Evanston Insurance Co. v. The Break I Inc.

          MEMORANDUM OPINION

          KARON OWEN BOWDRE CHIEF UNITED STATES DISTRICT JUDGE.

         This matter comes before the court on “Plaintiff's Motion for Judgment on the Pleadings Against Defendant The Break I, Inc.” (Doc. 17). Evanston Insurance Company filed this case against The Break I, Inc., d/b/a The Break Restaurant & Billiards, Inc. and Amanda Beasley on July 31, 2018. (Doc. 1). On August 1, 2015, Ms. Beasley was shot outside The Break in Birmingham, Alabama. Ms. Beasley sued The Break in the Circuit Court of Jefferson County, Alabama, on July 6, 2017. The Break allegedly failed to inform Evanston, its insurer, of the pending lawsuit until June 29, 2018, when the parties were scheduled to mediate the underlying suit. At that time, The Break requested that Evanston defend it against Ms. Beasley's lawsuit and provide coverage for any damages she might obtain.

         Evanston filed this action seeking a declaratory judgment that (1) because The Break breached the insurance policy's notice conditions, Evanston does not owe a duty of defense or indemnity to The Break; (2) because Ms. Beasley's claim is barred by the policy's assault-and-battery exclusion, Evanston does not owe a duty of defense or indemnity to The Break; and (3)

         because the policy does not cover punitive damages, Evanston does not owe a duty of indemnification to The Break for any punitive damages that may be awarded to Ms. Beasley.

         On January 9, 2019, Evanston filed its motion for judgment on the pleadings against The Break, (doc. 17), and a motion for default judgment against Ms. Beasley, (doc. 15).^[1] The court ordered The Break to respond to the motion for judgment on the pleadings on or before February 6, 2019, and Evanston to submit its reply brief, if necessary, on or before February 20, 2019. (Doc. 21). The Break never filed a response, and so Evanston never filed a reply brief. The motion is now ripe for review.

         I. Background

         Evanston's predecessor, Essex, insured The Break prior to the merger between Evanston and Essex. The policy at issue, Policy 2CU1833, ran from April 6, 2015 until April 6, 2016. Under the policy, Essex agreed to pay The Break for damages incurred by bodily injuries or property damages caused by an occurrence, which must take place in the coverage territory during the policy period. Essex has “the right and duty to defend the insured against any ‘suit' seeking those damages, ” but has no such right or duty to defend a suit to which the insurance did not apply. (Doc. 1 at 3).

         In the event of an occurrence, offense, claim, or suit, the policy required The Break:

(1) [to i]mmediately record the specifics of the claim or “suit” and the date received; and

(2) [to n]otify [the insurer] as soon as practicable. You must see to it that [the insurer] receive[s] written notice of the claim or “suit” as soon as practicable.

(Doc. 1 at 3). Further, The Break must “[i]mmediately send [to the insurer] copies of any demands, notices, summonses, or legal papers received in connection with the claim or ‘suit.'” (Id.).

         The policy specifically excluded from the insurance coverage injuries arising from assault or battery. The policy also excluded “[f]ines, penalties, and punitive or exemplary damages, or any expenses or any obligation to share such damages or repay another.” (Doc. 1 at 5).

         On August 1, 2015, Ms. Beasley was shot in the left leg and ankle outside The Break's place of business at 1001 20th Street South, Birmingham, Alabama. She alleges that she observed one of The Break's “security guards or personnel escort a male and female patron to their vehicle.” (Doc. 1 at 7). She watched those patrons get into the vehicle and drive off the premises. Several minutes later, the same two patrons purportedly returned in their vehicle and stopped at the parking lot entrance of The Break. The male patron fired several gunshots before the patrons fled in their vehicle. The Break's security guard then brandished a gun and began shooting at the vehicle. During this time, the security guard allegedly shot Ms. Beasley in the left leg and ankle.

         Evanston first learned of the potential claim by Ms. Beasley upon receiving a letter, dated January 11, 2016, from Ms. Beasley's then-attorneys, Norris Injury Lawyers. The letter was directed to The Break's insurance agent, Nesbitt and Associates, Inc. Evanston subsequently sent two reservation-of-rights letters to The Break-one in January 2016 and one in May 2016. Both letters included the following language:

In the event that you receive notice that a suit has been filed, please forward the suit and any additional information to our attention as soon as possible so that we can evaluate the specific allegations under the policy.

(Doc. 1 at 6). In the January 2016 letter, because no suit had been filed as of that time, Evanston reserved the right to investigate the matter and disclaim coverage, but pointed out that “it appears that Ms. Beasley was injured due to a battery . . . and even a theory that you/your security had the duty to suppress the assault/battery would not be covered by the Essex policy.” (Doc. 1-2 at 4). The May 2016 letter merely referred to the January 2016 letter and included a copy of that letter. (Doc. 1-3).

         In May 2017, Ms. Beasley's current attorney, Jarrod Nichols, wrote to Evanston's claims manager. Mr. Nichols included the police report relating to the shooting and the affidavit of Bobby Banks, a purported witness of the shooting.

         On July 6, 2017, Ms. Beasley filed a lawsuit against The Break in the Circuit Court of Jefferson County, Alabama. In Count One, Ms. Beasley alleged that The Break “engaged in willful misconduct, malice, wantonness or otherwise demonstrated an entire want of care with regard to [Ms. Beasley], thereby entitling [her] to punitive damages.” (Doc. 1 at 8). In Count Two, she alleged that The Break “negligently hired, contracted, retained and/or trained its employees, agents or servants” resulting in the employees, agents, or servants “not [being] adequately or properly qualified nor competent to provide safety and security to and for customers, patrons or invitees of Defendant THE BREAK or to others on or near Defendant's premises.” (Id. at 8-9).

         On September 20, 2017, The Break's owner and president, James Meeks, Jr., received notice of the lawsuit. The Break hired its own lawyer and filed its answer to the lawsuit on September 26, 2017.

         In January 2018, the Circuit Court ordered The Break and Ms. Beasley to mediate the claim by June 29, 2018.

         On June 29, 2018, The Break informed Evanston of the lawsuit. The Break's attorney emailed the complaint to an employee of Evanston's claims manager. The Break did not submit any additional lawsuit documents and did not inform Evanston of the mediation order. The Break requested that Evanston defend it against Ms. Beasley's lawsuit and that Evanston provide coverage for any damages she may recover. Evanston agreed to defend The Break, but- according to this complaint-expressly reserved its right to withdraw the defense and deny coverage pending the outcome of this litigation. (Doc. 1 at 10-11).

         On July 31, 2018, Evanston filed this declaratory judgment lawsuit against The Break and Ms. Beasley. Evanston raises three arguments why it owes no duty to defend or indemnify The Break: (1) The Break breached the notice conditions of the insurance policy; (2) Ms. Beasley's injuries arose out of assaults or batteries, which are excluded from policy ...