Filed: Jul. 20, 1999
Latest Update: Feb. 21, 2020
Summary: PUBLISH IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT FILED _ U.S. COURT OF APPEALS ELEVENTH CIRCUIT 07/20/99 No. 98-9069 THOMAS K. KAHN _ CLERK D. C. Docket No. 4:97-CV-124-HLM SCI LIQUIDATING CORPORATION f.k.a. SUNRISE CARPET INDUSTRIES, INC., Plaintiff-Appellee, versus HARTFORD FIRE INSURANCE COMPANY a Connecticut Corporation, HARTFORD CASUALTY INSURANCE COMPANY, a Connecticut Corporation, Defendants-Appellants. _ Appeal from the United States District Court for the Northern
Summary: PUBLISH IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT FILED _ U.S. COURT OF APPEALS ELEVENTH CIRCUIT 07/20/99 No. 98-9069 THOMAS K. KAHN _ CLERK D. C. Docket No. 4:97-CV-124-HLM SCI LIQUIDATING CORPORATION f.k.a. SUNRISE CARPET INDUSTRIES, INC., Plaintiff-Appellee, versus HARTFORD FIRE INSURANCE COMPANY a Connecticut Corporation, HARTFORD CASUALTY INSURANCE COMPANY, a Connecticut Corporation, Defendants-Appellants. _ Appeal from the United States District Court for the Northern D..
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PUBLISH
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
________________________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
07/20/99
No. 98-9069
THOMAS K. KAHN
________________________ CLERK
D. C. Docket No. 4:97-CV-124-HLM
SCI LIQUIDATING CORPORATION f.k.a.
SUNRISE CARPET INDUSTRIES, INC.,
Plaintiff-Appellee,
versus
HARTFORD FIRE INSURANCE COMPANY
a Connecticut Corporation, HARTFORD
CASUALTY INSURANCE COMPANY, a
Connecticut Corporation,
Defendants-Appellants.
________________________
Appeal from the United States District Court
for the Northern District of Georgia
_________________________
(July 20, 1999)
Before TJOFLAT, DUBINA and HULL, Circuit Judges,
HULL, Circuit Judge:
Hartford Fire Insurance Company and Hartford Casualty Insurance
Company appeal the district court’s summary judgment order finding insurance
coverage exists for sexual harassment claims made against their insured, SCI
Liquidating Corporation. After review, we reverse.
I. BACKGROUND
On October 3, 1994, three former female employees sued Sunrise Carpet
Industries, Inc. (“Sunrise”) and Larry Hankins, one of Sunrise’s managers, alleging
causes of action for sexual harassment, retaliation, assault, battery, intentional
infliction of emotional distress, and negligent hiring and retention. SCI
Liquidating Corporation (“SCI”) is the successor to Sunrise.
For the relevant time period, Hartford Fire Insurance Company (“Hartford”)
had issued to Sunrise a commercial general liability insurance policy (the “CGL
policy”) and Hartford Casualty Insurance Company (“Hartford Casualty”) had
issued a separate umbrella liability insurance policy (the “Umbrella policy”).
Hartford and Hartford Casualty initially defended the lawsuit under a reservation
of rights. On February 17, 1995, Hartford and Hartford Casualty denied coverage
and SCI was forced to retain counsel. A jury verdict for four thousand dollars was
2
rendered in the employees’ favor against SCI.1 The trial court also awarded
attorneys’ fees against SCI. After negotiations, on March 5, 1997, SCI paid a total
of $81,109.18 to the employees to satisfy the verdict and award of attorneys’ fees,
costs, and interest. SCI incurred its own attorneys’ fees and expenses of
$111,222.03 in defending the employees’ lawsuit.
On May 1, 1997, SCI filed this coverage case against Hartford and Hartford
Casualty. SCI seeks to recover the attorneys’ fees for its defense counsel as well as
the money SCI paid to the plaintiff employees in the underlying lawsuit, plus
interest. All parties filed motions for summary judgment. On January 26, 1998,
the district court granted SCI’s motion and denied Hartford’s and Hartford
Casualty’s joint motion, finding that the insurance policies covered the underlying
sexual harassment lawsuit. On August 12, 1998, the district court entered final
judgment in SCI’s favor for $187,972.21 plus prejudgment interest against the
Defendants jointly and severally, for an additional $4,359 plus prejudgment
interest against Hartford, and for $3,384 in costs against both Defendants.
On August 17, 1998, Hartford and Hartford Casualty filed a joint Notice of
Appeal. On appeal, all parties agree that no material facts are in dispute regarding
the insurance coverage issues here.
1
The general verdict did not specify upon which claims liability was based.
3
II. STANDARD OF REVIEW
We review de novo the district court’s rulings on motions for summary
judgment. Maniccia v. Brown, 171 F.3d 1364, 1367 (11th Cir. 1999).
III. DISCUSSION
A. CGL Policy
Because this appeal turns on the policy language, we first review in detail
the two policies in issue.
Coverage A of the CGL policy provides for coverage of “bodily injury”
liability that results from an “occurrence”:
1. Insuring Agreement.
a. We will pay those sums that the insured becomes legally
obligated to pay as damages because of “bodily injury” . . . to
which this insurance applies. We will have the right and duty
to defend any “suit” seeking those damages.
. . .
b. This insurance applies to “bodily injury” . . .only if:
(1) The “bodily injury” or “property damage” is caused by
an “occurrence” that takes place in the “coverage
territory;”.
The CGL policy defines “occurrence” in section V and “bodily injury” in an
endorsement, as follows:
9. “Occurrence” means an accident, including continuous or repeated
exposure to substantially the same general harmful conditions.
. . .
4
17. MENTAL ANGUISH
The definition of “bodily injury” in the DEFINITIONS section is replaced
by the following:
“Bodily injury” means bodily injury, sickness or disease sustained by a
person, including mental anguish or death resulting from any of these.
However, the CGL policy excludes coverage for “bodily injury” in several
circumstances, such as:
SECTION I - COVERAGES
COVERAGE A. BODILY INJURY AND PROPERTY DAMAGE
LIABILITY
. . .
2. Exclusions.
This insurance does not apply to:
a. “Bodily injury” . . . expected or intended from the standpoint of
the insured.
. . .
e. “Bodily injury” to:
(1) An employee of the insured arising out of and in the
course of employment by the insured; . . .
This exclusion applies:
(1) Whether the insured may be liable as an employer or in
any other capacity;
In addition to “bodily injury”, the CGL policy, in Coverage B, covers “personal
injury” liability caused by an “offense” arising out of the insured’s business:
5
1. Insuring Agreement
a. We will pay those sums that the insured becomes legally
obligated to pay as damages because of “personal injury” . . . to
which this coverage part applies. We will have the right and
duty to defend any “suit” seeking those damages.
. . .
b. This insurance applies to:
(1) “Personal injury” caused by an offense arising out of
your business, excluding advertising, publishing,
broadcasting, or telecasting done by or for you;
The CGL policy defines “personal injury” to cover one or more of the following
five offenses:
10. “Personal injury” means injury, other than “bodily injury,” arising out
of one or more of the following offenses:
a. False arrest, detention, or imprisonment;
b. Malicious prosecution;
c. The wrongful eviction from, wrongful entry into, or invasion of
the right of private occupancy of a room, dwelling or premises
that a person occupies by or on behalf of its owner, landlord or
lessor;
d. Oral or written publication of material that slanders or libels a
person or organization or disparages a person’s or
organization’s goods, products or services; or
e. Oral or written publication of material that violates a person’s
right of privacy.
An endorsement to the CGL policy expands the definition of “personal injury” to
include certain discrimination, but only if that discrimination is unrelated to the
employment:
1. PERSONAL INJURY
a. The following is added to the “personal injury” definition:
6
f. Discrimination or humiliation that results in injury to the
feelings or reputation of a natural person, but only if such
discrimination or humiliation is:
(1) Not done intentionally by or at the direction of:
(a) The insured; or
(b) Any executive officer, director, stockholder,
partner or member of the insured; and
(2) Not directly or indirectly related to the
employment, prospective employment or
termination of employment of any person or
persons by any insured.
B. Umbrella Policy
The Umbrella policy also provides coverage for both “bodily injury” and
“personal injury”, and requires both types of injury to be caused by an
“occurrence” in order to be covered:
A. Umbrella Liability Insurance
We will pay those sums that the “insured” must legally pay as
“damages” in excess of the “underlying insurance,” or of the “self-
insured retention” when no “underlying insurance” applies, because of
“bodily injury,” “property damage,” “personal injury” or “advertising
injury” to which this insurance applies caused by an “occurrence.”
The Umbrella policy’s definitions of “bodily injury” and “personal injury” are
different from those in the CGL policy; plus, the Umbrella policy defines
“occurrence” differently for “bodily injury” versus “personal injury,” as follows:
C. “Bodily injury” means bodily injury, sickness, or disease sustained by
a person which occurs during the “policy period,” including death
resulting from any of these at any time.
. . .
H. “Occurrence” means
7
1. With respect to “bodily injury” or “property damage:” an
accident, including continuous or repeated exposure to
substantially the same general harmful conditions, which results
in “bodily injury” or “property damage” neither expected nor
intended from the standpoint of the “insured” and includes the
use of reasonable force to protect persons or property; and
2. With respect to “advertising injury” and “personal injury”
respectively: an offense described in one of the numbered
subdivisions of those definitions in this policy.
I. “Personal injury” means injury, other than “advertising injury” or
“bodily injury,” arising out of one or more of the following offenses
committed during the “policy period” in the conduct of your business:
1. False arrest, detention or imprisonment;
2. Malicious prosecution;
3. The wrongful eviction from, wrongful entry into, or invasion
ofthe [sic] right of private occupancy of a room, dwelling or
premises that a person occupies by or on behalf of his or her
owner, landlord or lessor;
4. Oral or written publication of material that slanders or libels a
person or organization or disparages a person’s or
organization’s goods, products or services;
5. Oral or written publication of material that violates a person’s
right of privacy; or
6. Discrimination or humiliation not intentionally committed by or
at the direction of the “insured” or any “executive officer,”
director, stockholder, partner or member thereof, but only with
respect to injury to the feelings or reputation of a natural
person.
Lastly, the Umbrella policy excludes coverage for “bodily injury” and “personal
injury” to employees “arising out of and in the course of their employment”:
B. Exclusions
This policy does not apply:
. . .
8
16. With respect to coverage afforded any of your employees to
“bodily injury” or “personal injury:”
a. To other employees arising out of and in the course of
their employment;
b. To you or, if you are a partnership or joint venture, any
of your partners or members;
or
c. Arising out of the providing or failing to provide
professional health care services.
Even if the employees’ claims involve “bodily injury” or “personal injury” caused
by an “occurrence”, the Defendants contend that this exclusion precludes coverage.
C. Georgia Law
In this diversity action, Georgia’s substantive law governs the interpretation
of the CGL and Umbrella policies here. Provau v. State Farm Mut. Auto. Ins. Co.,
772 F.2d 817, 819 (11th Cir. 1985). In determining insurance coverage, we look to
the allegations in the complaint in the underlying lawsuit and to the terms of the
insurance policies. Elan Pharm. Research Corp. v. Employers Ins. of Wausau,
144
F.3d 1372, 1375 (11th Cir. 1998); Great Am. Ins. Co. v. McKemie,
244 Ga. 84, 85-
86 (1979); Colonial Oil Indus. v. Underwriters Subscribing to Policy Nos.
T031504670 & T031504671,
268 Ga. 561 (1997).
Ambiguities in insurance contracts are construed against the insurer.
Claussen v. Aetna Cas. & Sur. Co., 259 Ga. 333, 334-35 (1989). In contrast,
“unambiguous terms of an insurance policy require no construction, and the plain
9
meaning of such terms must be given full effect, regardless of whether they might
be beneficial to the insurer or detrimental to the insured.” Continental Cas. Co. v.
HSI Fin. Servs., Inc., 266 Ga. 260, 262 (1996). “[E]xclusions from coverage
sought to be invoked must be strictly construed.” Tifton Mach. Works, Inc. v.
Colony Ins. Co.,
224 Ga. App. 19, 20 (1996).
We also review several Georgia cases involving similar claims and similar
policy terms. In Presidential Hotel v. Canal Ins. Co., 188 Ga. App. 609 (1988), the
Georgia Court of Appeals held that a corporate defendant was not entitled to
insurance coverage for a sexual harassment claim. In that case, the hotel’s
employees in the underlying sexual harassment lawsuit alleged that their
supervisor, acting individually and as an agent of the hotel, used his position and
authority to sexually harass
them. 188 Ga. App. at 609. The employees alleged
that they were damaged both mentally and monetarily.
Id. Similar to the CGL and
Umbrella policies here, the insurance policy in Presidential Hotel covered “bodily
injury” which resulted from an “occurrence”.
Id. at 610. The policy defined
“bodily injury” as “bodily injury, sickness or disease sustained by any person
which occurs during the policy period, including death at any time resulting
therefrom.”
Id. The policy defined “occurrence” as “an accident, including
continuous or repeated exposure to conditions, which results in bodily injury or
10
property damage neither expected nor intended from the standpoint of the insured.”
Id.
The Georgia Court of Appeals held that the employees did not allege claims
seeking damages for “bodily injury” under the policy because they sought only
monetary and “mental damages”, and not damages for actual physical harm.
Id. at
611. In addition, the Georgia Court held that even if the employees asserted claims
for “bodily injury”, the intentional conduct of sexual harassment is not an
“occurrence” because that term is defined as an accident resulting in bodily injury
unintended by the insured:
Assuming, arguendo, plaintiffs do assert claims for bodily
injury, we must conclude nevertheless that the policy issued by
[the defendant insurer] does not afford coverage to the
[insured]. The policy covers damages for bodily injury
resulting from an “occurrence.” That term is defined in the
policy as an “accident . . . which results in bodily injury or
property damage neither expected nor intended from the
standpoint of the insured.” Thus, intentional acts are not
covered under the policy. Georgia Farm Bureau, etc., Ins. Co.
v. Meriwether, 169 Ga. App. 363,
312 S.E.2d 823 (1983);
Georgia Farm Bureau, etc., Ins. Co. v. Ray, 148 Ga. App. 85,
251 S.E.2d 34 (1978).
It is alleged by plaintiffs that the hotel, by and through its
agents, sexually harassed and defrauded plaintiffs. Given
these allegations of intentional conduct, it cannot be said
that any resulting bodily injury to plaintiffs was
unintended. Accordingly, the assertions of liability by
plaintiffs do not fall with the policy’s definition of an
11
“occurrence.” Georgia Farm Bureau, etc., Ins. Co. v.
Meriwether, 169 Ga. App. 363,
312 S.E.2d 823.
188 Ga. App. at 611.
In O’Dell v. St. Paul Fire & Marine Ins. Co., 223 Ga. App. 578 (1996), the
Georgia Court of Appeals found that similar liability policies did not cover a
lawsuit by a company’s employee for sexual harassment, assault, battery,
intentional infliction of emotional distress, and negligent retention of employment.
In O’Dell, the Georgia Court found that these allegations did not constitute “bodily
injury” under the liability policies, and that intentional sexual harassment does not
constitute a triggering “event” defined as an “accident” under the insurance
policies:
Moreover, even assuming that Gilleland’s complaint alleged
bodily injury as contemplated by the policies, all policies recite
that coverage applies if bodily injury arises out of an “event.”
They define event as “an accident, including continuous or
repeated exposure to substantially the same general harmful
conditions.” . . . Although the policies do not define accident,
“in Georgia an accident is defined as an event which takes place
without one’s foresight or expectation or design. An accident
refers to an unexpected happening rather than one occurring
through intention or design. Acts could not be unexpected
unless they were accidental.” [Citations and punctuation
omitted.] Given the allegations that O’Dell committed sexual
harassment and assault and battery, which are by their nature
intentional, we cannot conclude that bodily injury, if any, was
caused by an accident. [Citation omitted.] Consequently, the
allegations of bodily injury do not fall within the policies’
definitions of “events” and are not covered.
12
223 Ga. App. at 580. The Georgia Court concluded that the plaintiff’s negligent
retention claims also were not covered, because, among other things, the plaintiff
“did not allege that those injuries were caused by an accident and thus were
brought about by an ‘event.’”
Id.
In the instant case, the district court relied on Crook v. Georgia Farm Bureau
Mut. Ins. Co.,
207 Ga. App. 614 (1993), which involved coverage for a wrongful
death claim under a homeowner’s insurance policy. The plaintiffs in the
underlying lawsuit sued the insured, Crook, for the wrongful death of their son,
who intentionally committed acts causing his own death. The homeowner’s
insurance policy obligated the insurer to defend Crook in a lawsuit to recover
damages for personal injury that was “caused by an
occurrence.” 207 Ga. App. at
614. The policy defined “occurrence” as “an accident”, but “accident” was not
otherwise defined.
Id. The Georgia Court found that “‘[a]ccident’ means an event
which takes place without one’s foresight or expectation or design.”
Id. Using this
definition, the Georgia Court reasoned that the lawsuit against the insured Crook
was covered, as the deceased’s actions did not take place within the insured’s
“foresight or expectation or design”:
In the underlying tort action, there are no allegations that Crook
intentionally caused the death with “foresight or expectation or
design.” Indeed, the undisputed evidence of record shows that
the death occurred entirely without Crook’s intentional
13
“foresight or expectation or design.” Accordingly, insofar as
Crook, in his capacity as an insured, is concerned, the death of
the [plaintiffs’] son was clearly an “accident,” because it was an
unintentional event which took place without his “foresight or
expectation or design.”
That the [plaintiffs’] son may have caused his own death is
obviously not a ground for the Insurer’s present refusal to
defend Crook in the underlying tort action.
207 Ga. App. at 614-15. We observe that the parties did not cite the Presidential
Hotel case before the district court, which appears why the district court relied
heavily on Crook. We now apply this Georgia law to this case.
D. CGL Policy
Presidential Hotel and O’Dell answer directly the coverage issues under
SCI’s CGL policy. Under Presidential Hotel and O’Dell, allegations of intentional
sexual harassment, assault, battery, and negligent retention do not constitute an
“occurrence”, as defined by SCI’s CGL policy. The policies in both Presidential
Hotel and here define “occurrence” as “an accident”, and do not cover the
intentional conduct of Hankins.
SCI argues that Presidential Hotel should be read with Crook, and that,
together, these cases indicate that the allegations in an underlying lawsuit should
be observed from the viewpoint of the insured, as opposed to the actor. There is
some difficulty in reconciling the different approaches taken in Crook and
14
Presidential Hotel. However, we find Presidential Hotel squarely discusses sexual
harassment allegations in the context of a liability policy where “occurrence” is
defined as “an accident,” just as in the CGL policy here, and thus, we must follow
it. Moreover, the Presidential Hotel policy includes additional language in its
definition of “occurrence”, specifying that the “accident” must “result[] in bodily
injury or property damage neither expected nor intended from the standpoint of the
insured.” Despite this language, the Georgia court explicitly ruled that there was no
occurrence with regard to the hotel’s insurance policy, where a supervisor had
allegedly sexually harassed other employees. Thus, even if viewed from the
standpoint of the insured, Presidential Hotel holds that there is still no
“occurrence”. Finally, Crook is distinguishable, in that it involves coverage issues
for a wrongful death claim under a homeowner’s policy against the insured
homeowner, as opposed to a liability policy and the actions of an employee of the
insured. Because the allegations of the underlying sexual harassment lawsuit are
not an “occurrence” under the CGL policy, that lawsuit was not covered under the
CGL policy’s coverage for “bodily injury” caused by an “occurrence”.
Furthermore, the parties do not contend that the allegations of the underlying
lawsuit come within the definition of “personal injury” in the CGL policy. We
note that the endorsement to the CGL policy expands the definition of “personal
15
injury” to include certain discrimination, but denies coverage where the
discrimination is “directly or indirectly related to the employment . . . of any
person or persons by any insured.”
Accordingly, we hold that the CGL policy nowhere provides SCI coverage
for the underlying lawsuit.
E. Umbrella Policy
Coverage for “bodily injury” under the Umbrella policy is also limited to
“occurrences” defined exactly as the liability policy in the Presidential Hotel
decision. Accordingly, under the above reasoning, we hold that the Umbrella
policy’s “bodily injury” provisions do not provide coverage to SCI for the
underlying sexual harassment lawsuit.
However, the Umbrella policy defines “personal injury” differently than the
CGL policy. Specifically, the Umbrella policy does not as strictly limit the range
of discrimination included in its definition of “personal injury.” The Umbrella
policy includes as “personal injury”:
Discrimination or humiliation not intentionally committed by or
at the direction of the “insured” or any “executive officer,”
director, stockholder, partner or member thereof, but only with
respect to injury to the feelings or reputation of a natural
person.
16
The employees’ complaint in the underlying lawsuit alleges discrimination, among
other things, as follows:
49. The unwelcome and offensive actions by defendant
Hankins against plaintiffs and other Sunrise employee [sic],
which actions, Sunrise knew or should have known of, created a
sexually-charged, hostile working environment which
substantially affected plaintiffs’ conditions of employment and
discriminated against plaintiffs because of their sex in violation
of Title VII.
50. Defendant Hankins made known to plaintiffs that if
they would succumb to his sexual solicitations and advances
they would receive preferential treatment at the workplace.
Hankins’ behavior in making plaintiffs’ submission to his
advances an express and implied condition of employment
constitutes quid pro quo sexual harassment against plaintiffs
because of their sex in violation of Title VII, for which both
Sunrise and Hankins are liable.
The employees’ allegations of discrimination under Title VII appear to be covered
by the plain language of the sixth offense listed as “personal injury” in the
Umbrella policy.2
2
We note that discrimination “intentionally committed by or at the direction of the
‘insured’” would not fit within the definition of “personal injury”. However, the parties do not
argue that Hankins, the alleged harassing supervisor, would be an “insured” under the terms of
the Umbrella policy. Further, the Umbrella policy limits its definition of “insured” to
“employees, other than your ‘executive officers,’ but only for acts within the scope of their
employment by you.” We note that “[t]he general rule is that sexual harassment by a supervisor
is not conduct within the scope of employment.” Burlington Indus. v. Ellerth, 524 U.S. 742,
118
S. Ct. 2257, 2267 (1998); see also, Faragher v. City of Boca Raton,
524 U.S. 775,
118 S. Ct.
2275, 2286-90 (1998); B.C.B. Co. v. Troutman,
200 Ga. App. 671, 672 (1991).
The parties also do not argue that we need to disaggregate those claims in the underlying
sexual harassment complaint which appear to be covered from those which are not. Therefore,
as the employees’ Title VII discrimination claim appears to be covered by the Umbrella policy,
(continued...)
17
In addition, the Umbrella policy’s definition of “occurrence” with respect to
“personal injury” is different from the definition of “occurrence” with respect to
“bodily injury”. “Occurrence” with respect to “personal injury” simply refers back
to the six listed offenses within the definition of “personal injury”: “‘Occurrence’
means . . . With respect to . . . ‘personal injury’ . . . an offense described in one of
the numbered subdivisions of [that] definition[] in this policy.” Accordingly, as
plaintiffs’ claim for discrimination and sexual harassment under Title VII is
included within the offenses listed in the definition of “personal injury”, the Title
VII claim also qualifies as an “occurrence” for purposes of “personal injury” under
the Umbrella policy.
However, the Umbrella policy then excludes from coverage “personal
injury” caused by employees “arising out of and in the course of their
employment.” Thus, the question arises regarding whether, for purposes of a
liability insurance policy, sexual harassment by a coworker is conduct “arising out
of and in the course of their employment.” No Georgia Supreme Court or Georgia
Court of Appeals decision has decided this issue.
2
(...continued)
we need not discuss the employees’ assault, battery, intentional infliction of emotional distress,
or negligent hiring and retention claims.
18
A Georgia workers’ compensation decision has held that injuries from
sexual harassment by another employee occur “in the course of” employment, but
do not arise “out of” that employment, and thus an employee’s sexual harassment
claim is not barred by the Workers’ Compensation Act. Murphy v. ARA Servs.,
Inc., 164 Ga. App. 859, 861-62 (1982); see also O.C.G.A. § 34-9-1(4). In Murphy,
the Georgia Court of Appeals reasoned that “‘[a]n injury arises in the course of
employment, . . . when it occurs within the period of employment, at a place where
the employee may be in the performance of his duties, and while he is fulfilling
those duties or engaged in doing something incidental thereto.’”
Id. at 861
(quoting New Amsterdam Cas. Co. v. Sumrell,
30 Ga. App. 682 (1923)). The
Georgia Court found, however, that injuries caused by sexual harassment do not
arise “out of” the employment because the “causative danger of the injury” was not
“reasonably incidental to the character of [the plaintiff’s] employment.”
Id. at 862.
In 1992, the Georgia Court of Appeals cited Murphy with approval in Rogers v.
Carmike Cinemas, Inc.,
211 Ga. App. 427 (1993), and held without discussion that
the sexual harassment injuries there did not arise “out of” the plaintiff’s
employment. 211 Ga. App. at 429.
Nonetheless, under Georgia law, the result in the workers’ compensation
context may be different from the liability insurance context generally. See Jones
19
v. Aldrich Co., Inc., 188 Ga. App. 581, 584 (1988) (pointing out that workers’
compensation presents its own problems and rules regarding “scope of
employment”). In fact, one state supreme court has specifically discussed why this
same language in an insurance exclusion necessarily must be read differently than
similar language in a state workers’ compensation act and why it excludes injuries
from sexual harassment claims. McCleod v. Tecorp Int’l Ltd.,
865 P.2d 1283,
1286-88 (Or. 1993). In McCleod, the Oregon Supreme Court observed that
general liability policies include a separate exclusion for workers’ compensation
claims and that construing the “arising out of and in the course of employment”
exclusion to have the same meaning as the workers’ compensation exclusion
effectively reads a provision out of the policy. SCI’s Umbrella policy has the same
exclusion for workers’ compensation claims as the policy in McCleod, and thus the
issue arises regarding how the two exclusions should be read together.
In addition, other jurisdictions have held that sexual harassment by a
coworker at the workplace necessarily “arises out of and in the course of
employment”, and have therefore excluded coverage of sexual harassment claims
based on the same exclusion present here. See, e.g., Aberdeen Ins. Co. v. Bovee,
777 S.W.2d 442, 444 (Tx. Ct. App. 1989); Western Heritage Ins. Co. v. Magic
Years Learning Ctrs. and Child Care, Inc.,
45 F.3d 85, 89-90 (5th Cir. 1995)
20
(applying Texas law). Also, even though intentional sexual harassment may not be
within “the scope of employment,” a sexual harassment claim under Title VII may
arguably arise “out of” employment. Indeed, to be viable, a sexual harassment
claim under Title VII requires an employment relationship between the supervisor
harasser and injured employee.
Thus, regarding the Umbrella policy, we face an issue of unsettled Georgia
law that is determinative of the final issue in this appeal. We, therefore, certify this
question for resolution by the Georgia Supreme Court.
CERTIFICATION FROM THE UNITED STATES COURT OF
APPEALS FOR THE ELEVENTH CIRCUIT TO THE SUPREME
COURT OF GEORGIA PURSUANT TO O.C.G.A. § 15-2-9 (1994).
TO THE SUPREME COURT OF GEORGIA AND ITS
HONORABLE JUSTICES:
Because this appeal depends on resolution of this question of unsettled
Georgia law, we certify the following question to the Supreme Court of Georgia:
DOES SEXUAL HARASSMENT OR RETALIATION BY A
SUPERVISOR TRIGGER EXCLUSION SIXTEEN ON PAGE
THREE OF THE UMBRELLA INSURANCE POLICY IN THIS
CASE, WHERE THE INSURANCE POLICY EXCLUDES:
“COVERAGE AFFORDED ANY OF [THE INSURED’S]
EMPLOYEES TO ‘BODILY INJURY’ OR ‘PERSONAL INJURY’ .
. . TO OTHER EMPLOYEES ARISING OUT OF AND IN THE
COURSE OF THEIR EMPLOYMENT”?
21
The phrasing used in this certified question should not restrict the Supreme
Court’s consideration of the problem posed by this case. This extends to the
Supreme Court’s restatement of the issues and the manner in which the answer is
given. In order to assist the Supreme Court’s consideration of the case, the entire
record, along with the briefs of the parties, shall be transmitted to the Supreme
Court of Georgia.
REVERSED in part; QUESTION CERTIFIED.
22
