American Best Food, Inc. v. Alea London

• Decision Date: 21 May 2007
• Docket Number: No. 57181-8-I.,57181-8-I.
• Citation: 138 Wn. App. 674,158 P.3d 119
• Court: Washington Court of Appeals
• Parties: AMERICAN BEST FOOD, INC., a Washington corporation d/b/a Café Arizona; and Myung Chol Seo and Hyun Heui Seo-Jeong, Appellants, v. ALEA LONDON, LTD., a foreign company, Respondent.

158 P.3d 119

138 Wn. App. 674

AMERICAN BEST FOOD, INC., a Washington corporation d/b/a Café Arizona; and Myung Chol Seo and Hyun Heui Seo-Jeong, Appellants, v. ALEA LONDON, LTD., a foreign company, Respondent.

No. 57181-8-I.

Court of Appeals of Washington, Division 1.

May 21, 2007.

Scott R. Sleight, Ahlers & Cressman PLLC, Shane A. Moloney, Scott Easter, Sandy Kang Mi Lee, Montgomery Purdue Blankinship & Austin, Seattle, Paul Jeffrey Miller, South Surrey, British Columbia, for Appellants.

J.C. Ditzler, Molly K. Siebert, Melissa O'Loughlin White, Cozen O'Connor, Seattle, for Respondents.

DWYER, J.

¶ 1 In this case we resolve a dispute between the proprietor of a nightclub, Café Arizona,¹ and its liability insurer, Alea London, Ltd., concerning Alea's duty to defend and Café Arizona's right to indemnity. The dispute stems from a separate lawsuit brought by Michael Dorsey, who was repeatedly shot by George Antonio while both men were patrons of Café Arizona. Dorsey initiated a lawsuit that included allegations that the negligence of Café Arizona's employees, both before and after the shooting, was a proximate cause of Dorsey's injuries. Café Arizona notified Alea of the Dorsey lawsuit, and asserted that the Alea policy both required Alea to defend Café Arizona against Dorsey's claims and provided Café Arizona the right to indemnity for sums that it "becomes legally obligated to pay [Dorsey] as damages because of `bodily injury.'" Alea refused to defend Café Arizona against Dorsey's claims and denied that Café Arizona was entitled to indemnity for liability to Dorsey. Alea based its refusal on the liability insurance policy's exclusionary clause, which states: "This insurance does not apply to any claim arising out of . . . Assault and/or Battery."

¶ 2 Café Arizona then initiated this lawsuit against Alea, seeking monetary damages and declaratory relief, and asserting that Alea breached the insurance contract, acted in bad faith, violated the Washington Consumer Protection Act, and violated the Washington insurance code and insurance commissioner's regulations. Café Arizona and Alea each filed a motion for summary judgment. The trial court granted Alea's motion for summary judgment and dismissed Café Arizona's claims. In so ruling, the trial court relied on our holding in McAllister v. Agora Syndicate, Inc., 103 Wash.App. 106, 11 P.3d 859 (2000), to conclude that the injuries Dorsey suffered as a result of allegedly negligent acts by employees of Café Arizona, occurring both before and after the shooting, necessarily "arise out of" the assault or battery.

¶ 3 We conclude that Café Arizona's potential liability for its employees' alleged negligence after Dorsey was shot did not necessarily "arise out of" an assault or battery upon Dorsey. Therefore, Alea had a duty to defend Café Arizona. In addition, unresolved issues of fact exist concerning both Café Arizona's claimed right to indemnity and whether Alea acted in bad faith, rendering summary judgment inappropriate. Conversely, the trial court ruled correctly in dismissing the remaining claims based on the Consumer Protection Act, the insurance code, and insurance regulations. The trial court's ruling is thus affirmed in part and reversed in part, and the cause is remanded to that court for further proceedings.

FACTS

¶ 4 On January 19, 2003, in the parking lot of the Café Arizona, George Antonio repeatedly shot and severely injured Michael Dorsey. Dorsey subsequently brought a lawsuit against both Antonio and Café Arizona. Dorsey's original complaint alleged that, while Dorsey was at Café Arizona, Antonio started a confrontation with him. Antonio was escorted out of the club by security personnel but was subsequently allowed to re-enter, whereupon Antonio again confronted Dorsey. Security personnel again intervened and escorted both men out of the club. The men continued their verbal dispute outside the club, and the security guards began to surround Antonio. Antonio pulled out a gun and shot Dorsey several times. After Dorsey was shot, "[s]everal security guards carried [Dorsey] into the club, however, the club owner/manager ordered [the] guards to carry [Dorsey] back outside, where the guards dumped him back on the sidewalk."

¶ 5 The liability insurance policy Café Arizona purchased from Alea expressly provides coverage for sums that Café Arizona "becomes legally obligated to pay as damages because of `bodily injury.'" The policy imposes upon Alea "the right and duty" to defend Café Arizona against any suit seeking such damages. However, the policy contains several exclusionary clauses, including the following:

This insurance does not apply to any claim arising out of—

A. Assault and/or Battery committed by any person whosoever, regardless of degree of culpability or intent and whether the acts are alleged to have been committed by the insured or any officer, agent, servant or employee of the insured or by any other person; or

B. Any actual or alleged negligent act or omission in the:

1. Employment;

2. Investigation;

3. Supervision;

4. Reporting to the proper authorities or failure to so report; or

5. Retention;

of a person for whom any insured is or ever was legally responsible, which results in Assault and/or Battery; or

C. Any actual or alleged negligent act or omission in the prevention or suppression of any act of Assault and/or Battery.

¶ 6 Café Arizona notified Alea of the commencement of Dorsey's lawsuit, asserting both that Café Arizona had a right to indemnity for monetary damages it might incur as a result of Dorsey's claims, and that Alea had a duty to defend Café Arizona against those claims. By letter, Alea responded that Dorsey's claims fell within the insurance policy's assault and battery exclusion and that, therefore, Café Arizona was not entitled to indemnity and Alea had no duty to defend Café Arizona in the Dorsey litigation.

¶ 7 Café Arizona's counsel wrote Alea disputing Alea's interpretation of the policy, noting that Dorsey's complaint contained factual allegations concerning the actions of Café Arizona's employees following the shooting, and that Dorsey "appears to claim [that those actions] caused him further injuries" that would not necessarily be excluded by the assault and battery exclusion. In response, Alea's counsel stated that, based on McAllister, 103 Wash.App. 106, 11 P.3d 859, Dorsey's injuries from Café Arizona employees' allegedly negligent acts "arise out of" the assault or battery. Alea's counsel stated that, based on the policy's assault and battery exclusion, Alea had no duty to defend Café Arizona against Dorsey's claims, and Café Arizona had no right to indemnity for its liability to Dorsey. In reply, counsel for Café Arizona wrote to counsel for Alea stating, in part:

[B]ecause neither the Court of Appeals nor the Supreme Court have addressed the issue raised in the instant case, and because there is at least one case out there that does support my clients' position,² it is certainly conceivable that this claim would ultimately be found to be a covered occurrence, thereby entitling my clients to a defense and coverage.

Alea's response reaffirmed its position that it had no duty to defend Café Arizona against Dorsey's claims, and that Café Arizona was not entitled to indemnity for its liability to Dorsey.

¶ 8 In May 2005, Café Arizona initiated this lawsuit against Alea. In July 2005, Dorsey served Café Arizona with a motion to amend his complaint.³ Dorsey's amended complaint states:

[S]ecurity guards carried the injured Michael Dorsey from the lobby of Café Arizona and dumped him on the sidewalk, exacerbating his injuries more, after Mr. Seo negligently ordered the guards to carry [Dorsey] back outside.

¶ 9 Café Arizona's counsel then engaged in further correspondence with Alea's counsel. On July 20, 2005, Café Arizona sent Alea a copy of Dorsey's amended complaint and asserted, based on the allegations set forth in the amended complaint, that Café Arizona had a right to coverage and that Alea had a duty to defend Café Arizona in the Dorsey litigation. On July 25, 2005, Café Arizona sent Alea portions of a report by Michael Comte, Dorsey's expert witness. Comte's report stated:

Dorsey was able to stagger into the alcove of the club. He said the owner of the club ordered security officers to carry him out and place him on the sidewalk, which they did. I was rather startled by Mr. Dorsey's description of the owner's behavior. I thought common sense would dictate you do not move a victim who has been shot.

The parties' correspondence did not produce a resolution of their dispute.

¶ 10 Café Arizona and Alea each filed a motion for summary judgment. The trial court granted Alea's motion for summary judgment and dismissed Café Arizona's claims.

DISCUSSION

¶ 11 An appellate court engages in de novo review of a trial court's ruling on summary judgment, considering all facts and reasonable inferences therefrom in the light most favorable to the nonmoving party. Liberty Mut. Ins. Co. v. Tripp, 144 Wash.2d 1, 10, 25 P.3d 997 (2001).

Duty to Defend

¶ 12 Café Arizona's initial contention is that Alea breached its duty to defend Café Arizona against Dorsey's claims. We agree.

¶ 13 The duty to defend is a primary benefit of an insurance contract. Truck Ins. Exch. v. VanPort Homes, Inc., 147 Wash.2d 751, 760, 58 P.3d 276 (2002) (citing Safeco Ins. Co. of Am. v. Butler, 118 Wash.2d 383, 392, 823 P.2d 499 (1992)). An insurer's duty to defend against a claim is broader in scope and distinct from its duty to indemnify. Allstate Ins. Co. v. Bowen, 121 Wash.App. 879, 881, 91 P.3d 897 (2004) (citing Truck Ins. Exch., 147 Wash.2d at 760, 58 P.3d 276). The insurer's duty to defend arises when an action is brought against its insured, and is based on the potential for the insured's liability. Bowen, 121 Wash.App. at 883, 91 P.3d 897 (citing Truck Ins. Exch., 147 Wash.2d at 760, 58 P.3d 276). "The duty...