In June 2021, the Commerce insurance company (Commerce) settled a personal injury action against the owners of a commercial property in Worcester for $6 million. The case arose from the rape of a social worker who was working in the Worcester building Commerce insured.
Late in the afternoon of August 16, 2016, a tenant at 340 Main Street, Worcester, reported being scared by a man wandering in the building and asked for help from the building management. The building security personnel located the person, Antonio Damon, who appeared to be intoxicated or high and instructed him to leave the building. However, the security personnel failed to escort him out or even observe him leaving. Instead, they turned their backs on him and returned to their office.
A young social worker was working alone in the office of South Bay Mental Health (South Bay), located in the building. After his confrontation with the security personnel, Antonio Damon remained in the building and approached the social worker’s office twice, allegedly seeking mental health services. The social worker denied him entry. However, he returned a third time, forcefully pushed through the door with a knife, and subjected the young woman to a brutal rape for over an hour.
Following the rape, Damon left the building and proceeded to commit a carjacking, sexually assault another woman, and commit a robbery before being apprehended. He was indicted, tried, convicted, and received a 25-to-30-year sentence in state prison. Subsequently, he appealed this sentence to a three-judge criminal sentence panel, seeking to reduce his sentence. The panel, instead, increased his sentence to a 35-to-40-year term based on the severity of his crimes.
In 2018, the social worker filed a lawsuit against Commerce’s insureds, the owners or managers of the building, alleging negligence that resulted in her bodily injury and extreme emotional distress from the rape. Three days before a scheduled jury trial, Commerce settled her lawsuit for $6 million.
During the pendency of the social worker’s lawsuit, Commerce sought to involve South Bay’s insurer, the Philadelphia Indemnity Company (Philadelphia), in the defense and indemnification process based on the lease terms between their respective insureds. However, Philadelphia refused to participate.
Subsequently, Commerce sued Philadelphia, asserting indemnity claims. Philadelphia defended itself on various grounds. However, in deciding the insurers’ cross-motions for summary judgment, the federal judge focused on the ‘abuse and molestation’ exclusion in Philadelphia’s primary policy. This exclusion stated that coverage would not be provided for claims arising from “the actual or threatened abuse or molestation by anyone of any person while in the care, custody, or control of any insured.”
Commerce argued unsuccessfully that the abuse and molestation exclusion did not apply to a crime such as the rape that occurred at 340 Main Street on August 16, 2016. However, the Court ruled that Philadelphia’s abuse and molestation exclusion did indeed apply to this negligent security case involving a rape in a commercial rental property.
In making this ruling, the Court may have identified an uncovered risk for property owners who have a duty to provide adequate security on their premises for tenants and business invitees. If upheld, commercial property insureds whose policies include this exclusion may find themselves without coverage for negligent security suits involving criminal sexual assaults committed on their premises.
The social worker’s negligent security suit against Commerce’s insureds
In September 2018, the social worker sued the owners of the building at 340 Main Street, Worcester, Massachusetts. Her suit alleged that at all relevant times, owned, managed, and controlled by Commerce insureds – Commerce Associates Real Estate Management, Commerce Associates LP, 340 & 390 Main Street Associates, Inc., and New Commerce Properties, Inc.
Her complaint alleged that Damon’s August 9, 2016, assault resulted from the negligence of agents of the defendants.
The owners and property managers of 340 Main Street had allegedly been informed by several tenants about concerns for their safety. These complaints ranged from trespassers wandering in the building to evidence of substance abuse like empty alcohol bottles and drug paraphernalia littering the common spaces. Despite these complaints, no notable action was taken to enhance building security.
On the day of the assault, a tenant had allegedly complained to the building’s customer service representative and security provider about an encounter with an intruder who scared her, and she had requested assistance. The building’s security person found Damon and determined he was a trespasser and visibly intoxicated with some substance.
According to the complaint, the security person instructed him to leave the premises but neither escorted him from the building nor watched him leave. Instead, the security person turned around and went back to their office, leaving Damon in the vicinity of the social worker’s office, where she was working alone.
A brief time later, Mr. Damon forced his way into the social worker’s office with a knife and raped her.
Commerce settles the social worker’s lawsuit for $6 million based on permanent PTSD
Approximately three years after commencing her action, the social worker’s claims were scheduled for a jury to begin on June 21, 2021. Just prior to the trial, the parties engaged in mediation.
While the defendants denied liability, the damages alleged by the social worker from her trauma were significant.
A vocational expert was expected to testify about the aftermath of the attack leaving the social worker fearing routine tasks like grocery shopping or even filling up her car with gas. According to this expert, even basic human interactions have become a source of fear for the social worker, often triggering panic attacks.
The social worker had received her master’s degree in social work just a year before the assault. However, the aftermath of the assault, characterized by Post Traumatic Stress Disorder (PTSD), constant anxiety, depression, and hypervigilance, had largely ruled out her potential to serve in that job. Her struggle extended to the point where even stepping out of her house alone was a struggle.
In terms of financial repercussions, the social worker’s attorneys were prepared to present evidence from an economist, who would opine the social worker had a loss of earning capacity valued at the present day to be $2,630,286.00 because of the attack.
A psychologist was also expected to testify that the social worker’s continued struggle with PTSD made her “permanently disabled” and “unemployable,” with little likelihood that these symptoms will ever fully dissipate.
On June 18, 2021, three days before a trial was to begin, Commerce reported to the Superior Court that its Insureds had settled with the social worker, in mediation, by Commerce paying $6 million, its policies’ limits.
Commerce sues Philadelphia claiming defense and indemnity for the social worker’s lawsuit under premise lease with the social worker’s employer
At the time of the assault, the social worker was employed by South Bay and working within the premises leased to South Bay by a Commerce Insured at 340 Main Street, Worcester.
While the social worker’s lawsuit was pending against Commerce’s Insureds, Commerce had reached out to Philadelphia as the insurer of South Bay. Commerce sought indemnification in relation to the social worker’s claims, citing that its Insureds were covered under South Bay’s commercial general liability and umbrella policies with Philadelphia, owing to the terms of the lease agreement between South Bay and Commerce’s Insureds
As per the lease agreement between South Bay and the Underlying Defendants, South Bay was obligated to include its landlord, Commerce Associates LP, as an additional insured party in its commercial general liability insurance policy. South Bay was also responsible, per the terms of the lease, to indemnify Commerce Associates for any personal injury claims that might arise on the leased property
However, Philadelphia countered Commerce’s demands taking the position that neither the commercial general liability policy nor the umbrella policy extended coverage to the Commerce Insureds. As a result of this stand, Philadelphia chose not to participate in the mediation process, which eventually led to the settlement with the social worker.
The Commerce and Philadelphia policies in the dispute
Commerce issued two relevant policies to multiple named insureds, including the defendants in the social worker’s lawsuit – a commercial general liability policy with a $1,000,000 limit of liability and a liability umbrella policy with a $5,000,000 limit of liability
Philadelphia also issued two policies to Community Intervention Services, Inc., and multiple other entities, including South Bay, that were in effect at the time of the incident – a commercial general liability coverage with a $1,000,000 limit of liability and a commercial umbrella liability policy with a $10,000,000 limit of liability
Commerce’s declaratory judgment against Philadelphia Insurance
As the social worker’s suit approached trial, Commerce brought a declaratory judgment action in federal court seeking a ruling that Commerce’s Insureds were covered under the Philadelphia CGL Policy for the social worker’s suit. The declarations Commerce asked the Court to make, included, in part, that:
- Commerce’s Insureds were covered under the Philadelphia Commercial General Liability (CGL) Policy in relation to the social worker’s lawsuit.
- Philadelphia had a responsibility to defend Commerce’s Insureds against the social worker’s lawsuit as per the terms of the Philadelphia CGL Policy.
- Philadelphia had a duty to indemnify Commerce’s Insureds for any liability arising from the social worker’s lawsuit in accordance with the Philadelphia CGL Policy.
- Philadelphia had the duty to indemnify South Bay for its obligation to indemnify any of Commerce’s Insureds, as specified in its lease agreement for the premises where the assault took place.
The lease of the property provided that South Bay had to obtain liability insurance and name the property owners as additional insureds on a commercial general liability insurance policy. The lease required a minimum liability limit of $1 million, stating that the lessee would maintain at its expense:
Commercial general liability insurance in at least the Required Insurance Amount, for bodily and personal injury and property damage, including as additional insureds [Commerce Associates], any general partner or other person directly liable for the obligations of [Commerce Associates], and any representative or employee of [Commerce Associates] … such coverage to be primary and not excess or contributing or secondary to any other insurance available to [Commerce Associates] or the additional insureds.”
Commerce’s suit also claimed that Philadelphia’s insured had to indemnify the Commerce Insureds for claims like the social worker’s at the leased property under a section of the property lease stating an indemnity
To the maximum extent permitted by law, (a) [South Bay] agrees that it will occupy the Property at its own risk, and that [Commerce Associates] will not be liable to [South Bay], or to any person claiming or admitted to the Property through [South Bay], for injury or death to persons, or loss or damage to property of any nature whatsoever, and (b) [South Bay] waives and will indemnify [Commerce Associates] against any claim for personal injury or death or damage to property, including legal fees and expenses, by [South Bay] or by any person claiming or admitted to the Property through [South Bay], while at the Property.
Cross-motions for summary judgment filed by Commerce and Philadelphia
Based upon the development of all the facts in the social worker’s lawsuit, neither Commerce nor Philadelphia disputed any material facts necessary for the federal court to decide the case as a matter of law.
Both Commerce and Philadelphia filed motions for summary judgment, arguing their respective interpretations of the insurance policies and lease involved in the coverage dispute.
Commerce argued, as before, that based on the South Bay lease, Philadelphia had the duty to defend and indemnify Commerce’s Insureds based on their being additional insureds under Philadelphia’s policies and based on the Bay Shore’s lease indemnity provision being an insured contract under the Philadelphia’s policies.
Philadelphia’s position was that, at best, only one of Commerce’s four Insureds had any claim to being an additional insured. That entity, Commerce Associates, was the only party to the lease with South Bay. While Philadelphia denied that even that entity had coverage based on the facts, Philadelphia focused on the policy exclusion for Abuse or Molestation.
This exclusion in South Bay’s primary CGL stated: “This insurance does not apply to “‘bodily injury’ . . . arising out of: . . . [t]he actual or threatened abuse or molestation by anyone of any person while in the care, custody, or control of any insured.”
Commerce’s CGL policy, as reviewed in the federal case pleadings, does not have this evermore ubiquitous exclusion.
The Court’s reasoning for finding no coverage based on the “Abuse and Molestation” exclusion
In deciding the cross-motions for summary judgment of Commerce and Philadelphia, the Court brushed aside the arguments for coverage posed by Commerce and focused on whether Philadelphia’s Abuse and Molestation exclusion applied.
The Court noted the primary policy issued by Philadelphia explicitly excluded any “bodily injury” that resulted from:
The actual or threatened abuse or molestation by anyone of any person while in the care, custody, or control of any insured.”
Philadelphia contended that the social worker’s rape fell squarely within this exclusion since the social worker was molested while being under the care of South Bay and Commerce’s Insured, Commerce Associates LP, the manager of 340 Main Street.
Commerce argued in opposition that the rape did not meet the criteria required for “abuse or molestation” as defined in the exclusion and asserted that the social worker was not in South Bay’s or its insured’s care.
When interpreting insurance policy terms, the Court noted, judges typically use common contract interpretation rules, which involve examining the actual language of the policies and giving them their plain and ordinary meaning. While Commerce encouraged the judge hearing the motions to consider the past history of abuse or molestation exclusions, the Court ruled it was not necessary because the language used in these exclusions is usually straightforward and unambiguous.
The Court agreed that under Massachusetts law, the rule is to use the narrowest possible interpretation of an exclusion, resolving any doubts about the scope of an exclusion in the insured’s favor. However, in this case, the Court found the term “molestation” did not leave any room for any doubt that could tip the scales in favor of Commerce’s position.
The Court found that the word “molestation, as generally understood and defined, was the act of making unwanted and indecent advances to or on someone, particularly for sexual gratification, while rape was forced sexual intercourse without consent. To the Court, rape was a prime example of molestation according to this definition. As such, the Court ruled the social worker’s undisputed rape fell under Philadelphia’s exclusion for molestation.
The Court finds the social worker was “in the care of the landlord” as per the Abuse and Molestation Exclusion
The next question the Court addressed was whether the social worker was under the care of Commerce’s Insured, Commerce Associates LP at the time of the incident. The Court found the term “care” in this context matches the dictionary definition that being ‘in the care of’ includes ‘charge, supervision, management: responsibility for or attention to safety and well-being.’ Thus, to the Court, one could be ‘in the care’ of another without necessarily being ‘in their custody’ or ‘under their control.’
The Court determined that the social worker, as a tenant, was under the care of her landlord, Commerce Associates LP, who was responsible for ensuring adequate security on the premises. The Court considered that the building’s security services were provided by Commerce’s insureds and that they were aware of Damon’s presence before the attack yet failed to remove him and maintain the safety of the tenants. This supported the Court’s conclusion that the social worker was under the care of the landlord. Consequently, the Court found that the social worker was molested while under the legal care of Commerce Associates LP, which brought Commerce’s coverage claim within the scope of Philadelphia’s Abuse or Molestation Exclusion.”
Since South Bay’s umbrella policy with Philadelphia followed the same limitations as its general liability policy, the umbrella policy also would not offer coverage for the rape settlement, the Court ruled, based on the abuse and molestation exclusion.
In conclusion, the Court found that the social worker’s rape fell within Philadelphia’s policy exclusion for molestation and that she was under the care of Commerce Associates LP at the time. Therefore, the Court ruled Philadelphia was not obligated to reimburse Commerce.
Agency Checklists will keep its readers posted on this potentially important case involving the scope of the Abuse and Molestation exclusion.
Insurance Coverage Legal Expert/Co-Founder & Publisher of Agency Checklists
Over the course of my legal career, I have argued a number of cases in the Massachusetts Supreme Judicial Court as well as helped agents, insurance companies, and lawmakers alike with the complexities and idiosyncrasies of insurance law in the Commonwealth.
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