SCI Liquidating Corp. v. Hartford Fire Ins., 98-9069

• Decision Date: 20 July 1999
• Docket Number: No. 98-9069,98-9069
• Citation: 181 F.3d 1210
• Parties: (11th Cir. 1999) SCI LIQUIDATING CORPORATION f.k.a. SUNRISE CARPET INDUSTRIES, INC., Plaintiff-Appellee, v. HARTFORD FIRE INSURANCE COMPANY a Connecticut Corporation, HARTFORD CASUALTY INSURANCE COMPANY, a Connecticut Corporation, Defendants-Appellants
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1210

181 F.3d 1210 (11th Cir. 1999)

SCI LIQUIDATING CORPORATION f.k.a. SUNRISE CARPET INDUSTRIES, INC., Plaintiff-Appellee, v. HARTFORD FIRE INSURANCE COMPANY a Connecticut Corporation, HARTFORD CASUALTY INSURANCE COMPANY, a Connecticut Corporation, Defendants-Appellants.

No. 98-9069

IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT

July 20, 1999

D. C. Docket No. 4:97-CV-124-HLM Appeal from the United States District Court for the Northern District of Georgia

Before TJOFLAT, DUBINA and HULL, Circuit Judges,

HULL, Circuit Judge:

Hartford Fire Insurance Company and Hartford Casualty Insurance Company appeal the district court's summary judgment order finding insurance coverage exists for sexual harassment claims made against their insured, SCI Liquidating Corporation. After review, we reverse.

I. BACKGROUND

On October 3, 1994, three former female employees sued Sunrise Carpet Industries, Inc. ("Sunrise") and Larry Hankins, one of Sunrise's managers, alleging causes of action for sexual harassment, retaliation, assault, battery, intentional infliction of emotional distress, and negligent hiring and retention. SCI Liquidating Corporation ("SCI") is the successor to Sunrise.

For the relevant time period, Hartford Fire Insurance Company ("Hartford") had issued to Sunrise a commercial general liability insurance policy (the "CGL policy") and Hartford Casualty Insurance Company ("Hartford Casualty") had issued a separate umbrella liability insurance policy (the "Umbrella policy"). Hartford and Hartford Casualty initially defended the lawsuit under a reservation of rights. On February 17, 1995, Hartford and Hartford Casualty denied coverage and SCI was forced to retain counsel. A jury verdict for four thousand dollars was rendered in the employees' favor against SCI.¹ The trial court also awarded attorneys' fees against SCI. After negotiations, on March 5, 1997, SCI paid a total of $81,109.18 to the employees to satisfy the verdict and award of attorneys' fees, costs, and interest. SCI incurred its own attorneys' fees and expenses of $111,222.03 in defending the employees' lawsuit.

On May 1, 1997, SCI filed this coverage case against Hartford and Hartford Casualty. SCI seeks to recover the attorneys' fees for its defense counsel as well as the money SCI paid to the plaintiff employees in the underlying lawsuit, plus interest. All parties filed motions for summary judgment. On January 26, 1998, the district court granted SCI's motion and denied Hartford's and Hartford Casualty's joint motion, finding that the insurance policies covered the underlying sexual harassment lawsuit. On August 12, 1998, the district court entered final judgment in SCI's favor for $187,972.21 plus prejudgment interest against the Defendants jointly and severally, for an additional $4,359 plus prejudgment interest against Hartford, and for $3,384 in costs against both Defendants.

On August 17, 1998, Hartford and Hartford Casualty filed a joint Notice of Appeal. On appeal, all parties agree that no material facts are in dispute regarding the insurance coverage issues here.

II. STANDARD OF REVIEW

We review de novo the district court's rulings on motions for summary judgment. Maniccia v. Brown, 171 F.3d 1364, 1367 (11th Cir. 1999).

III. DISCUSSION

A.CGL Policy

Because this appeal turns on the policy language, we first review in detail the two policies in issue.

Coverage A of the CGL policy provides for coverage of "bodily injury" liability that results from an "occurrence":

1. Insuring Agreement.

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" . . . to which this insurance applies. We will have the right and duty to defend any "suit" seeking those damages.

. . .

b. This insurance applies to "bodily injury" . . .only if:

(1) The "bodily injury" or "property damage" is caused by an "occurrence" that takes place in the "coverage territory;".

The CGL policy defines "occurrence" in section V and "bodily injury" in an endorsement, as follows:

9. "Occurrence" means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.

. . .

17. MENTAL ANGUISH

The definition of "bodily injury" in the DEFINITIONS section is replaced by the following:

"Bodily injury" means bodily injury, sickness or disease sustained by a person, including mental anguish or death resulting from any of these.

However, the CGL policy excludes coverage for "bodily injury" in several circumstances, such as:

SECTION I - COVERAGES

COVERAGE A. BODILY INJURY AND PROPERTY DAMAGE LIABILITY

. . .

2. Exclusions.

This insurance does not apply to:

a. "Bodily injury" . . . expected or intended from the standpoint of the insured.

. . .

e. "Bodily injury" to:

(1) An employee of the insured arising out of and in the course of employment by the insured; . . .

This exclusion applies:

(1) Whether the insured may be liable as an employer or in any other capacity;

In addition to "bodily injury", the CGL policy, in Coverage B, covers "personal injury" liability caused by an "offense" arising out of the insured's business:

1. Insuring Agreement

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of "personal injury" . . . to which this coverage part applies. We will have the right and duty to defend any "suit" seeking those damages . . .

b. This insurance applies to:

(1) "Personal injury" caused by an offense arising out of your business, excluding advertising, publishing, broadcasting, or telecasting done by or for you;

The CGL policy defines "personal injury" to cover one or more of the following five offenses:

10. "Personal injury" means injury, other than "bodily injury," arising out of one or more of the following offenses:

a. False arrest, detention, or imprisonment;

b. Malicious prosecution;

c. The wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies by or on behalf of its owner, landlord or lessor;

d. Oral or written publication of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services; or

e. Oral or written publication of material that violates a person's right of privacy.

An endorsement to the CGL policy expands the definition of "personal injury" to include certain discrimination, but only if that discrimination is unrelated to the employment:

1. PERSONAL INJURY

a. The following is added to the "personal injury" definition:

. . . .

f. Discrimination or humiliation that results in injury to the feelings or reputation of a natural person, but only if such discrimination or humiliation is:

(1) Not done intentionally by or at the direction of:

(a) The insured; or

(b) Any executive officer, director, stockholder, partner or member of the insured; and

(2) Not directly or indirectly related to the employment, prospective employment or termination of employment of any person or persons by any insured.

B.Umbrella Policy

The Umbrella policy also provides coverage for both "bodily injury" and "personal injury", and requires both types of injury to be caused by an "occurrence" in order to be covered:

A. Umbrella Liability Insurance

We will pay those sums that the "insured" must legally pay as "damages" in excess of the "underlying insurance," or of the "self-insured retention" when no "underlying insurance" applies, because of "bodily injury," "property damage," "personal injury" or "advertising injury" to which this insurance applies caused by an "occurrence."

The Umbrella policy's definitions of "bodily injury" and "personal injury" are different from those in the CGL policy; plus, the Umbrella policy defines "occurrence" differently for "bodily injury" versus "personal injury," as follows:

C. "Bodily injury" means bodily injury, sickness, or disease sustained by a person which occurs during the "policy period," including death resulting from any of these at any time.

. . .

H. "Occurrence" means

1. With respect to "bodily injury" or "property damage:" an accident, including continuous or repeated exposure to substantially the same general harmful conditions, which results in "bodily injury" or "property damage" neither expected

nor intended from the standpoint of the "insured" and includes the use of reasonable force to protect persons or property; and

2. With respect to "advertising injury" and "personal injury" respectively: an offense described in one of the numbered subdivisions of those definitions in this policy.

I. "Personal injury" means injury, other than "advertising injury" or "bodily injury," arising out of one or more of the following offenses committed during the "policy period" in the conduct of your business:

1. False arrest, detention or imprisonment;

2. Malicious prosecution;

3. The wrongful eviction from, wrongful entry into, or invasion ofthe [sic] right of private occupancy of a room, dwelling or premises that a person occupies by or on behalf of his or her owner, landlord or lessor;

4. Oral or written publication of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services;

5. Oral or written publication of material that violates a person's right of privacy; or

6. Discrimination or humiliation not intentionally committed by or at the direction of the "insured" or any "executive officer," director, stockholder, partner or member thereof, but only with respect to injury to the feelings or reputation of a natural person.

Lastly, the Umbrella policy excludes coverage for "bodily injury" and "personal injury" to employees "arising out of and in the course of their employment":

B. Exclusions

This policy does not apply:

. . .

16. With respect to coverage afforded any of your employees to "bodily...