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RJC Realty Holding Corp. v. Republic Franklin Ins. Co.

Court of Appeals of New York

February 11, 2004, Argued ; April 1, 2004, Decided

No. 26

Opinion

 [***5]   [**1264]   [*161]  R.S. Smith, J.

The issue here is whether a liability insurer is obligated to defend and indemnify its insured, a "beauty salon/health spa," in an action brought against the insured based on an alleged sexual assault by the insured's employee. We hold that the alleged assault was an "accident" within the meaning of the policy, and that the policy's exclusions for injuries expected or intended from the standpoint of the insured and for bodily injury arising out of body massage do not apply. We therefore hold that the insurer is obligated to defend and indemnify.

Facts and Procedural History

Appellant, RJC Realty Holding Corp., doing business as "Pure Maximus Spa/Salon," obtained an insurance policy including "Businessowners Liability Coverage" from respondent [****2]  Republic Franklin Insurance Co. 1 In the policy, Republic agreed to  [*162]  indemnify and defend RJC against claims for "bodily injury" 2 caused by an "occurrence" as defined in the policy. "Occurrence" is defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions."

Two exclusions in the policy are also relevant here. The policy states that it is not applicable to " '[b]odily injury' . . . expected or intended from the standpoint of the insured" or to " '[b]odily injury' . . . arising out of [****3]  . . . [b]ody massage other than facial massage."

Marie and Thomas Harrison brought an action against RJC and a masseur employed by RJC, alleging that the masseur performed a body massage on Marie Harrison and that Marie Harrison "was the victim of improper sexual contact." The Harrisons alleged that RJC was liable to them for negligently hiring and retaining the masseur, and for failing properly to supervise his activities.

RJC notified Republic of the alleged sexual assault, and subsequently provided Republic with a copy of the Harrison complaint. Republic responded by disclaiming coverage, relying on the definition of "occurrence" and the two exclusions quoted above. 3 

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2 N.Y.3d 158 *; 808 N.E.2d 1263 **; 777 N.Y.S.2d 4 ***; 2004 N.Y. LEXIS 601 ****; 22 I.E.R. Cas. (BNA) 245

RJC Realty Holding Corp., Doing Business as Pure Maximus Spa/Salon, Appellant, v. Republic Franklin Insurance Company et al., Respondents, et al., Defendants.

Prior History:  [****1]  Appeal, by permission of the Court of Appeals, from an order of the Appellate Division of the Supreme Court in the Second Judicial Department, entered March 17, 2003. The Appellate Division (1) dismissed, as subsumed in the appeal from the judgment, an appeal from an order of the Supreme Court, New York County (Edward W. McCarty, III, J.), which had granted plaintiff's motion for summary judgment and denied a cross motion by defendants Republic Franklin Insurance Company and Utica National Insurance Group for summary judgment, (2) reversed, on the law, a judgment of that Supreme Court which had declared that defendants Republic Franklin Insurance Company and Utica National Insurance Group were obligated to defend and indemnify plaintiff in the action instituted against it by defendants Marie Harrison and Thomas Harrison in Supreme Court, Nassau County, under index No. 01-011145, (3) denied plaintiff's motion, (4) granted defendants' cross motion, and (5) declared that defendants were not obligated to defend and indemnify plaintiff in the underlying action.

RJC Realty Holding Corp. v. Republic Franklin Ins. Co., 303 A.D.2d 573, 756 N.Y.S.2d 631, 2003 N.Y. App. Div. LEXIS 2658 (N.Y. App. Div. 2d Dep't, 2003), reversed.

Disposition: Order of the appellate division reversed; judgment of trial court reinstated.

CORE TERMS

massage, insured, masseur, sexual assault, respondeat, coverage, bodily injury, point of view, indemnify, murder

Insurance Law, Business Insurance, Commercial General Liability Insurance, Duty to Defend, Exclusions, Intentional Acts, Torts, Vicarious Liability, Employers, General Overview