                     United States Court of Appeals,

                               Fifth Circuit.

                               No. 96-60731.

 AMERICAN STATES INSURANCE COMPANY, Plaintiff-Counter-Defendant-
Appellee,

                                       v.

     NATCHEZ STEAM LAUNDRY, a Division of Vicksburg Laundry,

                                       and

     James Simmons, Defendants-Counter-Claimants-Appellants.

                               Jan. 6, 1998.

Appeal from the United States District Court for the Southern
District of Mississippi.

Before REYNALDO G. GARZA, SMITH and WIENER, Circuit Judges.

     JERRY E. SMITH, Circuit Judge:

     The district court granted summary judgment for American

States Insurance Company ("American States"), holding that it had

no duty to defend its insureds, Natchez Steam Laundry ("Natchez")

and the laundry's owner, James Simmons, from an Equal Employment

Opportunity Commission ("EEOC") lawsuit alleging intentional sexual

harassment.    The     court   also    granted      American   States   summary

judgment on the insureds' counterclaim, dismissing their contention

that the insurance agent had orally modified the contract and that

American States had acted in bad faith.                Finding no error, we

affirm.

                                       I.

     In   February    1995,    the    EEOC   sued    Natchez   and   its   chief

executive   officer    and    owner,   James   Simmons,    charging     various


                                        1
employment-related offenses, including hostile work environment,

quid pro quo sexual harassment, retaliation, and constructive

discharge.       The    agency    further     alleged    that    "[t]he      unlawful

employment practices complained of were and are intentional."

      Natchez and Simmons turned to American States, demanding

defense of, and coverage for, the EEOC claims.                  Two policies were

in effect at the time of the alleged harassment:                  a comprehensive

general liability policy and an umbrella policy.                  After receiving

advice from its lawyers, American States denied coverage.

      American States then sought a declaratory judgment that it had

no   duty to     defend    either     insured,    claiming      that   the    charged

offenses fell squarely within the intentional-acts exclusion to the

policies.1       Natchez    and   Simmons     disputed    this    conclusion      and

claimed   that    any     touching,    if    it   even   occurred,     was     purely

accidental—the inevitable result of the close working quarters in

the laundry.

      Natchez and Simmons also counterclaimed, arguing that the

American States agent who sold Simmons the policies had represented

that lawsuits for sexual harassment were covered.                      Natchez and

Simmons   further       contended     that    American   States's      failure    to

investigate the facts underlying the EEOC charges constituted bad

faith.    The district court granted summary judgment for American

States.

                                        II.


          1
         American States also invokes the                    employer     liability
exclusion, but we do not reach that issue.

                                         2
       We review grants of summary judgment de novo.               Knight v.

United States Fidelity & Guar. Ins. Co., 65 F.3d 34, 36 (5th

Cir.1995). "The interpretation of an insurance contract, including

the question of whether the contract is ambiguous, is a legal

determination meriting de novo review."         National Union Fire Ins.

Co. v. Kasler Corp., 906 F.2d 196, 198 (5th Cir.1990).                 Under

Mississippi law—which both sides agree governs interpretation of

the   policies—ambiguities      regarding     defense    obligations     are

construed strictly against the insurer.          Mulberry Square Prods.,

Inc. v. State Farm Fire & Cas. Co., 101 F.3d 414, 420 (5th

Cir.1996).

                                    III.

      Both policies contain an intentional-acts exclusion, providing

that coverage does not extend to bodily injury or property damage

"expected    or   intended   from   the    standpoint   of   the   insured."

American States argues that the injuries alleged in the EEOC

complaint come within this exclusion.

                                     A.

      The general rule in Mississippi is that an insurer's duty to

defend hinges on the allegations in the underlying complaint.

State Farm Mut. Auto. Ins. Co. v. Taylor, 233 So.2d 805, 808

(Miss.1970).      Under Mississippi law, "an insurer's duty to defend

an action against its insured is measured by the allegations in the

plaintiff's pleadings regardless of the ultimate outcome of the

action."     EEOC v. Southern Pub. Co., 894 F.2d 785, 789 (5th

Cir.1990).


                                     3
      The EEOC complaint states that "[t]he unlawful employment

practices complained of were and are intentional."            The policies

exclude coverage for damages resulting from intentional acts by the

insured.     We agree with American States that Simmons's alleged

conduct falls squarely within the policy exclusions.

      There is, however, a narrow exception to the general rule:

Mississippi courts impose a duty to defend upon an insurer who has

knowledge,    or   could   obtain   knowledge   through   a     reasonable

investigation, of the existence of facts that trigger coverage. In

State Farm, 233 So.2d at 808, the court observed that "a divergence

may exist between the facts as alleged in the petition and the

actual facts as they are known to or reasonably ascertainable by

the insurer, in which latter case the insurer has a duty to

defend...."     Similarly, in Meng v. Bituminous Cas. Corp., 626

F.Supp. 1237, 1241 (S.D.Miss.1986), the court noted that "where the

complaint alleges facts which fall within a policy exclusion, the

insurer is not obligated to defend unless it later learns or is

apprised of facts which indicate coverage."

      Natchez and Simmons argue that since they promptly notified

American States that any touching was unintentional, American

States knew of "facts" that triggered its duty to defend.             This

argument fails for a simple reason:      Natchez and Simmons have not

supplied "facts" that indicate coverage. Simmons's contention that

his bawdy behavior was accidental is not a "fact," but only an

assertion.

     Were we to accept Simmons's legal argument, an insured could


                                    4
trigger the duty to defend merely by denying the allegations in the

complaint.      Allowing   Simmons    to   defeat   the   intentional   acts

exclusion in this way would increase the investigatory burden on

insurers and eviscerate Mississippi's general rule—that an insurer

can determine whether it has a duty to defend by comparing the

complaint to the policy.

                                     B.

     Although Mississippi courts have skirted the issue, some

courts in this circuit have deemed sexual harassment an intentional

act as a matter of law.           See, e.g., Old Republic Ins. Co. v.

Comprehensive    Health    Care    Assocs.,   786   F.Supp.   629,   632-33

(N.D.Tex.1992), aff'd, 2 F.3d 105 (5th Cir.1993).             Other courts

reach the same destination by a different route, holding that

sexual harassment is not an "occurrence" and therefore is excluded

from coverage. See, e.g., Cornhill Ins. PLC v. Valsamis, Inc., 106

F.3d 80, 88 (5th Cir.1997).       Because we rely on the plain language

of the EEOC complaint, which alleges intentional conduct, we need

not reach this larger issue.

                                     C.

      Even if Simmons's actions are found to be intentional,

Natchez contends that it should not be held liable for its owner's

conduct.   Because the insurance policies treat Natchez and Simmons

as separate insureds, Natchez argues that a finding that Simmons

acted intentionally does not necessarily mean that Natchez did so.

     Natchez directs us to Western Heritage Ins. Co. v. Magic Years

Learning Ctrs. & Child Care, Inc., 45 F.3d 85 (5th Cir.1995), a


                                      5
case with similar facts that arose under Texas law.2                          There, a

former employee sued the Wilsons (the owners of a day care center)

and the business itself, claiming that she had been sexually

harassed by Mr. Wilson.          Mr. and Mrs. Wilson and the business were

listed as separate insureds on the same policy. The insurer denied

coverage to all parties on the ground that sexual harassment is an

intentional     act     and    thus   falls       outside      the      definition     of

"occurrence."        The court agreed with the insurer that the policy

did not cover Mr. Wilson—because his conduct was intentional—but

held that Mrs. Wilson and the business were covered.                         The court

concluded: "[T]he alleged acts or omissions are within the general

definition of occurrence, because there is no contention that Mrs.

Wilson or [the business] expected or intended to injure" the

plaintiff.    Id. at 89.

     The   instant      case     differs       from    Western     Heritage       in   one

important respect: Here, the underlying complaint charged that the

business acted intentionally.          The Western Heritage plaintiff sued

the business under a theory of respondeat superior, alleging gross

negligence      in      entrusting      Mr.           Wilson     with       supervisory

responsibility,       in   not   providing       a     workplace     free    of   sexual

harassment, and in not providing an avenue for redress.                      Id. at 87.

Here, the EEOC sued the business for similar conduct—failure to

    2
     As noted in New York Life Ins. Co. v. Travelers Ins. Co., 92
F.3d 336, 340 n. 4 (5th Cir.1996), parts of Western Heritage are
inconsistent with our holding in Columbia Mut. Ins. Co. v. Fiesta
Mart, Inc., 987 F.2d 1124 (5th Cir.1993). We do not attempt to
reconcile this apparent conflict;     we discuss Western Heritage
merely to illustrate that Natchez cannot prevail even under Western
Heritage's more favorable standard.

                                           6
investigate the complaints against Simmons, to take action against

Simmons, and to provide an avenue for redress—but charged that

these omissions were intentional.

     Under Mississippi law, the EEOC's allegation of intent is

sufficient to defeat coverage for Natchez.      As we noted in Jones v.

Southern Marine & Aviation Underwriters, Inc., 739 F.Supp. 315, 324

(S.D.Miss.1988), aff'd, 888 F.2d 358 (5th Cir.1989), "[I]f a

plaintiff's allegations against an insured are unequivocal with

regard to claiming injury or damages caused by acts which, if

proved, would place his claim within an exclusion from coverage,

there is no duty to defend."       Here, the allegations that Natchez

acted intentionally are unequivocal.     Accordingly, American States

had no duty to defend.

                                   IV.

      In   their   counterclaim,    Natchez   and   Simmons   argue   that

American States is bound by the oral representations of its agent,

Susan Loflin, who sold the policies to Simmons.           Although they

concede that ordinarily the written language of an insurance policy

is binding, Natchez and Simmons suggest that Loflin told them that

the policies covered "all liabilities," including claims for sexual

harassment.

      Under Mississippi law, the construction of an insurance

contract is limited to examining the policy.        Employers Mut. Cas.

Co. v. Nosser, 250 Miss. 542, 164 So.2d 426, 430 (1964).              "The

policy itself is the sole manifestation of the parties' intent, and

no extrinsic evidence is permitted absent a finding by a court that


                                    7
the language is ambiguous and cannot be understood from a reading

of the policy as a whole."       Great N. Nekoosa Corp. v. Aetna Cas. &

Sur. Co., 921 F.Supp. 401, 406 (N.D.Miss.1996).

         Nonetheless, an agent's oral representations, when relied

upon, sometimes       can   modify    an       insurance    contract.   Scott    v.

Transport Indem. Co., 513 So.2d 889, 894 (Miss.1987) ("Certain

verbal representations made by persons in authority may become ...

parts of the contract.").        But this special rule does not apply

when the contractual language is plain.                    In Godfrey, Bassett v.

Huntington Lumber & Supply Co., 584 So.2d 1254, 1257 (Miss.1991),

the court remarked that "a person is under an obligation to read a

contract before signing it, and will not as a general rule be heard

to complain of an oral misrepresentation the error of which would

have been disclosed by reading the contract."

     As the district court noted, both policies patently exclude

claims for injuries stemming from intentional acts by the insured.

There is no suggestion that the contractual language is ambiguous.

Finally, it is difficult to understand how Simmons reconciled his

belief    that   he   was   covered    for       "all   liabilities"    with    the

multi-page lists of exclusions.

                                       V.

      Natchez and Simmons accuse American States of bad faith and

seek punitive damages. They charge American States with failing to

investigate the allegations underlying the EEOC complaint before

denying coverage.

     The Mississippi Supreme Court recently addressed an insurer's


                                           8
duty to investigate.      In Murphree v. Federal Ins. Co. & Inst. for

Tech. Dev., No. 94-CA-00669-SCT, 1997 Miss. LEXIS 145, --- So.2d --

-- (Miss. Apr. 10, 1997), the court held that

     although it is well settled under Mississippi law that an
     insurance company has a duty to investigate promptly and
     adequately an insured's claim ... a plaintiff's burden in
     proving a claim for bad faith refusal goes beyond merely
     demonstrating that the investigation was negligent.... [T]his
     level of negligence in conducting the investigation must be
     such that a proper investigation by the insurer "would easily
     adduce evidence showing its defenses to be without merit."

Id. at *21, --- So.2d at ---- (citing Merchants Nat'l Bank v.

Southeastern Fire Ins. Co., 751 F.2d 771, 777 (5th Cir.1985)).

     Natchez and Simmons have supplied no persuasive evidence that

American States acted maliciously or committed anything approaching

an intentional tort.       Nor would an investigation have "easily"

uncovered evidence showing its defenses to be "without merit."

American States obtained the opinion of counsel, then properly

denied the claim after reviewing the EEOC's allegations and the

insurance    policies.      Its   investigation     hardly     reaches     the

heightened   level   of   negligence    required   for   bad   faith     under

Mississippi law.

     AFFIRMED.




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