Waiting Room Sols. v. Excelsior Ins. Co.

• Decision Date: 09 September 2020
• Docket Number: No. 19-CV-7978 (CS),19-CV-7978 (CS)
• Parties: WAITING ROOM SOLUTIONS, LIMITED LIABILITY LIMITED PARTNERSHIP, Plaintiff, v. EXCELSIOR INSURANCE COMPANY and LIBERTY MUTUAL GROUP INC., Defendants.
• Court: U.S. District Court — Southern District of New York

WAITING ROOM SOLUTIONS, LIMITED LIABILITY LIMITED PARTNERSHIP, Plaintiff, v. EXCELSIOR INSURANCE COMPANY and LIBERTY MUTUAL GROUP INC., Defendants.

No. 19-CV-7978 (CS)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

September 9, 2020

OPINION & ORDER

Appearances:

Chelsea A. Four-Rosenbaum

Catania, Mahon & Rider, PLLC

Newburgh, New York

Counsel for Plaintiff

Marshall T. Potashner

Jaffe & Asher LLP

New York, New York

Counsel for Defendants

Seibel, J.

Before the Court is Defendants' motion to dismiss for failure to state a claim. (Doc. 17.) Also pending, in this case removed from New York Supreme Court, Orange County, is Plaintiff's cross-motion to dismiss for lack of subject matter jurisdiction. (Doc. 20.) For the reasons stated below, Plaintiff's motion is DENIED and Defendants' motion is GRANTED.

I. BACKGROUND

A. Facts

For purposes of Defendants' motion to dismiss for failure to state a claim, I accept as true the facts, but not the conclusions, set forth in the Complaint. (Doc. 1-1 ("Compl.").)¹ Plaintiff Waiting Room Solutions, Limited Liability Limited Partnership ("Waiting Room") is a limited liability limited partnership organized under the laws of the U.S. Virgin Islands with its principal place of business in New York. (Compl. ¶ 7; NOR ¶ 6.)² Waiting Room provides software products and other technology for the medical industry. (Compl. ¶¶ 1, 18.) Defendant Excelsior Insurance Company ("Excelsior") is a stock insurance company organized under the laws of New Hampshire with its principal place of business in Massachusetts. (NOR ¶ 8.) Defendant Liberty Mutual Group Inc. ("Liberty Mutual") is a corporation organized under the laws of Massachusetts with its principal place of business in Massachusetts. (Id. ¶ 9.)

1. The Excelsior Policy

Waiting Room procured a Commercial Protector Policy, Policy No. BOP8050067, (Doc. 18-2 ("Ins. Policy")), underwritten by Excelsior (the "Excelsior Policy," "Insurance Agreement," or "Agreement"), covering the period July 20, 2015 to July 20, 2016. (Compl. ¶ 2; Ins. Policy at 6.)³ The Excelsior Policy's liability insuring agreement (pursuant to the New York - Amendatory Endorsement) provides, in pertinent part:

We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury", "property damage", "personal injury" or "advertising injury" to which this insurance applies. We will have the right and duty to defendany "suit" seeking those damages even if the allegations of the "suit" are groundless, false or fraudulent. We may at our discretion investigate any "occurrence" or offense and settle any claim or "suit" that may result.

(Ins. Policy at 94.) The insurance applies to bodily injury and property damage only if "[t]he 'bodily injury' or 'property damage' is caused by an 'occurrence' that takes place in the 'coverage territory,'" (id. at 80), which includes "[t]he United States of America (including its territories [and] possessions), Puerto Rico and Canada," (id. at 88), and "occurs during the policy period," (id. at 80). The insurance applies to "'personal injury' caused by an offense arising out of your business, excluding advertising, publishing, broadcasting or telecasting done by or for you; . . . but only if the offense was committed in the 'coverage territory' during the policy period." (Id.) "Bodily injury" is defined as "physical injury, sickness or disease sustained by a person," including "mental anguish, mental injury, shock, fright or death that results from such physical injury, sickness or disease." (Id. at 71.) "Personal injury" is defined as

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.

(Id. at 89.) "'Occurrence' means an accident, including continuous or repeated exposure to substantially the same general harmful conditions." (Id.)⁴

2. The Underlying Action

This matter arises out of what was originally several state court lawsuits filed by five former Waiting Room employees (the "Underlying Plaintiffs") against Waiting Room in 2016 and 2017, which the state court consolidated into one action on September 25, 2017 (the "Underlying Action"). (See Doc. 21-1.) The Underlying Plaintiffs allege that Waiting Room's employee, Corey Shuster, who provided information technology services to the company, placed a video camera disguised as a pen in the women's restroom at Waiting Room's offices. (See Doc. 18-3 ¶¶ 39, 57; Doc. 18-4 at 1.)⁵ In or about February 2016, one of the Underlying Plaintiffs discovered the camera and brought it to the attention of her supervisor. (UVC ¶¶ 45-46.) The supervisor confronted Shuster, but did not reprimand him, instead giving him back the camera and its contents and permitting him to leave the premises. (Id. ¶ 46-48.) The Underlying Plaintiffs allege that Waiting Room permitted Shuster to delete certain videos and images of them from digital devices, including devices owned or controlled by Waiting Room. (Id. ¶ 49.)

The Underlying Plaintiffs further allege that on or about March 5, 2016, Waiting Room's Chief Executive Officer Lawrence Gordon. M.D. met with Shuster, took possession of the computer and other devices held by Shuster, and viewed and deleted or destroyed certain videos and images contained therein. (Id. ¶¶ 17, 50.) On March 9, 2016, Gordon convened a meeting of Waiting Room staff, at which time the issue of the discovery of the camera was raised. (Id. ¶ 51.) During this meeting, Gordon initially denied, but later admitted, having viewed the footage from the camera. (Id. ¶¶ 52-54.) Gordon also admitted at that meeting that WaitingRoom was aware that Shuster had placed a camera in the women's restroom three years earlier, and that Waiting Room continued to employ Shuster and allow him access to the restroom despite its awareness of his activities. (Id. ¶¶ 58-59, 62-65.) Waiting Room did not discipline Shuster for this behavior at the time and did not disclose this knowledge to the Underlying Plaintiffs when they were hired. (Id. ¶¶ 64-66.) It is further alleged that, at the March 9 meeting, Dr. Gordon demanded secrecy from Waiting Room employees and forbade them from discussing the matter with any person other than those selected by Dr. Gordon. (Id. ¶ 60.) The Underlying Plaintiffs allege that trade and business reasons motivated the decision to conceal Shuster's past activities and the demand for secrecy. (Id. ¶¶ 61, 67.)

The Underlying Plaintiffs asserted ten causes of action against Waiting Room and its co-defendants. (Id. ¶¶ 78-150.)⁶ In or about 2017, Waiting Room called upon Excelsior to defend and indemnify it and its employees in connection with claims in the Underlying Action. (Compl. ¶ 21.) In October 2017, the same month that the UVC was filed, Liberty Mutual issued correspondence acknowledging receipt of the UVC and agreed to defend Waiting Room, subject to a "full and complete reservation of rights." (Id. ¶ 22.) The reservation of rights stated, in relevant part:

• Coverage exists under the Policy for damages because of "bodily injury" or "property damage" caused by an "occurrence" as defined by the Policy. We reserve all rights to deny coverage to the extent that Plaintiff does not seek to impose liability on an insured for "bodily injury" as defined under the Policy and New York law. [Underlying Plaintiff]alleges physical and emotional injuries but this does not meet the definition of "bodily injury" in the Policy.

• Coverage exists under the Policy for damages because of "bodily injury" or "property damage" caused by an "occurrence" as defined by the Policy. We reserve all rights to deny coverage to the extent that Plaintiff does not seek to impose liability on an insured for an "occurrence" as defined in the Policy. The thrust of the allegations are that the defendants engaged in intentional and deliberate employment discrimination on the basis of gender arising out of Plaintiff's employment. This does not constitute an "occurrence" as defined in the Policy.

• Coverage is excluded under the Policy for "bodily injury" or "property damage" expected or intended from the standpoint of the insured. While we do not believe the Lawsuit involves damages because of "bodily injury" or "property damage" caused by an "occurrence" as defined, to the extent the Lawsuit involves "bodily injury" or "property damage" which is expected or intended from the standpoint of the insured, there is no coverage.

• Coverage is precluded under the Policy for any obligation of the insured under a worker's compensation or any similar law.

• Coverage is precluded under the Policy for "bodily injury" to an employee arising out of and in the course of "employment by the insured or performing duties related to the conduct of the insured business." Although we do not believe that the Lawsuit seeks to impose liability on the Insured for "bodily injury" this exclusion operates to preclude coverage.

(Id. ¶ 22; Doc. 18-5 at 8.)

On November 27, 2017, Waiting Room and Gordon filed a motion to dismiss all claims and causes of action asserted against them in the Underlying Action, and on April 24, 2018, the court granted the motion to dismiss in part, dismissing all claims except the claims for gender discrimination as to three Plaintiffs and IIED as to all Plaintiffs. (Compl. ¶¶ 24-25; Order at 13.)

In the year that followed, Excelsior and Liberty Mutual (together, "Defendants") participated in mediation along with Waiting Room and extended a settlement...