Capitol Specialty Ins. Corp. v. Beach Eatery & Surf Bar, LLC

36 F.Supp.3d 1026

CAPITOL SPECIALTY INSURANCE CORPORATION, Plaintiff

v.The BEACH EATERY & SURF BAR, LLC, d/b/a Jack Didley's Eatery and Catering; Eric Todd Jones and Rebecca Jones, husband and wife and the marital community composed thereof; Benjamin Adam Trudeau and Jane Doe Trudeau, husband and wife and the marital community composed thereof; Matthew Thomas Hibbard and Jane Doe Hibbard, husband and wife and the marital community composed thereof; Michael V. Eisele and Jane Doe Eisele, husband and wife and the marital community composed thereof; Michael D. Cates; and John and Jane Does 1–5, Defendants.

No. CV–13–05041–EFS.

United States District Court, E.D. Washington.

Signed July 30, 2014.

Frank Joseph Steinmark, McCafferty & Steinmark PLLC, Seattle, WA, for Plaintiff.

Paul J. Lawrence, Hickory M. Gateless, Pacifica Law Group, Seattle, WA, Douglas Dwight Phelps, Phelps & Associates, Spokane, WA, for Defendants.

ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT, GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION FOR SUMMARY JUDGMENT, AND DENYING PLAINTIFF'S MOTION TO STRIKE

EDWARD F. SHEA, Senior District Judge.

I. INTRODUCTION

Before the Court, without oral argument, is Plaintiff's Motion for Summary Judgment Regarding Assault or Battery Exclusion, ECF No. 21; Defendants'¹ Cross–Motion for Summary Judgment, ECF No. 24; and Plaintiff's Motion to Strike Certain Evidence Offered in Response and Cross–Motion to Plaintiff's Motion for Summary Judgment Regarding Assault or Battery Exclusion and Memorandum of Authorities, ECF No. 33. Having reviewed the pleadings and the file in this matter, the Court is fully informed. For the reasons that follow, the Court partially grants Plaintiff's Motion for Summary Judgment finding that the Assault or Battery Exclusion creates no duty to defend the defamation claim in the underlying lawsuit, partially grants Defendants' Cross–Motion for Summary Judgment finding an ambiguity as to reasonable force, and denies Plaintiff's Motion to Strike.

II. BACKGROUND

A. Factual History²

The catalyst for the present case is an altercation between Michael D. Cates and certain staff members of Jack Didley's Eatery & Catering, a property operated by The Beach Eatery & Surf Bar, LLC (hereafter referred to, in a term including its staff, as the “Beach Eatery”) in Kennewick, Washington on February 18–19, 2011. In that case, Cates was a patron at Jack Didley's. Cates received several injuries as a result of being ejected from the bar. Cates filed a lawsuit (hereafter referred to as the “Cates lawsuit”) in Benton County Superior Court against Beach Eatery alleging assault, negligent hiring and selection, negligent supervision, negligent training, negligent retention, intentional infliction of emotional distress, defamation, negligence (excessive force), and respondeat superior.

At issue, in the factual context of this case, is the interpretation of a commercial general liability insurance policy executed between Capitol Insurance and Beach Eatery which was titled Commercial General Liability Coverage Form and Liquor Liability Coverage Form. Included in the insurance policy is a 4–part document and endorsement titled “Assault or Battery Exclusion” which is meant to modify both the Commercial General Liability Form and the Liquor Liability Coverage Form. Sections A and B of the Assault or Battery Exclusion exclude from insurance coverage under the policy certain types of harm. Section A, which applies to the Commercial General Liability Coverage Form, excludes from insurance coverage what it defines as expected or intended “bodily harm” and “property damage.” Section B, which applies to the Liquor Liability Coverage Form, excludes from insurance coverage what it defines as expected or intended “injury.” Section A states that “[t]his exclusion does not apply to ‘bodily injury’ or ‘property damage’ resulting from the use of reasonable force by any insured to protect persons or property.” Section B states that “[t]his exclusion does not apply to ‘injury’ resulting from the use of reasonable force by any insured to protect persons or property.” Both Parts A and B except the use of reasonable force from the Expected or Intended Injury policy exclusion, and thus allow coverage for harm resulting from the use of reasonable force. In other words, Parts A and B (hereafter referred to as the “reasonable force provisions”) disallow coverage for damage resulting from expected or intended harm, but allow coverage when the resulting harm is the product of reasonable force.

Part C, however, also titled “ ‘Assault or Battery’ Exclusion,” rejects this idea in what will hereafter be referred to as the “no force provision,” stating that:

This insurance does not apply to, nor shall we have a duty to defend, any claim or “suit” seeking damages or expenses due to “bodily injury,” “property damage,” “personal and advertising injury” or “injury”, as defined respectively in the Commercial General Liability Coverage Form and Liquor Liability Coverage Form, arising out of, resulting from, or in connection with any of the following acts or omissions regardless of their sequence or any concurring cause: ....

e. The use of any force or property whether or not the “bodily injury”, “property damage”, “personal or advertising injury” or “injury” was committed by or at the direction of you, any insured or any person or legal entity; ....”

The reasonable force exceptions to the Assault and Battery Exclusion in Parts A and B seem to conflict with Part C's provisions regarding any force. While Parts A and B allow coverage for those who use reasonable force, Part C seems to say that the use of any force precludes insurance coverage. The question this court must answer is which provision controls: the reasonable force provisions or the no force provision. Concurrently, Defendants ask the Court to decide that Plaintiff has a duty to defend Beach Eatery in the Cates lawsuit.

B. Procedural History

In Washington State, “[i]f the insurer is uncertain of its duty to defend, it may defend under a reservation of rights and seek a declaratory judgment that it has no duty to defend.” Woo v. Fireman's Fund Ins. Co., 161 Wash.2d 43, 54, 164 P.3d 454 (Wash.2007). Plaintiff followed this protocol by sending a Reservation of Rights Letter dated March 25, 2013, to Beach Eatery, and filing this declaratory action to determine if Plaintiff has a duty to defend Beach Eatery in the Cates lawsuit.

Plaintiff filed its Motion for Summary Judgment Regarding Assault or Battery Exclusion, claiming that the Assault or Battery Exclusion in the insurance policy, namely Part C subsection (e) on the use of any force, precludes insurance coverage for the defendants in the Cates lawsuit, as it is uncontested that there was the use of at least some force in that altercation. ECF No. 21 at 9. Plaintiff cites McAllister v. Agora Syndicate, Inc., 103 Wash.App. 106, 111, 11 P.3d 859 (2000), which says that if there is an assault or battery exclusion and there are claims “ultimately based on assault and battery in the sense that without first establishing the underlying assault, negligence cannot be proved,” the exclusion denies coverage for those claims that while not actually titled “assault” or “battery,” are claims that are not possible unless there is the assault or battery to begin with. ECF No. 21 at 10–12.

Defendants in their response to Plaintiff's Motion for Summary Judgment, and in filing their own Cross–Motion for Summary Judgment, argue that the no force provision does not apply to the reasonable force provisions, or in the alternative, that the entire Assault or Battery Exclusion is ambiguous due to a conflict between the no force provision and the reasonable force provisions. ECF No. 24 at 6–8, 11, 14–15. Washington insurance law states that “[t]he duty to defend arises where the complaint against the insured, construed liberally, alleges facts which could, if proven, impose liability upon the insured within the policy's coverage.” Am. Best Food, Inc. v. Alea London, Ltd., 168 Wash.2d 398, 404–05, 229 P.3d 693 (2010). Defendants point out that Washington law states that doubts and ambiguities are read in favor of insurance coverage. Id. at 411, 229 P.3d 693 ; ECF No. 24 at 10. Defendants argue that Plaintiff owes them a duty to defend, asserting that there is at least an ambiguity in the Assault or Battery Exclusion with conflicting terms directly controlling whether or not a duty to defend in the Cates lawsuit exists. ECF No. 24 at 6–8, 11, 14–15.

Plaintiff also moves to strike certain testimony by Matthew Hibbard, General Manager of Jack Didley's, whose staff allegedly assaulted Cates in the underlying lawsuit. ECF No. 33. This testimony is contained in what is hereafter called the “Hibbard Declaration.” ECF No. 28; ECF No. 33 at 3. The Hibbard Declaration is a Post–Incident Report that Hibbard wrote regarding the February 18–19, 2011 altercation between Cates and the staff of the Beach Eatery. ECF No. 28. The report shows Hibbard's recollection of what happened during that altercation, which appears to show that the Beach Eatery's staff exercised reasonable force towards Cates. Id. Defendants rely on the Hibbard Declaration to further their argument that they exercised reasonable force. ECF No. 24 at 12. Plaintiff argues that this testimony should be stricken under Federal Rules of Evidence 401, 402, and 403, because the testimony is irrelevant to the case before this Court, as the testimony does not answer the question of whether Cates' claims are covered under the policy. ECF No. 33 at 3.

III. PARTIES' MOTIONS FOR SUMMARY JUDGMENT

A. Legal Standard for Summary Judgment

Summary judgment is appropriate if the record establishes “no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The party opposing summary judgment must point to specific facts establishing a genuine...