Tolson v. Hartford Financial Services Group, Inc.

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

SHARON TOLSON,

Plaintiff,
v. Civil Action No. 16-440 (JDB)
THE HARTFORD FINANCIAL
SERVICES GROUP, INC. et al.,

Defendants.

MEMORANDUM OPINION

In 2014, plaintiff Sharon Tolson filed an action in D.C. Superior Court against Massage

Escape Spa, Inc. (“Massage Escape”), alleging that a Massage Escape employee sexually assaulted

her during a massage. Massage Escape’s business liability insurance carriers, The Hartford

Financial Services Group, Inc. (“Hartford”) and Sentinel Insurance Company, Ltd. (“Sentinel”),

refused to defend or indemnify Massage Escape on Tolson’s claims, and the Superior Court

entered a $1,000,000 consent judgment against Massage Escape. Instead of agreeing to pay Tolson

directly, Massage Escape assigned to Tolson its rights—if any—against Hartford and Sentinel

(collectively, “defendants”). Tolson brought this action in Superior Court against defendants,

asserting several claims arising out of their denial of coverage to Massage Escape. After removing

the action to this Court, defendants moved to dismiss Tolson’s complaint on grounds that, inter

alia, her claims against Massage Escape fell within a policy exclusion that disclaims coverage for

“any injury or damage . . . arising out of . . . ‘sexual abuse.’”

Tolson’s complaint alleges a grievous wrong. But unfortunately, as the Court will explain

below, the settlement that she accepted in Superior Court leaves her with few avenues to seek

redress. For the reasons that follow, the Court will grant defendants’ motion to dismiss.
 BACKGROUND 1

In July 2014, a friend gave Tolson a “Groupon” 2 that entitled her to a free 60-minute

massage at Massage Escape. Pl.’s Compl. [ECF No. 1-1] ¶ 10. When Tolson went to Massage

Escape to redeem her Groupon a few months later, she was introduced to “Tommy,” a male

employee whose real name (according to Tolson) was Zhenkai Tong. Id. ¶ 12. Tolson followed

Tong into a small room, where she undressed, placed a sheet over her body, and laid face down on

a massage table. Id. ¶ 14. Tong then proceeded to massage Tolson. Id. During the massage,

Tolson alleges, Tong “rub[ed] his erect penis against [her] head,” “insert[ed] his fingers into [her]

vagina and anus,” and “perform[ed] oral sex on her” while “forcefully holding [her] down”—all

without her consent. Id. ¶ 15. Tolson was eventually able to escape Tong, dress quickly, and flee

the premises. Id.

After leaving Massage Escape, Tolson immediately flagged down a police officer and

reported what had happened. Id. ¶ 16. According to Tolson’s complaint, Tong was arrested that

day and charged with “the felony of First Degree Sexual Abuse of a Patient/Client.” Id.

Nonetheless, Tolson alleges, Tong remained an employee at Massage Escape until a few days later,

when “he was able to flee the country to China.” Id. Tolson later discovered that she was not the

first woman to be assaulted during a massage at Massage Escape: in an online review dated January

21, 2014, another female customer had written that during her massage, “my male masseur pressed

himself against me—I could feel his penis through his pants.” Id. ¶ 17. Tolson also alleges that

Tong was not licensed to practice massage therapy in the District of Columbia. Id. ¶ 12.

1
The following factual summary is taken from the allegations in Tolson’s complaint, which the Court
assumes to be true for purposes of ruling on this motion to dismiss.
2
As Tolson explained in her complaint in the underlying action, a “Groupon” is a promotional coupon sold
by Groupon, Inc. that entitles the holder to a good or service provided by a local business. See Ex. A to Defs.’ Mot.
to Dismiss [ECF No. 7-1] ¶ 11. Groupons are ordinarily sold at discounted prices so as to attract new customers to
such businesses.

2
 Tolson filed a complaint in the Superior Court for the District of Columbia against several

defendants, including Massage Escape. Id. ¶ 19. Her complaint asserted five claims against

Massage Escape: (1) negligent hiring, training, and supervision; (2) negligence per se; (3) unlawful

trade practices in violation of the D.C. Consumer Protection Procedures Act (“CPPA”), D.C. Code

§§ 3901–13; (4) assault and battery; and (5) intentional infliction of emotional distress. Ex. A to

Defs.’ Mot. to Dismiss [7-1] ¶¶ 24–36, 42–47, 54–63. At some point thereafter, Massage Escape

asked Hartford and Sentinel, its business liability insurance carriers, 3 to defend it against Tolson’s

claims. In a letter dated November 20, 2014, Hartford and Sentinel disclaimed any duty to defend

or indemnify Massage Escape under the policy because, inter alia, Tolson’s claims fell within an

exclusion in the policy for “injury or damage . . . arising out of . . . ‘sexual abuse.’” Ex. 2 to Pl.’s

Compl. [ECF No. 1-1] at 6.

In August 2015, the Superior Court entered a consent judgment against Massage Escape in

the amount of $1,000,000. See Ex. 1 to Pl.’s Compl. [ECF No. 1-1]. The judgment provided that:

Massage Escape . . . shall grant, assign[,] and transfer to [Tolson] . . . all rights,
claims[,] and causes of action, including but not limited to those for failure to
defend, indemnification, breach of contract, bad faith, wrongful failure to settle
within the limits of liability[,] and the award of attorneys [sic] and costs,
which . . . Massage Escape . . . has or may have against [] Hartford . . . arising
under and out of the Business Owner[’]s insurance policy . . . issued by []
Hartford . . . to Massage Escape . . . []or as a result of a wrongful denial by []
Hartford of liability insurance coverage and defense to Massage Escape . . . for
claims and causes of action[] asserted by [Tolson] . . . []or as a result of []

3
The relationship between Hartford and Sentinel with respect to Massage Escape’s policy is unclear from
the parties’ briefing. Tolson’s complaint alleges that Sentinel “participated in a joint venture with Hartford for
purposes of providing insurance services to Massage Escape.” Pl.’s Compl. ¶ 8. In their motion to dismiss, by
contrast, defendants state that “Sentinel was the insurer that issued the policy. [Hartford], which is not an insurer, did
not issue the policy and is not a proper party to Ms. Tolson’s claims.” Defs.’ Mot. at 1 n.1; but see Ex. 2. to Pl.’s
Compl. (showing the November 2014 denial-of-coverage letter—the authenticity of which defendants do not
dispute—which was prepared on Hartford’s letterhead but signed by a representative of Sentinel and which refers to
the two entities interchangeably). For purposes of this motion to dismiss, the Court will assume the truth of Tolson’s
allegation that defendants were coinsurers on Massage Escape’s policy. The parties do not dispute that the policy was
in effect at the time of Tong’s assault on Tolson in late 2014. See Pl.’s Compl. ¶ 22; Defs.’ Mot. to Dismiss at 4.

3
 Hartford’s wrongful failure to settle those claims and cause[s] of action[] within the
limits of liability of the Policy. 4

Id. at 1–2. The judgment explicitly provided that “this Consent Judgment shall not be enforced

against [] Massage Escape.” Id. at 2.

Consent judgment in hand, Tolson filed this action in Superior Court against defendants

Hartford and Sentinel. Tolson’s complaint asserts five claims arising out of defendants’ failure to

indemnify Massage Escape on the consent judgment, as well as their alleged failure to properly

“investigate,” “evaluat[e],” “negotiate,” and “defend” Tolson’s claims in the underlying action.

These claims are: (1) breach of contract, see Pl.’s Compl. ¶ 29–37; (2) breach of the implied

covenant of good faith and fair dealing, see id. ¶¶ 38–43; (3) breach of fiduciary duty, see id.

¶¶ 44–50; (4) negligence, see id. ¶ 51–55; and (5) unlawful trade practices in violation of the D.C.

Consumer Protection Procedures Act, see id. ¶¶ 56–65. Defendants removed to this Court on the

basis of the parties’ diverse citizenship, see Notice of Removal [ECF No. 1] at 1–2, and filed this

motion to dismiss Tolson’s complaint under Federal Rule of Civil Procedure 12(b)(6).

LEGAL STANDARD

To survive a Rule 12(b)(6) motion to dismiss, a complaint must contain “‘a short and plain

statement of the claim showing that the pleader is entitled to relief,’ in order to ‘give the defendant

fair notice of what the . . . claim is and the grounds upon which it rests.’” Bell Atl. Corp. v.

Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)).

Although “detailed factual allegations” are not necessary, to provide the “grounds” of

4
In fact, Massage Escape had already executed an assignment to Tolson of its rights against Hartford. See
Exh. 3 to Pl.’s Compl. [ECF No. 1-1]. As defendants note, neither the consent judgment nor the assignment executed
earlier by Massage Escape purports to assign to Tolson any rights that Massage Escape may have had against Sentinel.
See Defs.’ Mot. to Dismiss at 6 n. 7. But because the precise relationship between Hartford and Sentinel in this case
is unclear, see supra note 3, the Court will assume without deciding that the assignment is valid and operates against
both defendants. See Defs.’ Mot. to Dismiss at 2 n.3 (“reserv[ing] [defendants’] rights with respect to [inter alia]
whether Ms. Tolson’s assignment is effective.”).

4
“entitle[ment] to relief” plaintiffs must furnish “more than labels and conclusions” or “a formulaic

recitation of the elements of a cause of action.” Id. at 555–56 (citation and internal quotation

marks omitted). “To survive a motion to dismiss, a complaint must contain sufficient factual

matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal,

556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570); accord Atherton v. D.C. Office of

the Mayor, 567 F.3d 672, 681 (D.C. Cir. 2009).

ANALYSIS

I. TOLSON’S CONTRACT CLAIMS AGAINST HARTFORD AND SENTINEL

Because an insurance policy is a contract, it is governed by principles of contract law. See

Stevens v. United Gen. Title Ins. Co., 801 A.2d 61, 66 (D.C. 2002). As the assignee of Massage

Escape’s rights (if any) against defendants, Tolson “stands in the shoes” of Massage Escape and

may assert any claims that Massage Escape could have asserted against defendants. Flack v.

Laster, 417 A.2d 393, 400 (D.C. 1980) (citations and internal quotation marks omitted). Neither

party disputes that the law of the District of Columbia governs in this diversity action. See Adolph

Coors Co. v. Truck Ins. Exch., 960 A.2d 617, 620–21 (D.C. 2008) (setting out the “governmental

interest test” that D.C. courts use to determine which state’s law governs the interpretation of an

insurance contract).

A. Breach of Contract

Tolson’s primary claim in this action is that defendants breached their insurance contract

with Massage Escape by failing both to defend it in the underlying action and to indemnify it on

the $1,000,000 consent judgment. 5 The motion to dismiss will be granted as to this claim.

5
Tolson also asserts that defendants breached the insurance contract by failing to “investigate the facts and
applicable law,” “evaluat[e] the claim,” and “negotiate” with Tolson. Because the policy does not impose an express
duty on defendants to investigate, evaluate, or settle claims, see Ex. B to Defs.’ Mot. to Dismiss [7-2] at 1 (providing

5
 Under District law, an insurer’s duty to defend an insured is “conceptually distinct” from

its duty to indemnify the insured on any judgment that may be entered against it. Salus Corp. v.

Cont’l Cas. Co., 478 A.2d 1067, 1069 (D.C. 1984). “To determine whether an insurance company

has the duty to defend an insured,” courts in the District apply the so-called “eight corners rule,”

which calls for an examination of “both the underlying complaint and the insurance policy.”

Carlyle Inv. Mgt., LLC v. Ace Am. Ins. Co., 131 A.3d 886, 896 (D.C. 2016). “If the allegations

of the complaint state a cause of action within the coverage of the policy[,] the insurance company

must defend.” Id. (citation omitted). Moreover, because “[t]he duty to defend is broader than the

duty to indemnify,” “[i]f there is no duty to defend, there is no duty to indemnify.” Id. (citations

omitted). Where an insurer disclaims coverage on the basis of a policy exclusion, “the burden is

on the insurer to prove the facts which bring the case within the specified exception.” Id. (citation

omitted). At the motion-to-dismiss stage, this means that “it must be clear, without sweeping

generalizations, that all claims in the underlying complaint[] fall squarely within the [claimed]

exclusion.” Id. at 897.

Here, Massage Escape’s business liability insurance policy provides that defendants “will pay

those sums that [Massage Escape] becomes legally obligated to pay as damages because of ‘bodily

injury[,’] ‘property damage’ or ‘personal and advertising injury’ to which this insurance applies.” Ex.

B to Defs.’ Mot. to Dismiss [ECF No. 7-2] at 21. Defendants also “have the right and duty to defend

[Massage Escape] against any ‘suit’ seeking those damages.” Id. 6

that defendants “may, at our discretion, investigate any ‘occurrence’ or offense and settle any claim or ‘suit’ that may
result” (emphasis added)), the Court will construe these allegations as allegations of bad-faith performance of
defendants’ contractual obligations, and discuss them infra in connection with Tolson’s claim for breach of the implied
contractual duty of good faith and fair dealing.
6
The policy defines the phrases in quotation marks as follows: “‘Bodily injury’ means physical a. Injury; b.
Sickness; or c. Disease sustained by a person and, if arising out of the above, mental anguish or death at any time.”
Id. at 40–41. “‘Personal and advertising injury’ means injury, including consequential ‘bodily injury,’ arising out of
[inter alia] . . . h. Discrimination or humiliation that results in injury to the feelings or reputation of a natural person.”

6
 But the policy also contains several exclusions, including one entitled “EXCLUSION –

SEXUAL ABUSE OR MOLESTATION” (the “sexual-abuse exclusion”). Under this exclusion, the

policy

does not apply to any injury or damage, loss, cost or expense, including but not limited
to “bodily injury[,”] “property damage” or “personal and advertising injury” arising
out of, or relating to, in whole or in part:

1. Actual, threatened or attempted “sexual abuse[.”] “Sexual abuse” means
lewd, lascivious or sexual conduct, including but not limited to: a. Sexual intercourse,
including but not limited to any kind of sexual penetration, of any bodily orifice or part;
b. Sexual molestation; c. Sexually explicit, sexually oriented, or sexually suggestive
language, images, acts or statements; d. Inappropriate touching, including but not
limited to any, kissing or fondling of any bodily part, including but not limited to
genitalia; e. Sexual exhibitionism; f. Voyeurism; or g. Photographic, audio, video or
digital recording or the showing of any of the foregoing by any person(s), whether
injury is intended or not.

2. Any: a. Employment of; b. Investigation of or failure to investigate; c.
Supervision of or failure to supervise; d. Reporting to the proper authorities of, or
failure to so report; e. Retention of; or f. Failure to protect others from the conduct of
any person(s) whose conduct would be excluded by Paragraph 1. above.

Id. at 49. Defendants argue that the sexual-abuse exclusion bars coverage on all of Tolson’s claims

against Massage Escape in the underlying action. See, e.g., Defs.’ Reply [ECF No. 9] at 6–12.

As an initial matter, Tolson argues that the sexual-abuse exclusion is ambiguous and that,

as a result, her complaint raises a factual issue that precludes disposing of this case on a motion to

dismiss. Pl.’s Opp’n [ECF No. 8-1] at 6–7 (citing Carlyle, 131 A.3d at 895 (“If the provisions of

the contract are ambiguous, the correct interpretation becomes a question for a factfinder.”

(alterations and internal quotation marks omitted))). But the sexual-abuse exclusion here could

Id. at 42–43. “‘Property damage’ means a. [p]hysical injury to tangible property . . . ; or b. [l]oss of use of tangible
property that is not physically injured.” Id. “‘Suit’ means a civil proceeding in which damages because of ‘bodily
injury’ . . . or ‘personal and advertising injury’ to which this insurance applies are alleged.” Id.

7
not be clearer: by its plain terms, it bars coverage for any injury “arising out of, or relating to, in

whole or in part . . . [a]ctual, threatened or attempted ‘sexual abuse[.]’” It then defines “sexual

abuse” as “lewd, lascivious or sexual conduct,” lists seven different examples, and clarifies various

scenarios in which “sexual abuse” committed by a third party also falls within the exclusion.

Tolson maintains that the exclusion is ambiguous because it has “two parts with a total of

thirteen [] subparts.” Pl.’s Opp’n at 7–8. As explained above, however, these parts and subparts

help to clarify, rather than to obscure, the exclusion’s meaning. Tolson also argues that “the mere

fact that [defendants] believe that Ms. Tolson’s CPPA claims, which are based on the fact that

Massage Escape hired an unlicensed masseur, could be excluded under the ‘sexual abuse’

exclusion demonstrates the ambiguity of the exclusion.” Id. at 8. But the D.C. Court of Appeals

has explicitly stated that “otherwise clear language in an insurance agreement is not to be deemed

ambiguous ‘merely because the parties do not agree’ on its meaning.” Chase v. State Farm Fire

and Cas. Co., 780 A.2d 1123, 1127 (D.C. 2001) (citation omitted). Tolson’s argument that the

sexual-abuse exclusion is ambiguous and therefore presents a question of fact for a jury is without

merit.

Apart from asserting that the sexual-abuse exclusion is ambiguous, Tolson also claims that

defendants improperly refused to defend and indemnify Massage Escape in the underlying action

because “all claims in the underlying complaint[] [do not] fall squarely within the [sexual-abuse]

exclusion.” Carlyle, 131 A.3d at 896; see Pl.’s Opp’n at 8. Tolson does not meaningfully dispute

that Tong’s acts during the 2014 massage constituted “sexual abuse” or that her assault-and-battery

claim alleged an “injury . . . arising out of” that sexual abuse and hence fell under the sexual-abuse

exclusion. See id. at 8–13. But she argues that her remaining claims against Massage Escape—

negligence, negligence per se, intentional infliction of emotional distress, and unlawful trade

8
practices in violation of the CPPA—alleged injuries that did not “aris[e] out of” the 2014 sexual

assault. The Court will consider each of these remaining claims in turn.

i. Negligence (Including Negligence Per Se)

Tolson does not dispute that her claims for negligent “supervision” and “hiring,” see Ex.

A to Defs.’ Mot. to Dismiss ¶ 25, are barred by the sexual-abuse exclusion, which expressly

disclaims coverage for injuries arising out of the insured’s “[e]mployment of” or “failure to

supervise . . . any person[] whose conduct” would fall within the policy’s definition of “sexual

abuse.” See Pl.’s Opp’n at 11 (quoting Ex. B to Defs.’ Mot. to Dismiss). But she urges that her

claim for negligent training is not covered by the sexual-abuse exclusion, because the exclusion

does not mention training, and because “exclusions from coverage are to be strictly construed.”

Id. (quoting Carlyle, 131 A.3d at 896).

In the District of Columbia, “a claim alleging the tort of negligence must show: (1) that the

defendant owed a duty to the plaintiff, (2) breach of that duty, and (3) injury to the plaintiff that

was proximately caused by the breach.” Poola v. Howard Univ., 147 A.3d 267, 289 (D.C. 2016)

(alteration and citation omitted). Here, Tolson’s claims for negligent supervision, hiring, and

training alleged different breaches of duties that Massage Escape allegedly owed to Tolson. See,

e.g., Ex. A to Defs.’ Mot. to Dismiss ¶ 25 (alleging that “Massage Escape . . . breached [its] duty

to exercise reasonable care by,” inter alia, “ [f]ailing to conduct background checks on employees,”

“[f]ailing to ensure that all employees . . . were licensed,” “[f]ailing to . . . train employees,” and

“[f]ailing to supervise Zhenkai Tong”). But as defendants point out, each alleged breach resulted

in the same injury: Tong’s alleged sexual assault of Tolson during the 2014 massage. And because

Tolson does not dispute that this assault was “sexual abuse” within the meaning of the policy, all

of Tolson’s negligence claims seek to recover for an “injury . . . arising out of . . . ‘sexual abuse’”

9
and therefore fall within the policy’s sexual-abuse exclusion. See Am. Registry of Pathology v.

Ohio Cas. Ins. Co., 461 F. Supp. 2d 61, 70 (D.D.C. 2006) (noting that “it is the origin of the

damages, rather than the legal theories alleged[,] that inform the analysis under the eight-corners

rule”) (alteration and internal quotation marks omitted).

The same is true of Tolson’s negligence-per-se claim. As defendants correctly point out,

“negligence per se is not in and of itself a separate legal claim—rather, it permits a plaintiff under

certain circumstances and under specified conditions to rely on a statute or regulation as proof of

the applicable standard of care.” Hunter ex rel. A.H. v. District of Columbia, 64 F. Supp. 3d 158,

188–89 (D.D.C. 2014) (internal quotation marks omitted). In the underlying action, Tolson alleged

that Massage Escape violated various D.C. statutes and regulations pertaining to the provision of

massage therapy services. See Ex. A to Defs.’ Mot. to Dismiss ¶ 32 (alleging violations of, inter

alia, D.C. Code § 3-1205.01(a)(1), which provides that “[a] license issued pursuant to this chapter

is required to practice . . . massage therapy”). But even if these alleged statutory and regulatory

violations were sufficient to establish that Massage Escape breached a duty owed to Tolson, she

would still have to prove that she was injured as a result of that breach. And because the only

injury alleged in her complaint was the 2014 sexual assault, Tolson’s negligence-per-se theory—

like her other theories of negligence—necessarily relies on an “injury . . . arising out of . . . ‘sexual

abuse.’” Thus, it too falls within the policy’s sexual-abuse exclusion.

ii. Intentional Infliction of Emotional Distress

Tolson’s claim for intentional infliction of emotional distress (“IIED”) fares no better. The

tort of IIED has three elements: “(1) extreme and outrageous conduct . . . that (2) intentionally or

recklessly (3) caused [the plaintiff] severe emotional distress.” Newmyer v. Sidwell Friends Sch.,

128 A.3d 1023, 1037 (D.C. 2015). Here, the injury Tolson alleges is not the 2014 sexual assault

10
itself, but rather the emotional distress that Tolson allegedly suffered as a result of that assault.

Ex. A to Defs.’ Mot. to Dismiss ¶ 62 (alleging that “[a]s a direct and proximate result of [Massage

Escape’s] and/or [Massage Escape’s] employees[’] . . . reckless and willful disregard of

[Tolson’s] rights and safety, [she] experienced, and will continue to experience . . . severe

emotional distress,” including “humiliation” and “embarrassment”). But Tolson does not

meaningfully dispute that this emotional distress “ar[ose] out of . . . ‘sexual abuse.’” See Pl.’s

Opp’n at 11–12. Thus, her IIED claim falls within the sexual-abuse exclusion. 7

iii. The D.C. Consumer Protection Procedures Act

Finally, Tolson alleges that her CPPA claims were not covered by the policy’s sexual-

abuse exclusion. See Pl.’s Opp’n 9–10. The CPPA provides, in relevant part, that “[i]t shall be a

violation of this chapter . . . for any person to”:

(a) represent that goods or services have a source, sponsorship, approval, certification,
accessories, characteristics, ingredients, uses, benefits, or quantities that they do not
have;

(b) represent that the person has a sponsorship, approval, status, affiliation,
certification, or connection that the person does not have; . . . [or]

(f) fail to state a material fact if such failure tends to mislead.

D.C. Code § 28–3904 (entitled “unlawful trade practices”). These provisions apply “whether or

not any consumer is in fact misled, deceived or damaged” by the unlawful trade practice alleged.

7
In an attempt to escape this conclusion, Tolson cites American Continental Insurance Co. v. Pooya, 666
A.2d 1193 (D.C. 1995), a case in which the D.C. Court of Appeals held that an exclusion for “any claim arising out
of any fraudulent, criminal or malicious acts” did not apply to an IIED claim. See id. at 1199. This was so, the court
explained, because under District law, the tort of IIED can be committed recklessly, and because the exclusion by its
terms applied only to intentional conduct. Id. But unlike the exclusion at issue in Pooya, the sexual-abuse exclusion
here unambiguously defines “sexual abuse” as “lewd, lascivious[,] or sexual conduct . . . whether injury is intended
or not.” Ex. B to Defs.’ Mot. to Dismiss at 49 (emphasis added). Hence, Pooya is inapposite here, where the exclusion
applies to any sexual conduct regardless of the perpetrator’s mental state.

11
Id. The CPPA also authorizes any “consumer” 8 to “bring an action seeking relief from the use of

a trade practice in violation of a law of the District.” Id. § 28–3905(k)(1)(A). The consumer may

recover, inter alia, “[t]reble damages, or $1,500 per violation, whichever is greater,” “[r]easonable

attorney’s fees,” and “[p]unitive damages.” Id. § 28–3905(k)(2).

In the underlying lawsuit, Tolson alleged that Massage Escape had committed the

following unlawful trade practices: (1) “misrepresenting that [] Massage Escape . . . was certified

by the Board of Health as fully licensed to provide massage therapy services” in violation of

subsection (a) of section 28–3904, Ex. A to Defs.’ Mot. to Dismiss ¶ 43; (2) “misrepresenting that

Zhenkai Tong was certified as a licensed massage therapist in the District of Columbia” in

violation of subsection (b), id. ¶ 44; and (3) “failing to disclose the material fact to Ms. Tolson that

prior customers complained of being assaulted by a massage therapist . . . employed by Massage

Escape” in violation of subsection (f), id. ¶ 45. 9 Tolson argues that these claims did not allege

“injury . . . arising out of . . . ‘sexual abuse,’” because they were based not on the sexual assault

itself, but rather “on the fact that Massage Escape hired an unlicensed masseur.” Pl.’s Opp’n at 9–

10. Tolson also alleges that she suffered injuries “separate and apart from the sexual assault,

including without limitation, statutory damages of $1,500[] per unlawful trade

practice . . . , attorney’s fees . . . , economic losses associated with the cost of the massage itself,

and emotional distress damages relating to the CPPA claims.” Id. at 9 n.3.

These arguments fail for at least two reasons. For one thing, as defendants point out, the

D.C. Court of Appeals recently held that the CPPA does not dispense with the District’s

8
In relevant part, the statute defines a “consumer” as “a person who, other than for purposes of resale, does
or would purchase . . . consumer goods or services.” D.C. Code § 28-3901(a)(2)(A). When used as an adjective,
“consumer” means, in relevant part, “anything, without exception, that [a] person does or would purchase . . . and
normally use for personal, household, or family purposes.” Id. § (a)(2)(B).
9
Tolson also pleaded the various violations of D.C. statutes and regulations alleged in connection with her
negligence per se claim, see id. ¶ 33, as independent violations of the CPPA, see id. ¶ 43.

12
“longstanding injury-in-fact requirement,” which D.C. courts “typically follow . . . for prudential

reasons.” Rotunda v. Marriott Intern., Inc., 123 A.3d 980, 988 (D.C. 2015) (explaining that the

standing requirement, though not jurisdictional because D.C. courts are not organized under

Article III, is nonetheless grounded in the “recognition that an adversary system can best adjudicate

real, not abstract, conflicts”). Thus, a plaintiff must allege that she suffered “some threatened or

actual injury resulting from . . . putatively illegal action” to maintain a CPPA claim in a D.C. court.

Id.; see also Stone v. Landis Const. Co., 120 A.3d 1287, 1289 (D.C. 2015). This injury-in-fact

must be both “concrete and particularized” and “actual or imminent, not conjectural or

hypothetical.” Grayson v. AT&T Corp., 15 A.3d 219, 246 (D.C. 2011) (citing Lujan v. Defenders

of Wildlife, 504 U.S. 555, 561 (1992)); see also Spokeo v. Robins, 136 S. Ct. 1540, 1548 (2016)

(explaining that the term “concrete” means “‘real,’ and not ‘abstract.’”).

Here, of course, Tolson did allege an injury-in-fact in her underlying complaint: the 2014

sexual assault. But as the Court has already explained, Tolson does not dispute that this alleged

injury falls squarely within the policy’s sexual-abuse exclusion. Moreover, with one possible

exception, none of the other injuries asserted by Tolson would have given her standing to bring

her CPPA claims. 10 This suggests that her claims “ar[ose] out of” the sexual assault, at least in the

sense that the assault was likely the injury-in-fact that gave her standing to assert them.

10
The mere fact that Massage Escape allegedly “hired an unlicensed masseur,” Pl.’s Opp’n at 8, is neither
sufficiently concrete (because it infringes only an abstract interest in masseurs being licensed) nor sufficiently
particularized (because all District residents share that interest) to confer standing. Nor is it sufficient that Tolson
might have been entitled to statutory damages under the CPPA. See Spokeo, 136 S. Ct. at 1549 (explaining that “a
plaintiff [does not] automatically satisf[y] the injury-in-fact requirement whenever a statute grants a person a statutory
right and purports to authorize that person to sue to vindicate that right”). Likewise, Tolson’s conclusory assertion of
“emotional distress . . . relating to the CPPA claims,” Pl.’s Opp’n at 9 n.3, does not explain how the alleged CPPA
violations caused her distress in their own right. Thus, it too would not support a finding of standing.
The possible exception noted above is the “economic loss[] associated with the cost of the massage itself.”
Pl.’s Opp’n at 9 n.3. Defendants argue that Tolson’s complaint does not actually allege such losses, because Tolson
alleges that she received her Groupon to Massage Escape as a gift. See Defs.’ Mot. to Dismiss at 8; Pl.’s Compl. ¶ 10.
But Tolson did allege that the Groupon entitled her to a 60-minute massage—a thing of value that she claims she
never received. Ultimately, however, the Court need not decide whether this alleged economic loss would have been

13
 In any case, even if Tolson’s CPPA claims alleged injuries that did not “aris[e] out of” the

2014 assault, those claims still would not be covered by the policy, because the alternative injuries

Tolson alleges do not qualify as “bodily injury,” “property damage,” or “personal and advertising

injury”—the only types of injuries covered by the policy in the first place. Nowhere does the

policy provide coverage for statutory damages, and although the policy obligates defendants to

pay for attorneys’ fees “incurred by us [that is, defendants] in the defense of [Massage Escape],”

see Ex. B to Defs.’ Mot. to Dismiss at 23 (emphasis added), it does not provide coverage for

attorneys’ fees that Massage Escape becomes obligated to pay to another party by virtue of a fee-

shifting statute. Nor does the policy’s definition of “property damage”—which is limited to

“tangible property,” see id. at 43—extend to economic losses such as those associated with

Tolson’s loss of the value of the Groupon. Finally, although the policy’s definition of “personal

and advertising injury” does extend to “humiliation that results in injury to the feelings or

reputation of a natural person,” see id., Tolson does not explain how Massage Escape’s alleged

failures to accurately represent its qualifications or those of its employees—independently of the

sexual assault to which those failures allegedly led—“humiliat[ed]” her in their own right.

In short, in arguing that her CPPA claims were covered by Massage Escape’s policy,

Tolson finds herself between a rock and a hard place: her CPPA claims either “ar[ose] out of” the

2014 sexual assault, in which case coverage is barred by the sexual-abuse exclusion, or they

“ar[ose] out of” some kind of other, freestanding injury that does not qualify as “bodily injury,”

“property damage,” or “personal and advertising injury” and thus does not fall within the policy’s

prima facie scope of coverage. Though it seems that the former reading of her claims is the more

plausible one, under either reading her claims were not covered by the policy.

sufficient to confer standing, because—as explained below—even if it were, it would not constitute “bodily injury,”
“property damage,” or “personal [or] advertising injury” covered by the policy.

14
 Thus, none of the claims asserted by Tolson in the underlying litigation were covered by

Massage Escape’s insurance policy. Defendants therefore had no duty to defend Massage Escape

in the underlying action or to indemnify it on any judgment entered in that action, and Tolson’s

complaint fails to state a claim that defendants breached the insurance contract by disclaiming

coverage.

B. Breach of the Duty of Good Faith and Fair Dealing

“Under District of Columbia law, every contract contains within it an implied covenant of

both parties to act in good faith and damages may be recovered for its breach as part of a contract

action.” Choharis v. State Farm Fire and Cas. Co., 961 A.2d 1080, 1087 (D.C. 2008). A party to

a contract breaches its duty of good faith and fair dealing if it “evades the spirit of the contract,

willfully renders imperfect performance, or interferes with performance by the other party.”

Allworth v. Howard Univ., 890 A.2d 194, 201 (D.C. 2006).

Here, Tolson asserts that defendants breached their duty of good faith and fair dealing by

refusing (1) to “investigate” and “evaluat[e]” Tolson’s claims, (2) to “negotiate” with Tolson, (3)

to defend Massage Escape in the underlying litigation, and (4) to indemnify it on the consent

judgment. Pl.’s Compl. ¶¶ 39–41. But Tolson’s complaint does not plausibly allege facts that

suggest that defendants made any of these refusals in bad faith. For example, Tolson alleges that

defendants “did not evaluate or investigate Ms. Tolson’s negligence, negligence per se, and

unlawful trade practices [claims] to determine if the Policy provided coverage for those claims.”

Id. ¶ 40. But defendants’ denial letter, which expressly acknowledges these claims on its second

page, shows that defendants concluded that the claims were barred by the sexual-abuse exclusion.

See Ex. 2 to Pl.’s Compl. at 24 (listing all seven counts in Tolson’s underlying complaint, including

the counts against Massage Escape for negligence, negligence per se, and violations of the CPPA);

15
id. at 30 (concluding that the sexual-abuse exclusion “bars coverage for the alleged ‘sexual abuse’

by Zhenkai Tong as well as [Massage Escape’s] employment of, investigation of . . . , supervision

of . . . , reporting to proper authorities of . . . , retention of[,] or failure to protect others from the

conduct alleged of Zhenkai Tong”). The fact that the denial-of-coverage letter did not refer to

these claims by name in its discussion of the sexual-abuse exclusion does not raise a plausible

inference of bad-faith conduct.

Nor does Tolson plausibly allege that defendants sought to “evade[] the spirit of the

contract” or “willfully render[] imperfect performance” simply by disclaiming coverage. At best,

her allegations suggest that defendants reviewed her claims against Massage Escape and

determined that they were not covered by Massage Escape’s insurance policy. See Iqbal, 556 U.S.

at 680 (explaining that even where a complaint alleges facts that are “consistent with” unlawful

conduct, it does not “plausibly suggest” that the defendant engaged in such conduct if those facts

are “not only compatible with, but indeed [] more likely explained by” an alternative pattern of

“lawful . . . behavior”). Tolson’s allegations are therefore insufficient to state a claim for breach

of the duty of good faith and fair dealing.

II. TOLSON’S TORT CLAIMS AGAINST HARTFORD AND SENTINEL

In addition to her contractual claims, Tolson brings multiple tort claims against defendants.

In the District of Columbia, an insured may sue an insurer in tort where “the injury to the [insured

is] an independent injury over and above the mere disappointment of [the insured’s] hope to

receive his contracted-for benefit. Put another way, the tort must exist in its own right independent

of the contract, and any duty upon which the tort is based must flow from considerations other

than the contractual relationship.” Choharis, 961 A.2d at 1087 (citation omitted). The D.C. Court

of Appeals has specifically declined to recognize a tort for “bad faith by insurance companies in

16
the handling of policy claims,” including “failure to conduct good faith investigation of insured’s

claims.” Id. at 1086–87 & n.5.

A. Negligent Failure to Investigate and Defend

Tolson’s first tort claim, for “negligent failure to investigate and defend,” is essentially a

reprisal of her claim for breach of the duty of good faith and fair dealing. She alleges that

defendants “had a duty to investigate and fairly evaluate the claims brought by Ms. Tolson against

Massage Escape,” that they “breached [their] duty to Ms. Tolson by failing to evaluate and

investigate [her] negligence, negligence per se, and CPPA claims,” and that “as a direct and

proximate result,” Tolson “suffered substantial damages.” Pl.’s Compl. ¶¶ 52–55.

Even assuming that Tolson’s negligence claims are cognizable under D.C. law, but see

Choharis, 961 A.2d at 1087 (explaining that “[d]isputes relating to the respective obligations of

the parties to an insurance contract should generally be addressed within the principles of law

relating to contracts” and that “bad faith conduct can be compensated within those principles”),

they still fail. As the Court has already explained, Tolson’s own allegations suggest that

defendants did all of the investigation and evaluation that was required of them under District

law. 11 And in any case, Tolson’s negligence claims do not allege any injury “over and above the

mere disappointment of [her] hope to receive” indemnification on her judgment against Massage

Escape. Id. Thus, defendants’ motion to dismiss will be granted as to Tolson’s negligence claims.

11
In her opposition, Tolson emphasizes that defendants’ November 2014 denial-of-coverage letter “makes
absolutely no mention of Ms. Tolson’s negligence, negligence per se, [IIED], and CPPA claims in reference to the
‘sexual abuse.’” Pl.’s Opp’n at 17. True, the letter does not mention these claims by name under the heading “Form
SS 05 71 04 05,” which refers to the designation assigned to the sexual-abuse exclusion in the policy. Ex. 2 to Pl.’s
Compl. at 28–30. But the letter does expressly acknowledge those claims elsewhere, see id. at 24, and its general
discussion of the sexual-abuse exclusion’s application to Tolson’s claims allays any concerns that defendants
somehow overlooked or ignored her claims for negligence, negligence per se, IIED, and violations of the CPPA. See
id. at 30 (concluding that the sexual-abuse exclusion “bars coverage for the alleged ‘sexual abuse’ by Zhenkai Tong
as well as [Massage Escape’s] employment of, investigation of . . . , supervision of . . . , or failure to protect others
from the conduct alleged of Zhenkai Tong”).

17
 B. Breach of Fiduciary Duty

Tolson’s claim for breach of fiduciary duty is also a reprisal of her claim for the breach of

duty of good faith and fair dealing. Again, she alleges that “[t]he factual basis for this claim is not

just the inadequate excuse for the Hartford Group’s decision to deny coverage, but its utter failure

to even evaluate coverage for the negligence, negligence per se, intentional infliction of emotional

distress, and CPPA claims in the Underlying Complaint.” Pl.’s Opp’n at 14.

Though the D.C. Court of Appeals has acknowledged “the possibility of fiduciary

principles coming into play in certain third-party situations, such as where the insurance company

is involved in a settlement of a third-party claim or directs the actual course of the defense,”

Coharis, 961 A.2d at 1090, Tolson cites no authority establishing that here—where defendants

neither were “involved in a settlement” nor “direct[ed] the actual course of the defense”—

defendants breached or even owed any fiduciary duties to Massage Escape. See Pl.’s Opp’n at

14–15. And again, in any case, Tolson’s fiduciary-duty claim seeks redress for “the mere

disappointment of [her] hope to receive [the] contracted-for benefit” in Massage Escape’s

insurance contract. Choharis, 961 A.2d at 1087. Defendants’ motion to dismiss will be granted

as to this claim.

III. TOLSON’S CPPA CLAIMS AGAINST HARTFORD AND SENTINEL

Finally, Tolson alleges a slew of CPPA claims against Hartford and Sentinel—claims

separate and apart from her CPPA claims against Massage Escape in the underlying action.

Specifically, Tolson alleges that the policy’s statement that defendants “will pay those sums that

[Massage Escape] becomes legally obligated to pay as damages because of ‘bodily

injury[,]’ ‘property damage,’ or ‘personal and advertising injury’ to which this insurance applies,”

Ex. B. to Defs.’ Mot. to Dismiss at 21, is an unlawful trade practice in violation of D.C. Code

18
section 28–3904(a), (d), and (e). 12 See Pl.’s Compl. ¶¶ 57–59. She also alleges that the policy

“misrepresented the material fact that it ‘address[ed] coverage [under the policy] as it applies to

the allegations that have been made” in violation of § 28–3904(e) and (f), 13 because defendants

failed to evaluate Tolson’s negligence, negligence per se, and CPPA claims. Id. ¶¶ 60–62

(alterations in original). Finally, she alleges that defendants “committed four [] unlawful trade

practices [in violation of the CPPA] by violating . . . the District of Columbia’s Unfair Insurance

Trade Practices [statute].” Id. ¶ 63 (citing D.C. Code § 31–2231.17).

Unfortunately for Tolson, these claims are also unavailing. As defendants point out in their

reply brief, the CPPA only authorizes private suits for unlawful trade practices related to consumer

goods. See D.C. Code § 28–3905(k)(1)(A) (“A consumer may bring an action seeking relief from

the use of a trade practice in violation of a law of the District.” (emphasis added)); id. § 28–

3901(a)(6) (defining “trade practice” as “any act which does or would create, alter, repair, furnish,

make available, provide information about, or, directly or indirectly, solicit or offer for or

effectuate, a sale, lease or transfer, of consumer goods or services”) (emphasis added); see also id.

§ 28–3901(a)(1)(2) (defining “consumer,” when used as an adjective, as “anything . . . that [] [a]

person does or would purchase, lease (as lessee), or receive and normally use for personal,

household, or family purposes”) (emphasis added). Tolson alleges that Massage Escape’s policy

was a business liability insurance policy, and Tolson does not argue—nor could she—that the

policy was issued to Massage Escape for “personal, household, or family purposes.” Thus, the

12
Subsection (a) of section 28–3904 makes it an unlawful trade practice to “represent that goods or services
have a source, sponsorship, approval, certification, accessories, characteristics, ingredients, uses, benefits, or
quantities that they do not have.” Subsection (d) makes it an unlawful trade practice to “represent that goods or
services are of particular standard, quality, grade, style, or model, if in fact they are of another.” Subsection (e) makes
it an unlawful trade practice to “misrepresent as to a material fact which has a tendency to mislead.”
13
Subsection (f) of section 28–3904 makes it an unlawful trade practice to “fail to state a material fact if such
failure tends to mislead.”

19
CPPA is inapplicable to Massage Escape’s insurance policy with defendants, and Tolson’s

complaint fails to state a claim for violations of the CPPA. 14

CONCLUSION

For the foregoing reasons, defendants’ motion to dismiss will be granted. A separate order

has been issued on this date.

/s/
JOHN D. BATES
United States District Judge
Dated: September 29, 2017

14
Defendants also argue that the CPPA does not apply to insurers at all, because the D.C. Court of Appeals
has construed the CPPA to apply only to actions that arise under the administrative jurisdiction of the D.C. Department
of Consumer and Regulatory Affairs, see Howard v. Riggs Nat. Bank, 432 A.2d 701, 709 (D.C. 1981), and because
that agency was stripped of jurisdiction over insurance contracts in 1997. See Defs.’ Reply at 14–15. But the Court
need not address this argument because, as stated above, even if the CPPA did apply to insurance contracts in some
cases, it would not apply to the contract at issue here.

20