Amer Guarnt & Liab v. The 1906 Company

UNITED STATES COURT OF APPEALS
For the Fifth Circuit

No. 99-60758

AMERICAN GUARANTEE AND LIABILITY INSURANCE COMPANY,

Plaintiff-Counter Defendant-Appellee,

VERSUS

THE 1906 COMPANY, ETC.; ET AL

Defendants

THE 1906 COMPANY (Formerly Known as Hattiesburg Coca-Cola
Bottling Company); RICHARD S. THOMSON;

Defendants-Cross Defendants-Counter Claimants-Appellants,

and

GENERAL STAR NATIONAL INSURANCE COMPANY,

Defendant-Cross Claimant-Counter Claimant-Appellant.

Appeal from the United States District Court
For the Southern District of Mississippi, Jackson Division
November 12, 2001

Before SMITH and DENNIS, Circuit Judges, and ROETTGER,1 District
Judge.

1
District Judge of the Southern District of Florida, sitting
by designation.

1
DENNIS, Circuit Judge: panel affirmed the district
American Guarantee and court’s judgment denying
Liability Insurance Company coverage for any claims against
(“American Guarantee”) brought John Thomson and claims against
this diversity suit seeking a Richard Thomson and Hattiesburg
declaratory judgment that the Coke based on their alleged
comprehensive general liability vicarious liability for John’s
(“CGL”) insurance policies it acts. That panel also affirmed
sold to Hattiesburg Coca-Cola the district court’s ruling that
Bottling Company (“Hattiesburg all claims against Richard
Coke” or “Coke”) afforded no Thomson and Hattiesburg Coke are
coverage or defense for twenty- excluded from coverage under the
one Mississippi lawsuits Coverage A portion of the
alleging that, among other policies. See id. However,
things, the insured’s male that panel vacated the district
employee had surreptitiously court’s ruling that the policies
videotaped female customers excluded coverage for Richard
changing clothes in a women’s Thomson and Hattiesburg Coke
dressing room on the insured’s under Coverage B. See id. at
premises. The district court, 811. The panel remanded the
on American Guarantee’s motion case for new proceedings on
for summary judgment, ruled that Coverage B. After remand, on
the insurer had no duty to American Guarantee’s motion for
defend or indemnify Hattiesburg summary judgment, the district
Coke, Richard Thomson (Coke’s court ruled that the insurer
chief executive officer), or also had no duty to defend or
John Thomson, (Coke’s alleged indemnify under Coverage B. All
employee-voyeur and Richard adversely affected parties
Thomson’s son) under either appealed, including Hattiesburg
Coverage A or Coverage B. Coke’s umbrella insurer, General
(Generally speaking, Coverage A Star National Insurance Company.
insures against accidental We reverse and grant motions for
bodily injury and property summary judgment against
damage liability; Coverage B American Guarantee and in favor
insures against non-accidental, of Hattiesburg Coke, Richard
non-bodily personal injury Thomson, and General Star.3
liability). Hattiesburg Coke,
Richard Thomson, and John I. Facts and Procedural History
Thomson appealed. A prior panel A. Background: American Guar. I
of this court affirmed in part,
reversed in part, and remanded
in part. See American Guar. & name to “The 1906 Company.” To
Liab. Ins. Co. v. The 1906 Co., avoid confusion, we follow the
129 F.3d 802, 810 (5th Cir. first panel’s precedent of
1997)(“American Guar. I”).2 That referring to the company’s
original name.
2 3
After this case was filed, John Thomson is not a
Hattiesburg Coke changed its party to this appeal.

2
 the studio's operations. John,
The background facts were however, still had access to VAS
well stated in the prior panel and was in the midst of winding
opinion. We repeat them up its affairs when the events
verbatim for easy reference: giving rise to the underlying
“Having recently developed state court lawsuits came to
an interest in photography while light.
living in Minnesota, John “In November 1991, a VAS
Thomson returned to Hattiesburg, client picked up a videotape
Mississippi with a desire to which she thought contained her
open his own photography studio. portfolio photographs. When
In early 1990, Richard Thomson, she viewed the tape, she
John's father and CEO of discovered footage of herself
Hattiesburg Coke, authorized the dressing and undressing in the
use of Hattiesburg Coke funds to VAS dressing room. She reported
open a photography studio, her discovery to police, who
Visual Arts Studio (VAS). The searched the studio and found
new studio was located at 3820 numerous other tapes containing
Hardy Street, Hattiesburg, footage of young women dressing
Mississippi, more than a mile and undressing in the same room.
from the company's bottling The police also discovered a
operation. The studio fiber optic camera concealed
concentrated on photographing underneath a bench in the
and videotaping young women for dressing room.
modeling portfolios and “In the months following
advertisements, as well as the police investigation,
‘glamour photography.’ Although twenty-one women filed lawsuits
the studio operated under a against John Thomson, Richard
different name and was Thomson, VAS, and Hattiesburg
physically separate from the Coke. These plaintiffs alleged
bottling company, it was owned various causes of action
and operated as a division of including invasion of privacy,
Hattiesburg Coke. Moreover, the outrage, intentional infliction
VAS employees were considered of emotional distress, fraud,
employees of Hattiesburg Coke, negligence, and exploitation of
and all major business decisions minors. The complaints included
concerning the studio, from the allegations that Hattiesburg
purchase of equipment to the Coke and Richard Thomson were
scope and ultimate termination vicariously liable for John's
of the business, were made at acts because John acted as a
Hattiesburg Coke's corporate Hattiesburg Coke employee in
headquarters at 4501 Hardy making the tapes and because
Street. John served as a director and
“By the spring of 1991, VAS officer of Hattiesburg Coke.
was operating in the red and The complaints also sought to
John Thomson wanted to return to visit liability on Hattiesburg
school. Thus, Hattiesburg Coke Coke and Richard Thomson for a
officials decided to terminate host of negligence-based torts,

3
including negligent entrustment, damages alleged constituted
negligent supervision, and ‘bodily injury’; and whether
negligent hiring. John's conduct fell within a
“Hattiesburg Coke held policy exclusion for criminal
liability insurance policies for activities. Eventually,
the periods in question. nineteen of the twenty-one suits
American Guarantee, their were settled,4 with John Thomson
principal insurer, issued a agreeing to contribute
combined property and approximately $2,545,000 and
comprehensive general liability General Star agreeing to pay
insurance policy to Hattiesburg approximately $3,774,000 on
Coke covering the period from behalf of Richard Thomson and
December 31, 1989, through Hattiesburg Coke.
December 31, 1990. The policy “Once the underlying
was renewed for the period from lawsuits were settled, American
December 31, 1990, through Guarantee filed this declaratory
December 31, 1991. The policy judgment action against John
provided liability insurance Thomson, the 1906 Company,
coverage of $500,000 per Richard Thomson, and General
occurrence and $1,000,000 in the Star to resolve its coverage
aggregate. Hattiesburg Coke was obligations. The district court
also the named insured under an found that the insurance policy
Umbrella Liability Policy for unambiguously limited liability
the Coca-Cola Bottlers coverage to injuries arising
Association issued by General from certain premises designated
Star National Insurance Company on the declarations page of the
("General Star") for the policy policy and that the VAS property
period January 1, 1990, through was not included in that
January 1, 1991. Each General designation. The court also
Star policy provided liability concluded that John Thomson's
coverage of $5,000,000 per actions were not within the
occurrence and in the aggregate. scope of his employment and that
“After discussions the injuries alleged by the
concerning coverage, American women did not constitute an
Guarantee agreed to defend ‘occurrence’ under the policy
Hattiesburg Coke and Richard because they were intended or
Thomson in the state court suits expected from the standpoint of
under a reservation of rights, the insured. Accordingly, the
but refused to defend or district court granted summary
indemnify John Thomson. In its judgment in favor of American
reservation of rights Guarantee. The court also
correspondence, American denied General Star's claim for
Guarantee raised several indemnification for the payments
coverage questions, including it had made on behalf of Richard
whether the VAS building was a Thomson and the 1906 Company.
designated premises; whether
the conduct alleged constituted
4
an ‘occurrence’; whether the The remaining two suits
were dismissed as time barred.

4
See id. at 804-05. novo. See Liberty Mut. Fire
Ins. Co. v. Canal Ins. Co., 177
B. Current Issues F.3d 326, 331 (5th Cir. 1999);
Before the Court Lubbock County Hosp. Dist. v.
National Union Fire Ins. Co.,
In this second appeal by 143 F.3d 239, 241-42 (5th Cir.
Hattiesburg Coke, Richard 1998).
Thomson, and General Star, the
case returns with little added II. Mississippi’s Rules for
to the record or the district Interpreting Insurance
court’s reasons; however, the Contracts
parties have provided additional
oral and written arguments The law governing the
focused on Coverage B. With the interpretation of insurance
benefit of their advocacy, we contracts is well settled in
address the questions that the Mississippi. In determining
prior panel pretermitted or did whether American Guarantee owes
not definitively resolve: (1) Hattiesburg Coke or its CEO a
whether the state court duty to defend or indemnify, we
complaints allege viable causes look to the allegations in the
of action against Hattiesburg underlying state court
Coke and Richard Thompson complaints. If the complaints
because of their own negligence state a claim that is within or
in not taking appropriate arguably within the scope of
precautions against the alleged coverage provided by the policy,
tortious conduct of John American Guarantee is obliged to
Thomson; (2) whether the alleged defend and, if necessary,
personal injuries arose out of indemnify Hattiesburg Coke. See
the conduct of Hattiesburg Centennial Ins. Co. v. Ryder
Coke’s business; and (3) if so, Truck Rental, Inc., 149 F.3d
whether the complainants’ 378, 383 (5th Cir. 1998); State
injuries arose out of offenses Farm Mut. Auto. Ins. Co. v.
for which Coverage B provided Scitzs, 394 So. 2d 1371, 1373
non-bodily personal injury (Miss. 1981) (both noting that
liability insurance (viz., the Mississippi courts interpret
offense of the invasion of the terms of insurance policies,
right of private occupancy of a particularly exclusion clauses,
room that a person occupies by favorably to the insured
or on behalf of its owner). wherever reasonably possible);
see also Canal Ins. Co., 177
C. Standard of Review F.3d at 331 (stating that under
Mississippi law, “any doubt as
In our plenary review of to the existence of a defense
the district court’s granting obligation is . . . resolved in
and rejecting motions for favor of the insured”). In
summary judgment, we decide the comparing the complaints with
foregoing issues of law and the policy terms, we look not to
insurance policy construction de the particular legal theories

5
pursued by the state general rule that “[a]n insurer
complainants, but to the must bear the entire cost of
allegedly tortious conduct defense when ‘there is no
underlying their suits. See reasonable means of prorating
Equal Employment Opportunity the costs of defense between the
Comm’n v. Southern Publ’g Co., covered and the not-covered
894 F.2d 785, 790-91 (5th Cir. items.’”) (quoting Insurance Co.
1990) (“Under Mississippi’s of N. Amer. v. Forty-Eight
‘allegations of the complaint’ Insulations, Inc., 633 F.2d
rule if the factual allegations 1212, 1224-25 (6th Cir. 1980),
of the complaint bring the cert. denied, 454 U.S. 1109
action within coverage of the (1981)). We must give the
policy, the insurer has a duty policy language its plain and
to defend.”); see also State ordinary meaning, see Blackledge
Farm Mut. Auto. Ins. Co. v. v. Omega Insurance Co., 740 So.
Taylor, 233 So. 2d. 805, 808 2d 295, 298 (Miss. 1999) (“terms
(Miss. 1970) (stating that used in an insurance policy
although an insurer normally should be understood in their
bases its duty to defend on the plain, ordinary, and popular
facts alleged in the petition, sense rather than in a
it may also have a duty to philosophical or scientific
defend if it knows of other sense”), and resolve any
facts that warrant coverage). ambiguities or equivocal
American Guarantee is justified expressions in favor of the
in refusing to defend only if it insureds, see Ryder Truck
is clear from the face of the Rental, Inc., 149 F.3d at 382-
state court complaints that the 83, but not create ambiguities
allegations therein are not where none exist. See Scitzs,
covered. See Moeller v. 394 So. 2d at 1372.
American Guar. & Liab. Ins. Co.,
707 So. 2d 1062, 1069 (Miss. III. Relevant Coverage B
1996); see also Merchants Co. v. Provisions; Coverage A
American Motorists Ins. Co., 794 Distinguished
F.Supp. 611, 617 (S.D. Miss.
1992) (“[T]he duty to defend is Coverage B of the CGL
broader than the insurer's duty policy that American Guarantee
to indemnify under its policy of issued to Hattiesburg Coke in
insurance: the insurer has a 1990 provides:
duty to defend when there is any
basis for potential liability COVERAGE B. PERSONAL
under the policy”). Moreover, AND ADVERTISING INJURY
because the state suits allege LIABILITY
multiple grounds for recovery,
American Guarantee must provide 1. Insuring Agreement.
a defense if any ground falls
within the terms of the policy. a. We will pay those
See Southern Publ’g Co., 894 sums that the insured
F.2d at 790-91 (adopting the becomes legally

6
 obligated to pay In 1991, American Guarantee
as damages altered the “wrongful entry”
because of provision of the policy as
“personal injury” follows:
or “advertising
injury” to which c. Wrongful eviction
this insurance from, wrongful entry
applies. . . . into, or invasion of
We will have the the right of private
right and duty to occupancy of a room,
defend any “suit” dwelling or premises
seeking those that a person occupies
damages. by or on behalf of its
owner, landlord or
* * * lessor

b. This insurance (emphasis added).
applies to “personal Coverage B insurance
injury” only if against personal injury
caused by an offense: liability is typical of such
(1) Committed in the provisions that have been
“coverage territory” included in CGL policies since
during the policy the 1980s. See generally M.
period; and Jane Goode, Personal Injury
(2) Arising out of the Liability Coverage, 30-SPG Brief
conduct of your 39 (Spring 2001); Fritz K.
business . . . . Huszagh & Marisa A. Mancici,
Current Issues Involving
* * * Insurance of Claims for Personal
Injury, 427 PLI/LIT 483 (1992).
SECTION V–DEFINITIONS Coverage B personal injury
liability insurance differs from
* * * Coverage A bodily injury and
property damage insurance in at
10. “Personal injury” least two important ways.
means injury, other First, unlike Coverage A,
than “bodily injury”, Coverage B may be triggered
arising out of one or without proof of an accidental
more of the following occurrence. Instead, Coverage B
offenses: is activated by the commission
* * * of certain specified offenses
c. Wrongful entry during the policy period. Also
into, or eviction of a unlike Coverage A, which
person from, a room, excludes coverage for “‘[b]odily
dwelling or premises injury’ or ‘property damage’
that the person expected or intended from the
occupies. standpoint of the insured,”
Coverage B expressly extends

7
coverage to liability for and B coverage; we deal only
“‘personal injury’ . . . other with intrinsic Coverage B
than ‘bodily injury’,” caused by personal liability insurance
certain defined offenses arising claims.
out of the insured’s business.
American Guar. I, 129 F.3d at IV. Discussion of Coverage
808. Therefore, under Coverage Issues
B, the triggering act may be A. The Insureds’ Liability
intentional. Under State Law
Consequently, cases turning
on the “occurrence” or Under Coverage B, American
“accident” requirement of Guarantee agreed to “pay those
Coverage A type liability sums that the insured becomes
insurance (or its exclusion of legally obligated to pay as
intentional or expected damages because of ‘personal
injuries) are irrelevant to this injury’ . . . to which this
appeal. See, e.g., Sennett v. insurance applies.” “Personal
United States Fid. & Guar. Co., injury” is defined by the policy
757 So. 2d 206, 210-13 (Miss. as “injury, other than ‘bodily
2000); Ramsay v. Omnibank, 215 injury’, arising out of one or
F.3d 502, 503 (5th Cir. 2000); more of the following offenses .
Audubon Ins. Co. v. Stefancik, . . .” Thus, the threshold
98 F. Supp.2d 751, 754-55 (S.D. question is whether, based on
Miss. 1999); United States Fid. the state court allegations,
& Guar. Co. v. B & B Oil Well Hattiesburg Coke and Richard
Serv., Inc., 910 F. Supp. 1172, Thomson can be held liable under
1176-86 (S.D. Miss. 1995) (all Mississippi law to pay damages
interpreting Coverage A type for non-bodily personal injury
policies). Also irrelevant to to the state court plaintiffs.
this appeal are cases in which We conclude that they can.
the insured seeks Coverage B The complainants in the
personal injury liability underlying state court actions
coverage for its pollution alleged that, as the result of
damage to another person despite the negligent acts and omissions
the pollution damage exclusion of Richard Thomson and
contained in the Coverage A Hattiesburg Coke, they sustained
provision of its policy. See, personal injuries arising out of
e.g., Gregory v. Tennessee Gas John Thomson’s wrongful
Pipeline Co., 948 F.2d 203, 209 intrusion into the women’s
(5th Cir. 1991) (holding that dressing room and his
“to extend Coverage B to all clandestine videotaping of their
property damages, including images while they occupied the
damages which would be covered room to change clothes. In
under Coverage A, would render particular, the factual
the pollution exclusion allegations include the
meaningless”). In other words, following: (1) Hattiesburg Coke
in this appeal we are not faced and Richard Thomson funded VAS
with a claim for overlapping A and John Thomson in all aspects

8
of the VAS business, and that furtive, secretive photography,
Hattiesburg Coke owned the which had no legitimate place in
building in which VAS operated; a photography studio”; (8) John
(2) VAS and John Thomson used Thomson “‘wired’ the changing
the Hattiesburg Coke trademark room with hidden movie cameras
on its letterhead stationary, and secretly recorded by VCR
holding themselves out to be tape the [state court plaintiff]
official agents and advertising in the process of changing
representatives of Hattiesburg clothes”; (9) “Thomson then
Coke; (3) VAS and John Thomson utilized the entire tape of the
“set themselves out to the [state court plaintiffs, whom
public to be . . . professional were minors] to add to his
photographers”; (4) Hattiesburg ‘composite’ tape of other women,
Coke and Richard Thomson all in different stages of
“induc[ed] the [state court nudity”; (10) Thomson shared
plaintiffs, some of them copies of the tapes with other
minors,] to submit to the viewers and possibly sold the
photograph sessions . . . in the copies; (11) John Thomson had a
furtherance of the business history of distributing
interests of Hattiesburg Coca- “illegitimate” nude photography;
Cola Bottling Company”; (5) (12) Hattiesburg Coke and
Hattiesburg Coke and Richard Richard Thomson “failed to
Thomson “solicited clients for properly warn the [state court
VAS for purposes of its own plaintiffs] that . . . John
advertising”; (6) Hattiesburg Thomson had the propensity to
Coke “purchased the special commit illegal acts such as
fiber optic lenses and camera photographing and videotaping
equipment used by . . . John [minors] in various stages of
Thomson for the secretive and undress”; (13) Hattiesburg Coke
illicit dressing room and Richard Thomson “were
photographs . . . [and] that negligent in allowing [John
[Hattiesburg Coke] knew, or Thomson] to utilize the
should have known, that the said Hattiesburg Coca-Cola Company
special equipment and lenses staff, equipment, and assets in
were not necessary to a his business efforts to induce
legitimate photography business, the [state court plaintiffs] . .
and were for an improper and . to be photographed and
illicit purpose”; (7) videotaped in various stages of
Hattiesburg Coke “was negligent undress”; (14) Hattiesburg Coke
in purchasing for the [VAS] and Richard Thomson “were
special ‘spy’ type lenses and negligent in failing to keep a
camera equipment that did not proper . . . lookout for safety
have a legitimate purpose in a and well being of the [state
normal photography studio, and court plaintiffs] while in the
[that Hattiesburg Coke] knew or studios of the defendants” due
should have known that the said to the fact that the state court
special lenses and camera plaintiffs were business
equipment were normally used for invitees of Hattiesburg Coke and

9
Richard Thomson; and (15) the (citing Little by Little v.
actions of Hattiesburg Coke “in Bell, 719 So. 2d 757, 760 (Miss.
purchasing for [VAS] the special 1998); Steele v. Inn of
‘spy’ type camera lenses and Vicksburg, Inc., 697 So. 2d 373,
other special camera equipment, 377 (Miss. 1997)). “‘[A]n
when the officers and directors invitee is a person who goes
of the said company knew or upon the premises of another in
should have known that such answer to the express or implied
equipment did not have a invitation of the owner or
legitimate purpose in a occupant for their mutual
photography studio, was grossly advantage.’” Little by Little,
negligent.” 719 So. 2d at 760 (quoting
Based on the allegations of Hoffman v. Planters Gin Co., 358
the state court complainants, So. 2d 1008, 1011 (Miss. 1978));
the insureds are potentially Steele, 697 So. 2d at 377
liable under three theories of (quoting Skelton v. Twin County
negligence. First, Richard Rural Elec. Ass’n, 611 So. 2d
Thomson and Hattiesburg Coke 931, 936 (Miss. 1992)).
failed to maintain reasonably Second, the insureds were
safe conditions for their potentially liable for
business invitees. “Mississippi negligently hiring John Thomson.
imposes on business owners ‘the Under Mississippi law, an
duty to maintain the premises in employer may be held liable for
a reasonably secure or safe negligently hiring an employee
condition’ for business patrons who intentionally injures
or invitees.” Whitehead v. Food another if, prior to the injury,
Max, Inc., 163 F.3d 265, 271 the employer knew or should have
(5th Cir. 1998) (quoting Lyle v. known of the employee’s
Mladinich, 584 So. 2d 397, 399 propensity for the conduct in
(Miss. 1991); see also id. question. Thatcher v. Brennan,
(further quoting Lyle: “[A]ny 657 F. Supp. 6, 10 (S.D. Miss.
business which invites the 1986) (citing Jones v. Toy, 476
company of the public must take So. 2d 30, 31 (Miss. 1985));
reasonably necessary acts to Freeman v. Lester Coggins
guard against the predictable Trucking, Inc., 771 F.2d 860,
risk of assaults. A business 861 n.1 (5th Cir. 1985); Schultz
proprietor owes a duty to those v. Evelyn Jewell, Inc., 476 F.2d
entering its premises to provide 630, 631 (5th Cir. 1973));
a reasonably safe place.” Tichenor v. Roman Catholic
(internal quotations omitted)). Church, 32 F.3d 953, 960 (5th
This duty owed by business Cir. 1994); cf. Restatement
owners includes the protection (Second) of Torts § 307 (1965)
of patrons or invitees from the (“It is negligence to use an
foreseeable wrongful acts of instrumentality, whether a human
employees and third persons on being or a thing, which the
the premises. See id.; L.T. v. actor knows or should know to be
City of Jackson, 145 F. Supp. 2d so incompetent, inappropriate,
756, 759 (S.D. Miss. 2000) or defective, that its use

10
involves an unreasonable risk of Additionally, John
harm to others.”). Thomson’s voyeuristic acts fall
Third, Hattiesburg Coke and squarely within two of
Richard Thomson are potentially Mississippi’s intentional torts:
liable for their entrustment of (a) invasion of privacy and (b)
the VAS facilities and equipment outrageous conduct causing
to John Thomson. Mississippi severe emotional distress. In
has adopted the doctrine of each instance, the state’s
negligent entrustment as defined courts have expressly or
by the Restatement (Second) of
Torts § 390 (1965):
One who supplies
directly or through a entrustment: “It is negligence
third person a chattel to permit a third person to use
for use of another a thing or to engage in an
whom the supplier activity which is under the
knows or has reason to control of the actor, if the
know to be likely actor knows or should know that
because of his youth, such person intends or is likely
inexperience, or to use the thing or to conduct
otherwise, to use it himself in the activity in such
in a manner involving a manner as to create an
unreasonable risk of unreasonable risk of harm to
physical harm to others.”). See also id. § 7
himself and others (“‘[I]njury’ . . . denote[s] the
whom the supplier invasion of any legally
should expect to share protected interest[;] ‘harm’
in or be endangered by denote[s] the existence of loss
its use, is subject to or detriment in fact of any kind
liability for physical to a person[;] ‘physical harm’ .
harm resulting to . . denote[s] the physical
them. impairment of the human body, or
of land or tangible chattels.”).
See Sligh v. First Nat’l Bank, Under the Restatement (Second)
735 So. 2d 963, 968 (Miss. 1999) of Torts § 46, liability may
(quoting section 390); Tillman result from extreme and
v. Singletary, No. 1999-CA- outrageous conduct intentionally
00686-COA, 2001 WL 268246, *3 or recklessly causing severe
(Miss. Ct. App. March 20, 2001) emotional distress even without
(same).5 bodily contact or harm. See,
e.g., Adams v. U.S.
Homecrafters, Inc., 744 So. 2d
736, 742-43 (Miss. 1999) Smith
5
We believe that the v. Malouf, 722 So. 2d 490, 497-
Mississippi courts would also 98 (Miss. 1998) (both
follow the closely related
Restatement (Second) of Torts § recognizing a right to recover
308 (1965) (providing a more for mental anguish in the
general definition of negligent absence of bodily injury).

11
implicitly adopted the pertinent
sections of the Restatement Finally, the Mississippi
(Second) of Torts. Supreme Court has recognized the
Sections 652B and 652C of tort of intentional or reckless
the Restatement (Second) of infliction of emotional distress
Torts, in pertinent parts, state by extreme and outrageous
the elements of invasion of conduct. The Restatement
privacy: “One who intentionally (Second) of Torts § 46 (1965)
intrudes, physically or provides: “One who by extreme
otherwise, upon the solitude or and outrageous conduct
seclusion of another or his intentionally or recklessly
private affairs or concerns, is causes severe emotional distress
subject to liability to the to another is subject to
other for invasion of his liability for such emotional
privacy, if the intrusion would distress, and if bodily harm to
be highly offensive to a the other results from it, for
reasonable person.” Restatement such bodily harm.” See Speed v.
(Second) of Torts § 652B (1977). Scott, 787 So. 2d 626, 629 n.1
“One who appropriates to his own (Miss. 2001) (acknowledging the
use or benefit the name or existence under Mississippi law
likeness of another is subject of the cause of action detailed
to liability to the other for by Restatement (Second) of Torts
invasion of his privacy.” Id. § § 46); Donald v. Amoco Prod.
652C. The Mississippi Supreme Co., 735 So. 2d 161, 178-79
Court has held that a person is (Miss. 1999) (same).
liable if there has been Considering the facts
“interference with plaintiff’s alleged by the plaintiffs in the
seclusion . . . that would be underlying state court lawsuits,
highly offensive to the ordinary taken as true and construed in
reasonable man, as the result of the light most favorable to the
conduct to which the reasonable
man would strongly object.”
Candebat v. Flanagan, 487 So. 2d So. 2d 378, 382 (Miss.
207, 209 (Miss. 1986) (quoting 1990)(adopting § 652D); Candebat
id. § 652B cmt. d). Although v. Flanagan, 487 So. 207, 212
the Mississippi Supreme Court (Miss. 1986) (adopting § 652H);
has not expressly adopted Prescott v. Bay St. Louis
section 652C, we think that it Newspapers, Inc., 497 So. 2d 77,
would if it were presented with 79 (Miss. 1986) (adopting §
a case falling within its ambit.6 652E). Furthermore, the
Mississippi Supreme Court has
made clear that it has not yet
6
Mississippi has expressly defined the outer limits of the
adopted several of the state’s invasion of privacy law.
Restatement’s invasion of See Young, 786 So. 2d at 381
privacy provisions. See, e.g., (“We have made no effort to
Plaxico v. Michael, 735 So. 2d identify the outer limits of a
1036, 1039 (Miss. 1999) (quoting person’s right of privacy and
§ 652B); Young v. Jackson, 572 certainly make none here”).

12
plaintiffs, and complying with precludes coverage because John
our Erie duty, we conclude that Thomson’s acts at VAS did not
the Supreme Court of Mississippi arise out of the conduct of
would decide that (1) John Hattiesburg Coke. This court in
Thomson committed the torts of American Guar. I concluded that,
invasion of privacy and extreme under the facts alleged by the
and outrageous conduct upon the state court complainants, their
plaintiffs in the underlying personal injuries were caused by
state lawsuits; and that (2) the offenses of John Thomson
Richard Thomson and Hattiesburg which arose out of the conduct
Coke may be held liable for of VAS’s business, as part of
their own negligence in the Hattiesburg Coke’s business, and
state lawsuits under at least was managed and directed by the
three theories of recovery:(a) company and its CEO from the
failure to take reasonable company headquarters on the
precautions to protect the designated premises. The prior
victims, as invitees, from the panel said:
foreseeable intentional torts of [I]n the present case
John Thomson; (b) negligent the phrase “arising
hiring of John Thomson to out of” the “use” of
operate VAS although they knew the designated
or should have known of John premises requires that
Thomson’s propensity to commit there be a causal
the intentional torts against connection between the
the victims; and (c) negligently injuries to the women
entrusting John Thomson with the improperly videotaped
VAS studio and equipment highly by John Thomson and
susceptible to voyeuristic uses the designated
although they knew or should premises located at
have known that he was likely 4501 Harding Street.
because of his history, We further conclude
character, and propensities to that such a connection
use them to personally injure exists. It is
the victims. undisputed that the
decisions to set up
B. Personal Injury “Arising VAS, construct its
Out of the Conduct of” the offices, purchase
Insureds’ Business equipment, and,
eventually, to close
Under Coverage B, American it down, were all made
Guarantee agreed to indemnify by Richard Thomson and
Hattiesburg Coke and Richard other Hattiesburg Coke
Thomson for non-bodily personal officials and
injury liability caused by an employees at
offense “arising out of the Hattiesburg Coke
conduct of” the insureds’ headquarters, a
business. American Guarantee designated premises.
argues that this provision Moreover, VAS was

13
operated as a activities, the
formal division operation of the
of Hattiesburg d e s i g n a t e d
Coke, with John premises, and the
Thomson assigned injuries that
the title of vice resulted from
president of John Thomson’s
Hattiesburg intentional and
Coke’s “Visual tortious actions
Arts Division.” at VAS. . . .
In addition, Were we confined
Richard Thomson to finding a
testified in his causal connection
deposition that between the
a l l o f injuries stemming
Hattiesburg from the improper
Coke’s divisions videotaping at
shared the same VAS and use of
general checking Hattiesburg
account and that Coke’s premises
all of VAS’s at 4501 Hardy
expenses were Street as a
paid from this building, we
account. John doubt we would
Thomson was reach the same
required to pay conclusion.
all VAS expenses However, a CGL
from a rolling policy is
petty cash designed to
account and then insure its holder
submit his from more than
expenses and just injuries
receipts to arising from the
Hattiesburg Coke, condition or use
which would then of its buildings
remit these sums as buildings.
back into the For the reasons
account. U n d e r described above,
t h e we conclude that
circumstances, a the requisite
factfinder could causal connection
find a causal exists between
c o n n e c t i o n the injuries
b e t w e e n alleged in the
Hattiesburg Coke underlying state
and Richard court lawsuits
T h o m s o n ’ s and the use of
supervisory the company’s

14
 headquarter between the personal injuries
s b y and the company headquarters
R i c h a r d building. Consequently, the
Thomson and prior panel necessarily decided
Hattiesburg that the alleged injuries arose
Coke to out of the conduct of the
supervise insured’s business. For
J o h n virtually the same reasons, we
Thomson’s conclude that John Thomson’s
activities acts arose out of the conduct of
at VAS, a Hattiesburg Coke’s business.
wholly-owne
d division C. The Offense of
of the Invasion of the Right of
company. Private Occupancy of a Room
Thus, the by or on Behalf of Its Owner
negligence
c l a i m s American Guarantee was
a g a i n s t obligated to defend and
Hattiesburg indemnify Hattiesburg Coke and
Coke and Richard Thomson against all of
R i c h a r d the state court complainants’
Thomson are actions because (1) Coverage B
n o t of the 1991 policy may be
excluded reasonably interpreted to insure
f r o m against offenses, i.e., torts,
coverage by that accrued in 1991; (2) the
t h e alleged torts of invasion of
designated privacy committed by John
premises Thomson all accrued in 1991; and
endorsement (3) the alleged personal
. liability of Hattiesburg Coke
and Richard Thomson reasonably
American Guar. I, 129 F.3d at may be found to have arisen out
807-08 (emphasis added). The of offenses of invasions of
first panel, in reaching the private occupancy of a room that
decision that there was the persons occupied by or on behalf
requisite causal connection of its owner.
between the alleged personal
injuries and the corporate 1. “Offense committed during .
headquarters premises, expressly . . the policy period.”
stated that it did so because
the VAS operations from which Coverage B of the 1991
the actionable offenses arose insurance policy “applies to . .
were conducted by Hattiesburg . ‘[p]ersonal injury’ caused by
Coke as part of its business at an offense arising out of your
its headquarters, and not business . . . but only if the
because of a physical connection offense was committed . . .

15
during the policy period.” conduct that amounts to a legal
Coverage under the 1991 policy wrong and that causes harm for
began on December 31, 1990 and which courts will impose civil
ended on December 31, 1991. The liability. Taken in this sense,
policy does not define “offense” an offense, or tort, is not
or “committed.” committed unless and until the
The ordinary meaning of injury that results from it
“offense” is “a breach of a amounts to a harm for which
moral or social code” or “an courts will impose civil
infraction of law.” Merriam liability.
Webster’s Collegiate Dictionary Correlatively, the
806 (10th ed. 1997). Because Mississippi Supreme Court has
the policy insures against held that “[a] tort is not
liability arising out of certain complete until an injury
“offenses,” the word in this occurs.” McMillan v. Puckett,
context conveys the same meaning 678 So. 2d 652, 654 (Miss.
as “tort.” “Tort” has the same 1996)(en banc). The McMillan
meaning in the ordinary and court also held that “‘[a] cause
legal senses. Compare id. at of action accrues only when it
1245 (“a wrongful act other than comes into existence as an
a breach of contract for which enforceable claim; that is when
relief may be obtained”), with the right to sue becomes
Black’s Law Dictionary 1496 (7th vested.’” Id. (quoting Owens-
ed. 1999)(“A civil wrong for Illinois, Inc. v. Edwards, 573
which a remedy may be So. 2d 704, 706 (Miss. 1990)).7
obtained”), and 1 Dan B. Dobbs,
The Law of Torts § 1, at 1
(2001)(“a legal wrong . . . that
7
causes harm for which courts In interpreting a venue
will impose civil liability”). statute authorizing the
Consequently, “a wrong is called commencement of a civil action
a tort only if the harm which in the county “where the cause
has resulted, or is about to of action may occur or accrue”
result from it, is capable of the McMillan court explained the
being compensated in an action difference between “occur” and
at law for damages.” W. Page “accrue”:
Keeton et al., Prosser & Keeton We read accrual in its
on the Law of Torts § 1, at 4 formalistic sense. A
(5th ed. 1984). In ordinary cause of action
parlance, “commit” means “to accrues when it comes
carry into action deliberately: into existence as an
perpetrate a crime.” Merriam enforceable claim,
Webster’s Collegiate Dictionary that is, when the
231 (10th ed. 1997). Thus, in right to sue becomes
both legal and ordinary vested. This may well
language, to commit an offense mean the moment injury
that results in liability (i.e., is inflicted, that
a tort), means to engage in point in space and
time when the last

16
Consequently, we believe the McCorkle v. McCorkle, No. 1999-
Mississippi Supreme Court, CA-01711-COA, 2001 WL 19727, at
reading the policy from the *5-*6 (Miss. Ct. App. Jan. 9,
standpoint of a reasonable 2001); see also Tichenor v.
purchaser of insurance, would Roman Catholic Church, 32 F.3d
either (1) interpret “offense . 953, 962 (5th Cir. 1994)
. . committed . . . during the (acknowledging Mississippi’s
policy period” to include an application of the discovery
accrued or completed tort, or rule to invasions of privacy
(2) conclude that the phrase is involving “inherently
ambiguous and should be undiscoverable” injury). All of
construed in favor of coverage. the original twenty-one state
See Great N. Nekoosa Corp. v. court claimants first discovered
Aetna Cas. & Sur. Co., 921 F. in November 1991 that John
Supp. 401, 419 (N.D. Miss. 1996) Thomson had invaded the young
(holding that it is unclear women’s rights of privacy.
whether the “offense” of Eighteen of them alleged that
emotional distress occurs at the Thomson videotaped them in 1991.
time of the causative act or at The remaining state claimants
the time that the plaintiff alleged that he taped them in
learned of the act, and 1990 but that they had not
therefore interpreting the term learned of the incidents until
to allow for coverage). 1991. American Guarantee does
Under Mississippi law, the not contend that any of the
tort of invasion of privacy claimants failed to exercise
accrues when the plaintiff reasonable diligence. Thus, the
discovers or through exercise of torts of invasion of privacy
reasonable diligence should have alleged in all of the state
discovered the invasion. See court actions accrued in 1991.
Accordingly, if the alleged
liability of Hattiesburg Coke
l e g a l l y and Richard Thomson arose out of
significant fact the offense of “invasion of the
is found. right of private occupancy of a
"Occur" is a less room . . . that a person
formalistic term. occupies by or on behalf of its
It is event owner,” American Guarantee is
oriented to its obliged to defend and indemnify
core. It the insureds in all of the state
connotes conduct cases under Coverage B of its
and phenomena and 1991 policy.
imports no
preference among 2. “Invasion of the right of
all of those private occupancy of a room”
necessary that a
plaintiff may The “invasion of the
sue. private right of occupancy”
678 So. 2d at 655 (internal phrase is not defined in the
citations and emphases omitted).

17
policy and has not been includes “something due to a
interpreted by the Mississippi person . . . by law.” Id. at
courts. Therefore, according 1175. The common-place meaning
to Mississippi rules of of “occupancy” is “[t]he period
insurance contract during which one owns, rents, or
interpretation, we must give it uses certain premises.” Id. at
its plain, ordinary, and popular 944. “Occupy” means “to fill up
meaning. (time or space).” Id.
The Mississippi Supreme It is apparent from the
Court often consults leading above definitions that an
dictionaries to determine the average purchaser of insurance
ordinary meaning of insurance could reasonably understand the
contracts. See, e.g., Bank of phrase "invasion of the right of
Mississippi v. Mississippi Life private occupancy of a room" to
& Health Ins. Guar. Ass’n, 730 include the invasion of a room
So. 2d 49, 57 (Miss. 1999); that is secluded from the sight,
Merrimack Mut. Fire Ins. Co. v. presence, or intrusion of
McDill, 674 So. 2d 4, 9 (Miss. others. John Thomson’s invasion
1996); Allstate Ins. Co. v. by hidden camera of the young
Moulton, 464 So. 2d 507, 509 women’s right to occupy and
(Miss. 1985); Blackledge, 740 change clothes in the women’s
So. 2d at 301 (McRae, J., dressing room reasonably falls
dissenting). The mainstream within this definition.
dictionary definition of The United States Supreme
“invasion” is “an act of . . . Court has recognized that a
encroachment or trespassing.” person has a constitutional
Webster’s New World Dictionary right to privacy whenever he or
740 (1976); Webster’s Deluxe she has a reasonable expectation
Unabridged Dictionary 965 of privacy. See Kyllo v. United
(1979); American Heritage States, 121 S.Ct. 2038, 2043
Dictionary 688 (1979). (2001) (reaffirming the rule
Similarly, “invade” means “to that a person has a
encroach upon” or “to affect constitutional “expectation of
injuriously and progressively.” privacy” when “society is
Merriam Webster’s Collegiate prepared to recognize [that
Dictionary 615 (10th ed. 1997). expectation] as reasonable”).
“Private” commonly means Mississippi has emphatically
“intended for or restricted to recognized the tort of invasion
the use of a particular person, of privacy and in doing so has
group, or class” or “[w]ithdrawn taken notice of an individual’s
from company or observation.” right to privacy under state
Id. at 927. A thing is law. Mississippi also requires
"private" if it is "[s]ecluded of commercial property owners
from the sight, presence, or the highest duty to protect
intrusion of others." American their business invitees from
Heritage Collegiate Dictionary unreasonable risks of harm while
1089 (3d ed. 1993). In its visiting their premises. Hence,
ordinary sense, a “right” we conclude that the Mississippi

18
Supreme Court would find that Mississippi Supreme Court does
John Thomson, by secretly not adopt this meaning outright,
videotaping the young women in we believe that it would find
VAS’s dressing room, invaded that the phrase is ambiguous,
their “right of private recognize that the foregoing
occupancy” of that room. interpretation is reasonable,
Related Mississippi case and, in accord with its
law supports our anticipation of precedents, apply it in the
this conclusion. See Candebat, present case in favor of
487 So. 2d at 209 (finding a coverage. Well reasoned
person liable if there has been opinions of other courts have
“interference with plaintiff’s found the same policy language
seclusion . . . that would be highly ambiguous and susceptible
highly offensive to the ordinary to providing coverage in a wide
reasonable man, as the result of array of circumstances.
conduct to which the reasonable In New Castle County v.
man would strongly object.”); National Union Fire Ins. Co.,
Plaxico, 735 So. 2d at 1038-39 243 F.3d 744 (3d Cir. 2001)
(recognizing that the defendant (“New Castle III”) the Third
violated the plaintiff’s Circuit, after a comprehensive
reasonable expectation of survey of cases nationwide,
privacy when he took voyeuristic concluded that the phrase
nude photographs of her while “invasion of the right of
she was in her bedroom); see private occupancy” is ambiguous
also Malloy v. Sears, Roebuck & as a matter of law. See id. at
Co., No. 4:96CV157-EMB, 1997 WL 756 (“A single phrase, which
170313, at *1 (N.D. Miss. Mar. insurance companies have
4, 1997) (recognizing a business consistently refused to define,
invitee’s state law cause of and that has generated literally
action for “unreasonable hundreds of lawsuits, with
intrusion upon the seclusion of widely varying results, cannot,
another” where the defendant’s under our application of
employee peeped on the invitee commonsense, be termed
while she was using the restroom unambiguous”). Moreover, as the
on the defendant’s premises). New Castle III court points out,
Considering Mississippi’s the courts which claim to have
vigorous protection of the right divined one true meaning of the
of privacy, it is reasonable to phrase have ended up espousing
anticipate that an “invasion of three different and inconsistent
the right of private occupancy interpretations. See id. at
of a room” would be interpreted 750-753; see also Goode, supra,
by the state’s courts as at 41-43 & nn. 21-35 (citing and
including John Thomson’s discussing a wide spectrum of
surreptitious videotaping of case law regarding the meaning
female business invitees of the phrase “right of private
disrobing while occupying a
private dressing room.
Alternatively, if the

19
occupancy”).8 This wide variance “noxious odors, noise and
in interpretations is itself light”); Beltway Mgmt. Co. v.
evidence that the phrase is Lexington-Landmark Ins. Co., 746
ambiguous. See id. at 756. F.Supp. 1145, 1156 (D.D.C. 1990)
New Castle III also (holding that the phrase
illustrates the breadth of encompasses liability for a
meaning that reasonably may be breach of the implied warranty
attributed to the phrase “right of habitability of an
of private occupancy.” At issue apartment); Town of Goshen v.
in that case was whether a Grange Mut. Ins. Co., 424 A.2d
county’s failure to award a 822, 825 (N.H. 1980) (finding
building permit in violation of coverage under the phrase where
the applicant’s due process a town planning board refused to
rights qualified as an invasion allow a property owner to
of the applicant’s private right develop a subdivision in
of occupancy of the property. violation of his civil rights).
Id. at 749. Employing rules of In light of the
insurance contract comprehensive studies undertaken
interpretation similar to by New Castle III and other
Mississippi’s, the court found courts, we are convinced that
the phrase to be ambiguous and the present case is simple by
liberally construed it in favor comparison and falls well within
of coverage. the ambit of a reasonable
Other courts finding the interpretation of the phrase.
phrase to be ambiguous have also Consequently, in view of the
found coverage under far- Mississippi rules of insurance
reaching circumstances. See policy construction, the
Titan Holdings Syndicate, Inc. ordinary meanings of the words
v. City of Keene, 898 F.2d 265, involved, and the persuasive
272-73 (1st Cir. 1990) (holding reasoning of New Castle III, we
that a similar phrase included conclude that the Mississippi
the interference in the quiet Supreme Court would construe the
use of property resulting from clause in favor of coverage in
the present case.
8
In her article, Jane Goode 3. “[B]y or on behalf of its
collects various cases and finds owner, landlord, or lessor”
that the term “right of private
occupancy” has been interpreted Of the many ordinary usages
to require a range of activity, of the word “by,” several lend
from as much as a physical cogent meaning to the policy
trespass upon a real property clause: “through or through the
interest to lesser intrusions medium of”; “through the agency
and impairments of the use and or instrumentality of”; in
enjoyment of property, such as conformity with”; “according
an invasion of privacy or a mere to”; “on behalf of”; or “with
legal encroachment upon an respect to.” Merriam Webster’s
economic interest. See Goode, Collegiate Dictionary 157 (10th
supra, at 41-43 & nn.21-35.

20
ed. 1997). “On behalf of” is that American Guarantee was
commonly thought to mean “in the obliged to defend and indemnify
interest of” and “as a Richard Thomson and Hattiesburg
representative of.” Id. at 103. Coke under Coverage B of the
Therefore, the phrase reasonably 1991 CGL policy in the
may be interpreted to mean that, underlying state court actions.
in order for there to be
coverage, the victim must be
occupying the room “through,” V. Reimbursement of
“through the medium of,” Attorney’s Fees
“through the agency or
instrumentality of,” “by the Hattiesburg Coke and
authority of,” “according to,” Richard Thomson seek
“in relation to,” or “in the reimbursement for attorney’s
interest of” the owner of the fees and expenses incurred in
room. Thus, in the ordinary hiring separate and independent
sense of the words, the young counsel. In Moeller v. American
women in the underlying Guarantee and Liability
litigation were occupying the Insurance Company, 707 So. 2d
dressing room “through,” “by the 1062, 1069 (Miss. 1996), the
authority of,” and “in the Mississippi Supreme Court
interests of” its owner, stated:
Hattiesburg Coke, when John
Thomson violated their rights of When defending under a
private occupancy of a room. reservation of rights,
Consequently, we think the . . . a special
Mississippi courts would apply obligation is placed
that reasonable meaning in favor upon the insurance
of coverage, either as their own carrier. . . . [N]ot
interpretation or in accordance only must the insured
with Mississippi law governing be given the
the construction of ambiguous opportunity to select
insurance contracts. The Third his own counsel to
and Eighth Circuits have held defend the claim, the
that the effect of the phrase is carrier must also pay
ambiguous and that it must be the legal fees
construed in favor of coverage. reasonably incurred in
See New Castle County v. the defense.
National Union Fire Ins. Co.,
174 F.3d 338 (3d Cir. 1999) We are bound by the
(“New Castle I”); Royal Ins. Co. Mississippi Supreme Court’s
of America v. Kirksville College decision in Moeller. The
of Osteopathic Med., 191 F.3d insureds hired separate counsel
959, 963 (8th Cir. 1999) because American Guarantee only
(following the New Castle I agreed to defend Hattiesburg
holding that the phrase is Coke and Richard Thomson under a
ambiguous). reservation of rights and
Accordingly, we conclude because the insureds were

21
potentially exposed to liability judgment for American Guarantee
in excess of the CGL policy and REMAND the case to the
limits. Because we have district court with instructions
determined that the claims for it to grant summary judgment
contained allegations covered in favor of Richard Thomson and
under Coverage B, Moeller Hattiesburg Coke and against
mandates that Hattiesburg Coke American Guarantee, decreeing
and Richard Thomson be that American Guarantee is
reimbursed for the reasonable obliged to defend, indemnify,
costs of obtaining a separate and reimburse them in connection
attorney. See id. at 1071 with the underlying state court
(“Because [the insureds were] actions in accordance with this
being defended under the . . . court’s opinion. The case is
claim with a reservation of remanded for these purposes and
rights, American Guarantee was for further proceedings
obligated to let them select consistent herewith.
their own attorney at American
Guarantee’s cost”).
Although American Guarantee
acknowledges the Moeller
decision, the company argues
that we should not retroactively
apply its holding. We reject
American Guarantee’s argument.
The Mississippi Supreme Court
has clearly held that its
rulings apply retroactively
except in cases involving
government action or public
monetary resources. See Ales v.
Ales, 650 So. 2d 482, 484-85
(Miss. 1995). Because Moeller
involves neither of those
exceptions, its holding controls
this case, which was pending
when the Mississippi Supreme
Court issued the opinion.

VI. Conclusion

Accordingly, we conclude
that American Guarantee is
obligated to defend and
indemnify Hattiesburg Coke and
Richard Thomson in the
underlying state lawsuits. We
REVERSE the grant of summary

22