Northland Cas. Co. v. Hbe Corp.

Citation160 F.Supp.2d 1348
Decision Date13 September 2001
Docket NumberNo. 6:00-cv-532-Orl-31DAB.,6:00-cv-532-Orl-31DAB.
PartiesNORTHLAND CASUALTY COMPANY, Plaintiff/Counter-Defendant, v. HBE CORPORATION, d/b/a Adam's Mark Hotel, Fred S. Kummer, Defendants/Counter-Plaintiffs.
CourtU.S. District Court — Middle District of Florida

Ronald L. Kammer, Hinshaw & Culbertson, Miami, FL, for Plaintiff.

Duncan B. Dowling, III, Rogers, Dowling, Orlando, FL, Michael M. Baylson, Duane, Morris & Heckscher, Philadelphia, PA, for Defendants.

ORDER

PRESNELL, District Judge.

This is a declaratory judgment action in which the parties seek a declaration as to their rights and obligations under an insurance policy. This matter is now before the Court on the following matters: (1) HBE's Motion for Summary Judgment (Doc. No. 43, filed December 22, 2000); (2) Northland's Motion for Summary Judgment (Doc. No. 45, filed December 28, 2000); (3) Memorandum by HBE in Opposition to Northland's Motion for Summary Judgment (Doc. No. 61, filed February 9, 2001); (4) Response by Northland to HBE's Motion for Summary Judgment (Doc. 62, filed February 9, 2001); (5) Notice of Filing Supplemental Authority by Northland (Doc. No. 70, filed April 9, 2001); (6) HBE's Response to Court's Order (Doc. No. 81, filed June 14, 2001); (7) Northland's Response to Court's Order (Doc. No. 86, filed July 2, 2001); (8) Northland's Opposition to HBE's Motion for Judicial Notice (Doc. No. 84, filed June 29, 2001); (9) HBE's Response to Northland's Opposition to Motion for Judicial Notice (Doc. No. 88, filed July 12, 2001); and (10) Notice of Filing Supplemental Authority by Northland (Doc. No. 92, filed August 7, 2001).

I. BACKGROUND
A. The Parties

Defendant/Counter-Plaintiff HBE Corporation ("HBE"), a Delaware corporation with its principal place of business in Missouri, operates a chain of Adam's Mark Hotels throughout the United States. Defendant/Counter-Plaintiff Fred S. Kummer ("Kummer") operates HBE's Hotel and Resorts Division and owns a controlling interest in the stock of the privately-held HBE. Plaintiff/Counter-Defendant Northland Casualty Company ("Northland") is a Minnesota corporation with its principal place of business also in Minnesota. Northland issued general liability policies to HBE. These policies, which are the focus of this litigation, were applied for, negotiated, and issued to HBE in Missouri.1

B. The Insurance Policy

The policy contains the following relevant provisions:

SECTION II—COMPREHENSIVE GENERAL LIABILITY

INSURING AGREEMENTS

A—COMPREHENSIVE GENERAL LIABILITY: Underwriters hereby agree, subject to the limitations, terms and conditions hereunder mentioned, to indemnify the Assured for all sums, including expenses, all as more fully defined by the term ultimate net loss, which the Assured shall become legally obligated to pay as damages imposed by law because of bodily injury, property damage, personal injury, advertising injury, products liability and[/]or completed operations, host/liquor liability or incidental malpractice which result from an occurrence and which occur during the policy period.

...

DEFINITIONS

1. PERSONAL INJURY—The term "personal injury" wherever used herein, shall mean Bodily Injury, Mental Anguish, Shock, Sickness, Disease, Disability, False Arrest, False Imprisonment, Wrongful Eviction, Detention, Malicious Prosecution, Discrimination, Humiliation, Libel, Slander or Defamation of Character, Invasion of Rights of Privacy, infringement of copyright or of property, erroneous service of Civil Papers, Violation of Civil Rights, Assault and Battery, Disparagement of Property and Advertising Injury. (emphasis added)

...

9. OCCURRENCE—The term "occurrence" wherever used herein shall mean an accident or a happening or event or a continuous or repeated exposure to conditions which result in personal injury or damage to property during the policy period. All personal injuries to one or more persons and/or property damage arising out of an accident or a happening or event or a continuous or repeated exposure to conditions shall be deemed one occurrence.

...

17. ULTIMATE NET LOSS ... For Section II, the term "ultimate net loss" shall mean the total sum which the Assured becomes obligated to pay by reason of personal injury or property damage claims, either through adjudication or compromise, after making proper deductions for all recoveries and salvages.

"Ultimate net loss" shall also include ... law costs, premiums on attachment of appeal bonds, expenses for lawyers and investigators and other persons for litigation, settlement, adjustment and investigation of claims or suits which are paid as a consequence of any occurrence covered hereunder....

...

EXCLUSIONS APPLICABLE TO SECTION II

THIS SECTION DOES NOT APPLY— to any Claim for damages, whether direct or consequential, or for any cause of action which is covered under any other section of this policy or

(a) to personal injury or property damage which the Assured intended or expected or reasonably could have expected but this exclusion shall not apply to personal injury resulting from the use of reasonable force to protect persons or property.

C. Procedural History

On April 25, 2000, Northland filed a Complaint for Declaratory Relief pursuant to 28 U.S.C. §§ 2201-2202. Specifically, Northland asks this Court to declare that Northland is not required to indemnify HBE for expenses incurred with respect to a Florida lawsuit entitled Gilliam v. HBE Corp. and two other related lawsuits brought against HBE by the United States Department of Justice and the Attorney General of Florida (the "Gilliam lawsuits"). In the seven count Complaint, Northland seeks a declaration that these lawsuits are not covered under the policy because (1) there has been no occurrence; (2) the "intended or expected" exclusion applies; (3) public policy prohibits coverage for acts of intentional racial discrimination and (4) there is no coverage for injunctive relief. Alternatively, in the event there is a finding of coverage, Northland seeks a declaration that the acts alleged in the lawsuits constitute only one occurrence. Northland further seeks restitution and damages for unjust enrichment for payments made to HBE in connection with the defense of the Gilliam lawsuits.2

On July 7, 2000, HBE filed an Answer, Affirmative Defenses, and Counterclaim against Northland. In its Counterclaim, HBE seeks declaratory relief and damages for breach of contract against Northland for failure to provide coverage as provided in the policy for the Gilliam lawsuits, as well as two other lawsuits filed outside the state of Florida (collectively referred to as "the underlying lawsuits").

Northland and HBE now move for summary judgment on their claims. HBE seeks summary judgment on Counts I V of Northland's Complaint and on its own Counterclaim. By its motion, HBE asks the Court to order Northland to indemnify HBE on the underlying lawsuits. Further, HBE asks the Court to grant summary judgment on HBE's claim that Northlands' refusal to continue indemnification payments it made to HBE for defense costs incurred in the Gilliam lawsuits constitutes breach of the insurance agreement. Conversely, Northland's motion for summary judgment seeks a declaration that it has no duty to indemnify HBE in any of the underlying lawsuits and that Northland is entitled to reimbursement of defense costs already paid to HBE under the policy.

D. The Underlying Lawsuits

There are five complaints which are the subject of Northland's Complaint and HBE's Counterclaim. The Court will briefly summarize each case below.

(i) Gilliam v. HBE

On May 20, 1999, Dante Gilliam and four other plaintiffs filed a complaint for declaratory and injunctive relief, and damages, against HBE in the United States District Court for the Middle District of Florida.3 The lawsuit seeks redress for alleged acts of discrimination that occurred in April of 1999 at the Adam's Mark Hotel in Daytona Beach, Florida during an event known as the Black College Reunion ("BCR"). The complaint asserts alleged violations of Title II of the Civil Rights Act of 1964, 42 U.S.C. §§ 1981 and 2000a et seq., as well as violations of the Florida Civil Rights Act, Chapters 509 and 760, Florida Statutes. The complaint alleges that HBE subjected the plaintiffs to various forms of discriminatory treatment based on their race, including

(a) requiring black guests, but not white guests, to pre-pay their hotel rooms in full; (b) requiring black guests, but not white guests, to wear neon orange nondetachable plastic wristbands; (c) subjecting black guests, but not white guests, to hostile and threatening security measures; (d) charging black guests higher rates for rooms than were charged to white guests; (e) charging black guests higher deposits for rooms and other services than were charged to white guests; (f) limiting the types of rooms that were available to black guests, but not to white guests; (g) denying or providing substandard service and amenities to black guests, but not to white guests; (h) limiting the number of persons who could enter the hotel's premises to visit black guests, but not white guests; and (i) requiring black guests, but not white guests, to vacate their rooms and check out of the hotel earlier in the day than normally required.

(Gilliam Compl. at ¶ 3). According to the Gilliam plaintiffs, these actions "were intended to, and did in fact, deny them the right to contract for goods, services and public accommodations on the same terms as white persons" and "were intended to, and did in fact, deny them the same right to the full and equal benefit of all laws" as is enjoyed by white persons. (Id. at ¶¶ 4-5).

The complaint further alleges that HBE "has authorized its employees to discriminate against black persons in the manner described in [the] complaint" and "has demonstrated callous and reckless...

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