Filed: Jun. 02, 1997
Latest Update: Mar. 02, 2020
Summary: REVISED IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT No. 95-20898 CORNHILL INSURANCE PLC, HANSA MARINE INSURANCE CO U K LTD; ANGLO AMERICAN INSURANCE COMPANY, LIMITED; UNDERWRITERS AT LLOYD’S LONDON, Plaintiffs-Appellees, versus VALSAMIS, INC.; CHERYL GISENTANER, Defendants-Appellants. ***************************************************************** AMERICAS INSURANCE COMPANY Plaintiff -Appellee versus VALSAMIS, INC.; CHERYL GISENTANER, Defendants-Appellants *********************
Summary: REVISED IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT No. 95-20898 CORNHILL INSURANCE PLC, HANSA MARINE INSURANCE CO U K LTD; ANGLO AMERICAN INSURANCE COMPANY, LIMITED; UNDERWRITERS AT LLOYD’S LONDON, Plaintiffs-Appellees, versus VALSAMIS, INC.; CHERYL GISENTANER, Defendants-Appellants. ***************************************************************** AMERICAS INSURANCE COMPANY Plaintiff -Appellee versus VALSAMIS, INC.; CHERYL GISENTANER, Defendants-Appellants **********************..
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REVISED
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 95-20898
CORNHILL INSURANCE PLC,
HANSA MARINE INSURANCE CO U K LTD;
ANGLO AMERICAN INSURANCE COMPANY, LIMITED;
UNDERWRITERS AT LLOYD’S LONDON,
Plaintiffs-Appellees,
versus
VALSAMIS, INC.;
CHERYL GISENTANER,
Defendants-Appellants.
*****************************************************************
AMERICAS INSURANCE COMPANY
Plaintiff -Appellee
versus
VALSAMIS, INC.;
CHERYL GISENTANER,
Defendants-Appellants
*****************************************************************
OCEAN MARINE INDEMNITY CO.,
Plaintiff-Appellee
versus
VALSAMIS, INC;
CHERYL GISENTANER,
Defendants-Appellants
Appeal from the United States District Court
for the Southern District of Texas
February 7, 1997
Before KING and HIGGINBOTHAM, Circuit Judges, and LAKE*, District
Judge.
HIGGINBOTHAM, Circuit Judge:
This suit is the consolidation of three actions filed by
insurers and underwriters seeking a declaration that insurance
policies1 issued to Valsamis, Inc. do not cover incidences of
sexual harassment. The district court granted summary judgment for
the insurers and Cheryl Gisentaner, assignee of Valsamis, Inc.’s
claims and defendant in the action below, appeals. We find that
the claims of sexual harassment do not raise a potential for
coverage under the policies, and affirm the decision of the
district court.
I.
On October 29, 1992, Cheryl Gisentaner filed a lawsuit in
Texas state court against her former employer, Valsamis Inc., her
supervisor at Valsamis, Christos Papapetrou, and the president of
Valsamis Inc., Dimitrios Valsamis. Gisentaner alleged that from
approximately March 1992 until her resignation on September 2,
1992, Papapetrou made sexual remarks to her, touched her in an
inappropriate and offensive manner, exposed himself, made
threatening and obscene gestures, and eventually attempted to force
*
District Judge of the Southern District of Texas, sitting by
designation.
1
The policies in question are a comprehensive general
liability policy issued by Americas Insurance Company, three
policies issued by Cornhill Insurance PLC providing comprehensive
general liability and excess comprehensive general liability
coverage, and an umbrella policy issued by Ocean Marine Indemnity
Co. Appellees, plaintiffs in the action below, will be referred to
as “insurers.”
2
himself on her in a supply room. When she reported this behavior
to Valsamis in June of 1992, he failed to address Papapetrou’s
conduct, tried to kiss her, asked her out repeatedly, and arranged
to meet her alone under pretenses of work. In her initial
complaint, Gisentaner sought damages for intentional and negligent
infliction of emotional distress, tortious assault and battery,
intentional and negligent invasion of privacy, and negligent hiring
and supervision. Denial of coverage premised on the allegations in
this complaint was sent to Valsamis on September 8, 1993.
Subsequently, Gisentaner filed a first amended complaint, adding a
claim for failure to maintain a safe work environment. Coverage
premised on this amended complaint was denied on January 27, 1994.
The defendants in the state court sexual harassment suit
settled with Gisentaner for an agreed judgment of $1,250,000, an
assignment of Valsamis, Inc.’s claims against its insurers,
$110,000 paid by Valsamis, Inc. to Gisentaner in consideration for
the assignment, and a covenant by Gisentaner not to execute on the
judgment against Valsamis. One month after the settlement,
Gisentaner filed a second amended complaint which deleted all
intentional tort claims.
The insurers then brought the present action, seeking a
judgment declaring that they had no duty to defend against
Gisentaner’s state court claims and that their policies do not
provide coverage for the claims settled by Valsamis and Gisentaner.
Subsequently, Gisentaner filed suit against the insurers in state
court as a judgment creditor of Valsamis and as an assignee of
3
Valsamis’ cause of action for bad faith, insurance code violations
and deceptive trade practices. Defendants in Gisentaner’s state
court suit included all of the plaintiffs in this declaratory
judgment action and the issuers of two employer liability policies
as well as the agent and broker for all of the policies.
Gisentaner attempted to dismiss this declaratory judgment
action, claiming that the extra parties in the state court suit
were indispensable to the federal suit and that their mandatory
joinder would defeat diversity. The district court judge withheld
ruling on this motion until September 26, 1995, when he denied it
and also granted summary judgment in favor of the insurers.
II.
Gisentaner claims that the district court should not have
exercised jurisdiction in this case because it failed to join
indispensable nondiverse parties and abused its discretion in not
staying the federal suit in favor of the state court suit.
A.
Fed R. Civ. P. 19 allows joinder of necessary parties unless
that joinder would defeat diversity jurisdiction. If jurisdiction
is threatened, the court must determine whether the potentially
joined parties are indispensable, that is, if the court finds that,
as a matter of equity and good conscience, the lawsuit cannot
proceed without them. Sandefer Oil & Gas, Inc. v. Duhon, 871 F.2d
526, 529 (5th Cir. 1989). The threat of multiple litigation will
not make a party indispensable but the threat of inconsistent
obligations will. Shelton v. Exxon Corp.,
843 F.2d 212, 218 (5th
4
Cir. 1988). Fed. R. Civ. P. 19(b) lists four factors for courts to
consider in deciding whether a party is indispensable: 1)
prejudice to an absent party or others in the lawsuit from a
judgment; 2) whether the shaping of relief can lessen prejudice to
absent parties; 3) whether adequate relief can be given without
participation of the party; and 4) whether the plaintiff has
another effective forum if the suit is dismissed.
Gisentaner claims that the agent and broker for the policies
in this case are indispensable parties because Cornhill and OMI
asserted lack of notice as a defense to coverage. Gisentaner also
claims that because OMI is an umbrella policy, the issuer of its
underlying employer liability policy is an indispensable party.
None of the factors listed in Fed. R. Civ. P. 19(b) cut in favor of
joining the parties Gisentaner identified as indispensable. The
district court’s decision rested solely on contractual language in
the policies and those parties with an interest in the
interpretation of that language were present in this action.
B.
Gisentaner also claims that the district court abused its
discretion in refusing to dismiss this suit. A district court has
broad discretion to retain or dismiss a declaratory judgment suit
where a parallel state court suit has been filed. Brillhart v.
Excess Ins., 316 U.S. 491 (1942). The breadth of this discretion
was recently reaffirmed by the Supreme Court in Wilton v. Seven
Falls Co.,
115 S. Ct. 2137, 2144 (1995). The district court in
this case found that the insurers’ suits were not anticipatorily
5
filed, and that no indispensable parties were excluded. We do not
find this action to be an abuse of discretion.
III.
Under Texas law, an insurer’s duty to defend is triggered
where the allegations in the plaintiff’s pleadings raise a
potential for coverage under the policy. Argonaut Southwest Ins.
Co. v. Maupin, 500 S.W.2d 633, 635 (Tex. 1973). An insurer bears
the burden of proving that the allegations contained in the
underlying plaintiff’s petition are excluded from coverage and any
doubt is resolved in favor of the insured. Adamo v. State Farm
Lloyds Co.,
853 S.W.2d 673 (Tex. App.-Houston 1993, writ denied),
cert. denied, 114 S. Ct. (1994). This burden includes proving that
none of the claims asserted potentially fall within coverage.
Heyden Newport Chem. Corp. v. Southern Gen. Ins. Co.,
387 S.W.2d
22, 26 (Tex. 1965). The duty to defend is determined by examining
the latest amended pleading upon which the insurer based its
refusal to defend the action. Rhodes v. Chicago Insurance Co.,
719
F.2d 116, 120 (5th Cir. 1983).
A. Americas Policy
The comprehensive general liability policy issued to Valsamis
by Americas covered bodily and personal injury. For bodily injury,
the policy restricted coverage to damages caused by an
“occurrence,” but there was no occurrence requirement for claims of
personal injury. The definition of personal injury included injury
arising out of “false arrest, detention, imprisonment or malicious
6
prosecution,” or “a publication or utterance . . . in violation of
an individual’s privacy.”
Gisentaner seeks coverage for her claims in the definition of
“personal injury” in the Americas policy.2 In her original
petition in state court, Valsamis alleged invasion of privacy,
which is specifically referenced as a personal injury within
Americas policy. She also now alleges that the facts in her
complaint state a claim for false detention, also covered in the
definition of personal injury.
Texas courts do not look to conclusory assertions of a cause
of action in determining a duty to defend. Instead, they look to
see if the facts giving rise to the alleged actionable conduct, as
stated within the eight corners of the complaint, constitute a
claim potentially within the insurance coverage. Adamo v. State
Farm Lloyds Co., 853 S.W.2d 673 (Tex. App.-Houston 1993, writ
denied). We will therefore look to see if Gisentaner alleged facts
that constitute a claim for invasion of privacy or false
imprisonment under Texas law to determine whether Americas had a
duty to defend.
1. Invasion of Privacy
The Texas Supreme Court first recognized the tort of invasion
of privacy in Billings v. Atkinson, 489 S.W.2d 858, 859 (Tex.
1973). Texas law now recognizes three distinct torts, any of which
2
Gisentaner does not argue that Americas’ bodily injury
provision covers her claims.
7
constitutes an invasion of privacy.3 Industrial Found. of the
South v. Texas Indus. Accident Bd., 540 S.W.2d 668, 682 (Tex.
1976), cert. denied,
430 U.S. 931 (1977). Gisentaner did not
allege that Valsamis publicly disclosed embarrassing private facts
about her or appropriated her name or likeness. Gisentaner’s
allegations come closest to fitting the cause of action for
invasion of privacy where there has been “intrusion upon the
plaintiff’s seclusion or solitude, or into his private affairs.”
Texas Indus. Accident
Bd., 540 S.W.2d at 682. However, no Texas
court has considered whether sexual harassment is cognizable under
this definition, therefore we must assess whether Texas courts
could find that Gisentaner stated a claim for invasion of the right
to privacy.
To state a cause of action under this theory of invasion of
the right to privacy, Texas case law requires proof that there was
an intentional intrusion upon the solitude or seclusion of another
or his private affairs or concerns that is highly offensive to a
reasonable person. Farrington v. Sysco Food Serv., Inc., 865
S.W.2d 247, 252 (Ct. App.-Houston 1993); Gill v. Snow,
644 S.W.2d
222, 224 (Ct. App.-Ft. Worth 1982). However, at least one Texas
court has noted that this type of invasion of privacy “is generally
associated with either a physical invasion of a person’s property
or eavesdropping on another’s conversation with the aid of
3
Texas Indus. Accident Bd. actually established four types of
invasion of privacy but the Texas supreme court has since abolished
the fourth, false light invasion of privacy. Cain v. Hearst Corp.,
878 S.W.2d 577 (Tex. 1994)
8
wiretaps, microphones or spying.” Wilhite v. H.E. Butt Co., 812
S.W.2d 1, 6 (Tex. App.-Corpus Christi 1991). Gisentaner made no
such allegation in her complaint. In contrast, she alleged that
Valsamis and Papapetrou made offensive comments and inappropriate
advances toward her. These facts would not be cognizable as a
cause of action for invasion of privacy under Texas law.
2. False Imprisonment
Americas’ policy defines personal injury to include claims of
false imprisonment. Gisentaner claims that the incident where
Papapetrou tried to force himself on her in a closet at work states
a cause of action for false imprisonment under Texas law. Texas
law defines false imprisonment as willful detention without consent
and without authority of law. Sears, Roebuck & Co. v. Castillo,
693 S.W.2d 374, 375 (Tex. 1985). However, Gisentaner alleged that
Papapetrou attempted to force himself on her in an unlocked supply
room accessible to other employees. She did not allege that he
kept her there by physical force or by threatening her. She did
not allege detention and therefore her allegations are insufficient
to state a claim for false imprisonment under Texas law. See
Randall’s Food Markets, Inc. v. Johnson,
891 S.W.2d 640 (Tex.
1995).
B. Cornhill Policies
Unlike Americas, Cornhill’s comprehensive general liability
policy included an employment exclusion that applied to both bodily
and personal injury. However, Cornhill’s policy also contained a
personal injury endorsement that extended coverage to include
9
liability for personal injury arising from Valsamis’ shiprepairing
operations.
The employment-related claim exclusion in Cornhill’s policy
precluded coverage for:
Any liability of whatsoever nature of the Assured,
whether the Assured may be liable as an employer or in
any other capacity whatsoever, to any of its Employees,
including without limiting the generality of the
foregoing any liability under any workers’ compensation
law, unemployment compensation law, disability benefit
law, United States Longshoremen’s and Harbor Workers’
Compensation Act, Jones Act, Death on the High Seas Act,
General Maritime Law, Federal Employer’s Liability Act,
or any similar laws or liabilities, and/or whether by
reason of the relationship of master and servant or
employer and employee or not . . . [and] [a]ny liability
of any Employee of the Assured with respect to bodily
and/or personal injury to or illness or death of another
Employee of the Assured sustained in the course of such
employment.
The wording of this employment exclusion is very broad.
Gisentaner’s state court action complained of negligent acts by
Valsamis, Inc. as her employer. Negligent hiring and supervision
necessarily involve the employment relationship and therefore this
exclusion precludes coverage. The injuries inflicted by Valsamis
and Papapetrou all occurred while Gisentaner was employed by
Valsamis and were sustained in the course of her employment and are
therefore also excluded. Our interpretation of this employment
exclusion is supported by Texas law. In Aberdeen Ins. Co. v.
Bovee, 777 S.W.2d 442 (Tx. App.-El Paso 1989), the court considered
a similar employment exclusion and found that it was broad enough
to encompass sexual harassment and negligent hiring and supervision
claims.
Bovee, 777 S.W.2d at 444.
10
Gisentaner argues that the language in Cornhill’s policy is
similar to that in Western Heritage Insurance Company v. Magic
Learning Centers and Child Care, Inc., 45 F.3d 85, 88-89 (5th Cir.
1995), and that this employment-related claim exclusion only
excludes claims against Valsamis, Inc. because it is the only
employer. However, the policy language in Magic Years did not
contain the language found in Cornhill’s policy excluding coverage
for liability of one employee to another. Therefore, the holding
in Magic Years that the employment exclusion only applied to claims
against the employer and not to claims against the president and
secretary of the organization does not control our decision here.
Gisentaner also argues that because her secretarial duties
included accounting and scheduling for shiprepairing operations,
she should benefit from the shiprepairing endorsement. The
endorsement covers:
legal liability of the Assured for death or personal
injury occurring in the course of and arising from the
shiprepairing operations of the Assured but in no event
. . . for any claim arising directly or indirectly under
. . . Common Law Liability in respect of loss of life,
bodily injury to, or illness of any workman or other
person employed in any capacity whatsoever by the
Assured, his agents or sub-contractors when such loss of
life, bodily injury to, or illness arises out of or in
the course of the employment of such workman or other
person.
Gisentaner’s argument, however, ignores the requirement that the
personal injury must arise from the shiprepairing operations.
Gisentaner’s injuries arose from sexual harassment, not the
administrative support work she did for the shiprepairing
operations.
11
C. OMI Policy
OMI provided a umbrella excess liability policy that covered
damages on account of personal injuries caused by or arising out of
an occurrence. The personal injury definition included invasion of
privacy, false detention, and discrimination. OMI’s policy also
originally contained an employee exclusion but this was eliminated
when Valsamis purchased employee buy-back coverage.
Because OMI’s policy does not contain an employment exclusion,
we must determine whether Gisentaner’s claims fall within the
definition of personal injury in OMI’s policy. Under OMI’s policy,
personal injury coverage requires an occurrence. OMI’s policy
defines an occurrence as “an accident or a happening or event or a
continuous or repeated exposure to conditions which unexpectedly
and unintentionally results in personal injury, property damage or
advertising liability.”
Gisentaner claims that we are bound to accept the
characterization of Valsamis’ acts as negligent because judgment
was entered on this basis in the state court as a result of the
settlement between herself and Valsamis. However, in Columbia
Mutual Ins. Co. v. Fiesta Mart, 987 F.2d 1124 (5th Cir. 1993), a
panel of this court declined to bind an insurer to findings in a
state court suit where coverage was not at issue. Fiesta
Mart, 987
F.2d at 1127. Therefore, we must characterize the facts alleged in
Gisentaner’s complaint to determine whether they fall within the
language of OMI’s policy.
12
Gisentaner also insists that we look at each individual cause
of action she listed in her complaint to determine whether she
alleged an “occurrence.” In her original complaint, Gisentaner
alleged negligent infliction of emotional distress, negligent
invasion of privacy, and negligent hiring and supervision. In
1993, the Texas Supreme Court eliminated negligent infliction of
emotional distress as a cause of action. Boyles v. Kerr, 855
S.W.2d 593, 593 (Tex. 1993). Texas law also requires proof of
intent for an invasion of privacy cause of action. See Billings v.
Atkinson,
489 S.W.2d 858, 859 (Tex. 1973); Childers v. A.S.,
909
S.W.2d 282, 291 (Ct. App.-Ft. Worth 1995); but see Wheeler v.
Yettie Kersting Memorial Hospital,
866 S.W.2d 32, 54 (Tex. App.-
Houston 1993, no writ)(finding that the question of whether Texas
law recognizes a claim of negligent invasion of privacy is still an
open question). Therefore, the only negligence claims available
under Texas law are for negligent supervision and hiring of
Papapetrou.
This circuit has held that where liability premised on
negligence is related to and interdependent of other tortious
activities, the “ultimate issue” is whether the tortious activities
themselves are encompassed by the “occurrence” definition. New
York Life Ins. v. Traveler’s Ins. Co., 92 F.3d 336 (5th Cir. 1996);
Fiesta Mart,
Inc., 987 F.2d at 1128 (citing Thornhill v. Houston
Gen. Lloyds,
802 S.W.2d 127, 130 (Tex. App.-Fort Worth 1991-no
writ); Centennial Ins. Co. v. Hartford Accident and Indemnity Co.,
821 S.W.2d 192, 1994 (Tex. App.-Houston 1991, no writ); Fidelity
13
and Guaranty Ins. Underwriters, Inc. v. McManus, 633 S.W.2d 787,
790 (Tex. 1982)). Gisentaner’s negligent hiring and supervision
claims require proof of misconduct by Papapetrou. See Canutillo
Independent School District v. National Union Fire Ins. Co.,
99
F.3d 695, 705 (5th Cir. 1996)(finding that negligent supervision
claim would not exist without damage caused by sexual abuse).
Therefore, our only inquiry is whether Papapetrou and Valsamis’
acts are covered under the definition of “occurrence.”
The district court cited Old Republic Ins. v. Comprehensive
Health Care, 786 F. Supp. 629 (N.D. Tex. 1992), affd. on other gds.,
2 F.2d (5th Cir. 1993), for the proposition that intentional torts,
such as sexual harassment, cannot be occurrences under Texas law.
Old Republic held that intentional or willful acts are not
“occurrences” as that term is defined in insurance policies. The
specific language in Old Republic mirrored that of OMI’s policy
here, stating that occurrences result in personal injuries neither
expected nor intended from the standpoint of the insured. Old
Republic, 786 F. Supp. at 633. The court in Old Republic noted that
Texas courts had consistently excluded intentional torts from the
definition of “occurrence” and found that the insured had not
produced Texas precedent to call these decisions into question.
In one of the cases cited by Old Republic, Argonaut Southwest
Insurance Company v. Maupin, 500 S.W.2d 633, 636 (Tex. 1973), the
Texas Supreme Court considered whether an intentional tort could be
considered an occurrence under a comprehensive general liability
policy. The policy in Maupin defined an occurrence as “either (a)
14
an accident, or (b) in the absence of an accident, a condition for
which the insured is responsible which during the policy period
causes physical injury to or destruction of the property which was
not intended.” Maupin, 500 S.W.2d at 634 n.1. The insured in
Maupin purchased dirt from a man who occupied a parcel of land,
mistakenly thinking that he owned the land. The insured then went
onto the land and removed the dirt. The actual owners then sued
the insured for trespass. The court found that the resulting
injury to the owners was not caused by an occurrence because the
insured acted intentionally when he took the soil off the property,
even though the resulting injury was unforeseen or unintended.
Maupin has been interpreted by Texas courts to exclude intentional
acts from the definition of occurrence without regard to whether
the harm was expected or intended by the actor. See, e.g., Pierce
v. Benefit Trust Life Insurance Co.,
784 S.W.2d 516, 518 (Ct. App.-
Amarillo 1990)(finding that the insured’s hernia was not caused by
an occurrence because, although it was unexpected and unintended,
it resulted from the insured’s intentionally lifting a bag);
Baldwin v. Aetna Casualty & Surety Co.,
750 S.W.2d 919, 920 (Tex.
App.-Amarillo 1988, error denied)(finding that the definition of
occurrence excluded a trucking company’s claims for damage caused
by their deliberately putting overweight trucks on the road);
Southern Farm Bureau Casualty Ins. Co. v. Brock,
659 S.W.2d 165
(Ct. App.-Amarillo 1983)(finding that damage to a truck that was
rammed into a car in order to prevent the occupant of the car from
15
shooting someone was not caused by an occurrence because the truck
driver meant to drive into the car).
Gisentaner claims, however, that the Texas supreme court’s
decision in State Farm Fire & Cas. Co. v. S.S., 858 S.W.2d 374
(Tex. 1993) modifies the rule in Maupin to require specific intent
to commit the harm for a claim to fall outside the definition of
occurrence. She reasons that an intentional act with unintended
consequences can still give rise to liability unexpected or
unintended from the standpoint of the insured.
In State Farm, the supreme court considered whether an
intentional injury exclusion precluded recovery for a woman who
contracted herpes from her boyfriend. The court held that the
transmission of herpes was not an intentional act, despite the
intentional nature of the intercourse, because the boyfriend was
asymptomatic and therefore the transmission was not a “natural
result” of his intentional act. The court explained that Maupin
stood for the proposition that damage is not accidental where the
acts are voluntary and intentional and the injury was the natural
result of the act, “even though the injury may have been
unexpected, unforeseen and unintended.” State Farm, 858 S.W.2d at
377 n.2.
Even if Texas law requires specific, instead of general,
intent, we find that the harm in this case was not caused by an
occurrence. State Farm does not preclude a finding that intent to
cause injury can be inferred as a matter of law. The Texas supreme
court noted that the question of intent is highly fact specific and
16
that an actor intends to injure if he believes that the
consequences of his acts are substantially certain to follow.
State Farm, 858 S.W.2d at 379. In the present case, Gisentaner’s
first amended complaint alleged that Papapetrou and Valsamis’
conduct was “extreme and outrageous, undertaken for the purpose of
causing . . . severe emotional distress,” and was “calculated to
and did produce . . . severe emotional distress.” Her injuries
were the natural result of Valsamis’ actions and were substantially
certain to follow.
IV.
Gisentaner also alleges that the district court erred in
failing to require the insurers involved in this case to post a
bond with the court, as required by Tex. Ins. Code Ann. art. 1.36,
§ 11 (Vernon’s Supp. 1991). However, under that provision, a court
has discretion to dispense with the deposit of a bond. We find
that the district court acted within its discretion by releasing
Americas, Cornhill, and OMI from the bond requirement.
CONCLUSION
Because we find that Gisentaner’s claims did not raise a
potential for coverage under the policies issued by Americas,
Cornhill, and OMI, we AFFIRM the decision of the district court.
17
