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Encompass Indemnity Co. v. J.H.

United States District Court, D. Utah, Central Division

May 12, 2017

ENCOMPASS INDEMNITY COMPANY, an Illinois Company Plaintiff,
v.
J.H., a Utah Citizen; and D.C., a Utah Citizen, Defendant.

          MEMORANDUM DECISION AND ORDER GRANTING [31] MOTION FOR SUMMARY JUDGMENT

          David Nuffer District Judge.

         BACKGROUND

         Plaintiff Encompass Indemnity Company is a liability insurance company. Encompass seeks declaratory relief from defending or indemnifying J.H., an insured.[1] In the Complaint for Damages (Underlying Complaint), [2] D.C. brings numerous tort and statutory claims against J.H. and others. In this Motion, [3] Encompass moves for summary judgment. Defendant D.C. opposes this motion.[4] Defendant J.H. did not file a response. Encompass replied in support of its Motion.[5]

         Because the allegations in the Underlying Complaint are not an “occurrence” and therefore do not fall within the policy, the Motion is GRANTED.

         Table of Contents

         Background ..................................................................................................................................... 1

         Evidentiary Objections .................................................................................................................... 2

         1. D.C.'s objection regarding J.H.'s tender of the Underlying Complaint is overruled. . ............................................................................................................... 2

         2. D.C.'s objection to admissibility of Exhibits A and B is overruled. . ..................... 3

Undisputed Material Facts .............................................................................................................. 5

         Standard of Review ....................................................................................................................... 13

         Discussion ..................................................................................................................................... 14

         Encompass Does Not Have a Duty To Defend J.H. Under the Policy Because D.C.'S Injuries Are not “Occurrences” ................... 15

         1. Unwanted sexual contact with a minor is not an occurrence. . .................. 17

         2. Knowingly supplying alcohol to a minor is not an occurrence. . .............. 18

         3. Verbal abuse and sexual harassment at the workplace is not an occurrence. .................................... 18

         Conclusion .................................................................................................................................... 19

         Order ........................................................................................................................................... 20

         EVIDENTIARY OBJECTIONS

         D.C. makes numerous evidentiary objections. For the reasons that follow, those objections are overruled.

         1. D.C.'s objection regarding J.H.'s tender of the Underlying Complaint is overruled.

         D.C. argues that Encompass's reference to J.H. tendering the Underlying Complaint to Encompass is hearsay, lacks foundation, and lacks authenticity.[6] Encompass responds that J.H. already admitted to tendering the Underlying Complaint to Compass in her Answer.[7] Because of relevant judicial admissions, the question of whether J.H. tendered the Underlying Complaint to Encompass is beyond dispute.

         Judicial admissions are “formal concessions in the pleadings, or stipulations by a party or its counsel, that are binding upon the party making them. They may not be controverted at trial or on appeal. Indeed, they are not evidence at all but rather have the effect of withdrawing a fact from contention.”[8]

         In the Complaint, Encompass alleges

26. In August of 2015, J.H. provided notice and tender the Underlying [Complaint] to Encompass.[9]
27. Encompass conducted an investigation of the tender of the Underlying [Complaint] and on or about October 13, 2015, counsel for Encompass sent a letter to J.H. and her defense counsel informing them of Encompass' decision to defend J.H. in the Underlying [Complaint], subject to a reservation of rights.[10]

         Defendant J.H. filed an answer.[11] In response to the above two paragraphs of the Complaint, J.H. stated

26. Defendant J.H. admits the allegations contained in paragraph 26 of Plaintiff's Complaint.
27. Defendant J.H. admits that counsel for Encompass sent a letter to J.H. and her defense counsel informing them of Encompass' decision to defend J.H. in the Underlying [Complaint], subject to a reservation of rights. All other allegations are denied.

         Therefore, J.H. has admitted that she tendered the Underlying Complaint to Encompass. That admission is binding. Defendants' objection is overruled.

         2. D.C.'s objection to admissibility of Exhibits A and B is overruled.

         D.C. also argues that the USP Deluxe Home Insurance Policy that Encompass attaches as Exhibit A to the Motion[12] and Defense Under a Reservation of Rights Letter Encompass attaches as Exhibit B to the Motion[13] are hearsay, lack foundation, and are not authenticated.[14]Encompass makes numerous arguments for why Exhibits A and B are not hearsay, have foundation, and are authenticated.[15] Encompass also attempts to remedy the alleged issue by adding Additional Statement of Material Facts.[16] Exhibits A and B are admissible because Encompass's Additional Statement of Material Facts provide foundation and authenticity.

         Federal Rule of Civil Procedure 56(e) states that if “a party fails to properly support an assertion of fact . . ., the court may . . . give an opportunity to properly support or address the fact.” Rule 56(e) materials included in a reply brief are distinct from simply adding facts or evidence in a reply. When a moving party includes additional facts or evidence in a reply brief, a district court can “either . . . permit[] a surreply or, in granting summary judgment for the movant, it [can] . . . refrain[] from relying on any new material contained in the reply brief.”[17]By contrast, Rule 56(e) evidence can be used to remedy evidentiary objections-such as lack of foundation or authenticity-without requiring the district court to disregard the material fact or allow further briefing.[18] This is because the facts or evidence would have already been present in the original motion; the Rule 56(e) materials are simply resolving any technical evidentiary deficiencies.

         To authenticate and lay foundation for Exhibits A[19] and B[20] to the Motion, Encompass includes in its Reply numerous statements of fact[21] that reference a Declaration of Rebecca L. Hill (Hill Declaration)[22] and numerous attachments to the Hill Declaration (collectively “Rule 56(e) Materials”). These Rule 56(e) Materials sufficiently lay foundation and authenticate Exhibits A and B to the Motion. Therefore, Encompass's Additional Statement of Material Facts[23] and the affidavit and exhibits resolve the alleged evidentiary deficiencies in Encompass's motion. The defendants' objections are overruled. And no additional briefing is required.

         UNDISPUTED MATERIAL FACTS[24]

         1. D.C. filed a complaint against J.H. under seal in the United States District Court for the District of Utah on or about December 23, 2014 under civil number 1:14-cv-00175 (the “Underlying Complaint”).[25]

         2. The Underlying Complaint's “Statement of Facts” alleges facts and conduct common to each cause of action asserted in the Underlying Complaint.[26]

         3. The Statement of Facts Section of the Underlying Complaint alleges that J.H. performed sexual acts on D.C. to which D.C. did not consent - including molestation, intercourse and oral sex - and often did so while D.C. was under the intoxicating effects of alcohol that J.H. had furnished to D.C.:

30. On multiple occasions in or about April 2013 and thereafter, Defendants furnished, or allowed to be furnished, alcohol and alcoholic products to minors at some or all of Defendants Properties, including to Plaintiff, a minor.
31. On or about May 16, 2013, for example, [J.H.] . . . supplied Plaintiff with alcohol, to the point that [J.H.] aided and abetted Plaintiff in becoming intoxicated.
32. Due to being intoxicated, Plaintiff went and laid down on a bed. After Plaintiff was lying down, [J.H.] came to Plaintiff, pulled Plaintiff's pants down, and began to perform unwelcomed sex acts to Plaintiff without his consent.
33. In doing so, [J.H.] touched the intimate parts and genitalia of Plaintiff's body, taking indecent liberties with him, such as performing oral sex and vaginal sex to him.
36. From mid-May to mid-July, multiple similar incidents took place . . . including sexual activity by [J.H.] to Plaintiff.
37. [J.H.] [had] interactions with minor boys, including Plaintiff, and her involvement towards them involve[ed] [sic] drugs, alcohol and sexual activity.
41. On or about July 11, 2013, Plaintiff attempted suicide and was hospitalized due to the emotional damages, injuries and harm he sustained as a result of Defendants' unlawful conduct to him.
42. While Plaintiff was hospitalized in July 2013, [J.H.] went to Plaintiff at the hospital and while there she engaged in further inappropriate conduct with Plaintiff.
43. Later, on or about July 23, 2013, after Plaintiff was out of the hospital and knowing of Plaintiff's condition, severe depression and troubles, [J.H.] engaged in further inappropriate conduct with Plaintiff, including further sexual activity, including intercourse.
44. On or about July 23, 2013, Plaintiff attempted suicide a second time and was taken to emergency and hospitalized due to the further emotional damages, injuries and harm he sustained as a result of Defendants' unlawful conduct to him.[27]

         4. The Underlying Complaint's “Statement of Facts” otherwise alleges that J.H. furnished D.C. with alcohol:

26. In or about April 2013 and thereafter on multiple occasions, including at El Matador, Defendants furnished alcohol and alcoholic products to Plaintiff, whom they knew was a minor.
27. Defendants' supplying of alcohol to Plaintiff, a minor, was in violation Utah's Alcoholic Beverage Control Act, Utah Code Title 32B, Chapter 4, including section 32B-4-403.
28. In or about April 2013 and thereafter, Defendants had special duties, knowledge and familiarity with prohibitions of furnishing alcohol and alcoholic products to minors.
29. Among their duties, knowledge and familiarity, including not to furnish alcohol and alcoholic products to minors, Defendants had made and taken upon themselves statutory and affirmative duties, including with the Utah Department of Alcoholic Beverage Control (“DABC”), including with respect to an application with and a liquor license[] through the DABC . . . .
96. For example, shortly after Plaintiff was hired, [J.H.] furnished regularly alcohol and alcoholic products to employees, including minors . . . .[28]

         5. The statute cited in Paragraph No. 27 of the Underlying Complaint, Section 32B-4-403 of Utah's Beverage Control Act, is a criminal statute providing, in relevant part:

(1) A person may not sell, offer for sale, or furnish an alcoholic product to a minor. (2)(a)(i) Except as provided in Subsection (3), a person is guilty of a class B misdemeanor if the person who violates Subsection (1) negligently or recklessly fails to determine whether the recipient of the alcoholic product is a minor.
(b) Except as provided in Subsection (3), a person is guilty of a class A misdemeanor if the person who violates Subsection (1) knows the recipient of the alcohol product is a minor.[29]

         6. Within the cause of action for “Violations of Civil Rights, ” the Underlying Complaint alleges that J.H. sexually harassed and verbally abused D.C. while D.C. was working at El Matador, and from that conduct alleges economic losses and other injuries:

92. At all times during Plaintiff's employment at El Matador, [J.H.] was Plaintiff's superior, supervisor and an owner, principal, and officer of El Matador.
95. Beginning in May 2013, and thereafter, Plaintiff, a male and a member of a protected class, was subjected to repeated severe and pervasive harassment, including sexual harassment, with numerous unwelcomed and offensive crude, lewd verbal abuse directed to Plaintiff by [J.H.], a female, including because of and based on Plaintiff's sex. . . . .
98. Defendant would also make sexually explicit and verbally harassing comments to others, including to Plaintiff, such as: “It's hard to work with you because I want to fuck you.” 99. Defendant [J.H.] would also make quid-pro-quo promises to keep Plaintiff [D.C.] “happy”, with physical and inappropriate touching, hugging, and kissing [D.C.], with promises by Defendants to Plaintiff [D.C.] of pay raises, including one for $.50/hour. . . . .
101. Notwithstanding the above, and despite Plaintiff's questioning to his superiors, including [J.H.], Plaintiff was subjected to further harassment, hostile work environment, discrimination, ridicule, insult, abuse, intimidation, fear of reprisal, and retaliation. . . . .
104. As a result of actions of El Matador, including by its agent and proxy, [J.H.], Plaintiff has suffered irreparable injuries and is entitled to damages, including but not limited to, actual damages such as back and front pay, compensatory damages, and other economic loses [sic], emotional pain and suffering, mental anguish, humiliations, embarrassment, personal indignity and other intangible injuries for all of which he should be compensated, as well as for punitive damages, attorney fees and costs.[30]

         7. The Underlying Complaint alleges that “[J.H.] engaged in all or some of the wrongful acts and omissions . . . while under the supervision and control of the Defendants [El Matador and its owners] as their agents.[31]

         8. The Underlying Complaint's “Statement of Facts” alleges that J.H. was 39 years old and D.C. was 16 years old at the time when J.H. performed unwanted sex acts on D.C., furnished D.C. with alcohol, and mentally abused and sexually harassed D.C. at work. The Underlying Complaint further alleges that at the time J.H. was committing these acts she knew that D.C. was a minor.[32]

         9. The Underlying Complaint's “Statement of Facts” alleges harm to D.C. from the alleged conduct of J.H. or the other Defendants named in the suit:

41. On or about July 11, 2013, Plaintiff [D.C.] attempted suicide and was hospitalized due to the emotional damages, injuries and harm he sustained as a result of Defendants' unlawful conduct to him.
42. While Plaintiff [D.C.] was hospitalized in July 2013, [J.H.] went to Plaintiff [D.C.] and while there she engaged in further inappropriate conduct with Plaintiff.
43. Later, on or about July 23, 2013, after Plaintiff [D.C.] was out of the hospital and knowing of Plaintiff's condition, severe depression and troubles, [J.H.] engaged in further inappropriate conduct with Plaintiff, including further sexual activity, including intercourse.
44. On or about July 23, 2013, Plaintiff [D.C.] attempted suicide a second time and was taken to emergency and hospitalized due to the further emotional damages, injuries and harm he sustained as a ...

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