The Fourth Circuit affirmed the district court's determination that the duty to defend was limited by the policy's $100,000 limit. Gemini Ins. Co. v. Earth Treks, Inc., 2018 U.S. App LEXIS 7622 (4th Cir. March 27, 2018).
Kelsey Fabian sued Earth Treks, Inc., alleging she suffered sexual abuse by two of Earth Treks coaches when she was a 14-year-old member of Earth Treks' competitive youth climbing team. Earth Treks tendered to Gemini, who disputed liability. Gemini filed suit for a declaratory judgment, seeking a declaration that it owed no defense or indemnity for the Fabian lawsuit or, alternatively, that its liability was limited to $100,000 under several endorsements to the policy. Earth Treks counterclaimed for breach of the duty to defend.
Cross-motions for summary judgment were filed. The district court held that Gemini had a duty to defend, but that its liability was limited to $100,000 based alternatively on the "Sexual Abuse and Molestation" endorsement (SAM endorsement) or the "Assault, Battery, or Assault and Battery endorsement (A&B endorsement). The Fabian suit settled. Gemini and Earth Treks stipulated to the entry of final judgment and Earth Treks appealed challenging the ruling that limited Gemini's duty to defend to $100,000 based upon the endorsements.
Under Maryland law, an insured could establish a potentiality of coverage under a policy through the use of extrinsic evidence. Earth Treks submitted highlighted portions of deposition transcripts to support its arguments. The district court relied on portions of the transcripts that were not highlighted. Earth Treks argued that this was tantamount to considering extrinsic evidence provided by the insurer. The Fourth Circuit disagreed. The district court was not required to turn a blind eye to testimony that Earth Treks itself placed before the court.
Earth Treks next argued that the A&B endorsement was not applicable. Earth Treks submitted that the coaches' sexual contact with Fabian was not a battery because a reasonable factfinder could conclude that Fabian consented to, and was not harmed by, the contact. Under Maryland law, however, consent to sexual contact with an adult could not be given by a child as a matter of law.
Earth Treks also argued that the district court erroneously resolved factual disputes in favor of Gemini in determining that Fabian was harmed by the sexual contact. Assuming the district court erred, any such error was harmless. The sexual contact with a minor was harmful and injurious as a matter of law, regardless of whether she suffered any actual physical injury.
Therefore, the district court properly determined, as a matter of law, that the A&B endorsement limited Gemini's duty to defend to $100,000. The district court's judgment was affirmed.