Usf Ins. Co. v. Orion Dev. Ra Xxx, Civil Action No. 5:09CV110.

• Court: United States District Courts. 4th Circuit. Northern District of West Virginia
• Writing for the Court: FREDERICK P. STAMP, JR., District Judge.
• Citation: 756 F.Supp.2d 749
• Parties: USF INSURANCE COMPANY, Plaintiff,v.ORION DEVELOPMENT RA XXX, LLC and Orion Development Company, Defendants.
• Docket Number: Civil Action No. 5:09CV110.
• Decision Date: 18 November 2010

756 F.Supp.2d 749

USF INSURANCE COMPANY, Plaintiff,
v.
ORION DEVELOPMENT RA XXX, LLC and Orion Development Company, Defendants.

Civil Action No. 5:09CV110.

United States District Court, N.D. West Virginia.

Nov. 18, 2010.

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Brian S. Kane, Christopher M. Jacobs, Dapper Baldasare Benson Behling & Kane PC, Pittsburgh, PA, for Plaintiff.Melanie A. Norris, Steptoe & Johnson, PLLC, Wheeling, WV, for Defendants.

MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AND DENYING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT FREDERICK P. STAMP, JR., District Judge.I. Procedural History

On March 24, 2009, Jane Doe filed a complaint against Orion Development RA

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XXX, LLC and Orion Development Company (cumulatively “Orion”) in the Court of Common Pleas of Lawrence County, Pennsylvania (“underlying lawsuit”). ¹ The underlying lawsuit alleges that from October 31, 2004 to April 30, 2005, Jerry Valecko (“Valecko”), a foreman in connection with a Rite Aid construction project, sexually assaulted three minors at the construction site in Lawrence County, Pennsylvania. Further, the underlying lawsuit alleges that Orion owned the premises at the time of the alleged sexual assaults and that Valecko was a “special employee” of Orion. (Compl. Ex. A at ¶ 23.)

USF Insurance Company (“USF”) initiated this declaratory judgment action on October 9, 2009, seeking confirmation that it does not have any coverage obligations relative to Orion with respect to the underlying lawsuit. According to the plaintiff's complaint: (1) Valecko was not an employee or a “special employee” of Orion; (2) Valecko was not in the course and scope of any employment with Orion at the time of the alleged sexual assaults; (3) Orion did not have any control or supervision over Valecko at the time of the alleged sexual assaults; (4) Valecko was not an “insured” under Orion's commercial general liability insurance policy issued by USF (“Policy”); ² (5) the claims set forth in the underlying lawsuit do not establish an “occurrence” under the Policy; (6) the alleged damages set forth in the underlying lawsuit do not establish “bodily injury” under the policy; (7) the Policy excludes coverage for the claims for punitive or exemplary damages set forth in the underlying lawsuit; and (8) USF does not have a duty to defend or indemnify Orion in the underlying lawsuit. (Compl. ¶¶ 26–34.)

On August 30, 2010, both parties filed motions for summary judgment. The plaintiff's motion argues that the Policy does not provide coverage for intentional conduct, non-bodily injury, or punitive damages; therefore, USF has no duty to defend or indemnify Orion with respect to the underlying lawsuit. More specifically, USF contends: (1) because the underlying lawsuit relates to sexual misconduct, which is inherently non-accidental in nature, the underlying lawsuit does not allege an “occurrence” for the purposes of a commercial general liability insurance policy; (2) the underlying lawsuit alleges intentional conduct on the part of Orion; (3) the underlying lawsuit does not allege “bodily injury” under the Policy; and (4) the Policy does not provide coverage for any award of punitive damages in connection with the underlying lawsuit.

The defendants' motion for summary judgment requests that this Court enter an order declaring that USF does have a duty to provide the defendants coverage for both the defense of, and indemnification for, the claims in the underlying lawsuit. In support of their motion, the defendants argue the following: (1) the underlying lawsuit alleges an “occurrence” so as to trigger coverage; (2) the underlying lawsuit alleges “bodily injury” so as to trigger coverage; and (3) the expected or intended injury exclusion does not apply.

On September 16, 2010, both parties filed responses to the cross motions for summary judgment. The plaintiff's response countered that: (1) West Virginia courts have applied the rationale of

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Smith v. Animal Urgent Care, 208 W.Va. 664, 542 S.E.2d 827 (2000), in finding no “occurrence” in cases alleging a failure to prevent the sexual molestation of minors; (2) the allegations of the underlying lawsuit trigger the “expected or intended injury” exclusion; and (3) the underlying lawsuit does not allege “bodily injury” under the Policy because allegations of post-traumatic stress disorder (“PTSD”), nightmares, and other emotional distress injuries do not satisfy the definition of “bodily injury.” The defendants' response reasserts the arguments in their motion to dismiss and further argues that the plaintiff's reliance on Animal Urgent Care is misplaced because it ignores more recent West Virginia precedent, which requires courts to give deference to the standpoint of the insured when making liability coverage determinations.

Finally, both parties filed replies on September 28, 2010 reiterating their previous arguments. The plaintiff's reply also emphasizes that Orion has acknowledged that USF does not have a duty to provide coverage for any award of punitive damages in the underlying lawsuit. This Court held oral argument on the cross motions for summary judgment on October 12, 2010.³

II. Facts

The complaint in the underlying lawsuit consists of five counts. However, only two of those five counts are directed towards Orion, both of which sound in negligence. Count IV of the complaint alleges that the sexual assault and resulting injuries suffered by the John Doe plaintiffs were caused or contributed to by “the negligence, carelessness, recklessness and other liability-producing conduct of Defendants Orion and/or RITE AID.” (Compl. Ex. A ¶ 74.) Specifically, the complaint alleges that Orion, as the owner of the premises, was negligent in failing to prevent Valecko from exploiting the plaintiffs. Count V alleges that because the wrongful acts of Valecko occurred on premises owned or in the possession of Orion and/or Rite Aid, such entities knew or should have known that they had the responsibility to exercise control over Valecko. (Compl. Ex. A ¶¶ 80–84.) As a result of Valecko's abusive actions, the plaintiffs claim to have sustained severe physical and psychological injuries. (Compl. Ex. A ¶¶ 53–55.) In addition to compensatory damages, the underlying complaint also sets forth a claim for punitive damages. The underlying lawsuit is still pending against Orion in Pennsylvania.

This Court has reviewed the parties' pleadings and the relevant law and believes that a decision on the merits on each of the motions for summary judgment is warranted.⁴ For the reasons that follow, this Court grants the plaintiff's motion for summary judgment and denies the defendants' motion for summary judgment.

III. Applicable Law

Under Federal Rule of Civil Procedure 56(c), summary judgment is appropriate if “the pleadings, depositions, answers to interrogatories, and admissions on file, together

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with the affidavits, if any, show 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.” The party seeking summary judgment bears the initial burden of showing the absence of any genuine issues of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 322–23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). “The burden then shifts to the nonmoving party to come forward with facts sufficient to create a triable issue of fact.” Temkin v. Frederick County Comm'rs, 945 F.2d 716, 718 (4th Cir.1991), cert. denied, 502 U.S. 1095, 112 S.Ct. 1172, 117 L.Ed.2d 417 (1992)(citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)).

However, as the United States Supreme Court noted in Anderson, “Rule 56(e) itself provides that a party opposing a properly supported motion for summary judgment may not rest upon the mere allegations or denials of his pleading, but ... must set forth specific facts showing that there is a genuine issue for trial.” Anderson, 477 U.S. at 256, 106 S.Ct. 2505. “The inquiry performed is the threshold inquiry of determining whether there is the need for a trial—whether, in other words, there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party.” Id. at 250, 106 S.Ct. 2505; see also Charbonnages de France v. Smith, 597 F.2d 406, 414 (4th Cir.1979) (Summary judgment “should be granted only in those cases where it is perfectly clear that no issue of fact is involved and inquiry into the facts is not desirable to clarify the application of the law.” (citing Stevens v. Howard D. Johnson Co., 181 F.2d 390, 394 (4th Cir.1950))).

In Celotex, the Court stated that “the plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.” Celotex, 477 U.S. at 322, 106 S.Ct. 2548. Summary judgment is not appropriate until after the non-moving party has had sufficient opportunity for discovery. See Oksanen v. Page Mem'l Hosp., 912 F.2d 73, 78 (4th Cir.1990), cert. denied, 502 U.S. 1074, 112 S.Ct. 973, 117 L.Ed.2d 137 (1992). In reviewing the supported underlying facts, all inferences must be viewed in the light most favorable to the party opposing the motion. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

IV. Discussion

In this diversity action, state law controls the Court's construction of the insurance policy. In re Nantahala Village, Inc., 976 F.2d 876, 880–81 (4th Cir.1992) (“A federal court sitting in diversity must apply the forum state's choice-of-law rules.”). “As a general rule, an insurer's duty to defend is tested by whether the allegations in the plaintiff's...