Holiday Hospitality Franchising, Inc. v. AMCO Ins. Co.

• Decision Date: 06 March 2013
• Docket Number: No. 33S01–1206–CT–312.,33S01–1206–CT–312.
• Citation: 983 N.E.2d 574
• Parties: HOLIDAY HOSPITALITY FRANCHISING, INC., Appellant (Defendant below), v. AMCO INSURANCE COMPANY, Appellee (Plaintiff below).
• Court: Indiana Supreme Court

983 N.E.2d 574

HOLIDAY HOSPITALITY FRANCHISING, INC., Appellant (Defendant below),

v.AMCO INSURANCE COMPANY, Appellee (Plaintiff below).

No. 33S01–1206–CT–312.

Supreme Court of Indiana.

March 6, 2013.

Robert B. Clemens, Curtis T. Jones, Indianapolis, IN, Attorneys for Appellant.

Danford R. Due, Scott E. Andres, Indianapolis, IN, Attorneys for Appellee.

On Petition to Transfer from the Indiana Court of Appeals, No. 33A01–1103–CT–00104

DAVID, Justice.

A motel and an insurance company entered into an insurance contract that specifically excluded several categories of injury and harm—including harm resulting from acts of sexual molestation by motel employees. After an off-duty motel employee (now convicted for his crimes) molested a young motel guest, the motel's insurer sought a declaratory judgment to enforce its reading of the contract disclaiming coverage for, and its duty to defend against, a civil complaint brought by the motel guest. The trial court granted summary judgment in favor of the insurer, and the Court of Appeals reversed. We now affirm the trial court.

Facts and Procedural History

In mid-May 2007, R.M.H., a minor, was a guest at a motel in New Castle, Indiana, operating under the name of Holiday Inn Express–New Castle, LLC (“Holiday Inn Express”), and owned by Anil Megha. The motel was a Holiday Inn franchise, established pursuant to an agreement with Holiday Hospitality Franchising, Inc. During this stay, R.M.H. was molested by a Holiday Inn Express employee, Michael Forshey, who entered R.M.H.'s locked room at night. ¹

At the time R.M.H. was molested, Holiday Inn Express was insured under a policy issued by Amco Insurance Company (“AMCO”). Holiday Hospitality and Megha were additional insureds under the policy's terms. The policy provided coverage for, as well as a duty to defend against, claims for bodily injury and personal and advertising injury liability.² However, AMCO had no duty to defend against any suit to which the policy did not apply.

AMCO's policy expressly disclaimed coverage for both bodily injury and personal and advertising injury when the injury arose out of intentional conduct. Specifically, it excluded coverage for bodily injury “which is expected or intended by the insured,” even if the actual injury “[i]s of a different kind, quality or degree than initially expected or intended,” or it “[i]s sustained by a different person, entity, real property, or personal property than that initially expected or intended.” (App. at 129.) For personal and advertising injury, the policy did not apply to such injury “[c]aused by or at the direction of the insured with the knowledge that the act would violate the rights of another and would inflict ‘personal and advertising injury.’ ” (App. at 136.)

The policy also disclaimed coverage for acts of molestation or abuse, by excluding any bodily injury or personal or advertising injury arising from “[t]he actual or threatened abuse or molestation by anyone of any person while in the care, custody or control of the insured.” (App. at 133, 137.). This included claims of negligent employment, investigation, supervision, reporting (or failure to report), or retention of any insured responsible for the abuse or molestation.

Additionally, AMCO only provided coverage for bodily injury caused by an “occurrence,” which the policy defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” (App. at 128, 149.) And finally, the policy contained a “Separation of Insureds” provision, providing that the policy applied “[a]s if each Named Insured were the only Named Insured ... and ... [s]eparately to each insured against whom claim is made or ‘suit’ is brought.” (App. at 146.)

In September 2008, R.M.H.'s mother, S.H., sued Holiday Inn Express, Holiday Hospitality, and Megha. She claimed battery, intentional infliction of emotional distress, negligent hiring, negligent retention and supervision, and negligent infliction of emotional distress, all brought under agency and vicarious liability theories.³

AMCO filed a separate complaint in January 2009, seeking a declaratory judgment that it owed no coverage for any potential liability arising from S.H.'s complaint, and also that it had no duty to defend Holiday Inn Express, Holiday Hospitality, or Megha. AMCO then filed a motion for summary judgment, with S.H. and Holiday Hospitality filing separate responses that Holiday Inn Express and Megha later joined. The trial court granted AMCO's motion, framing its order as a final judgment and appealable order.

Holiday Hospitality appealed. S.H., Holiday Inn Express, and Megha did not file a notice of appeal or joinder in Holiday Hospitality's appeal, but instead filed “Briefs of Interested Parties.” The Court of Appeals reversed and remanded, concluding that an “occurrence” took place under the terms of AMCO's insurance policy, and that there remained a genuine issue of material fact as to whether R.M.H. was “in the care, custody or control” of Holiday Inn Express at the time Forshey molested him. Holiday Hospitality Franchising, Inc. v. Amco Ins. Co., 955 N.E.2d 827, 836 (Ind.Ct.App.2011).

On rehearing, the Court of Appeals clarified that its reversal applied only to Holiday Hospitality, Holiday Hospitality Franchising, Inc. v. Amco Ins. Co., 963 N.E.2d 1125, 1125–26 (Ind.Ct.App.2012), because even though Appellate Rule 17(A) made S.H., Holiday Inn Express, and Megha “parties to the appeal,” that did not relieve them of their Rule 9(A) obligation to file a notice of appeal within thirty days after a final judgment was entered against them or forfeit appellate relief, id. at 1126.

We granted transfer, thereby vacating the two Court of Appeals decisions. ⁴Holiday Hospitality Franchising, Inc. v. Amco Ins. Co., 969 N.E.2d 88 (Ind.2012) (table); Ind. Appellate Rule 58(A).

Standard of Review

Summary judgment is only appropriate when the moving party affirmatively shows that there are no genuine issues of material fact with regard to a particular issue or claim. Ind. Trial Rule 56(C); Town of Avon v. W. Cent. Conservancy Dist., 957 N.E.2d 598, 602 (Ind.2011). The non-moving party then bears the burden of coming forward with designated evidence showing the existence of a genuine issue of material fact. Id.

An appellate court reviews these cases through the same lens, and we view all designated evidence and reasonable inferences in a light most favorable to the non-moving party; any doubts are resolved against the moving party. Id. We will affirm a trial court's summary judgment on any theory supported by the record. Woodruff v. Ind. Family & Soc. Servs. Admin., 964 N.E.2d 784, 790 (Ind.2012). When the facts are undisputed, reversal is only appropriate if the trial court incorrectly applied the law to those facts. Id.

The construction of a contract is particularly well-suited for de novo appellate review, because it generally presents questions purely of law. Colonial Penn Ins. Co. v. Guzorek, 690 N.E.2d 664, 667 (Ind.1997). Insurance contracts are governed by the same rules of construction as any other contract. Id. Clear and unambiguous policy language is given its ordinary meaning, id., in order to accomplish the primary goal of contract interpretation: “to determine the intent of the parties at the time the contract was made as disclosed by the language used to express their rights and duties,” First Fed. Sav. Bank of Ind. v. Key Markets, Inc., 559 N.E.2d 600, 603 (Ind.1990).

Where contractual language is ambiguous, we generally resolve those ambiguities in favor of the insured, Guzorek, 690 N.E.2d at 667, but will not do so if such an interpretation fails to harmonize the provisions of the contract as a whole, see Key Markets, 559 N.E.2d at 603. However, the failure to define a contractual term does not necessarily make that term ambiguous, Guzorek, 690 N.E.2d at 667, nor does a simple disagreement about the term's meaning. “Rather, an ambiguity exists where the provision is susceptible to more than one reasonable interpretation.” Id.

Discussion

AMCO sought summary judgment based on two distinct provisions of the contract. First, it said that the contractual definition of “occurrence” did not extend to Forshey's criminal conduct or Holiday Inn Express's decision to hire and retain him. Second, it argued that the policy specifically excluded coverage for acts of abuse and molestation, as well as coverage for any negligence in hiring or retaining someone committing those acts. Because we find this second issue dispositive on appeal, we need not address the first. ⁵

We think it obvious that the plain and ordinary meaning of the abuse/molestation exclusion as a whole is that both parties intended to exclude from coverage those claims arising from conduct like Forshey's. However, the exclusion is limited to acts occurring when the victim is in the “care, custody or control” of an insured, making the issue a bit counter-intuitive. On one hand, the insurer is arguing that R.M.H. was under the “care, custody or control” of its insureds so it can deny coverage. And on the other hand, the insureds are arguing that R.M.H. was not under their “care, custody or control,” in order to obtain coverage; in essence, they seek insurance coverage for injury to an individual over whom they claim they had little (if any) power or authority.

Be that as it may, the phrase “care, custody or control” is undefined in the policy agreement, but no party claims it is ambiguous. Instead, they dispute the existence (or non-existence) of a genuine issue of material fact as to whether R.M.H. was “in the care, custody or control” of Holiday Inn Express, Holiday Hospitality, or Megha when he was molested; but they do so without advancing a particular definition for the phrase.

Holiday Hospitality points to Am. Family Mut. Ins. Co. v. Bentley, 170 Ind.App. 321, 352 N.E.2d 860 (1976), in which the Court of Appeals said ...