Commercial Union Ins. Companies v. Sky, Inc.

• Decision Date: 11 December 1992
• Docket Number: Civ. No. 92-2145.
• Parties: COMMERCIAL UNION INSURANCE COMPANIES, Plaintiff, v. SKY, INC. and Kimberly Cluck, Defendants. SKY, INC., Counter-Claimant, v. COMMERCIAL UNION INSURANCE COMPANIES, Counter-Defendant.
• Court: U.S. District Court — Western District of Arkansas

810 F. Supp. 249

COMMERCIAL UNION INSURANCE COMPANIES, Plaintiff, v. SKY, INC. and Kimberly Cluck, Defendants.

SKY, INC., Counter-Claimant, v. COMMERCIAL UNION INSURANCE COMPANIES, Counter-Defendant.

Civ. No. 92-2145.

United States District Court, W.D. Arkansas, Fort Smith Division.

December 11, 1992.

Douglas M. Carson, O. Ben Core, Daily, West, Core, Coffman & Canfield, Fort Smith, AR, for plaintiff.

Ronald W. Metcalf, Gregory T. Karber, Pryor, Barry, Smith, Karber & Alford, Fort Smith, AR, for defendants.

MEMORANDUM OPINION

H. FRANKLIN WATERS, Chief Judge.

Currently before the court is a motion for summary judgment filed by the plaintiff, Commercial Union Insurance Companies, and responses thereto by the separate defendants, Sky, Inc. and Kimberly Cluck. The court has considered the motion, responses and briefs and is now ready to rule. For the reasons stated below, the court believes that the plaintiff's motion for summary judgment should be granted.

Commercial Union Insurance Companies (Commercial) is a Massachusetts insurance corporation with its principal place of business in Boston, Massachusetts. Sky, Inc. is an Arkansas corporation doing business in Alma, Arkansas, as either Ozark Plaza Motel or Ozark Truck Plaza. Commercial and Sky, Inc. entered into a written contract of insurance, policy number A E R122397, with a policy period from July 15, 1991, to July 15, 1992.

Kimberly Cluck is a resident of Alma, Arkansas, and a former employee of Sky, Inc. during a period from August, 1991, through approximately January 4, 1992. Kimberly Cluck thereafter filed an action against Sky, Inc., alleging that while an employee of Sky, Inc., she suffered sexual harassment from Bob Thurman, another employee of Sky, Inc. Cluck contends that this harassment arose out of and in the scope of her employment with Sky, Inc. and as such constitutes a violation of Title VII. Kimberly Cluck also alleges that the actions attributable to Sky, Inc. give rise to state claims for the tort of outrage and for negligent hiring and supervision. As a result of Cluck's complaint, Sky, Inc. requested that Commercial provide a defense in the sexual harassment action, contending that the policy of insurance issued by Commercial provided coverage for any liability arising from the claims of Kimberly Cluck.

Commercial then filed a declaratory action against the defendants, Sky, Inc. and Kimberly Cluck, seeking declarations by this court that (1) Commercial has no duty to defend Sky, Inc. in the case filed by Kimberly Cluck and (2) the insurance policy issued by Commercial to Sky, Inc. provides no coverage as a matter of law for any liability which may result in that action. Commercial has now filed a motion for summary judgment, asserting that no genuine issue of material fact remains, Commercial has no duty to defend Sky, Inc., and the policy of insurance provides no coverage for sexual liability as a matter of law. Commercial contends that (1) Coverage A of the insurance policy does not provide coverage because there was no "bodily injury" within the meaning of the Coverage A; (2) alternatively, the injury was not caused by an "occurrence" or was "expected or intended from the standpoint of the insured" within the meaning of those terms as used in the Coverage A provisions; and (3) Coverage B of the policy does not provide coverage or excludes coverage because there was no "personal" or "advertising" injury within the meaning of those terms as used in Coverage B.

Sky, Inc, has responded to the motion, contending that (1) an insurer has an obligation to defend its insured within coverage limits of the policy whether or not a duty to pay exists under the policy; (2) the injuries alleged by Kimberly Cluck are either "bodily injury" or "personal injury" as defined in Commercial's policy of insurance; and (3) Bob Thurman, an employee of Sky, Inc., is an additional insured under the insurance policy.

Kimberly Cluck has also responded to the motion, stating that (1) her complaint alleges "bodily injury" within the meaning of the insurance policy sufficient to invoke coverage under the policy; (2) the "expected or intended from the standpoint of the insured" clause of the insurance policy does not exclude coverage for these injuries because the alleged negligence of Bob Thurman was not expected or intended within the meaning of the policy; and (3) her complaint alleges "personal injury" within the meaning of the insurance policy sufficient to invoke coverage under the policy.

Summary judgment is appropriate only when there is no genuine issue of material fact, so that the dispute may be decided on purely legal grounds. Holloway v. Lockhart, 813 F.2d 874 (8th Cir. 1987); Fed.R.Civ.P. 56. The Supreme Court has issued the following guidelines for trial courts to determine whether this standard has been satisfied.

The inquiry performed is the threshold inquiry of determining whether there is a need for trial — whether, in other words, there are genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party.

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). See also Agristor Leasing v. Farrow, 826 F.2d 732 (8th Cir.1987); Niagara of Wisconsin Paper Corp. v. Paper Industry Union — Management Pension Fund, 800 F.2d 742, 746 (8th Cir.1986).

The Eighth Circuit Court of Appeals has advised trial courts that summary judgments should be cautiously invoked so that no person will be improperly deprived of a trial of disputed factual issues. Inland Oil & Transport Co. v. United States, 600 F.2d 725 (8th Cir.1979), cert. denied, 444 U.S. 991, 100 S.Ct. 522, 62 L.Ed.2d 420 (1979). The Court has recently reviewed the burdens of the respective parties in connection with a summary judgment motion. In Counts v. M.K.-Ferguson Co., 862 F.2d 1338 (8th Cir.1988), the court stated:

The burden on the party moving for summary judgment is only to demonstrate, i.e., `to point out to the District Court,' that the record does not disclose a genuine dispute on a material fact. It is enough for the movant to bring up the fact that the record does not contain such an issue and to identify that part of the record which bears out his assertion. Once this is done, his burden is discharged, and, if the record in fact bears out the claim that no genuine dispute exists on any material fact, it is then the respondent's burden to set forth affirmative evidence, specific facts, showing that there is a genuine dispute on that issue. If the respondent fails to carry that burden, summary judgment should be granted.

Id. at 1339, quoting, City of Mt. Pleasant v. Associated Elec. Coop., 838 F.2d 268, 273-74 (8th Cir.1988) (citations omitted) (brackets in original).

However, the Court of Appeals for this circuit has also held that the court, in ruling on the motion for summary judgment, must give the non-moving party "the benefit of the reasonable inferences that can be drawn from the underlying facts." Fischer v. NWA, Inc., 883 F.2d 594, 598 (8th Cir.1989), cert. denied, 495 U.S. 947, 110 S.Ct. 2205, 109 L.Ed.2d 531 (1990), citing Trnka v. Elanco Products, 709 F.2d 1223 (8th Cir.1983).

Commercial Union Insurance Company and Sky, Inc. entered into a contract of insurance, policy number A E R122397, with a general liability policy period from July 15, 1991, to July 15, 1992. There are two issues raised by the plaintiff's motion for summary judgment which are before the court for decision: (1) whether Commercial has a duty to defend Sky, Inc. in the sexual harassment action filed against Sky, Inc. by Kimberly Cluck; and (2) whether coverage exists under the general policy of insurance issued by Commercial to Sky, Inc. for liabilities incurred in a sexual harassment action.

a. Duty to Defend Sky, Inc.

The "duty to defend an insured is broader than the duty to pay damages and cannot always be determined by reference to the complaint." See State Farm Mut. Auto Ins. Co. v. Hollingsworth, 759 F.Supp. 1355 (W.D.Ark.1991) (citing Smith v. St. Paul Guardian Ins. Co., 622 F.Supp. 867 (W.D.Ark.1985). "The duty to defend arises `where there is a possibility that the injury or damage may fall within the policy coverage.'" Commercial Union Ins. Co. v. Henshall, 262 Ark. 117, 553 S.W.2d 274 (1977). Thus, there "may be an obligation to defend even though there is no duty to pay." Equity Mutual Ins. Co. v. Southern Ice Co., 232 Ark. 41, 334 S.W.2d 688 (1960). The general rule is that the pleadings against the insured determine the insurer's duty to defend. Mattson v. St. Paul Title Co. of the South, 277 Ark. 290, 292, 641 S.W.2d 16, 18 (1982).

These cases hold, however, that there can be situations where the duty to defend cannot be determined solely from the pleadings. The Arkansas Supreme Court has stated that it is enough if the possibility of damages exists; if injury or damage within the policy coverage could result, the duty to defend arises. Home Indem. Co. v. City of Marianna, 291 Ark. 610, 618, 727 S.W.2d 375, 379 (1987). This court must, therefore, determine if a possibility of coverage exists, under the terms of Sky Inc.'s insurance policy with Commercial for liabilities incurred as the result of a sexual harassment action.

b. Policy Coverage for Sexual Harassment

The law is well-settled that a policy of insurance is nothing more than a contract between the insurance carrier and its insured, and is to be governed by the ordinary rules of interpretation of a contract. Couch on Insurance § 45: 294 at 620, and Perkins v. Clinton State Bank, 593 F.2d 327 (8th Cir.1979). A common sense approach should be used and generally the words employed in the policy are to be understood in their ordinary sense. Wommack v. United States Fire Ins. Co., 323 F.Supp. 981 (W.D.Ark.1971). Of course, the law is also well-settled in Arkansas that ambiguous provisions of an...