Continental Ins. Co. v. McDaniel, 2

• Decision Date: 03 November 1988
• Docket Number: CA-CV,No. 2,2
• Citation: 160 Ariz. 183,772 P.2d 6
• Parties: , 48 Fair Empl.Prac.Cas. (BNA) 522 The CONTINENTAL INSURANCE COMPANY, Plaintiff/Appellee, v. Carole McDANIEL; John G. Handgis and Carolyn C. Handgis, husband and wife; Nicholas G. Handgis and Maria Handgis, husband and wife; Demosthenes Handgis and Mary Lou Handgis, husband and wife, dba Darby's Restaurant-Coffee Shop, a partnership; and each of them individually, Defendants/Appellants. 88-0211.
• Court: Arizona Court of Appeals

Page 6

772 P.2d 6

160 Ariz. 183, 48 Fair Empl.Prac.Cas. (BNA) 522

The CONTINENTAL INSURANCE COMPANY, Plaintiff/Appellee, v. Carole McDANIEL; John G. Handgis and Carolyn C. Handgis, husband and wife; Nicholas G. Handgis and Maria Handgis, husband and wife; Demosthenes Handgis and Mary Lou Handgis, husband and wife, dba Darby's Restaurant-Coffee Shop, a partnership; and each of them individually, Defendants/Appellants.

No. 2 CA-CV 88-0211.

Court of Appeals of Arizona Division 2, Department B.

Nov. 3, 1988.

Review Denied May 2, 1989.

[160 Ariz. 184] Crampton, Woods, Broening & Oberg by Terrence P. Woods and Neal B. Thomas, Phoenix, for plaintiff/appellee.

Gust, Rosenfeld & Henderson by Steven E. Harrison and Douglas E. Thomas, Phoenix, for defendants/appellants.

OPINION

LACAGNINA, Chief Judge.

This appeal is taken from a summary judgment in favor of Continental Insurance Company declaring that the acts of John G. Handgis were not covered by a comprehensive business policy issued to a partnership doing business as Darby's Restaurant--Coffee Shop (Darby's). The issues raised concern the policy definition of "occurrence" as an accident which results in bodily injury "neither expected nor intended from the standpoint of the insured" as related to the torts of sexual harassment, assault and battery, and intentional infliction of mental suffering. We affirm.

FACTS AND PROCEDURAL BACKGROUND

Carole McDaniel, a former employee of Darby's, sued the Handgis brothers, individually and as partners doing business as Darby's, (Handgis) for acts committed by John Handgis, alleging assault and battery, intentional infliction of mental suffering, and sexual harassment. Continental is providing a defense to McDaniel's claim in that action with a reservation of rights because the complaint alleged intentional acts not covered by the policy. The trial court in the tort action denied a motion to dismiss for lack of jurisdiction, ruling that McDaniel's injuries were not covered by workers' compensation laws because they did not arise out of and in the course of employment and the claims alleged by McDaniel were intentional torts. Thereafter, Continental brought this action for declaratory judgment and successfully argued in the trial court that the acts and conduct of John Handgis were not covered by its policy.

The acts committed by John Handgis for approximately one year, as alleged by McDaniel in her action for damages, are briefly summarized as follows: 1) talking to her in a vulgar manner, 2) exposing his genitals for her opinion, 3) telling her to "kiss [his] cock," 4) pulling her head toward his penis, 5) grabbing and fondling her breasts, buttocks and pelvic area, and 6) calling her at home. Handgis argues that whatever occurred between him and McDaniel was with her consent. That dispute will be resolved in the trial of the tort action.

THE LIABILITY INSURANCE POLICY

Continental issued a policy insuring the Handgis brothers doing business as Darby's against all sums which they would be legally obligated to pay as damages due to bodily injury caused by an "occurrence." "Occurrence" is defined by the policy as "an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured."

Handgis argue that the trial court could not conclude as a matter of law that John Handgis intended to injure McDaniel because his testimony that she participated and encouraged the relationship supports the conclusion that the purpose of his acts was mutual satisfaction and pleasure, not bodily harm, and therefore, those acts were covered by the policy. In support of this argument, Handgis cite Transamerica Ins. Group v. Meere, 143 Ariz. 351, 694 P.2d 181 (1984), for the proposition that the issue is not whether the insured's acts were intended but whether, from the subjective standpoint of the insured, the injury itself was intended. A careful reading and analysis of the supreme court's decision in Meere does not support the argument.

Although we can distinguish between the different policy provisions involved in Meere (exclusion for injury expected or intended by the insured) and Fire Ins. Exchange v. Berray, 143 Ariz. 361, 694 P.2d 191 (1984) (exclusion for intentional acts and coverage for injury neither expected nor intended from standpoint of the insured), because the policy here specifically provided coverage only for accidents which result in bodily injury neither expected nor intended from the standpoint of the insured, we believe the use of the word "accident" in the definition of "occurrence" does not alter or change the principles of law governing this case. In addition, the supreme court in both Meere and Berray was faced with factual disputes regarding the insured's intent because the insurance companies were seeking relief from their duty to defend and summary judgment relief was denied. Because Continental is defending Handgis, we are not faced with that dilemma and can decide the coverage issue in this case as though McDaniel's allegations are true. The trial court decided the issue of coverage in favor of Continental as a matter of law, and we affirm that judgment.

NO COVERAGE FOR SEXUAL HARASSMENT

McDaniel's claim against John Handgis for assault and battery, intentional infliction of mental suffering and sexual harassment were all based upon the same set of facts. The acts occurred for approximately one year while McDaniel was the bookkeeper for Darby's. The conduct of John Handgis was so certain to cause injury to McDaniel that his intent to cause harm is inferred as a matter of law, despite his statements to the contrary that all he intended was to provide pleasure and satisfaction. Steinmetz v. National American Ins. Co., 121 Ariz. 268, 589 P.2d 911 (App.1978); Clark v. Allstate Ins. Co., 22 Ariz.App. 601, 529 P.2d 1195 (1975). The decisions in Steinmetz and Clark are based upon the legal principle that once one intentionally commits an act against another and injury results as a natural and probable consequence of the intentional act, the injury is intended and expected and therefore excluded from coverage.

There are exceptions to the Steinmetz-Clark rule as stated by Meere and Berray, which were cases dealing with an insured's claim of self-defense. In that context the court in Meere said:

The basic question is whether the insured's subjective intent to cause or not to cause injury is relevant where the act producing injury was intentional but committed in self-defense.

143 Ariz. at 354, 694 P.2d at 184. Later, the supreme court in Berray stated:

However, as we stated in Meere, [citation omitted] the Steinmetz-Clark presumption does not apply to the language of an "intentional acts" exclusion clause when an insured acts in self-defense or with some other justification.

143 Ariz. at 363, 694 P.2d at 193. The sexual harassment by John Handgis cannot be compared to the act of one defending...