Wake County Hosp. System, Inc. v. Safety Nat. Cas. Corp.

• Decision Date: 05 August 1997
• Docket Number: No. COA96-1038,COA96-1038
• Citation: 487 S.E.2d 789,127 N.C.App. 33
• Court: North Carolina Court of Appeals
• Parties: WAKE COUNTY HOSPITAL SYSTEM, INC. and St. Paul Fire and Marine Insurance Company, Plaintiffs, v. SAFETY NATIONAL CASUALTY CORPORATION, Defendant.

Page 789

487 S.E.2d 789

127 N.C.App. 33

WAKE COUNTY HOSPITAL SYSTEM, INC. and St. Paul Fire and Marine Insurance Company, Plaintiffs, v. SAFETY NATIONAL CASUALTY CORPORATION, Defendant.

No. COA96-1038.

Court of Appeals of North Carolina.

Aug. 5, 1997.

Smith Helms Mulliss & Moore, L.L.P. by Martin N. Erwin, Greensboro, for plaintiff-appellants.

Robinson Maready Lawing & Comerford, L.L.P. by Robert J. Lawing and Jane C. Jackson, Winston-Salem, for defendant-appellee.

JOHN C. MARTIN, Judge.

Wake County Hospital System, Inc., ("the Hospital") brought this action to recover under an insurance policy issued by defendant Safety National Casualty Corporation ("Safety"). Defendant answered, denying that its policy provided coverage for the claim asserted by the Hospital. Defendant's motion to join St. Paul Fire and Marine Insurance Company ("St.Paul") as a party plaintiff was granted. After discovery, all parties moved for summary judgment.

The materials before the trial court established the following:

Defendant Safety issued its "Specific Excess and Aggregate Excess Workers' Compensation Insurance Agreement" to the Hospital, providing coverage for "Loss sustained ... because of liability imposed ... by the Workers' Compensation or Employers' Liability Laws of: [North Carolina] ... on account of bodily injury or occupational disease due to Occurrences taking place ... to Employees...." The policy was excess coverage to the Hospital's self-insured retention of $225,000 and provided coverage of $500,000. The policy was in force at all times pertinent to this action.

In addition, at all times pertinent to this action, the Hospital was covered by two policies issued by St. Paul. One policy was a general liability policy providing coverage of $1,000,000 for a "covered bodily injury" "caused by an event" and excluding from coverage bodily injury which was "expected or intended by a protected person," "bodily injury to any employee arising out of and in the course of ... employment," and any obligation under the workers' compensation laws. The other St. Paul policy was an Umbrella Excess policy with a coverage limit of $10,000,000 providing excess coverage for claims covered by listed underlying policies, including both the Safety policy and the St. Paul general liability policy.

On 8 August 1990, Kimberly Crews was employed as a social worker by the Hospital. As she was leaving work on that date, she was abducted in the Hospital's parking lot by Michael Sexton, a Hospital employee who worked in the laundry. Sexton forced Mrs. Crews to drive him to a location away from the Hospital, where he raped and murdered her. Sexton was subsequently convicted of kidnaping, rape, and murder. On 10 July 1992, Mrs. Crews' husband, who was the administrator of her estate, and her minor child brought an action ("the Crews lawsuit") against the Hospital seeking compensatory and punitive damages for her wrongful death and for infliction of emotional distress. The complaint in the Crews lawsuit alleged that the Hospital negligently hired, supervised, and retained Michael Sexton without regard to his violent propensities and that the Hospital's gross negligence subjected Mrs. Crews and other employees to an unreasonable risk and a substantial certainty of serious injury.

The Hospital placed both St. Paul and Safety on notice when the Crews lawsuit was filed. St. Paul issued a reservation of rights letter and agreed to provide the Hospital with a defense. Safety also issued a reservation of rights letter, but under the terms of its policy, Safety had no obligation to provide a defense.

At a settlement conference conducted in connection with the Crews lawsuit, the Hospital and St. Paul indicated their willingness, in principle, to contribute to a settlement in the amount of $1,000,000, even if Safety declined to participate. When Safety announced that it would not participate in the settlement, the Hospital and St. Paul entered into a Loan Receipt and Non-Waiver Agreement, pursuant to which the Hospital contributed its self-insured retention of $225,000 and St. Paul contributed $275,000, the amount for which it would be liable if Safety contributed its limits of $500,000. Of the remaining $500,000, the Hospital paid $250,000 and St. Paul "loaned" the Hospital the remaining $250,000 to be repaid from any amounts recovered in this action. Safety agreed that if the Hospital elected to proceed with a settlement of the underlying action, Safety would not raise as a defense in any later litigation the absence of consent under the Safety policy.

After completing settlement of the Crews lawsuit, the Hospital filed the present action alleging that Safety owes $500,000 under its policy, and that its denial of coverage constitutes an unfair and deceptive practice. The trial court granted Safety's motion for summary judgment. Plaintiffs appeal.

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A party moving for summary judgment must establish that there is no genuine issue of material fact and that the party is entitled to judgment as a matter of law. N.C. Gen.Stat. § 1A-1, Rule 56; Glover v. First Union National Bank, 109 N.C.App. 451, 428 S.E.2d 206 (1993). There are no disputed issues of fact in this case; resolution of the issue of Safety's coverage involves questions of law, properly resolved by summary judgment. Waste Management v. Peerless Insurance Co., 315 N.C. 688, 340 S.E.2d 374, reh'g denied, 316 N.C. 386, 346 S.E.2d 134 (1986); Duke University v. St. Paul Fire and Marine Insurance Co., 96 N.C.App. 635 386 S.E.2d 762, disc. review denied, 326 N.C. 595, 393 S.E.2d 876 (1990).

I.

In their first argument, plaintiffs contend the Safety policy provides coverage for the Hospital's liability in this case. They argue that the policy provides coverage for liability imposed under "Employers' Liability Laws," language which is sufficiently broad to include liability for negligent hiring, supervision and retention, and liability imposed pursuant to Woodson v. Rowland, 329 N.C. 330, 407 S.E.2d 222 (1991) (holding that misconduct by an employer which is substantially certain to cause injury to an employee is actionable at common law, notwithstanding the exclusivity provisions of the Workers' Compensation Act). Defendant contends that, no matter which analysis we choose to apply to determine the basis for the Hospital's liability to the Crews plaintiffs, the end result is that the Safety policy does not provide coverage to the Hospital. We agree with defendant.

A.

Because the policy was a "Specific Excess and Aggregate Excess Workers' Compensation Insurance Agreement," we must first determine whether the Hospital had liability under the Workers' Compensation Act for the injuries to Mrs. Crews. In order for an injury to be compensable under the Workers' Compensation Act, a claimant must prove: "(1) [t]hat the injury was caused by an accident; (2) that the injury arose out of the employment; and (3) that the injury was sustained in the course of employment." See Gallimore v. Marilyn's Shoes, 292 N.C. 399, 402, 233 S.E.2d 529, 531 (1977).

In North Carolina, courts have consistently held that an intentional assault in the work place by a fellow employee or third party is an accident that occurs in the course of employment, but does not arise out of the employment unless a job-related motivation or some other causal relation between the job and the assault exists. Gallimore, 292 N.C. 399, 233 S.E.2d 529 (holding that the death of an employee at a shopping mall who was kidnaped in the parking lot by a third party did not arise out of the employment because the risk of assault was common to the neighborhood, not peculiar to the employment); Culpepper v. Fairfield Sapphire Valley, 93 N.C.App. 242, 377 S.E.2d 777, affirmed, 325 N.C. 702, 386 S.E.2d 174 (1989) (holding that a causal relation existed between the employment and the assault of a resort employee who was kidnaped and assaulted by a guest of the resort); Hogan v. Forsyth Country Club Co., 79 N.C.App. 483, 340 S.E.2d 116, disc. review denied, 317 N.C. 334, 346 S.E.2d 140 (1986) (holding that sexual harassment did not arise out of the employment for a waitress because it was not a risk to which an employee is exposed because of the nature of the employment).

We must determine whether a causal relation exists in this case between Ms. Crews' job and the assault such that the death arose out of the employment and is compensable under the Workers' Compensation Act. Here, the evidence indicates that Mrs. Crews was abducted from the employee parking lot, she was assaulted and killed on an adjacent street, she was carrying work materials, and the assailant was a co-employee. The case of Culpepper v. Fairfield Sapphire Valley, supra, is illustrative. In Culpepper, plaintiff was a cocktail waitress at a resort who was on her way home from work when she noticed a driver having car trouble on the side of the road leading to the resort. She recognized the driver as a resort guest and given her employer's instructions to be courteous to resort guests, she stopped in order to assist the guest. She was kidnaped and assaulted by the driver. In holding that plaintiff's injuries were compensable under the Workers' Compensation Act, the Court concluded that there was a causal relation between plaintiff's employment and the assault such that the plaintiff's injuries arose out of her employment. In addition, the Court stated that "course of employment" included the employer's premises and may extend to adjacent premises or roads. Id. Following the reasoning in Culpepper, we believe the facts here are sufficient to show a causal relationship between Mrs. Crews' employment and her death. Thus, Mrs. Crews' death was compensable under the Workers' Compensation Act. Discovery materials established that death benefits in the amount of $176,500 would be payable to Mrs. Crews' estate under the Workers' Compensation Act, an amount within the...