United Nat. Ins. Co. v. Waterfront New York Realty Corp.

• Decision Date: 02 June 1993
• Docket Number: No. 1409,D,1409
• Citation: 994 F.2d 105
• Parties: UNITED NATIONAL INSURANCE CO., Plaintiff-Appellant, v. WATERFRONT NEW YORK REALTY CORPORATION; William M. Weaver; William M. Weaver Trust; Coleman P. Burke; Adreas M. Rickenbach; Atone E. Schraft; Loring D. Bolger; Bulgroup Properties; Chalet Suiss International, Inc.; C.A. Kalman; James A. Newman; John C. Wist; Karl-Adam Bonnier; Francis P. Lang; Maag Finance Ltd.; Atone E. Schraft; Tuckerman Ltd.; U.S. Friends Investment Corp. (Panama), doing business as Waterfront N.Y., and The Tunnel, Inc., also known as The Tunnel; Eli-Ben Dayan; Jonata Dayan, Defendants-Appellees, Lourdes Ortiz, Defendant. ocket 92-9350.
• Court: U.S. Court of Appeals — Second Circuit

Page 105

994 F.2d 105

61 USLW 2771

UNITED NATIONAL INSURANCE CO., Plaintiff-Appellant, v. WATERFRONT NEW YORK REALTY CORPORATION; William M. Weaver William M. Weaver Trust; Coleman P. Burke; Adreas M Rickenbach; Atone E. Schraft; Loring D. Bolger; Bulgroup Properties; Chalet Suiss International, Inc.; C.A. Kalman James A. Newman; John C. Wist; Karl-Adam Bonnier Francis P. Lang; Maag Finance Ltd.; Atone E. Schraft; Tuckerman Ltd.; U.S. Friends Investment Corp. (Panama), doing business as Waterfront N.Y., and The Tunnel, Inc., also known as The Tunnel; Eli-Ben Dayan; Jonata Dayan, Defendants-Appellees, Lourdes Ortiz, Defendant.

No. 1409, Docket 92-9350.

United States Court of Appeals, Second Circuit.

Argued April 20, 1993.

Decided June 2, 1993.

Sheryl E. Katz, New York City (Carolyn Karp Schwartz, Richard E. Lerner, Wilson, Elser, Moskowitz, Edelman & Dicker, of counsel), for plaintiff-appellant.

Warren A. Herland, New York City (Michelle J. France, Jones Hirsch Connors & Bull, of counsel), for defendants-appellees.

Before: PRATT and JACOBS, Circuit Judges, and KNAPP, Senior District Judge. ^*

JACOBS, Circuit Judge:

United National Insurance Co. ("UNI") appeals from a judgment of the United States District Court for the Southern District of New York (Lowe, J.), declaring that it must defend and indemnify defendants-appellees Waterfront New York Realty Corp. ("Waterfront") and The Tunnel, Inc. under a liability insurance policy. The insured premises were operated as a nightclub known as The Tunnel. ¹ The underlying tort claim was asserted by defendant Lourdes Ortiz, a patron of The Tunnel, who was raped and sodomized in the bathroom of the nightclub. After Ms. Ortiz sued Waterfront and The Tunnel, Inc. in state court, UNI filed the present action for a declaratory judgment that the policy's exclusion for assault and battery excluded coverage for Ms. Ortiz's claim. Upon cross-motions for summary judgment, the district court held that the assault and battery exclusion does not encompass rape and sodomy and that the policy affords coverage. We reverse.

BACKGROUND

On July 17, 1988, Ms. Ortiz was sexually assaulted by an unidentified armed man while she was using the women's bathroom at The Tunnel. Ms. Ortiz thereafter filed a complaint in state court against, inter alia, Waterfront and The Tunnel, Inc. in which she alleged that she was "accosted, attacked, assaulted, sodomized, raped and placed in fear of deadly bodily harm" while on The Tunnel's premises. For a first cause of action, Ms. Ortiz alleged that the defendants in that suit were liable to her in negligence because the women's and men's bathrooms were open to and used by both sexes and that this practice was known to employees of The Tunnel. For a second cause of action, Ms. Ortiz alleged that the defendants were liable to her because they violated various UNI had issued a liability policy to The Tunnel, Inc., the nightclub operator, and its landlord, Waterfront, for the period from July 16, 1988 to July 16, 1989. The policy includes an assault and battery exclusion for:

                sections of the Administrative Code and Building Code of The City of New York.   Ms. Ortiz sought $80 million in damages for the resulting physical and emotional harm
                

Claims arising out of an assault and/or battery, whether caused by or at the instigation of, or at the direction of, or omission by, the insured and/or his employees.

The policy also contains a sexual molestation exclusion which provides that coverage does not apply:

To bodily injury arising out of alleged and/or actual "sexual abuse" of or "sexual molestation" of a person not having attained the age of sixteen (16) years. The terms "sexual abuse" and "sexual molestation" include, but are not limited to physical sex acts, nudity, touching, assault and battery.

UNI agreed to defend Waterfront and The Tunnel, Inc. in Ms. Ortiz's state court action, but did so under a reservation of rights. UNI then began the present action against the insureds and Ms. Ortiz, seeking a declaration that it owed no duty of defense or indemnification. UNI brought a motion for summary judgment and Waterfront cross-moved. The sole issue to be determined was the interpretation of the assault and battery exclusion. The Tunnel, Inc., which became defunct sometime after the attack on Ms. Ortiz, did not respond to any of the motions.

On October 29, 1991, the district court issued a non-final order granting summary judgment in favor of Waterfront and The Tunnel, Inc. The district court held that the assault and battery exclusion is ambiguous because assault and battery is legally distinguishable from assault with intent to commit rape. The district court found that "[t]he distinction is further supported by the fact that UNI felt it necessary to create a separate exclusion for sexual molestation." The district court reasoned that the sexual molestation clause, which excludes coverage for claims arising from the sexual abuse or molestation of persons under the age of 16, would not have been necessary "had the assault and battery clause been as clear and unambiguous as UNI maintains." The district court further observed:

[W]hen read with the rest of the policy exclusions, the sexual molestation exclusion could be interpreted to mean that only sexual assaults on patrons 16 years old or younger would be exempted; all others would be within the scope of general liability coverage.

777 F.Supp. at 257. Having perceived an ambiguity in the assault and battery exclusion, the district court construed the ambiguity against the insurer, and held that the policy provided coverage for claims arising out of the rape of Ms. Ortiz, who had attained the age of 16 years.

On December 2, 1992, Ms. Ortiz's state court suit was settled for $1,050,000. UNI paid this amount to Ms. Ortiz, but reserved its right to appeal the district court's coverage opinion and to recover the damage award from its policyholders. On December 10, 1992, the district court amended its order and entered a final judgment. This appeal ensued.

DISCUSSION

The primary question presented is whether the assault and battery exclusion is ambiguous. "As with contracts generally, a provision in an insurance policy is ambiguous when it is reasonably susceptible to more than one reading." United States Fire Ins. Co. v. General Reinsurance Corp., 949 F.2d 569, 572 (2d Cir.1991). An ambiguity is present only where each of the competing interpretations is objectively reasonable:

A word or phrase is ambiguous when it is capable of more than a single meaning "when viewed objectively by a reasonably intelligent person who has examined the context of the entire integrated agreement and who is cognizant of the customs, practices, usages and terminology as generally understood in the particular trade or business."

Garza v. Marine Transport Lines, Inc., 861 F.2d 23, 27 (2d Cir.1988) (citation omitted).

"Courts may not create an ambiguity where none exists." Ingersoll Milling Mach. Co. v. M/V Bodena, 829 F.2d 293, 306 (2d Cir.1987).

Waterfront contends that the assault and battery exclusion is ambiguous because the phrase "assault and battery" can be construed to reference a fight or altercation rather than a rape which, it asserts, is "qualitatively different." Waterfront argues that the presence of the sexual molestation exclusion is evidence of ambiguity because it encompasses some incidents of sexual assault and battery that would also be excluded by the assault and battery clause. According to Waterfront, the sexual molestation exclusion would not have been necessary had the assault and battery exclusion unambiguously applied to incidents of a sexual nature. Waterfront adduces extrinsic evidence to support its reading of the exclusion, in particular, the New York Penal Law, which defines assault and rape as separate offenses, and which differentiates among degrees of assault based on the nature of the injury inflicted and weapons used. Finally, Waterfront invites us to invoke the rule that ambiguities in an insurance policy are to be construed against the insurer and accordingly limit application of the assault and battery exclusion to assaults of a non-sexual nature.

Waterfront's analysis is flawed. To begin with, Waterfront's narrow reading of the assault and battery exclusion is not sustainable. An "assault" is an intentional placing of another person in fear of imminent harmful or offensive contact. A "battery" is an intentional wrongful physical contact with another person without consent. See Hernandez v. Lattimore, 612 F.2d 61, 67 (2d Cir.1979), citing Johnson v. Glick, 481 F.2d 1028, 1033 (2d Cir.), cert. denied sub nom. Employer-Officer John, # 1765 Badge Number v. Johnson, 414 U.S. 1033, 94 S.Ct. 462, 38 L.Ed.2d 324 (1973); Merzon v. County of Suffolk, 767 F.Supp. 432, 448 (E.D.N.Y.1991) (see authorities cited therein); Coopersmith v. Gold, 172 A.D.2d 982, 984, 568 N.Y.S.2d 250, 252 (3d Dep't 1991); 6 N.Y.Jur.2d--Assault § 1, at 194 (1990). The terms "assault" and "battery" do not change in meaning depending on the degree of violence, the means of inflicting injury, or the part of the body injured:

In the case of a battery, the slightest unlawful touching of the person of another is...