McAvey v. Lee

Citation260 F.3d 359,57 Fed.R.Evid. Serv 511
Decision Date25 July 2001
Docket NumberNo. 98-31274,CHIN-LI,CHEN-HORNG,98-31274
Parties(5th Cir. 2001) WILLIAM J. McAVEY, Plaintiff-Appellee, v.LEE;LEE, Defendants-Appellees, v. FIRST FINANCIAL INSURANCE CO., Defendant-Appellant
CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)

Richard M. Martin, Jr. (argued), Eaves Law Firm, John J. Cummings, III, Cummings, Cummings & Dudenhefer, New Orleans, LA, for Plaintiff-Appellee.

Thomas G. Buck (argued), Blue Williams, Metairie, LA, for First Financial insurance Co.

James Richard Swanson, Correro, Fishman, Haygood, Phelps, Walmsley & Casteix, New Orleans, LA, for Chen-Horng Lee and Chin-Li Lee.

Appeal from the United States District Court For the Eastern District of Louisiana

Before GARWOOD, WIENER, and DENNIS, Circuit Judges.

DENNIS, Circuit Judge:

William J. McAvey brought this diversity action against Chen-Horng Lee (Mr. Lee), his wife, Chin-Li Lee (Mrs. Lee), and Ming Chun, Inc. d/b/a Tomfort Lodge ("Ming Chun") (collectively, "the insureds" or "the innkeepers"), and First Financial Insurance Company ("First Financial"), the insureds' commercial liability insurer, for damages for personal injury to McAvey caused by the negligence of the insureds and their employees in failing to take reasonable precautions and to exercise proper vigilance for the safety and security of their hotel guests. McAvey alleged that he fractured his heel while chasing two unidentified robbers who had taken his wallet by force in his Tomfort Lodge motel room. He further averred that the criminals entered the motel and the hall outside his room without detection by the motel employees, tricked him into opening his door, committed the robbery, and escaped without being identified or detained, because of the defendants' inadequate motel security and safety precautions and the negligence of the motel clerk in failing to exercise reasonable efforts to monitor and protect hotel guests against such dangers. At the close of the plaintiff's case at trial, the district court entered a judgment as a matter of law ("JMOL") dismissing the action against Mr. and Mrs. Lee. After completion of the trial, the jury returned a verdict in favor of McAvey, fixing damages and apportioning fault between him and the innkeepers. The district court rendered a judgment in McAvey's favor against First Financial.

First Financial appealed, contending, inter alia, that its policy excluded coverage for bodily injuries arising from assault or battery; that all of McAvey's injuries arose from a battery by the robbers; that the dismissal of the suit against two of First Financial's insureds, Mr. and Mrs. Lee, and the plaintiff's failure to properly serve the third insured, Ming Chun, effectively extinguished the plaintiff's right to a direct action and judgment against the insurer; and that the district court erred in not instructing the jury to determine whether the fault of the unidentified criminals was a legal cause of McAvey's injuries, and, if so, to apportion a share of the fault and liability to them.


McAvey, a truck driver, arrived in New Orleans, Louisiana, on the evening of November 6, 1995, with a load of household goods to be delivered the next morning. McAvey checked into the Tomfort Lodge, a modestly priced motel on Tulane Avenue.

Mr. and Mrs. Lee had purchased the building in which the Tomfort Lodge was located in 1988, and Mr. Lee had managed a motel business in the building from 1988 to 1995. At some point prior to 1993, the motel business was taken over by Ming Chun, Inc. ("Ming Chun"). The Lees leased the building to Ming Chun for minimum and percentage-of-profits rentals, pursuant to an oral agreement. In 1995, the Lees and Ming Chun signed a written lease formalizing their existing oral lease agreement. Mr. Lee continued to manage the motel business for Ming Chun.

According to McAvey, he was awakened around 11 p.m. the night of his stay at the Tomfort Lodge by a man who knocked on the door and announced himself as "motel security." When McAvey opened the door, two men forced their way in and hurled him onto the bed. As McAvey struggled with one assailant, the other grabbed McAvey's wallet and ran. McAvey pursued the robber outside the room and down the motel stairs. During the chase, the second robber made contact with McAvey as he passed McAvey on the stairs; McAvey's bare right heel landed on the edge of one of the steps, fracturing his heel bone.

McAvey filed suit in district court initially only against Mr. Lee. First Financial, the innkeepers' commercial liability insurer, refused to defend the claim against Mr. Lee on the ground that McAvey's claim arose from a battery, a risk it alleged was excluded from coverage under the policy. McAvey added Mrs. Lee as a defendant in his First Amended Complaint, and added Ming Chun and First Financial as defendants in his Second Amended Complaint.

First Financial moved for summary judgment on the basis that McAvey's loss arose from a battery, which it claimed was excluded from coverage by the policy. On November 20, 1997, the district court denied the insurer's motion, holding that the documents constituting the insurance contract were ambiguous as to whether an assault and battery exclusion had been incorporated by reference and therefore must be construed in favor of coverage. On August 8, 1998, for the same reasons, the district court granted Mr. and Mrs. Lee's motion for a partial summary judgment, decreeing that the policy did not include an assault and battery exclusion.

During trial, after McAvey rested his case-in-chief, the Lees' attorney, James Swanson, moved orally for a JMOL to dismiss the action against the Lees on the ground that "[t]here is no evidence . . . that Mr. Lee did anything that was unreasonable under the circumstances. The evidence seems to be that at worse the desk clerk should have done something and he wasn't Mr. Lee's employee, he was the corporation's employee." The district court granted JMOL dismissing the action against the Lees "for the reasons argued by the plaintiff [sic]." Evidently, the district court meant "for the reasons argued by the defendants' attorney, Mr. Swanson." After the defendants presented their case-in-chief, First Financial moved for dismissal of Ming Chun on the grounds that the corporation had not been properly served pursuant to Federal Rule of Civil Procedure 4. After that motion was denied, First Financial moved for a JMOL pursuant to Rule 50(a)(2) to dismiss McAvey's suit on the grounds that Louisiana's direct action statute did not permit the maintenance of a direct action against an insurer when the insureds were no longer parties to the action, arguing that the Lees had been dismissed and Ming Chun, the only other insured, had not been properly served. The district court denied the motion and, after closing arguments and instructions, submitted the case to the jury.

The jury returned a verdict finding that the negligence of the innkeeper and McAvey were legal causes of McAvey's injury, charging the insureds with eighty percent of the fault and McAvey with twenty percent. The district court entered final judgment against First Financial as insurer of Ming Chun, awarding McAvey a net sum of $301,600 in damages after discounting his recovery by his apportioned fault. First Financial's motions for a JMOL and a new trial were denied. First Financial appealed from the district court's final judgment. McAvey appealed from the JMOL dismissing his action against the Lees. Mr. and Mrs. Lee appealed from evidentiary and legal rulings made during the trial and the final judgment. After appellate briefs had been filed, however, McAvey and the Lees settled the dispute between them. Upon a joint motion by McAvey and the Lees, their appeals were dismissed by order of the Clerk of Court on July 21, 1999.1


First Financial contends that the policy for 1995, the applicable policy year, excluded coverage for losses arising from assault or battery; and that McAvey's injuries resulted from a battery. We conclude, however, that (1) the policy did not exclude coverage for such losses and, (2) therefore, whether McAvey's injuries arose from a battery is irrelevant to determination of the insurer's liability. This coverage issue was raised by Mr. and Mrs. Lee's partial motion for summary judgment, which the district court granted, and First Financial's motion for summary judgment, which was denied by the trial court.

"The general standard that an appellate court applies in reviewing the grant or denial of a summary-judgment motion is the same as that employed by the trial court initially under Rule 56(c)-a summary judgment is proper when it appears 'that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.'" 10A Charles Alan Wright, Arthur R. Miller, & Mary Kay Kane, Federal Practice and Procedure: Civil 3d § 2716 (1998) (quoting Fed. R. Civ. P. 56(c)) (citing, inter alia, GATX Aircraft Corp. v. M/V Courtney Leigh, 768 F.2d 711 (5th Cir. 1985); McCrae v. Hankins, 720 F.2d 863 (5th Cir. 1983)). "[O]n summary judgment the inferences to be drawn from the underlying facts contained in such materials [such as affidavits, depositions, and exhibits] must be viewed in the light most favorable to the party opposing the motion." United States v. Diebold, Inc., 369 U.S. 654, 655 (1962). "[W]e look at the record on summary judgment in the light most favorable to . . . the party opposing the motion . . . ." Poller v. Columbia Broad. Sys., Inc., 368 U.S. 464, 473 (1962); see also John v. La. Bd. of Trustees, 757 F.2d 698 (5th Cir. 1985); Simon v. United States, 711 F.2d 740 (5th Cir. 1983).

The record contains numerous documents pertaining to contracts of commercial general liability insurance between First Financial and Ming Chun. First Financial issued one new policy and two renewal policies for the annual policy periods commencing in 1993, 1...

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