Court Opinion

ID: 25939
Source: CourtListenerOpinion
Date Created: 2010-04-25 08:46:03+00
Date Added: 2024-06-11T08:45:07.392583
License: Public Domain

UNITED STATES COURT OF APPEALS
                        For the Fifth Circuit

                            No. 99-60758

         AMERICAN GUARANTEE AND LIABILITY INSURANCE COMPANY,

                              Plaintiff-Counter Defendant-Appellee,

                               VERSUS

                    THE 1906 COMPANY, ETC.; ET AL

                                                         Defendants

   THE 1906 COMPANY (Formerly Known as Hattiesburg Coca-Cola
             Bottling Company); RICHARD S. THOMSON;

         Defendants-Cross Defendants-Counter Claimants-Appellants,

                                 and

              GENERAL STAR NATIONAL INSURANCE COMPANY,

               Defendant-Cross Claimant-Counter Claimant-Appellant.

          Appeal from the United States District Court
   For the Southern District of Mississippi, Jackson Division
                          November 12, 2001

Before SMITH and DENNIS, Circuit Judges, and ROETTGER,1 District
Judge.

    1
      District Judge of the Southern District of Florida, sitting
by designation.

                                  1
DENNIS, Circuit Judge:                      panel   affirmed   the  district
     American      Guarantee      and       court’s     judgment     denying
Liability     Insurance       Company       coverage for any claims against
(“American Guarantee”) brought              John Thomson and claims against
this diversity suit seeking a               Richard Thomson and Hattiesburg
declaratory judgment that the               Coke based on their alleged
comprehensive general liability             vicarious liability for John’s
(“CGL”) insurance policies it               acts. That panel also affirmed
sold to Hattiesburg Coca-Cola               the district court’s ruling that
Bottling Company (“Hattiesburg              all   claims   against   Richard
Coke” or “Coke”) afforded no                Thomson and Hattiesburg Coke are
coverage or defense for twenty-             excluded from coverage under the
one     Mississippi         lawsuits        Coverage   A   portion  of   the
alleging    that,      among    other       policies.    See id.    However,
things,   the     insured’s      male       that panel vacated the district
employee    had     surreptitiously         court’s ruling that the policies
videotaped     female      customers        excluded coverage for Richard
changing clothes in a women’s               Thomson and Hattiesburg Coke
dressing room on the insured’s              under Coverage B. See id. at
premises.    The district court,            811.    The panel remanded the
on American Guarantee’s motion              case for new proceedings on
for summary judgment, ruled that            Coverage B.    After remand, on
the insurer had no duty to                  American Guarantee’s motion for
defend or indemnify Hattiesburg             summary judgment, the district
Coke, Richard Thomson (Coke’s               court ruled that the insurer
chief executive officer), or                also had no duty to defend or
John Thomson, (Coke’s alleged               indemnify under Coverage B. All
employee-voyeur       and     Richard       adversely    affected    parties
Thomson’s    son)     under    either       appealed, including Hattiesburg
Coverage   A     or    Coverage    B.       Coke’s umbrella insurer, General
(Generally speaking, Coverage A             Star National Insurance Company.
insures     against       accidental        We reverse and grant motions for
bodily   injury      and    property        summary     judgment     against
damage liability; Coverage B                American Guarantee and in favor
insures against non-accidental,             of Hattiesburg Coke, Richard
non-bodily      personal       injury       Thomson, and General Star.3
liability).      Hattiesburg Coke,
Richard    Thomson,       and    John       I. Facts and Procedural History
Thomson appealed. A prior panel             A. Background: American Guar. I
of this court affirmed in part,
reversed in part, and remanded
in part. See American Guar. &               name to “The 1906 Company.” To
Liab. Ins. Co. v. The 1906 Co.,             avoid confusion, we follow the
129 F.3d 802, 810 (5th Cir.                 first   panel’s  precedent  of
1997)(“American Guar. I”).2 That            referring    to the company’s
                                            original name.
     2                                           3
      After this case was filed,                   John Thomson is    not   a
Hattiesburg Coke changed its                party to this appeal.

                                        2
                                           the studio's operations. John,
     The background facts were             however, still had access to VAS
well stated in the prior panel             and was in the midst of winding
opinion.       We    repeat     them       up its affairs when the events
verbatim for easy reference:               giving rise to the underlying
     “Having recently developed            state court lawsuits came to
an interest in photography while           light.
living   in     Minnesota,      John            “In November 1991, a VAS
Thomson returned to Hattiesburg,           client picked up a videotape
Mississippi with a desire to               which she thought contained her
open his own photography studio.           portfolio photographs.       When
In early 1990, Richard Thomson,            she   viewed    the   tape,   she
John's   father     and    CEO    of       discovered footage of herself
Hattiesburg Coke, authorized the           dressing and undressing in the
use of Hattiesburg Coke funds to           VAS dressing room. She reported
open   a   photography       studio,       her discovery to police, who
Visual Arts Studio (VAS).        The       searched the studio and found
new studio was located at 3820             numerous other tapes containing
Hardy    Street,      Hattiesburg,         footage of young women dressing
Mississippi, more than a mile              and undressing in the same room.
from the     company's     bottling        The police also discovered a
operation.           The      studio       fiber optic camera concealed
concentrated on photographing              underneath   a   bench   in   the
and videotaping young women for            dressing room.
modeling      portfolios         and            “In the months following
advertisements,     as    well    as       the     police    investigation,
‘glamour photography.’ Although            twenty-one women filed lawsuits
the studio operated under a                against John Thomson, Richard
different     name       and     was       Thomson, VAS, and Hattiesburg
physically separate from the               Coke. These plaintiffs alleged
bottling company, it was owned             various    causes    of    action
and operated as a division of              including invasion of privacy,
Hattiesburg Coke. Moreover, the            outrage, intentional infliction
VAS employees were considered              of emotional distress, fraud,
employees of Hattiesburg Coke,             negligence, and exploitation of
and all major business decisions           minors. The complaints included
concerning the studio, from the            allegations    that  Hattiesburg
purchase of equipment to the               Coke and Richard Thomson were
scope and ultimate termination             vicariously liable for John's
of the business, were made at              acts because John acted as a
Hattiesburg    Coke's     corporate        Hattiesburg Coke employee in
headquarters     at   4501     Hardy       making the tapes and because
Street.                                    John served as a director and
     “By the spring of 1991, VAS           officer of Hattiesburg Coke.
was operating in the red and               The complaints also sought to
John Thomson wanted to return to           visit liability on Hattiesburg
school. Thus, Hattiesburg Coke             Coke and Richard Thomson for a
officials decided to terminate             host of negligence-based torts,

                                       3
including negligent entrustment,          damages    alleged     constituted
negligent     supervision,      and       ‘bodily injury’;      and whether
negligent hiring.                         John's conduct fell within a
     “Hattiesburg     Coke     held       policy exclusion for criminal
liability insurance policies for          activities.           Eventually,
the    periods    in      question.       nineteen of the twenty-one suits
American     Guarantee,       their       were settled,4 with John Thomson
principal   insurer,     issued   a       agreeing       to     contribute
combined       property         and       approximately     $2,545,000   and
comprehensive general liability           General Star agreeing to pay
insurance policy to Hattiesburg           approximately     $3,774,000    on
Coke covering the period from             behalf of Richard Thomson and
December   31,    1989,     through       Hattiesburg Coke.
December 31, 1990.      The policy             “Once      the     underlying
was renewed for the period from           lawsuits were settled, American
December   31,    1990,     through       Guarantee filed this declaratory
December 31, 1991.      The policy        judgment action against John
provided   liability      insurance       Thomson,    the    1906   Company,
coverage    of    $500,000      per       Richard Thomson, and General
occurrence and $1,000,000 in the          Star to resolve its coverage
aggregate. Hattiesburg Coke was           obligations. The district court
also the named insured under an           found that the insurance policy
Umbrella Liability Policy for             unambiguously limited liability
the     Coca-Cola        Bottlers         coverage to injuries arising
Association issued by General             from certain premises designated
Star National Insurance Company           on the declarations page of the
("General Star") for the policy           policy and that the VAS property
period January 1, 1990, through           was   not    included    in   that
January 1, 1991.     Each General         designation.      The court also
Star policy provided liability            concluded that John Thomson's
coverage   of    $5,000,000     per       actions were not within the
occurrence and in the aggregate.          scope of his employment and that
     “After         discussions           the injuries alleged by the
concerning coverage, American             women did not constitute an
Guarantee   agreed     to    defend       ‘occurrence’ under the policy
Hattiesburg Coke and Richard              because they were intended or
Thomson in the state court suits          expected from the standpoint of
under a reservation of rights,            the insured.     Accordingly, the
but   refused    to    defend    or       district court granted summary
indemnify John Thomson. In its            judgment in favor of American
reservation        of       rights        Guarantee.      The court also
correspondence,          American         denied General Star's claim for
Guarantee      raised       several       indemnification for the payments
coverage questions, including             it had made on behalf of Richard
whether the VAS building was a            Thomson and the 1906 Company.
designated premises;        whether
the conduct alleged constituted
                                               4
an ‘occurrence’;      whether the                 The remaining two suits
                                          were dismissed as time barred.

                                      4
See id. at 804-05.                         novo.   See Liberty Mut. Fire
                                           Ins. Co. v. Canal Ins. Co., 177
       B. Current Issues                   F.3d 326, 331 (5th Cir. 1999);
        Before the Court                   Lubbock County Hosp. Dist. v.
                                           National Union Fire Ins. Co.,
     In this second appeal by              143 F.3d 239, 241-42 (5th Cir.
Hattiesburg      Coke,       Richard       1998).
Thomson, and General Star, the
case returns with little added              II. Mississippi’s Rules for
to the record or the district                  Interpreting Insurance
court’s reasons; however, the                         Contracts
parties have provided additional
oral   and    written      arguments            The    law   governing    the
focused on Coverage B. With the            interpretation     of    insurance
benefit of their advocacy, we              contracts is well settled in
address the questions that the             Mississippi.      In determining
prior panel pretermitted or did            whether American Guarantee owes
not definitively resolve: (1)              Hattiesburg Coke or its CEO a
whether     the      state     court       duty to defend or indemnify, we
complaints allege viable causes            look to the allegations in the
of action against Hattiesburg              underlying       state      court
Coke    and    Richard      Thompson       complaints.    If the complaints
because of their own negligence            state a claim that is within or
in   not     taking     appropriate        arguably within the scope of
precautions against the alleged            coverage provided by the policy,
tortious     conduct      of    John       American Guarantee is obliged to
Thomson; (2) whether the alleged           defend    and,    if    necessary,
personal injuries arose out of             indemnify Hattiesburg Coke. See
the   conduct     of    Hattiesburg        Centennial Ins. Co. v. Ryder
Coke’s business; and (3) if so,            Truck Rental, Inc., 149 F.3d
whether     the       complainants’        378, 383 (5th Cir. 1998); State
injuries arose out of offenses             Farm Mut. Auto. Ins. Co. v.
for which Coverage B provided              Scitzs, 394 So. 2d 1371, 1373
non-bodily     personal       injury       (Miss. 1981) (both noting that
liability insurance (viz., the             Mississippi    courts    interpret
offense of the invasion of the             terms of insurance policies,
right of private occupancy of a            particularly exclusion clauses,
room that a person occupies by             favorably     to    the    insured
or on behalf of its owner).                wherever reasonably possible);
                                           see also Canal Ins. Co., 177
     C. Standard of Review                 F.3d at 331 (stating that under
                                           Mississippi law, “any doubt as
     In our plenary review of              to the existence of a defense
the district court’s granting              obligation is . . . resolved in
and   rejecting    motions   for           favor of the insured”).         In
summary judgment, we decide the            comparing the complaints with
foregoing issues of law and                the policy terms, we look not to
insurance policy construction de           the particular legal theories

                                       5
pursued      by     the      state       general rule that “[a]n insurer
complainants,     but     to   the       must bear the entire cost of
allegedly     tortious     conduct       defense   when    ‘there    is    no
underlying their suits.        See       reasonable means of prorating
Equal   Employment     Opportunity       the costs of defense between the
Comm’n v. Southern Publ’g Co.,           covered   and   the    not-covered
894 F.2d 785, 790-91 (5th Cir.           items.’”) (quoting Insurance Co.
1990)    (“Under    Mississippi’s        of N. Amer. v. Forty-Eight
‘allegations of the complaint’           Insulations,    Inc.,    633    F.2d
rule if the factual allegations          1212, 1224-25 (6th Cir. 1980),
of the complaint bring the               cert. denied, 454 U.S. 1109
action within coverage of the            (1981)).     We must give the
policy, the insurer has a duty           policy language its plain and
to defend.”); see also State             ordinary meaning, see Blackledge
Farm Mut. Auto. Ins. Co. v.              v. Omega Insurance Co., 740 So.
Taylor, 233 So. 2d. 805, 808             2d 295, 298 (Miss. 1999) (“terms
(Miss.    1970)   (stating    that       used in an insurance policy
although an insurer normally             should be understood in their
bases its duty to defend on the          plain, ordinary, and popular
facts alleged in the petition,           sense    rather    than      in    a
it may also have a duty to               philosophical     or    scientific
defend if it knows of other              sense”),    and     resolve      any
facts that warrant coverage).            ambiguities      or      equivocal
American Guarantee is justified          expressions in favor of the
in refusing to defend only if it         insureds,    see     Ryder    Truck
is clear from the face of the            Rental, Inc., 149 F.3d at 382-
state court complaints that the          83, but not create ambiguities
allegations    therein    are  not       where none exist.      See Scitzs,
covered.       See    Moeller   v. 394 So. 2d at 1372.
American Guar. & Liab. Ins. Co.,
707 So. 2d 1062, 1069 (Miss.                 III. Relevant Coverage B
1996); see also Merchants Co. v.              Provisions; Coverage A
American Motorists Ins. Co., 794                   Distinguished
F.Supp. 611, 617 (S.D. Miss.
1992) (“[T]he duty to defend is               Coverage   B  of the CGL
broader than the insurer's duty          policy that American Guarantee
to indemnify under its policy of         issued to Hattiesburg Coke in
insurance: the insurer has a             1990 provides:
duty to defend when there is any
basis for potential liability                 COVERAGE B. PERSONAL
under the policy”).      Moreover,            AND ADVERTISING INJURY
because the state suits allege                LIABILITY
multiple grounds for recovery,
American Guarantee must provide               1. Insuring Agreement.
a defense if any ground falls
within the terms of the policy.               a. We will pay those
See Southern Publ’g Co., 894                  sums that the insured
F.2d at 790-91 (adopting the                  becomes      legally

                                     6
     obligated to pay              In 1991, American Guarantee
     as      damages          altered the “wrongful entry”
     because        of        provision of the policy as
     “personal injury”        follows:
     or   “advertising
     injury” to which               c. Wrongful eviction
     this    insurance              from, wrongful entry
     applies. . . .                 into, or invasion of
     We will have the               the right of private
     right and duty to              occupancy of a room,
     defend any “suit”              dwelling or premises
     seeking     those              that a person occupies
     damages.                       by or on behalf of its
                                    owner,   landlord   or
*         *          *              lessor

b.   This     insurance       (emphasis added).
applies to “personal                Coverage        B      insurance
injury”       only   if       against        personal        injury
caused by an offense:         liability is        typical of such
(1) Committed in the          provisions       that     have    been
“coverage   territory”        included in CGL policies since
during    the    policy       the 1980s.        See generally M.
period; and                   Jane    Goode,     Personal     Injury
(2) Arising out of the        Liability Coverage, 30-SPG Brief
conduct     of     your       39 (Spring 2001); Fritz K.
business . . . .              Huszagh & Marisa A. Mancici,
                              Current       Issues        Involving
*         *          *        Insurance of Claims for Personal
                              Injury, 427 PLI/LIT 483 (1992).
SECTION V–DEFINITIONS         Coverage     B     personal     injury
                              liability insurance differs from
*         *          *        Coverage A bodily injury and
                              property damage insurance in at
10. “Personal injury”         least     two     important      ways.
means injury, other           First,     unlike       Coverage    A,
than “bodily injury”,         Coverage B may be triggered
arising out of one or         without proof of an accidental
more of the following         occurrence. Instead, Coverage B
offenses:                     is activated by the commission
*         *          *        of certain specified offenses
c.   Wrongful    entry        during the policy period. Also
into, or eviction of a        unlike     Coverage        A,    which
person from, a room,          excludes coverage for “‘[b]odily
dwelling or premises          injury’ or ‘property damage’
that    the     person        expected or intended from the
occupies.                     standpoint      of    the    insured,”
                              Coverage B expressly extends

                          7
coverage    to    liability   for       and B coverage; we deal only
“‘personal injury’ . . . other          with    intrinsic    Coverage   B
than ‘bodily injury’,” caused by        personal    liability   insurance
certain defined offenses arising        claims.
out of the insured’s business.
American Guar. I, 129 F.3d at             IV. Discussion of Coverage
808. Therefore, under Coverage                       Issues
B, the triggering act may be              A. The Insureds’ Liability
intentional.                                    Under State Law
     Consequently, cases turning
on    the     “occurrence”     or            Under Coverage B, American
“accident”     requirement     of       Guarantee agreed to “pay those
Coverage    A    type   liability       sums that the insured becomes
insurance (or its exclusion of          legally obligated to pay as
intentional       or    expected        damages because of ‘personal
injuries) are irrelevant to this        injury’ . . . to which this
appeal.   See, e.g., Sennett v.         insurance applies.”    “Personal
United States Fid. & Guar. Co.,         injury” is defined by the policy
757 So. 2d 206, 210-13 (Miss.           as “injury, other than ‘bodily
2000); Ramsay v. Omnibank, 215          injury’, arising out of one or
F.3d 502, 503 (5th Cir. 2000);          more of the following offenses .
Audubon Ins. Co. v. Stefancik,          . . .”      Thus, the threshold
98 F. Supp. 2d 751, 754-55 (S.D.         question is whether, based on
Miss. 1999); United States Fid.         the state court allegations,
& Guar. Co. v. B & B Oil Well           Hattiesburg Coke and Richard
Serv., Inc., 910 F. Supp. 1172,         Thomson can be held liable under
1176-86 (S.D. Miss. 1995) (all          Mississippi law to pay damages
interpreting Coverage A type            for non-bodily personal injury
policies).    Also irrelevant to        to the state court plaintiffs.
this appeal are cases in which          We conclude that they can.
the insured seeks Coverage B                 The complainants in the
personal     injury     liability       underlying state court actions
coverage   for    its   pollution       alleged that, as the result of
damage to another person despite        the negligent acts and omissions
the pollution damage exclusion          of    Richard     Thomson     and
contained in the Coverage A             Hattiesburg Coke, they sustained
provision of its policy.     See,       personal injuries arising out of
e.g., Gregory v. Tennessee Gas          John     Thomson’s      wrongful
Pipeline Co., 948 F.2d 203, 209         intrusion   into   the    women’s
(5th Cir. 1991) (holding that           dressing     room     and     his
“to extend Coverage B to all            clandestine videotaping of their
property    damages,    including       images while they occupied the
damages which would be covered          room to change clothes.        In
under Coverage A, would render          particular,      the     factual
the     pollution      exclusion        allegations      include      the
meaningless”). In other words,          following: (1) Hattiesburg Coke
in this appeal we are not faced         and Richard Thomson funded VAS
with a claim for overlapping A          and John Thomson in all aspects

                                    8
of the VAS business, and that                furtive, secretive photography,
Hattiesburg     Coke     owned     the       which had no legitimate place in
building in which VAS operated;              a photography studio”; (8) John
(2) VAS and John Thomson used                Thomson “‘wired’ the changing
the Hattiesburg Coke trademark               room with hidden movie cameras
on its letterhead stationary,                and secretly recorded by VCR
holding themselves out to be                 tape the [state court plaintiff]
official agents and advertising              in the process of changing
representatives of Hattiesburg               clothes”;    (9)    “Thomson   then
Coke; (3) VAS and John Thomson               utilized the entire tape of the
“set themselves out to the                   [state court plaintiffs, whom
public to be . . . professional              were minors] to add to his
photographers”; (4) Hattiesburg              ‘composite’ tape of other women,
Coke    and      Richard      Thomson        all in different stages of
“induc[ed]    the     [state    court        nudity”; (10) Thomson shared
plaintiffs,       some     of     them       copies of the tapes with other
minors,]    to     submit    to    the       viewers and possibly sold the
photograph sessions . . . in the             copies; (11) John Thomson had a
furtherance     of    the    business        history      of       distributing
interests of Hattiesburg Coca-               “illegitimate” nude photography;
Cola Bottling        Company”;     (5)       (12)    Hattiesburg      Coke   and
Hattiesburg Coke and Richard                 Richard    Thomson     “failed   to
Thomson “solicited clients for               properly warn the [state court
VAS for purposes of its own                  plaintiffs] that . . . John
advertising”; (6) Hattiesburg                Thomson had the propensity to
Coke “purchased        the    special        commit illegal acts such as
fiber optic lenses and camera                photographing and videotaping
equipment used by . . . John                 [minors] in various stages of
Thomson for the secretive and                undress”; (13) Hattiesburg Coke
illicit        dressing         room         and    Richard     Thomson    “were
photographs . . . [and] that                 negligent    in   allowing    [John
[Hattiesburg      Coke]    knew,    or       Thomson]     to      utilize    the
should have known, that the said             Hattiesburg Coca-Cola Company
special equipment and lenses                 staff, equipment, and assets in
were    not    necessary       to    a       his business efforts to induce
legitimate photography business,             the [state court plaintiffs] . .
and were for an improper and                 .   to    be    photographed    and
illicit        purpose”;           (7)       videotaped in various stages of
Hattiesburg Coke “was negligent              undress”; (14) Hattiesburg Coke
in purchasing for the [VAS]                  and    Richard     Thomson    “were
special ‘spy’ type lenses and                negligent in failing to keep a
camera equipment that did not                proper . . . lookout for safety
have a legitimate purpose in a               and well being of the [state
normal photography studio, and               court plaintiffs] while in the
[that Hattiesburg Coke] knew or              studios of the defendants” due
should have known that the said              to the fact that the state court
special     lenses     and     camera        plaintiffs       were      business
equipment were normally used for             invitees of Hattiesburg Coke and

                                         9
Richard Thomson; and (15) the         (citing Little by Little v.
actions of Hattiesburg Coke “in       Bell, 719 So. 2d 757, 760 (Miss.
purchasing for [VAS] the special      1998);     Steele     v.    Inn   of
‘spy’ type camera lenses and          Vicksburg, Inc., 697 So. 2d 373,
other special camera equipment,       377 (Miss. 1997)).            “‘[A]n
when the officers and directors       invitee is a person who goes
of the said company knew or           upon the premises of another in
should have known that such           answer to the express or implied
equipment    did    not    have   a   invitation of the owner or
legitimate     purpose      in    a   occupant      for    their    mutual
photography studio, was grossly       advantage.’” Little by Little,
negligent.” 719 So. 2d at 760 (quoting
      Based on the allegations of     Hoffman v. Planters Gin Co., 358
the state court complainants,         So. 2d 1008, 1011 (Miss. 1978));
the insureds are potentially          Steele, 697 So. 2d at 377
liable under three theories of        (quoting Skelton v. Twin County
negligence.       First,    Richard   Rural Elec. Ass’n, 611 So. 2d
Thomson and Hattiesburg Coke          931, 936 (Miss. 1992)).
failed to maintain reasonably               Second, the insureds were
safe    conditions     for    their   potentially          liable      for
business invitees. “Mississippi       negligently hiring John Thomson.
imposes on business owners ‘the       Under     Mississippi      law,   an
duty to maintain the premises in      employer may be held liable for
a reasonably secure or safe           negligently hiring an employee
condition’ for business patrons       who      intentionally       injures
or invitees.” Whitehead v. Food       another if, prior to the injury,
Max, Inc., 163 F.3d 265, 271          the employer knew or should have
(5th Cir. 1998) (quoting Lyle v.      known      of     the     employee’s
Mladinich, 584 So. 2d 397, 399        propensity for the conduct in
(Miss. 1991); see also id.            question. Thatcher v. Brennan,
(further quoting Lyle:       “[A]ny   657 F. Supp. 6, 10 (S.D. Miss.
business    which    invites    the   1986) (citing Jones v. Toy, 476
company of the public must take       So. 2d 30, 31 (Miss. 1985));
reasonably necessary acts to          Freeman     v.     Lester    Coggins
guard against the predictable         Trucking, Inc., 771 F.2d 860,
risk of assaults.       A business    861 n.1 (5th Cir. 1985); Schultz
proprietor owes a duty to those       v. Evelyn Jewell, Inc., 476 F.2d
entering its premises to provide      630, 631 (5th Cir. 1973));
a    reasonably    safe     place.”   Tichenor      v.   Roman    Catholic
(internal quotations omitted)).       Church, 32 F.3d 953, 960 (5th
This duty owed by business            Cir.    1994);    cf.    Restatement
owners includes the protection        (Second) of Torts § 307 (1965)
of patrons or invitees from the       (“It is negligence to use an
foreseeable wrongful acts of          instrumentality, whether a human
employees and third persons on        being or a thing, which the
the premises. See id.; L.T. v.        actor knows or should know to be
City of Jackson, 145 F. Supp. 2d      so incompetent, inappropriate,
756, 759 (S.D. Miss. 2000)            or defective, that its use

                                   10
involves an unreasonable risk of           Additionally,          John
harm to others.”).                    Thomson’s voyeuristic acts fall
     Third, Hattiesburg Coke and      squarely     within     two    of
Richard Thomson are potentially       Mississippi’s intentional torts:
liable for their entrustment of       (a) invasion of privacy and (b)
the VAS facilities and equipment      outrageous     conduct    causing
to John Thomson.      Mississippi     severe emotional distress.     In
has adopted the doctrine of           each   instance,    the   state’s
negligent entrustment as defined      courts    have    expressly    or
by the Restatement (Second) of
Torts § 390 (1965):
     One    who     supplies
     directly or through a            entrustment: “It is negligence
     third person a chattel           to permit a third person to use
     for use of another               a thing or to engage in an
     whom    the    supplier          activity which is under the
     knows or has reason to           control of the actor, if the
     know   to   be   likely          actor knows or should know that
     because of his youth,            such person intends or is likely
     inexperience,        or          to use the thing or to conduct
     otherwise, to use it             himself in the activity in such
     in a manner involving            a   manner   as   to    create   an
     unreasonable risk of             unreasonable risk of harm to
     physical     harm    to          others.”).    See also id. § 7
     himself    and   others          (“‘[I]njury’ . . . denote[s] the
     whom    the    supplier          invasion     of     any     legally
     should expect to share           protected    interest[;]     ‘harm’
     in or be endangered by           denote[s] the existence of loss
     its use, is subject to           or detriment in fact of any kind
     liability for physical           to a person[;] ‘physical harm’ .
     harm    resulting    to          . . denote[s] the physical
     them.                            impairment of the human body, or
                                      of land or tangible chattels.”).
See Sligh v. First Nat’l Bank,        Under the Restatement (Second)
735 So. 2d 963, 968 (Miss. 1999)      of Torts § 46, liability may
(quoting section 390); Tillman        result     from     extreme     and
v.   Singletary,  No.   1999-CA-      outrageous conduct intentionally
00686-COA, 2001 WL 268246, *3         or recklessly causing severe
(Miss. Ct. App. March 20, 2001)       emotional distress even without
(same).5                              bodily contact or harm.        See,
                                      e.g.,      Adams       v.      U.S.
                                      Homecrafters, Inc., 744 So. 2d
736, 742-43 (Miss. 1999) Smith
     5
         We believe that the          v. Malouf, 722 So. 2d 490, 497-
Mississippi courts would also         98     (Miss.      1998)      (both
follow   the   closely  related
Restatement (Second) of Torts §       recognizing a right to recover
308 (1965) (providing a more          for   mental    anguish    in   the
general definition of negligent       absence of bodily injury).

                                    11
implicitly adopted the pertinent
sections of the       Restatement         Finally, the Mississippi
(Second) of Torts.                   Supreme Court has recognized the
     Sections 652B and 652C of       tort of intentional or reckless
the Restatement      (Second)   of   infliction of emotional distress
Torts, in pertinent parts, state     by   extreme    and   outrageous
the elements of invasion of          conduct.       The   Restatement
privacy: “One who intentionally      (Second) of Torts § 46 (1965)
intrudes,      physically       or   provides: “One who by extreme
otherwise, upon the solitude or      and     outrageous      conduct
seclusion of another or his          intentionally    or   recklessly
private affairs or concerns, is      causes severe emotional distress
subject to liability to the          to   another   is   subject   to
other   for   invasion    of   his   liability for such emotional
privacy, if the intrusion would      distress, and if bodily harm to
be   highly    offensive    to   a   the other results from it, for
reasonable person.” Restatement      such bodily harm.” See Speed v.
(Second) of Torts § 652B (1977).     Scott, 787 So. 2d 626, 629 n.1
“One who appropriates to his own     (Miss. 2001) (acknowledging the
use or benefit the name or           existence under Mississippi law
likeness of another is subject       of the cause of action detailed
to liability to the other for        by Restatement (Second) of Torts
invasion of his privacy.” Id. §      § 46); Donald v. Amoco Prod.
652C.    The Mississippi Supreme     Co., 735 So. 2d 161, 178-79
Court has held that a person is      (Miss. 1999) (same).
liable    if   there    has   been        Considering    the    facts
“interference with plaintiff’s       alleged by the plaintiffs in the
seclusion . . . that would be        underlying state court lawsuits,
highly offensive to the ordinary     taken as true and construed in
reasonable man, as the result of     the light most favorable to the
conduct to which the reasonable
man would     strongly    object.”
Candebat v. Flanagan, 487 So. 2d     So.    2d   378,    382    (Miss.
207, 209 (Miss. 1986) (quoting       1990)(adopting § 652D); Candebat
id. § 652B cmt. d).       Although   v. Flanagan, 487 So. 207, 212
the Mississippi Supreme Court        (Miss. 1986) (adopting § 652H);
has    not   expressly     adopted   Prescott   v.   Bay   St.   Louis
section 652C, we think that it       Newspapers, Inc., 497 So. 2d 77,
would if it were presented with      79 (Miss. 1986) (adopting §
a case falling within its ambit.6    652E).        Furthermore,    the
                                     Mississippi Supreme Court has
                                     made clear that it has not yet
     6
       Mississippi has expressly     defined the outer limits of the
adopted     several    of    the     state’s invasion of privacy law.
Restatement’s     invasion    of     See Young, 786 So. 2d at 381
privacy provisions. See, e.g.,       (“We have made no effort to
Plaxico v. Michael, 735 So. 2d       identify the outer limits of a
1036, 1039 (Miss. 1999) (quoting     person’s right of privacy and
§ 652B); Young v. Jackson, 572       certainly make none here”).

                                 12
plaintiffs, and complying with          precludes coverage because John
our Erie duty, we conclude that         Thomson’s acts at VAS did not
the Supreme Court of Mississippi        arise out of the conduct of
would decide that (1) John              Hattiesburg Coke. This court in
Thomson committed the torts of          American Guar. I concluded that,
invasion of privacy and extreme         under the facts alleged by the
and outrageous conduct upon the         state court complainants, their
plaintiffs in the underlying            personal injuries were caused by
state lawsuits; and that (2)            the offenses of John Thomson
Richard Thomson and Hattiesburg         which arose out of the conduct
Coke may be held liable for             of VAS’s business, as part of
their own negligence in the             Hattiesburg Coke’s business, and
state lawsuits under at least           was managed and directed by the
three theories of recovery:(a)          company and its CEO from the
failure   to     take    reasonable     company   headquarters    on  the
precautions     to    protect   the     designated premises. The prior
victims, as invitees, from the          panel said:
foreseeable intentional torts of             [I]n the present case
John Thomson;      (b)    negligent          the phrase “arising
hiring   of    John    Thomson   to          out of” the “use” of
operate VAS although they knew               the      designated
or should have known of John                 premises requires that
Thomson’s propensity to commit               there   be   a   causal
the intentional torts against                connection between the
the victims; and (c) negligently             injuries to the women
entrusting John Thomson with the             improperly videotaped
VAS studio and equipment highly              by John Thomson and
susceptible to voyeuristic uses              the      designated
although they knew or should                 premises located at
have known that he was likely                4501 Harding Street.
because     of     his     history,          We further conclude
character, and propensities to               that such a connection
use them to personally injure                exists.        It     is
the victims.                                 undisputed that the
                                             decisions to set up
  B. Personal Injury “Arising                VAS,   construct    its
  Out of the Conduct of” the                 offices,      purchase
      Insureds’ Business                     equipment,        and,
                                             eventually, to close
     Under Coverage B, American              it down, were all made
Guarantee agreed to indemnify                by Richard Thomson and
Hattiesburg Coke and Richard                 other Hattiesburg Coke
Thomson for non-bodily personal              officials          and
injury liability caused by an                employees           at
offense “arising out of the                  Hattiesburg       Coke
conduct   of”    the  insureds’              headquarters,          a
business.   American  Guarantee              designated   premises.
argues   that   this  provision              Moreover,    VAS    was

                                      13
operated     as   a        activities,     the
formal     division        operation of the
of    Hattiesburg          d e s i g n a t e d
Coke, with John            premises, and the
Thomson assigned           injuries      that
the title of vice          resulted      from
president        of        John     Thomson’s
Hattiesburg                intentional     and
Coke’s      “Visual        tortious actions
Arts   Division.”          at VAS.     . . .
In     addition,           Were we confined
Richard     Thomson        to    finding     a
testified in his           causal connection
deposition     that        between        the
a l l           o f        injuries stemming
Hattiesburg                from the improper
Coke’s divisions           videotaping      at
shared the same            VAS and use of
general checking           Hattiesburg
account and that           Coke’s    premises
all    of     VAS’s        at   4501    Hardy
expenses       were        Street     as     a
paid from this             building,        we
account.       John        doubt we would
Thomson         was        reach the same
required to pay            conclusion.
all VAS expenses           However, a CGL
from a rolling             policy          is
petty         cash         designed         to
account and then           insure its holder
submit         his         from more than
expenses        and        just      injuries
receipts         to        arising from the
Hattiesburg Coke,          condition or use
which would then           of its buildings
remit these sums           as     buildings.
back    into    the        For the reasons
account. U n d e r         described above,
t         h       e        we conclude that
circumstances, a           the     requisite
factfinder could           causal connection
find    a    causal        exists     between
c o n n e c t i o n        the      injuries
b e t w e e n              alleged in the
Hattiesburg Coke           underlying state
and       Richard          court     lawsuits
T h o m s o n ’ s          and the use of
supervisory                the     company’s

                      14
               headquarter           between the personal injuries
               s        b y          and the company headquarters
               R i c h a r d         building.     Consequently, the
               Thomson and           prior panel necessarily decided
               Hattiesburg           that the alleged injuries arose
               Coke       to         out of the conduct of the
               supervise             insured’s    business.       For
               J o h n               virtually the same reasons, we
               Thomson’s             conclude that John Thomson’s
               activities            acts arose out of the conduct of
               at VAS, a             Hattiesburg Coke’s business.
               wholly-owne
               d   division                   C. The Offense of
               of       the                Invasion of the Right of
               company.                  Private Occupancy of a Room
               Thus,     the             by or on Behalf of Its Owner
               negligence
               c l a i m s                American    Guarantee    was
               a g a i n s t         obligated     to    defend    and
               Hattiesburg           indemnify Hattiesburg Coke and
               Coke      and         Richard Thomson against all of
               R i c h a r d         the state court complainants’
               Thomson are           actions because (1) Coverage B
               n     o     t         of the 1991 policy may be
               excluded              reasonably interpreted to insure
               f r o m               against offenses, i.e., torts,
               coverage by           that accrued in 1991; (2) the
               t     h     e         alleged torts of invasion of
               designated            privacy    committed    by   John
               premises              Thomson all accrued in 1991; and
               endorsement           (3)    the    alleged    personal
               .                     liability of Hattiesburg Coke
                                     and Richard Thomson reasonably
American Guar. I, 129 F.3d at        may be found to have arisen out
807-08 (emphasis added).     The     of offenses of invasions of
first panel, in reaching the         private occupancy of a room that
decision that there was the          persons occupied by or on behalf
requisite    causal   connection     of its owner.
between the alleged personal
injuries   and   the   corporate        1.   “Offense committed during .
headquarters premises, expressly             . . the policy period.”
stated that it did so because
the VAS operations from which             Coverage B of the 1991
the actionable offenses arose        insurance policy “applies to . .
were conducted by Hattiesburg        . ‘[p]ersonal injury’ caused by
Coke as part of its business at      an offense arising out of your
its   headquarters,    and   not     business . . . but only if the
because of a physical connection     offense was committed . . .

                                   15
during   the   policy    period.”   conduct that amounts to a legal
Coverage under the 1991 policy      wrong and that causes harm for
began on December 31, 1990 and      which courts will impose civil
ended on December 31, 1991. The     liability. Taken in this sense,
policy does not define “offense”    an offense, or tort, is not
or “committed.”                     committed unless and until the
     The ordinary meaning of        injury that results from it
“offense” is “a breach of a         amounts to a harm for which
moral or social code” or “an        courts    will    impose   civil
infraction of law.”       Merriam   liability.
Webster’s Collegiate Dictionary          Correlatively,          the
806 (10th ed. 1997).      Because   Mississippi Supreme Court has
the   policy   insures    against   held that “[a] tort is not
liability arising out of certain    complete    until    an   injury
“offenses,” the word in this        occurs.” McMillan v. Puckett,
context conveys the same meaning    678 So. 2d 652, 654 (Miss.
as “tort.” “Tort” has the same      1996)(en banc).     The McMillan
meaning in the ordinary and         court also held that “‘[a] cause
legal senses. Compare id. at        of action accrues only when it
1245 (“a wrongful act other than    comes into existence as an
a breach of contract for which      enforceable claim; that is when
relief may be obtained”), with      the   right    to   sue  becomes
Black’s Law Dictionary 1496 (7th    vested.’”   Id. (quoting Owens-
ed. 1999)(“A civil wrong for        Illinois, Inc. v. Edwards, 573
which    a    remedy    may    be   So. 2d 704, 706 (Miss. 1990)).7
obtained”), and 1 Dan B. Dobbs,
The Law of Torts § 1, at 1
(2001)(“a legal wrong . . . that
                                         7
causes harm for which courts               In interpreting a venue
will impose civil liability”).      statute     authorizing      the
Consequently, “a wrong is called    commencement of a civil action
a tort only if the harm which       in the county “where the cause
has resulted, or is about to        of action may occur or accrue”
result from it, is capable of       the McMillan court explained the
being compensated in an action      difference between “occur” and
at law for damages.”      W. Page   “accrue”:
Keeton et al., Prosser & Keeton          We read accrual in its
on the Law of Torts § 1, at 4            formalistic sense. A
(5th ed. 1984).      In ordinary         cause     of    action
parlance, “commit” means “to             accrues when it comes
carry into action deliberately:          into existence as an
perpetrate a crime.” Merriam             enforceable     claim,
Webster’s Collegiate Dictionary          that   is,   when  the
231 (10th ed. 1997). Thus, in            right to sue becomes
both    legal    and     ordinary        vested. This may well
language, to commit an offense           mean the moment injury
that results in liability (i.e.,         is   inflicted,   that
a tort), means to engage in              point in space and
                                         time when the last

                                 16
Consequently, we believe the            McCorkle v. McCorkle, No. 1999-
Mississippi     Supreme      Court,     CA-01711-COA, 2001 WL 19727, at
reading the policy from the             *5-*6 (Miss. Ct. App. Jan. 9,
standpoint    of    a   reasonable      2001); see also Tichenor v.
purchaser of insurance, would           Roman Catholic Church, 32 F.3d
either (1) interpret “offense .         953,   962   (5th   Cir.   1994)
. . committed . . . during the          (acknowledging     Mississippi’s
policy period” to include an            application of the discovery
accrued or completed tort, or           rule to invasions of privacy
(2) conclude that the phrase is         involving         “inherently
ambiguous     and     should     be     undiscoverable” injury). All of
construed in favor of coverage.         the original twenty-one state
See Great N. Nekoosa Corp. v.           court claimants first discovered
Aetna Cas. & Sur. Co., 921 F.           in November 1991 that John
Supp. 401, 419 (N.D. Miss. 1996)        Thomson had invaded the young
(holding that it is unclear             women’s   rights   of   privacy.
whether    the     “offense”     of     Eighteen of them alleged that
emotional distress occurs at the        Thomson videotaped them in 1991.
time of the causative act or at         The remaining state claimants
the time that the plaintiff             alleged that he taped them in
learned    of    the    act,    and     1990 but that they had not
therefore interpreting the term         learned of the incidents until
to allow for coverage).                 1991.   American Guarantee does
     Under Mississippi law, the         not contend that any of the
tort of invasion of privacy             claimants failed to exercise
accrues   when    the    plaintiff      reasonable diligence. Thus, the
discovers or through exercise of        torts of invasion of privacy
reasonable diligence should have        alleged in all of the state
discovered the invasion. See            court actions accrued in 1991.
                                        Accordingly, if     the alleged
                                        liability of Hattiesburg Coke
          l e g a l l y                 and Richard Thomson arose out of
          significant fact              the offense of “invasion of the
          is      found.                right of private occupancy of a
          "Occur" is a less             room . . . that a person
          formalistic term.             occupies by or on behalf of its
          It    is    event             owner,” American Guarantee is
          oriented to its               obliged to defend and indemnify
          core.          It             the insureds in all of the state
          connotes conduct              cases under Coverage B of its
          and phenomena and             1991 policy.
          imports        no
          preference among              2.   “Invasion of the right of
          all    of   those             private occupancy of a room”
          necessary that a
          plaintiff     may                  The   “invasion   of   the
          sue.                          private  right   of  occupancy”
678 So. 2d at 655 (internal             phrase is not defined in the
citations and emphases omitted).

                                      17
policy   and    has    not    been   includes    “something due to a
interpreted by the Mississippi       person . . . by law.” Id. at
courts.   Therefore,     according   1175. The common-place meaning
to    Mississippi     rules     of   of “occupancy” is “[t]he period
insurance            contract        during which one owns, rents, or
interpretation, we must give it      uses certain premises.” Id. at
its plain, ordinary, and popular     944. “Occupy” means “to fill up
meaning.                             (time or space).” Id.
     The   Mississippi     Supreme         It is apparent from the
Court often consults leading         above    definitions     that    an
dictionaries to determine the        average purchaser of insurance
ordinary meaning of insurance        could reasonably understand the
contracts.   See, e.g., Bank of      phrase "invasion of the right of
Mississippi v. Mississippi Life      private occupancy of a room" to
& Health Ins. Guar. Ass’n, 730       include the invasion of a room
So. 2d 49, 57 (Miss. 1999);          that is secluded from the sight,
Merrimack Mut. Fire Ins. Co. v.      presence,    or    intrusion     of
McDill, 674 So. 2d 4, 9 (Miss.       others. John Thomson’s invasion
1996); Allstate Ins. Co. v.          by hidden camera of the young
Moulton, 464 So. 2d 507, 509         women’s right to occupy and
(Miss. 1985); Blackledge, 740        change clothes in the women’s
So. 2d at 301 (McRae, J.,            dressing room reasonably falls
dissenting).     The mainstream      within this definition.
dictionary     definition       of         The United States Supreme
“invasion” is “an act of . . .       Court has recognized that a
encroachment or trespassing.”        person   has   a    constitutional
Webster’s New World Dictionary       right to privacy whenever he or
740 (1976); Webster’s Deluxe         she has a reasonable expectation
Unabridged     Dictionary      965   of privacy. See Kyllo v. United
(1979);     American      Heritage   States, 121 S. Ct. 2038, 2043
Dictionary       688      (1979).    (2001) (reaffirming the rule
Similarly, “invade” means “to        that     a    person      has     a
encroach upon” or “to affect         constitutional “expectation of
injuriously and progressively.”      privacy”    when     “society    is
Merriam   Webster’s     Collegiate   prepared   to    recognize    [that
Dictionary 615 (10th ed. 1997).      expectation] as reasonable”).
“Private”     commonly       means   Mississippi    has    emphatically
“intended for or restricted to       recognized the tort of invasion
the use of a particular person,      of privacy and in doing so has
group, or class” or “[w]ithdrawn     taken notice of an individual’s
from company or observation.”        right to privacy under state
Id. at 927.         A thing is       law. Mississippi also requires
"private" if it is "[s]ecluded       of commercial property owners
from the sight, presence, or         the highest duty to protect
intrusion of others." American       their business invitees from
Heritage Collegiate Dictionary       unreasonable risks of harm while
1089 (3d ed. 1993).        In its    visiting their premises. Hence,
ordinary   sense,     a    “right”   we conclude that the Mississippi

                                  18
Supreme Court would find that         Mississippi Supreme Court does
John   Thomson,      by    secretly   not adopt this meaning outright,
videotaping the young women in        we believe that it would find
VAS’s dressing room, invaded          that the phrase is ambiguous,
their    “right      of     private   recognize that the foregoing
occupancy” of that room.              interpretation is reasonable,
     Related Mississippi case         and,    in    accord     with    its
law supports our anticipation of      precedents, apply it in the
this conclusion. See Candebat,        present    case     in   favor    of
487 So. 2d at 209 (finding a          coverage.         Well      reasoned
person liable if there has been       opinions of other courts have
“interference with plaintiff’s        found the same policy language
seclusion . . . that would be         highly ambiguous and susceptible
highly offensive to the ordinary      to providing coverage in a wide
reasonable man, as the result of      array of circumstances.
conduct to which the reasonable             In New Castle County v.
man would strongly object.”);         National Union Fire Ins. Co.,
Plaxico, 735 So. 2d at 1038-39        243 F.3d 744 (3d Cir. 2001)
(recognizing that the defendant       (“New Castle III”) the Third
violated     the       plaintiff’s    Circuit, after a comprehensive
reasonable      expectation      of   survey   of    cases    nationwide,
privacy when he took voyeuristic      concluded     that     the    phrase
nude photographs of her while         “invasion    of    the    right   of
she was in her bedroom); see          private occupancy” is ambiguous
also Malloy v. Sears, Roebuck &       as a matter of law. See id. at
Co., No. 4:96CV157-EMB, 1997 WL 756 (“A single phrase, which
170313, at *1 (N.D. Miss. Mar.        insurance       companies       have
4, 1997) (recognizing a business      consistently refused to define,
invitee’s state law cause of          and that has generated literally
action     for      “unreasonable     hundreds    of    lawsuits,     with
intrusion upon the seclusion of       widely varying results, cannot,
another” where the defendant’s        under    our     application      of
employee peeped on the invitee        commonsense,         be      termed
while she was using the restroom      unambiguous”). Moreover, as the
on the defendant’s premises).         New Castle III court points out,
Considering        Mississippi’s      the courts which claim to have
vigorous protection of the right      divined one true meaning of the
of privacy, it is reasonable to       phrase have ended up espousing
anticipate that an “invasion of       three different and inconsistent
the right of private occupancy        interpretations.       See id. at
of a room” would be interpreted       750-753; see also Goode, supra,
by   the   state’s      courts   as   at 41-43 & nn. 21-35 (citing and
including      John      Thomson’s    discussing a wide spectrum of
surreptitious     videotaping    of   case law regarding the meaning
female     business       invitees    of the phrase “right of private
disrobing   while     occupying   a
private dressing room.
     Alternatively,       if    the

                                  19
occupancy”).8 This wide variance     “noxious     odors,     noise     and
in interpretations is itself         light”); Beltway Mgmt. Co. v.
evidence that the phrase is          Lexington-Landmark Ins. Co., 746
ambiguous. See id. at 756.           F.Supp. 1145, 1156 (D.D.C. 1990)
     New    Castle    III    also    (holding      that     the     phrase
illustrates    the   breadth   of    encompasses     liability     for   a
meaning that reasonably may be       breach of the implied warranty
attributed to the phrase “right      of      habitability        of     an
of private occupancy.” At issue      apartment); Town of Goshen v.
in that case was whether a           Grange Mut. Ins. Co., 424 A.2d
county’s failure to award a          822, 825 (N.H. 1980) (finding
building permit in violation of      coverage under the phrase where
the applicant’s     due   process    a town planning board refused to
rights qualified as an invasion      allow    a   property     owner    to
of the applicant’s private right     develop     a     subdivision      in
of occupancy of the property.        violation of his civil rights).
Id. at 749. Employing rules of             In      light       of      the
insurance           contract         comprehensive studies undertaken
interpretation     similar     to    by New Castle III and other
Mississippi’s, the court found       courts, we are convinced that
the phrase to be ambiguous and       the present case is simple by
liberally construed it in favor      comparison and falls well within
of coverage.                         the    ambit    of   a   reasonable
     Other courts finding the        interpretation of the phrase.
phrase to be ambiguous have also     Consequently, in view of the
found    coverage   under    far-    Mississippi rules of insurance
reaching circumstances.       See    policy      construction,         the
Titan Holdings Syndicate, Inc.       ordinary meanings of the words
v. City of Keene, 898 F.2d 265,      involved, and the persuasive
272-73 (1st Cir. 1990) (holding      reasoning of New Castle III, we
that a similar phrase included       conclude that the Mississippi
the interference in the quiet        Supreme Court would construe the
use of property resulting from       clause in favor of coverage in
                                     the present case.
     8
      In her article, Jane Goode     3. “[B]y or on behalf of its
collects various cases and finds     owner, landlord, or lessor”
that the term “right of private
occupancy” has been interpreted           Of the many ordinary usages
to require a range of activity,      of the word “by,” several lend
from as much as a physical           cogent meaning to the policy
trespass upon a real property        clause: “through or through the
interest to lesser intrusions        medium of”; “through the agency
and impairments of the use and       or   instrumentality   of”;   in
enjoyment of property, such as       conformity   with”;   “according
an invasion of privacy or a mere     to”; “on behalf of”; or “with
legal   encroachment   upon   an     respect to.” Merriam Webster’s
economic interest.   See Goode,      Collegiate Dictionary 157 (10th
supra, at 41-43 & nn.21-35.

                                   20
ed. 1997).      “On behalf of” is       that   American  Guarantee   was
commonly thought to mean “in the        obliged to defend and indemnify
interest     of”     and     “as    a   Richard Thomson and Hattiesburg
representative of.” Id. at 103.         Coke under Coverage B of the
Therefore, the phrase reasonably        1991    CGL   policy   in    the
may be interpreted to mean that,        underlying state court actions.
in   order    for   there     to   be
coverage, the victim must be
occupying the room “through,”                 V. Reimbursement of
“through     the     medium      of,”            Attorney’s Fees
“through      the      agency      or
instrumentality of,” “by the                 Hattiesburg     Coke    and
authority of,” “according to,”          Richard       Thomson      seek
“in relation to,” or “in the            reimbursement   for   attorney’s
interest of” the owner of the           fees and expenses incurred in
room.     Thus, in the ordinary         hiring separate and independent
sense of the words, the young           counsel. In Moeller v. American
women     in     the      underlying    Guarantee      and    Liability
litigation were occupying the           Insurance Company, 707 So. 2d
dressing room “through,” “by the        1062, 1069 (Miss. 1996), the
authority of,” and “in the              Mississippi     Supreme    Court
interests      of”    its      owner,   stated:
Hattiesburg     Coke,    when    John
Thomson violated their rights of             When defending under a
private occupancy of a room.                 reservation of rights,
      Consequently, we think the             .   .  .   a   special
Mississippi courts would apply               obligation is placed
that reasonable meaning in favor             upon   the   insurance
of coverage, either as their own             carrier. . . . [N]ot
interpretation or in accordance              only must the insured
with Mississippi law governing               be     given       the
the construction of ambiguous                opportunity to select
insurance contracts. The Third               his own counsel to
and Eighth Circuits have held                defend the claim, the
that the effect of the phrase is             carrier must also pay
ambiguous and that it must be                the     legal     fees
construed in favor of coverage.              reasonably incurred in
See    New   Castle     County     v.        the defense.
National Union Fire Ins. Co.,
174 F.3d 338 (3d Cir. 1999)                  We   are   bound    by   the
(“New Castle I”); Royal Ins. Co.        Mississippi   Supreme     Court’s
of America v. Kirksville College        decision   in   Moeller.      The
of Osteopathic Med., 191 F.3d           insureds hired separate counsel
959,    963    (8th    Cir.     1999)   because American Guarantee only
(following the New Castle I             agreed to defend Hattiesburg
holding that the phrase is              Coke and Richard Thomson under a
ambiguous).                             reservation   of    rights    and
      Accordingly, we conclude          because   the    insureds    were

                                     21
potentially exposed to liability        judgment for American Guarantee
in excess of the CGL policy             and REMAND the case to the
limits.        Because      we   have   district court with instructions
determined     that    the     claims   for it to grant summary judgment
contained allegations covered           in favor of Richard Thomson and
under    Coverage      B,     Moeller   Hattiesburg Coke and against
mandates that Hattiesburg Coke          American Guarantee, decreeing
and     Richard      Thomson       be   that   American   Guarantee   is
reimbursed for the reasonable           obliged to defend, indemnify,
costs of obtaining a separate           and reimburse them in connection
attorney.      See id. at 1071          with the underlying state court
(“Because [the insureds were]           actions in accordance with this
being defended under the . . .          court’s opinion.    The case is
claim with a reservation of             remanded for these purposes and
rights, American Guarantee was          for     further     proceedings
obligated to let them select            consistent herewith.
their own attorney at American
Guarantee’s cost”).
     Although American Guarantee
acknowledges        the      Moeller
decision, the company argues
that we should not retroactively
apply its holding.         We reject
American Guarantee’s argument.
The Mississippi Supreme Court
has   clearly     held    that    its
rulings    apply      retroactively
except    in     cases     involving
government    action     or    public
monetary resources. See Ales v.
Ales, 650 So. 2d 482, 484-85
(Miss. 1995).      Because Moeller
involves     neither      of    those
exceptions, its holding controls
this case, which was pending
when the Mississippi Supreme
Court issued the opinion.

         VI.   Conclusion

     Accordingly, we conclude
that   American  Guarantee  is
obligated    to    defend  and
indemnify Hattiesburg Coke and
Richard    Thomson     in  the
underlying state lawsuits.  We
REVERSE the grant of summary

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