Vaughner v. Pulito

Decision Date25 November 1986
Docket NumberNo. 86-3285,86-3285
Citation804 F.2d 873
PartiesCharles VAUGHNER, et al., Plaintiffs-Appellees Cross-Appellants, v. F.J. PULITO, Defendant-Appellant Cross-Appellee, v. GENERAL ACCIDENT INSURANCE COMPANY OF AMERICA, the Camden Fire Insurance Association, Potomac Insurance Company of Illinois and Pennsylvania General Insurance Company, Third-Party Defendants-Appellees. Summary Calendar.
CourtU.S. Court of Appeals — Fifth Circuit

Roy A. Raspanti, New Orleans, La., for F.J. Pulito.

New Orleans Legal Assistance Corp., Stephen H. Burrington, New Orleans, La., for Charles Vaughner, et al.

Laurence E. Larmann, Metairie, La., for General Acc. Ins. Co. of America, et al.

Appeals from the United States District Court for the Eastern District of Louisiana.

Before CLARK, Chief Judge, GARWOOD and HILL, Circuit Judges.

ROBERT MADDEN HILL, Circuit Judge:

Defendant and third-party plaintiff F.J. Pulito appeals, complaining that the magistrate erroneously concluded that third-party defendant General Accident Insurance Company (General Accident) did not have a duty to defend him in a discrimination action brought by plaintiffs Charles Vaughner and Rebecca Hollister, and that the magistrate erroneously denied his request for attorney's fees. The plaintiffs also appeal, claiming that the magistrate erroneously concluded that Pulito did not intentionally discriminate against them. Finding Pulito's arguments unpersuasive, we affirm the summary judgment in favor of General Accident and the denial of attorney's fees. We also affirm the finding of no intentional discrimination.

I.

This civil rights action was brought by Charles Vaughner and Rebecca Hollister against Pulito. Plaintiffs claim that Pulito intentionally violated their civil rights by refusing to rent them an apartment based upon racial animosity. Pulito impled his insurance carrier General Accident to defend him and to indemnify him if liability were established. General Accident objected to its presence in the suit and claimed that it was not obligated to defend or indemnify Pulito under the insurance policy it had issued.

The basic facts are as follows. In April 1985, plaintiffs were looking for a new apartment in the New Orleans area. Hollister is a young white woman and Vaughner is a black male; the two are not married. On April 22, Hollister contacted Pulito after seeing an ad in the New Orleans Times-Picayune/States-Item for an available apartment. Pulito was the owner and landlord of the apartment complex. Hollister viewed the apartment that same day and then met with Pulito to negotiate a lease. Pulito and Hollister did not execute a written lease, but Hollister did pay Pulito $908 as a security deposit and advance rent for the remaining part of April and all of May. During their discussions, Hollister told Pulito that she was married to Orville Bradshaw, a white male. Bradshaw was in fact a friend and roommate of Hollister and Vaughner. Hollister did not mention Vaughner at any time during this initial meeting. 1

Later that day, Mrs. Hollister informed Pulito by telephone that Vaughner would be living in the apartment and that he was a black man. Pulito's response to this information is much in dispute. Mrs. Hollister claims that Pulito stated he did not rent to blacks and that he would not allow Vaughner to permanently reside at the apartment. Pulito claims he never made these statements nor even received the phone call. Vaughner, introducing himself as Bradshaw, soon contacted Pulito and asked for the deposit back. Pulito stated that he thought it was "a good idea that Hollister, Vaughner, and Bradshaw not move into the apartment," and agreed to return the deposit.

The next day Hollister went to Pulito's home to obtain the deposit. Pulito returned only $790 of the $908 deposit, retaining the balance for loss of prospective renters, advertising costs, and mental anguish over the events of the past days. Hollister complained about the retention of part of the deposit but left without obtaining a full refund.

Plaintiffs filed suit against Pulito alleging intentional violations of their civil rights secured by 42 U.S.C. Secs. 1981 and 1982; the Fair Housing Act of 1968, 42 U.S.C. Sec. 3604(a), (b), (d); and intentional violation of the Louisiana Unfair Trade Practices and Consumer Protection Law, LSA-R.S. 51:1401 et seq. (1985). Plaintiffs asked for compensatory and punitive damages along with declaratory and injunctive relief.

Pulito answered, generally denying the allegations. Pulito also filed a third-party complaint against General Accident, his insurer under an owner/landlord and tenant policy. Pulito claimed that General Accident had a duty to defend and possibly indemnify him for the conduct alleged by the plaintiffs. General Accident's answer denied the third-party complaint. General Accident moved for summary judgment; it claimed in its motion that it had no duty to defend or indemnify Pulito since Vaughner and Hollister alleged he intentionally violated their civil rights, and the policy did not cover intentionally inflicted injuries. Pulito responded to the motion for summary judgment stating that the policy covered his acts and that summary judgment was improper as to the question of his intent.

The case was transferred, pursuant to written consent of the parties, to a federal magistrate for trial. On the morning of trial the magistrate granted General Accident's motion for summary judgment stating that the policy did not obligate General Accident to defend Pulito for his intentional injurious actions or to indemnify him if liability was established. The plaintiffs' action was tried and judgment was rendered for Pulito. The magistrate denied Pulito's request for attorney's fees as the prevailing party under 42 U.S.C. Sec. 1988. Pulito and plaintiffs perfected an appeal to this court.

II.
A.

Pulito's chief complaint on appeal is that the magistrate erred in granting General Accident summary judgment on its duty to defend him. Any duty on the part of General Accident to defend Pulito grows out of the owner/landlord and tenant policy existing between these parties. The policy provides:

The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of

Coverage A. bodily injury or

Coverage B. property damage

to which this insurance applies, caused by an occurrence and arising out of the ownership, maintenance or use of the insured premises and all operations necessary or incidental thereto, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage.... (emphasis in original).

The policy defines occurrence as:

an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured....

The parties agree that Louisiana law governs whether General Accident had a duty to defend Pulito. We thus examine that law to determine whether General Accident had a duty to defend Pulito in this case.

Under Louisiana law, whether an insurer has a duty to defend its insured when sued is determined by a comparison of the terms of the policy and of the allegations of plaintiff's complaint. Audubon Coin & Stamp Co. v. Alford Safe & Lock Co., 230 So.2d 278, 279 (La.App. 1st Cir.1969). "Or as some courts have expressed it the language of the policy and the allegations of the complaint must be construed together, to determine the insurer's obligation [to defend]." 7C Appleman, Insurance Law and Practice Sec. 4683 (Berdal ed. 1979). Louisiana also recognizes that the obligation of an insurer to defend suits brought against its insured is broader than the insured's duty to indemnify, and therefore is the first determination that must be made by a court. See American Home Assurance Company v. Czarniecki, 255 La. 251, 230 So.2d 253, 259 (1969); West Brothers of DeRidder v. Morgan Roofing, 376 So.2d 345, 348 (La.App. 3d Cir.1979). Only if the allegations in the plaintiff's complaint unambiguously and absolutely exclude coverage is the insurer relieved of the duty to defend its insured. Michel v. Ryan, 373 So.2d 985, 988 (La.App. 3d Cir.1979); see also Bandy v. Avondale Shipyards, Inc., 458 F.2d 900, 902 (5th Cir.1972) (applying Louisiana law).

In determining the duty to defend, the plaintiff's complaint against the insured is examined with the assumption that all the allegations are true. West Brothers, 376 So.2d at 348. The plaintiff's allegations are liberally construed in deciding whether they set forth grounds that could possibly bring the claim within the scope of the insurer's duty to defend. American Home, 230 So.2d at 259; see also Albritton v. Fireman's Fund Insurance Co., 70 So.2d 111, 113 (La.1953). If upon such an examination there appears to be potential coverage under the policy and liability to the plaintiff, the insurer is obligated to defend, regardless of the ultimate outcome of the case. West Brothers, 376 So.2d at 348; see also Scarborough v. Northern Assurance Co. of America, 718 F.2d 130, 134-35 (5th Cir.1983) (applying Louisiana law).

With these principles in mind, we determine if the magistrate properly rendered summary judgment in favor of General Accident. The owner/landlord and tenant policy in this case excludes from its coverage Pulito's intentionally injurious actions which occur while he is administering or maintaining the apartment complex. See Ashland Oil Inc. v. Miller Oil Purchasing Co., 678 F.2d 1293, 1317-18 (5th Cir.1982) (construing identical insurance contract provision pursuant to Louisiana law). Policy coverage, therefore, is activated only if Pulito's potential liability is premised on a cause of action not requiring an intentional act.

All of the plaintiffs' alleged causes of action against Pulito, however,...

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