Amer Guarnt & Liab v. The 1906 Company

UNITED STATES COURT OF APPEALS For the Fifth Circuit

No. 99-60758

AMERICAN GUARANTEE AND LIABILITY INSURANCE COMPANY,

Plaintiff-Counter Defendant-Appellee,

VERSUS

THE 1906 COMPANY, ETC.; ET AL

Defendants

THE 1906 COMPANY (Formerly Known as Hattiesburg Coca-Cola Bottling Company); RICHARD S. THOMSON;

Defendants-Cross Defendants-Counter Claimants-Appellants,

and

GENERAL STAR NATIONAL INSURANCE COMPANY,

Defendant-Cross Claimant-Counter Claimant-Appellant.

Appeal from the United States District Court For the Southern District of Mississippi, Jackson Division November 12, 2001

Before SMITH and DENNIS, Circuit Judges, and ROETTGER,1 District Judge.

1 District Judge of the Southern District of Florida, sitting by designation.

DENNIS, Circuit Judge: panel affirmed the district American Guarantee and court’s judgment denying Liability Insurance Company coverage for any claims against (“American Guarantee”) brought John Thomson and claims against this diversity suit seeking a Richard Thomson and Hattiesburg declaratory judgment that the Coke based on their alleged comprehensive general liability vicarious liability for John’s (“CGL”) insurance policies it acts. That panel also affirmed sold to Hattiesburg Coca-Cola the district court’s ruling that Bottling Company (“Hattiesburg all claims against Richard Coke” or “Coke”) afforded no Thomson and Hattiesburg Coke are coverage or defense for twenty- excluded from coverage under the one Mississippi lawsuits Coverage A portion of the alleging that, among other policies. See id. However, things, the insured’s male that panel vacated the district employee had surreptitiously court’s ruling that the policies videotaped female customers excluded coverage for Richard changing clothes in a women’s Thomson and Hattiesburg Coke dressing room on the insured’s under Coverage B. See id. at premises. The district court, 811. The panel remanded the on American Guarantee’s motion case for new proceedings on for summary judgment, ruled that Coverage B. After remand, on the insurer had no duty to American Guarantee’s motion for defend or indemnify Hattiesburg summary judgment, the district Coke, Richard Thomson (Coke’s court ruled that the insurer chief executive officer), or also had no duty to defend or John Thomson, (Coke’s alleged indemnify under Coverage B. All employee-voyeur and Richard adversely affected parties Thomson’s son) under either appealed, including Hattiesburg Coverage A or Coverage B. Coke’s umbrella insurer, General (Generally speaking, Coverage A Star National Insurance Company. insures against accidental We reverse and grant motions for bodily injury and property summary judgment against damage liability; Coverage B American Guarantee and in favor insures against non-accidental, of Hattiesburg Coke, Richard non-bodily personal injury Thomson, and General Star.3 liability). Hattiesburg Coke, Richard Thomson, and John I. Facts and Procedural History Thomson appealed. A prior panel A. Background: American Guar. I of this court affirmed in part, reversed in part, and remanded in part. See American Guar. & name to “The 1906 Company.” To Liab. Ins. Co. v. The 1906 Co., avoid confusion, we follow the 129 F.3d 802, 810 (5th Cir. first panel’s precedent of 1997)(“American Guar. I”).2 That referring to the company’s original name. 2 3 After this case was filed, John Thomson is not a Hattiesburg Coke changed its party to this appeal.

the studio's operations. John, The background facts were however, still had access to VAS well stated in the prior panel and was in the midst of winding opinion. We repeat them up its affairs when the events verbatim for easy reference: giving rise to the underlying “Having recently developed state court lawsuits came to an interest in photography while light. living in Minnesota, John “In November 1991, a VAS Thomson returned to Hattiesburg, client picked up a videotape Mississippi with a desire to which she thought contained her open his own photography studio. portfolio photographs. When In early 1990, Richard Thomson, she viewed the tape, she John's father and CEO of discovered footage of herself Hattiesburg Coke, authorized the dressing and undressing in the use of Hattiesburg Coke funds to VAS dressing room. She reported open a photography studio, her discovery to police, who Visual Arts Studio (VAS). The searched the studio and found new studio was located at 3820 numerous other tapes containing Hardy Street, Hattiesburg, footage of young women dressing Mississippi, more than a mile and undressing in the same room. from the company's bottling The police also discovered a operation. The studio fiber optic camera concealed concentrated on photographing underneath a bench in the and videotaping young women for dressing room. modeling portfolios and “In the months following advertisements, as well as the police investigation, ‘glamour photography.’ Although twenty-one women filed lawsuits the studio operated under a against John Thomson, Richard different name and was Thomson, VAS, and Hattiesburg physically separate from the Coke. These plaintiffs alleged bottling company, it was owned various causes of action and operated as a division of including invasion of privacy, Hattiesburg Coke. Moreover, the outrage, intentional infliction VAS employees were considered of emotional distress, fraud, employees of Hattiesburg Coke, negligence, and exploitation of and all major business decisions minors. The complaints included concerning the studio, from the allegations that Hattiesburg purchase of equipment to the Coke and Richard Thomson were scope and ultimate termination vicariously liable for John's of the business, were made at acts because John acted as a Hattiesburg Coke's corporate Hattiesburg Coke employee in headquarters at 4501 Hardy making the tapes and because Street. John served as a director and “By the spring of 1991, VAS officer of Hattiesburg Coke. was operating in the red and The complaints also sought to John Thomson wanted to return to visit liability on Hattiesburg school. Thus, Hattiesburg Coke Coke and Richard Thomson for a officials decided to terminate host of negligence-based torts,

including negligent entrustment, damages alleged constituted negligent supervision, and ‘bodily injury’; and whether negligent hiring. John's conduct fell within a “Hattiesburg Coke held policy exclusion for criminal liability insurance policies for activities. Eventually, the periods in question. nineteen of the twenty-one suits American Guarantee, their were settled,4 with John Thomson principal insurer, issued a agreeing to contribute combined property and approximately $2,545,000 and comprehensive general liability General Star agreeing to pay insurance policy to Hattiesburg approximately $3,774,000 on Coke covering the period from behalf of Richard Thomson and December 31, 1989, through Hattiesburg Coke. December 31, 1990. The policy “Once the underlying was renewed for the period from lawsuits were settled, American December 31, 1990, through Guarantee filed this declaratory December 31, 1991. The policy judgment action against John provided liability insurance Thomson, the 1906 Company, coverage of $500,000 per Richard Thomson, and General occurrence and $1,000,000 in the Star to resolve its coverage aggregate. Hattiesburg Coke was obligations. The district court also the named insured under an found that the insurance policy Umbrella Liability Policy for unambiguously limited liability the Coca-Cola Bottlers coverage to injuries arising Association issued by General from certain premises designated Star National Insurance Company on the declarations page of the ("General Star") for the policy policy and that the VAS property period January 1, 1990, through was not included in that January 1, 1991. Each General designation. The court also Star policy provided liability concluded that John Thomson's coverage of $5,000,000 per actions were not within the occurrence and in the aggregate. scope of his employment and that “After discussions the injuries alleged by the concerning coverage, American women did not constitute an Guarantee agreed to defend ‘occurrence’ under the policy Hattiesburg Coke and Richard because they were intended or Thomson in the state court suits expected from the standpoint of under a reservation of rights, the insured. Accordingly, the but refused to defend or district court granted summary indemnify John Thomson. In its judgment in favor of American reservation of rights Guarantee. The court also correspondence, American denied General Star's claim for Guarantee raised several indemnification for the payments coverage questions, including it had made on behalf of Richard whether the VAS building was a Thomson and the 1906 Company. designated premises; whether the conduct alleged constituted 4 an ‘occurrence’; whether the The remaining two suits were dismissed as time barred.

See id. at 804-05. novo. See Liberty Mut. Fire Ins. Co. v. Canal Ins. Co., 177 B. Current Issues F.3d 326, 331 (5th Cir. 1999); Before the Court Lubbock County Hosp. Dist. v. National Union Fire Ins. Co., In this second appeal by 143 F.3d 239, 241-42 (5th Cir. Hattiesburg Coke, Richard 1998). Thomson, and General Star, the case returns with little added II. Mississippi’s Rules for to the record or the district Interpreting Insurance court’s reasons; however, the Contracts parties have provided additional oral and written arguments The law governing the focused on Coverage B. With the interpretation of insurance benefit of their advocacy, we contracts is well settled in address the questions that the Mississippi. In determining prior panel pretermitted or did whether American Guarantee owes not definitively resolve: (1) Hattiesburg Coke or its CEO a whether the state court duty to defend or indemnify, we complaints allege viable causes look to the allegations in the of action against Hattiesburg underlying state court Coke and Richard Thompson complaints. If the complaints because of their own negligence state a claim that is within or in not taking appropriate arguably within the scope of precautions against the alleged coverage provided by the policy, tortious conduct of John American Guarantee is obliged to Thomson; (2) whether the alleged defend and, if necessary, personal injuries arose out of indemnify Hattiesburg Coke. See the conduct of Hattiesburg Centennial Ins. Co. v. Ryder Coke’s business; and (3) if so, Truck Rental, Inc., 149 F.3d whether the complainants’ 378, 383 (5th Cir. 1998); State injuries arose out of offenses Farm Mut. Auto. Ins. Co. v. for which Coverage B provided Scitzs, 394 So. 2d 1371, 1373 non-bodily personal injury (Miss. 1981) (both noting that liability insurance (viz., the Mississippi courts interpret offense of the invasion of the terms of insurance policies, right of private occupancy of a particularly exclusion clauses, room that a person occupies by favorably to the insured or on behalf of its owner). wherever reasonably possible); see also Canal Ins. Co., 177 C. Standard of Review F.3d at 331 (stating that under Mississippi law, “any doubt as In our plenary review of to the existence of a defense the district court’s granting obligation is . . . resolved in and rejecting motions for favor of the insured”). In summary judgment, we decide the comparing the complaints with foregoing issues of law and the policy terms, we look not to insurance policy construction de the particular legal theories

pursued by the state general rule that “[a]n insurer complainants, but to the must bear the entire cost of allegedly tortious conduct defense when ‘there is no underlying their suits. See reasonable means of prorating Equal Employment Opportunity the costs of defense between the Comm’n v. Southern Publ’g Co., covered and the not-covered 894 F.2d 785, 790-91 (5th Cir. items.’”) (quoting Insurance Co. 1990) (“Under Mississippi’s of N. Amer. v. Forty-Eight ‘allegations of the complaint’ Insulations, Inc., 633 F.2d rule if the factual allegations 1212, 1224-25 (6th Cir. 1980), of the complaint bring the cert. denied, 454 U.S. 1109 action within coverage of the (1981)). We must give the policy, the insurer has a duty policy language its plain and to defend.”); see also State ordinary meaning, see Blackledge Farm Mut. Auto. Ins. Co. v. v. Omega Insurance Co., 740 So. Taylor, 233 So. 2d. 805, 808 2d 295, 298 (Miss. 1999) (“terms (Miss. 1970) (stating that used in an insurance policy although an insurer normally should be understood in their bases its duty to defend on the plain, ordinary, and popular facts alleged in the petition, sense rather than in a it may also have a duty to philosophical or scientific defend if it knows of other sense”), and resolve any facts that warrant coverage). ambiguities or equivocal American Guarantee is justified expressions in favor of the in refusing to defend only if it insureds, see Ryder Truck is clear from the face of the Rental, Inc., 149 F.3d at 382- state court complaints that the 83, but not create ambiguities allegations therein are not where none exist. See Scitzs, covered. See Moeller v. 394 So. 2d at 1372. American Guar. & Liab. Ins. Co., 707 So. 2d 1062, 1069 (Miss. III. Relevant Coverage B 1996); see also Merchants Co. v. Provisions; Coverage A American Motorists Ins. Co., 794 Distinguished F.Supp. 611, 617 (S.D. Miss. 1992) (“[T]he duty to defend is Coverage B of the CGL broader than the insurer's duty policy that American Guarantee to indemnify under its policy of issued to Hattiesburg Coke in insurance: the insurer has a 1990 provides: duty to defend when there is any basis for potential liability COVERAGE B. PERSONAL under the policy”). Moreover, AND ADVERTISING INJURY because the state suits allege LIABILITY multiple grounds for recovery, American Guarantee must provide 1. Insuring Agreement. a defense if any ground falls within the terms of the policy. a. We will pay those See Southern Publ’g Co., 894 sums that the insured F.2d at 790-91 (adopting the becomes legally

obligated to pay In 1991, American Guarantee as damages altered the “wrongful entry” because of provision of the policy as “personal injury” follows: or “advertising injury” to which c. Wrongful eviction this insurance from, wrongful entry applies. . . . into, or invasion of We will have the the right of private right and duty to occupancy of a room, defend any “suit” dwelling or premises seeking those that a person occupies damages. by or on behalf of its owner, landlord or * * * lessor

b. This insurance (emphasis added). applies to “personal Coverage B insurance injury” only if against personal injury caused by an offense: liability is typical of such (1) Committed in the provisions that have been “coverage territory” included in CGL policies since during the policy the 1980s. See generally M. period; and Jane Goode, Personal Injury (2) Arising out of the Liability Coverage, 30-SPG Brief conduct of your 39 (Spring 2001); Fritz K. business . . . . Huszagh & Marisa A. Mancici, Current Issues Involving * * * Insurance of Claims for Personal Injury, 427 PLI/LIT 483 (1992). SECTION V–DEFINITIONS Coverage B personal injury liability insurance differs from * * * Coverage A bodily injury and property damage insurance in at 10. “Personal injury” least two important ways. means injury, other First, unlike Coverage A, than “bodily injury”, Coverage B may be triggered arising out of one or without proof of an accidental more of the following occurrence. Instead, Coverage B offenses: is activated by the commission * * * of certain specified offenses c. Wrongful entry during the policy period. Also into, or eviction of a unlike Coverage A, which person from, a room, excludes coverage for “‘[b]odily dwelling or premises injury’ or ‘property damage’ that the person expected or intended from the occupies. standpoint of the insured,” Coverage B expressly extends

coverage to liability for and B coverage; we deal only “‘personal injury’ . . . other with intrinsic Coverage B than ‘bodily injury’,” caused by personal liability insurance certain defined offenses arising claims. out of the insured’s business. American Guar. I, 129 F.3d at IV. Discussion of Coverage 808. Therefore, under Coverage Issues B, the triggering act may be A. The Insureds’ Liability intentional. Under State Law Consequently, cases turning on the “occurrence” or Under Coverage B, American “accident” requirement of Guarantee agreed to “pay those Coverage A type liability sums that the insured becomes insurance (or its exclusion of legally obligated to pay as intentional or expected damages because of ‘personal injuries) are irrelevant to this injury’ . . . to which this appeal. See, e.g., Sennett v. insurance applies.” “Personal United States Fid. & Guar. Co., injury” is defined by the policy 757 So. 2d 206, 210-13 (Miss. as “injury, other than ‘bodily 2000); Ramsay v. Omnibank, 215 injury’, arising out of one or F.3d 502, 503 (5th Cir. 2000); more of the following offenses . Audubon Ins. Co. v. Stefancik, . . .” Thus, the threshold 98 F. Supp.2d 751, 754-55 (S.D. question is whether, based on Miss. 1999); United States Fid. the state court allegations, & Guar. Co. v. B & B Oil Well Hattiesburg Coke and Richard Serv., Inc., 910 F. Supp. 1172, Thomson can be held liable under 1176-86 (S.D. Miss. 1995) (all Mississippi law to pay damages interpreting Coverage A type for non-bodily personal injury policies). Also irrelevant to to the state court plaintiffs. this appeal are cases in which We conclude that they can. the insured seeks Coverage B The complainants in the personal injury liability underlying state court actions coverage for its pollution alleged that, as the result of damage to another person despite the negligent acts and omissions the pollution damage exclusion of Richard Thomson and contained in the Coverage A Hattiesburg Coke, they sustained provision of its policy. See, personal injuries arising out of e.g., Gregory v. Tennessee Gas John Thomson’s wrongful Pipeline Co., 948 F.2d 203, 209 intrusion into the women’s (5th Cir. 1991) (holding that dressing room and his “to extend Coverage B to all clandestine videotaping of their property damages, including images while they occupied the damages which would be covered room to change clothes. In under Coverage A, would render particular, the factual the pollution exclusion allegations include the meaningless”). In other words, following: (1) Hattiesburg Coke in this appeal we are not faced and Richard Thomson funded VAS with a claim for overlapping A and John Thomson in all aspects

of the VAS business, and that furtive, secretive photography, Hattiesburg Coke owned the which had no legitimate place in building in which VAS operated; a photography studio”; (8) John (2) VAS and John Thomson used Thomson “‘wired’ the changing the Hattiesburg Coke trademark room with hidden movie cameras on its letterhead stationary, and secretly recorded by VCR holding themselves out to be tape the [state court plaintiff] official agents and advertising in the process of changing representatives of Hattiesburg clothes”; (9) “Thomson then Coke; (3) VAS and John Thomson utilized the entire tape of the “set themselves out to the [state court plaintiffs, whom public to be . . . professional were minors] to add to his photographers”; (4) Hattiesburg ‘composite’ tape of other women, Coke and Richard Thomson all in different stages of “induc[ed] the [state court nudity”; (10) Thomson shared plaintiffs, some of them copies of the tapes with other minors,] to submit to the viewers and possibly sold the photograph sessions . . . in the copies; (11) John Thomson had a furtherance of the business history of distributing interests of Hattiesburg Coca- “illegitimate” nude photography; Cola Bottling Company”; (5) (12) Hattiesburg Coke and Hattiesburg Coke and Richard Richard Thomson “failed to Thomson “solicited clients for properly warn the [state court VAS for purposes of its own plaintiffs] that . . . John advertising”; (6) Hattiesburg Thomson had the propensity to Coke “purchased the special commit illegal acts such as fiber optic lenses and camera photographing and videotaping equipment used by . . . John [minors] in various stages of Thomson for the secretive and undress”; (13) Hattiesburg Coke illicit dressing room and Richard Thomson “were photographs . . . [and] that negligent in allowing [John [Hattiesburg Coke] knew, or Thomson] to utilize the should have known, that the said Hattiesburg Coca-Cola Company special equipment and lenses staff, equipment, and assets in were not necessary to a his business efforts to induce legitimate photography business, the [state court plaintiffs] . . and were for an improper and . to be photographed and illicit purpose”; (7) videotaped in various stages of Hattiesburg Coke “was negligent undress”; (14) Hattiesburg Coke in purchasing for the [VAS] and Richard Thomson “were special ‘spy’ type lenses and negligent in failing to keep a camera equipment that did not proper . . . lookout for safety have a legitimate purpose in a and well being of the [state normal photography studio, and court plaintiffs] while in the [that Hattiesburg Coke] knew or studios of the defendants” due should have known that the said to the fact that the state court special lenses and camera plaintiffs were business equipment were normally used for invitees of Hattiesburg Coke and

Richard Thomson; and (15) the (citing Little by Little v. actions of Hattiesburg Coke “in Bell, 719 So. 2d 757, 760 (Miss. purchasing for [VAS] the special 1998); Steele v. Inn of ‘spy’ type camera lenses and Vicksburg, Inc., 697 So. 2d 373, other special camera equipment, 377 (Miss. 1997)). “‘[A]n when the officers and directors invitee is a person who goes of the said company knew or upon the premises of another in should have known that such answer to the express or implied equipment did not have a invitation of the owner or legitimate purpose in a occupant for their mutual photography studio, was grossly advantage.’” Little by Little, negligent.” 719 So. 2d at 760 (quoting Based on the allegations of Hoffman v. Planters Gin Co., 358 the state court complainants, So. 2d 1008, 1011 (Miss. 1978)); the insureds are potentially Steele, 697 So. 2d at 377 liable under three theories of (quoting Skelton v. Twin County negligence. First, Richard Rural Elec. Ass’n, 611 So. 2d Thomson and Hattiesburg Coke 931, 936 (Miss. 1992)). failed to maintain reasonably Second, the insureds were safe conditions for their potentially liable for business invitees. “Mississippi negligently hiring John Thomson. imposes on business owners ‘the Under Mississippi law, an duty to maintain the premises in employer may be held liable for a reasonably secure or safe negligently hiring an employee condition’ for business patrons who intentionally injures or invitees.” Whitehead v. Food another if, prior to the injury, Max, Inc., 163 F.3d 265, 271 the employer knew or should have (5th Cir. 1998) (quoting Lyle v. known of the employee’s Mladinich, 584 So. 2d 397, 399 propensity for the conduct in (Miss. 1991); see also id. question. Thatcher v. Brennan, (further quoting Lyle: “[A]ny 657 F. Supp. 6, 10 (S.D. Miss. business which invites the 1986) (citing Jones v. Toy, 476 company of the public must take So. 2d 30, 31 (Miss. 1985)); reasonably necessary acts to Freeman v. Lester Coggins guard against the predictable Trucking, Inc., 771 F.2d 860, risk of assaults. A business 861 n.1 (5th Cir. 1985); Schultz proprietor owes a duty to those v. Evelyn Jewell, Inc., 476 F.2d entering its premises to provide 630, 631 (5th Cir. 1973)); a reasonably safe place.” Tichenor v. Roman Catholic (internal quotations omitted)). Church, 32 F.3d 953, 960 (5th This duty owed by business Cir. 1994); cf. Restatement owners includes the protection (Second) of Torts § 307 (1965) of patrons or invitees from the (“It is negligence to use an foreseeable wrongful acts of instrumentality, whether a human employees and third persons on being or a thing, which the the premises. See id.; L.T. v. actor knows or should know to be City of Jackson, 145 F. Supp. 2d so incompetent, inappropriate, 756, 759 (S.D. Miss. 2000) or defective, that its use

involves an unreasonable risk of Additionally, John harm to others.”). Thomson’s voyeuristic acts fall Third, Hattiesburg Coke and squarely within two of Richard Thomson are potentially Mississippi’s intentional torts: liable for their entrustment of (a) invasion of privacy and (b) the VAS facilities and equipment outrageous conduct causing to John Thomson. Mississippi severe emotional distress. In has adopted the doctrine of each instance, the state’s negligent entrustment as defined courts have expressly or by the Restatement (Second) of Torts § 390 (1965): One who supplies directly or through a entrustment: “It is negligence third person a chattel to permit a third person to use for use of another a thing or to engage in an whom the supplier activity which is under the knows or has reason to control of the actor, if the know to be likely actor knows or should know that because of his youth, such person intends or is likely inexperience, or to use the thing or to conduct otherwise, to use it himself in the activity in such in a manner involving a manner as to create an unreasonable risk of unreasonable risk of harm to physical harm to others.”). See also id. § 7 himself and others (“‘[I]njury’ . . . denote[s] the whom the supplier invasion of any legally should expect to share protected interest[;] ‘harm’ in or be endangered by denote[s] the existence of loss its use, is subject to or detriment in fact of any kind liability for physical to a person[;] ‘physical harm’ . harm resulting to . . denote[s] the physical them. impairment of the human body, or of land or tangible chattels.”). See Sligh v. First Nat’l Bank, Under the Restatement (Second) 735 So. 2d 963, 968 (Miss. 1999) of Torts § 46, liability may (quoting section 390); Tillman result from extreme and v. Singletary, No. 1999-CA- outrageous conduct intentionally 00686-COA, 2001 WL 268246, *3 or recklessly causing severe (Miss. Ct. App. March 20, 2001) emotional distress even without (same).5 bodily contact or harm. See, e.g., Adams v. U.S. Homecrafters, Inc., 744 So. 2d 736, 742-43 (Miss. 1999) Smith 5 We believe that the v. Malouf, 722 So. 2d 490, 497- Mississippi courts would also 98 (Miss. 1998) (both follow the closely related Restatement (Second) of Torts § recognizing a right to recover 308 (1965) (providing a more for mental anguish in the general definition of negligent absence of bodily injury).

implicitly adopted the pertinent sections of the Restatement Finally, the Mississippi (Second) of Torts. Supreme Court has recognized the Sections 652B and 652C of tort of intentional or reckless the Restatement (Second) of infliction of emotional distress Torts, in pertinent parts, state by extreme and outrageous the elements of invasion of conduct. The Restatement privacy: “One who intentionally (Second) of Torts § 46 (1965) intrudes, physically or provides: “One who by extreme otherwise, upon the solitude or and outrageous conduct seclusion of another or his intentionally or recklessly private affairs or concerns, is causes severe emotional distress subject to liability to the to another is subject to other for invasion of his liability for such emotional privacy, if the intrusion would distress, and if bodily harm to be highly offensive to a the other results from it, for reasonable person.” Restatement such bodily harm.” See Speed v. (Second) of Torts § 652B (1977). Scott, 787 So. 2d 626, 629 n.1 “One who appropriates to his own (Miss. 2001) (acknowledging the use or benefit the name or existence under Mississippi law likeness of another is subject of the cause of action detailed to liability to the other for by Restatement (Second) of Torts invasion of his privacy.” Id. § § 46); Donald v. Amoco Prod. 652C. The Mississippi Supreme Co., 735 So. 2d 161, 178-79 Court has held that a person is (Miss. 1999) (same). liable if there has been Considering the facts “interference with plaintiff’s alleged by the plaintiffs in the seclusion . . . that would be underlying state court lawsuits, highly offensive to the ordinary taken as true and construed in reasonable man, as the result of the light most favorable to the conduct to which the reasonable man would strongly object.” Candebat v. Flanagan, 487 So. 2d So. 2d 378, 382 (Miss. 207, 209 (Miss. 1986) (quoting 1990)(adopting § 652D); Candebat id. § 652B cmt. d). Although v. Flanagan, 487 So. 207, 212 the Mississippi Supreme Court (Miss. 1986) (adopting § 652H); has not expressly adopted Prescott v. Bay St. Louis section 652C, we think that it Newspapers, Inc., 497 So. 2d 77, would if it were presented with 79 (Miss. 1986) (adopting § a case falling within its ambit.6 652E). Furthermore, the Mississippi Supreme Court has made clear that it has not yet 6 Mississippi has expressly defined the outer limits of the adopted several of the state’s invasion of privacy law. Restatement’s invasion of See Young, 786 So. 2d at 381 privacy provisions. See, e.g., (“We have made no effort to Plaxico v. Michael, 735 So. 2d identify the outer limits of a 1036, 1039 (Miss. 1999) (quoting person’s right of privacy and § 652B); Young v. Jackson, 572 certainly make none here”).

plaintiffs, and complying with precludes coverage because John our Erie duty, we conclude that Thomson’s acts at VAS did not the Supreme Court of Mississippi arise out of the conduct of would decide that (1) John Hattiesburg Coke. This court in Thomson committed the torts of American Guar. I concluded that, invasion of privacy and extreme under the facts alleged by the and outrageous conduct upon the state court complainants, their plaintiffs in the underlying personal injuries were caused by state lawsuits; and that (2) the offenses of John Thomson Richard Thomson and Hattiesburg which arose out of the conduct Coke may be held liable for of VAS’s business, as part of their own negligence in the Hattiesburg Coke’s business, and state lawsuits under at least was managed and directed by the three theories of recovery:(a) company and its CEO from the failure to take reasonable company headquarters on the precautions to protect the designated premises. The prior victims, as invitees, from the panel said: foreseeable intentional torts of [I]n the present case John Thomson; (b) negligent the phrase “arising hiring of John Thomson to out of” the “use” of operate VAS although they knew the designated or should have known of John premises requires that Thomson’s propensity to commit there be a causal the intentional torts against connection between the the victims; and (c) negligently injuries to the women entrusting John Thomson with the improperly videotaped VAS studio and equipment highly by John Thomson and susceptible to voyeuristic uses the designated although they knew or should premises located at have known that he was likely 4501 Harding Street. because of his history, We further conclude character, and propensities to that such a connection use them to personally injure exists. It is the victims. undisputed that the decisions to set up B. Personal Injury “Arising VAS, construct its Out of the Conduct of” the offices, purchase Insureds’ Business equipment, and, eventually, to close Under Coverage B, American it down, were all made Guarantee agreed to indemnify by Richard Thomson and Hattiesburg Coke and Richard other Hattiesburg Coke Thomson for non-bodily personal officials and injury liability caused by an employees at offense “arising out of the Hattiesburg Coke conduct of” the insureds’ headquarters, a business. American Guarantee designated premises. argues that this provision Moreover, VAS was

operated as a activities, the formal division operation of the of Hattiesburg d e s i g n a t e d Coke, with John premises, and the Thomson assigned injuries that the title of vice resulted from president of John Thomson’s Hattiesburg intentional and Coke’s “Visual tortious actions Arts Division.” at VAS. . . . In addition, Were we confined Richard Thomson to finding a testified in his causal connection deposition that between the a l l o f injuries stemming Hattiesburg from the improper Coke’s divisions videotaping at shared the same VAS and use of general checking Hattiesburg account and that Coke’s premises all of VAS’s at 4501 Hardy expenses were Street as a paid from this building, we account. John doubt we would Thomson was reach the same required to pay conclusion. all VAS expenses However, a CGL from a rolling policy is petty cash designed to account and then insure its holder submit his from more than expenses and just injuries receipts to arising from the Hattiesburg Coke, condition or use which would then of its buildings remit these sums as buildings. back into the For the reasons account. U n d e r described above, t h e we conclude that circumstances, a the requisite factfinder could causal connection find a causal exists between c o n n e c t i o n the injuries b e t w e e n alleged in the Hattiesburg Coke underlying state and Richard court lawsuits T h o m s o n ’ s and the use of supervisory the company’s

headquarter between the personal injuries s b y and the company headquarters R i c h a r d building. Consequently, the Thomson and prior panel necessarily decided Hattiesburg that the alleged injuries arose Coke to out of the conduct of the supervise insured’s business. For J o h n virtually the same reasons, we Thomson’s conclude that John Thomson’s activities acts arose out of the conduct of at VAS, a Hattiesburg Coke’s business. wholly-owne d division C. The Offense of of the Invasion of the Right of company. Private Occupancy of a Room Thus, the by or on Behalf of Its Owner negligence c l a i m s American Guarantee was a g a i n s t obligated to defend and Hattiesburg indemnify Hattiesburg Coke and Coke and Richard Thomson against all of R i c h a r d the state court complainants’ Thomson are actions because (1) Coverage B n o t of the 1991 policy may be excluded reasonably interpreted to insure f r o m against offenses, i.e., torts, coverage by that accrued in 1991; (2) the t h e alleged torts of invasion of designated privacy committed by John premises Thomson all accrued in 1991; and endorsement (3) the alleged personal . liability of Hattiesburg Coke and Richard Thomson reasonably American Guar. I, 129 F.3d at may be found to have arisen out 807-08 (emphasis added). The of offenses of invasions of first panel, in reaching the private occupancy of a room that decision that there was the persons occupied by or on behalf requisite causal connection of its owner. between the alleged personal injuries and the corporate 1. “Offense committed during . headquarters premises, expressly . . the policy period.” stated that it did so because the VAS operations from which Coverage B of the 1991 the actionable offenses arose insurance policy “applies to . . were conducted by Hattiesburg . ‘[p]ersonal injury’ caused by Coke as part of its business at an offense arising out of your its headquarters, and not business . . . but only if the because of a physical connection offense was committed . . .

during the policy period.” conduct that amounts to a legal Coverage under the 1991 policy wrong and that causes harm for began on December 31, 1990 and which courts will impose civil ended on December 31, 1991. The liability. Taken in this sense, policy does not define “offense” an offense, or tort, is not or “committed.” committed unless and until the The ordinary meaning of injury that results from it “offense” is “a breach of a amounts to a harm for which moral or social code” or “an courts will impose civil infraction of law.” Merriam liability. Webster’s Collegiate Dictionary Correlatively, the 806 (10th ed. 1997). Because Mississippi Supreme Court has the policy insures against held that “[a] tort is not liability arising out of certain complete until an injury “offenses,” the word in this occurs.” McMillan v. Puckett, context conveys the same meaning 678 So. 2d 652, 654 (Miss. as “tort.” “Tort” has the same 1996)(en banc). The McMillan meaning in the ordinary and court also held that “‘[a] cause legal senses. Compare id. at of action accrues only when it 1245 (“a wrongful act other than comes into existence as an a breach of contract for which enforceable claim; that is when relief may be obtained”), with the right to sue becomes Black’s Law Dictionary 1496 (7th vested.’” Id. (quoting Owens- ed. 1999)(“A civil wrong for Illinois, Inc. v. Edwards, 573 which a remedy may be So. 2d 704, 706 (Miss. 1990)).7 obtained”), and 1 Dan B. Dobbs, The Law of Torts § 1, at 1 (2001)(“a legal wrong . . . that 7 causes harm for which courts In interpreting a venue will impose civil liability”). statute authorizing the Consequently, “a wrong is called commencement of a civil action a tort only if the harm which in the county “where the cause has resulted, or is about to of action may occur or accrue” result from it, is capable of the McMillan court explained the being compensated in an action difference between “occur” and at law for damages.” W. Page “accrue”: Keeton et al., Prosser & Keeton We read accrual in its on the Law of Torts § 1, at 4 formalistic sense. A (5th ed. 1984). In ordinary cause of action parlance, “commit” means “to accrues when it comes carry into action deliberately: into existence as an perpetrate a crime.” Merriam enforceable claim, Webster’s Collegiate Dictionary that is, when the 231 (10th ed. 1997). Thus, in right to sue becomes both legal and ordinary vested. This may well language, to commit an offense mean the moment injury that results in liability (i.e., is inflicted, that a tort), means to engage in point in space and time when the last

Consequently, we believe the McCorkle v. McCorkle, No. 1999- Mississippi Supreme Court, CA-01711-COA, 2001 WL 19727, at reading the policy from the *5-*6 (Miss. Ct. App. Jan. 9, standpoint of a reasonable 2001); see also Tichenor v. purchaser of insurance, would Roman Catholic Church, 32 F.3d either (1) interpret “offense . 953, 962 (5th Cir. 1994) . . committed . . . during the (acknowledging Mississippi’s policy period” to include an application of the discovery accrued or completed tort, or rule to invasions of privacy (2) conclude that the phrase is involving “inherently ambiguous and should be undiscoverable” injury). All of construed in favor of coverage. the original twenty-one state See Great N. Nekoosa Corp. v. court claimants first discovered Aetna Cas. & Sur. Co., 921 F. in November 1991 that John Supp. 401, 419 (N.D. Miss. 1996) Thomson had invaded the young (holding that it is unclear women’s rights of privacy. whether the “offense” of Eighteen of them alleged that emotional distress occurs at the Thomson videotaped them in 1991. time of the causative act or at The remaining state claimants the time that the plaintiff alleged that he taped them in learned of the act, and 1990 but that they had not therefore interpreting the term learned of the incidents until to allow for coverage). 1991. American Guarantee does Under Mississippi law, the not contend that any of the tort of invasion of privacy claimants failed to exercise accrues when the plaintiff reasonable diligence. Thus, the discovers or through exercise of torts of invasion of privacy reasonable diligence should have alleged in all of the state discovered the invasion. See court actions accrued in 1991. Accordingly, if the alleged liability of Hattiesburg Coke l e g a l l y and Richard Thomson arose out of significant fact the offense of “invasion of the is found. right of private occupancy of a "Occur" is a less room . . . that a person formalistic term. occupies by or on behalf of its It is event owner,” American Guarantee is oriented to its obliged to defend and indemnify core. It the insureds in all of the state connotes conduct cases under Coverage B of its and phenomena and 1991 policy. imports no preference among 2. “Invasion of the right of all of those private occupancy of a room” necessary that a plaintiff may The “invasion of the sue. private right of occupancy” 678 So. 2d at 655 (internal phrase is not defined in the citations and emphases omitted).

policy and has not been includes “something due to a interpreted by the Mississippi person . . . by law.” Id. at courts. Therefore, according 1175. The common-place meaning to Mississippi rules of of “occupancy” is “[t]he period insurance contract during which one owns, rents, or interpretation, we must give it uses certain premises.” Id. at its plain, ordinary, and popular 944. “Occupy” means “to fill up meaning. (time or space).” Id. The Mississippi Supreme It is apparent from the Court often consults leading above definitions that an dictionaries to determine the average purchaser of insurance ordinary meaning of insurance could reasonably understand the contracts. See, e.g., Bank of phrase "invasion of the right of Mississippi v. Mississippi Life private occupancy of a room" to & Health Ins. Guar. Ass’n, 730 include the invasion of a room So. 2d 49, 57 (Miss. 1999); that is secluded from the sight, Merrimack Mut. Fire Ins. Co. v. presence, or intrusion of McDill, 674 So. 2d 4, 9 (Miss. others. John Thomson’s invasion 1996); Allstate Ins. Co. v. by hidden camera of the young Moulton, 464 So. 2d 507, 509 women’s right to occupy and (Miss. 1985); Blackledge, 740 change clothes in the women’s So. 2d at 301 (McRae, J., dressing room reasonably falls dissenting). The mainstream within this definition. dictionary definition of The United States Supreme “invasion” is “an act of . . . Court has recognized that a encroachment or trespassing.” person has a constitutional Webster’s New World Dictionary right to privacy whenever he or 740 (1976); Webster’s Deluxe she has a reasonable expectation Unabridged Dictionary 965 of privacy. See Kyllo v. United (1979); American Heritage States, 121 S.Ct. 2038, 2043 Dictionary 688 (1979). (2001) (reaffirming the rule Similarly, “invade” means “to that a person has a encroach upon” or “to affect constitutional “expectation of injuriously and progressively.” privacy” when “society is Merriam Webster’s Collegiate prepared to recognize [that Dictionary 615 (10th ed. 1997). expectation] as reasonable”). “Private” commonly means Mississippi has emphatically “intended for or restricted to recognized the tort of invasion the use of a particular person, of privacy and in doing so has group, or class” or “[w]ithdrawn taken notice of an individual’s from company or observation.” right to privacy under state Id. at 927. A thing is law. Mississippi also requires "private" if it is "[s]ecluded of commercial property owners from the sight, presence, or the highest duty to protect intrusion of others." American their business invitees from Heritage Collegiate Dictionary unreasonable risks of harm while 1089 (3d ed. 1993). In its visiting their premises. Hence, ordinary sense, a “right” we conclude that the Mississippi

Supreme Court would find that Mississippi Supreme Court does John Thomson, by secretly not adopt this meaning outright, videotaping the young women in we believe that it would find VAS’s dressing room, invaded that the phrase is ambiguous, their “right of private recognize that the foregoing occupancy” of that room. interpretation is reasonable, Related Mississippi case and, in accord with its law supports our anticipation of precedents, apply it in the this conclusion. See Candebat, present case in favor of 487 So. 2d at 209 (finding a coverage. Well reasoned person liable if there has been opinions of other courts have “interference with plaintiff’s found the same policy language seclusion . . . that would be highly ambiguous and susceptible highly offensive to the ordinary to providing coverage in a wide reasonable man, as the result of array of circumstances. conduct to which the reasonable In New Castle County v. man would strongly object.”); National Union Fire Ins. Co., Plaxico, 735 So. 2d at 1038-39 243 F.3d 744 (3d Cir. 2001) (recognizing that the defendant (“New Castle III”) the Third violated the plaintiff’s Circuit, after a comprehensive reasonable expectation of survey of cases nationwide, privacy when he took voyeuristic concluded that the phrase nude photographs of her while “invasion of the right of she was in her bedroom); see private occupancy” is ambiguous also Malloy v. Sears, Roebuck & as a matter of law. See id. at Co., No. 4:96CV157-EMB, 1997 WL 756 (“A single phrase, which 170313, at *1 (N.D. Miss. Mar. insurance companies have 4, 1997) (recognizing a business consistently refused to define, invitee’s state law cause of and that has generated literally action for “unreasonable hundreds of lawsuits, with intrusion upon the seclusion of widely varying results, cannot, another” where the defendant’s under our application of employee peeped on the invitee commonsense, be termed while she was using the restroom unambiguous”). Moreover, as the on the defendant’s premises). New Castle III court points out, Considering Mississippi’s the courts which claim to have vigorous protection of the right divined one true meaning of the of privacy, it is reasonable to phrase have ended up espousing anticipate that an “invasion of three different and inconsistent the right of private occupancy interpretations. See id. at of a room” would be interpreted 750-753; see also Goode, supra, by the state’s courts as at 41-43 & nn. 21-35 (citing and including John Thomson’s discussing a wide spectrum of surreptitious videotaping of case law regarding the meaning female business invitees of the phrase “right of private disrobing while occupying a private dressing room. Alternatively, if the

occupancy”).8 This wide variance “noxious odors, noise and in interpretations is itself light”); Beltway Mgmt. Co. v. evidence that the phrase is Lexington-Landmark Ins. Co., 746 ambiguous. See id. at 756. F.Supp. 1145, 1156 (D.D.C. 1990) New Castle III also (holding that the phrase illustrates the breadth of encompasses liability for a meaning that reasonably may be breach of the implied warranty attributed to the phrase “right of habitability of an of private occupancy.” At issue apartment); Town of Goshen v. in that case was whether a Grange Mut. Ins. Co., 424 A.2d county’s failure to award a 822, 825 (N.H. 1980) (finding building permit in violation of coverage under the phrase where the applicant’s due process a town planning board refused to rights qualified as an invasion allow a property owner to of the applicant’s private right develop a subdivision in of occupancy of the property. violation of his civil rights). Id. at 749. Employing rules of In light of the insurance contract comprehensive studies undertaken interpretation similar to by New Castle III and other Mississippi’s, the court found courts, we are convinced that the phrase to be ambiguous and the present case is simple by liberally construed it in favor comparison and falls well within of coverage. the ambit of a reasonable Other courts finding the interpretation of the phrase. phrase to be ambiguous have also Consequently, in view of the found coverage under far- Mississippi rules of insurance reaching circumstances. See policy construction, the Titan Holdings Syndicate, Inc. ordinary meanings of the words v. City of Keene, 898 F.2d 265, involved, and the persuasive 272-73 (1st Cir. 1990) (holding reasoning of New Castle III, we that a similar phrase included conclude that the Mississippi the interference in the quiet Supreme Court would construe the use of property resulting from clause in favor of coverage in the present case. 8 In her article, Jane Goode 3. “[B]y or on behalf of its collects various cases and finds owner, landlord, or lessor” that the term “right of private occupancy” has been interpreted Of the many ordinary usages to require a range of activity, of the word “by,” several lend from as much as a physical cogent meaning to the policy trespass upon a real property clause: “through or through the interest to lesser intrusions medium of”; “through the agency and impairments of the use and or instrumentality of”; in enjoyment of property, such as conformity with”; “according an invasion of privacy or a mere to”; “on behalf of”; or “with legal encroachment upon an respect to.” Merriam Webster’s economic interest. See Goode, Collegiate Dictionary 157 (10th supra, at 41-43 & nn.21-35.

ed. 1997). “On behalf of” is that American Guarantee was commonly thought to mean “in the obliged to defend and indemnify interest of” and “as a Richard Thomson and Hattiesburg representative of.” Id. at 103. Coke under Coverage B of the Therefore, the phrase reasonably 1991 CGL policy in the may be interpreted to mean that, underlying state court actions. in order for there to be coverage, the victim must be occupying the room “through,” V. Reimbursement of “through the medium of,” Attorney’s Fees “through the agency or instrumentality of,” “by the Hattiesburg Coke and authority of,” “according to,” Richard Thomson seek “in relation to,” or “in the reimbursement for attorney’s interest of” the owner of the fees and expenses incurred in room. Thus, in the ordinary hiring separate and independent sense of the words, the young counsel. In Moeller v. American women in the underlying Guarantee and Liability litigation were occupying the Insurance Company, 707 So. 2d dressing room “through,” “by the 1062, 1069 (Miss. 1996), the authority of,” and “in the Mississippi Supreme Court interests of” its owner, stated: Hattiesburg Coke, when John Thomson violated their rights of When defending under a private occupancy of a room. reservation of rights, Consequently, we think the . . . a special Mississippi courts would apply obligation is placed that reasonable meaning in favor upon the insurance of coverage, either as their own carrier. . . . [N]ot interpretation or in accordance only must the insured with Mississippi law governing be given the the construction of ambiguous opportunity to select insurance contracts. The Third his own counsel to and Eighth Circuits have held defend the claim, the that the effect of the phrase is carrier must also pay ambiguous and that it must be the legal fees construed in favor of coverage. reasonably incurred in See New Castle County v. the defense. National Union Fire Ins. Co., 174 F.3d 338 (3d Cir. 1999) We are bound by the (“New Castle I”); Royal Ins. Co. Mississippi Supreme Court’s of America v. Kirksville College decision in Moeller. The of Osteopathic Med., 191 F.3d insureds hired separate counsel 959, 963 (8th Cir. 1999) because American Guarantee only (following the New Castle I agreed to defend Hattiesburg holding that the phrase is Coke and Richard Thomson under a ambiguous). reservation of rights and Accordingly, we conclude because the insureds were

potentially exposed to liability judgment for American Guarantee in excess of the CGL policy and REMAND the case to the limits. Because we have district court with instructions determined that the claims for it to grant summary judgment contained allegations covered in favor of Richard Thomson and under Coverage B, Moeller Hattiesburg Coke and against mandates that Hattiesburg Coke American Guarantee, decreeing and Richard Thomson be that American Guarantee is reimbursed for the reasonable obliged to defend, indemnify, costs of obtaining a separate and reimburse them in connection attorney. See id. at 1071 with the underlying state court (“Because [the insureds were] actions in accordance with this being defended under the . . . court’s opinion. The case is claim with a reservation of remanded for these purposes and rights, American Guarantee was for further proceedings obligated to let them select consistent herewith. their own attorney at American Guarantee’s cost”). Although American Guarantee acknowledges the Moeller decision, the company argues that we should not retroactively apply its holding. We reject American Guarantee’s argument. The Mississippi Supreme Court has clearly held that its rulings apply retroactively except in cases involving government action or public monetary resources. See Ales v. Ales, 650 So. 2d 482, 484-85 (Miss. 1995). Because Moeller involves neither of those exceptions, its holding controls this case, which was pending when the Mississippi Supreme Court issued the opinion.

VI. Conclusion

Accordingly, we conclude that American Guarantee is obligated to defend and indemnify Hattiesburg Coke and Richard Thomson in the underlying state lawsuits. We REVERSE the grant of summary