ENTERTAINMENT INNOVATORS v. SCOTTSDALE INS.

• Decision Date: 13 December 1993
• Docket Number: Civ. No. 93-5040.
• Parties: ENTERTAINMENT INNOVATORS, INC., Doc Murdock's Inc., and J.P. Warren, Plaintiffs, v. SCOTTSDALE INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Western District of Arkansas

839 F. Supp. 654

ENTERTAINMENT INNOVATORS, INC., Doc Murdock's Inc., and J.P. Warren, Plaintiffs, v. SCOTTSDALE INSURANCE COMPANY, Defendant.

Civ. No. 93-5040.

United States District Court, W.D. Arkansas, Fayetteville Division.

December 13, 1993.

COPYRIGHT MATERIAL OMITTED

W.H. Taylor, Mashburn & Taylor, Fayetteville, AR, for plaintiffs.

John Leslie Evitts, III, Hardin, Jesson, Dawson & Terry, Fort Smith, AR, for defendant.

MEMORANDUM OPINION

H. FRANKLIN WATERS, Chief Judge.

This is an action for declaratory judgment filed by Entertainment Innovators, Inc., Doc Murdock's Inc., and J.P. Warren on October 22, 1992, in the Chancery Court of Washington County, Arkansas. The action was removed to this court by the defendant on the basis of diversity of citizenship on March 23, 1993, after the dismissal of a non-diverse defendant.

Background.

The plaintiffs seek a declaration that the defendant is obligated under the terms of a general comprehensive liability insurance policy number GLS172856 to pay a compensatory damage award and an award of attorney's fees and costs rendered against the plaintiffs in civil case number 91-5159, Jenkins, et al. v. Entertainment Innovators, Inc., et al.¹

The policy was in full force and effect at the time the judgment was rendered. In fact, Scottsdale provided a defense in the Jenkins case. The parties have agreed to submit this case to the court for decision based upon the stipulated facts and the briefs of the parties.

In Jenkins the plaintiffs, Bradford Jenkins, III, Willie Jenkins, and James and Martha Bradley on behalf of their minor children Torrance, Camalita and Brett, brought a number of claims against the defendants arising out of incidents occurring on August 9, 1991, and October 30, 1991, at Doc Murdock's Dance Hall in Fayetteville, Arkansas.² At the conclusion of the trial, three separate federal claims were submitted to the jury, conspiracy to violate the civil rights of the plaintiffs and other black patrons of Doc Murdock's under 42 U.S.C. § 1985(3), neglect to prevent civil rights violations under 42 U.S.C. § 1986, and denial of equal access to a place of public accommodation under 42 U.S.C. § 2000a. Three state law claims, intentional infliction of emotional distress, battery, and negligent failure to maintain the premises in a reasonably safe condition, were also submitted to the jury.

The jury returned verdicts in favor of the plaintiffs on the following claims: conspiracy to deprive Bradford Jenkins, III, of his civil rights and awarded him $3.00 in compensatory damages on this claim; neglect to prevent a conspiracy and awarded Bradford Jenkins, III, $1.00 in compensatory damages on this claim; battery with respect to Torrance Bradley and Brett Bradley and awarded Torrance Bradley $125.00 in compensatory damages and Brett Bradley $4.00³ in compensatory damages; and failure to maintain the premises in a reasonably safe condition and awarded compensatory damages in the amount of $1250. The jury also awarded the plaintiffs punitive damages. Judgment in the Jenkins case was entered on September 23, 1992. The total amount of the judgment was $23,883.00. This judgment amount was later reduced by $1750 to $22,132.00 by the court in ruling on a motion for judgment as a matter of law. Of this amount $20,750 represented an award of punitive damages and is no longer in issue. Thus, there remains only $132.00 in compensatory damages at issue. The court also awarded plaintiffs attorney's fees in the amount of $32,500 and costs in the amount of $6933.45. Plaintiffs also contend Scottsdale is liable for these sums.

Plaintiffs made demand on Scottsdale to pay the judgment and award of attorney's fees and costs entered in the Jenkins case. Scottsdale paid $1250.00 awarded on the negligence claim and declined to pay any further amounts.⁴ Scottsdale advances the following arguments: (1) the damages awarded for conspiracy to violate civil rights and neglect to prevent a conspiracy to violate civil rights do not fall within the policy definitions of bodily injury or property damage; (2) the damages awarded for conspiracy to violate civil rights, neglect to prevent a conspiracy to violate civil rights and battery are intentional acts and do not fall within the policy definition of occurrence; (3) the attorneys fees and costs were assessed by virtue of plaintiffs' recovery on intentional and non-covered events and are therefore not recoverable under the policy.

Applicability of the Definitions contained in the Jacket.

As a preliminary matter the court is asked to determine whether or not the insurance jacket which contains, among other things, certain definitions is to be regarded as part of the policy. It is the plaintiffs' position that the definitions contained on the jacket are not part of the policy because the policy does not incorporate the definitions and there was no physical attachment of the jacket to the actual policy. Plaintiffs state that the only alleged relationship between the definitions on the jacket and the actual policy numbered GLS 172856 was their purported physical proximity to each other.

Scottsdale contends that the general liability insurance policy consists of a jacket which contains policy definitions and contract language and the coverage parts and endorsements which together comprise the entire insurance policy. Defendant informs the court that the provisions of the jacket are three pages long and the coverage parts and endorsements are attached to page three of the jacket in such a manner as to permit the policy number and the insured's name and address to appear through the jacket window.

The court has been furnished a copy of the jacket, the coverage sections, and the endorsements to the policy. The jacket contains in the lower left hand corner the notation GLS-J-1 and consists of three pages. The first page indicates the name and address of the insurance company and is labeled "Policy Provisions-Part A."

The three pages contain definitions, supplementary payment terms, and conditions including the insured's duties in the event of occurrence, claim or suit. Page one begins with the following statement: Scottsdale Insurance Company in consideration of the payment of the premium, in reliance upon the statements in the declarations made a part hereof and subject to all of the terms of this policy, agrees with the named insured as follows: When used in this policy (including endorsements forming a part hereof)...." Page three of the jacket states "in Witness Whereof, the company has caused this policy to be executed and attested, but this policy shall not be valid unless countersigned by a duly authorized representative of the company." This statement is followed by the signatures of the secretary and president of the insurance company. At the top of page three it states "Insert Part B here so that top edge butts against above fold to permit policy number, Insured's name and address on Part B to appear through window. Attach Coverage Part(s) and Endorsement(s) (If Any) Here."

These pages are followed by the declaration page which indicates the policy number, the insured's name, the type of policy, the premium, the policy period, and lists by number the applicable endorsements. The declaration page is stamped "this is a true and certified copy of the designated policy."⁵ Thereafter, the materials submitted consist of an additional declaration page, one page discussing coverage A for bodily injury liability and coverage B for property damage liability, and a number of pages setting forth endorsements and amendments. While the jacket refers to the provisions of the policy including endorsements, the coverage parts and endorsements do not refer to the jacket. Endorsement L9194, however, states it amends the definition of "products hazard" which is contained in the definitions section of the jacket.

Plaintiffs do not argue that they did not receive the jacket and in fact the only testimony in this regard is that of Carlon Bassett where he states he did not remember the jacket. Plaintiffs also present no evidence that the jacket was not attached. Plaintiffs merely cite Black & White, Inc. v. Reserve Ins. Co., 242 Ark. 573, 414 S.W.2d 369 (1967) and American Pioneer Life Ins. Co. v. Allender, 18 Ark.App. 234, 713 S.W.2d 249 (1986) for the proposition that without words of incorporation on the policy (which they contend begins with the stamped declaration page) or physical attachment the jacket does not become part of the policy.

The court would have little hesitation adopting plaintiffs' position if plaintiffs had presented evidence that they did not receive the jacket with the coverage sections and the endorsements. If that were plaintiffs' position the court would undoubtedly find that the plaintiffs were not on inquiry notice that other provisions of the policy were missing. This would be true because the pages received would not refer to the jacket or the materials contained therein. A similar argument was presented to the court in Twin City Fire Ins. Co. v. Terry, 472 S.W.2d 248 (Ky.1971). In that case the insurer presented evidence that the policy was assembled by glueing together three separate documents one of which, referred to as part 1, was so adapted as to form a jacket for the document. The insured presented evidence that a portion of the policy containing a one-year limitation was never received. The court held the meager statements in the forms received were insufficient to put the insured on notice or inquiry.

The Twin City Fire case, however, is readily distinguishable. As the plaintiffs have presented no evidence that they did not receive the jacket, we must assume that the policy was assembled as defendant states. An insured receiving the jacket would by the terms of the jacket be advised that it was considered part of the policy. We therefore hold the definitions contained in the jacket constitute a part of the...