Minnis v. Oregon Mutual Ins. Co.

• Decision Date: 04 August 1999
• Citation: 162 Or. App. 198,986 P.2d 77
• Parties: John MINNIS and Little John's Pizza Co., LLC, Appellants, v. OREGON MUTUAL INSURANCE COMPANY, Respondent.
• Court: Oregon Court of Appeals

986 P.2d 77

162 Or. App. 198

John MINNIS and Little John's Pizza Co., LLC, Appellants, v. OREGON MUTUAL INSURANCE COMPANY, Respondent.

(C96-1230-CV; CA A98241).

Court of Appeals of Oregon.

Argued and Submitted November 30, 1998.

Decided August 4, 1999.

Christopher A. Rycewicz, Portland, argued the cause for appellants. With him on the briefs were Brian D. Chenoweth and Rycewicz & Chenoweth, P.C., Portland, and Michael J. Knapp and Myers & Knapp, Portland.

William G. Earle, Portland, argued the cause for respondent. With him on the brief were Alan Gladstone and Abbott, Davis, Rothwell, Mullin & Earle, P.C.

Before EDMONDS, Presiding Judge, and ARMSTRONG and KISTLER,¹ Judges.

KISTLER, J.

Plaintiffs, a corporation and its owner, appeal from a summary judgment dismissing their claim for breach of an insurance policy. They argue that defendant had a duty to provide a defense to an action that a third party (Winters) filed against them. Plaintiffs also seek indemnity for the cost of settling the case. We conclude that defendant had a duty to defend the corporation and that it was not entitled to summary judgment on the related question of whether it had a duty to indemnify the corporation. We conclude, however, that defendant had no duty to defend the owner. Accordingly, we reverse the judgment as to the corporation, affirm the judgment as to the owner, and remand.

In determining whether an insurer has a duty to defend an action against its insured, the court looks at two things: the facts alleged in the complaint and the terms of the insurance policy. An insurer has a duty to defend an action against its insured if the claim stated in the underlying complaint could, without amendment, impose liability for conduct the policy covers. The insurer should be able to determine from the face of the complaint whether to accept or reject the tender of defense. It has a duty to defend if the complaint provides any basis of recovery for which the insurer provides coverage, resolving any ambiguity in the complaint in favor of the insured. Ledford v. Gutoski, 319 Or. 397, 399-400, 877 P.2d 80 (1994).

Given that standard, we state the facts as Winters alleged them in the underlying complaint. Plaintiff John Minnis (John) is the owner of plaintiff Little John's Pizza Co., LLC. Little John's employed Tuck Minnis (Tuck) to manage the restaurant. Winters alleged that she had been an employee of Little John's and that while she was employed, Tuck engaged in a variety of misconduct towards her. Throughout Winters' employment with Little John's, Tuck allegedly subjected her to a sexually hostile work environment that included, "[u]nwelcome statements and graphic descriptions of sex habits, activities, body parts and abilities" and repeated "offensive sexual comments about the anatomy of females * * *." According to Winters' complaint, "sexual harassment was part of defendant Tuck Minnis' management style."

Most of Tuck's alleged misconduct occurred on the job. Some occurred at his apartment. Plaintiffs rely on the sexual harassment that occurred at the apartment to establish that defendant had a duty to defend them. Paragraph 8 of Winters' complaint alleges:

"On or about May 28, 1995, plaintiff's supervisor, defendant Tuck Minnis[,] called her at home at 3:45 a.m. and implored her and her female roommate, the assistant manager of Little John's Pizza Co., L.L.C., to come over to his apartment to help him grieve the death of his brother. Plaintiff and her roommate went to his apartment and stayed from approximately 4:30 a.m. until 9:00 a.m. During that time period plaintiff was subjected to sexually explicit, unwelcome, offensive and intimidating comments and conduct from her supervisor, defendant Tuck Minnis."

In paragraph 9, Winters alleged specific "intimidating, unwanted, and demeaning sexual contact and remarks directed from defendant Tuck Minnis to plaintiff" while Winters was at Tuck's apartment, including that Tuck engaged in "[u]nwelcome forced kissing, and touching of plaintiff's breasts while pinning her arms against the wall[.]" She also alleged that while she was at the apartment, Tuck made "[i]ntimidating statements about his ability to fire employees at Little John's Pizza Co., L.L.C., but that [Winters] should think of herself as his friend."

Winters asserted six claims for relief variously against Little John's, Tuck, and John. We summarize the three claims that are relevant to our decision.² Her third claim, which she labeled as "Sexual Assault and Battery," was against Tuck and Little John's. In that claim, Winters alleged that Tuck "intended harmful, offensive, hostile, and insulting physical contact of a sexual nature" to her, that he did so within the scope of his employment, that Little John's condoned Tuck's conduct, and that Tuck's conduct was not unexpected because of Little John's failure to have any policy or training relating to sexual harassment. As a result of Tuck's actions, Winters allegedly suffered "severe emotional distress, depression, embarrassment, apprehension, fright, anguish, loss of dignity, humiliation, and physical anxiety, pain and nausea[.]" She also alleged that both defendants acted willfully, wantonly, and maliciously, entitling her to punitive damages in order to punish them and deter similar conduct in the future.

Winters labeled her fourth claim, against Tuck and Little John's, "Intentional Infliction of Severe Emotional Distress." She alleged that Tuck acted

"volitionally with knowledge that his acts would cause plaintiff severe emotional distress, and also with the intent to cause plaintiff severe emotional distress. Defendant Tuck Minnis intentionally and deliberately committed the alleged acts under circumstances in which it was likely that plaintiff would suffer such distress."

She also alleged that Tuck's actions reflected the "deliberate intent of defendant Little John's Pizza Co., L.L.C." Her alleged harm was of the same nature as that described in the third claim, and her allegation concerning punitive damages was the same.

Winters' fifth claim was directed at Little John's and John. That claim was also labeled "Intentional Infliction of Emotional Distress." Winters alleged that John acted with the same state of mind that she had alleged in the fourth claim that Tuck had had, and she alleged the same harm that she had alleged in the third and fourth claims. Winters alleged that John and Little John's "condoned defendant Tuck Minnis' conduct in subjecting plaintiff to sexual harassment, assault and battery" and "retaliated against her for resisting and reporting the harassment and other abuse in a successful effort to force plaintiff from her job."

In the policy that it issued to Little John's,³ defendant agreed to pay those sums that Little John's became legally obligated to pay "as damages because of bodily injury * * * [or] personal injury" and to provide a defense for any action seeking damages for those injuries. The policy applies to bodily injury caused by an "occurrence" during the policy period and to personal injury caused by an "offense" arising out of the business. The policy defines bodily injury to mean "bodily injury, sickness or disease sustained by a person[.]" It defines "personal injury" to mean "injury, other than bodily injury" arising out of one of several listed offenses. One of those offenses is "[f]alse arrest, detention or imprisonment[.]" There are a number of exclusions to the coverage of bodily injuries; no exclusion to the coverage of personal injuries is relevant to this case.

In Klamath Pacific Corp. v. Reliance Ins. Co., 151 Or.App. 405, 950 P.2d 909 (1997), on recons. 152 Or.App. 738, 955 P.2d 340 (1998), we held that an allegation of "severe physical * * * distress" stated a claim for bodily injury. 151 Or.App. at 414, 950 P.2d 909. Defendant recognizes that, under this court's decisions, Winters' allegations that she suffered "physical * * * pain and nausea" as a result of Tuck's actions state potential claims for bodily injury under the policy. On the other hand, her allegations that she suffered "severe emotional distress, depression, embarrassment, apprehension, fright, anguish, [and] loss of dignity" state potential claims for personal rather than bodily injury. Winters' claims thus raise issues under both policy coverages.

We first consider whether defendant had a duty to defend Winters' claims against Little John's for bodily injury. Because Winters' complaint alleges a claim for bodily injury against Little John's, the issues on appeal reduce to primarily two questions. The first is whether Winters' claims are excluded from coverage because they arose out of and in the course of her employment. The second is whether because Tuck acted intentionally, the injuries Winters sustained were either not an occurrence under the policy or were subject to an exception for intentional acts.

Defendant argues initially that the policy exclusion for bodily injury to "[a]n employee of the insured arising out of and in the course of employment by the insured" justifies its refusal to defend Little John's. Defendant acknowledges that the bodily injury Winters suffered could have arisen when Tuck sexually assaulted her at his apartment. And because Tuck called Winters at her home and "implored" her and her roommate "to come over to his apartment to help him grieve the death of his brother," it does not appear that the injuries Winters sustained at the apartment occurred in the course of her employment. This case thus differs from McLeod v. Tecorp International, Ltd., 318 Or. 208, 216-17, 865 P.2d 1283 (1993), and Klamath Pacific, where all of the harassment that gave rise to the employees' injuries occurred on the job.⁴

Defendant argues, however, that Little John's cannot be vicariously liable for Tuck's conduct at the apartment unless Winters was acting in the course of her employment. Defendant observes that Winters sought to...