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

United States Court of Appeals, Sixth Circuit

August 22, 2019

United Specialty Insurance Company, Plaintiff-Appellee,
v.
Cole's Place, Inc., Defendant-Appellant.

          Argued: February 1, 2019

          Appeal from the United States District Court for the Western District of Kentucky at Louisville. No. 3:17-cv-00326-Thomas B. Russell, District Judge.

         ARGUED:

          Marque G. Carey, SMITH & CAREY, PLLC, Louisville, Kentucky, for Appellant.

          J. Kendrick Wells IV, FROST BROWN TODD LLC, Louisville, Kentucky, for Appellee.

         ON BRIEF:

          Marque G. Carey, SMITH & CAREY, PLLC, Louisville, Kentucky, for Appellant.

          J. Kendrick Wells IV, Griffin Terry Sumner, Jeremiah A. Byrne, Justin S. Fowles, FROST BROWN TODD LLC, Louisville, Kentucky, for Appellee.

          Before: GRIFFIN, WHITE, and BUSH, Circuit Judges.

          OPINION

          John K. Bush, Circuit Judge.

         One summer night in 2015, gunshot blasts pulverized the sociable hum of a nightclub in Louisville, Kentucky. Somebody had brought a firearm into the bar, and the ensuing discharge of bullets struck eight people. Six of those people sued the nightclub's owner, Cole's Place, Inc. ("Cole's Place"), in state court, arguing that Cole's Place had failed to protect the plaintiffs from a foreseeable harm. Now that United Specialty Insurance Company ("USIC") has obtained a federal declaratory judgment that it is not obligated to defend or indemnify Cole's Place in the state-court litigation, Cole's Place appeals.

         Two issues are before us. First, did the district court abuse its discretion in exercising Declaratory Judgment Act jurisdiction over USIC's lawsuit? Second, if the answer to the first question is no, did the district court err in finding that an assault-and-battery exclusion in Cole's Place's insurance policy with USIC applies to the state-court litigation? Because the district court did not abuse its discretion in exercising jurisdiction and because it correctly applied controlling law to the insurance-coverage issue, we AFFIRM.

         I. BACKGROUND

         A. The State-Court Litigation

         Based on injuries they sustained from the shooting, six plaintiffs filed a total of four lawsuits in state court against Cole's Place, alleging (among other things) that the nightclub owner had negligently failed to protect them. Three of the four lawsuits sought punitive damages as well as compensatory relief. On one plaintiff's unopposed motion, the actions were consolidated under the caption Kendall Latrell Starks v. Cole's Place, Inc., Jefferson Circuit Court, Division 8, No. 15-CI-005424. The complaints allege a "shooting," which three of the complaints also describe as an "attack." R. 1-2, PageID 115-17, 120-21, 125-29, 134-37. For example, plaintiff Kendall Starks's complaint makes the following allegations:

13. That the identity of the person suspected of committing the shooting described herein was known to Defendant Cole's Place prior to the period July 18-19, 2015 [the night when the shooting allegedly occurred];
14. That the person suspected of committing the shooting described herein was a patron of the Defendant during the period noted in this Complaint;
17. That . . . Defendant Cole's Place failed to hire, train, supervise and otherwise employ appropriate security personnel and procedures to prevent or otherwise protect patrons visiting its business premises from a known history of potentially violent conduct;
18. That . . . Defendant Cole's Place failed to take appropriate adequate steps to prevent or otherwise protect members of the general public visiting its business premises from a known history of potentially violent conduct;

         V. Counts

         A. That the Defendant did commit the tort of outrageous conduct by:

1) wrongfully and intentionally preventing[1] the attack injuring the Plaintiff
2) by acts which they either knew or should [sic] were not provoked or caused by him, and
3) did exacerbate said tort by failing to take reasonable steps to prevent the risk of harm to the Plaintiff in an environment with a known history of violent, aggressive conduct . . . .

         B. That the Defendant did commit the tort of negligence in that:

b. Defendant Cole's Place . . . failed to take proper, reasonable steps to protect the Plaintiff from a substantial risk of aggressive, violent conduct which it knew or reasonably should have known might occur towards members of the general public including the Plaintiff, and by otherwise failing to prevent the use of unreasonable force against and upon the person of the Plaintiff . . . .

Id. at PageID 115-18. The remainder of the Starks complaint, and two of the other state-court complaints, make similar allegations, including the following:

[T]he person suspected of committing the shooting . . . had, within a short period of time preceding the . . . incident . . ., been instructed to leave the Defendant's business premises for being involved in illegal activity and/or for being involved in altercations with the Defendant's private security, staff and/or patrons.
That . . . on the same evening of the shooting but prior to the shooting . . . the person suspected of committing the shooting had instigated and participated in an altercation and/or argument with another unknown patron but was not removed from the premises . . . .
Defendant . . . failed to take steps to protect Plaintiff from the aforementioned attack which it knew or reasonably should have known might occur against it's [sic] patrons and/or members of the general public, including the Plaintiff . . . .

Id. at PageID 126, 127, 136. Finally, the shortest of the state-court complaints alleges that:

Plaintiff, a business invitee of . . . Cole's Place[] . . . was injured when he was shot on the premises . . . .
It is known or reasonably should have been known by . . . Cole's Place[] . . . that there were previous violent incidents on this property.
Cole's Place[] . . . had notice of previous dangerous and violent acts on its property during events.
The incident and Plaintiff's resulting injuries and damages were caused and brought about by the negligence and carelessness of . . . Cole's Place[] . . . in creating and/or allowing a foreseeable danger to the Plaintiff.

Id. at PageID 120-21.

         After the state-court plaintiffs filed their complaints, Cole's Place filed a third-party complaint against Kevon Taylor, who had entered an Alford plea to two criminal charges of assault in the second degree arising from the shooting.[2] The third-party complaint alleges that Taylor "was the individual who actually did the shooting" and seeks apportionment of fault against Taylor in the ongoing state litigation. R. 15-2, PageID 264-65. In the alternative, the third-party complaint seeks indemnification against Taylor in the event Cole's Place is found liable in the state lawsuits. Taylor filed an answer to the third-party complaint, denying that he had been the shooter.

         B. The Insurance Policy

         At the time of the shooting and all times relevant to this appeal, Cole's Place has held an insurance policy with USIC. Relevant to this appeal, the policy provides:

         SECTION I-COVERAGES

         COVERAGE A BODILY INJURY AND PROPERTY DAMAGE LIABILITY

         1. Insuring Agreement

a. 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.

R. 1-1, PageID 23 (emphases added).

         The policy also contains a list of exclusions from coverage, including the following:

         EXCLUSION-ASSAULT AND BATTERY

         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 ...

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