187 A.3d 797
Md. Ct. Spec. App.2018Background
- Rams Head Tavern patron discovered a camera in the single-occupancy women's restroom; manager/owner Kyle Muehlhauser later pled guilty under Md. Code Crim. Law §3-902 for surreptitious videotaping with prurient intent.
- Two class-action complaints (Castle and Clar) alleged unlawful surveillance, intrusion upon seclusion, statutory violations, and related torts against Muehlhauser and Rams Head; plaintiffs alleged Muehlhauser acted within scope of his employment and Rams Head ratified his conduct.
- Harleysville, insurer for Rams Head (policies covering 2011–2014), filed a declaratory judgment seeking a determination it had no duty to defend under Coverage A (bodily injury) or Coverage B (personal and advertising injury).
- Coverage B included protection for “wrongful eviction, wrongful entry, or invasion of the right of private occupancy of a room…committed by or on behalf of its owner, landlord or lessor.” The 2014 policy added a Recording and Distribution exclusion and the policies contained Criminal Acts and Knowing Violation exclusions.
- The trial court held Harleysville had a duty to defend both Rams Head and Muehlhauser. On appeal, the Court of Special Appeals affirmed Harleysville’s duty to defend Rams Head but held Harleysville had no duty to defend Muehlhauser because the Criminal Acts exclusion barred coverage for him.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether allegations potentially fall within Coverage B’s “invasion of the right of private occupancy” | Plaintiffs (Rams Head) — restroom users have a right to private occupancy; surreptitious videotaping is an invasion covered by the policy | Harleysville — phrase should be limited to possessory interests (wrongful eviction/entry); plaintiffs lacked possessory interest | Held: Coverage B applies; phrase covers a patron’s right to private occupancy of a restroom and includes surreptitious surveillance as an invasion |
| Whether Rams Head qualifies as an “owner…committed by or on behalf of its owner” | Rams Head — as lessee with exclusive control, it is the owner for purposes of the coverage term | Harleysville — “owner” requires fee simple ownership; lessee not an owner | Held: Rams Head is an “owner” for purposes of the coverage grant because it possessed and controlled the restroom |
| Whether the 2014 Recording and Distribution exclusion bars coverage for the surveillance claims | Harleysville — the exclusion precludes coverage for recording/communication violations | Rams Head — exclusion targets statutes like TCPA/CAN-SPAM/FCRA related to consumer spam/credit data, not private-surveillance recordings | Held: Exclusion interpreted narrowly by ejusdem generis; it does not reach the private-surveillance at issue |
| Whether Harleysville must defend Muehlhauser personally | Plaintiffs — complaints allege Muehlhauser acted within scope of employment, so he is an insured and entitled to defense | Harleysville — Criminal Acts and Knowing Violation exclusions preclude coverage for Muehlhauser; insurer may rely on extrinsic evidence to deny duty | Held: For duty-to-defend analysis, court must apply the eight-corners rule and not decide scope-of-employment via extrinsic evidence; but Criminal Acts exclusion bars coverage for Muehlhauser because complaints allege only criminal conduct (no non-criminal theory) |
Key Cases Cited
- Brohawn v. Transamerica Ins. Co., 276 Md. 396 (coverage/duty to defend depends on whether complaint potentially alleges covered claims)
- St. Paul Fire & Marine Ins. Co. v. Pryseski, 292 Md. 187 (scope-of-employment findings intertwined with duty-to-defend; defer factual resolution to underlying action)
- Bailer v. Erie Ins. Exch., 344 Md. 515 (insurer cannot invoke an exclusion that would render coverage illusory; intrusion upon seclusion requires intent)
- New Castle County v. Nat’l Union Fire Ins. Co., 243 F.3d 744 (survey of conflicting authorities on "right of private occupancy" language; ambiguous phrasing construed in favor of insured)
- Am. Guarantee & Liab. Ins. Co. v. The 1906 Co., 273 F.3d 605 (similar facts; videotaping in private room falls within "invasion of the right of private occupancy")