Clarendon Amer Ins v. Embers, Inc, et al

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________
m 00-60409
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CLARENDON AMERICA INSURANCE CO.,
Plaintiff-Appellant,
VERSUS
THE EMBERS, INC., D/B/A CENTERFOLD STRIP CLUB;
UNKNOWN JOHN DOES;
AND
PEGGY LARK,
AS ADMINISTRATRIX OF THE ESTATE OF TONY DAVIS, DECEASED,
ON BEHALF OF THE ESTATE OF TONY DAVIS
AND ON BEHALF OF ALL WRONGFUL DEATH BENEFICIARIES OF TONY DAVIS,
Defendant-Appellee.
_________________________
Appeal from the United States District Court
for the Southern District of Mississippi
_________________________
September 12, 2001

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Before JONES, SMITH, and DeMOSS,
Circuit Judges.
JERRY E. SMITH, Circuit Judge:*
Clarendon America Insurance Company
(“Clarendon”) appeals a summary judgment in
favor of the Embers d/b/a/ Centerfold Strip
Club and Peggy Lark (collectively “Embers”)
on Clarendon’s motion for declaratory relief to
determine coverage and defense duties under
a commercial general insurance policy. The
district court held that Clarendon (1) has a
duty to defend Embers in the underlying state
court suit, (2) may have a coverage duty to
Embers for actual damages, but coverage will
turn on a jury question to be determined in the
state court action, and (3) has no duty to cover
any punitive damages arising from the
underlying suit. Clarendon appeals the first
two determinations. Finding no error, we
affirm.
I.
The coverage questions arose when Lark,
as administratrix of the estate of Tony Davis
and representative of his wrongful death bene-
ficiaries, sued Embers in state court for the
wrongful death. Davis allegedly was killed on
the premises of the club owned by Embers.
The state complaint alleges he was killed by an
errant bullet to the head in the parking lot of
the club, resulting from a skirmish between
employees of the club and some recently-
ejected patrons not affiliated with Davis.
II.
We review a summary judgement de novo.
See Shakelford v. Deloitte, 190 F.3d 398, 403
(5th Cir. 1999). Interpretation of insurance
contracts also are reviewed de novo. See Am.
States Ins. Co. v. Natchez Steam Laundry, 131
F.3d 551, 553 (5th Cir. 1998).
III.
The parties agree that Mississippi law ap-
plies. In Mississippi, (1) where the policy is
plain and unambiguous, the court must
construe the contract as written; (2) the policy
must be read as a whole to give effect to all
provisions; (3) the court must read an
insurance policy more strongly against the
drafter; (4) where the terms of the policy are
ambiguous, the court must interpret them in
favor of the insured; (5) where a policy is
subject to two reasonable interpretations, a
court must adopt the interpretation affording
the greater indemnity to the insured; (6) where
there is no practical difficulty in making the
language of a policy free form doubt, any
doubtful provision must be resolved against
the insurer; (7) a court must interpret policies,
especially exclusions, favorably to the insured
wherever reasonably possible; and (8) a court
must refrain from changing a policy where the
terms are unambiguous, despite any resulting
hardship. See Centennial Ins. Co. v. Ryder
Truck Rental, Inc., 149 F.3d 378, 382-83 (5th
Cir. 1998) (citations omitted).
The touchstone of interpretation is the in-
tention of the parties. “If there is ambiguity
within a policy of insurance, then the intention
of the parties to the insurance contract should
be determined based upon what a reasonable
person placed in the insured’s position would
have understood the terms to mean.” J & W
Foods Corp. v. State Farm Mut. Auto. Ins.
Co., 723 So. 2d 550, 552 (Miss. 1998).
* Pursuant to 5TH CIR. R. 47.5, the court has
determined that this opinion should not be
published and is not precedent except under the
limited circumstances set forth in 5TH CIR. R.
47.5.4.

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IV.
The dispute centers on two sections of the
exclusions part of the Clarendon policy. The
first is the so-called “expected or intended in-
jury exclusion.” The policy excludes from
coverage “Bodily Injury or property damage
expected or intended from the standpoint of
the insured. This exclusion does not apply to
bodily injury resulting from the use of
reasonable force to protect persons or
property.” Policy § I.A.2.a. (internal
quotation marks omitted). The other
exclusion is for assault and battery. It
excludes from coverage
Bodily injury or property damage arising
from the following:
(1) assault;
(2) battery;
(3) harmful or offensive contact between
or among two or more persons;
(4) apprehension of harmful or offensive
contact between or among two or more
persons; or
(5) threats by words or deeds;
regardless of degree of culpability or in-
tent and without regard to:
(a) whether the acts are alleged to
be by or at the direction of the insured,
his officers, employees, agents, or
servants; or by anyone otherwise on, at,
or near premises owned or occupied by
the insured; or by any other person;
(b) the alleged failure of the
insured, or his officers, employees,
agents, or servants, in the hiring,
supervision, retention or control of any
person whether or not an officer, agent
or servant of the insured; or(c) the
alleged failure of the insured or his
officers, employees, agents, or servants
to attempt to prevent, bar, or halt any
such conduct.
This exclusion also applies to any claim
made by any other person, firm, or or-
ganization, asserting rights derived
from, or contingent upon any person
asserting a claim excluded hereunder.
(internal quotation marks omitted)
Policy § II.A.2.q.
The district court held that the facts plead-
ed in the underlying suit conceivably fall under
both exclusions. That is, if the actions of the
Embers employees were done with “reasonable
force to protect persons or property,” while at
the same time rising to the level of an
“assault”, “battery”, or “harmful or offensive
contact,” those actions would seem to be both
excluded by subsection “q” and not excluded
by subsection “a.” This, the court held, is an
ambiguity, to be resolved in favor of coverage.
Clarendon argues that, far from there being
an ambiguity, the policy is clear as written, and
an exclusion cannot be used to grant coverage
affirmatively. Clarendon reads the policy so
that the exclusion for assault and battery ends
the question. Under this view, the non-
exclusion of the same suit under another ex-
clusion is irrelevant.
The problem with this argument is that it
renders the “reasonable force” clause of the
“expected or intended injury” exclusion

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superfluous. Both parties recognize this is
inconsistent with plain Mississippi law to
interpret an insurance policy as a whole and to
“giv[e] operative effect to every provision”.
Continental Cas. Co. v. Hester, 360 So. 2d
695, 697 (Miss. 1978).
Clarendon apparently recognizes as much in
its reply brief, stating that the “reasonable
force” clause of the “expected or intended in-
jury” exclusion is not superfluous, because a
hypothetical may be imagined in which an em-
ployee uses reasonable force that does not rise
to the level of an assault or battery, to protect
another patron. Specifically, Clarendon offers
a hypothetical in which an employee tackles a
patron to prevent him from being hit from
behind by a flying chair thrown by another
patron.
There are two problems with this argument.
First, it is far from evident that this action by
the employee is not excluded from coverage
under the “assault and battery” exclusion for
being a “harmful or offensive contact.” As
that same exclusion makes clear, intent is ir-
relevant. Thus, if the patron were injured by
the employee’s heroics, it would not matter
that the employee had a noble motive. Thus,
the “assault and battery” exclusion still appears
to be in conflict with the non-exclusion, in the
“expected or intended injury” exclusion, of
acts of “reasonable force” to protect persons
or property.
Even if one does not rely on this analysis,
Clarendon’s hypothetical fails. When
analyzing an insurance contract for ambiguity,
the relevant facts are those of the instant case,
not any possible hypothetical that may
eliminate the ambiguity at a theoretical level.
See LEE R. RUSS, COUCH ON INSURANCE §
21:11 (3d ed. 1995). The case to be dealt with
comes from the facts of the coverage for this
insured.1
There undeniably was an assault against
Davis. If the assault were the result of
“reasonable force to protect persons or
property” by Embers employees, the policy
would not exclude resulting damages from
coverage under the “expected or intended
injury” exclusion. The plain wording of the
“assault and battery” exclusion, though, would
exclude such damages from coverage. This is
an ambiguity in coverage.
V.
Under Mississippi law, the duty of an in-
surer to defend the insured against a lawsuit
depends only on the facts pleaded in the un-
derlying lawsuit. If a suit is filed alleging facts
that bring the suit within coverage of the
policy, the duty to defend is triggered. See
Moeller v. Am. Guar. & Liab. Ins. Co., 707
So. 2d 1062, 1069 (Miss. 1998). Any
ambiguities regarding this defense obligation
are strictly construed against the insurer. See
Amer. States Ins., 131 F.3d at 553 (applying
Mississippi law). This duty extends even to
defend suits that are groundless, false, or
fraudulent. See State Farm Mut. Auto. Ins.
Co. v. Taylor, 233 So. 2d 805, 808 (Miss.
1970). Consequently, Clarendon owes a duty
of defense to Embers in the wrongful death
lawsuit.
AFFIRMED.
1 See, e.g., J&W Foods Corp. v. State
Farm Mut. Auto. Ins. Co., 723 So. 2d 550 (Miss.
1998) (remanding to determine the intent of stock-
holders of close corporation as to whether they
intended insurance policy in name of corporation to
cover relatives of the insured).

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