Associated Indus. Ins. Co. v. Ridgewyck Ventures, LLC

611 F.Supp.3d 1272

ASSOCIATED INDUSTRIES INSURANCE COMPANY, INC., Plaintiff,

v.RIDGEWYCK VENTURES, LLC, dba Ridgewyck Apartments; Property Asset Management, Inc.; and Travis Sykes, an individual, Defendants.

Case No. 2:18-cv-00138

United States District Court, D. Utah.

Signed March 4, 2020

Filed March 5, 2020

Kirk G. Gibbs, Jonathan M. Burt, Kipp & Christian, Smith D. Monson, Dorsey & Whitney LLP, Salt Lake City, UT, for Plaintiff.

Dennis R. James, Morgan Minnock Rice & Miner, Salt Lake City, UT, for Defendants.

MEMORANDUM DECISION AND ORDER

ROBERT J. SHELBY, United States Chief District Judge

This action for declaratory relief concerns a dispute about the interpretation of an insurance policy. Plaintiff Associated Industries Insurance Co. filed this Motion for Summary Judgment, asking the court to declare that it owes no duty to defend or indemnify Defendants Ridgewyck Ventures, LLC (Ridgewyck) and Property Asset Management, Inc. (PAM, Inc.) in an underlying action brought against Ridgewyck.¹ For the reasons explained below, Associated's Motion is GRANTED.

BACKGROUND

Travis Sykes was a tenant of the Ridgewyck Apartments in Memphis, Tennessee.² The Ridgewyck Apartments were managed and operated by Defendants.³ After an alleged gunfight at his apartment on November 16, 2016, Sykes filed a lawsuit against Defendants (the Underlying Suit).⁴ In the Underlying Suit, Sykes alleges three masked individuals entered his apartment, he exchanged gunfire with the masked individuals, and he was shot four times.⁵ Sykes seeks monetary damages from Defendants, alleging they negligently failed to protect him from "the foreseeable criminal assault perpetrated on him."⁶

Associated issued insurance policy number AES1035289 01 (the Policy) to Capital Growth Corporation, dba Property Management Assets, LLC, (Capital Growth).⁷ The Policy covered sixteen different properties—including the Ridgewyck Apartments—during the time period from July 1, 2016 to July 1, 2017.⁸ Ridgewyck is listed as an additional named insured under the Policy.⁹

The Policy's Insuring Agreement's general grant of coverage provides:

We will pay those sums that the insured becomes legally obligated to pay as damages for "bodily injury" or "property damages" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking damages for "bodily injury" or "property damage" to which this insurance does not apply.¹⁰

Relevant to this action, the Policy also contains several exclusions and sublimits.

First, the Policy contains an "Assault & Battery Hazard Sublimit" (A & B Sublimit), which provides in relevant part:

A. Assault & Battery

The insurance provided under SECTION I - COVERAGES COVERAGE A - BODILY INJURY AND PROPERTY DAMAGE LIABILITY and COVERAGE

B - PERSONAL AND ADVERTISING INJURY LIABILITY LIMIT applies to any "occurrence" that the insured becomes legally obligated to pay because of an "assault & battery hazard injury," arising out of:

1. Actual or threatened assault or battery by anyone or any person;

2. Use and/or failure to use reasonable force to protect persons or property

3. Failure to prevent assault or battery; or

4. The negligent:

a. Employment;

b. Investigation

c. Supervision

d. Reporting to the proper authorities, or failure to so report; or

e. Retention of a person for whom any insured is or ever was legally responsible and whose conduct is described in 1. above.

...

D. The following is added to SECTION V-DEFINITIONS

"Assault & battery hazard injury" means "bodily injury," "property damage," or "personal and advertising injury" due to the:

a. Use and/or failure to use reasonable force to protect persons or property;

b. Failure to prevent assault or battery; or

c. Improper or negligent hiring, employment, training or supervision of your "employees" involving a. or b. above.¹¹

The A & B Sublimit applies to all sixteen properties and imposes both aggregate and "per occurrence" limits on what Associated will pay for damages resulting from "assault & battery hazard injury."¹²

Second, the Policy contains an "Assault and Battery" Exclusion (A & B Exclusion), which provides:

A. The following Exclusion is added to SECTION 1-COVERAGES, paragraph 2. Exclusions of COVERAGE A-BODILY INJURY AND PROPERTY DAMAGE LIABILITY, paragraph 2. Exclusions of COVERAGE B-PERSONAL

AND ADVERTISING INJURY LIABILITY:

2. Exclusions

This insurance does not apply to:

Assault and Battery

"Bodily injury," "property damage," or "personal and advertising injury" arising out of any assault, battery, fight, altercation, misconduct or similar incident or act of violence, whether caused by or at the instigation of, or at the direction of the insured, his/her employees, customers, patrons, guests or any cause whatsoever, including, but not limited to claims of negligent or improper hiring practices, negligent, improper or non-existent supervision of employees, patrons, or guests and negligence in failing to protect customers, patrons or guests.¹³

The A & B Exclusion applies only to the Ridgewyck Apartments.¹⁴

Finally, the Policy contains a "Firearms" Exclusion, which provides:

The following Exclusion is added to SECTION I - COVERAGES, paragraph 2. Exclusions of COVERAGE A - BODILY INJURY AND PROPERTY DAMAGE LIABILITY, and paragraph 2. Exclusions of COVERAGE B - PERSONAL AND ADVERTISING INJURY LIABILITY.

This insurance does not apply to:

Firearms

Any claim or "suit" for "bodily injury," "property damage," "personal and advertising injury" or medical payments arising from the use of firearms.¹⁵

The Firearms Exclusion applies to all sixteen properties.

PROCEDURAL HISTORY

On November 9, 2018, Associated filed an Amended Complaint in this court, seeking a declaratory judgment that Associated owes no duty to defend or indemnify Defendants in the Underlying Suit.¹⁶ On October 3, 2019, Defendants filed their Answer to the Amended Complaint.¹⁷ And on October 7, 2019, Associated filed a Motion for Summary Judgment.¹⁸

LEGAL STANDARD

Summary judgment is appropriate when "there is no genuine dispute as to any material fact" and the moving party is "entitled to judgment as matter of law."¹⁹ A fact is material if it "might affect the outcome of the suit under the governing law," and a dispute is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party."²⁰ Under this standard, the court will "view the evidence and draw reasonable inferences therefrom in the light most favorable to the nonmoving party."²¹

ANALYSIS

In its Motion for Summary Judgment, Associated asks the court to enter judgment declaring: (1) the A & B Exclusion excludes coverage and therefore Associated has no duty to defend or indemnify Defendants; (2) the Firearms Exclusion excludes coverage and therefore Associated has no duty to defend or indemnify Defendants; and (3) Associated owes no duty to defend or indemnify PAM, Inc.²²

I. A & B EXCLUSION

Associated first asks the court to enter judgment declaring "[t]he A & B Exclusion excludes coverage for claims in the Underlying Suit, and therefore Associated owes no duty to defend or indemnify Ridgewyck or PAM, Inc. in the Underlying Suit."²³ In response, Defendants argue the Policy is ambiguous on this issue and therefore the court should construe the Policy in favor of coverage.²⁴

Under Utah law, "[a]n insurance policy is merely a contract between the insured and the insurer."²⁵ Accordingly, Utah courts interpret insurance policies as they do contracts.²⁶

"The underlying purpose in construing or interpreting a contract is to ascertain the intentions of the parties to the contract."²⁷ "[I]f the language within the four corners of the contract is unambiguous, the parties' intentions are determined from the plain meaning of the contractual language, and the contract may be interpreted as a matter of law."²⁸ If an ambiguity exists, however, then any doubts are resolved against the insurer.²⁹ "Whether an ambiguity exists in a contract is a question of law."³⁰

Ambiguity in a contract may arise "(1) because of vague or ambiguous language in a particular provision or (2) because two or more contract provisions, when read together, give rise to different or inconsistent meanings, even though each provision is clear when read alone."³¹ When faced with either form of ambiguity, "the policy must be construed in light of how the average, reasonable purchaser of insurance would understand the language of the policy as a whole."³²

Here, Defendants argue the Policy contains an ambiguity of the latter variety. That is, the A & B Exclusion and A & B Sublimit—while each unambiguous when read alone³³ —give rise to inconsistent meanings when read together.

The A & B Sublimit explains the Policy's general grant of coverage covers "assault & battery hazard injury," and then proceeds to define that term to include "bodily injury ... due to the ... [f]ailure to prevent assault or battery." In other words, while limiting the amount of coverage available for it, the A & B Sublimit explains the Policy covers bodily injury resulting from a failure to prevent assault or battery—the very injury Sykes alleges in the Underlying Suit.

The A & B Exclusion, on the other hand, states that "[t]his insurance does not apply to ... bodily injury ... arising out of any assault, battery, fight, altercation, misconduct or similar incident or act of violence ... including ... negligence in failing to protect customers, patrons or guests." In other words, the A & B Exclusion excludes coverage for the injury complained of by Sykes in the Underlying Suit—but only as to the Ridgewyck Apartments.

Defendants argue these two sections create an irreconcilable conflict because the A & B Sublimit "extends coverage" for failure to prevent assault or battery on one hand while the A & B Exclusion "excludes coverage" on the other.³⁴ Defendants urge the court to resolve this conflict in their favor...