Am. Nat'l Prop. & Cas. Co. v. Select Mgmt. Grp., LLC

• Citation: 528 F.Supp.3d 1188
• Decision Date: 23 March 2021
• Docket Number: Case No. 20-CV-542-JED-CDL
• Parties: AMERICAN NATIONAL PROPERTY AND CASUALTY COMPANY, Plaintiff, v. SELECT MANAGEMENT GROUP, LLC; Michelle Bradshaw; Michelle Bradshaw Realty, LLC ; Kathleen Barnes; Bruce A. Miller; Lynne R. Miller, Defendants.
• Court: U.S. District Court — Northern District of Oklahoma

528 F.Supp.3d 1188

AMERICAN NATIONAL PROPERTY AND CASUALTY COMPANY, Plaintiff,

v.SELECT MANAGEMENT GROUP, LLC; Michelle Bradshaw; Michelle Bradshaw Realty, LLC ; Kathleen Barnes; Bruce A. Miller; Lynne R. Miller, Defendants.

Case No. 20-CV-542-JED-CDL

United States District Court, N.D. Oklahoma.

Signed March 23, 2021

Andrew Charles Jayne, Baum Glass Jayne Carwile & Peters PLLC, Emily Catherine Krukowski, Rosenstein Fist & Ringold, Tulsa, OK, for Plaintiff.

Lawrence D. Taylor, Lawrence D. Taylor, Attorney at Law, Tulsa, OK, for Defendants Select Management Group, L.L.C., Michelle Bradshaw, Michelle Bradshaw Realty, L.L.C.

Joel LaCourse, Zachary Keen, LaCourse Law, PLLC, Tulsa, OK, for Defendant Kathleen Barnes.

OPINION AND ORDER

JOHN E. DOWDELL, UNITED STATES DISTRICT JUDGE

The Court has for its consideration the following motions: the Motion for Summary Judgment (Doc. 25) filed by Plaintiff American National Property and Casualty Company; the Motion to Defer Consideration of the Motion for Summary Judgment (Doc. 26) filed by Defendant Kathleen Barnes; and the Motion to Dismiss (Doc. 28) filed by Defendants Bruce and Lynne Miller.

I. Background

This is a declaratory judgment action in which Plaintiff American National, an insurer, seeks a determination that it has no policy obligations related to tort claims filed by Defendant Kathleen Barnes in state court.

The underlying tort action arose from injuries Ms. Barnes, a realtor, suffered as she was showing clients a house for sale in Broken Arrow, Oklahoma. According to Ms. Barnes's petition, she was showing the clients the backyard when a dog, whose presence was not disclosed in the listing information, came around the side of the house and began to approach them. As she ran toward the back door, she tripped and broke her arm.

Ms. Barnes alleges her claims against two groups of defendants. Defendant Michelle Bradshaw was the listing agent on the sale and, according to the petition, was the employee/agent of Defendants Bradshaw Realty and Select Management during the period relevant to the suit. Defendants Bruce and Lynne Miller owned the house. The petition alleges negligence against the Millers and Ms. Bradshaw, and vicarious liability against Bradshaw Realty and Select Management.

Select Management had a general liability policy with American National that also covered its employees. Coverage, however, was subject to the following professional services exclusion:

1. Applicable to Business Liability Coverage

This insurance does not apply to:

....

j. Professional Services

"Bodily injury", "property damage" or "personal and advertising injury" caused by the rendering or failure to render any professional service. This includes but is not limited to:

(1) Legal, accounting or advertising services;

(2) Preparing, approving, or failing to prepare or approve maps, drawings, opinions, reports, surveys, change orders, designs or specifications;

(3) Supervisory, inspection or engineering services;

(4) Medical, surgical, dental, X-ray or nursing services treatment, advice or instruction;

(5) Any health or therapeutic service treatment, advice or instruction;

(6) Any service, treatment, advice or instruction for the purpose of appearance or skin enhancement, hair removal or replacement or personal grooming;

(7) Optometry or optical or hearing aid services including the prescribing, preparation, fitting, demonstration or distribution of ophthalmic lenses and similar products or hearing aid devices;

(8) Body piercing services; and

(9) Services in the practice of pharmacy.

This exclusion applies even if the claims allege negligence or other wrongdoing in the supervision, hiring, employment, training or monitoring of others by an insured, if the "occurrence" which caused the "bodily injury" or "property damage", or the offense which caused the "personal and advertising injury", involved the rendering or failure to render of any professional service.

(Doc. 37-3 at 38, 41–42).

In addition to the liability coverage provided as part of the base policy, the parties agreed to an Employment Practices Liability Insurance Endorsement, which provided as follows:

SECTION I. WHAT IS COVERED

A. Insuring Agreement

1. "We" shall pay those "losses" arising out of an "insured's" "wrongful employment act" (other than a "third party violation") against "your" "employees", "recognized volunteers" and applicants for employment to which this insurance applies.

....

Section VII. Definitions

....

S. "Wrongful employment act(s)" means any actual or alleged:

1. Wrongful dismissal, discharge or termination (either actual or constructive), including breach of an implied contract;

2. Harassment or coercion (including sexual harassment, whether quid pro quo, hostile work environment or otherwise);

3. Discrimination (including but not limited to discrimination based upon age, gender, race, color, national origin, religion, sexual orientation or preference, pregnancy or disability);

4. "Retaliation" (including lockouts);

5. Employment-related misrepresentation(s) to "your" "employee" or applicant for employment with "you"; 6. Employment-related libel, slander, humiliation, mental anguish, infliction of emotional distress, defamation, or invasion of privacy;

7. Wrongful failure to employ or promote;

8. Wrongful deprivation of career opportunity, wrongful demotion or negligent "employee" evaluation, including the giving of negative or defamatory statements in connection with an "employee" reference;

9. Wrongful discipline;

10. Failure to provide or enforce adequate or consistent corporate policies and procedures relating to any "wrongful employment act";

11. Negligent supervision or hiring by an "insured", relating to any of the above;

12. Violation of an individual's civil rights relating to any of the above; or

13. "Third party violations", but only if coverage for "third party violations" is shown on the Schedule of this endorsement.

(Doc. 37-2 at 4, 12).

American National moves for summary judgment on three issues. First, it contends that Ms. Barnes's claims against Ms. Bradshaw and her alleged employers (the Bradshaw Defendants) fall within the scope of the professional services exclusion. Second, the insurer argues that it owes no duties to the Bradshaw Defendants under the Employment Practices Endorsement because the claims fall outside the endorsement's scope. And finally, American National argues that, even if coverage exists, it does not extend to any potential punitive damages.

II. Discussion

Before advancing to the merits of American National's motion for summary judgment, the Court briefly addresses the Millers' Motion to Dismiss and Ms. Barnes's Motion to Defer Consideration of Summary Judgment.

A. Motion to Dismiss

The Millers move to dismiss under Rule 12(b)(1) of the Federal Rules of Civil Procedure, alleging the absence of subject matter jurisdiction. The Millers contend that they are not insureds or intended beneficiaries under the insurance policy and therefore have no interest in this litigation. Consequently, they say, there is no case or controversy between them and American National such that the Court can exercise subject matter jurisdiction. The Court agrees.

The Constitution limits the role of federal courts to the resolution of "cases" and "controversies." U.S. Const. art. III, § 2. This is a "bedrock requirement." Valley Forge Christian Coll. v. Ams. United for Separation of Church and State, Inc. , 454 U.S. 464, 471, 102 S.Ct. 752, 70 L.Ed.2d 700 (1982). The Declaratory Judgment Act permits courts to determine the legal rights of parties even if no party seeks relief beyond the declaration itself, but the requirement of an actual case or controversy remains. 28 U.S.C. § 2201 ; Aetna Life Ins. Co. of Hartford, Conn. v. Haworth , 300 U.S. 227, 239–41, 57 S.Ct. 461, 81 L.Ed. 617 (1937). And the party seeking the declaration bears the burden of establishing the existence of an actual case or controversy. Cardinal Chem. Co. v. Morton Int'l, Inc. , 508 U.S. 83, 95, 113 S.Ct. 1967, 124 L.Ed.2d 1 (1993).

Whether the case-or-controversy requirement has been satisfied "comes down to ‘whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.’ "

Columbian Fin. Corp. v. BancInsure, Inc. , 650 F.3d 1372, 1376 (10th Cir. 2011) (quoting, with added emphasis, Maryland Cas. Co. v. Pacific Coal & Oil Co. , 312 U.S. 270, 273, 61 S.Ct. 510, 85 L.Ed. 826 (1941) ).

The Millers cite several cases in which courts have held that, in an action to determine the obligations of an insurer with respect to an underlying tort action, an uninsured party's status as an alleged joint tortfeasor is not enough to establish a justiciable controversy. See Essex Ins. Co. v. Sheppard & Sons Const., Inc. , No. CIV-12-1022-D, 2015 WL 4251073, at *5–9 (W.D. Okla. July 13, 2015) ; Pa. Mfrs. Indem. Co. v. Air Power, Inc. , No. 1:13CV217, 2014 WL 1513966, *4–6 (M.D.N.C. Apr. 16, 2014) ; Lott v. Scottsdale Ins. Co. , 811 F. Supp. 2d 1224, 1230–32 (E.D. Va. 2011).

In Essex Insurance Co. , an insurance company brought a declaratory judgment action against its insured, a general contractor, that, along with its subcontractor, was being sued for the allegedly negligent construction of a commercial building. Essex Ins. Co. , 2015 WL 4251073, at *1. The subcontractor moved to dismiss on the grounds that there was no case or controversy between it and the insurance company since the general contractor was the only insured under the policy at issue.¹ The court granted the motion, holding that the subcontractor's potential interest in the outcome of the declaratory judgment action was too attenuated to create a justiciable controversy. Id. at *8.

In reaching its decision, the court reasoned that the justiciability issue was different with respect to the various defendants. Established precedent held that...