260 F. Supp. 3d 467
D. Md.2017Background
- Earth Treks, a climbing-gym operator, was defended in state-court suit by Kelsey Fabian alleging sexual abuse by two coaches (Lyons and Montague); Earth Treks spent ~ $1.2M defending and settled the suit confidentially.
- Gemini issued a CGL policy to Earth Treks with $1,000,000 per-occurrence limits, but two endorsement limits applied: a Sexual Abuse or Molestation (SAM) endorsement and an Assault & Battery (A&B) endorsement, each limiting coverage to $100,000 "Each Claim" and $300,000 aggregate; endorsements treat all claims from one act or series of acts as one claim.
- Gemini initially acknowledged a duty to defend but later sued for a declaratory judgment denying any duty to defend or, alternatively, asserting its defense obligation was limited to $100,000 under SAM or A&B endorsements; Earth Treks counterclaimed for breach and moved for partial summary judgment.
- Maryland law governs; insurer generally must defend if underlying complaint potentially alleges covered claims; insured may introduce extrinsic evidence to show potential coverage but insurer may not rely on extrinsic evidence to defeat the duty to defend.
- The district court held Gemini did owe a defense (because Earth Treks presented extrinsic evidence showing it lacked subjective knowledge of the coaches’ propensity), but the duty-to-defend was limited to $100,000 per the SAM endorsement or, alternatively, the A&B endorsement; Gemini’s extrinsic evidence was stricken and not considered.
Issues
| Issue | Plaintiff's Argument (Gemini) | Defendant's Argument (Earth Treks) | Held |
|---|---|---|---|
| Did Gemini owe a duty to defend Earth Treks in the Fabian suit? | No — Fabian’s injuries were not an "occurrence" because they were not accidental or were expected/intentional from insured’s standpoint. | Yes — extrinsic evidence shows Earth Treks lacked subjective knowledge/expectation of abuse, so negligence allegations potentially allege an "accident." | Held: Gemini owed a defense as a matter of law (Maryland's potentially-covered duty to defend; subjective standard). |
| May Gemini rely on extrinsic evidence to negate or limit its duty to defend? | Gemini sought to use extrinsic materials to show exclusion/endorsement application. | Earth Treks moved to strike insurer’s extrinsic evidence; insured may use extrinsic evidence but insurer may not. | Held: Court struck and did not consider Gemini’s extrinsic evidence for duty-or-scope questions. |
| Does the SAM endorsement apply ("care, custody or control"; sexual "abuse or molestation")? | SAM applies only when victim was not under other care; Gemini argued facts show abuse in care/control and constituted sexual abuse. | Earth Treks argued Fabian was sometimes under others’ care (e.g., parent chaperone) and some acts occurred off-premises; also argued some conduct was consensual. | Held: SAM applies as a matter of law — coach–student relationship and conduct arising from team activities brought Fabian within Earth Treks’ care/custody/control and constituted sexual abuse of a minor. |
| Does the A&B endorsement alternatively apply? | (Implicit) Abuse/battery falls within A&B endorsement, limiting liability. | Earth Treks argued alleged consent and lack of injury negate A&B application. | Held: A&B endorsement also applies as a matter of law — sexual contact between adult coaches and a 14-year-old is an offensive/injurious battery; endorsement limits defense to $100,000. |
| How many "claims" does the Fabian suit constitute for per-claim limits? | Fabian suit reflects one injured person and thus one "claim" (one $100,000 limit). | Earth Treks argued multiple abusers/acts create multiple "claims" (entitling it to separate $100,000 limits per abuser). | Held: The suit is one "claim" within endorsement language (all claims for injury to one person count as one claim); defense liability limited to $100,000. |
Key Cases Cited
- Walk v. Hartford Cas. Ins. Co., 852 A.2d 98 (Md. 2004) (insurer must defend if underlying suit potentially alleges covered claims)
- Brohawn v. Transamerica Ins. Co., 347 A.2d 842 (Md. 1975) (potentiality standard for duty to defend)
- Aetna Cas. & Sur. Co. v. Cochran, 651 A.2d 859 (Md. 1995) (insured may use extrinsic evidence to show potential coverage; insurer generally may not)
- Sheets v. Brethren Mut. Ins. Co., 679 A.2d 540 (Md. 1996) ("accident" defined subjectively; negligent acts covered if damage was unforeseen by insured)
- Provident Bank of Md. v. Travelers Prop. Cas. Corp., 236 F.3d 138 (4th Cir. 2001) (pre-litigation insurer acknowledgments are probative on duty-to-defend)
- Leake v. Johnson, 40 A.3d 1127 (Md. Ct. Spec. App. 2012) ("each claim"/"per person" limits construed to include all claims for injury to one person)