Cornhill Ins. PLC v. Valsamis, Inc.

• Decision Date: 07 February 1997
• Docket Number: No. 95-20898,95-20898
• Citation: 106 F.3d 80
• Parties: 73 Fair Empl.Prac.Cas. (BNA) 164, 37 Fed.R.Serv.3d 261, 12 IER Cases 902 CORNHILL INSURANCE PLC, Hansa Marine Insurance Co. U.K. Ltd.; Anglo American Insurance Company, Limited; Underwriters at Lloyd'S London, Plaintiffs-Appellees, v. VALSAMIS, INC.; Cheryl Gisentaner, Defendants-Appellants. AMERICAS INSURANCE COMPANY, Plaintiff-Appellee, v. VALSAMIS, INC.; Cheryl Gisentaner, Defendants-Appellants. OCEAN MARINE INDEMNITY CO., Plaintiff-Appellee, v. VALSAMIS, INC.; Cheryl Gisentaner, Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 80

106 F.3d 80

73 Fair Empl.Prac.Cas. (BNA) 164, 37

Fed.R.Serv.3d 261,

12 IER Cases 902

CORNHILL INSURANCE PLC, Hansa Marine Insurance Co. U.K.

Ltd.; Anglo American Insurance Company, Limited;

Underwriters at Lloyd'S London, Plaintiffs-Appellees, v. VALSAMIS, INC.; Cheryl Gisentaner, Defendants-Appellants.

AMERICAS INSURANCE COMPANY, Plaintiff-Appellee, v. VALSAMIS, INC.; Cheryl Gisentaner, Defendants-Appellants.

OCEAN MARINE INDEMNITY CO., Plaintiff-Appellee, v. VALSAMIS, INC.; Cheryl Gisentaner, Defendants-Appellants.

No. 95-20898.

United States Court of Appeals, Fifth Circuit.

Feb. 7, 1997.

Rehearing and Suggestion for Rehearing En Banc Denied March

10, 1997.

Glenn Richard Legge, Kent Melvin Hanszen, Houston, TX, for plaintiffs-appellees Cornhill Ins. PLC, Hansa Marine Ins. Co. U.K. Ltd., Anglo American Ins. Co., Ltd. and Underwriters at LLoyd's London.

Julia M. Adams, Karen Klaas Milhollin, Phelps Dunbar, Houston, TX, for Americas Ins. Co., plaintiff-appellee.

Ronnie W. Baham, Ronald L. White, Brown, Sims, Wise and White, Houston, TX, for Ocean Marine Indem. Co., plaintiff-appellee.

Joan M. Lucci Bain, Bain & Bain, Houston, TX, for defendants-appellants.

Appeal from the United States District Court for the Southern District of Texas.

Before KING and HIGGINBOTHAM, Circuit Judges, and LAKE ^*, District Judge.

PATRICK E. HIGGINBOTHAM, Circuit Judge:

This suit is the consolidation of three actions filed by insurers and underwriters seeking a declaration that insurance policies ¹ issued to Valsamis, Inc. do not cover incidences of sexual harassment. The district court granted summary judgment for the insurers and Cheryl Gisentaner, assignee of Valsamis, Inc.'s claims and defendant in the action below, appeals. We find that the claims of sexual harassment do not raise a potential for coverage under the policies, and affirm the decision of the district court.

I.

On October 29, 1992, Cheryl Gisentaner filed a lawsuit in Texas state court against her former employer, Valsamis Inc., her supervisor at Valsamis, Christos Papapetrou, and the president of Valsamis Inc., Dimitrios Valsamis. Gisentaner alleged that from approximately March 1992 until her resignation on September 2, 1992, Papapetrou made sexual remarks to her, touched her in an inappropriate and offensive manner, exposed himself, made threatening and obscene gestures, and eventually attempted to force himself on her in a supply room. When she reported this behavior to Valsamis in June of 1992, he failed to address Papapetrou's conduct, tried to kiss her, asked her out repeatedly, and arranged to meet her alone under pretenses of work. In her initial complaint, Gisentaner sought damages for intentional and negligent infliction of emotional distress, tortious assault and battery, intentional and negligent invasion of privacy, and negligent hiring and supervision. Denial of coverage premised on the allegations in this complaint was sent to Valsamis on September 8, 1993. Subsequently, Gisentaner filed a first amended complaint, adding a claim for failure to maintain a safe work environment. Coverage premised on this amended complaint was denied on January 27, 1994.

The defendants in the state court sexual harassment suit settled with Gisentaner for an agreed judgment of $1,250,000, an assignment of Valsamis, Inc.'s claims against its insurers, $110,000 paid by Valsamis, Inc. to Gisentaner in consideration for the assignment, and a covenant by Gisentaner not to execute on the judgment against Valsamis. One month after the settlement, Gisentaner filed a second amended complaint which deleted all intentional tort claims.

The insurers then brought the present action, seeking a judgment declaring that they had no duty to defend against Gisentaner's state court claims and that their policies do not provide coverage for the claims settled by Valsamis and Gisentaner. Subsequently, Gisentaner filed suit against the insurers in state court as a judgment creditor of Valsamis and as an assignee of Valsamis' cause of action for bad faith, insurance code violations and deceptive trade practices. Defendants in Gisentaner's state court suit included all of the plaintiffs in this declaratory judgment action and the issuers of two employer liability policies as well as the agent and broker for all of the policies.

Gisentaner attempted to dismiss this declaratory judgment action, claiming that the extra parties in the state court suit were indispensable to the federal suit and that their mandatory joinder would defeat diversity. The district court judge withheld ruling on this motion until September 26, 1995, when he denied it and also granted summary judgment in favor of the insurers.

II.

Gisentaner claims that the district court should not have exercised jurisdiction in this case because it failed to join indispensable nondiverse parties and abused its discretion in not staying the federal suit in favor of the state court suit.

A.

Fed R. Civ. P. 19 allows joinder of necessary parties unless that joinder would defeat diversity jurisdiction. If jurisdiction is threatened, the court must determine whether the potentially joined parties are indispensable, that is, if the court finds that, as a matter of equity and good conscience, the lawsuit cannot proceed without them. Sandefer Oil & Gas, Inc. v. Duhon, 871 F.2d 526, 529 (5th Cir.1989). The threat of multiple litigation will not make a party indispensable but the threat of inconsistent obligations will. Shelton v. Exxon Corp., 843 F.2d 212, 218 (5th Cir.1988). Fed.R.Civ.P. 19(b) lists four factors for courts to consider in deciding whether a party is indispensable: 1) prejudice to an absent party or others in the lawsuit from a judgment; 2) whether the shaping of relief can lessen prejudice to absent parties; 3) whether adequate relief can be given without participation of the party; and 4) whether the plaintiff has another effective forum if the suit is dismissed.

Gisentaner claims that the agent and broker for the policies in this case are indispensable parties because Cornhill and OMI asserted lack of notice as a defense to coverage. Gisentaner also claims that because OMI is an umbrella policy, the issuer of its underlying employer liability policy is an indispensable party. None of the factors listed in Fed.R.Civ.P. 19(b) cut in favor of joining the parties Gisentaner identified as indispensable. The district court's decision rested solely on contractual language in the policies and those parties with an interest in the interpretation of that language were present in this action.

B.

Gisentaner also claims that the district court abused its discretion in refusing to dismiss this suit. A district court has broad discretion to retain or dismiss a declaratory judgment suit where a parallel state court suit has been filed. Brillhart v. Excess Ins., 316 U.S. 491, 62 S.Ct. 1173, 86 L.Ed. 1620 (1942). The breadth of this discretion was recently reaffirmed by the Supreme Court in Wilton v. Seven Falls Co., 515 U.S. 277, ----, 115 S.Ct. 2137, 2144, 132 L.Ed.2d 214 (1995). The district court in this case found that the insurers' suits were not anticipatorily filed, and that no indispensable parties were excluded. We do not find this action to be an abuse of discretion.

III.

Under Texas law, an insurer's duty to defend is triggered where the allegations in the plaintiff's pleadings raise a potential for coverage under the policy. Argonaut Southwest Ins. Co. v. Maupin, 500 S.W.2d 633, 635 (Tex.1973). An insurer bears the burden of proving that the allegations contained in the underlying plaintiff's petition are excluded from coverage and any doubt is resolved in favor of the insured. Adamo v. State Farm Lloyds Co., 853 S.W.2d 673 (Tex.App.-Houston 1993, writ denied), cert. denied, 511 U.S. 1053, 114 S.Ct. 1613, 128 L.Ed.2d 340 (1994). This burden includes proving that none of the claims asserted potentially fall within coverage. Heyden Newport Chem. Corp. v. Southern Gen. Ins. Co., 387 S.W.2d 22, 26 (Tex.1965). The duty to defend is determined by examining the latest amended pleading upon which the insurer based its refusal to defend the action. Rhodes v. Chicago Insurance Co., 719 F.2d 116, 120 (5th Cir.1983).

A. Americas Policy

The comprehensive general liability policy issued to Valsamis by Americas covered bodily and personal injury. For bodily injury, the policy restricted coverage to damages caused by an "occurrence," but there was no occurrence requirement for claims of personal injury. The definition of personal injury included injury arising out of "false arrest, detention, imprisonment or malicious prosecution," or "a publication or utterance ... in violation of an individual's privacy."

Gisentaner seeks coverage for her claims in the definition of "personal injury" in the Americas policy. ² In her original petition in state court, Valsamis alleged invasion of privacy, which is specifically referenced as a Texas courts do not look to conclusory assertions of a cause of action in determining a duty to defend. Instead, they look to see if the facts giving rise to the alleged actionable conduct, as stated within the eight corners of the complaint, constitute a claim potentially within the insurance coverage. Adamo v. State Farm Lloyds Co., 853 S.W.2d 673 (Tex.App.-Houston 1993, writ denied). We will therefore look to see if Gisentaner alleged facts that constitute a claim for invasion of privacy or false imprisonment under Texas law to determine whether Americas had a duty to defend.

personal injury within Americas policy. She also now alleges that the facts in her complaint state a claim for false detention, also covered in the definition of personal injury.

1. Invasion of Privacy

The Texas Supreme Court first recognized the tort of invasion of privacy in Billings v. Atkinson, 489 S.W.2d 858, 859 (Tex.1973). Texas law now recognizes three distinct torts, any of which constitutes an invasion of...