United States District Court, D. Maryland
Richard D. Bennett United States District Judge
Insurance Company (“Gemini”) has brought this
action against Earth Treks, Inc. (“Earth Treks”),
a Maryland corporation operating a series of rock climbing
gyms, which purchased a commercial general liability
insurance policy issued by Gemini (the “Policy”).
Gemini seeks a declaration that it did not owe Earth Treks a
defense under the Policy or, alternatively, owed
Earth Treks a defense limited to $100, 000, in the
now-settled underlying action of Kelsey Fabian v. Earth
Treks, Inc., Case Number 13-C-14-100242 (the
“Fabian Suit”) in the Circuit Court for
Howard County, Maryland. See Compl., p. 1, ECF No.
1. Earth Treks expended approximately $1, 200, 000 in
defending against the Fabian Suit, but Gemini has
declined to reimburse Earth Treks for any portion of that
amount. Earth Treks has now filed a Counterclaim against
Gemini, alleging breach of the Policy's defense
provisions and requesting a monetary judgment in the full
amount of its costs and expenses incurred in defending
against the Fabian Suit. See Counterclaim,
¶¶ 85-89, ECF No. 7. Currently pending before this
Court are Earth Treks' Motion for Partial Summary
Judgment (ECF No. 19) and Gemini's Cross-Motion for
Summary Judgment (ECF No. 27) on the issue of liability.
Specifically, the issues before this Court are whether or not
Gemini owed Earth Treks a defense in the underlying
Fabian Suit and if so, whether Gemini's defense
obligation is limited by one or more of the Policy's
coverage limitation endorsements. Also pending is Earth
Treks' Motion to Strike Gemini's Extrinsic Evidence
(ECF No. 28).
parties' submissions have been reviewed, and no hearing
is necessary. See Local Rule 105.6 (D. Md. 2016).
For the reasons stated herein, Earth Treks' Motion for
Partial Summary Judgment (ECF No. 19) is GRANTED IN PART and
DENIED IN PART, and Gemini's Cross-Motion for Summary
Judgment (ECF No. 27) is also GRANTED IN PART and DENIED IN
PART. Specifically, Gemini did owe Earth Treks a defense in
the Fabian Suit as a matter of law, but its defense
obligation is limited to $100, 000 pursuant to the
“Sexual Abuse or Molestation” (“SAM”)
coverage limitation endorsement or, alternatively, the
“Assault, Battery, or Assault and Battery”
(“A&B”) endorsement. Accordingly, Judgment is
entered for Earth Treks on Gemini's initial claim for
declaratory judgment and Earth Treks' Counterclaim for
breach of contract, subject to a $100, 000 limit on
Gemini's defense liability. This case shall proceed to a
separate determination of the specific damages to be awarded,
pursuant to this Court's Bifurcation Order of December
22, 2016 (ECF No. 25). Additionally, Earth Treks' Motion
to Strike Gemini's Extrinsic Evidence (ECF No. 28) is
GRANTED. All extrinsic evidence submitted by Gemini is
stricken and has not been considered by this Court in
determining whether Gemini owed Earth Treks a defense or in
determining the scope of that defense under the coverage
Earth Treks Rock Climbing Gyms
Earth Treks, Inc. (“Earth Treks”) is a Maryland
corporation operating three rock climbing gyms in Rockville,
Timonium, and Columbia, Maryland, and a fourth gym in Golden,
Colorado. Fabian Second Am. Compl., ¶¶ 2,
9, ECF No. 7-7. “Each of these locations offers
climbing lessons and instructions.” Id.,
¶ 9. Additionally, Earth Treks leads climbing teams for
children between the ages of six (6) and eighteen (18),
including “Team Earth Treks, ” a nationally
ranked competition team. Id. ¶ 10. In 2008,
Earth Treks hired Michael Lyons (“Lyons”) to be
the head coach of Team Earth Treks. Id., ¶ 17.
Daniel Montague (“Montague”) was the assistant
coach. Id., ¶ 29.
Gemini's Commercial General Liability Insurance
Treks is a participating member of the “Climbing Wall
Association.” Counterclaim, ¶ 2, ECF No. 7.
Plaintiff/Counterclaim-Defendant Gemini Insurance Company
(“Gemini”) has issued a commercial general
liability insurance policy (Policy Number VUMC 10000010) (the
“Policy”) to the participating members of the
Climbing Wall Association, including Earth Treks.
See Policy, ECF No. 1-1; Certificate, ECF No. 7-1.
At all relevant times, the Policy has provided Earth Treks
general liability coverage subject to a per occurrence limit
of $1, 000, 000 and an aggregate limit of $2, 000, 000.
Id. at 1.
Policy provides insurance against “bodily injury”
or “property damage” caused by an
“occurrence” that takes place in the
“coverage territory.” Id. at 6. The
Policy defines “occurrence” as “an
accident, including continuous or repeated exposure to
substantially the same general harmful conditions.”
Id. at 19. The Policy further provides that
“[Gemini] will have the right and duty to defend any
‘insured' against any ‘suit' seeking
those damages . . . . [h]owever, [Gemini has] no duty to
defend the insured against any ‘suit' seeking
damages for ‘bodily injury' or ‘property
damage' to which [the] insurance does not apply.”
Id. at 6. Additionally, the Policy excludes coverage
for “ ‘bodily injury' . . . expected or
intended from the standpoint of the insured.' ”
Id. at 7. The Policy further includes two separate
coverage limitation endorsements for damages resulting from
“Sexual Abuse or Molestation” (the
“SAM” endorsement) and “Assault, Battery,
or Assault and Battery” (the “A&B”
endorsement”). Id. at 59-60. Coverage for
claims that fall within the scope of those endorsements is
limited to $100, 000 for “Each Claim” and $300,
000 in the “Aggregate.” Id. Under both
endorsements, “[a]ll claims for damages made by one or
more persons because of any one act or series of
acts . . . shall be deemed to be one
claim.” Id. (emphasis added).
The Underlying “Fabian Suit” - Fabian v.
Earth Treks, Inc., No. 13-C-14-100242
April 16, 2014, Kelsey Fabian (“Fabian”), a
former member of Team Earth Treks, filed suit against Earth
Treks in the Circuit Court for Baltimore County, Maryland.
See Fabian v. Earth Treks, Inc., Case No.
13-C-14-100242 (the “Fabian Suit”). The
case was subsequently transferred to the Circuit Court for
Howard County, Maryland on Earth Treks' motion. Fabian,
then a minor acting under the direction of her parents,
initially brought suit under the pseudonym “Jane Doe,
” but was required to proceed under her real name after
the case was transferred. The Second Amended Complaint was
the operative Complaint in that now-settled action. Kelsey
Fabian's allegations were as follows:
September of 2010, Fabian joined Team Earth Treks at the
Earth Treks gym in Columbia, Maryland. Fabian Second
Am. Compl., ¶ 29, ECF No. 7-7. At that time, Fabian was
thirteen years old. Id. Head Coach Lyons was thirty
years old, and Assistant Coach Montague was nineteen years
old. Id. Fabian has claimed that Lyons had a history
of inappropriate relationships with Earth Treks students and
team members, of which Earth Treks personnel were aware.
Id., ¶¶ 21-22. She has alleged that Lyons
and Montague “engaged in a course of increasingly
aggressive sexual behavior” targeted at her and at
least one other climber. Id., ¶¶ 30-31. It
is specifically alleged that “Montague . . . engaged in
sexual activity with [her] on multiple occasions between
March and May of 2011.” Id., ¶ 34.
the increasingly apparent nature of Michael Lyons'
inappropriate, sexual behavior, ” Earth Treks permitted
him to lead a team trip to Massachusetts in the “late
Spring/early Summer of 2011.” Id., ¶ 43.
Lyons and members of Team Earth Treks stayed in the same
hotel room, “an arrangement that was known to Earth
Treks beforehand.” Id., ¶ 44. During this
trip, Lyons “engaged in sexual intercourse with
[Fabian] twice in his hotel room.” Id. The
following weekend, “Earth Treks again permitted Mr.
Lyons to organize and conduct a sleepover event with Earth
Treks' youth climbers” at the Earth Treks gym in
Columbia, Maryland. Id., ¶ 45. That night,
Lyons again sexually assaulted then-fourteen-year-old Fabian
in a storage closet. Id.
connection with these allegations, Fabian brought a
three-count Second Amended Complaint against Earth Treks for
Negligence (Count I), Negligent Hiring, Retention, and
Supervision (Count II), and Respondeat Superior Liability
(Count III). Id., ¶¶ 54-98. Earth Treks
coaches Lyons and Montague each subsequently pled guilty to
various sex offenses in the Circuit Court for Howard County,
Maryland. Id., ¶ 11 (citing State v.
Lyons, Case No. 13-K-11-051485; State v.
Montague, Case No. 13-K-11-51536). As a result of
repeated sexual assaults by both Lyons and Montague, Fabian
has claimed injuries “in the form of significant,
negative effects on [her] health.” Id., ¶
50. In August of 2016, Earth Treks and Fabian reached a
settlement in the Fabian Suit that was reflected in
a confidential Settlement Agreement and Release. See
Gemini Counterclaim, ¶ 50, ECF No. 7.
Earth Treks' Extrinsic Evidence as to the Fabian
Treks Chief Executive Officer Christopher Warner
(“Warner”), Chief Operating Office Christopher
Jenkins (“Jenkins”), and Vice President of
Operations Scott Heidtman (“Heidtman”) have
stated that “[n]o one in Earth Treks' senior
management knew or suspected that Michael Lyons or Daniel
Montague would engage in inappropriate sexual activity or
conduct with Kelsey Fabian or with any other Earth Treks team
member.” See, e.g., Warner Aff., ¶ 4, ECF
No. 19-1. Prior to joining Earth Treks, Lyons was a USA
Climbing certified coach and coached a competitive climbing
team in Ohio. See Lyons Dep., pp. 18:14-19:3;
15:7-16:10, ECF No. 19-16. Additionally, Lyons was referred
to Earth Treks by the parent of a Team Earth Treks climber.
Jenkins Dep., p. 46:4-9, ECF No. 19-14. Before offering Lyons
the coaching position, Earth Treks contacted Lyons'
references, and members of Earth Treks management interviewed
him. Id. at 51:10-17; 53:8-20; 58:4-9.
Aaron Miller of the Howard County Police Department was an
investigator in the criminal cases against Lyons and
Montague. When asked by Earth Treks parents if they could
have detected Lyons' and Montague's actions sooner,
Detective Miller responded that “with no prior
allegations, no criminal investigation, no criminal
conviction, there would be no record of it.” Miller
Dep., p. 159:1-8, ECF No. 19-17. Detective Miller has
explained that perpetrators of child sex abuse
“groom” both their “victim[s]” and
“social fabric” “to see the [perpetrator]
as being . . . above reproach.” Id. at
154:11-155:5. Detective Miller has concluded that Lyons
groomed both the Earth Treks parents and “Earth Treks
as a corporate employer” because “no one seemed
to have anything bad to say about him or would say anything
bad about him . . . [t]hey all had praise about him.”
Id. at 157:1-15.
Fabian was a minor incapable of legal consent, she has
acknowledged her own wrongdoing. In a police interview on
June 24, 2011, Fabian stated that the sexual abuse was
“a little bit” her fault, that she “could
have said no, ” that Montague did not threaten her, and
that engaging in sexual intercourse with Lyons was a
“mutual decision.” Kelsey Fabian Interview, pp.
41-47, ECF No. 19-24. Additionally, Kelsey Fabian has
indicated that she and her friend Clarissa Sheltraw composed
a “bucket list” of sexual acts that they sought
to complete. Id. at 20-29. Fabian completed several
of those acts with Montague and Lyons, and initialed various
items on the list with a “K” to indicate that she
had completed them. Id. Fabian has further stated
that she had a “little girl crush” on Montague
shortly after joining Team Earth Treks. Kelsey Fabian Dep.,
p. 91, ECF No. 19-11. Fabian kissed Montague at Earth Treks
and subsequently engaged in sexual acts with him about
“four or five times” at her mother's home.
Kelsey Fabian Interview, pp. 33-36, ECF No. 19-24. Sometime
later, Fabian learned that Montague was also “doing
stuff” with another sixteen-year-old climber named
“Steph.” Id. at 34-38. She has stated
that she “was kind of upset with Dan.”
Id. at 43. Accordingly, when Lyons “started
coming on to [her]” around that time, “[she]
really didn't say no.” Id. Fabian has
stated that Lyons began “touching” her
“[a]t Earth Treks in Columbia, ” “and [she]
didn't say no.” Id. at 44:1-6.
Treks Executives Warner, Jenkins, and Heidtman have stated
that “Daniel Montague was not working for Earth Treks
when he and Kelsey Fabian engaged in their consensual sexual
activity in Linda Fabian's home” and, accordingly,
that “Kelsey Fabian at this time was not in the care,
custody, or control of Earth Treks.” See,
e.g., Warner Aff., ¶ 15, ECF No. 19-1.
Additionally, Warner, Jenkins, and Heidtman have stated that
“Earth Treks did not accept responsibility for the
care, custody, control of Kelsey Fabian during the
competitive-climbing trip to Massachusetts on June 11-12,
2011.” Id., ¶ 17. Kelsey travelled to the
climbing competition in June of 2011 “in the care
of” Georgann Sheltraw, her friend Clarissa's
mother. See, e.g., Georgann Sheltraw Dep., p. 19,
ECF No. 19-21.
The Instant Action - Gemini Insurance Co. v. Earth Treks,
Inc. - No. RDB-16-2520
January 2, 2014, counsel for Kelsey Fabian, then-proceeding
under the pseudonym “Jane Doe, ” issued a demand
letter upon Earth Treks, informing Earth Treks of
Fabian's intent to file the Fabian Suit,
discussed supra. See Demand Letter, ECF No.
7-9. After receiving that demand letter, Earth Treks notified
Verus Underwriting Managers, LLC (“Verus”),
claims services representative for Gemini, that Earth Treks
may have a claim under the Policy in connection with the
impending Fabian Suit and, via letter dated February
21, 2014 (ECF No. 7-10), Verus acknowledged receipt of Earth
Treks' notice. Subsequently, Verus forwarded to Earth
Treks a letter from Verus' outside coverage counsel,
DeCaro, Doran, Siciliano, Gallagher, & DeBlasis, LLP (ECF
No. 7-11), providing counsel's opinions as to, inter
alia, Gemini's duty to defend Earth Treks in the
Fabian Suit. The opinion letter stated that
“if suit were filed [Gemini] would have a duty to
defend under the [P]olicy, ” but that “coverage
for this claim would be limited to $100, 000 each claim and
$300, 000 aggregate, ” pursuant to the Policy's
“Sexual Abuse or Molestation” (“SAM”)
Kelsey Fabian filed the Fabian Suit on April 16,
2014, Verus confirmed via letter dated May 8, 2014 (ECF No.
7-13) that the Fabian Suit did constitute a
“claim” under the Policy, but that the SAM
endorsement limited coverage for the lawsuit to “$100,
000.” In a response dated May 9, 2014 (ECF No. 7-14),
counsel for Earth Treks agreed to this limitation, but
“reserve[d] the right to renew its demand for indemnity
and a defense based on the changed situation or
circumstances.” Additionally, Earth Treks declined to
draw on the $100, 000 coverage amount as defense costs were
incurred, but rather requested that it be held in reserve to
cover potential costs. Over a year later, on October 30,
2015, Verus inquired as to whether Earth Treks was ready to
receive the $100, 000 payment. See Verus October 30,
2015 Email, ECF No. 7-15. Earth Treks declined Verus'
offer and instead sent Verus a letter (ECF No. 7-16), in
which it reasserted its demand for indemnification and
defense and argued that the SAM endorsement did not apply.
Following several weeks of ...