Essex Insurance v. Greenville Convalescent Home Inc. , 236 F. App'x 49 ( 2007 )

United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT June 5, 2007
Charles R. Fulbruge III
Clerk
No. 06-60847
ESSEX INSURANCE COMPANY
Plaintiff - Appellant
v.
GREENVILLE CONVALESCENT HOME INC; MOLLIE ROGERS COPELAND, as
Executrix of the Estate of Doris Bariola; EVA ANN BOSCHERT; VERNA
BALL COOK; NANCY PRYOR; BONNIE HATTEN; BETTY SCOTT, individually
and on behalf of the Estate and wrongful death beneficiaries of
Ida Henderson
Defendants - Appellees
Consol. w/ Case No. 06-60848
ESSEX INSURANCE COMPANY
Plaintiff - Appellant
v.
GREENVILLE CONVALESCENT HOME INC; BONNIE HATTEN; GLADIS EVANS
Defendants - Appellees
Consol. w/ Case No. 06-60851
ESSEX INSURANCE COMPANY
Plaintiff - Appellant
v.
GREENVILLE CONVALESCENT HOME INC; MOLLIE ROGERS COPELAND,
Executrix of the Estate of Doris Bariola; EVA ANN BOSCHERT; VERNA
BALL COOK; NANCY PRYOR; BONNIE HATTEN; TRESSIE GREEN,
Individually and on behalf of the Estate and the wrongful death
beneficiaries of Susie Height Green
Appeals from the United States District Court
for the Northern District of Mississippi, Greenville
No. 4:05-CV-102
Before KING, DeMOSS, and OWEN, Circuit Judges.
PER CURIAM:*
Plaintiff-appellant Essex Insurance Company appeals the
district court’s entry of final judgment declaring that it has a
duty to defend and indemnify its insured, defendant-appellee
Greenville Convalescent Home, Inc., against certain state-court
claims. For the following reasons, we AFFIRM in part and VACATE
in part.
I. BACKGROUND
Essex Insurance Company (“Essex”) sought a declaratory
judgment that the Comprehensive General Liability insurance
policy it sold to Greenville Convalescent Home, Inc. (“GCH”)
provides no duty to defend or indemnify GCH against claims
brought by certain long-term care patients (or their
representatives). The court granted Essex’s motion for summary
judgment in part and denied it in part and determined that Essex
owes a duty to defend GCH against the claims brought by the long-
term care patients. The court also determined that Essex owes a
*
Pursuant to 5TH CIR. R. 47.5, the court has determined
that this opinion should not be published and is not precedent
except under the limited circumstances set forth in 5TH CIR. R.
47.5.4.
2
duty to indemnify GCH for any damages recovered by the long-term
care patients in relation to their claims for negligence, gross
negligence, and medical malpractice.
Essex now appeals, asserting that the policy’s “hiring and
supervision” exclusion and “intended and expected injuries”
exclusion bar coverage for, and thus its duty to defend or
indemnify, the underlying claims.
II. DISCUSSION
A. Standard of Review
We review a district court’s order granting or denying
summary judgment de novo, applying the same standards as the
district court. ACS Constr. Co., Inc. of Miss. v. CGU, 332 F.3d
885, 887-88 (5th Cir. 2003). Summary judgment is proper if the
“pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact.” FED. R.
CIV. P. 56(c). “We look to state law for rules governing
contract interpretation.” F.D.I.C. v. Firemen’s Ins. Co. of
Newark, NJ, 109 F.3d 1084, 1087 (5th Cir. 1997). Under
Mississippi law, an insurance policy is a contract subject to the
general rules of contract interpretation. See Clark v. State
Farm Mut. Auto. Ins. Co., 725 So. 2d 779, 781 (Miss. 1998).
Where an insurance policy is clear and unambiguous, the meaning
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and effect of the policy is a question of law. Love By Smith v.
McDonough, 758 F. Supp. 397, 399 (S.D. Miss. 1991).
The duty of an insurance provider to defend its insured
depends upon the language of the policy. Delta Pride Catfish,
Inc. v. Home Ins. Co., 697 So. 2d 400, 403 (Miss. 1997). “‘The
traditional test’ for whether an insurer has a duty to defend
under the policy language ‘is that the obligation of a liability
insurer is to be determined by the allegations of the complaint
or declaration [in the underlying action].’” Id. (quoting State
Farm Mut. Auto. Ins. Co. v. Taylor, 233 So. 2d 805, 808 (Miss.
1970)). If the factual allegations in an underlying complaint
state a claim that is within or arguably within the scope of
coverage provided by a policy, then the insurance provider is
obligated to defend the insured. Ingalls Shipbuilding v. Fed.
Ins. Co., 410 F.3d 214, 225 (5th Cir. 2005); see also Am. Guar. &
Liab. Ins. Co. v. 1906 Co., 273 F.3d 605, 610 (citing cases).
“In comparing the complaints with the policy terms, we look not
to the particular legal theories pursued by the state
complainants, but to the allegedly tortious conduct underlying
their suits.” Am. Guar. & Liab. Ins. Co., 273 F.3d at 610.
B. Negligent Hiring and Supervision Exclusion
Essex first argues that despite the policy’s Professional
Liability Endorsement providing coverage for the negligent
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rendering or failure to render professional services,1 the
policy’s “negligent hiring and supervision” exclusion2 bars
coverage for——and thus relieves Essex of a duty to defend
against——many of the underlying plaintiffs’ factual allegations.
Essex asserts that the district court erred in concluding that
the exclusion did not bar coverage because it relied on the legal
theories advanced in the complaints rather than the factual
allegations in the complaints.
Because whether Essex has a duty to defend GCH rests on the
factual allegations in the underlying complaint rather than the
determination of those facts, we may resolve Essex’s challenge as
a matter of law. See generally Green v. Aetna Ins. Co., 349 F.2d
919, 923-924 (5th Cir. 1965) (applying Texas law). Although the
underlying claims generally sound in the negligent rendering of
1
The Professional Liability Endorsement provides that
Essex
will pay those sums that the insured becomes
legally obligated to pay as damages because of
“bodily injury” or “property damage” to which
this insurance applies and will include
damages arising out of any negligent act,
error or omission in rendering or failure to
render professional services of the type
described in the Schedule of this policy. We
will have the right and duty to defend any
“suit” seeking those damages.
2
The pertinent policy provision states that the “insurance
does not apply to any claim, suit, cost or expense arising out
of . . . E. HIRING AND/OR SUPERVISION: Charges or allegations of
negligent hiring, training, placement or supervision.” A later
policy issued to GHC added negligent retention, discrimination,
and harassment as among the claims excluded under the negligent
hiring and supervision exclusion.
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professional services, Essex points to allegations scattered
throughout the complaints of negligent supervision and hiring and
argues that the exclusion applies to bar its duty to defend GCH
against those allegations and indemnify GCH for any resulting
liability. In Ingalls Shipbuilding v. Federal Insurance Co.,
however, we held that Mississippi law requires an insurer to
defend claims brought against its insured if the factual
allegations in the underlying complaint state a claim that is
within or arguably within the scope of coverage provided by a
policy. 410 F.3d at 225; accord Am. Guar. & Liab. Ins. Co., 273
F.3d at 611 (“[B]ecause the [Mississippi] state suits allege
multiple grounds for recovery, [the insurer] must provide a
defense if any ground falls within the terms of the policy.”).
Because there are factual allegations of negligence, gross
negligence, and medical malpractice in the underlying complaints
that clearly fall under the policy’s coverage for “damages
arising out of any negligent act, error or omission in rendering
or failure to render professional services,” the district court’s
conclusion that Essex has a duty to defend GCH against those
claims is correct.
The district court, apparently relying on its conclusion
that Essex had a duty to defend GCH against these claims, also
determined that Essex had a duty to indemnify GCH. However, the
duty to defend is “broader than the insured’s duty to indemnify
under its policy of insurance.” Cullop v. Sphere Drake Ins. Co.,
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129 F. Supp. 2d 981, 982 (S.D. Miss. 2001) (quoting Merchants Co.
v. Am. Motorists Ins. Co., 794 F. Supp. 611, 616 (S.D. Miss.
1992)); see also Green, 349 F.2d at 923-24 (“[I]n determining the
duty of a liability insurance company to defend a lawsuit, the
allegations of the complainant should be considered in the light
of the policy provisions without reference to the truth or
falsity of such allegations . . . or without reference to a legal
determination thereof.”). Whereas the duty to defend turns on
the factual allegations in a complaint, the duty to indemnify
turns “upon the actual facts that underlie the cause of action
and result in liability.” See Northfield Ins. Co. v. Loving Home
Care, Inc., 363 F.3d 523, 528-29 (5th Cir. 2004) (applying Texas
law); accord Am. States Ins. Co. v. Synod of the Russian Orthodox
Ch., 335 F.3d 493, 496 (5th Cir. 2003) (“[T]he duty to pay is
determined by the actual basis for the insured’s liability to a
third person.”) (applying Texas law). “Whether [indemnification]
is available depends on the nature of any such imposed liability.
To determine that means a full trial of the damage claim on the
merits.” Green, 349 F.2d at 926. Accordingly, the decision of
the district court on the issue of indemnification is premature.
If GCH is found liable, the factual basis for that liability
finding will determine whether indemnification is required. See
id. at 926-28; Northfield Ins. Co., 363 F.3d at 528-29; Am.
States Ins. Co., 335 F.3d at 496. Any associated legal questions
regarding coverage will be informed by the results of the trial,
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and the resolution of these questions should also await its
conclusion. We therefore vacate the district court’s conclusion
that Essex has a duty to indemnify GCH.
C. Expected or Intended Injury Exclusion
Essex next contends that the policy’s “expected or intended
injury” exclusion3 bars coverage for——and thus Essex’s duty to
defend against——the failures alleged in the underlying
complaints. The district court concluded that this exclusion did
not apply to the underlying claims because the claims primarily
sounded in negligence and medical malpractice, which do not
involve intentional acts.
Essex contends that the district court erred in two
respects. First, Essex differentiates between the meanings of
“intended” and “expected” and argues that the district court
erred because it failed to independently consider whether the
alleged injuries were expected. Essex essentially advances the
novel argument that because injuries caused by negligent acts are
foreseeable, they fall under the “expected” prong of the expected
3
The pertinent policy provision states
This insurance does not apply to:
a. Expected or Intended Injury
“Bodily injury” or “property damage”
expected or intended from the standpoint
of the insured. This exclusion does not
apply to “bodily injury” resulting from
the use of reasonable force to protect
persons or property.
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and intended injuries exclusion. By way of example, Essex posits
that it is “clearly foreseeable or easily expected” that the
failure to adequately feed a patient and provide her with needed
therapeutic diets will result in malnutrition. This argument is
entirely without merit. Essex relies solely on New Hampshire
Insurance Co. v. Vardaman, 838 F. Supp. 1132 (N.D. Miss. 1993),
in arguing that foreseeable injuries caused by negligent acts are
“expected” ones. But New Hampshire Insurance Co. is inapposite
because it addresses only expected injuries resulting from
intentional acts, not negligent ones. We find no support for the
proposition that injuries determined to be foreseeable for
purposes of proximate causation are by definition “expected” ones
within the meaning of the “expected or intended injury”
exclusion.
Second, Essex argues that the district court erred in its
conclusion that Essex had a duty to defend by relying on the
theories of liability asserted against GCH——instead of the
tortious conduct alleged——to determine that the underlying
complaints asserted no intentional acts. Essex’s challenge fails
because the underlying claims are supported by numerous factual
allegations of negligent conduct that do not fall within the
“expected or intended injury” exclusion. Because these
allegations state a claim that is within the scope of coverage
provided by the policy, Essex has a duty to defend GCH. See
Ingalls, 410 F.3d at 225. To the extent that the underlying
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complaints allege expected or intentional injury, a determination
of Essex’s duty to indemnify should await a trial on the merits
for the reasons already considered above.
III. CONCLUSION
For the foregoing reasons, we AFFIRM the district court’s
final judgment declaring that Essex has a duty to defend GCH
against the pending state-court claims but we VACATE the final
judgment declaring that Essex has a duty to indemnify GCH.
AFFIRMED IN PART AND VACATED IN PART. Each party shall bear
its own costs.
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