Mt. Hawley Insurance Company v. First Street Ocean Grille, LLC

Background

Mt. Hawley provided commercial general liability insurance to First Street Ocean Grille, LLC, from August 20, 2020, through August 20, 2021. Amber Rodriguez sued Ocean Grille and one of its employees in Florida over an April 25, 2021 incident. Mt. Hawley was defending Ocean Grille in that lawsuit.

Rodriguez’s original complaint alleged that the employee assaulted and battered her by pushing her, causing her to fall, and dragging her. The amended complaint removed the assault and battery allegations and instead alleged that the employee negligently escorted Rodriguez toward the exit in a hurried and aggressive manner, causing her to fall and suffer injury. The amended complaint asserted negligence-related claims against the employee and Ocean Grille.

Insurance Coverage Dispute

The policy excluded coverage for claims arising from an assault, battery, physical altercation, or efforts to prevent or suppress such conduct. Mt. Hawley sought a declaration that it had no duty to defend or indemnify Ocean Grille in the Florida case. It argued that the original complaint’s assault allegations showed that the exclusion applied, even though the amended complaint alleged negligence.

Ocean Grille opposed the motion. It argued that the amended complaint did not refer to an assault, battery, or physical altercation; that the policy did not define those terms; and that the facts surrounding Rodriguez’s fall were disputed. Ocean Grille also asserted that Mt. Hawley possessed security video showing the incident, although neither party submitted that video to the court.

Court’s Analysis

A motion for judgment on the pleadings asks the court to decide a case based on the pleadings and materials properly considered with them. The court must accept the nonmoving party’s factual allegations and draw reasonable inferences in that party’s favor. It may not use this procedure to weigh disputed facts.

Under New York law, an insurer’s duty to defend is broader than its duty to indemnify. An insurer must defend when the allegations in an underlying lawsuit create a reasonable possibility of coverage. To avoid that duty based on an exclusion, the insurer must show that the allegations fall entirely within the exclusion and that no reasonable interpretation or possible facts could create coverage.

The court explained that an amended complaint ordinarily replaces the earlier complaint. Although courts sometimes disregard amended allegations that directly contradict earlier allegations, the court found no evidence that Rodriguez deliberately amended her complaint to avoid the exclusion. The court also said it was not clear that the changes between the two complaints directly contradicted one another.

The court distinguished a case in which successive complaints continued to allege assault and battery. Here, the amended complaint did not carry forward those allegations. The court therefore could not conclude from the pleadings that the incident necessarily was a physical altercation rather than a negligent escort. The undisclosed security video might show that the exclusion did not apply, that it unquestionably did apply, or that the evidence was ambiguous. Those possibilities made judgment on the pleadings inappropriate.

As to indemnification, the court held that deciding Mt. Hawley’s duty to indemnify was premature. If there were no duty to defend, there would be no duty to indemnify. Even if there were a duty to defend, indemnification would depend on how the claims against the employee and Ocean Grille were resolved in the Florida case.

Disposition

The court denied Mt. Hawley’s motion for judgment on the pleadings as to both the duty to defend and the duty to indemnify. The court directed the parties to appear for a status conference on April 26, 2024, and to submit a proposed case-management plan and joint status letter before that conference.