White Pine Insurance Co. v. Taylor

Berger, J. This appeal arises from appellant-defendant, White Pine Insurance Company’s (“White Pine”), denial of coverage to its insured, West End Pub and Restaurant, LLC (“West End” or “West End Pub”), for a shooting injury suffered by one of West End’s patrons, plaintiff-appellee, Howard R. Taylor (“Taylor”). The injury occurred on March 31, 2013, as Taylor opened the door of the pub and was shot in the leg. No suspect was apprehended and Taylor did not see who fired the gun. After West End’s insurer, White Pine, denied West End’s request to provide a defense to Taylor’s claim for negligence, West End and Taylor reached a consent judgment agreement (the “Consent Verdict”), in which West End admitted negligence and agreed to a settlement of $100,000.00.

Further, West End assigned to Taylor its claims against White Pine for denying indemnity coverage under its commercial general liability policy (“the Policy”). Thereafter, Taylor filed an action for breach of contract against White Pine seeking judgment in the amount of $74,999.99 in the Circuit Court for Washington County. After a bench trial, during which neither side presented any evi ⁴⁸⁷ dence of the circumstances leading to the shooting (other than the Consent Verdict), the circuit court found in favor of Taylor and awarded damages in the amount of $100,000.00. White Pine presents three issues on appeal, which we have reworded as follows: 1.

Whether the circuit court erred by finding that White Pine presented insufficient evidence that Taylor's injury was excluded from coverage under the Policy’s Assault and Battery Exclusion, and therefore, that White Pine had a duty to indemnify West End Pub for its liability to Taylor. 2. Whether the circuit court erred when it did not find that White Pine had established that the Consent Verdict between West End Pub and Taylor, in which West End Pub admitted liability for negligence, was unreasonable. 3. Whether the circuit court properly awarded damages in the amount of $100,000.00, which exceeded the $74,999.99 amount of the ad damnum clause of Taylor’s complaint. BACKGROUND AND PROCEDURAL HISTORY Factual Circumstances On the night of March 81, 2013, Taylor visited the West End Pub in Hagerstown, Maryland, not far from his apartment to watch a basketball game.

Taylor began to leave the pub at approximately 1:43 a,m. As Taylor opened the door to exit, however, he was struck by a bullet in his left leg. The police did not apprehend the shooter or determine his or her identity, and the shooter’s motivation for firing the gun remains unknown. Taylor testified that he did not observe anyone brandishing a gun while he was inside West End Pub, nor had he been warned that he was about to be shot.

Taylor further testified that he had not heard of any prior shootings at the Pub, and he did not see who shot him or where the bullet was fired. In addition, Taylor testified that approximately ten people were standing nearby when he was shot, two of whom ⁴⁸⁸ were employees of the pub. No other evidence regarding the circumstances of the shooting was entered into evidence. Commercial General Liability Framework On the first page of the “Commercial General Liability Coverage Form,” the Policy begins by noting that “[vferious provisions in this policy restrict coverage.

Read the entire policy carefully to determine rights, duties and what is and is not covered.” Under “Section I—Coverages,” the Policy provides that the insurer 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. [The insurer] 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. We may, at our discretion, investigate any ‘occurrence’ and settle any claim or ‘suit’ that may result. [[Image here]] This insurance applies to “bodily injury” and “property damage” only if: (1) The “bodily injury” or “property damage” is caused by an “occurrence” that takes place in the “coverage territory”; (2) The “bodily injury” or “property damage” occurs during the policy period; and (3) Prior to the policy period, no insured ... and no “employee” authorized by [the named insured] to give or receive notice of an “occurrence” or claim, knew that the “bodily injury” or “property damage” had occurred in whole or in part. Under Section IV—“Commercial General Liability Conditions,” regarding third-party actions against the insurer, the Policy provides the following: A person or organization may sue us to recover on an agreed settlement or on a final judgment against an in ⁴⁸⁹ sured; but we will not be liable for damages that are not payable under the terms of this Coverage Part or that are in excess of the applicable limit of insurance.

An agreed settlement means a settlement and release of liability signed by us, the insured and the claimant or the claimant’s legal representative. Finally, Section V—“Definitions”—defines several terms used in the Policy. “Bodily injury” means bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time. [[Image here]] “Occurrence” means an accident, including continuous or repeated exposure to substantially the same general harmful conditions. [[Image here]] “Suit” means a civil proceeding in which damages because of “bodily injury” ... to which this insurance applies are alleged. (Emphasis added). The “Assault, Battery, or Assault and Battery Exclusion” (“Assault and Battery Exclusion”) is an endorsement, which is attached to the Policy.

The Assault and Battery Exclusion provides that the insurance policy does not apply to “bodily injury”, “property damage” or “personal and advertising injury” arising out of or resulting from: 1. “Assault”, “Battery”, or “Assault and Battery” committed by any person; 2. The failure to suppress or prevent “Assault”, “Battery”, or “Assault and Battery” committed by any person; 3. The failure to provide an environment safe from “Assault”, “Battery”, or “Assault and Battery”; ⁴⁹⁰ 4. The failure to warn of the dangers of the environment which could contribute to “Assault”, “Battery”, or “Assault and Battery”; 5. “Assault”, “Battery”, or “Assault and Battery” arising out of the negligent hiring, supervision, or training of any person; 6.

The use of any force to protect persons or property whether or not the “bodily injury” or “property damage” or “personal and advertising injury” was intended from the standpoint of the insured or committed by or at the direction of the insured. The Policy provides definitions for “Assault”, “Battery”, and “Assault and Battery.” An “assault” is defined as (a) “an act creating an apprehension in another of immediate harmful or offensive contact,” or (b) “an attempt to commit a ‘Battery.’ ” A “battery” is “an act which brings about harmful or offensive contact to another or anything connected to another.” According to the Policy, an “Assault and Battery” occurs when both are committed together. Procedural History Following his injury, Taylor sued West End Pub alleging negligence in the Circuit Court for Washington County. West End requested a defense and indemnification from White Pine and White Pine denied the request, asserting that the shooting incident was not covered under the Policy.

West End and Taylor agreed to settle and the circuit court entered a Consent Verdict in the amount of $100,000.00 for medical expenses and noneconomic damages. Under the terms of the Consent Verdict, West End assigned to Taylor all of its rights, interests, claims, actions, and suits, including extra contractual and punitive damage claims against West End’s insurer, White Pine, for breach of the Policy. Thereafter, Taylor made a demand on White Pine for payment, including medical payment benefits, which White Pine denied for the same reasons that it denied West End a defense and indemnification. Taylor filed his Complaint ⁴⁹¹ against White Pine for breach of contract on March 12, 2015, and White Pine filed a counterclaim for declaratory relief.

On or around June 4, 2015, White Pine moved for summary judgment, which the circuit court denied. Both parties presented oral arguments during open court proceedings on March 10, 2016. White Pine moved for judgment at the close of Taylor’s case and renewed the motion at the close of all evidence. The court denied both motions.

During the proceedings, Taylor’s counsel argued that Taylor’s injury was covered under the insurance policy, and White Pine argued that the Assault and Battery Exclusion removed the incident from coverage under the Policy. Taylor’s counsel argued that White Pine failed to show that Taylor’s injury was the result of an “assault” or a “battery.” White Pine argued, and continues to argue on appeal, that the fact that Taylor was shot by a gun is enough to show that the incident constituted a battery, as there is no intent requirement under the Policy’s definition of “battery.” In ruling on White Pine’s motion for judgment, the tidal court explained: I have to admit that as I was listening to the testimony, the—the brief testimony of Mr. Taylor, it did occur to me that I don’t know what happened. I know he was, based on this testimony, he was shot. That doesn’t seem to be in dispute here.

But how—how that happened, I—I don’t know. And I think it’s very easy to have a knee-jerk reaction and say, “Well clearly it’s an assault and battery. If a person’s shot, it’s an assault and battery.” But that’s not necessarily—that’s not necessarily the case .... [I]f I don’t know what happened, then I don’t—I can’t say that it’s an assault and battery. And if I can’t say it’s an assault and battery, then I can’t apply ... the exclusion in that contract.

So at this time, the Motion is denied. In its defense, White Pine presented one witness—Lauren O’Shea—a Senior Claims Analyst with Conifer Holdings, Inc., of which White Pine Insurance Company is a subsidiary. Through O’Shea’s testimony, White Pine offered into evidence ⁴⁹² the process through which White Pine had reviewed and denied Taylor’s requests and claims. After the presentation of O’Shea’s testimony, White Pine rested its defense and renewed its motion.

Counsel for White Pine focused exclusively on the language of the Policy’s Assault and Battery Exclusion. She argued that the exclusion requires that the act be “committed by any person.” She continued, “If you cut yourself on a glass, that’s an accident. But if some person engages in an act which brings about a harmful or offensive contact, that wouldn’t be covered.” The court explained, however, “I don’t have any evidence that another person did that .... I think there’s ... a leap happening here that someone ... shot him.” The court responded, “Can a gun discharge accidentally?

Yes .... [C]an a bullet go through the air not intentionally?” Counsel for White Pine attempted to reconcile the difference between an “accident” under the Policy and a “battery” in the following way: Sure it can .... But it’s done by a person and it’s an act which brings about a harmful and offensive contact. We don’t need to show for the analysis of this policy that somebody intended to shoot, somebody intended to discharge their gun .... [A]s it’s defined in this policy, it’s whether a person commits an act which brings about a harmful or offensive result. So yes, if it were an accidental discharge of a gun by a person, yes, I would submit that we would still be here saying that this exclusion applies.

Finally, the court asked, “[I]sn’t it the same scenario as the waitress handing me a broken glass? It’s an act done by another person accidentally that causes me harm.” Counsel for White Pine responded, “I guess ... suppose for ... argument’s sake, perhaps I would be here arguing under that factual scenario that ... in that particular situation, this endorsement would apply.” On May 4, 2016, the circuit court entered judgment in favor of Taylor in the amount of $100,000.00, the full amount of the Consent Verdict, and denied White Pine’s request for declara ⁴⁹³ tory relief. White Pine filed a timely appeal. Additional facts are discussed herein as they become relevant.

DISCUSSION I. Standard of Review Pursuant to Maryland Rule 8—131(e), “[w]hen an action has been tried without a jury, the appellate court will review the case on both the law and the evidence. It will not set aside the judgment of the trial court on the evidence unless clearly erroneous ....” To the extent this case involves questions of law, including the interpretation of a contract, we review for legal error. See Clickner v. Magothy River Ass 'n, 424 Md. 253, 266-67 , 35 A.3d 464 (2012) (quoting Dickerson v. Longoria, 414 Md. 419, 432 , 995 A.2d 721 (2010)) (“Where a case involves both issues of fact and questions of law, this Court will apply the appropriate standard to each issue”). “The interpretation of a contract, including the determination of whether a contract is ambiguous, is a question of law .... ” SpaceSaver Systems, Inc. v. Adam, 440 Md. 1, 8, 98 (A.3d 264 2014) (citing Towson Univ. v. Conte, 384 Md. 68, 78 , 862 A.2d 941 (2004)).

II

The Circuit Court Did Not Err by Finding that White Pine Did Not Meet Its Burden to Show that the Assault and Battery Exclusion Applied to Preclude Coverage for Taylor’s Injuries. The critical issue in this case is whether the circuit court erred by finding that White Pine failed to establish that Taylor’s injuries were excluded from coverage as a “battery” as defined in the Policy’s Assault and Battery Exclusion. Our focus, therefore, is on the evidence presented at trial and the interpretation and applicability of the Policy’s definition of “battery.” The only evidence presented regarding Taylor’s injuries at West End, however, established only that a bullet hit him in the leg as he opened the door to leave the pub and that he did not know who shot him or from where the bullet was fired. Neither side presented any evidence to the trial ⁴⁹⁴ court tending to show that the shooting was intentional rather than “accidental.” In other words, the trial court had no evidence before it regarding whether or not the shooter intended to harm another person, to put another person in apprehension of harm, or to set a force in motion that ultimately led to Taylor’s shooting injury.

Nevertheless, on appeal, White Pine frames the trial court’s ultimate determination in the following way: The trial court based its ruling on the illogical and specious assertion that the evidence did not provide “information ... as to how the injury occurred,” presumably because the assailant’s identity and location were unknown, notwithstanding the incontrovertible agreement that Taylor was shot by a gun. The court then followed that fallacy with the concern that it could not “leap to the conclusion” that the shooting of a bystander was “an assault, battery, or assault and battery simply because it is a gunshot.” Put quite simply, if shooting someone isn’t a battery, it is hard to say what is. Despite White Pine’s simplistic characterization of the result it seeks in this case, the combination of two specific facts distinguishes this case from other cases addressed previously in our case law. First, the Policy’s definition of “battery” in the Assault and Battery Exclusion, at least ostensibly, does not require any particular state of mind.

Other cases, decided on different grounds, have involved policies that do not define assault and battery, but leave the determination of whether an assault or battery occurred to be decided in an underlying tort case or related criminal prosecution. See, e.g., 7416 Baltimore Ave. Corp, v. Penn-Am. Ins.

Co., 83 Md.App. 692, 695, 698 , 577 A.2d 398 (1990) (concluding that, where an exclusion in the Policy excludes “claims arising out of Assault and Battery,” the issue must “be resolved in the tort action.”). Second, the shooter in this case was not identified or apprehended. Indeed, there is no evidence in the record that ⁴⁹⁵ any person, including Taylor, witnessed any person shoot Taylor or of any other circumstance leading to the shooting. Whereas in other cases, the evidence presented tended to indicate the shooter’s intent to commit a battery or assault— such as evidence of an altercation preceding the injury 1 —the absence of this kind of evidence raises the issue of whether the intent of the shooter must be established to distinguish the injury from one that simply arises out of an “accident.” White Pine alternates between two varying positions in arguing that evidence of the cause of or intent behind the shooting is immaterial.

On one hand, when White Pine confronts the issue of whether it must establish the intent of the shooter, White Pine argues that we should rely principally on the Policy’s definition of the term “battery,” which White Pine asserts requires no evidence of the shooter’s state of mind. Nevertheless, without any state of mind requirement, the Policy’s definition of a “battery” blurs the line between a covered bodily injury as a result of an “accident” and an excluded bodily injury that conceivably arose out of “an act which brings about harmful or offensive contact to another”— the policy’s definition of a “battery.” Alternatively, when White Pine is faced with the ambiguity raised by the Policy’s definition of “battery” in the context of the Policy as a whole, White Pine argues that the Policy’s definition is consistent with a commonsense understanding of the definition of a battery 2 within criminal and civil common law contexts. As explained below, however, definitions of battery under both ⁴⁹⁶ criminal and civil law require that the person committing the battery intend to commit some particular act or possess some other culpable state of mind. The rather unique facts of this case raise the question of whether the Policy’s Assault and Battery Exclusion can, properly, exclude from coverage bodily injuries and property damage arising out of any “harmful or offensive contact of another.” Put differently, either the Policy’s exclusion bars from coverage all bodily injuries and property damage that arise out of “an act which brings about harmful or offensive contact to another” (and it is therefore inconsistent with common law definitions of battery), or White Pine was required to show more than the mere fact that Taylor was shot in order to establish that his injury fell within the exclusion.

Indeed, not even White Pine’s counsel—albeit understandably—could reconcile the assertion that virtually all bodily injuries caused by another person are barred from coverage with the Policy’s overall purpose of providing general commercial liability insurance for bodily injuries and property damage arising out of “accidents.” 3 For the reasons discussed herein, we hold that the circuit court did not err in its finding that White Pine failed to establish that it had no duty to indemnify West End Pub for Taylor’s bodily injury under the Policy’s Assault and Battery Exclusion. ⁴⁹⁷ A. White Pine had the Burden of Establishing that the Exclusion Applies. Although the insured has the burden of establishing that a claim falls within the scope of coverage, the insured may meet that burden by showing proof of a valid settlement agreement. See Prop. & Cas. Ins.

Guar. Corp. v. Beebe-Lee, 431 Md. 474, 493-94 , 66 A.3d 615 (2013). Typically, if the insured establishes that an injury is within the scope of coverage, the burden shifts to the insurer to establish that an exclusion removes the insurer’s duty to indemnify. See, e.g., Mut.

Fire Ins. Co. of Calvert County v. Ackerman, 162 Md.App. 1, 7-8 , 872 A.2d 110 (2005) (affirming a circuit court’s decision to place the burden on the insurer to establish whether a house was being used as a “dwelling” at the time of a fire, because the relevant clause in the policy that the insurer argued relieved it of liability constituted an exclusion from coverage). In other words, where an insurer claims that an exclusion removes the insurer’s obligation to indemnify the insured, the insurer bears the burden of showing that the exclusion applies. See id.; Beebe-Lee, supra, 431 Md. at 489 , 66 A.3d 615 .

In the instant case, the circuit court found that Taylor had met his initial burden of proof, that his bodily injury fell within the scope of the commercial liability policy. Taylor entered into evidence the Consent Verdict in which West End admitted to negligence and agreed to a settlement for which West End was liable. Further, Taylor testified at trial and recalled that he had no warning of the shooting and no knowledge of who shot him or even the direction of the bullet. In its defense, White Pine did not present any evidence at all relevant to the cause of the shooting.

Instead, White Pine argued that the definition of “battery” under the Assault and Battery Exclusion eliminated White Pine’s burden to present evidence regarding the circumstances surrounding the shooting or the shooter’s intent. We disagree. As we explain below, the circuit court did not err in finding that White Pine failed to establish that Taylor’s bodily injury fell within the scope of the Assault and Battery Exclusion. ⁴⁹⁸ B. The Policy’s Coverage is Ambiguous with Respect to Unintentional or “Accidental” Acts that Fall Within the Assault and Battery Exclusion’s Definition of “Battery.” In interpreting the provisions of an insurance policy, we rely on the same principles that we apply to traditional contracts. Bailer v. Erie Ins.

Exch, 344 Md. 515, 521 , 687 A.2d 1375 (2000) (citing Bond v. Pennsylvania Nat’l Mut. Casualty Ins. Co., 289 Md. 379, 384 , 424 A.2d 765 (1981)). We explained in Philadelphia Indem.

Ins. Co. v. Maryland Yacht Club, Inc. that the trial court’s foremost goal in its interpretation of a contract is to ascertain and effectuate the intention of the contracting parties, unless that intention is at odds with an established principle of law. Hartford Accident & Indem. Co. v. Scarlett Harbor Assocs.

Ltd. Partnership, 109 Md. App. 217, 290-91 , 674 A.2d 106 (1996), aff'd, 346 Md. 122 , 695 A.2d 153 (1997). “The primary source for determining the intention of the parties is the language of the contract itself.” Id. at 291, 674 A.2d 106 . Therefore, “[i]n construing insurance contracts in Maryland we give the words of the contract their ordinary and accepted meaning, looking to the intention of the parties from the instrument as a whole.” Finci v. American Cas. Co., 323 Md. 358, 369-70 , 593 A.2d 1069 (1991). Moreover, “[a] contract must be construed as a whole, and effect given to every clause and phrase, so as not to omit an important part of the agreement.” Baltimore Gas & Elec., 113 Md.App. at 554, 688 A.2d 496 ; see Bausch & Lomb, 330 Md. [758] at 779, 625 A.2d 1021 ([1993]). 129 Md.App. 455, 467-68 , 742 A.2d 79 (1999).

As with any other contract, the court examines “the contract language employed by the parties to determine the scope and limitations of the insurance coverage .... ” Pennsylvania Nat. Mut. Ins. v. Roberts, 668 F.3d 106, 112 (4th Cir. 2012) (quoting Cole v. State Farm Mut. Ins.

Co., 359 Md. 298 , 753 A.2d 533 (2000)). In determining the effect of the con ⁴⁹⁹ tract’s language, Maryland courts are guided by the objective theory of contracts, which requires the court to determine from the language of the agreement itself what a reasonable person in the position of the parties would have meant at the time it was effectuated. In addition, when the language of the contract is plain and unambiguous there is no room for construction, and a court must presume that the parties meant what they expressed. In these circumstances, the true test of what is meant is not what the parties to the contract intended it to mean, but what a reasonable person in the position of the parties would have thought it meant.

Spacesaaver, supra, 440 Md. at 8 , 98 A.3d 264 (quoting Gen. Motors Acceptance Corp. v. Daniels, 303 Md. 254, 261 , 492 A.2d 1306 (1985)). “If the language in an insurance policy suggests more than one meaning to a reasonably prudent layperson, it is ambiguous.” State Farm Mut. Auto. Ins.

Co. v. DeHaan, 393 Md. 163, 193 , 900 A.2d 208 (2006) (quoting Sullins v. Allstate Ins. Co., 340 Md. 503, 508-09 , 667 A.2d 617 (1995)). To determine “whether language is susceptible of more than one meaning includes a consideration of ‘the character of the contract, its purpose, and the facts and circumstances of the parties at the time of execution.’” Huggins v. Huggins & Harrison, Inc., 220 Md.App. 405, 418 , 103 A.3d 1133 (2014) (quoting Calomiris v. Woods, 353 Md. 425, 436 , 727 A.2d 358 (1999)). The court’s analysis should “accord words their ordinary and accepted meanings.

The test is what meaning a reasonably prudent layperson would attach to the term.” JMP Associates, Inc. v. St. Paul Fire & Marine Ins. Co., 345 Md. 630, 635 , 693 A.2d 832 (1997) (quoting Pacific Indem. Co. v. Interstate Fire & Cas. Co., 302 Md. 383, 388 , 488 A.2d 486 (1985)).

Maryland does not follow the rule of many other states that insurance policies are generally construed against the insurance company. Nevertheless, “any ambiguity will be ‘construed liberally in favor of the insured and against the ⁵⁰⁰ insurer as drafter of the instrument.’” Md. Cas. Co. v. Blackstone Int’l Ltd., 442 Md. 685, 695 , 114 A.3d 676 (2015) (quoting Dutta v. State Farm Ins. Co., 363 Md. 540, 556-57 , 769 A.2d 948 (2001)); accord Empire Fire & Marine Ins.

Co. v. Liberty Mut. Ins. Co., 117 Md.App. 72, 97-98 , 699 A.2d 482 (1997). As the Court of Appeals noted in Megonnell v. United Servs.

Auto. Ass’n., we interpret exclusionary provisions within insurance contracts narrowly. 368 Md. 633, 656 , 796 A.2d 758 (2002) (quoting Eric Mills Holmes & Mark S. Rhodes, Holmes’s Appleman on Insurance, 2d 276-81 (Eric Mills Holmes ed., vol. 2 § 7.2, West 1996)). “[S]ince exclusions are designed to limit or avoid liability,” limitations on coverage must be construed strictly and narrowly and “in favor of a finding of coverage.” Id. The insurer, therefore, as the drafter of the agreement, must draft the language of an exclusion “conspicuously, plainly and clearly” and “clearly set forth” any limitation on coverage to the insured. Id.

Moreover, “[a]n exclusion by implication is legally insufficient.” Id. “Maryland courts first ascertain the intent of the parties from the policy as a whole, considering extrinsic and parol evidence to construe any ambiguity.” Connors v. Gov’t Employees Ins. Co., 442 Md. 466, 483 , 113 A.3d 595 (2015). If no relevant extrinsic evidence is introduced, however, “or if the ambiguity remains after consideration of extrinsic or parol evidence that is introduced, it will be construed against the insurer as the drafter of the instrument.” James G. Davis Const. Corp. v. Erie Ins.

Exchange, 226 Md.App. 25, 35 , 126 A.3d 753 (2015) (quoting Cheney v. Bell Nat’l Life Ins. Co., 315 Md. 761, 767 , 556 A.2d 1135 (1989)). In this case, the Policy’s Assault and Battery Exclusion provides that the insurance “does not apply to” “bodily injury” or “property damage” “arising out of or resulting from” an “Assault,” “Battery,” or an “Assault and Battery” that is “committed by any person.” “Battery” is defined as “an act which brings about harmful or offensive contact to another or anything connected to another.” The Assault and Battery Exclusion in the extant commercial general liability policy ⁵⁰¹ does not contain any state of mind requirement or leave battery to be defined by common law definitions, nor does it contain a statement of exclusion for unintentional contacts. White Pine asks us to hold as a matter of law that, to be entitled to a declaratory judgment, the absence of an intent requirement in the Policy’s definition of “battery” permitted White Pine to establish nothing more than the mere fact that Taylor was injured as a result of a shooting. 4 A shooting, White Pine argues, is “an act which brings about harmful or offensive contact” regardless of the shooter’s intent.

Our task in interpreting the Policy’s