Opinion
Civil Action No. 3:00-CV-0464-D
September 18, 2001
MEMORANDUM OPINION AND ORDER
In this insurance coverage declaratory judgment action, plaintiffs State Farm Fire and Casualty Company ("State Farm Fire") and State Farm Lloyds (collectively, "State Farm") seek summary judgment declaring that they are not obligated to defend or indemnify one of their insureds, defendant James L. Blythe ("Blythe"), in a suit brought against him and others by defendant Alyssa Wright ("Wright"). The lawsuit, Wright v. Blythe-Nelson, Civil Action No. 3:99-CV-2522-D, is also pending in this court. See Wright v. Blythe-Nelson, 2000 WL 349747 (N.D. Tex. Apr. 3, 2000) (Fitzwater, J.); Wright v. Blythe-Nelson, 2001 WL 1012701 (N.D. Tex. Aug. 15, 2001) (Fitzwater, J.) (" Wright I"). For the reasons that follow, the court grants the motion and by judgment filed today declares that State Farm has no duty to defend or indemnify Blythe in Wright v. Blythe-Nelson.
I
In Wright v. Blythe-Nelson Wright sued Blythe alleging violations of Title VII of the Civil Rights Act of 1964 ("Title VII"), 42 U.S.C. § 2000e et seq., an unlawful retaliation under Title VII, and claims for intentional infliction of emotional distress, assault and battery, and conspiracy. In Wright I the court dismissed Wright's claims against Blythe for retaliation and conspiracy. See Wright I, 2001 WL 1012701, at *4, *5. Blythe was a general partner of Blythe-Nelson ("Blythe-Nelson"), a Texas General Partnership, Wright's former employer. Blythe-Nelson employed Wright initially in its Marketing Department and later as its Communications Director. Ultimately, it terminated her employment. Wright sued Blythe-Nelson and other defendants on various claims. In Wright I the court also dismissed certain of Wright's claims against other defendants to the suit. Id. at *3-*5.
According to Wright's February 2, 2001 amended complaint in Wright v. Blythe-Nelson, Blythe violated her rights under Title VII by subjecting her to a sexually hostile work environment. After she complained, she suffered retaliation in the form of the restructuring of her job responsibilities and duties and, ultimately, termination of her employment. Based upon these and related allegations, Wright sued Blythe for intentional infliction of emotional distress, assault and battery, and conspiracy. See Wright I, 2001 WL 1012701, at *1.
Because of the "eight corners" rule that applies to this case, the court will restrict its analysis to Wright's amended complaint in Wright v. Blythe-Nelson filed February 2, 2001. "To determine whether an insurer has a duty to defend its insured in a lawsuit, the allegations in the underlying suit must be considered in light of the provisions of the insurance policy." Potomac Ins. Co. of Ill. v. Jayhawk Med. Acceptance Corp., 198 F.3d 548, 551 (5th Cir. 2000) (quoting Duncanville Diagnostic Ctr., Inc. v. Atl. Lloyd's Ins. Co., 875 S.W.2d 788, 789 (Tex.App. 1994, writ denied)).
On June 27, 2001 plaintiffs filed a motion to amend their complaint and on August 6, 2001 filed an amended motion to amend. They seek to amend their complaint on the ground that Wright amended her complaint in Wright v. Blythe-Nelson on February 2, 2001. The court holds that it is unnecessary to decide State Farm's motions to amend because the briefing concerning State Farm's motion for summary judgment and the court's reasoning are based on Wright's amended complaint and the relevant insurance policies, as required by the eight corners rule, and will not change despite the absence of an amended complaint in the present lawsuit. Accordingly, the court denies as moot the June 27, 2001 motion to amend and the August 6, 2001 amended motion to amend.
State Farm Lloyds insured Blythe under Texas Homeowners Policy-Form B ("Homeowners Policy") for five successive one-year periods (beginning October 1, 1993 and ending October 1, 1998). State Farm Fire insured Blythe under a Personal Liability Umbrella Policy ("PLU Policy") that took effect October 30, 1993 and was renewed for successive one-year periods through October 30, 1998. State Farm is currently providing Blythe a defense in Wright v. Blythe-Nelson under a reservation of rights. It moves for summary judgment, seeking a declaratory judgment that it has neither a duty to defend nor indemnify Blythe.
Blythe has responded to the motion; Wright has not.
II
This case involves both an alleged duty to defend Blythe in Wright v. Blythe-Nelson and an alleged duty to indemnify him for liability arising from the lawsuit. "In Texas, the duties to defend and indemnify are separate duties creating separate causes of action. . . . The duty to defend, which rests on allegations, is broader than the duty to indemnify, which can only be created by actual facts." W. Alliance Ins. Co. v. Northern Ins. Co. of N. Y., 176 F.3d 825, 829 (5th Cir. 1999); see Am. Alliance Ins. Co. v. Frito-Lay, Inc., 788 S.W.2d 152, 153 (Tex.App. 1990, writ dism'd) (holding that duty to indemnify, unlike the duty to defend, is based not upon the pleadings, but on the actual facts that underlie suit). Because the duty to defend is broader than the duty to indemnify or pay, see Enserch Corp. v. Shand Morahan Co., 952 F.2d 1485, 1493 (5th Cir. 1992), a determination that there is no duty to defend means there is no duty to indemnify.Texas courts use the "eight corners" or "complaint allegation" rule when determining whether an insurer has a duty to defend. Potomac Ins. Co. of Ill. v. Jayhawk Med. Acceptance Corp., 198 F.3d 548, 551 (5th Cir. 2000). The court's decision regarding the duty to defend is not influenced by "facts ascertained before the suit, developed in the process of litigation, or by the ultimate outcome of the suit." Id. (quoting Gulf Chem. Metallurgical Corp. v. Associated Metals Minerals Corp., 1 F.3d 365, 369 (5th Cir. 1993)). Instead, an insurer must defend an insured when facts alleged in the petition in the underlying lawsuit, if taken as true, "potentially state a cause of action within the terms of the policy." Id. (quoting Canutillo Indep. Sch. Dist. v. Nat'l Union Fire Ins. Co., 99 F.3d 695, 701 (5th Cir. 1996)). Provided the petition states at least one cause of action within the policy's coverage, the duty to defend attaches. Id. An insurer has a duty to defend its insured if any allegation in the underlying complaint is potentially covered by the policy. See Enserch, 952 F.2d at 1492. The court looks only to the face of the pleadings and the insurance policy in determining the duty to defend. See id. "The insurer is under a legal duty to defend if, and only if, the petition alleges facts construing a cause of action within the coverage of the policy." Snug Harbor, Ltd. v. Zurich Ins., 968 F.2d 538, 545-46 (5th Cir. 1992) (quoting Md. Cas. Co. v. Mitchell, 322 F.2d 37, 39 (5th Cir. 1963)). The court must liberally construe the allegations in the underlying state court pleading, and any doubt about whether the allegations reflect a potential liability must be resolved in favor of the insured. Terra Int'l v. Commonwealth Lloyd's Ins. Co., 829 S.W.2d 270, 272 (Tex.App. 1992, writ denied).
Insurance policies are contracts governed by the principles of interpretation applicable to contracts, and state law rules of construction govern in diversity cases such as this one. Amica Mut. Ins. Co. v. Moak, 55 F.3d 1093, 1095 (5th Cir. 1995). The determination whether a contract term is ambiguous is a matter of law. D.E.W., Inc. v. Local 93, Laborers' Int'l Union, 957 F.2d 196, 199 (5th Cir. 1992). A term is ambiguous only if it is susceptible to more than one reasonable meaning, and mere disagreement between the parties about the correct interpretation of the term will neither render it ambiguous nor transform the issue of law into one of fact. Id. The court will not strain to find an ambiguity where none exists. Ramsay v. Md. Am. Gen. Ins. Co., 533 S.W.2d 344, 346 (Tex. 1976). If the contract is subject to a "certain or definite legal meaning or interpretation," it is not ambiguous, and the court will construe its meaning as a matter of law. Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983). "The interpretation of an unambiguous insurance contract is a question of law." Nutmeg Ins. Co. v. Pro-Line Corp., 836 F. Supp. 385, 388 (N.D. Tex. 1993) (Fitzwater, J.) (citing Utica Nat'l Ins. Co. of Tex. v. Fid. Cas. Co. of N.Y., 812 S.W.2d 656, 661 (Tex.App. 1991, writ denied)).
Unlike other contracts where ambiguous language creates a fact question, insurance policies are analyzed with a presumption in favor of coverage. State Farm Fire Cas. Co. v. Reed, 873 S.W.2d 698, 701 (Tex. 1993). When a policy term is ambiguous, the court will construe the term in favor of the insured. Toops v. Gulf Coast Marine Inc., 72 F.3d 483, 486 (5th Cir. 1996) (quoting Adams v. John Hancock Mut. Life Ins. Co., 797 F. Supp. 563, 567 (W.D. Tex. 1992)). When construing a policy term that excludes or limits coverage, a court must adopt any reasonable interpretation of the exclusion urged by the insured, even if the interpretation provided by the insurer appears more reasonable or a more accurate reflection of the parties' intent. Id. These rules of construction only apply, however, when the terms of the policy are ambiguous. Ranger Ins. Co. v. Bowie, 574 S.W.2d 540, 542 (Tex. 1978).
The insured has the burden to prove his acts are potentially within the ambit of policy coverage. See Canutillo Indep. Sch. Dist., 99 F.3d at 701. The insurer bears the burden of establishing that one of the policy's limitations or exclusions constitutes an avoidance or affirmative defense to coverage. See Tex. Ins. Code Ann. art. 21.58(b) (Vernon 2001).
III A
The Homeowners Policy provides coverage
[i]f a claim is made or a suit is brought against an insured for damages because of bodily injury or property damage caused by an occurrence to which this coverage applies[.]
Ps. App. 161 (bold type and underlining deleted). The Policy in turns provides that an "occurrence"
means an accident, including exposure to conditions, which results in bodily injury or property damage during the policy period.Id. at 154 (bold type and underlining deleted). State Farm contends it has no duty to defend or indemnify Blythe under the Homeowners Policy because the intentional acts that Blythe allegedly committed do not qualify as "occurrences." It argues that the behavior that Wright alleges in her complaint in Wright v. Blythe-Nelson are not occurrences because the conduct was intentional rather than accidental.
B
When terms are defined in a policy, the definitions control. See, e.g., Ramsay, 533 S.W.2d at 346. Although the term "accident" is not defined in the Homeowners Policy, several Texas courts have defined the term as it is used in insurance policies similar to the Homeowners Policy. The term "accident," when used in this context, is unambiguous as a matter of law. It is an event producing an effect that "cannot be reasonably anticipated from the use of [the means that produced it], an effect which the actor did not intend to produce and which he cannot be charged with the design of producing." Republic Nat'l Life Ins. Co. v. Heyward, 536 S.W.2d 549, 555 (Tex. 1976) (citing Int'l Travelers' Ass'n v. Francis, 23 S.W.2d 282, 284-85 (Tex. 1930)); see also Pac. Mut. Life Ins. Co. v. Schlakzug, 183 S.W.2d 709, 710-11 (Tex. 1944); Trinity Universal Ins. Co. v. Cowan, 945 S.W.2d 819, 827 (Tex. 1997). Merely because an actor intends to engage in the conduct that gives rise to an injury does not mean there can be no accident. Trinity Universal Ins., 945 S.W.2d at 828. This is so because accidents include the "negligent acts of the insured causing damage which is undesigned and unexpected." Mass. Bonding Ins. Co. v. Orkin Exterminating Co., 416 S.W.2d 396, 400 (Tex. 1967). A recent Fifth Circuit case recognizes this critical distinction. "[T]here is not an accident when the action is intentionally taken and performed in such a manner that it is an intentional tort, regardless of whether the effect was unintended or unexpected." Harken Exploration Co. v. Sphere Drake Ins. PLC, ___ F.3d ___, ___, 2001 WL 868275, at *3 (5th Cir. Aug. 16, 2001) (citing Argonaut Southwest Ins. Co. v. Maupin, 500 S.W.2d 633, 635 (Tex. 1973)). But "there is an accident when the action is intentionally taken, but is performed negligently, and the effect is not what would have been intended or expected had the action been performed non-negligently. Id. (citing Trinity Universal Ins., 945 S.W.2d at 828).
C
Because Wright alleges that Blythe acted intentionally, the determination whether his actions were accidental depends on whether he acted negligently, producing an effect that he neither intended nor expected had he acted non-negligently. State Farm appears to bypass the controlling standard by pointing to cases that address whether sexual harassment is an intentional, non-accidental act as a matter of law. Blythe argues that at least one of his "alleged acts potentially was accidental, and thus an `occurrence' or 'loss.'" D. Br. at 9. Specifically, he cites as an example that
it could not be reasonably anticipated that the mere touching of Defendant Wright's hand at a social dinner and telling her that she was beautiful, as alleged in her Amended Complaint, would be an assault causing bodily injury or infliction of emotional distress; such injuries cannot be said to ordinarily follow from a touch of the hand.
D. Br. at 9-10. Although the court cannot agree with State Farm's undifferentiated treatment of sexual harassing conduct, it must also reject Blythe's argument.
First, for purposes of deciding whether State Farm has a duty to defend, the court must accept as true the allegations of Wright's amended complaint in Wright v. Blythe-Nelson. She explicitly alleges that the conduct that Blythe cites in his example constitutes assault and battery. This tort occurs when someone knowingly or recklessly causes physical contact with another when he knows or reasonably should have known that the person would regard the contact as offensive or provocative. See Petta v. Rivera, 923 S.W.2d 678, 688 (Tex.App. 1996, writ denied). In other words, there are two types of "knowledge" relevant to an assault and battery claim. There is knowledge of the act itself, which is evident from the state of mind of the defendant (when he acts "knowingly") or is imputed to him based on the circumstances of his act (when he acts "recklessly"). But there must also be a second type of "knowledge" for the claim to lie. The defendant must know, or circumstances must be such that he reasonably should have known, that the plaintiff would regard the conduct as offensive or provocative.
In Wright v. Blythe-Nelson Wright alleges knowing and, alternatively, reckless action by Blythe in repeatedly touching and fondling her. If the court assumes from the pertinent pleadings that Blythe committed assault and battery by knowingly touching and fondling Wright on several occasions, it must necessarily conclude that he did so with the second level of knowledge — i.e., that Wright would regard his conduct as offensive and provocative. His actions were therefore non-negligent and not accidental as Wright has alleged them in the underlying lawsuit.
According to Wright's amended complaint, Blythe would on a daily basis "tell sexual jokes and make sexual innuendos to all the young women who worked in the company, including Wright." Am. Compl. ¶ 4.07. He "made comments about Wright's body, particularly her buttocks and her breasts, and attempted on several occasions to kiss, fondle and grope Wright." Id. He called Wright "at all hours of the day and night suggesting and communicating his desire that they engage in sexual acts." Id. at ¶ 4.08. Wright never responded favorably to any of these advances, yet at a dinner meeting in November 1997, Blythe slid his hand up Wright's leg and under her skirt and "touched her hands at every opportunity." Id. at ¶¶ 4.11, 4.12.
Assuming from the pleadings that Blythe groped or fondled Wright in an attempt to encourage her to engage in sexual activity, the very nature of his conduct establishes that he knew or should have known that Wright found his actions offensive. Blythe therefore could have reasonably anticipated her alleged injuries. Common sense dictates that a female employee is likely to be offended by repeated attempts "on several occasions to kiss, fondle and grope [her]." Id. at ¶ 4.07. Blythe does not attempt to argue this point. He focuses instead on his alleged inability to know that merely touching Wright's hands would cause offense or provocation. Blythe appears to contend that any assault and battery committed on the basis of such an act is negligent and, consequently, accidental under Texas law. But the facts as Wright alleges them in her amended complaint belie such a contention. Her accusations against Blythe before November 1997 indicate a pattern of harassment and sexual innuendo that she found offensive. Given this pattern, and assuming that it occurred as alleged, Blythe must have reasonably foreseen that touching Wright's hand, while contemporaneously complimenting her beauty, would result in the types of injuries that she alleges stem from such conduct.
Blythe next argues that because Wright alleges recklessness as an alternative basis for Blythe's actions constituting assault and battery, the results of such actions are by definition accidental and thus warrant a defense by State Farm. The court disagrees. The terms "knowingly" and "recklessly" relate to the defendant's state of mind when committing the act in question. Either state of mind satisfies the underlying intent requirement. Knowledge that the act will result in offense or provocation is a second, distinct requirement. Even if Blythe did not knowingly touch Wright but did so recklessly, in order for him to be liable for assault and battery Wright must prove that he should have known that if he did touch her as a result of his reckless behavior, she would be offended. By alleging assault and battery, Wright indicates her intent to prove such knowledge. Because the court must assume the truth of the allegations of Wright's amended complaint, it must conclude that Blythe could reasonably have anticipated her alleged injuries before he engaged in reckless behavior. Therefore, his actions were not "accidental."
The court must also conclude from Wright's allegations in Wright v. Blythe-Nelson that Blythe could have foreseen that each of the acts that she alleges constitute intentional infliction of emotional distress or assault and battery would result in the injuries alleged. Each time Blythe acted, he supposedly did so with knowledge that Wright would be offended or provoked. Moreover, this sexual conduct, especially when viewed in its entirety, is the type that normally results in the kinds of injuries Wright alleges. The acts therefore do not qualify as "occurrences" under the terms of the Homeowners Policy.
Accordingly, the court holds that State Farm is not obligated to defend Blythe under the Homeowners Policy. Because it has no duty to defend him, it follows that it has no duty to indemnify him.
IV
The PLU Policy is similar to the Homeowners Policy in that policy coverage is limited to "losses." The Policy states:
If you are legally obligated to pay damages for a loss we will pay your net loss minus the retained limit.
Ps. App. 19 (bold type deleted). A "loss"
means an accident that results in personal injury or property damage during the policy period. This includes injurious exposure to conditions.Id. at 17 (bold type deleted). As noted above, the Policy is limited to accidents. For the same reasons the court discusses above concerning the Homeowners Policy, it holds that State Farm has no duty to defend and, in turn, to indemnify, Blythe under the PLU Policy.
Because the PLU Policy defines "personal injury" to include assault and battery, see id. at 18, Blythe argues that the simple categorization of an act as an intentional tort does not preclude it from qualifying as an accident. Although this is true, Blythe misapprehends the distinction between intentional torts that can qualify as accidents and those that cannot. "For example, consider the hunter who deliberately fires a gun at what he believes to be a deer but is actually a person. Though firing the gun was intentional, the harm can reasonably be characterized as an `accident.'" Trinity Universal Ins., 945 S.W.2d at 828. In such a hypothetical, the hunter may have acted intentionally in causing contact with his unintended victim, and might be liable for assault and battery. But his act was also negligent. As the court discusses above in relation to insurance coverage for "occurrences," negligent commission of an intentional tort is the one manner in which such a tort can be committed accidentally. In the case of the hunter, he could not reasonably have foreseen the result of his act because he meant to shoot a deer rather than a person. In the present case, however, Wright alleges that Blythe not only engaged in the underlying conduct of, for example, touching her hand, but he did so purposely, with a view to convincing her to engage in sexual activity with him. In other words, he touched what he intended to touch. The potential results of such contact, in the context of Wright's repeated complaints of sexual harassment, should have been apparent. Blythe's acts therefore were not accidents and do not qualify as losses under the PLU Policy. State Farm has no obligation to defend or to indemnify Blythe.
Because the court determines that Blythe's acts are not covered under the terms of either insurance policy, it need not reach the issue whether the "intentional acts" or "business pursuits" policy exclusion excuses State Farm from a duty to defend or indemnify.
* * *
The court grants State Farm's June 1, 2001 motion for summary judgment. The court denies as moot State Farm's June 27, 2001 motion to amend and its August 6, 2001 amended motion to amend. A declaratory judgment is filed today in favor of State Farm.SO ORDERED.