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United Specialty Insurance Co. v. Cole's Place, Inc.

United States District Court, W.D. Kentucky, Louisville Division

April 20, 2018

UNITED SPECIALTY INSURANCE COMPANY, PLAINTIFF
v.
COLE'S PLACE, INC., DEFENDANT

          MEMORANDUM OPINION

          Thomas B. Russell, Senior Judge United States District Court.

         This matter is before the Court on motions from both parties. First, Plaintiff United Specialty Insurance Company filed a motion for summary judgment, [DN 15.] Defendant Cole's Place, Inc. responded, [DN 19], and Plaintiff replied, [DN 21.] Second, Defendant filed a motion to dismiss, [DN 16.] Plaintiff responded, [DN 20], and Defendant replied, [DN 22.] Fully briefed, these motions are ripe for consideration. For the reasons discussed below, Defendant's motion to dismiss is DENIED and Plaintiff's motion for summary judgment is GRANTED. The Court will issue a separate Order and Judgment consistent with this Memorandum Opinion.

         I. BACKGROUND

         This Declaratory Judgment action arises out of a commercial liability insurance policy between Plaintiff United Specialty Insurance Company (“USIC”) and Defendant Cole's Place, Inc. (“Cole's Place”). In this action, USIC seeks a declaratory judgment finding that it has no obligation to defend or indemnify Cole's Place in personal injury lawsuits that are ongoing against Cole's Place in Kentucky state court.

         Cole's Place owns and operates a nightclub in Louisville, Kentucky. [DN 1 at 5 (Complaint).] On July 19, 2015, a shooting took place at Cole's Place which injured several of its patrons. [Id.] “In September 2015, a Jefferson County grand jury indicted Kevon Taylor (not a party to this [federal] action) on three counts of assault in the first-degree and five counts of assault in the second-degree in connection with the shooting. In December 2015, Mr. Taylor pled guilty to eight counts of assault in the second-degree and is currently serving time in prison.” [Id.] Both parties agree that Kevon Taylor was the shooter at Cole's Place on July 19, 2015. [Id.; DN 16 at 5.]

         As a result of the shooting, four civil personal injury lawsuits were filed against Cole's Place in Kentucky state court. [DN 1 at 5.] The plaintiffs in those actions are Kendall Latrell Starks; De-Auntay Shrivers; Lanisha Walker, Wayne Woods and M.W.; and Jessie Offutt. [Id.; DN 16 at 4.] The four state court cases against Cole's Place have been consolidated into the first action, Kendall Latrell Starks v. Cole's Place, Inc., Case No. 15-CI-005424 (hereinafter the “State Court Action”). [DN 1 at 5.] The plaintiffs in the State Court Action “allege they were injured in the shooting and that their injuries were proximately caused by alleged acts and/or omissions on the part of Cole's Place.” [Id.] Specifically, the plaintiffs bring claims for intentional infliction of emotional distress; negligence; negligent hiring, training, retention, and supervision; and punitive damages. [See DN 1-2 (State Court Complaints).] Cole's Place filed a third party complaint against Kevon Taylor alleging that Taylor “was the individual who actually did the shooting, ” that Taylor “has pleaded guilty to charges arising from the shootings, ” and that his actions were “the sole and proximate cause of the injuries and damages complained of by the various plaintiffs in this action.” [DN 15-2 at 2 (Third Party Complaint).]

         USIC is currently defending Cole's Place in the State Court Action, but under a reservation of rights. [DN 1 at 2.] USIC contends that the terms of the “Commercial Lines Policy, ” (“the Policy”), between it and Cole's Place do not obligate USIC to defend or indemnify Cole's Place in the State Court Action because the claims in that Action are for bodily injury arising out of an assault or battery, a specific exclusion contained in the Policy. [Id. at 3-5, 6-8.] USIC further contends that it has no duty to indemnify Cole's Place for any claims for punitive damages, another exclusion in the Policy. [See id.] The Court will discuss the express language of the Policy and its exclusions below.

         Prior to addressing the parties' coverage dispute, however, the Court must determine whether to exercise jurisdiction over this declaratory judgment action. In its motion to dismiss, Cole's Place argues that the Court should decline to exercise jurisdiction in this case and therefore that it should dismiss the suit. [DN 16.] In USIC's motion for summary judgment, USIC argues the opposite. [DN 15.] The Court will consider the parties' jurisdictional arguments first in order to determine if it can proceed to the merits of USIC's claims for declaratory judgment.

         II. STANDARD OF REVIEW: DECLARATORY JUDGMENTS

         Pursuant to the Declaratory Judgment Act, a federal court “may declare the rights and other legal relations of any interested party seeking such declaration.” 28 U.S.C. § 2201(a). The Act is an enabling act that “confers a discretion on the courts” to act “rather than an absolute right upon the litigant.” Wilton v. Seven Falls Co., 515 U.S. 277, 287 (1995) (quoting Public Serv. Comm'n of Utah v. Wycoff Co., 344 U.S. 237, 241 (1952)). In other words, the Act authorizes district courts to exercise jurisdiction, but does not impose a duty to do so. Bituminous Cas. Corp. v. J & L Lumber Co., Inc., 373 F.3d 807, 812 (6th Cir. 2004); Allstate Ins. Co. v. Mercier, 913 F.2d 273, 276 (6th Cir. 1990), abrogated on other grounds by Wilton v. Seven Falls Co., 515 U.S. 277, (1995). A district court may not decline jurisdiction, however, as a matter of whim or personal disinclination. Mercier, 913 F.2d at 277.

         III. DISCUSSION: JURISDICTION

         A. The Policy and its Exclusions

         The Policy at issue in this case provides, in relevant part:

We will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury” or “property damage” to which this insurance applies. We will have the right and duty to defend the insured against any “suit” seeking those damages. However, we will have no duty to defend the insured against any “suit” seeking damages for “bodily injury” or “property damage” to which this insurance does not apply.

         [DN 1-1 at 15 (Commercial Lines Policy).] The Policy contains certain exclusions from coverage, such as the following “Assault and Battery” exclusion:

1. This insurance does not apply to “bodily injury”, “property damage”, or “personal and advertising injury” arising out of or resulting from:
(a) any actual, threatened or alleged assault or battery;
(b) the failure of any insured or anyone else for whom any insured is or could be held legally liable to prevent or suppress any assault or battery;
(c) the failure of any insured or anyone else for whom any insured is or could be held legally liable to render or secure medical treatment necessitated by any assault or battery;
(d) the rendering of medical treatment by any insured or anyone else for whom any insured is or could be held legally liable that was necessitated by any assault or battery;
(e) the negligent:
(i) employment;
(ii) investigation;
(iii)supervision;
(iv) training;
(v) retention; of a person for whom any insured is or ever was legally responsible and whose conduct would be excluded by 1. (a), (b), (c) or (d) above;
(f) any other cause of action or claim arising out of or as a result of 1. (a), (b), (c), (d) or (e) above.
2. We shall have no duty to defend or indemnify any claim, demand, suit, action, litigation, arbitration, alternative dispute resolution or other judicial or administrative proceeding seeking damages, equitable relief, injunctive relief, or administrative relief where:
(a) any actual or alleged injury arises out of any combination of an assault or battery related cause and a non-assault or battery-related cause.
(b) any actual or alleged injury arises out of a chain of events which includes assault or battery, regardless of whether the assault or battery is the initial precipitating event or a substantial cause of injury.
(c) any actual or alleged injury arises out of assault or battery as a concurrent cause of injury, regardless of whether the assault or battery is the proximate cause of injury.
3. For the purposes of this endorsement the words assault and battery are intended to include, but are not limited to, sexual assault.

[Id. at 48.]

         Also relevant to this case is the Policy's “Punitive Damages” exclusion:

A. In consideration of the premium charged this policy has been issued subject to the following exclusions being added to Coverages A & B:
This insurance does not apply to:
* * *
5. Punitive, Exemplary Treble Damages or Multipliers of Attorneys' Fees Claims or demands for payment of punitive, exemplary or treble damages whether arising from the acts of any insured or by anyone else for whom or which any insured or additional insured is legally liable; including any multiplier of attorney's fees statutorily awarded to the prevailing party.

[Id. at 43.]

         In its motion for summary judgment, USIC argues that “[t]he Policy's exclusions are unambiguous and preclude coverage for the claims asserted against Cole's Place in the underlying state court Complaints.” [DN 15 at 2.] Before the Court can consider the merits of this argument, however, it must first determine whether it should exercise jurisdiction over this declaratory judgment action.

         The Sixth Circuit has identified five factors, often referred to as the “Grand Trunk factors, ” for courts to consider in determining whether the ...


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