Clarendon Amer Ins v. Embers, Inc

Opinion

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

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m 00-60409

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CLARENDON AMERICA INSURANCE CO.,

Plaintiff-Appellant,

VERSUS

THE EMBERS, INC., D/B/A CENTERFOLD STRIP CLUB;

UNKNOWN JOHN DOES;

AND

PEGGY LARK,

AS ADMINISTRATRIX OF THE ESTATE OF TONY DAVIS, DECEASED, ON BEHALF OF THE ESTATE OF TONY DAVIS AND ON BEHALF OF ALL WRONGFUL DEATH BENEFICIARIES OF TONY DAVIS,

Defendant-Appellee.

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Appeal from the United States District Court for the Southern District of Mississippi

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September 12, 2001

Before JONES, SMITH, and DeMOSS, II.

Circuit Judges. We review a summary judgement de novo.

See Shakelford v. Deloitte, 190 F.3d 398, 403 JERRY E. SMITH, Circuit Judge:* (5th Cir. 1999). Interpretation of insurance contracts also are reviewed de novo. See Am.

Clarendon America Insurance Company States Ins. Co. v. Natchez Steam Laundry, 131 (“Clarendon”) appeals a summary judgment in F.3d 551, 553 (5th Cir. 1998). favor of the Embers d/b/a/ Centerfold Strip Club and Peggy Lark (collectively “Embers”) III. on Clarendon’s motion for declaratory relief to The parties agree that Mississippi law apdetermine coverage and defense duties under plies. In Mississippi, (1) where the policy is a commercial general insurance policy. The plain and unambiguous, the court must district court held that Clarendon (1) has a construe the contract as written; (2) the policy duty to defend Embers in the underlying state must be read as a whole to give effect to all court suit, (2) may have a coverage duty to provisions; (3) the court must read an Embers for actual damages, but coverage will insurance policy more strongly against the turn on a jury question to be determined in the drafter; (4) where the terms of the policy are state court action, and (3) has no duty to cover ambiguous, the court must interpret them in any punitive damages arising from the favor of the insured; (5) where a policy is underlying suit. Clarendon appeals the first subject to two reasonable interpretations, a two determinations. Finding no error, we court must adopt the interpretation affording affirm. the greater indemnity to the insured; (6) where there is no practical difficulty in making the I. language of a policy free form doubt, any The coverage questions arose when Lark, doubtful provision must be resolved against as administratrix of the estate of Tony Davis the insurer; (7) a court must interpret policies, and representative of his wrongful death bene- especially exclusions, favorably to the insured ficiaries, sued Embers in state court for the wherever reasonably possible; and (8) a court wrongful death. Davis allegedly was killed on must refrain from changing a policy where the the premises of the club owned by Embers. terms are unambiguous, despite any resulting The state complaint alleges he was killed by an hardship. See Centennial Ins. Co. v. Ryder errant bullet to the head in the parking lot of Truck Rental, Inc., 149 F.3d 378, 382-83 (5th the club, resulting from a skirmish between Cir. 1998) (citations omitted). employees of the club and some recentlyejected patrons not affiliated with Davis. The touchstone of interpretation is the intention of the parties. “If there is ambiguity within a policy of insurance, then the intention of the parties to the insurance contract should be determined based upon what a reasonable

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Pursuant to 5TH CIR. R. 47.5, the court has person placed in the insured’s position would determined that this opinion should not be have understood the terms to mean.” J & W published and is not precedent except under the Foods Corp. v. State Farm Mut. Auto. Ins. limited circumstances set forth in 5TH CIR. R. Co., 723 So. 2d 550, 552 (Miss. 1998). 47.5.4.

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IV. agents, or servants, in the hiring, The dispute centers on two sections of the supervision, retention or control of any exclusions part of the Clarendon policy. The person whether or not an officer, agent first is the so-called “expected or intended in- or servant of the insured; or(c) the jury exclusion.” The policy excludes from alleged failure of the insured or his coverage “Bodily Injury or property damage officers, employees, agents, or servants expected or intended from the standpoint of to attempt to prevent, bar, or halt any the insured. This exclusion does not apply to such conduct. bodily injury resulting from the use of reasonable force to protect persons or This exclusion also applies to any claim property.” Policy § I.A.2.a. (internal made by any other person, firm, or orquotation marks omitted). The other ganization, asserting rights derived exclusion is for assault and battery. It from, or contingent upon any person excludes from coverage asserting a claim excluded hereunder.

(internal quotation marks omitted)

Bodily injury or property damage arising from the following: Policy § II.A.2.q.

(1) assault; The district court held that the facts pleaded in the underlying suit conceivably fall under (2) battery; both exclusions. That is, if the actions of the Embers employees were done with “reasonable (3) harmful or offensive contact between force to protect persons or property,” while at or among two or more persons; the same time rising to the level of an “assault”, “battery”, or “harmful or offensive (4) apprehension of harmful or offensive contact,” those actions would seem to be both contact between or among two or more excluded by subsection “q” and not excluded persons; or by subsection “a.” This, the court held, is an ambiguity, to be resolved in favor of coverage.

(5) threats by words or deeds;

regardless of degree of culpability or in- Clarendon argues that, far from there being tent and without regard to: an ambiguity, the policy is clear as written, and an exclusion cannot be used to grant coverage (a) whether the acts are alleged to affirmatively. Clarendon reads the policy so be by or at the direction of the insured, that the exclusion for assault and battery ends his officers, employees, agents, or the question. Under this view, the nonservants ; or by anyone otherwise on, at, exclusion of the same suit under another exor near premises owned or occupied by clusion is irrelevant. the insured; or by any other person;

The problem with this argument is that it (b) the alleged failure of the renders the “reasonable force” clause of the insured, or his officers, employees, “expected or intended injury” exclusion

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superfluous. Both parties recognize this is comes from the facts of the coverage for this inconsistent with plain Mississippi law to insured.1 interpret an insurance policy as a whole and to “giv[e] operative effect to every provision”. There undeniably was an assault against Continental Cas. Co. v. Hester, 360 So. 2d Davis. If t he assault were the result of 695, 697 (Miss. 1978). “reasonable force to protect persons or property” by Embers employees, the policy Clarendon apparently recognizes as much in would not exclude resulting damages from its reply brief, stating that the “reasonable coverage under the “expected or intended force” clause of the “expected or intended in- injury” exclusion. The plain wording of the jury” exclusion is not superfluous, because a “assault and battery” exclusion, though, would hypothetical may be imagined in which an em- exclude such damages from coverage. This is ployee uses reasonable force that does not rise an ambiguity in coverage. to the level of an assault or battery, to protect another patron. Specifically, Clarendon offers V. a hypothetical in which an employee tackles a Under Mississippi law, the duty of an inpatron to prevent him from being hit from surer to defend the insured against a lawsuit behind by a flying chair thrown by another depends only on the facts pleaded in the unpatron . derlying lawsuit. If a suit is filed alleging facts that bring the suit within coverage of the There are two problems with this argument. policy, the duty to defend is triggered. See First, it is far from evident that this action by Moeller v. Am. Guar. & Liab. Ins. Co., 707 the employee is not excluded from coverage So. 2d 1062, 1069 (Miss. 1998). Any under the “assault and battery” exclusion for ambiguities regarding this defense obligation being a “harmful or offensive contact.” As are strictly construed against the insurer. See that same exclusion makes clear, intent is ir- Amer. States Ins., 131 F.3d at 553 (applying relevant. Thus, if the patron were injured by Mississippi law). This duty extends even to the employee’s heroics, it would not matter defend suits that are groundless, false, or that the employee had a noble motive. Thus, fraudulent. See State Farm Mut. Auto. Ins. the “assault and battery” exclusion still appears Co. v. Taylor, 233 So. 2d 805, 808 (Miss. to be in conflict with the non-exclusion, in the 1970). Consequently, Clarendon owes a duty “expected or intended injury” exclusion, of of defense to Embers in the wrongful death acts of “reasonable force” to protect persons lawsuit. or property.

AFFIRMED.

Even if one does not rely on this analysis, Clarendon’s hypothetical fails. When analyzing an insurance contract for ambiguity, the relevant facts are those of the instant case, 1 See, e.g., J&W Foods Corp. v. State not any possible hypothetical that may Farm Mut. Auto. Ins. Co., 723 So. 2d 550 (Miss. eliminate the ambiguity at a theoretical level. 1998) (remanding to determine the intent of stock- See LEE R. RUSS, COUCH ON INSURANCE § holders of close corporation as to whether they 21:11 (3d ed. 1995). The case to be dealt with intended insurance policy in name of corporation to cover relatives of the insured).