United States District Court, District of Columbia
D. BATES, UNITED STATES DISTRICT JUDGE.
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.
2014, a friend gave Tolson a
“Groupon” 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.
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.
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,  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.
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  Hartford's wrongful failure to
settle those claims and cause[s] of action within the
limits of liability of the Policy.
Id. at 1-2. The judgment explicitly provided that
“this Consent Judgment shall not be enforced against 
Massage Escape.” Id. at 2.
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
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 “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).
Tolson's Contract Claims against Hartford and
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).
Breach of Contract
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. The motion to dismiss will
be granted as to this claim.
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.
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.”
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.,