Terra Nova Ins. Co., Inc. v. Nanticoke Pines, Ltd.

Citations: 743 F. Supp. 293; 1990 U.S. Dist. LEXIS 11526; 1990 WL 126235Docket: Civ. A. 89-75-CMW

Court: District Court, D. Delaware; August 29, 1990; Federal District Court

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Terra Nova Insurance Company filed a declaratory judgment action against Nanticoke Pines, Ltd. and Kevin L. Gibbs, seeking a declaration of no obligation to defend or indemnify Nanticoke for claims made by Gibbs in an ongoing state lawsuit. Gibbs alleged that he was shot by John L. Hargett, a security officer for Nanticoke, and sought to hold Nanticoke liable under both respondeat superior and for its own negligence. Terra Nova had provided a liability insurance policy to Nanticoke, effective from December 1984 to December 1985, during which the incident occurred. The insurer moved for summary judgment, asserting that two provisions in the policy excluded coverage for the shooting. In response, the defendants argued that Nanticoke had not received the policy and disputed the applicability of the exclusions. The court, referencing Federal Rule of Civil Procedure 56, noted that the moving party must demonstrate the absence of genuine issues of material fact, while the opposing party must provide specific facts to contest the motion. Ultimately, the court granted summary judgment in favor of Terra Nova, affirming that the policy provisions barred coverage for the claims against Nanticoke.

Defendants argue that policy exclusions are invalid because Nanticoke did not receive the policy or exclusions before the incident. The court determined that delivery is irrelevant to the policy's enforceability under Delaware law, which does not require delivery for a binding insurance contract. The policy is considered delivered to Nanticoke when received by the Insurance Market, which acted as Nanticoke's agent. Even if the policy were invalid due to nondelivery, the court found no evidence supporting an oral insurance contract between Nanticoke and Terra Nova, as there were no conversations indicating such an agreement. Terra Nova claims no duty to defend Nanticoke in a state court suit due to two policy exclusions, one of which explicitly excludes coverage for claims related to assault and battery. The court stated that an insurer’s duty to defend is based on whether the complaint alleges claims covered by the policy. In this case, the allegations against Nanticoke, including negligence related to the assault, directly stem from the assault itself, thus falling under the exclusion. The court affirmed that the allegations do not present a covered risk, citing precedent that supports excluding coverage for negligence that indirectly allows an assault to occur.

In Terra Nova Ins. Co. v. Thee Kandy Store, Inc., the insured, a bar and restaurant, was sued by a patron who was assaulted by its employees. The insurance policy included an assault and battery exclusion similar to that in the current case. Despite the patron's claim of negligence in preventing the assault, the court ruled that the exclusion relieved the insurance company of liability, emphasizing that the underlying cause of injury stemmed from the assault and battery. In a related case, the court again found in favor of the insurer, asserting that the claims of negligence could not negate the assault and battery exclusion, as the injuries were directly caused by such actions.

The court determined that Terra Nova had no obligation to defend or indemnify the insured in the state court suit due to the exclusion. It also noted that the insured (Nanticoke) was a Delaware corporation, and because Delaware had the most significant relationship to the transaction, Delaware law would be applied. The court referenced the "most significant relationship" test for determining applicable law, which considers various factors related to the parties and the contract's execution. Additionally, the excerpt touches on the implications of non-delivery of an insurance contract, noting that while it might suggest coverage was never procured, the circumstances in this case differ significantly from those previously cited. Summary judgment was granted in favor of the insurance company.

An insurance contract is acknowledged to exist by both parties, but defendants claim that the plaintiff's written representation of the contract is invalid due to non-delivery. Evidence supporting the existence of a policy includes a policy copy, an invoice for the premium, and a payment check. The Delaware Superior Court has established that a broker's role—whether representing the insurer or insured—depends on case-specific circumstances. In this case, the Insurance Market acted as Nanticoke's agent, tasked with securing coverage from a choice of insurers. The Insurance Market did not interact directly with the insurer, Terra Nova, but rather with Tri-State, which secured the coverage. The Insurance Market lacks authority to bind coverage for Terra Nova. Notably, when a broker selects an insurer, they are generally considered the agent of the insured. Additionally, the defendants question whether the Insurance Market had the policy copy before a specific incident. Although the agency retains policies for only three years, evidence indicates it likely received the policy before the incident, supported by deposition testimony and business procedures. Records confirm the Insurance Market paid the premium in January 1985, and post-incident communications suggest the Insurance Market had the policy prior to the event.

Nanticoke's argument that exclusions in its insurance policy do not apply due to lack of awareness is dismissed, as insured parties are obligated to read their policies and are bound by clear provisions. The doctrine of reasonable expectations, which could apply in cases of ambiguity or hidden pitfalls in insurance terms, does not extend to creating contractual provisions. Although the assault and battery exclusion in the policy is unsigned, it can still be binding if incorporated by reference, as indicated by its inclusion in the list of forms and endorsements on the policy's front page. A cited case regarding negligent hiring does not apply here because it did not involve a policy with an assault and battery exclusion. The court concludes its examination without addressing the liquor liability exclusion due to its earlier ruling.