UNITED STATES DISTRICT COURT AT TACOMA COUNTRY MUTUAL INSURANCE CASE NO. 3:24-cv-05853-BHS ORDER Plaintiff, v. ATLASRHINO INC, et al., Defendant.
This matter is before the Court on plaintiff Country Mutual’s motion for summary judgment, Dkt. 38, and defendants Atlasrhino and Troy Dreiling’s cross-motion for summary judgment, Dkt. 50. Because Country Mutual’s insurance policies do not conceivably cover the workplace misconduct alleged against Atlasrhino and Dreiling in the underlying case, there is no duty to defend or indemnify as a matter of law. I. BACKGROUND Atlasrhino is a chiropractic clinic owned and run by Dreiling in Vancouver, Washington. Country Mutual insured Atlasrhino under a businessowners policy, and Dreiling and his wife under a homeowners policy and an umbrella policy.1 Dkt. 1-1 at 11, 858. The businessowners policy covers “bodily injury,” “property damage,” and
“personal and advertising injury” caused by an “occurrence,” meaning an “accident.” Id. at 84, 98. The injury cannot arise out of “employment-related practices, policies, acts or omissions,” including “harassment, humiliation, discrimination.” Id. at 116. The umbrella policy similarly covers “bodily injury,” “personal injury,” and “property damage” caused by an occurrence. Id. at 858. It defines occurrence as an
accident, as well as an act resulting in personal injury. It limits personal injury to false arrest, false imprisonment, wrongful eviction, wrongful detention, or malicious prosecution, and (some) defamation. Id. at 947. Bodily injury means “physical harm to a person, including sickness or disease, and any required care, loss of services, or death resulting from the physical harm.” Id. The umbrella policy excludes injury and damage
arising out of a business pursuit, as well as claims arising out of “sexual misconduct.” Id. at 860, 951. “[S]exual misconduct” includes “any activity . . . which is sexual in nature,” including the “reproduction of sexual activity” and “lewd and lascivious behavior.” Id. at 858. In May 2024, several former female Atlasrhino employees sued Atlasrhino and
Dreiling, asserting claims for sex discrimination, sexual harassment, and negligent infliction of emotional distress. Dkt. 53-1. They alleged that Dreiling would often “slap 1 Because the parties do not differentiate between the homeowners and umbrella policies in their briefing, the Court does the same in this Order. female employees” with a riding crop, make inappropriate sexual references in conversations, “frequently isolate female employees and insist on one-on-one conversations or meetings” in which they felt threatened or uncomfortable, and “regularly
use demeaning gender-based epithets in the workplace.” Id. at 10, 15–17, 21. One plaintiff, Suzanne Kelton, alleged Dreiling sent her “dozens of memes that depict anti-transgender, anti-immigrant, sexist, sex-based, homophobic, and other inappropriate topics” on the private messaging application Telegram. Id. at 19–20. Dreiling admitted to Kelton that one of these obscene images was “kinda in appropriate
[sic].” Id. at 21. Atlasrhino and Dreiling tendered the defense to Country Mutual. Country Mutual agreed to defend under a reservation of rights and brought this declaratory judgment action on October 4, 2024, seeking a determination that it had no duty to defend or indemnify its insureds from the underlying claims. Dkt. 1; Dkt. 38 at 6. Atlasrhino and
Dreiling countersued, seeking the opposite determination. Dkt. 19. They also alleged Country Mutual breached its duty to defend in bad faith, a claim they later withdrew. Dkt. 34. The underlying case settled. Dkt. 57. Country Mutual moves for summary judgment on the duty to defend. Dkt. 38. It argues the policy clearly does not cover the allegations in the underlying complaint
because the conduct falls under the policies’ exclusions. It also argues that the declaratory judgment is now moot because the underlying case has settled. Dkt. 56 at 1. Atlasrhino and Dreiling also move for summary judgment. Dkt. 50. They contend the policies conceivably cover the allegations in the complaint, giving rise to a duty to defend. They argue at least some of the underlying plaintiffs’ allegations occurred outside the workplace, arising out of Dreiling and Kelton’s personal friendship. Thus, they argue, the homeowner’s policy conceivably covers those claims. Id. at 2. They finally insist the
case cannot be moot because Country Mutual may still be liable for the costs it incurred in defending the underlying lawsuit. Dkt. 61 at 3–4. The issues are addressed in turn. Summary judgment is proper if the pleadings, the discovery and disclosure
materials on file, and any affidavits show that “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). In determining whether an issue of fact exists, the Court must view all evidence in the light most favorable to the nonmoving party and draw all reasonable inferences in that party’s favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248–50 (1986); Bagdadi v.
Nazar, 84 F.3d 1194, 1197 (9th Cir. 1996). A genuine issue of material fact exists where there is sufficient evidence for a reasonable factfinder to find for the nonmoving party. Anderson, 477 U.S. at 248. On cross-motions, the defendant bears the burden of showing that there is no evidence which supports an element essential of the plaintiff’s claim. Celotex Corp. v.
Catrett, 477 U.S. 317, 322 (1986). Conversely, the plaintiff “must prove each essential element by undisputed facts.” McNertney v. Marshall, No. C-91-2605-DLJ, 1994 WL 118276, at *2 (N.D. Cal. Mar. 4, 1994) (citing Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir. 1986)). Either party may defeat summary judgment by showing there is a genuine issue of material fact for trial. Id.; Anderson, 477 U.S. at 250. Although the parties may assert that there are no contested factual issues, this is ultimately the Court’s responsibility to determine. Fair Hous. Council of Riverside Cnty., Inc. v. Riverside Two,
249 F.3d 1132, 1136 (9th Cir. 2001). A. Duty to defend In Washington, the duty to defend arises when an action is filed and is based on the potential for liability. Woo v. Fireman’s Fund Ins. Co., 161 Wn.2d 43, 52 (2007). “Upon receipt of the complaint against its insured, the insurer is permitted to use the
‘eight corners rule’ to determine whether, on the face of the complaint and the insurance policy, there is an issue of fact or law that could conceivably result in coverage under the policy.” Xia v. ProBuilders Specialty Ins. Co., 188 Wn.2d 171, 182 (2017) (citing Expedia, Inc. v. Steadfast Ins. Co., 180 Wn.2d 793, 803 (2014)). If the insurance policy “conceivably covers the allegations in the complaint,” the duty to defend is triggered.
Woo, 161 Wn.2d at 53. An insurer “unsure of its obligation to defend in a given instance . . . may defend under a reservation of rights while seeking a declaratory judgment that it has no duty to defend.” Truck Ins. Exch. v. Vanport Homes, Inc., 147 Wn.2d 751, 761 (2002). The insurer bears the expense of defending the insured, Woo, 161 Wn.2d at 54, though that obligation ends “[a]fter obtaining a declaration of noncoverage.” Nat’l Sur.
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UNITED STATES DISTRICT COURT AT TACOMA COUNTRY MUTUAL INSURANCE CASE NO. 3:24-cv-05853-BHS ORDER Plaintiff, v. ATLASRHINO INC, et al., Defendant.
This matter is before the Court on plaintiff Country Mutual’s motion for summary judgment, Dkt. 38, and defendants Atlasrhino and Troy Dreiling’s cross-motion for summary judgment, Dkt. 50. Because Country Mutual’s insurance policies do not conceivably cover the workplace misconduct alleged against Atlasrhino and Dreiling in the underlying case, there is no duty to defend or indemnify as a matter of law. I. BACKGROUND Atlasrhino is a chiropractic clinic owned and run by Dreiling in Vancouver, Washington. Country Mutual insured Atlasrhino under a businessowners policy, and Dreiling and his wife under a homeowners policy and an umbrella policy.1 Dkt. 1-1 at 11, 858. The businessowners policy covers “bodily injury,” “property damage,” and
“personal and advertising injury” caused by an “occurrence,” meaning an “accident.” Id. at 84, 98. The injury cannot arise out of “employment-related practices, policies, acts or omissions,” including “harassment, humiliation, discrimination.” Id. at 116. The umbrella policy similarly covers “bodily injury,” “personal injury,” and “property damage” caused by an occurrence. Id. at 858. It defines occurrence as an
accident, as well as an act resulting in personal injury. It limits personal injury to false arrest, false imprisonment, wrongful eviction, wrongful detention, or malicious prosecution, and (some) defamation. Id. at 947. Bodily injury means “physical harm to a person, including sickness or disease, and any required care, loss of services, or death resulting from the physical harm.” Id. The umbrella policy excludes injury and damage
arising out of a business pursuit, as well as claims arising out of “sexual misconduct.” Id. at 860, 951. “[S]exual misconduct” includes “any activity . . . which is sexual in nature,” including the “reproduction of sexual activity” and “lewd and lascivious behavior.” Id. at 858. In May 2024, several former female Atlasrhino employees sued Atlasrhino and
Dreiling, asserting claims for sex discrimination, sexual harassment, and negligent infliction of emotional distress. Dkt. 53-1. They alleged that Dreiling would often “slap 1 Because the parties do not differentiate between the homeowners and umbrella policies in their briefing, the Court does the same in this Order. female employees” with a riding crop, make inappropriate sexual references in conversations, “frequently isolate female employees and insist on one-on-one conversations or meetings” in which they felt threatened or uncomfortable, and “regularly
use demeaning gender-based epithets in the workplace.” Id. at 10, 15–17, 21. One plaintiff, Suzanne Kelton, alleged Dreiling sent her “dozens of memes that depict anti-transgender, anti-immigrant, sexist, sex-based, homophobic, and other inappropriate topics” on the private messaging application Telegram. Id. at 19–20. Dreiling admitted to Kelton that one of these obscene images was “kinda in appropriate
[sic].” Id. at 21. Atlasrhino and Dreiling tendered the defense to Country Mutual. Country Mutual agreed to defend under a reservation of rights and brought this declaratory judgment action on October 4, 2024, seeking a determination that it had no duty to defend or indemnify its insureds from the underlying claims. Dkt. 1; Dkt. 38 at 6. Atlasrhino and
Dreiling countersued, seeking the opposite determination. Dkt. 19. They also alleged Country Mutual breached its duty to defend in bad faith, a claim they later withdrew. Dkt. 34. The underlying case settled. Dkt. 57. Country Mutual moves for summary judgment on the duty to defend. Dkt. 38. It argues the policy clearly does not cover the allegations in the underlying complaint
because the conduct falls under the policies’ exclusions. It also argues that the declaratory judgment is now moot because the underlying case has settled. Dkt. 56 at 1. Atlasrhino and Dreiling also move for summary judgment. Dkt. 50. They contend the policies conceivably cover the allegations in the complaint, giving rise to a duty to defend. They argue at least some of the underlying plaintiffs’ allegations occurred outside the workplace, arising out of Dreiling and Kelton’s personal friendship. Thus, they argue, the homeowner’s policy conceivably covers those claims. Id. at 2. They finally insist the
case cannot be moot because Country Mutual may still be liable for the costs it incurred in defending the underlying lawsuit. Dkt. 61 at 3–4. The issues are addressed in turn. Summary judgment is proper if the pleadings, the discovery and disclosure
materials on file, and any affidavits show that “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). In determining whether an issue of fact exists, the Court must view all evidence in the light most favorable to the nonmoving party and draw all reasonable inferences in that party’s favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248–50 (1986); Bagdadi v.
Nazar, 84 F.3d 1194, 1197 (9th Cir. 1996). A genuine issue of material fact exists where there is sufficient evidence for a reasonable factfinder to find for the nonmoving party. Anderson, 477 U.S. at 248. On cross-motions, the defendant bears the burden of showing that there is no evidence which supports an element essential of the plaintiff’s claim. Celotex Corp. v.
Catrett, 477 U.S. 317, 322 (1986). Conversely, the plaintiff “must prove each essential element by undisputed facts.” McNertney v. Marshall, No. C-91-2605-DLJ, 1994 WL 118276, at *2 (N.D. Cal. Mar. 4, 1994) (citing Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir. 1986)). Either party may defeat summary judgment by showing there is a genuine issue of material fact for trial. Id.; Anderson, 477 U.S. at 250. Although the parties may assert that there are no contested factual issues, this is ultimately the Court’s responsibility to determine. Fair Hous. Council of Riverside Cnty., Inc. v. Riverside Two,
249 F.3d 1132, 1136 (9th Cir. 2001). A. Duty to defend In Washington, the duty to defend arises when an action is filed and is based on the potential for liability. Woo v. Fireman’s Fund Ins. Co., 161 Wn.2d 43, 52 (2007). “Upon receipt of the complaint against its insured, the insurer is permitted to use the
‘eight corners rule’ to determine whether, on the face of the complaint and the insurance policy, there is an issue of fact or law that could conceivably result in coverage under the policy.” Xia v. ProBuilders Specialty Ins. Co., 188 Wn.2d 171, 182 (2017) (citing Expedia, Inc. v. Steadfast Ins. Co., 180 Wn.2d 793, 803 (2014)). If the insurance policy “conceivably covers the allegations in the complaint,” the duty to defend is triggered.
Woo, 161 Wn.2d at 53. An insurer “unsure of its obligation to defend in a given instance . . . may defend under a reservation of rights while seeking a declaratory judgment that it has no duty to defend.” Truck Ins. Exch. v. Vanport Homes, Inc., 147 Wn.2d 751, 761 (2002). The insurer bears the expense of defending the insured, Woo, 161 Wn.2d at 54, though that obligation ends “[a]fter obtaining a declaration of noncoverage.” Nat’l Sur.
Corp. v. Immunex Corp., 176 Wn. 2d 872, 885 (2013). “[I]f a complaint is ambiguous, a court will construe it liberally in favor of triggering the insurer’s duty to defend.” Woo, 161 Wn.2d at 53. Although an insurer may look outside the complaint if the allegations are contradictory or ambiguous, or if coverage is unclear, the insurer may only rely on extrinsic facts to trigger—not deny—the duty to defend. Id. at 54; Grange Ins. Ass’n v. Roberts, 179 Wn. App. 739, 752 (2013). In interpreting an insurance contract, the Court looks to the intent of the parties,
“which is ascertained from the language of the contract.” Campbell v. Ticor Title Ins. Co., 166 Wn.2d 466, 472 (2009). Language in an insurance contract is to be given its ordinary meaning, and the Court reads the policy as the average person purchasing insurance would. Id. (citing Hayden v. Mut. of Enumclaw Ins. Co., 141 Wn.2d 55, 64 (2000)). Policy exclusions are strictly and narrowly construed. Id.
B. Country Mutual must pay defense costs in the underlying action. Country Mutual agreed to defend the underlying action under a reservation of rights and commenced this declaratory judgment action to ascertain whether it owed a continuing duty to defend and indemnify under one or more of its policies. It also appears to have “funded the underlying settlement.” Dkt. 61 at 2. Atlasrhino and Dreiling assert,
however, that Country Mutual has not paid (or at least has not proved it paid) the underlying defense costs, primarily attorneys’ fees. Dkt. 38 at 6; Dkt. 50 at 4. They assert a claim for those costs and also seek attorneys’ fees in this declaratory judgment action under Olympic Steamship Co. Inc. v. Centennial Ins. Co., 117 Wn.2d 37 (1991). Dkt. 56 at 2; Dkt. 61 at 3.
Country Mutual’s argument that the underlying settlement mooted this action is persuasive. It defended its insured under a reservation of rights through a successful mediation, which it apparently funded. Nevertheless, Atlasrhino and Dreiling also seek the fees they incurred in this action under Olympic Steamship, and the resolution of that claim requires the Court to address whether Country Mutual owed its insureds a defense or indemnity under its policies As discussed below, because Country Mutual is entitled to summary judgment that
the underlying claims were not conceivably covered under the policies, Atlasrhino and Dreiling have not prevailed in this coverage declaratory judgment action, and they are not entitled Olympic Steamship fees. See Alaska Nat. Ins. Co. v. Bryan, 125 Wn. App. 24, 36 (Olympic held that “an insurer is required to pay attorney fees for the declaratory judgment action if the court there is coverage.”). Consistent with its agreement to defend
under a reservation of rights, Country Mutual is required to pay the defense fees and costs reasonably incurred up to the date of this Order in defending the underlying action. C. The policies do not conceivably cover the complaint. Based on the “eight corners” of the policies and the complaint, Country Mutual did not and does not have a duty to defend Atlasrhino and Dreiling. The policies broadly
exclude claims arising out of employment and business pursuits. Dkt. 1-1 at 116, 860. The businessowners policy expressly excludes claims arising out of employment-related “harassment” and “discrimination.” Id. at 116. The umbrella policy expressly excludes claims “arising out of sexual misconduct.” Id. at 951. On its face, the complaint alleges that Dreiling subjected former Atlasrhino employees to sexual harassment and sex
discrimination “in the workplace,” resulting in their emotional distress. Dkt. 53-1 at 3–4, 6. The Court reads the ordinary meaning of the insurance policies to exclude such alleged conduct. Even when construing the exclusions “strictly and narrowly,” Dreiling’s alleged misconduct with employees arises out of his employment-related practices and business pursuits. Ticor, 166 Wn.2d at 472. Dreiling and Atlasrhino argue that at least some of the underlying claims arose
from Dreiling’s personal friendship with Kelton, as demonstrated by memes shared “over a social media application.” Dkt. 50 at 13. They argue such “nonwork-related conduct” would be covered by the policies. Id. at 13–15. The Court disagrees. While it may be true that Kelton and Dreiling were friends outside of work, that is not an allegation in the four corners of the complaint. The
complaint alleges Kelton was an Atlasrhino employee who experienced persistent workplace misconduct.2 In addition to other harassment and discrimination, Kelton alleges she received lewd images that Dreiling “regularly sent . . . to employees.” Dkt. 53-1 at 19. The fact that Dreiling sent these inappropriate images over a messaging application is hardly indicative of a personal friendship, especially because Kelton claims
similarly inappropriate conduct at work. The policies do not cover claims arising out of employment practices and sexual misconduct. Dreiling’s sharing of inappropriate memes with former employees falls under both exclusions. The policies do not conceivably cover the former employees’ allegations against Atlasrhino and Dreiling. Country Mutual does not have a duty to defend or indemnify
under any of its policies. 2 Sharing offensive messages with one’s friends is generally not actionable. Kelton sued as an employee. Country Mutual’s motion for summary judgment, Dkt. 38, is GRANTED. Atlasrhino and Dreiling’s cross-motion for summary judgment, Dkt. 50, is DENIED. The Clerk shall enter a judgment and close the case.
Dated this 5th day of January, 2026. A BENJAMIN H. SETTLE United S tates District Judge