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Millers Capital Insurance Co. v. Vasant

United States District Court, D. Maryland

October 25, 2018

MILLERS CAPITAL INSURANCE COMPANY Plaintiff,
v.
ANIL VASANT, et al. Defendants.

          MEMORANDUM OPINION

          Richard D. Bennett United States District Judge.

         Millers Capital Insurance Company (“Millers Capital”) filed the instant action for a declaratory judgment pursuant to Fed.R.Civ.P. 57 and U.S.C. § 2201. (Compl., ECF No. 1.), seeking a declaration that it has no duty to defend or indemnify Defendants, Anil Vasant (“Vasant”), Nimesha Patel, Shailesh Patel, Vasu, Inc. (“Vasu”), and Choice Hotels International Inc. (“Choice Hotel”), all of whom are insured under a commercial general liability (“CGL”) policy (“the Policy”) with Millers Capital. Specifically, this matter arises out of a lawsuit filed in the Circuit Court for Wicomico County, Maryland, by Jane Doe plaintiffs, who were victims of a human trafficking and prostitution ring. That ring operated in Salisbury, Maryland in 2014 and utilized hotel rooms.

         Defendant Choice Hotel has filed a Counterclaim for Declaratory Relief (ECF No. 11) seeking a judgment declaring that Millers Capital owes Choice Hotel a defense in the underlying cases at issue as well as reimbursement for all past defense costs in the underlying cases and attorney's fees and costs incurred pursuing and defending the instant action.

         Millers Capital has denied its duty to defend the Defendants in the underlying cases based solely on the Abuse or Molestation Endorsement in its insurance policy. This denial of coverage is without merit as it is evident that none of the Defendant Insureds or their employees had the abuse victims under their care, custody, or control.

         Currently pending before this Court are cross-motions for summary judgment: (1) Millers Capital Insurance Company's Motion for Summary Judgment (ECF No. 20); (2) Defendants Anil Vasant, Nimesha Patel, Shailesh Patel and Vasu, Inc.'s Cross-Motion for Summary Judgment (ECF No. 22); and (3) Defendant Choice Hotel's Motion for Summary Judgment (ECF No. 23). The parties' submissions have been reviewed and no hearing is necessary. See Local Rule 105.6 (D. Md. 2016). For the following reasons, Millers Capital's motion shall be DENIED, and the Defendants' motions shall be GRANTED, and Judgment shall be entered in favor of Anil Vasant, Nimesha Patel, Shailesh Patel, Vasu, Inc., and Choice Hotels International Inc., and against Millers Capital Insurance Company.

         BACKGROUND

         I. The Policy

         Plaintiff Millers Capital and Defendants Anil Vasant, Nimesha Patel, Shailesh Patel and Vasu, Inc., were parties to a contract of insurance issued by Millers Capital, Policy No. CPP-5049946-01 for the contract period of October 25, 2014 through October 25, 2015. (ECF No. 1 at ¶ 12.) Defendant Choice Hotel is a franchisor of the named insureds and named as an “additional insured” under the Policy. (Id. at ¶ 9.) The insuring agreement includes Millers Capital's “duty to defend the insured against any ‘suit'” seeking bodily injury and property damages liability as well as personal and advertising injury liability, within stated limits and exclusions. (ECF No. 1-1.)

         The Policy's Abuse or Molestation Endorsement modifies the CGL coverage by adding the following exclusion to the “bodily injury and property damage” and “personal and advertising injury” coverage provisions:

The following exclusion is added to Paragraph 2., Exclusions of Section I - Coverage A - Bodily Injury And Property Damage Liability and Paragraph 2., Exclusions of Section I- Coverage B - Personal And Advertising Injury Liability:

         This insurance does not apply to "bodily injury", "property damage" or "personal and advertising injury" arising out of:

1. The actual or threatened abuse or molestation by anyone of any person while in the care, custody or control of any insured, or
2. The negligent:
a. Employment;
b. Investigation;
c. Supervision;
d. Reporting to the proper authorities, or failure to so report; or
e. Retention;
of a person for whom any insured is or ever was legally responsible and whose conduct would be excluded by Paragraph 1. above.

         Policy Form CG 21 46 07 98, Compl. Ex. A, ECF No. 1-1 at 141.

         II. The Underlying Lawsuits[1]

         This action arises out of underlying lawsuits against Defendants and others in the Circuit Court for Wicomico County, Maryland. (ECF No. 1 at ¶ 2.) The Jane Doe plaintiffs in the underlying lawsuits filed suit for injuries sustained after suffering various forms of abuse by a human trafficking and prostitution ring that they alleged operated in Salisbury, Maryland in 2014 between the months of June and November. (ECF No. 20-2 at ¶ 10.) The perpetrators of the abuse used America's Best Value Inn, owned by Subh Properties, L.L.C., as their primary headquarters, renting hotel rooms for extended periods of time where the prostitution and drug transactions took place. (Id. at ΒΆΒΆ 10-11, 15-20.) The perpetrators kidnapped women and held them against their will, took provocative pictures and posted them on a website advertising prostitution ...


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