Mount Vernon Fire Ins. Co. v. Stagebands, Inc.

• Decision Date: 21 July 2009
• Docket Number: C.A. No. 08-224 S.
• Citation: 636 F.Supp.2d 143
• Parties: MOUNT VERNON FIRE INSURANCE COMPANY, Plaintiff, v. STAGEBANDS, INC.<SMALL><SUP>1</SUP></SMALL> d/b/a Giza, Anthony Massarone, and TEL Realty, LLC, Defendants.
• Court: U.S. District Court — District of Rhode Island

636 F.Supp.2d 143

MOUNT VERNON FIRE INSURANCE COMPANY, Plaintiff, v. STAGEBANDS, INC.¹ d/b/a Giza, Anthony Massarone, and TEL Realty, LLC, Defendants.

C.A. No. 08-224 S.

United States District Court, D. Rhode Island.

July 21, 2009.

David A. Wollin, Esq., Adler Pollock & Sheehan P.C., Providence, RI, for Plaintiff.

Albin S. Moser, Esq., R. Daniel Prentiss, P.C., Providence, RI, for Stagebands and Massarone.

Holly R. Rao, Esq., Olenn & Penza, Warwick, RI, for TEL Realty.

DECISION AND ORDER

WILLIAM E. SMITH, District Judge.

Mount Vernon Fire Insurance Company filed this declaratory judgment action pursuant to 28 U.S.C. § 2201, seeking a declaration that it has no duty to defend or indemnify Stagehands, Inc. d/b/a Giza, its president and owner Anthony Massarone (collectively Giza), or Giza's landlord TEL Realty. The underlying suit involves personal injury claims by a patron who was injured at a Providence nightclub, and at issue is an assault and battery exclusion in the policy. Before the Court are cross-motions for summary judgment by Mount Vernon and Giza. For the following reasons, Mount Vernon's motion will be granted.

I. Factual Background and the Underlying Lawsuit

On July 29, 2006, Victor Cortes was the victim of a shooting outside the Giza nightclub in Providence. Cortes claims to have suffered a severe and permanent head injury resulting in brain damage. On or about April 17, 2008, Cortes sued Giza in Rhode Island Superior Court. He then added a claim against TEL Realty, the owner and lessor of the property.²

Cortes brings a host of negligence allegations against Giza, including failure to: provide adequate security and parking; provide experienced employees; maintain control of employees, which contributed to an "atmosphere of confusion and mayhem"; and adhere to its business plan with respect to the type of music played, clientele, parking and security—such that medical personnel were delayed in treating Cortes following the gunshot due to parking congestion. (Doc. No. 31-2 ex. C); (Compl. 37, Cortes v. Stagebands, Inc., C.A. No. 08-2957 (R.I.Super.Ct. Feb. 24, 2009) (such "delay in response caused further injuries to [Cortes]")). Against TEL Realty, Cortes alleges the parking area was negligently designed, configured, maintained and supervised, such that rescuers could not timely render aid, resulting in further injury.

Mount Vernon is defending the Cortes lawsuit under a reservation of rights, and commenced this single-count declaratory judgment action on the question of coverage. Diversity jurisdiction is proper under 28 U.S.C. § 1332, and there is no question Rhode Island law controls.

II. The Policy

Mount Vernon's Commercial Package Policy number CP 2122268A covered Giza and TEL Realty (as an additional insured) at the time of the incident. The initial coverage clause provides:

We [Mount Vernon] will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking damages for "bodily injury" or "property damage" to which this insurance does not apply. We may, at our discretion, investigate any "occurrence" and settle any claim or "suit" that may result.

The policy contains the following exclusion:

ASSAULT AND BATTERY EXCLUSION

This endorsement modifies insurance provided under the following:

COMMERCIAL GENERAL LIABILITY COVERAGE PART

It is agreed that no coverage shall apply under this Coverage Part for any claim, demand or suit based on Assault and Battery, or out of any act or omission in connection with the prevention or suppression of such acts, whether caused by or at the instigation or direction of the insured, his employees, patrons or any other person.

It is further agreed that claims, accusations or charges of negligent hiring, placement, training or supervision arising from actual or alleged assault or battery are not covered and no duty to defend any insured from such claims, accusations and charges is provided.

All other terms and conditions remain unchanged.

The friction in this case centers on this exclusion. Mount Vernon argues that it precludes coverage because Cortes's injuries are "based on" the shooting at Giza (or acts or omissions in connection with the shooting), and under Am. Commerce Ins. Co. v. Porto, 811 A.2d 1185 (R.I.2002) his negligence theories as to other contributing causes of injury are of no moment. Giza retorts that although Cortes was shot, the possibility of a separate and independent injury resulting from the delayed care triggers Mount Vernon's duty to defend as a matter of law. TEL Realty largely mirrors Giza's argument in opposing Mount Vernon's motion, but contends Cortes's injuries must be "more fully defined" before the issue can be resolved.

III. Standard

Summary judgment is proper if "there is no genuine issue as to any material fact" and "the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). An issue of fact is genuine if it "may reasonably be resolved in favor of either party." Vineberg v. Bissonnette, 548 F.3d 50, 56 (1st Cir.2008) (internal citation omitted). A material fact "has the capacity to sway the outcome of the litigation under the applicable law." Nat'l Amusements, Inc. v. Town of Dedham, 43 F.3d 731, 735 (1st Cir.1995). On cross-motions for summary judgment, the Court considers each movant separately. O'Donnell v. Twin City Fire Ins. Co., 40 F.Supp.2d 68, 71 (D.R.I. 1999); Barnes v. Fleet Nat'l Bank, N.A., 370 F.3d 164, 170 (1st Cir.2004) (court determines whether either party deserves judgment based on undisputed facts).

Although all conflicts must be resolved and all reasonable inferences drawn in the nonmovant's favor, see Calvi v. Knox County, 470 F.3d 422, 426 (1st Cir. 2006), the nonmovant cannot rest on "conclusory allegations, improbable inferences, [or] unsupported speculation" to avoid summary judgment. Welch v. Ciampa, 542 F.3d 927, 935 (1st Cir.2008) (quoting McCarthy v. Nw. Airlines, Inc., 56 F.3d 313, 315 (1st Cir.1995)).

IV. Discussion

The parties tee up a threshold question—though the answer does not change the end result. The question is whether (as Giza and TEL Realty argue) the widely-recognized pleadings test as to the potential for coverage dictates Mount Vernon's duty to defend; or, whether (as Mount Vernon argues) the dispute is beyond the pleadings test because Mount Vernon is already defending, and thus the Court can determine the ultimate question of coverage as a matter of law based on undisputed extrinsic facts.

Some familiar principles help flesh this out. In the usual course, an insurer has two obligations: the duty to defend (measured by the factual allegations of the underlying complaint under the pleadings test); and the duty to indemnify (dependent upon whether the plaintiff suing an insured prevails). See Emhart Indus., Inc. v. Home Ins. Co., 515 F.Supp.2d 228, 236-37 (D.R.I.2007), aff'd, 559 F.3d 57 (1st Cir.2009); Mellow v. Med. Malpractice Joint Underwriting Ass'n of R.I., 567 A.2d 367, 368 (R.I.1989). "[A]n insurer's duty to defend is broader than its duty to indemnify." Employers Mut. Cas. Co. v. PIC Contractors, Inc., 24 F.Supp.2d 212, 215 (D.R.I.1998). If there is no duty to defend, there can be no duty to indemnify.

But the duty to defend, once established, is not interminable. As Mount Vernon points out, this Court has recognized (albeit in a different context) an insurer's ability to, in essence, halt its duty by showing as a matter of law that claims could never be within the bounds of coverage. See Emhart, 515 F.Supp.2d at 238-39, 242-43 n. 18, 249 ("[O]nce triggered, the duty to defend continues until a finding that the claims do not fall within the risk of coverage."); Providence Journal Co. v. Travelers Indem. Co., 938 F.Supp. 1066, 1074, 1079 (D.R.I. 1996) (deciding applicability of pollution exclusion clause as a matter of law); Conway Chevrolet-Buick, Inc. v. Travelers Indem. Co., 136 F.3d 210, 213-15 (1st Cir.1998) (recognizing that an insurer can "get clear of" its duty to defend by demonstrating as a matter of fact that no coverage can exist) (citing Sterilite Corp. v. Cont'l Cas. Co., 17 Mass.App.Ct. 316, 458 N.E.2d 338, 343 (1983)).

The bottom line here is that whether measured against the face of Cortes's complaint or against all record evidence (each of which will be addressed in turn), Mount Vernon has established it can "confute" any such potential for coverage as a matter of law. Emhart, 515 F.Supp.2d at 239; see Montrose Chem. Corp. v. Superior Court, 6 Cal.4th 287, 24 Cal.Rptr.2d 467, 861 P.2d 1153, 1159 (1993) (agreeing with lower court that "where extrinsic evidence establishes that the ultimate question of coverage can be determined as a matter of law on undisputed facts, [there is] no reason to prevent an insurer from seeking summary adjudication that no potential for liability exists and thus that it has no duty to defend"); 14 Couch on Insurance § 200:47 (3d ed. 2007) ("[A]n insurer's duty to defend arises out of a potentially covered claim and lasts until the conclusion of the underlying lawsuit, or until it has been shown that there is no potential for coverage."); Appleman on Insurance § 136.2[D] (2d ed. 2006) ("[W]hen there are covered and non-covered claims in the same lawsuit, the insurer is obligated to provide a defense to the entire suit, at least until it can limit the suit to those claims outside of the policy coverage.") (all emphasis added).

A. Pleadings Test

This analysis zeroes in on the underlying complaint and the policy. Regardless of the merits of a claim against an insured, an insurer must defend if the facts alleged fall or potentially fall within the scope of coverage. Flori v. Allstate Ins. Co., 120 R.I. 511, 388 A.2d 25, 26 (1978...