SCI LIQUIDATING CORPORATION F.K.A. SUNRISE CARPET INDUSTRIES, INC., PLAINTIFF-APPELLEE,

v.

HARTFORD FIRE INSURANCE COMPANY A CONNECTICUT CORPORATION, HARTFORD CASUALTY INSURANCE COMPANY, A CONNECTICUT CORPORATION, DEFENDANTS-APPELLANTS

HULL, Circuit Judge: Hartford Fire Insurance Company and Hartford Casualty Insurance Company appeal the district court’s summary judgment order finding insurance coverage exists for sexual harassment claims made against their insured, SCI Liquidating Corporation.

After review, we reverse.

I.

BACKGROUND

On October 3, 1994, three former female employees sued Sunrise Carpet Industries, Inc. (“Sunrise”) and Larry Hankins, one of Sunrise’s managers, alleging causes of action for sexual harassment, retaliation, assault, battery, intentional infliction of emotional distress, and negligent hiring and retention.

SCI Liquidating Corporation (“SCI”) is the successor to Sunrise.

For the relevant time period, Hartford Fire Insurance Company (“Hartford”) had issued to Sunrise a commercial general liability insurance policy (the “CGL policy”) and Hartford Casualty Insurance Company (“Hartford Casualty”) had issued a separate umbrella liability insurance policy (the “Umbrella policy”).

Hartford and Hartford Casualty initially defended the lawsuit under a reservation of rights.

On February 17, 1995, Hartford and Hartford Casualty denied coverage and SCI was forced to retain counsel. A jury verdict for four thousand dollars was rendered in the employees’ favor against SCI.

The trial court also awarded attorneys’ fees against SCI.

After negotiations, on March 5, 1997, SCI paid a total of $81,109.18 to the employees to satisfy the verdict and award of attorneys’ fees, costs, and interest.

SCI incurred its own attorneys’ fees and expenses of $111,222.03 in defending the employees’ lawsuit.

On May 1, 1997, SCI filed this coverage case against Hartford and Hartford Casualty.

SCI seeks to recover the attorneys’ fees for its defense counsel as well as the money SCI paid to the plaintiff employees in the underlying lawsuit, plus interest.

All parties filed motions for summary judgment.

On January 26, 1998, the district court granted SCI’s motion and denied Hartford’s and Hartford Casualty’s joint motion, finding that the insurance policies covered the underlying sexual harassment lawsuit.

On August 12, 1998, the district court entered final judgment in SCI’s favor for $187,972.21 plus prejudgment interest against the Defendants jointly and severally, for an additional $4,359 plus prejudgment interest against Hartford, and for $3,384 in costs against both Defendants.

On August 17, 1998, Hartford and Hartford Casualty filed a joint Notice of Appeal.

On appeal, all parties agree that no material facts are in dispute regarding the insurance coverage issues here.

II.

STANDARD OF REVIEW

We review de novo the district court’s rulings on motions for summary judgment.

Maniccia v. Brown, 171 F. 3d 1364, 1367 (11th Cir.1999).

III.

DISCUSSION

A.

CGL Policy Because this appeal turns on the policy language, we first review in detail the two policies in issue.

Coverage A of the CGL policy provides for coverage of “bodily injury” liability that results from an “occurrence”:

1.

Insuring Agreement. a.

We will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury” ... to which this insurance applies.

We will have the right and duty to defend any “suit” seeking those damages. b.

This insurance applies to “bodily injury” ... only if: (1) The “bodily injury” or “property damage” is caused by an “occurrence” that takes place in the “coverage territory;”....

The CGL policy defines “occurrence” in section V and “bodily injury” in an endorsement, as follows: 9. “Occurrence” means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.

17.

MENTAL ANGUISH

The definition of “bodily injury” in the-DEFINITIONS section is replaced by the following: “Bodily injury” means bodily injury, sickness or disease sustained by a person, including mental anguish or death resulting from any of these.

However, the CGL policy excludes coverage for “bodily injury” in several circumstances, such as:

SECTION I-COVERAGES

COVERAGE A. BODILY INJURY AND PROPERTY DAMAGE LIABILITY

2.

Exclusions.

This insurance does not apply to: a. “Bodily injury” ... expected or intended from the standpoint of the insured. e. “Bodily injury” to: (1) An employee of the insured arising out of and in the course of employment by the insured. ...

This exclusion applies: (1) Whether the insured may be liable as an employer or in any other capacity....

In addition to “bodily injury,” the CGL policy, in Coverage B, covers “personal injury” liability caused by an “offense” arising out of the insured’s business:

1.

Insuring Agreement a.

We will pay those sums that the insured becomes legally obligated to pay as damages because of “personal injury” ... to which this coverage part applies.

We will have the right and duty to defend any “suit” seeking those damages. b.This insurance applies to: (1) “Personal injury” caused by an offense arising out of your business, excluding advertising, publishing, broadcasting, or telecasting done by or for you....

The CGL policy defines “personal injury” to cover one or more of the following five offenses: 10. “Personal injury” means injury, other than “bodily injury,” arising out of one or more of the following offenses: a.

False arrest, detention, or imprisonment; b.

Malicious prosecution; c.

The wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies by or on behalf of its owner, landlord or lessor; d.

Oral or written publication of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services; or e.

Oral or written publication of material that violates a person’s right of privacy.

An endorsement to the CGL policy expands the definition of “personal injury” to include certain discrimination, but only if that discrimination is unrelated to the employment:

1.

PERSONAL INJURY

a.

The following is added to the “personal injury” definition: f.

Discrimination or humiliation that results in injury to the feelings or reputation of a natural person, but only if such discrimination or humiliation is: (1) Not done intentionally by or at the direction of: (a) The insured; or (b) Any executive officer, director, stockholder, partner or member of the insured; and (2) Not directly or indirectly related, to the employment, prospective employment or termination of employment of any person or persons by any insured.

B.

Umbrella Policy The Umbrella policy also provides coverage for both “bodily injury” and “personal injury,” and requires both types of injury to be caused by an “occurrence” in order to be covered:

A.

Umbrella Liability Insurance We will pay those sums that the “insured” must legally pay as “damages” in excess of the “underlying insurance,” or of the “self-insured retention” when no “underlying insurance” applies, because of “bodily injury,” “property damage,” “personal injury” or “advertising injury” to which this insurance applies caused by an “occurrence.”

The Umbrella policy’s definitions of “bodily injury” and “personal injury” are different from those in the CGL policy; plus, the Umbrella policy defines “occurrence” differently for “bodily injury” versus “personal injury,” as follows: C. “Bodily injury” means bodily injury, sickness, or disease sustained by a person which occurs during the “policy period,” including death resulting from any of these at any time. H. “Occurrence” means

1.

With respect to “bodily injury” or “property damage:” an accident, including continuous or repeated exposure to substantially the same general harmful conditions, which results in “bodily injury” or “property damage” neither expected nor intended from the standpoint of the “insured” and includes the use of reasonable force to protect persons or property; and 2.With respect to “advertising injury” and “personal injury” respectively: an offense described in one of the numbered subdivisions of those definitions in this policy. I. “Personal injury” means injury, other than “advertising injury” or “bodily injury,” arising out of one or more of the following offenses committed during the “policy period” in the conduct of your business:

1.

False arrest, detention or imprisonment;

2.

Malicious prosecution;

3.

The wrongful eviction from, wrongful entry into, or invasion ofthe [sic] right of private occupancy of a room, dwelling or premises that a person occupies by or on behalf of his or her owner, landlord or lessor;

4.

Oral or written publication of material that violates a person’s right of privacy; or

6.

Discrimination or humiliation not intentionally committed by or at the direction of the “insured” or any “executive officer,” director, stockholder, partner or member thereof, but only with respect to injury to the feelings or reputation of a natural person.

Lastly, the Umbrella policy excludes coverage for “bodily injury” and “personal injury” to employees “arising out of and in the course of their employment”:

B.

Exclusions This policy does not apply:

16.

With respect to coverage afforded any of your employees to “bodily injury” or “personal injury:” a.

To other employees arising out of and in the course of their employment; b.

To you or, if you are a partnership or joint venture, any of your partners or members; or c.

Arising out of the providing or failing to provide professional health care services.

Even if the employees’ claims involve “bodily injury” or “personal injury” caused by an “occurrence,” the Defendants contend that this exclusion precludes coverage.

C.

Georgia Law In this diversity action, Georgia’s substantive law governs the interpretation of the CGL and Umbrella policies here.

Provau v. State Farm Mut.

Auto.

Ins.

Co., 772 F. 2d 817, 819 (11th Cir.1985).

In determining insurance coverage, we look to the allegations in the complaint in the underlying lawsuit and to the terms of the insurance policies.

Elan Pharm.

Research Corp. v. Employers Ins. of Wausau, 144 F. 3d 1372, 1375 (11th Cir.1998); Great Am.

Ins.

Co. v. McKemie, 244 Ga. 84, 85-86, 259 S.E. 2d 39 (1979); Colonial Oil Industries v. Underwriters Subscribing to Policy Nos. T031504670 & T031504671, 268 Ga. 561, 491 S.E. 2d 337 (1997).

Ambiguities in insurance contracts are construed against the insurer. Claussen v. Aetna Cas. & Sur. Co., 259 Ga. 333, 334-35, 380 S.E. 2d 686 (1989).

In contrast, “unambiguous terms of an insurance policy require no construction, and the plain meaning of such terms must be given full effect, regardless of whether they might be beneficial to the insurer or detrimental to the insured.”

Continental Cas.

Co. v. HSI Fin.

Servs., Inc., 266 Ga. 260, 262, 466 S.E. 2d 4 (1996). “[Exclusions from coverage sought to be invoked must be strictly construed.”

Tifton Mach.

Works, Inc. v. Colony Ins.

Co., 224 Ga.App. 19, 20, 480 S.E. 2d 37 (1996).

We also review several Georgia cases involving similar claims and similar policy terms.

In Presidential Hotel v. Canal Ins.

Co., 188 Ga.App. 609, 373 S.E. 2d 671 (1988), the Georgia Court of Appeals held that a corporate defendant was not entitled to insurance coverage for a sexual harassment claim.

In that case, the hotel’s employees in the underlying sexual harassment lawsuit alleged that their supervisor, acting individually and as an agent of the hotel, used his position and authority to sexually harass them. 188 Ga.App. at 609.

The employees alleged that they were damaged both mentally and monetarily.

Id.

Similar to the CGL and Umbrella policies here, the insurance policy in Presidential Hotel covered “bodily injury” which resulted from an “occurrence.”

Id. at 610, 373 S.E. 2d 671.

The policy defined “bodily injury” as “bodily injury, sickness or disease sustained by any person which occurs during the policy period, including death at any time resulting therefrom.”

Id.

The policy defined “occurrence” as “an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured.”

Id.

The Georgia Court of Appeals held that the employees did not allege claims seeking damages for “bodily injury” under the policy because they sought only monetary and “mental damages,” and not damages for actual physical harm.

Id. at 611, 373 S.E. 2d 671.

In addition, the Georgia Court held that even if the employees asserted claims for “bodily injury,” the intentional conduct of sexual harassment is not an “occurrence” because that term is defined as an accident resulting in bodily injury unintended by the insured: Assuming, arguendo, plaintiffs do assert claims for bodily injury, we must conclude nevertheless that the policy issued by [the defendant insurer] does not afford coverage to the [insured].

The policy covers damages for bodily injury resulting from an “occurrence.”

That term is defined in the policy as an “accident . .. which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured.”

Thus, intentional acts are not covered under the policy.

Georgia Farm Bureau, etc., Ins.

Co. v. Meriwether, 169 Ga.App. 363, 312 S.E. 2d 823 (1983); Georgia Farm Bureau, etc., Ins.

Co. v. Ray, 148 Ga.App. 85, 251 S.E. 2d 34 (1978).

It is alleged by plaintiffs that the hotel, by and through its agents, sexually harassed and defrauded plaintiffs.

Given these allegations of intentional conduct, it cannot be said that any resulting bodily injury to plaintiffs was unintended.

Accordingly, the assertions of liability by plaintiffs do not fall with the policy’s definition of an “occurrence.”

Georgia Farm Bureau, etc., Ins.

Co. v. Meriwether, 169 Ga.App. 363, 312 S.E. 2d 823. 188 Ga.App. at 611, 373 S.E. 2d 671.

In O’Dell v. St. Paul Fire & Marine Ins.

Co., 223 Ga.App. 578, 478 S.E. 2d 418 (1996), the Georgia Court of Appeals found that similar liability policies did not cover a lawsuit by a company’s employee for sexual harassment, assault, battery, intentional infliction of emotional distress, and negligent retention of employment.

In O’Dell, the Georgia Court found that these allegations did not constitute “bodily injury” under the liability policies, and that intentional sexual harassment does not constitute a triggering “event” defined as an “accident” under the insurance policies: Moreover, even assuming that Gille-land’s complaint alleged bodily injury as contemplated by the policies, all policies recite that coverage applies if bodily injury arises out of an “event.”

They define event as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” ...

Although the policies do not define accident, “in Georgia an accident is defined as an event which takes place without one’s foresight or expectation or design.

An accident refers to an unexpected happening rather than one occurring through intention or design.

Acts could not be unexpected unless they were accidental.” [Citations and punctuation omitted.] Given the allegations that O’Dell committed sexual harassment and assault and battery, which are by their nature intentional, we cannot conclude that bodily injury, if any, was caused by an accident. [Citation omitted.] Consequently, the allegations of bodily injury do not fall within the policies’ definitions of “events” and are not covered. 223 Ga.App. at 580, 478 S.E. 2d 418.

The Georgia Court concluded that the plaintiffs negligent retention claims alsb were not covered, because, among other things, the plaintiff “did not allege that those injuries were caused by an accident and thus were brought about by an ‘event.’ ” Id.

In the instant case, the district court relied on Crook v. Georgia Farm Bureau Mut.

Ins.

Co., 207 Ga.App. 614, 428 S.E. 2d 802 (1993), which involved coverage for' a wrongful death claim under a homeowner’s insurance policy.

The plaintiffs in the underlying lawsuit sued the insured, Crook, for the wrongful death of their son, who intentionally committed acts causing his own death.

The homeowner’s insurance policy obligated the insurer to defend Crook in a lawsuit to recover damages for personal injury that was “caused by an occurrence.” 207 Ga.App. at 614.

The policy defined “occurrence”, as “an accident,” but “accident” was not otherwise defined.

Id.

The Georgia Court found that “ ‘[a]ecident’ means an event which takes place without one’s foresight or expectation or design.”

Id.

Using this definition, the Georgia Court reasoned that the law- suit against the insured Crook was covered, as the deceased’s actions did not take place within the insured’s “foresight or expectation or design”: In the underlying tort action, there are no allegations that Crook intentionally caused the death with “foresight or expectation or design.”

Indeed, the undisputed evidence of record shows that the death occurred entirely without Crook’s intentiqnal “foresight or expectation or design.”

Accordingly, insofar as Crook, in his capacity as an insured, is concerned, the death of the [plaintiffs’] son was clearly an “accident,” because it was an unintentional event which took place without his “foresight or expectation or design.”

That the [plaintiffs’] son may have caused his own death is obviously not a ground for the Insurer’s present refusal to defend Crook in the underlying tort action. 207 Ga.App. at 614-15.

We observe that the parties did not cite the Presidential Hotel case before the district court, which appears why the district court relied heavily on Crook.

We now apply this Georgia law to this case.

D.

CGL Policy Presidential Hotel and O’Dell answer directly the coverage issues urider SCI’s CGL policy.

Under Presidential Hotel and O’Dell, allegations of intentional sexual' harassment, assault, battery, and negligent retention do not constitute an “occurrence,” as defined by SCI’s CGL policy.

The policies in both Presidential Hotel and here define “occurrence” as “an accident,” and do not cover the intentional conduct of Hankins.

SCI argues that Presidential Hotel should be read with Crook, and that, together, these cases indicate that the allegations in an underlying lawsuit should be observed from the viewpoint of the insured, as opposed to the actor. There is some difficulty in reconciling the different approaches taken in Crook and Presiden-, tial Hotel.

However, we find Presidential Hotel squarely discusses sexual harassment allegations in the context of a liability policy where “occurrence” is defined as “an accident,” just as in the CGL policy here, and thus, we must follow it.

Moreover, the Presidential Hotel policy includes additional language in its definition of “occurrence,” specifying that the “accident” must “result[] in bodily injury or property damage neither expected nor intended from the standpoint of the insured.”

Despite this language, the Georgia court explicitly ruled that there was no occurrence with regard to the hotel’s insurance policy,' where a supervisor had allegedly sexually harassed other employees.

Thus, even if viewed from the standpoint of the insured, Presidential Hotel holds that there is still no “occurrence.”

Finally, Crook is distinguishable, in that it involves coverage issues for a wrongful death claim under a homeowner’s policy against the insured homeowner, as opposed to a liability policy and the actions of an employee of the insured.

Because the allegations of the underlying sexual harassment lawsuit are not an “occurrence” under the CGL policy, that lawsuit was not covered under the CGL policy’s coverage for “bodily injury” caused by an “occurrence.”

Furthermore, the parties do not contend that the allegations of the underlying lawsuit come within the definition of “personal injury” in the CGL policy.

We note that the endorsement to the CGL policy expands the definition of “personal injury” to include certain discrimination, but denies coverage where the discrimination is “directly or indirectly related to the employment ... of any person or persons by any insured.”

Accordingly, we hold that the CGL policy nowhere provides SCI coverage for the underlying lawsuit.

E.

Umbrella Policy Coverage for “bodily injury” under the Umbrella policy is also limited to “occurrences” defined exactly as the liability policy in the Presidential Hotel decision.

Accordingly, under the above reasoning, we hold that the Umbrella policy’s “bodily injury” provisions do not provide coverage to SCI for the underlying sexual harassment lawsuit.

However, the Umbrella policy defines “personal injury” differently than the CGL policy. ’ Specifically, the Umbrella policy does not as strictly limit the range of discrimination included in its definition of “personal injury.”

The Umbrella policy includes as “personal injury”: Discrimination or humiliation not intentionally committed by or at the direction of the “insured” or any “executive officer,” director, stockholder, partner or member thereof, but only with respect to injury to the feelings or reputation of a natural person.

The employees’ complaint in the underlying lawsuit alleges discrimination, among other things, as follows: