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Appellate court reverses summary judgment for insurer

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The Indiana Court of Appeals reversed summary judgment in favor of a hotel’s insurance company in a negligent hiring suit, ruling there is a question as to whether the teenage hotel guest was under the “care, custody or control” of the hotel at the time the teen was molested by an employee.

The parent of R.H.M., a 15-year-old guest at the Holiday Inn Express of New Castle, sued the hotel, its parent company and employee Michael Forshey after R.H.M. was molested by Forshey. AMCO Insurance Co. sought a declaratory judgment action that its policy with Holiday Inn doesn’t provide coverage to any of the defendants. The trial court granted summary judgment to AMCO.

The hotel parent company, Holiday Hospitality, argued that the trial court was wrong in concluding the molestation wasn’t an “occurrence” as that term is defined in the policy. The appellate court agreed with Holiday Hospitality, citing Wayne Township Bd. Of Sch. Commissioners v. Indiana Insurance Co., 650 N.E.2d 1205, 1209 (Ind. Ct. App. 1995). The COA concluded in that case that due to a separation of insureds provision in the township’s insurance policy, the actions of the school board commissioners may have been accidental even though the principal’s action of molesting a minor in his office were intentional. AMCO’s insurance policy also contained a separation of insureds provision.

The judges noted that only once have the state appellate courts specifically addressed whether an employer’s negligent hiring or supervision of an employee could be accidental. They adopted the analysis in American Family Mut. Ins. Co. v. Bower, 752 F.Supp.2d 957 (N.D. Ind. 2010), a negligence supervision suit brought against parents Michael and Anne Bower after their son molested a minor. That court held in light of Indiana’s construction of ambiguous insurance policies against the insurance company, where a severability provision exists, no evidence is designated showing the defendants intended or expected their son Jonathan to molest the minor when they allegedly acted negligently and the term “accident” is not further defined in the policy and is “susceptible to differing reasonable interpretations,” then the alleged negligent conduct constitutes an “occurrence” for purposes of the insurance policy.  

The separation of insureds provision allows the finding of an “occurrence” regarding Holiday Hospital’s action even if Forshey’s actions don’t amount to an accident; there is ambiguity in the insurance policy; and without evidence that the employer intended or expected the sexual misconduct to result, it can’t be deemed intentional, wrote Chief Judge Margret Robb in Holiday Hospitality Franchising Inc. v. AMCO Insurance Company, No. 33A01-1103-CT-104.

The judges also concluded there was a genuine issue of material fact as to whether R.M.H. was in the “care, custody or control” of Holiday Inn, Holiday Hospitality or any other insured. There are exclusions in the insurance policy for abuse or molestation that occur while the person is in the care, custody or control of any of the insured.

While AMCO may be correct that the teen was a business invitee of the hotel and was owed a duty of reasonable care, that is not the same as being “in the care, custody or control” of Holiday Inn, wrote Robb.

“In the context of a hotel, it would require something additional, such as a minor being supervised by hotel employees. Thus, AMCO has not demonstrated that there are no genuine issues of material fact and that it is entitled to judgment as a matter of law,” she wrote. The judges remanded the case for further proceedings.

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