Court: District Court, E.D. Pennsylvania; July 17, 2018; Federal District Court
Nautilus Insurance Company initiated a declaratory judgment action against Owen's Café and the plaintiffs from an underlying wrongful death case stemming from a stabbing incident near the bar. Nautilus seeks a ruling that it is not obligated to defend or indemnify Owen's due to a policy exclusion for bodily injury resulting from an assault, battery, or physical altercation. Despite Owen's Café and the plaintiffs attempting to frame the complaint to bypass this exclusion, citing QBE Insurance Corporation v. M. S Landis Corp. as precedent, the court finds the exclusion in Nautilus's policy to be broader than in Landis. Consequently, the court grants Judgment on the Pleadings in favor of Nautilus.
The case arose after Thomas C. Ewing was fatally stabbed by Angelo Maldonado on August 7, 2015, following an incident where Ewing and others allegedly took a bottle from the bar without payment. Owen's employees instructed Maldonado to confront the patrons, leading to the confrontation that resulted in Ewing's death. The plaintiffs argue that Owen's negligence, given their awareness of Maldonado's violent tendencies and his intoxication, directly contributed to the tragic outcome. Initially, Nautilus defended Owen's in the underlying action under a reservation of rights but is now seeking a formal judgment based on the assault and battery exclusion in their insurance policy.
The proper interpretation of an insurance policy is determined as a matter of law in declaratory judgment actions, especially when coverage is not contested in the underlying case. A motion for judgment on the pleadings is appropriate in contract cases if the moving party demonstrates entitlement to judgment as a matter of law. Courts must consider the facts in the light most favorable to the non-moving party and grant the motion only if the non-moving party cannot prevail under any possible facts consistent with the complaint's allegations. The relevant insurance policy terms and the underlying complaint's allegations are crucial, with insurers required to accept the allegations as true and provide a defense if there is a possibility of coverage. If an insurer denies coverage based on an exclusion, it bears the burden of proving that the exclusion applies, which must be interpreted strictly against the insurer.
In this case, despite the claim falling under the policy's definition of "bodily injury," Nautilus Insurance argues that an exclusion for injuries connected to assault and battery applies. This exclusion is broad, applying regardless of the culpability of any person or the location of the incident. The underlying complaint indicates that the injuries leading to Ewing's death were linked to an assault, as he was stabbed by an intoxicated individual. Although Defendants claim the policy is ambiguous for lack of definitions for key terms, those terms have established common and legal meanings under Pennsylvania law. During oral argument, defense counsel could not specify what additional clarification would be necessary for policyholders to understand the exclusion's scope.
Judge Savage applied Pennsylvania definitions of "Trafficking," "Rape," and "Simple Assault" to assess whether a motel's liability claims for employee negligence in allowing unlawful conduct were excluded under insurance policy terms. In Nautilus Ins. Co. v. Motel Mgmt. Servs. Inc., the court referenced previous cases where terms like "assault" were deemed unambiguous under Pennsylvania law, noting that common language phrases like "physical altercation" could encompass actions such as stabbings, suggesting a broader intent by insurers. Owen's attempted to circumvent the exclusion by arguing that the negligence alleged in the complaint regarding its employees' actions led to a death, claiming ambiguity in the term "arising out of." Defendants cited QBE Ins. Corp. v. M. S Landis Corp., where a nightclub's negligence in evicting a patron allegedly caused his death, and the court found ambiguity in the policy exclusion language. However, distinctions were noted between the language in Nautilus' exclusion and that in Landis. A later case with QBE Insurance demonstrated changes in exclusion language after Landis, where a complaint alleged negligence in failing to ensure patron safety, leading the court to uphold the newer exclusion for claims associated with assault and battery.
The Court's decision hinges on the expansive definition of "assault and battery" outlined in QBE's revised policy exclusion, which includes negligent actions by the insured or their employees that cause direct harm to others, covering negligence related to preventing or responding to assaults and batteries. The exclusion is broad, applying to all actions arising from any assault, battery, or physical altercation, including negligent hiring, training, or supervision.
In this case, the allegation that Owen's employees were negligent in securing a bottle that initiated a series of events leading to Ewing's death qualifies as conduct associated with an "assault, battery, or physical altercation." Previous court decisions have upheld similar exclusions, emphasizing that they encompass negligence claims connected to assaults or batteries, contrasting with the more limited scope of the Landis case.
The Defendants' argument against the applicability of the exclusion is rejected. They also reference a separate exclusion for "Expected or Intended Injury," which excludes coverage for injuries expected or intended by the insured, but includes an exception for bodily injury resulting from reasonable force used to protect persons or property.
Exclusions in the insurance policy specify that coverage does not apply to bodily injury or property damage expected or intended by the insured, with an exception for injuries resulting from reasonable force used to protect persons or property. Defendants contend that instructing Maldonado to retrieve a bottle made him a volunteer employee, thus invoking the reasonable force exception and requiring Nautilus to defend them. However, the court disagrees, stating that the exception applies solely to the specific exclusion mentioned and cannot be interpreted as a general rule throughout the policy. This interpretation avoids rendering the policy's numerous exclusions and exceptions incoherent. Ultimately, applying the exclusion to the allegations in the underlying complaint indicates that coverage is not applicable, leading to the conclusion that Nautilus' Motion for Judgment on the Pleadings should be granted. Mr. Ewing's parents are also named as defendants in this case, along with Owen's Café and its employee, Shawn Szrankowski.
