A separate question, which these case do not squarely address, is whether the policy covers Dollar Emporium's alleged negligence. In Gene's Restaurant, the Supreme Court of Pennsylvania found that the assault and beating of a customer was not an accident, but rather was an intentional tort. Gene's Restaurant, 548 A.2d at 247. The policy defined "occurrence" as "an accident . . . which results in bodily injury . . . neither expected nor intended from the standpoint of the insured." Id. The court concluded that the alleged assault was not an accident but rather an intentional tort and therefore the restaurant owner was not covered by the policy and the insurer had no duty to defend. Id. Because there is no extended analysis of the issue and no statement as to the nature of the allegation in the underlying complaint as to the restaurant owner, it is difficult to determine the decision's impact on the present issue of whether the intentional acts of Lazar bar coverage for Dollar Emporium's alleged negligence.

In its opinion, the Supreme Court of Pennsylvania only mentions that the underlying complaint alleges trespass: "On or about January 6, 1976, at or about 1:30 a.m., the defendant . . . willfully and maliciously assaulted and beat the wife plaintiff . . . striking her with fists and with great force and violence repeatedly shook, cast and threw the said plaintiff to the ground causing plaintiffs [sic] to sustain the injuries and damages hereinafter set forth." Gene's Restaurant, 548 A.2d at 247. It is impossible to discern from this opinion whether the perpetrator was a restaurant employee or a patron, and no mention is made of the specific allegations against the restaurant owner.

Providing more specific direction on the issue, the Superior Court of Pennsylvania has concluded that an insurer cannot refuse to defend negligent insureds solely because the criminal acts of another insured entity are not covered under the same policy. Bd. of Educ. v. Natl. Union Fire Ins., 709 A.2d at 915. Underlying the Board of Education, case was a civil rights complaint filed by a middle-school student. Id. at 911. The student alleged various enumerated shortcomings by the school district and others, which allowed the president of the school's parent-teacher organization to sexually molest her. Id. The underlying complaint alleged that the school district was negligent because it failed to screen individuals who would have access to the students and failed to instruct or inform teachers and others to prevent unsupervised contact between students and unscreened volunteers. Id. at 913. The school district's policy provided coverage for claims alleging "any Wrongful Act . . . of the Insured or of any other person for whose actions the Insured is legally responsible." Id.

By way of an endorsement to the policy, the definition of "Insured" included volunteers. Id. at 913.

The court addressed the issue whether "allegations of negligence against an insured, clearly covered by the policy, [could] be swept outside the policy ambit solely by the nature of the allegations against another insured." Id. at 915. The court concluded that the insurer still had a duty to defend even though the perpetrator's criminal actions were not covered by the policy: "allowing the insured to deny a defense against claims sounding entirely in negligence to an entire roster of law abiding people and groups because of alleged criminality by a single `volunteer' cannot be what the parties bargained for." Id. This language, from an en banc, court, would seem to indicate that the allegations of negligence in the underlying complaint at issue should demand coverage for Dollar Emporium. Although the Superior Court was analyzing an exclusion for criminal acts, the language used would seem to apply to the distinction here where the issue is whether an intentional act by an employee precludes coverage for the alleged negligence of the employer.

Just one day after the Board of Education, decision was filed on March 16, 1998, the Third Circuit filed its decision in Nationwide v. Pipher. Nationwide Mutual Fire Insurance Company of Columbus, Ohio v. Pipher, 140 F.3d 222, 225 (3d Cir. 1998) ("Pipher"). The issue in that case was "whether bodily injury or death, directly caused by the intentional act of a third party but also attributable to the negligence of the policyholder-insured, constitutes an `occurrence', and thus obligates an insurer to defend, and potentially indemnify, its insured for the insured's alleged negligence." Id. at 223. In Pipher, the insured, a landlord, owned a multi-unit dwelling and hired a painter to paint one of its apartments. Id. at 223-24. The painter killed one of the landlord's tenants, whereupon the tenant's husband sued the landlord for wrongful death. Id. at 224. The insurance company sought a declaratory judgment that it had no duty to defend or indemnify because the death was caused by an intentional assault and murder and therefore was not an occurrence. Id.

In reversing the district court's grant of summary judgment for the insurance company, the Third Circuit found that Gene's Restaurant, was not dispositive because the plaintiff in Pipher, in addition to alleging an intentional tort, alleged that the insured landlord was negligent in the complaint. Id. at 225. The court noted that the underlying complaint in Gene's Restaurant, contained no allegations of negligence on the part of the insured. Id. at 224.

The Third Circuit affirmed the holding of Gene's Restaurant, but noted that "it in no way dictates that an insurer owes no duty to defend its insured when the complaint also alleges the assault was made possible by the negligence of the insured." Id. The Third Circuit concluded that the term "occurrence" includes "bodily injury or death which is directly caused by the intentional act of a third party, but which is also attributable to the negligence of the insured." Id. at 227. The court predicted that the Pennsylvania Supreme Court, if faced with this question, would hold that the insurer was obligated to defend and potentially indemnify its insured under the policy where the plaintiff alleged negligence on the part of the insured in addition to alleging that a third person committed intentional acts. Id. at 228. The court reasoned that it is the intentional acts of the insured, that preclude coverage, not the intentional acts of third parties: "[I]t is well established that the test of whether the injury or damage is caused by an accident must be determined from the perspective of the insured, and not from the viewpoint of the person who committed the injurious act." Id. at 226 (emphases in original). Finally, the Third Circuit noted that "in light of the above, it is obvious that term `occurrence' is ambiguous in this context and should be construed against Nationwide [the insurer] so as to provide coverage to its insured." Id. at 227. The court found that because the plaintiff alleged several grounds of negligence on the part of the insured landlord so that the insured's own negligence played a significant part in the death of the victim, and because the intentional acts were those of a third party, the insurer was obligated under the policy to defend and/or indemnify the insureds. Id. at 228.1 am, of course, bound by Pipher,

Like the plaintiff in Pipher, Miller alleges that the named insured, Dollar Emporium, was negligent. Underlying Compl. ¶ 18. She does so in addition to alleging that Lazar, a Dollar Emporium employee, committed intentional acts. Id. ¶ 15. Because plaintiff has also averred negligence, Pipher, states the appropriate rule for determining whether Quincy has a duty to defend. On the basis of the pleadings, I conclude that the intentional acts of Lazar are not an "occurrence," but that the alleged negligence of Dollar Emporium does constitute an "occurrence" under the policy. Thus, there is no coverage for Lazar on this basis, as well. However, although there are other deficiencies in Dollar Emporium's claim for coverage, it would not be denied coverage on this basis.

I find that where negligence on the part of the insured is plead, the issue of whether the third party was an employee or an independent contractor hired by the insured has little bearing, under current law, upon the insurer's obligation to defend. In Pipher, the perpetrator was presumably an independent contractor. Here, Lazar's status as an employee, as opposed to an independent contractor or an unrelated third person, does not make a substantial difference. But see Pipher, 140 F.3d at 229 (Alito, J., concurring) (suggesting that an employee's intentional acts become the employer's intentional acts). The nature of the employment relationships in Gene's, Restaurant and Pipher, were not determinative of the outcomes of those cases. Furthermore, Pennsylvania has found that even where employees (as opposed to independent contractors) have committed intentional acts, insurance companies owe a duty to defend where plaintiffs assert alternative theories of recovery sounding in negligence. Britamco Underwriters, Inc. v. Weiner, 636 A.2d 649, 652 (Pa.Super. 1994).

III. Employer's Liability Exclusion

Quincy's next argument is that Dollar Emporium's policy does not provide coverage because Miller is an employee, and the policy excludes coverage for employees for bodily injury that arises out of and in the course of employment of the insured or in the course of performing duties relating to the conduct of the insured's business. The relevant portions of the employer's liability exclusion read as follows:

B. EXCLUSIONS

1. Applicable to Business Liability Coverage, — This insurance does not apply to:
e. Employer's Liability, "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.
See Def.'s Mot., Exhib. 2C at §

B.1.e (page 2 of 12).

In McCabe, the Supreme Court of Pennsylvania interpreted language of a policy that specifically excluded from coverage any injury or death of an employee "arising out of and in the course of . . . employment by the insured." 228 A.2d 901, 903 (Pa. 1967). The court found that "[t]he clause, when read in its entirety, is clear and definite, and, this being so, a construction may not be adopted which conflicts with the plain language." Id. In addition, it quoted favorable language from a prior case, which stated that "`arising out of means causally connected with, not proximately caused by. `But for' causation, i.e. a cause and result relationship, is enough to satisfy this provision of the policy." Id.

Interpreting the language from an employer liability exclusion, the Third Circuit followed the McCabe, holding. Forum Ins. Co. v. Allied Security, Inc., 866 F.2d 80 (3d Cir. 1989). In Forum Insurance, a security guard attacked and killed his fellow employee while both were on assignment for their employer. Id. at 81. In an underlying suit, the victim's estate successfully pursued a negligence claim against the employer in hiring, retention, placement, supervision or control of the perpetrator. Id. The insurer asked the court to find that it had no obligation to provide a defense or coverage to the employer. Id. The district court granted summary judgment in favor of the insurer. Id. Affirming the district court decision, the Third Circuit found itself bound by McCabe, because the employer's insurance policy contained an exclusion for claims arising out of "[b]odily injury, sickness or disease, including death or disability at any time resulting therefrom to any employee . . . arising out of and in the course of his employment." Id. at 81-82 (emphasis in original). Even though the jury in the underlying case found that the attack was not directed to the victim because of his status as an employee, the Third Circuit concluded that it "does not mean that the injury did not arise out of [the victim's] employment in the sense used by Pennsylvania. [The victim's] death clearly arose out of his employment under Pennsylvania law, since he was killed by a fellow employee while both were on assignment as security guards for their employer." Id. at 83. The Third Circuit found that the policy did not cover the claim asserted by the victim's estate.

Defendant also cites a case from this district, as well as a number of cases from other jurisdictions, for the proposition that the employee exclusion clauses in general comprehensive liability policies exclude coverage for sexual harassment of employees. See, Def.'s Memo. at 20-22 (Scottsdale Ins. Co. v. Scholl Fassnacht, 2000 U.S. Dist. LEXIS 9030, 2000 W.L. 875693 (E.D.Pa. 2000), affirmed without opinion, 261 F.3d 493 (3d Cir. 2001); Truck Ins. Exch. v. Gagnon, 33 P.3d 901, 904 (N.M.App. 2001); State Farm Fire Casualty Co. v. Compupay, Inc., 654 So.2d 944, 947 (Fla.App. 1995); Meadowbrook, Inc. v. Tower Ins. Co., 559 N.W.2d 411, 419-20 (Minn. 1997); David v. Nationwide Mut. Ins. Co., 665 N.E.2d 1171 (1995); Smith v. Animal Urgent Care, Inc., 542 S.E.2d 827, 834-36 (2000); and Sec. Indus. Ins. Co. v. CIGNA Prop. Cas. Co., 1997 U.S. Dist. LEXIS 10544 (E.D.La. 1997)).

The language of these cases clearly precludes coverage; however, plaintiff contends that there is a factual dispute as to whether Miller was an employee or a temporary worker. Miller argues that this policy exclusion does not apply because she was a temporary worker. Under the policy, "temporary worker" means "a person who is furnished to you [the insured] to substitute for a permanent `employee' on leave or to meet seasonal or short-term workload conditions." See, Def's Mot., Exh. 2C at § F.17 (page 12 of 12 of the policy).

Initially, Plaintiff's contention fails because she herself alleged in the underlying complaint that she was an employee. Underlying Compl. ¶¶ 5-7 and 18(b). Moreover, the second problem with Plaintiff's argument is that the definition of a temporary worker limits that designation to an employee who is "furnished" to the employer, which Miller was not. Plaintiff argues that the word furnished applies only to substitute employees and not to seasonal employees. However, the structure of the sentence mandates a different interpretation. If the term "furnished" applies only to substitute employees, the sentence would read as to seasonal employees as follows: "Temporary worker means a person who is . . . to meet seasonal or short-term workload conditions." Obviously this construction makes no sense and, therefore, "furnished" applies to both types of temporary workers. Plaintiff presents absolutely no evidence that Miller was "furnished' to Dollar Emporium; therefore, she was not a temporary worker as defined by the policy. Plaintiff's claim fails because she herself alleged that she was an employee and there is no evidence that Miller was "furnished" to Dollar Emporium.

Plaintiff also argues that despite how she described herself in the underlying complaint, defendant had notice that Miller was a temporary worker. The duty to defend is normally determined by an analysis of the pleadings, and there is no necessity for the insurance company to continue to monitor the underlying proceedings to determine whether changing facts might create a duty to defend and indemnify. However, once an insurance company has notice of changing facts, it is at least arguable that the insurer has a duty to defend or indemnify. Unfortunately for plaintiff, she has never given notice, and does not even now allege, that plaintiff was "furnished" as an employee of Dollar Emporium. Thus, the evidence outside the pleadings, which plaintiff now seeks to hold defendant accountable for, even if established, would not change Plaintiff's status from employee to temporary worker.

Plaintiff sent defendant a letter on June 25, 2002, two months prior to the settlement of the underlying action on September 4, 2002, explaining that plaintiff should be considered a temporary worker. See, PL's Memo. in Opp. to Def.'s Mot., Exhib. 7 at 1-2.

Moreover, even though I might be inclined to allow the plaintiff to trigger a duty to defend as a result of notice given to a defendant insurance company of the possibility that plaintiff was a temporary worker, the Superior Court of Pennsylvania has declined to do so, noting that "we find no reason to expand the well-reasoned and long-standing principle that an insurer's duty to defend is triggered, if at all, by the factual averments contained in the complaint itself." Scopel v. Donegal Mut. Ins. Co., 698 A.2d 602, 606 (Pa.Super. 1997). The court went on to note that if the plaintiff in the underlying action obtained new information that might trigger coverage, "the better-reasoned approach is to require a plaintiff asserting a new theory of liability premised upon discovery evidence to file an amended complaint reflecting those factual averments. After reviewing the amended complaint, the insurer must then decide whether the supplemental factual allegations do, in fact, require the insurer to defend the policyholder." Id. Plaintiff filed no such amended complaint in the underlying action.

Plaintiff relies on the Batter-Up, case to further her claim that she is a "temporary worker." Batter-Up, Inc. v. Commercial Union Ins., 1997 U.S. Dist. LEXIS 13267 (1997). In that case the Illinois District Court concluded that the underlying plaintiff could conceivably be classified as a temporary worker, thus precluding the application of the employee exclusion provision in that case. Id. at *15. However, the court did not address the issue of whether the underlying plaintiff was "furnished" to the employer, which is dispositive in this action.

Thus, I find that there is no coverage for either Lazar or Dollar Emporium because of the employer's liability exclusion.

IV. Employment-Related Practices Exclusion

Quincy also argues that it had no duty to defend its insureds because the insurance policy does not afford coverage under the employment-related practices exclusion, which excludes coverage for injury arising out of any employment-related practices, policies, acts, or omissions. The provision states that the insurance policy does not apply to bodily injury to a person arising out of any "employment-related practices, policies, acts or omissions . . . directed at that person", (emphasis added).

The employment-related practices exclusion states that this insurance does not apply to:
1. "Bodily injury or "personal injury to:
a. A person arising out of any:
(1) Refusal to employ that person;
(2) Termination of that person's employment; or

(3) Employment-related practices, policies, acts or omissions, such as coercion, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation or discrimination directed at that person . . .

This exclusion applies:
a. Whether the insured may be liable as an employer or in any other capacity; and
b. To any obligation to share damages with or repay someone else who must pay damages because of the injury.
See, Def's Mot., Exhib. 2C at § B.I (form BP 04 17 01 96) (page 1 of 1, endorsement attached at the beginning of the policy).

The complaint alleges bodily injury to Miller; however, the claim against Dollar Emporium relates to its failure to train and supervise Lazar, not Miller. Because Dollar Emporium's employment-related practices were not directed at Miller, the employment-related practices exclusion does not apply.

Miller alleges that Dollar Emporium was negligent for failing to supervise and manage Lazar; failing to adequately protect its employees from molestation by Lazar; failing to adequately perform a background check on Lazar; and failing to adequately train Lazar in issues of sexual harassment. Underlying Compl. ¶ 18.

Plaintiff's counsel argues that this exclusion also does not apply to Miller because she was a "temporary worker," not an "employee," and that the exclusion is irrelevant because it applies only to employees. Id. at 13-16. I find that the employment-related practices exclusion does not require a determination of Miller's employment status because the exclusion does not apply only to employees. The exclusion itself refers generally to injury to a "person," not an "employee." The provision applies both to those employed as well as to those seeking employment.

The cases that defendant cites are not controlling because the language in those policies is substantially different. See Weinstein Supply Corp. v. Home Ins. Co., Civ. No. 97-7195, 1999 U.S. Dist. LEXIS 6661 (E.D.Pa. 1999); Miller v. McClure, 742 A.2d 564 (App.Div. 1998); Agriculture Ins. Co. v. Focus Homes, Inc., 212 F.3d 40 (8th Cir. 2000). Unlike the language in the Quincy policy, the language in the policies from these cases is not limited to bodily injury to "a person" arising out of employment-related practices "directed at that person." Thus, this exclusion does not preclude coverage for Dollar Emporium Because Lazar's alleged conduct constitutes harassment, I find that the employment-related practices exclusion bars coverage such that Quincy did not have a duty to defend or indemnify Lazar; however, I find that the exclusion does not bar coverage with respect to Dollar Emporium.

Lazar's repeated sexual molestation of Miller — his touching of her breasts and vaginal areas — falls under harassment, which is listed among the examples of employment-related practices, policies, acts, or omissions covered by the employment-related practices exclusion. Thus, under the employment-related practices exclusion, Quincy did not have a duty to defend or indemnify Lazar in the underlying suit.

I also find that Quincy did not act in bad faith. Kiewit Eastern Co., Inc. v. L R Constr. Co., Inc., 44 F.3d 1194, 1206 n. 39 (3d Cir. 1995) (insured has no bad faith claim where insurer had no duty to defend or indemnify insured). Miller's claim that Quincy acted in bad faith fails because there was no coverage and Quincy never had a duty to defend the underlying suit.

In conclusion, Defendant's motion for judgment on the pleadings is granted on the ground that plaintiff failed to allege bodily injury. Coverage under the Quincy policy is also precluded by the employer's liability exclusion. The defendant did not breach the terms of the policy and did not act in bad faith because under the language of the policy it had no duty to provide a defense or indemnification to Dollar Emporium or Lazar.

Order

And now, this ___ day of December 2003, upon consideration of defendant's motion for judgment on the pleadings pursuant to Fed.R.Civ.P. 12(c) (Doc. #4), Plaintiff's opposition thereto and memorandum of law in support thereof, defendant's reply brief in support of its motion, and Plaintiff's sur-reply to defendant's motion for judgment on the pleadings, and after oral argument, it is hereby ORDERED that defendant's motion for judgment on the pleadings is GRANTED, and judgment is entered in favor of the defendant, Quincy Mutual Fire Insurance Company, and against the plaintiff, Rachel Miller.


Summaries of

Miller v. Quincy Mutual Fire Insurance Company

United States District Court, E.D. Pennsylvania
Dec 4, 2003
CIVIL ACTION NO. 03-1328 (E.D. Pa. Dec. 4, 2003)

holding that physical touching is insufficient to constitute bodily injury and observing that "the weight of authority is that there must be some physical injury to the body alleged in order to constitute 'bodily injury'" and that Black's Law Dictionary defines "'bodily injury' as 'physical damage to a person's body'"

Summary of this case from Inc. Vill. of Old Westbury v. Am. Alt. Ins. Corp.

holding that, where the plaintiff alleged that she had been subjected to sexual assault, including the grabbing of her breasts and the touching of her vaginal area, yet claimed only emotional harm, insurance coverage was not available because the policy allowed for recovery only in instances of "bodily injury."

Summary of this case from Nationwide Mutual Fire Ins. Co. v. B.G

applying McCabe and Forum Insurance to hold that a similar employer's liability exclusion precludes coverage for liability arising from allegations of sexual assault in the workplace

Summary of this case from Nautilus Insurance Company v. Gardner
Case details for

Miller v. Quincy Mutual Fire Insurance Company

Case Details

Full title:RACHEL MILLER, Successor in interest to Richard Lazar and Dollar Emporium…

Court:United States District Court, E.D. Pennsylvania

Date published: Dec 4, 2003

Citations

CIVIL ACTION NO. 03-1328 (E.D. Pa. Dec. 4, 2003)

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