Court Opinion

ID: 1029278
Source: CourtListenerOpinion
Date Created: 2013-07-05 07:54:41.56434+00
Date Added: 2024-06-11T12:38:06.851166
License: Public Domain

UNPUBLISHED

                   UNITED STATES COURT OF APPEALS
                       FOR THE FOURTH CIRCUIT

                               No. 07-2019

CORNETT MANAGEMENT COMPANY, LLC, a foreign corporation,

                 Plaintiff - Appellant,

           v.

FIREMAN’S FUND INSURANCE COMPANY, a          foreign    corporation;
BRADY RISK MANAGEMENT, INCORPORATED,

                 Defendants - Appellees,

           and

LEXINGTON INSURANCE COMPANY, a foreign corporation; HARTAN
BROKERAGE, INCORPORATED,

                 Defendants.

Appeal from the United States District Court for the Northern
District of West Virginia, at Wheeling.     Frederick P. Stamp,
Jr., Senior District Judge. (5:04-cv-00022)

Argued:   May 14, 2009                       Decided:    June 22, 2009

Before NIEMEYER, MOTZ, and TRAXLER, Circuit Judges.

Affirmed by unpublished per curiam opinion.

ARGUED: Brent Karleton Kesner, KESNER, KESNER & BRAMBLE,
Charleston, West Virginia, for Appellant.        James William
Marshall, III, BAILEY & WYANT, PLLC, Charleston, West Virginia;
Melvin F. O’Brien, DICKIE, MCCAMEY & CHILCOTE, Wheeling, West
Virginia, for Appellees. ON BRIEF: Ellen R. Archibald, KESNER,
KESNER & BRAMBLE, Charleston, West Virginia, for Appellant.
Robert P. Martin, Billie Jo Streyle, BAILEY & WYANT, PLLC,
Charleston, West Virginia, for Appellee Fireman’s Fund Insurance
Company; Melissa M. Barr, DICKIE, MCCAMEY & CHILCOTE, Wheeling,
West Virginia, for Appellee Brady Risk Management, Incorporated.

Unpublished opinions are not binding precedent in this circuit.

                                2
PER CURIAM:

        In   this    insurance      coverage      dispute,     Cornett      Management

Company, LLC (Cornett) appeals the district court’s grant of

summary judgment to Fireman’s Fund Insurance Company (Fireman’s

Fund) finding Cornett not entitled to coverage.                    We affirm.

                                           I.

      Cornett,        a     Richmond-based       company,     owns    a     number    of

restaurants including a Hooters franchise in Charleston, West

Virginia.      Two female Hooters employees filed suit alleging that

a   Cornett    supervisor       improperly       conducted    a    strip    search    of

them.    Cornett      seeks     reimbursement       for     settlement      costs    and

attorneys     fees        arising   from   the   lawsuit,     under    an     insurance

policy issued by Fireman’s Fund.

      According to the employees’ complaint, in 2001 a manager at

the Hooters directed two female employees, one at a time, to his

office and stated that a customer had reported a stolen change

purse.       The manager told the women that a police officer had

telephoned,         and    he   directed    each    woman     to     listen    to    the

instructions of the officer on the phone.                      A male voice then

commanded the women to strip naked in front of the manager,

threatening them with a humiliating arrest if they failed to

comply.      The female employees complied.               (The telephone call was

later revealed to be a crank call.)

                                            3
     As a result of this and several other incidents at the

Hooters franchise, seven female employees filed a suit against

Cornett   and     others   alleging    sexual    harassment   (the    “Reynolds

complaint”).       The amended Reynolds complaint included a claim

for false imprisonment arising from the strip searches described

above.

     Cornett eventually settled the Reynolds suit, and Lexington

Insurance Company (Lexington) reimbursed Cornett for defense and

settlement costs to the limits of its coverage.                 Cornett then

sought additional coverage from a commercial general liability

insurance contract issued to it by Fireman’s Fund.

     “Coverage B” of the Fireman’s Fund policy covers claims

arising from “personal injury,” which include “[f]alse arrest,

detention    or   imprisonment.”        An   “Employment-Related      Practices

Exclusion”      (ERP   exclusion)     attached   to   the   policy,    however,

amends Coverage B, limiting coverage for personal injury.                 This

ERP exclusion provides:

     2.      The following exclusion is added to COVERAGE B
             (Section I):

             c. Personal injury arising out of any:

             . . .

                     (3)    Coercion,     demotion,  evaluation,
                     reassignment,     discipline,   defamation,
                     harassment, humiliation, discrimination or
                     other      employment-related    practices,
                     policies, acts or omissions.”

                                        4
(Emphasis added).

      Seeking coverage under this policy, Cornett filed suit in

state court against Fireman’s Fund.              After the case was removed

to federal court, the district court granted summary judgment to

Fireman’s Fund, finding that the ERP exclusion applied to all

claims presented in the underlying lawsuit and that therefore

Cornett was not entitled to reimbursement for costs arising from

that lawsuit.       Cornett noted a timely appeal. 1

                                      II.

        We review the district court’s grant of summary judgment de

novo.      Beard    Plumbing   &   Heating,   Inc.     v.   Thompson   Plastics,

Inc., 152 F.3d 313, 315 (4th Cir. 1998).               “[S]ummary judgment is

appropriate where there is no genuine dispute as to a material

fact.”     Id.     In this case, the parties agree that West Virginia

law   controls     the   interpretation     of   the   insurance   policy    and

that, under applicable law, “the language in an insurance policy

should be given its plain, ordinary meaning.”                   W. Va. Fire &

Cas. Co. v. Stanley, 602 S.E.2d 483, 489 (W. Va. 2004) (internal

quotation marks omitted).

      1
       If we determine that the exclusion does not apply to the
claims in the Reynolds suit, Fireman’s Fund seeks a remand in
order to conduct discovery to determine whether Cornett timely
notified Fireman’s Fund of its claim. Because we find that the
insurance policy excludes coverage of Cornett’s claim, we need
not reach the late notice issue.

                                       5
                                               III.

      Cornett      argues     that       the    ERP       exclusion    does      not    exclude

coverage for the Reynolds false imprisonment claim because (1)

Cornett had no practice or policy of strip searching employees

and (2) the ERP exclusion is ambiguous and therefore should be

construed against Fireman’s Fund as the insurer.                            Fireman’s Fund

disagrees,      arguing       that    because         the     manager      engaged       in    an

employment-related act when he strip searched the two women, the

exclusion applies.

      We can easily reject Cornett’s first argument -- that the

ERP exclusion applies only to employment-related practices or

policies    and    not   to     acts.          The    exclusion       specifically        lists

“employment-related         .   .    .     acts      or    omissions”      in    addition      to

“practices” and “policies.”                 Accordingly, the plain language of

the   exclusion       makes         clear       that       claims     arising          from    an

employment-related act may be excluded from coverage.

      Cornett’s second argument demands a bit more analysis.                                   It

requires us to determine what types of acts the policy meant to

exclude    from    coverage         when       it    listed    “[c]oercion,        demotion,

evaluation,       reassignment,          discipline,          defamation,        harassment,

humiliation, discrimination or other employment-related . . .

acts.”       Courts,        considering             similar    ERP     exclusions,            have

disagreed     as    to    how    to      interpret          this    type    of    provision.

Compare LDF Food Group, Inc. v. Liberty Mut. Fire Ins. Co., 146

                                                6
P.3d       1088,    1094-95        (Kan.    Ct.       App.    2006)      (holding          that     the

exclusion         applied     to    facts     very      similar         to    this        case)    with

Acuity       v.    N.   Cent.       Video,     LLLP,         No.    1:05-cv-010,            2007     WL

1356919, at *19 (D.N.D. May 7, 2007) (holding that the exclusion

was    ambiguous        and    thus    construing            it    against          the    insurance

company).          Because West Virginia law controls our interpretation

of the contract, we look to the West Virginia Supreme Court of

Appeals for guidance.

       In    Bowyer     v.    Hi-Lad,        Inc,      609    S.E.2d         895,    913     (W.    Va.

2004), which involved an employer installing a security camera

and microphone in a hotel lobby without informing employees,

West Virginia’s highest court found that an ERP exclusion 2 did

not apply because “nothing in the record suggest[s] that [the

insured] made it a practice, or had a policy, or engaged in,

acts of humiliation. . . .                   [T]here is nothing to indicate that

the    [insured’s]       actions       were       intended         to   cause       humiliation.”

Id. at 913 (emphasis added).

       In so holding, the West Virginia court indicated that the

ERP    exclusion        would        apply     to      any     claim         arising        from     an

       2
        The ERP exclusion in Bowyer excluded coverage for
liability “arising out of any . . . [e]mployment-related
practices, policies, acts or omissions, such as coercion, . . .
harassment, humiliation or discrimination directed at the
person.”   Bowyer, 609 S.E.2d at 913 (internal quotation marks
omitted).    For purposes of this case, we see no difference
between the meaning of this exclusion and of the ERP exclusion
in the Fireman’s Fund policy.

                                                  7
employer’s         act     or   omission   intended     to   result      in    coercion,

harassment,         humiliation,      or   discrimination.         In    the    case    at

hand,       such    intention     exists;    the     Reynolds     complaint         clearly

alleges      acts     by    a   Hooters    manager    that   involved     intentional

coercion,          harassment,       and   humiliation       of    the    two        female

employees who were strip searched.                 Accordingly, we believe that

a West Virginia court would hold that the ERP exclusion in the

Fireman’s          Fund     policy     excludes      coverage      for        the     false

imprisonment claim that arose from the strip searches.

     This interpretation of the ERP exclusion accords with that

of a number of other courts. 3              For example, in LDF Food Group v.

Liberty Mut. Fire Ins. Co., 146 P.3d 1088, 1094-95 (Kan. Ct.

App. 2006), the Kansas Court of Appeals determined that a nearly

identical ERP exclusion barred coverage of a claim resulting

from a strip search very similar to the one in this case.                            In so

holding, the Kansas court explained that the victim of the strip

search, in her lawsuit, had alleged coercive, harassing, and

humiliating acts by managers, and therefore the ERP exclusion in

that case excluded coverage.               Id.; see also Capitol Indem. Corp.

        3
       Moreover, we note that limiting the ERP exclusion to
claims in which the employer intends to cause coercion,
humiliation, or harassment, as the West Virginia court has done,
prevents the exclusion from applying to all acts done by an
employer or impacting an employee, a broad interpretation that
has led some courts to find the provision ambiguous. See, e.g.,
Acuity, 2007 WL 1356919, at *14-15, *19; Peterborough Oil Co. v.
Great Am. Ins. Co., 397 F. Supp. 2d 230, 238-39 (D. Mass. 2005).

                                             8
v. 1405 Assoc., Inc., 340 F.3d 547, 550 (8th Cir. 2003) (holding

that   under    Missouri   law,    the    term     “arising   out   of”    must    be

broadly construed thereby requiring the court to apply a broad

construction to the ERP exclusion).                A manager’s act, like the

one in this case, which intentionally humiliates, coerces, or

harasses   an    employee,   will        clearly    have   an   effect      on    the

employment relationship.          Such an act, therefore, is employment-

related and, under West Virginia law, falls within the language

of the ERP exclusion at issue here.

                                         IV.

       For the foregoing reasons, the judgment of the district

court is

                                                                          AFFIRMED.

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