Tolson v. Hartford Financial Services Group, Inc.
278 F. Supp. 3d 27
| D.D.C. | 2017Background
- Plaintiff Sharon Tolson was allegedly sexually assaulted by a Massage Escape employee during a paid Groupon massage; the employee fled and was later criminally charged.
- Massage Escape sued in D.C. Superior Court; its insurer(s) (Hartford and Sentinel) denied coverage citing a policy exclusion for "sexual abuse or molestation."
- Superior Court entered a $1,000,000 consent judgment against Massage Escape and Massage Escape assigned its rights against the insurers to Tolson (the judgment stated it would not be enforced against Massage Escape).
- Tolson, as assignee, sued Hartford and Sentinel in Superior Court (removed to federal court) asserting breach of contract, breach of implied covenant of good faith and fair dealing, breach of fiduciary duty, negligence, and CPPA claims based on insurers’ refusal to defend/indemnify and alleged deficient handling of the claim.
- The insurers moved to dismiss under Rule 12(b)(6); the insurers relied principally on a broad policy exclusion for injuries "arising out of" sexual abuse, and the court applied D.C. contract and insurance law (the eight-corners rule).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether insurers breached contract by denying defense/indemnity (duty under policy) | Tolson: some underlying claims (e.g., CPPA, negligent training) do not "arise out of" sexual abuse and thus fall within coverage; insurers wrongfully refused defense/indemnity | Insurers: sexual-abuse exclusion unambiguously bars coverage for any injury "arising out of" sexual abuse, and all underlying claims seek recovery for injuries that originate in the assault | Court: dismissal; exclusion unambiguously applies to all asserted underlying claims so insurers had no duty to defend or indemnify |
| Breach of implied covenant of good faith and fair dealing | Tolson: insurers acted in bad faith by failing to investigate/evaluate/negotiate and refusing defense/indemnity | Insurers: they evaluated the claims and reasonably concluded the exclusion applied; denial letter addressed the claims | Court: dismissal; facts do not plausibly allege bad faith—denial consistent with lawful performance of contract |
| Tort claims (negligent failure to investigate/defend; breach of fiduciary duty) | Tolson: insurers’ investigative failures and refusal to defend caused independent tort injuries | Insurers: disputes about handling of policy belong in contract law; D.C. law does not recognize independent torts for ordinary claim handling absent separate duty | Court: dismissal; tort claims duplicate contract dispute and do not allege independent injury beyond disappointment of contractual benefit |
| CPPA claims against insurers | Tolson: policy language/misrepresentations about coverage violated CPPA; some CPPA injuries (statutory damages, attorney’s fees, economic loss) are independent of the assault | Insurers: CPPA applies to consumer goods/services and requires concrete injury-in-fact; the business liability policy is not a consumer good and alleged injuries either arise from the assault (excluded) or are not covered types under the policy | Court: dismissal; CPPA inapplicable to business liability policy and alleged injuries either arose from excluded sexual abuse or are not covered by the policy |
Key Cases Cited
- Carlyle Inv. Mgt., LLC v. Ace Am. Ins. Co., 131 A.3d 886 (D.C. 2016) (applies eight-corners rule; insurer bears burden to show exclusion applies to bar duty to defend)
- Salus Corp. v. Cont’l Cas. Co., 478 A.2d 1067 (D.C. 1984) (duty to defend distinct from duty to indemnify)
- Choharis v. State Farm Fire & Cas. Co., 961 A.2d 1080 (D.C. 2008) (declines to recognize tort for insurer bad faith in claim handling; remedies generally contract-based)
- Rotunda v. Marriott Intern., Inc., 123 A.3d 980 (D.C. 2015) (CPPA requires an injury-in-fact to confer standing)
- Newmyer v. Sidwell Friends Sch., 128 A.3d 1023 (D.C. 2015) (elements of IIED under D.C. law)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (plausibility standard for Rule 12(b)(6) motions)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (plausibility and ‘‘more than labels and conclusions’’ pleading standard)
- American Continental Ins. Co. v. Pooya, 666 A.2d 1193 (D.C. 1995) (interpretation of exclusions tied to mental state; distinguished here because sexual-abuse exclusion covers conduct regardless of intent)